i

DEVELOPING THE PETROVIETNAM GROWTH

OPEN-ENDED FUND (PVGF) -

CHALLENGES AND OPPORTUNITIES

(PVFC Capital)

by

Duy Khanh Nguyen

A project study submitted in partial fulfillment of the requirements for the

degree of International Executive EMBA Program (AIT)

Examination Committee Dr Fredric William Swierczek

Nationality Vietnamese

Previous Degree Bachelor of Commerce amp Administration

Victoria University of Wellington (VUW)

New Zealand

Scholarship Donor Petrovietnam Oil amp Gas Group (PVN)

Asian Institute of Technology

School of Management

Thailand

December 2014

ii

ACKNOWLEDGMENT

Foremost I would like to express my sincere gratitude to my advisor Dr Fredric William

Swierczek for the support of my study and research His guidance helped me in all the time

of research and writing of this thesis

My sincere thanks also goes to Petrovietnam Oil amp Gas Group (PVN) for offering me the

full scholarship and giving me chance to contribute further to the development of the

Vietnam oil amp gas sector

Last but not the least I would like to thank my family my parents and my wife for always

supporting me spiritually throughout my academic life

iii

ABSTRACT

Open-ended fund is a new form of fund in Vietnam In the world more than 90 of the

funds are established in this form of open-ended funds The legal basis of open-ended

funds in Vietnam is Circular 1832011TT-BTC from Ministry of Finance which provides

regulation on establishment and management of open-ended funds effect from March 1st

2012 Since then many funds set up in Vietnam are in the form of open-ended funds

In early 2013 only 03 open-ended funds were established However by the end of the

year there were 08 open-ended funds have been established (in which 03 closed funds

converted to open-end funds) Currently there are 8 (eight) out of 46 (forty-six) fund

management companies established open-end funds and at least two companies are in the

process of raising capital

Petrovienam Finance Fund Incorporation (PVFC Capital) is establishing an open-ended

fund to build the image of a fund management company that can manage various types

and diversified funds

The Petrovietnam Growth Open-ended fund (PVGF) will invest stocks in oil amp gas sector

in Vietnam (the stocks in the basket of PVN-Index) in order to make a difference in the

market take advantage of industry and help promote the PVN-Index of Petrovietnam Oil

amp Gas Group (PVN) which developed by Petrovienam Securities Incorporation (PSI)

iv

Table of Contents

Chap I Introduction 1

11Rationale 1

12Problem statement 2

13Objective of the research 3

14Conceptual framework of the research 3

15 Scope of the research and data collection 4

16Organization of the research study 4

Chap II Best practice A case study of Profunds Ultrasector Oil amp Gas Svc 6

21 Introduction 6

22 Index Benchmark Dow Jones US Oil amp Gas Index 6

23 Investment strategy of Oil amp Gas UltraSector ProFund 7

24 Performance amp return of Oil amp Gas UltraSector ProFund 8

25 Summary of the chapter 10

Chap III Situational Analysis 11

31 Status of fund management companies and Open-ended funds in Vietnam market 11

32 Oil amp gas sector in Vietnam 11

33 Simulation and performance of PVN Index 13

34 PVN Index performance compared to other indexes 14

35 Impact model 15

36 Financial Market Condition 16

37 Confidence of investors 17

38 Legal Framework - Circular 1832011Circular 19

39 Revenue Structure 19

310 Support from shareholders 20

Chap IV Developing the PVGF 21

41 Introduction new form of fund (PVGF) 21

42 Investment objective amp strategy 22

43 Characteristics of listed companies in PVN-10 Index 23

v

Chap V Fund Development Alternative 25

51 Small Scale Start Up 25

52 Support from shareholders 25

53 Advantages of Open-ended Fund 26

54 Expected performance 27

55 PVN-10 exchange-traded fund 28

56 Evaluation of Alternative 28

57 Comparison 31

Chap VI Conclusion amp Recommendation 33

61 Conclusion 33

62 Action Plan 1 Open-ended Fund 34

63 Action Plan 2 Exchange Traded Fund 35

64 Recommendations 37

Appendix 1 39

Appendix 2 40

Appendix 3 41

Appendix 4 42

Appendix 5 43

Appendix 6 44

Appendix 7 45

Appendix 8 46

Reference 47

vi

LIST OF TABLE

Table 11 Asset under management 1

Table 21 Average Annual Total Returns as of December 31 2012 6

Table 22 Index Sector Weightings 6

Table 23 Top 10 Index Companies 7

Table 24 Average Annual Total Returns as of December 31 2012 9

Table 25 Annual Total Returns Summary 9

Table 31 Revenue Structure 19

Table 32 Summarized factors affecting business 20

Table 41 PetroVietnam Growth Open-ended Fund 21

Table 42 PVN-10 Index 23

Table 43 PVN-10 Dividend 24

Table 51 Advantages of Open-ended Fund 26

Table 52 Comparing open-ended fund (PVGF) with PVN-Index ETF 29

Table 53 Disadvantages of ETF 30

Table 54 Conditions for ETF to develop and operate effectively 30

Table 55 Evaluation Summary 32

Table 61 Fund structures of Open-ended fund (Plan 1) 34

Table 62 Fund Raising Plan of Open-ended fund (Plan 1) 35

Table 63 Fund structures of Exchange Traded Fund (Plan 2) 36

Table 64 Fund Raising Plan of Exchange Traded Fund (Plan 2) 37

Table 65 Process of investment management control and coordinate 38

vii

LIST OF FIGURE

Figure 11 Conceptual Framework of the Study 3

Figure 21 Average Annual Total Returns as of December 31 2012 8

Figure 31 The importance of oil and gas sector 12

Figure 32 PVN-Index component by sector 12

Figure 34 PVN Index vs VNIndex amp HNIndex 14

Figure 35 PVN Index vs VN30 amp HNX10 14

Figure 36 Conception of PVGF 15

Figure 37 Market players 16

Figure 38 VNIndex movements in 2013 16

Figure 39 GDP and GDP Growth 17

Figure 310 Trade Balance 17

Figure 311 FDI inflows 18

Figure 312 Interest rates 18

Figure 41 Asset allocation 23

Figure 42 Subsidiaries of PVN 24

Figure 51 Operation of Open-ended Fund 27

Figure 52 Regulation of establishment and management of ETFs 28

viii

LIST OF ABBREVIATIONS

ETF Exchange ndash Traded Fund

FC Fund Certificate

HNX Hanoi Stock Exchange

NAV Net Asset Value

VN30 30 biggest companies in the Vietnam Stock market

VEFF Vietnam Equitization Focused Fund

VIP LLC Vietnam Investment Platform

PVN Petrovietnam Oil amp Gas Group

PVcomBank Vietnam Public Bank

PVFC Capital Petrovietnam Finance Fund Incorporation

PVGF PetroVietnam Growth Open-ended Fund

PVN-Index 32 listed companies of PetroVietnam on two stock

exchanges of Vietnam

PVN-10 Index 10 biggest share of PVN in the Vietnam Stock market

1

CHAPTER 1

INTRODUCTION

11Rationale

PVFC Capital is the exclusive fund management company within PetroVietnam

Oil amp Gas Group (PVN) Established at the very early stage of the fund

management industry of Vietnam PVFC Capital serves as the fund raising and

fund management arm of the Group With expertise in oil and energy sector our

funds and portfolios have unique advantages in addition to wide range of selected

equities

Background of PVFC Capital

The exclusive fund management company within PetroVietnam Group

Establishment 14 December 2007

Chartered capital VND 100 billion (US$5million)

Shareholders

- PVcomBank (merger between Petrovietnam Finance Corporation

amp Western Bank)

- SOVICO (leading Investment Group)

Number of Employees 33

Assets under management US$490 million (~10 trillion VND)

Table 11 Asset under management

Local fund Offshore fund Portfolio management

Size of assets US$ 35

million

US$ 7 million US$ 480 million

Establishment Nov 2011 Aug 2008 2008

Accumulated

NAV growth

+113 +27 13year for FY2012

Source PVFC Capital

In a typical fund management company there are normally two main

departments Business Development Department and Investment Department I

have chance to apply the knowledge acquired and enhance my experience in both

fields here Particularly my main responsibilities as an associate including

operations for investment promotion market researching and customer

relationship development I also participate assist and support investment team in

analysis of investment opportunities daily work of fund management and

portfolio management

2

As an exclusive fund management company of PetroVietnam and a dynamic

member of PVcomBank PVFC Capital receives continued support as well as

inherits significant experience from PVcombank in terms of financial

management and investment and advantages in oil and gas sector

Funds and entrusted assets managed by PVFC Capital are from both foreign and

domestic investors PVFC Capital possesses a proven track record in asset

management and invaluable experience in the oil and energy sector with the total

value of successfully managed assets of more than VND 10000 billion

The company is managing two funds (one local fund and one offshore fund) with

net asset of 105 million US dollars and eleven investment portfolios with total

net value of 480 million US dollars (Source PVFC Capital) We have to deliver

the report monthly quarterly yearly to investors who are very interested in the

updated information of ther net asset value in the fund Beside the macro-

economic and stock market scanning we have to make recommendation to them

in which stock bonds or financial assets should be bought sold or hold

12Problem statement

The biggest problem of PVFC Capital at the moment is difficulties in establishing

a new fund given current situation of the economy Over the last few years after

the booming period Vietnam encounter the stabilization of the macroeconomic

Compare to the previous time investors are more conservative in their invesment

decisions

Based on market conditions and the current activities of PVFC Capital we realize

it is a critical task to raise fund as well as demand for new potential partners in

local and overseas It is our challenges to expand new customer network to

access and exploit more opportunities from potential partners to establish a new

fund

In 2013 PVFC Capitallsquos revenue is composed mainly from extremely active

portfolio management (8645227 USD out of total 1435655 USD revenue) As

of 31122013 the company has been managing 11 (eleven) portfolios in

domestic trusts and two foreign investment portfolio with total Net asset value of

about 450000000 USD (Source PVFC Capital)

Currently only two active funds are under our management which are Vietnam

Equitization Focused Fund (VEFF) amp Vietnam Investment Platform (VIP LLC)

both raising from Japanese investors Revenue from fund management in FY

2013 is 130000 USD contributed only 88 of total revenue (Source PVFC

Capital) For a fund management company this revenue structure needs to be

adjusted in the direction that increasing revenue from fund management

activities besides extremely well-managed and active portfolio management

activities

In addition since 2011 the company has not mobilized new funds after the

success of the fund establishment of VEFF Hence there is urgent need now to

establish new funds making revenue from this activity access to new capital

3

flow from investors in order to invest in opportunities within and outside the

petroleum industry

13Objective of the research

This research has the following objectives

o Review current situation of fund management companies and open-ended

funds in Vietnam market

o Identify the main causative factors of PVFC Capital lsquos unbalanced

revenue structure and difficulties in fund raising

o Evaluate the advantages and out-perform characteristics of PVGF in

compare to other form of fund

o Identify solution for PVFC Capital lsquos top management to raising capital

for this new type of fund

14Conceptual framework of the study

Figure 11 shows the approach to the research Firstly overview of PVFC Capital

and through impact model the main issues was defined Before analyzing the

prospects of PVGF the case study of ProFunds UltraSector Oil amp Gas Svc was

introduced as an example of the best practice of an open-ended fund investing in

oil amp gas index

Figure 11 Conceptual Framework of the Study

PROBLEM DEFINITION

BEST PRACTICE OF PROFUNDS

SITUATIONAL ANALYSIS

IMPACT MODEL

DEVELOPING PVGF

ALTERNATIVE SOLUTIONS amp EVALUATION

RECOMMENDATIONS amp CONCLUSION

4

15Scope of the research and data collection

To get the thorough understanding of the opportunities as well as challenges

investing in PVGF the information was retrieved from top management level

(Head of Department) to each associate in different unit in the organization

The primary information was collected though the questionnaires though internal

meeting and internal seminar with all the staff in the company and though the in-

depth interview with head of three most important department in PVFC Capital

which are Business Development Department Investment Department and

Internal Control Department

The secondary data were collected from

o Company profile

o Annual reports

o MonthlyAnnual Investment Report to investors

o Offering Letter to potential investor

o Updated data of PVN-Index from PSI

o PVFC Capitalrsquos Brochure

o Internal seminar Presentation on PVGF

o Other PVGF-related documents

o Public media (newspaper website magazineshellip)

16Organization of the research study

The research includes 7 chapters and its structure is as follows

Chapter 1 Introduction

This chapter provides a brief introduction the research rationales the main issue

research approach and the research structure

Chapter 2 Best Practice

Case of best practice on investing with open-ended fund in oil amp gas index was

used as examples to illustrate the theory and justification of the researcher

Chapter 3 Situational analysis

Chapter 3 provides a status of fund management companies and open-ended fund

in Vietnam market The chapter also discusses the main causative agents and the

result in the need to mobilize and establish a new fund of PVFC Capital

Chapter 4 Developing PVGF

Chapter 4 introduces the PVGF its investment objective strategy and its

advantages compared to other type of funds

5

Chapter 5 Fund development alternative

Chapter 5 provides solution for introduces the new fund of PVGF into the

Vietnam market such as small-scale starting with utilization of the capital from

shareholder as well as enhancing networking activities

The chapter provides alternative solution for introduces exchange-traded fund as

another effective investment tool for PVFC Capital It also compares and

contrasts between the two solutions and evaluates which solution is the most

appropriate one

Chapter 6 Recommendation and conclusion

Chapter 6 wraps up the above chapters conducts two action plans to raising

capital for PVFG as well as recommendations to PVFC Capitallsquos top

management board and strategic shareholders

6

CHAPTER 2

BEST PRACTICE A CASE STUDY OF PROFUNDS ULTRASECTOR

OIL amp GAS SVC

21Introduction

Oil amp Gas UltraSector ProFund is an open-end fund incorporated in the USA

The Fund is advised by ProFund Advisors since October 2013

The Fund invests in securities and derivatives that ProFund Advisors believes in

combination should have similar daily return characteristics as one and one-half

times (15x) the daily return of the Index

22Index Benchmark Dow Jones US Oil amp Gas Index

The Index measures the performance of the oil and gas sector of the US equity

market Component companies include among others exploration and

production integrated oil and gas oil equipment and services pipelines

renewable energy equipment companies and alternative fuel producers As of

September 30 2013 the Index included companies with capitalizations between

$9090 million and $3787 billion The average capitalization of the companies

comprising the Index was approximately $212 billion (Source Profund) The

Index is published under the Bloomberg ticker symbol ldquoDJUSENrdquo

Table 21 Average Annual Total Returns as of December 31 2012

Total Index Companies 84 PriceEarnings Ratio 1634 PriceBook Ratio 225 Dividend Yield 205 Average Index Market Capitalization 2486 billion

(Source httpwwwprofundscom)

Table 22 Index Sector Weightings

Index Sector Weightings Weight Oil amp Gas Producers 7196 Oil Equipment Services amp Distribution 2780 Alternative Energy 024

(Source httpwwwprofundscom)

ii

ACKNOWLEDGMENT

Foremost I would like to express my sincere gratitude to my advisor Dr Fredric William

Swierczek for the support of my study and research His guidance helped me in all the time

of research and writing of this thesis

My sincere thanks also goes to Petrovietnam Oil amp Gas Group (PVN) for offering me the

full scholarship and giving me chance to contribute further to the development of the

Vietnam oil amp gas sector

Last but not the least I would like to thank my family my parents and my wife for always

supporting me spiritually throughout my academic life

iii

ABSTRACT

Open-ended fund is a new form of fund in Vietnam In the world more than 90 of the

funds are established in this form of open-ended funds The legal basis of open-ended

funds in Vietnam is Circular 1832011TT-BTC from Ministry of Finance which provides

regulation on establishment and management of open-ended funds effect from March 1st

2012 Since then many funds set up in Vietnam are in the form of open-ended funds

In early 2013 only 03 open-ended funds were established However by the end of the

year there were 08 open-ended funds have been established (in which 03 closed funds

converted to open-end funds) Currently there are 8 (eight) out of 46 (forty-six) fund

management companies established open-end funds and at least two companies are in the

process of raising capital

Petrovienam Finance Fund Incorporation (PVFC Capital) is establishing an open-ended

fund to build the image of a fund management company that can manage various types

and diversified funds

The Petrovietnam Growth Open-ended fund (PVGF) will invest stocks in oil amp gas sector

in Vietnam (the stocks in the basket of PVN-Index) in order to make a difference in the

market take advantage of industry and help promote the PVN-Index of Petrovietnam Oil

amp Gas Group (PVN) which developed by Petrovienam Securities Incorporation (PSI)

iv

Table of Contents

Chap I Introduction 1

11Rationale 1

12Problem statement 2

13Objective of the research 3

14Conceptual framework of the research 3

15 Scope of the research and data collection 4

16Organization of the research study 4

Chap II Best practice A case study of Profunds Ultrasector Oil amp Gas Svc 6

21 Introduction 6

22 Index Benchmark Dow Jones US Oil amp Gas Index 6

23 Investment strategy of Oil amp Gas UltraSector ProFund 7

24 Performance amp return of Oil amp Gas UltraSector ProFund 8

25 Summary of the chapter 10

Chap III Situational Analysis 11

31 Status of fund management companies and Open-ended funds in Vietnam market 11

32 Oil amp gas sector in Vietnam 11

33 Simulation and performance of PVN Index 13

34 PVN Index performance compared to other indexes 14

35 Impact model 15

36 Financial Market Condition 16

37 Confidence of investors 17

38 Legal Framework - Circular 1832011Circular 19

39 Revenue Structure 19

310 Support from shareholders 20

Chap IV Developing the PVGF 21

41 Introduction new form of fund (PVGF) 21

42 Investment objective amp strategy 22

43 Characteristics of listed companies in PVN-10 Index 23

v

Chap V Fund Development Alternative 25

51 Small Scale Start Up 25

52 Support from shareholders 25

53 Advantages of Open-ended Fund 26

54 Expected performance 27

55 PVN-10 exchange-traded fund 28

56 Evaluation of Alternative 28

57 Comparison 31

Chap VI Conclusion amp Recommendation 33

61 Conclusion 33

62 Action Plan 1 Open-ended Fund 34

63 Action Plan 2 Exchange Traded Fund 35

64 Recommendations 37

Appendix 1 39

Appendix 2 40

Appendix 3 41

Appendix 4 42

Appendix 5 43

Appendix 6 44

Appendix 7 45

Appendix 8 46

Reference 47

vi

LIST OF TABLE

Table 11 Asset under management 1

Table 21 Average Annual Total Returns as of December 31 2012 6

Table 22 Index Sector Weightings 6

Table 23 Top 10 Index Companies 7

Table 24 Average Annual Total Returns as of December 31 2012 9

Table 25 Annual Total Returns Summary 9

Table 31 Revenue Structure 19

Table 32 Summarized factors affecting business 20

Table 41 PetroVietnam Growth Open-ended Fund 21

Table 42 PVN-10 Index 23

Table 43 PVN-10 Dividend 24

Table 51 Advantages of Open-ended Fund 26

Table 52 Comparing open-ended fund (PVGF) with PVN-Index ETF 29

Table 53 Disadvantages of ETF 30

Table 54 Conditions for ETF to develop and operate effectively 30

Table 55 Evaluation Summary 32

Table 61 Fund structures of Open-ended fund (Plan 1) 34

Table 62 Fund Raising Plan of Open-ended fund (Plan 1) 35

Table 63 Fund structures of Exchange Traded Fund (Plan 2) 36

Table 64 Fund Raising Plan of Exchange Traded Fund (Plan 2) 37

Table 65 Process of investment management control and coordinate 38

vii

LIST OF FIGURE

Figure 11 Conceptual Framework of the Study 3

Figure 21 Average Annual Total Returns as of December 31 2012 8

Figure 31 The importance of oil and gas sector 12

Figure 32 PVN-Index component by sector 12

Figure 34 PVN Index vs VNIndex amp HNIndex 14

Figure 35 PVN Index vs VN30 amp HNX10 14

Figure 36 Conception of PVGF 15

Figure 37 Market players 16

Figure 38 VNIndex movements in 2013 16

Figure 39 GDP and GDP Growth 17

Figure 310 Trade Balance 17

Figure 311 FDI inflows 18

Figure 312 Interest rates 18

Figure 41 Asset allocation 23

Figure 42 Subsidiaries of PVN 24

Figure 51 Operation of Open-ended Fund 27

Figure 52 Regulation of establishment and management of ETFs 28

viii

LIST OF ABBREVIATIONS

ETF Exchange ndash Traded Fund

FC Fund Certificate

HNX Hanoi Stock Exchange

NAV Net Asset Value

VN30 30 biggest companies in the Vietnam Stock market

VEFF Vietnam Equitization Focused Fund

VIP LLC Vietnam Investment Platform

PVN Petrovietnam Oil amp Gas Group

PVcomBank Vietnam Public Bank

PVFC Capital Petrovietnam Finance Fund Incorporation

PVGF PetroVietnam Growth Open-ended Fund

PVN-Index 32 listed companies of PetroVietnam on two stock

exchanges of Vietnam

PVN-10 Index 10 biggest share of PVN in the Vietnam Stock market

1

CHAPTER 1

INTRODUCTION

11Rationale

PVFC Capital is the exclusive fund management company within PetroVietnam

Oil amp Gas Group (PVN) Established at the very early stage of the fund

management industry of Vietnam PVFC Capital serves as the fund raising and

fund management arm of the Group With expertise in oil and energy sector our

funds and portfolios have unique advantages in addition to wide range of selected

equities

Background of PVFC Capital

The exclusive fund management company within PetroVietnam Group

Establishment 14 December 2007

Chartered capital VND 100 billion (US$5million)

Shareholders

- PVcomBank (merger between Petrovietnam Finance Corporation

amp Western Bank)

- SOVICO (leading Investment Group)

Number of Employees 33

Assets under management US$490 million (~10 trillion VND)

Table 11 Asset under management

Local fund Offshore fund Portfolio management

Size of assets US$ 35

million

US$ 7 million US$ 480 million

Establishment Nov 2011 Aug 2008 2008

Accumulated

NAV growth

+113 +27 13year for FY2012

Source PVFC Capital

In a typical fund management company there are normally two main

departments Business Development Department and Investment Department I

have chance to apply the knowledge acquired and enhance my experience in both

fields here Particularly my main responsibilities as an associate including

operations for investment promotion market researching and customer

relationship development I also participate assist and support investment team in

analysis of investment opportunities daily work of fund management and

portfolio management

2

As an exclusive fund management company of PetroVietnam and a dynamic

member of PVcomBank PVFC Capital receives continued support as well as

inherits significant experience from PVcombank in terms of financial

management and investment and advantages in oil and gas sector

Funds and entrusted assets managed by PVFC Capital are from both foreign and

domestic investors PVFC Capital possesses a proven track record in asset

management and invaluable experience in the oil and energy sector with the total

value of successfully managed assets of more than VND 10000 billion

The company is managing two funds (one local fund and one offshore fund) with

net asset of 105 million US dollars and eleven investment portfolios with total

net value of 480 million US dollars (Source PVFC Capital) We have to deliver

the report monthly quarterly yearly to investors who are very interested in the

updated information of ther net asset value in the fund Beside the macro-

economic and stock market scanning we have to make recommendation to them

in which stock bonds or financial assets should be bought sold or hold

12Problem statement

The biggest problem of PVFC Capital at the moment is difficulties in establishing

a new fund given current situation of the economy Over the last few years after

the booming period Vietnam encounter the stabilization of the macroeconomic

Compare to the previous time investors are more conservative in their invesment

decisions

Based on market conditions and the current activities of PVFC Capital we realize

it is a critical task to raise fund as well as demand for new potential partners in

local and overseas It is our challenges to expand new customer network to

access and exploit more opportunities from potential partners to establish a new

fund

In 2013 PVFC Capitallsquos revenue is composed mainly from extremely active

portfolio management (8645227 USD out of total 1435655 USD revenue) As

of 31122013 the company has been managing 11 (eleven) portfolios in

domestic trusts and two foreign investment portfolio with total Net asset value of

about 450000000 USD (Source PVFC Capital)

Currently only two active funds are under our management which are Vietnam

Equitization Focused Fund (VEFF) amp Vietnam Investment Platform (VIP LLC)

both raising from Japanese investors Revenue from fund management in FY

2013 is 130000 USD contributed only 88 of total revenue (Source PVFC

Capital) For a fund management company this revenue structure needs to be

adjusted in the direction that increasing revenue from fund management

activities besides extremely well-managed and active portfolio management

activities

In addition since 2011 the company has not mobilized new funds after the

success of the fund establishment of VEFF Hence there is urgent need now to

establish new funds making revenue from this activity access to new capital

3

flow from investors in order to invest in opportunities within and outside the

petroleum industry

13Objective of the research

This research has the following objectives

o Review current situation of fund management companies and open-ended

funds in Vietnam market

o Identify the main causative factors of PVFC Capital lsquos unbalanced

revenue structure and difficulties in fund raising

o Evaluate the advantages and out-perform characteristics of PVGF in

compare to other form of fund

o Identify solution for PVFC Capital lsquos top management to raising capital

for this new type of fund

14Conceptual framework of the study

Figure 11 shows the approach to the research Firstly overview of PVFC Capital

and through impact model the main issues was defined Before analyzing the

prospects of PVGF the case study of ProFunds UltraSector Oil amp Gas Svc was

introduced as an example of the best practice of an open-ended fund investing in

oil amp gas index

Figure 11 Conceptual Framework of the Study

PROBLEM DEFINITION

BEST PRACTICE OF PROFUNDS

SITUATIONAL ANALYSIS

IMPACT MODEL

DEVELOPING PVGF

ALTERNATIVE SOLUTIONS amp EVALUATION

RECOMMENDATIONS amp CONCLUSION

4

15Scope of the research and data collection

To get the thorough understanding of the opportunities as well as challenges

investing in PVGF the information was retrieved from top management level

(Head of Department) to each associate in different unit in the organization

The primary information was collected though the questionnaires though internal

meeting and internal seminar with all the staff in the company and though the in-

depth interview with head of three most important department in PVFC Capital

which are Business Development Department Investment Department and

Internal Control Department

The secondary data were collected from

o Company profile

o Annual reports

o MonthlyAnnual Investment Report to investors

o Offering Letter to potential investor

o Updated data of PVN-Index from PSI

o PVFC Capitalrsquos Brochure

o Internal seminar Presentation on PVGF

o Other PVGF-related documents

o Public media (newspaper website magazineshellip)

16Organization of the research study

The research includes 7 chapters and its structure is as follows

Chapter 1 Introduction

This chapter provides a brief introduction the research rationales the main issue

research approach and the research structure

Chapter 2 Best Practice

Case of best practice on investing with open-ended fund in oil amp gas index was

used as examples to illustrate the theory and justification of the researcher

Chapter 3 Situational analysis

Chapter 3 provides a status of fund management companies and open-ended fund

in Vietnam market The chapter also discusses the main causative agents and the

result in the need to mobilize and establish a new fund of PVFC Capital

Chapter 4 Developing PVGF

Chapter 4 introduces the PVGF its investment objective strategy and its

advantages compared to other type of funds

5

Chapter 5 Fund development alternative

Chapter 5 provides solution for introduces the new fund of PVGF into the

Vietnam market such as small-scale starting with utilization of the capital from

shareholder as well as enhancing networking activities

The chapter provides alternative solution for introduces exchange-traded fund as

another effective investment tool for PVFC Capital It also compares and

contrasts between the two solutions and evaluates which solution is the most

appropriate one

Chapter 6 Recommendation and conclusion

Chapter 6 wraps up the above chapters conducts two action plans to raising

capital for PVFG as well as recommendations to PVFC Capitallsquos top

management board and strategic shareholders

6

CHAPTER 2

BEST PRACTICE A CASE STUDY OF PROFUNDS ULTRASECTOR

OIL amp GAS SVC

21Introduction

Oil amp Gas UltraSector ProFund is an open-end fund incorporated in the USA

The Fund is advised by ProFund Advisors since October 2013

The Fund invests in securities and derivatives that ProFund Advisors believes in

combination should have similar daily return characteristics as one and one-half

times (15x) the daily return of the Index

22Index Benchmark Dow Jones US Oil amp Gas Index

The Index measures the performance of the oil and gas sector of the US equity

market Component companies include among others exploration and

production integrated oil and gas oil equipment and services pipelines

renewable energy equipment companies and alternative fuel producers As of

September 30 2013 the Index included companies with capitalizations between

$9090 million and $3787 billion The average capitalization of the companies

comprising the Index was approximately $212 billion (Source Profund) The

Index is published under the Bloomberg ticker symbol ldquoDJUSENrdquo

Table 21 Average Annual Total Returns as of December 31 2012

Total Index Companies 84 PriceEarnings Ratio 1634 PriceBook Ratio 225 Dividend Yield 205 Average Index Market Capitalization 2486 billion

(Source httpwwwprofundscom)

Table 22 Index Sector Weightings

Index Sector Weightings Weight Oil amp Gas Producers 7196 Oil Equipment Services amp Distribution 2780 Alternative Energy 024

(Source httpwwwprofundscom)

iii

ABSTRACT

Open-ended fund is a new form of fund in Vietnam In the world more than 90 of the

funds are established in this form of open-ended funds The legal basis of open-ended

funds in Vietnam is Circular 1832011TT-BTC from Ministry of Finance which provides

regulation on establishment and management of open-ended funds effect from March 1st

2012 Since then many funds set up in Vietnam are in the form of open-ended funds

In early 2013 only 03 open-ended funds were established However by the end of the

year there were 08 open-ended funds have been established (in which 03 closed funds

converted to open-end funds) Currently there are 8 (eight) out of 46 (forty-six) fund

management companies established open-end funds and at least two companies are in the

process of raising capital

Petrovienam Finance Fund Incorporation (PVFC Capital) is establishing an open-ended

fund to build the image of a fund management company that can manage various types

and diversified funds

The Petrovietnam Growth Open-ended fund (PVGF) will invest stocks in oil amp gas sector

in Vietnam (the stocks in the basket of PVN-Index) in order to make a difference in the

market take advantage of industry and help promote the PVN-Index of Petrovietnam Oil

amp Gas Group (PVN) which developed by Petrovienam Securities Incorporation (PSI)

iv

Table of Contents

Chap I Introduction 1

11Rationale 1

12Problem statement 2

13Objective of the research 3

14Conceptual framework of the research 3

15 Scope of the research and data collection 4

16Organization of the research study 4

Chap II Best practice A case study of Profunds Ultrasector Oil amp Gas Svc 6

21 Introduction 6

22 Index Benchmark Dow Jones US Oil amp Gas Index 6

23 Investment strategy of Oil amp Gas UltraSector ProFund 7

24 Performance amp return of Oil amp Gas UltraSector ProFund 8

25 Summary of the chapter 10

Chap III Situational Analysis 11

31 Status of fund management companies and Open-ended funds in Vietnam market 11

32 Oil amp gas sector in Vietnam 11

33 Simulation and performance of PVN Index 13

34 PVN Index performance compared to other indexes 14

35 Impact model 15

36 Financial Market Condition 16

37 Confidence of investors 17

38 Legal Framework - Circular 1832011Circular 19

39 Revenue Structure 19

310 Support from shareholders 20

Chap IV Developing the PVGF 21

41 Introduction new form of fund (PVGF) 21

42 Investment objective amp strategy 22

43 Characteristics of listed companies in PVN-10 Index 23

v

Chap V Fund Development Alternative 25

51 Small Scale Start Up 25

52 Support from shareholders 25

53 Advantages of Open-ended Fund 26

54 Expected performance 27

55 PVN-10 exchange-traded fund 28

56 Evaluation of Alternative 28

57 Comparison 31

Chap VI Conclusion amp Recommendation 33

61 Conclusion 33

62 Action Plan 1 Open-ended Fund 34

63 Action Plan 2 Exchange Traded Fund 35

64 Recommendations 37

Appendix 1 39

Appendix 2 40

Appendix 3 41

Appendix 4 42

Appendix 5 43

Appendix 6 44

Appendix 7 45

Appendix 8 46

Reference 47

vi

LIST OF TABLE

Table 11 Asset under management 1

Table 21 Average Annual Total Returns as of December 31 2012 6

Table 22 Index Sector Weightings 6

Table 23 Top 10 Index Companies 7

Table 24 Average Annual Total Returns as of December 31 2012 9

Table 25 Annual Total Returns Summary 9

Table 31 Revenue Structure 19

Table 32 Summarized factors affecting business 20

Table 41 PetroVietnam Growth Open-ended Fund 21

Table 42 PVN-10 Index 23

Table 43 PVN-10 Dividend 24

Table 51 Advantages of Open-ended Fund 26

Table 52 Comparing open-ended fund (PVGF) with PVN-Index ETF 29

Table 53 Disadvantages of ETF 30

Table 54 Conditions for ETF to develop and operate effectively 30

Table 55 Evaluation Summary 32

Table 61 Fund structures of Open-ended fund (Plan 1) 34

Table 62 Fund Raising Plan of Open-ended fund (Plan 1) 35

Table 63 Fund structures of Exchange Traded Fund (Plan 2) 36

Table 64 Fund Raising Plan of Exchange Traded Fund (Plan 2) 37

Table 65 Process of investment management control and coordinate 38

vii

LIST OF FIGURE

Figure 11 Conceptual Framework of the Study 3

Figure 21 Average Annual Total Returns as of December 31 2012 8

Figure 31 The importance of oil and gas sector 12

Figure 32 PVN-Index component by sector 12

Figure 34 PVN Index vs VNIndex amp HNIndex 14

Figure 35 PVN Index vs VN30 amp HNX10 14

Figure 36 Conception of PVGF 15

Figure 37 Market players 16

Figure 38 VNIndex movements in 2013 16

Figure 39 GDP and GDP Growth 17

Figure 310 Trade Balance 17

Figure 311 FDI inflows 18

Figure 312 Interest rates 18

Figure 41 Asset allocation 23

Figure 42 Subsidiaries of PVN 24

Figure 51 Operation of Open-ended Fund 27

Figure 52 Regulation of establishment and management of ETFs 28

viii

LIST OF ABBREVIATIONS

ETF Exchange ndash Traded Fund

FC Fund Certificate

HNX Hanoi Stock Exchange

NAV Net Asset Value

VN30 30 biggest companies in the Vietnam Stock market

VEFF Vietnam Equitization Focused Fund

VIP LLC Vietnam Investment Platform

PVN Petrovietnam Oil amp Gas Group

PVcomBank Vietnam Public Bank

PVFC Capital Petrovietnam Finance Fund Incorporation

PVGF PetroVietnam Growth Open-ended Fund

PVN-Index 32 listed companies of PetroVietnam on two stock

exchanges of Vietnam

PVN-10 Index 10 biggest share of PVN in the Vietnam Stock market

1

CHAPTER 1

INTRODUCTION

11Rationale

PVFC Capital is the exclusive fund management company within PetroVietnam

Oil amp Gas Group (PVN) Established at the very early stage of the fund

management industry of Vietnam PVFC Capital serves as the fund raising and

fund management arm of the Group With expertise in oil and energy sector our

funds and portfolios have unique advantages in addition to wide range of selected

equities

Background of PVFC Capital

The exclusive fund management company within PetroVietnam Group

Establishment 14 December 2007

Chartered capital VND 100 billion (US$5million)

Shareholders

- PVcomBank (merger between Petrovietnam Finance Corporation

amp Western Bank)

- SOVICO (leading Investment Group)

Number of Employees 33

Assets under management US$490 million (~10 trillion VND)

Table 11 Asset under management

Local fund Offshore fund Portfolio management

Size of assets US$ 35

million

US$ 7 million US$ 480 million

Establishment Nov 2011 Aug 2008 2008

Accumulated

NAV growth

+113 +27 13year for FY2012

Source PVFC Capital

In a typical fund management company there are normally two main

departments Business Development Department and Investment Department I

have chance to apply the knowledge acquired and enhance my experience in both

fields here Particularly my main responsibilities as an associate including

operations for investment promotion market researching and customer

relationship development I also participate assist and support investment team in

analysis of investment opportunities daily work of fund management and

portfolio management

2

As an exclusive fund management company of PetroVietnam and a dynamic

member of PVcomBank PVFC Capital receives continued support as well as

inherits significant experience from PVcombank in terms of financial

management and investment and advantages in oil and gas sector

Funds and entrusted assets managed by PVFC Capital are from both foreign and

domestic investors PVFC Capital possesses a proven track record in asset

management and invaluable experience in the oil and energy sector with the total

value of successfully managed assets of more than VND 10000 billion

The company is managing two funds (one local fund and one offshore fund) with

net asset of 105 million US dollars and eleven investment portfolios with total

net value of 480 million US dollars (Source PVFC Capital) We have to deliver

the report monthly quarterly yearly to investors who are very interested in the

updated information of ther net asset value in the fund Beside the macro-

economic and stock market scanning we have to make recommendation to them

in which stock bonds or financial assets should be bought sold or hold

12Problem statement

The biggest problem of PVFC Capital at the moment is difficulties in establishing

a new fund given current situation of the economy Over the last few years after

the booming period Vietnam encounter the stabilization of the macroeconomic

Compare to the previous time investors are more conservative in their invesment

decisions

Based on market conditions and the current activities of PVFC Capital we realize

it is a critical task to raise fund as well as demand for new potential partners in

local and overseas It is our challenges to expand new customer network to

access and exploit more opportunities from potential partners to establish a new

fund

In 2013 PVFC Capitallsquos revenue is composed mainly from extremely active

portfolio management (8645227 USD out of total 1435655 USD revenue) As

of 31122013 the company has been managing 11 (eleven) portfolios in

domestic trusts and two foreign investment portfolio with total Net asset value of

about 450000000 USD (Source PVFC Capital)

Currently only two active funds are under our management which are Vietnam

Equitization Focused Fund (VEFF) amp Vietnam Investment Platform (VIP LLC)

both raising from Japanese investors Revenue from fund management in FY

2013 is 130000 USD contributed only 88 of total revenue (Source PVFC

Capital) For a fund management company this revenue structure needs to be

adjusted in the direction that increasing revenue from fund management

activities besides extremely well-managed and active portfolio management

activities

In addition since 2011 the company has not mobilized new funds after the

success of the fund establishment of VEFF Hence there is urgent need now to

establish new funds making revenue from this activity access to new capital

3

flow from investors in order to invest in opportunities within and outside the

petroleum industry

13Objective of the research

This research has the following objectives

o Review current situation of fund management companies and open-ended

funds in Vietnam market

o Identify the main causative factors of PVFC Capital lsquos unbalanced

revenue structure and difficulties in fund raising

o Evaluate the advantages and out-perform characteristics of PVGF in

compare to other form of fund

o Identify solution for PVFC Capital lsquos top management to raising capital

for this new type of fund

14Conceptual framework of the study

Figure 11 shows the approach to the research Firstly overview of PVFC Capital

and through impact model the main issues was defined Before analyzing the

prospects of PVGF the case study of ProFunds UltraSector Oil amp Gas Svc was

introduced as an example of the best practice of an open-ended fund investing in

oil amp gas index

Figure 11 Conceptual Framework of the Study

PROBLEM DEFINITION

BEST PRACTICE OF PROFUNDS

SITUATIONAL ANALYSIS

IMPACT MODEL

DEVELOPING PVGF

ALTERNATIVE SOLUTIONS amp EVALUATION

RECOMMENDATIONS amp CONCLUSION

4

15Scope of the research and data collection

To get the thorough understanding of the opportunities as well as challenges

investing in PVGF the information was retrieved from top management level

(Head of Department) to each associate in different unit in the organization

The primary information was collected though the questionnaires though internal

meeting and internal seminar with all the staff in the company and though the in-

depth interview with head of three most important department in PVFC Capital

which are Business Development Department Investment Department and

Internal Control Department

The secondary data were collected from

o Company profile

o Annual reports

o MonthlyAnnual Investment Report to investors

o Offering Letter to potential investor

o Updated data of PVN-Index from PSI

o PVFC Capitalrsquos Brochure

o Internal seminar Presentation on PVGF

o Other PVGF-related documents

o Public media (newspaper website magazineshellip)

16Organization of the research study

The research includes 7 chapters and its structure is as follows

Chapter 1 Introduction

This chapter provides a brief introduction the research rationales the main issue

research approach and the research structure

Chapter 2 Best Practice

Case of best practice on investing with open-ended fund in oil amp gas index was

used as examples to illustrate the theory and justification of the researcher

Chapter 3 Situational analysis

Chapter 3 provides a status of fund management companies and open-ended fund

in Vietnam market The chapter also discusses the main causative agents and the

result in the need to mobilize and establish a new fund of PVFC Capital

Chapter 4 Developing PVGF

Chapter 4 introduces the PVGF its investment objective strategy and its

advantages compared to other type of funds

5

Chapter 5 Fund development alternative

Chapter 5 provides solution for introduces the new fund of PVGF into the

Vietnam market such as small-scale starting with utilization of the capital from

shareholder as well as enhancing networking activities

The chapter provides alternative solution for introduces exchange-traded fund as

another effective investment tool for PVFC Capital It also compares and

contrasts between the two solutions and evaluates which solution is the most

appropriate one

Chapter 6 Recommendation and conclusion

Chapter 6 wraps up the above chapters conducts two action plans to raising

capital for PVFG as well as recommendations to PVFC Capitallsquos top

management board and strategic shareholders

6

CHAPTER 2

BEST PRACTICE A CASE STUDY OF PROFUNDS ULTRASECTOR

OIL amp GAS SVC

21Introduction

Oil amp Gas UltraSector ProFund is an open-end fund incorporated in the USA

The Fund is advised by ProFund Advisors since October 2013

The Fund invests in securities and derivatives that ProFund Advisors believes in

combination should have similar daily return characteristics as one and one-half

times (15x) the daily return of the Index

22Index Benchmark Dow Jones US Oil amp Gas Index

The Index measures the performance of the oil and gas sector of the US equity

market Component companies include among others exploration and

production integrated oil and gas oil equipment and services pipelines

renewable energy equipment companies and alternative fuel producers As of

September 30 2013 the Index included companies with capitalizations between

$9090 million and $3787 billion The average capitalization of the companies

comprising the Index was approximately $212 billion (Source Profund) The

Index is published under the Bloomberg ticker symbol ldquoDJUSENrdquo

Table 21 Average Annual Total Returns as of December 31 2012

Total Index Companies 84 PriceEarnings Ratio 1634 PriceBook Ratio 225 Dividend Yield 205 Average Index Market Capitalization 2486 billion

(Source httpwwwprofundscom)

Table 22 Index Sector Weightings

Index Sector Weightings Weight Oil amp Gas Producers 7196 Oil Equipment Services amp Distribution 2780 Alternative Energy 024

(Source httpwwwprofundscom)

iv

Table of Contents

Chap I Introduction 1

11Rationale 1

12Problem statement 2

13Objective of the research 3

14Conceptual framework of the research 3

15 Scope of the research and data collection 4

16Organization of the research study 4

Chap II Best practice A case study of Profunds Ultrasector Oil amp Gas Svc 6

21 Introduction 6

22 Index Benchmark Dow Jones US Oil amp Gas Index 6

23 Investment strategy of Oil amp Gas UltraSector ProFund 7

24 Performance amp return of Oil amp Gas UltraSector ProFund 8

25 Summary of the chapter 10

Chap III Situational Analysis 11

31 Status of fund management companies and Open-ended funds in Vietnam market 11

32 Oil amp gas sector in Vietnam 11

33 Simulation and performance of PVN Index 13

34 PVN Index performance compared to other indexes 14

35 Impact model 15

36 Financial Market Condition 16

37 Confidence of investors 17

38 Legal Framework - Circular 1832011Circular 19

39 Revenue Structure 19

310 Support from shareholders 20

Chap IV Developing the PVGF 21

41 Introduction new form of fund (PVGF) 21

42 Investment objective amp strategy 22

43 Characteristics of listed companies in PVN-10 Index 23

v

Chap V Fund Development Alternative 25

51 Small Scale Start Up 25

52 Support from shareholders 25

53 Advantages of Open-ended Fund 26

54 Expected performance 27

55 PVN-10 exchange-traded fund 28

56 Evaluation of Alternative 28

57 Comparison 31

Chap VI Conclusion amp Recommendation 33

61 Conclusion 33

62 Action Plan 1 Open-ended Fund 34

63 Action Plan 2 Exchange Traded Fund 35

64 Recommendations 37

Appendix 1 39

Appendix 2 40

Appendix 3 41

Appendix 4 42

Appendix 5 43

Appendix 6 44

Appendix 7 45

Appendix 8 46

Reference 47

vi

LIST OF TABLE

Table 11 Asset under management 1

Table 21 Average Annual Total Returns as of December 31 2012 6

Table 22 Index Sector Weightings 6

Table 23 Top 10 Index Companies 7

Table 24 Average Annual Total Returns as of December 31 2012 9

Table 25 Annual Total Returns Summary 9

Table 31 Revenue Structure 19

Table 32 Summarized factors affecting business 20

Table 41 PetroVietnam Growth Open-ended Fund 21

Table 42 PVN-10 Index 23

Table 43 PVN-10 Dividend 24

Table 51 Advantages of Open-ended Fund 26

Table 52 Comparing open-ended fund (PVGF) with PVN-Index ETF 29

Table 53 Disadvantages of ETF 30

Table 54 Conditions for ETF to develop and operate effectively 30

Table 55 Evaluation Summary 32

Table 61 Fund structures of Open-ended fund (Plan 1) 34

Table 62 Fund Raising Plan of Open-ended fund (Plan 1) 35

Table 63 Fund structures of Exchange Traded Fund (Plan 2) 36

Table 64 Fund Raising Plan of Exchange Traded Fund (Plan 2) 37

Table 65 Process of investment management control and coordinate 38

vii

LIST OF FIGURE

Figure 11 Conceptual Framework of the Study 3

Figure 21 Average Annual Total Returns as of December 31 2012 8

Figure 31 The importance of oil and gas sector 12

Figure 32 PVN-Index component by sector 12

Figure 34 PVN Index vs VNIndex amp HNIndex 14

Figure 35 PVN Index vs VN30 amp HNX10 14

Figure 36 Conception of PVGF 15

Figure 37 Market players 16

Figure 38 VNIndex movements in 2013 16

Figure 39 GDP and GDP Growth 17

Figure 310 Trade Balance 17

Figure 311 FDI inflows 18

Figure 312 Interest rates 18

Figure 41 Asset allocation 23

Figure 42 Subsidiaries of PVN 24

Figure 51 Operation of Open-ended Fund 27

Figure 52 Regulation of establishment and management of ETFs 28

viii

LIST OF ABBREVIATIONS

ETF Exchange ndash Traded Fund

FC Fund Certificate

HNX Hanoi Stock Exchange

NAV Net Asset Value

VN30 30 biggest companies in the Vietnam Stock market

VEFF Vietnam Equitization Focused Fund

VIP LLC Vietnam Investment Platform

PVN Petrovietnam Oil amp Gas Group

PVcomBank Vietnam Public Bank

PVFC Capital Petrovietnam Finance Fund Incorporation

PVGF PetroVietnam Growth Open-ended Fund

PVN-Index 32 listed companies of PetroVietnam on two stock

exchanges of Vietnam

PVN-10 Index 10 biggest share of PVN in the Vietnam Stock market

1

CHAPTER 1

INTRODUCTION

11Rationale

PVFC Capital is the exclusive fund management company within PetroVietnam

Oil amp Gas Group (PVN) Established at the very early stage of the fund

management industry of Vietnam PVFC Capital serves as the fund raising and

fund management arm of the Group With expertise in oil and energy sector our

funds and portfolios have unique advantages in addition to wide range of selected

equities

Background of PVFC Capital

The exclusive fund management company within PetroVietnam Group

Establishment 14 December 2007

Chartered capital VND 100 billion (US$5million)

Shareholders

- PVcomBank (merger between Petrovietnam Finance Corporation

amp Western Bank)

- SOVICO (leading Investment Group)

Number of Employees 33

Assets under management US$490 million (~10 trillion VND)

Table 11 Asset under management

Local fund Offshore fund Portfolio management

Size of assets US$ 35

million

US$ 7 million US$ 480 million

Establishment Nov 2011 Aug 2008 2008

Accumulated

NAV growth

+113 +27 13year for FY2012

Source PVFC Capital

In a typical fund management company there are normally two main

departments Business Development Department and Investment Department I

have chance to apply the knowledge acquired and enhance my experience in both

fields here Particularly my main responsibilities as an associate including

operations for investment promotion market researching and customer

relationship development I also participate assist and support investment team in

analysis of investment opportunities daily work of fund management and

portfolio management

2

As an exclusive fund management company of PetroVietnam and a dynamic

member of PVcomBank PVFC Capital receives continued support as well as

inherits significant experience from PVcombank in terms of financial

management and investment and advantages in oil and gas sector

Funds and entrusted assets managed by PVFC Capital are from both foreign and

domestic investors PVFC Capital possesses a proven track record in asset

management and invaluable experience in the oil and energy sector with the total

value of successfully managed assets of more than VND 10000 billion

The company is managing two funds (one local fund and one offshore fund) with

net asset of 105 million US dollars and eleven investment portfolios with total

net value of 480 million US dollars (Source PVFC Capital) We have to deliver

the report monthly quarterly yearly to investors who are very interested in the

updated information of ther net asset value in the fund Beside the macro-

economic and stock market scanning we have to make recommendation to them

in which stock bonds or financial assets should be bought sold or hold

12Problem statement

The biggest problem of PVFC Capital at the moment is difficulties in establishing

a new fund given current situation of the economy Over the last few years after

the booming period Vietnam encounter the stabilization of the macroeconomic

Compare to the previous time investors are more conservative in their invesment

decisions

Based on market conditions and the current activities of PVFC Capital we realize

it is a critical task to raise fund as well as demand for new potential partners in

local and overseas It is our challenges to expand new customer network to

access and exploit more opportunities from potential partners to establish a new

fund

In 2013 PVFC Capitallsquos revenue is composed mainly from extremely active

portfolio management (8645227 USD out of total 1435655 USD revenue) As

of 31122013 the company has been managing 11 (eleven) portfolios in

domestic trusts and two foreign investment portfolio with total Net asset value of

about 450000000 USD (Source PVFC Capital)

Currently only two active funds are under our management which are Vietnam

Equitization Focused Fund (VEFF) amp Vietnam Investment Platform (VIP LLC)

both raising from Japanese investors Revenue from fund management in FY

2013 is 130000 USD contributed only 88 of total revenue (Source PVFC

Capital) For a fund management company this revenue structure needs to be

adjusted in the direction that increasing revenue from fund management

activities besides extremely well-managed and active portfolio management

activities

In addition since 2011 the company has not mobilized new funds after the

success of the fund establishment of VEFF Hence there is urgent need now to

establish new funds making revenue from this activity access to new capital

3

flow from investors in order to invest in opportunities within and outside the

petroleum industry

13Objective of the research

This research has the following objectives

o Review current situation of fund management companies and open-ended

funds in Vietnam market

o Identify the main causative factors of PVFC Capital lsquos unbalanced

revenue structure and difficulties in fund raising

o Evaluate the advantages and out-perform characteristics of PVGF in

compare to other form of fund

o Identify solution for PVFC Capital lsquos top management to raising capital

for this new type of fund

14Conceptual framework of the study

Figure 11 shows the approach to the research Firstly overview of PVFC Capital

and through impact model the main issues was defined Before analyzing the

prospects of PVGF the case study of ProFunds UltraSector Oil amp Gas Svc was

introduced as an example of the best practice of an open-ended fund investing in

oil amp gas index

Figure 11 Conceptual Framework of the Study

PROBLEM DEFINITION

BEST PRACTICE OF PROFUNDS

SITUATIONAL ANALYSIS

IMPACT MODEL

DEVELOPING PVGF

ALTERNATIVE SOLUTIONS amp EVALUATION

RECOMMENDATIONS amp CONCLUSION

4

15Scope of the research and data collection

To get the thorough understanding of the opportunities as well as challenges

investing in PVGF the information was retrieved from top management level

(Head of Department) to each associate in different unit in the organization

The primary information was collected though the questionnaires though internal

meeting and internal seminar with all the staff in the company and though the in-

depth interview with head of three most important department in PVFC Capital

which are Business Development Department Investment Department and

Internal Control Department

The secondary data were collected from

o Company profile

o Annual reports

o MonthlyAnnual Investment Report to investors

o Offering Letter to potential investor

o Updated data of PVN-Index from PSI

o PVFC Capitalrsquos Brochure

o Internal seminar Presentation on PVGF

o Other PVGF-related documents

o Public media (newspaper website magazineshellip)

16Organization of the research study

The research includes 7 chapters and its structure is as follows

Chapter 1 Introduction

This chapter provides a brief introduction the research rationales the main issue

research approach and the research structure

Chapter 2 Best Practice

Case of best practice on investing with open-ended fund in oil amp gas index was

used as examples to illustrate the theory and justification of the researcher

Chapter 3 Situational analysis

Chapter 3 provides a status of fund management companies and open-ended fund

in Vietnam market The chapter also discusses the main causative agents and the

result in the need to mobilize and establish a new fund of PVFC Capital

Chapter 4 Developing PVGF

Chapter 4 introduces the PVGF its investment objective strategy and its

advantages compared to other type of funds

5

Chapter 5 Fund development alternative

Chapter 5 provides solution for introduces the new fund of PVGF into the

Vietnam market such as small-scale starting with utilization of the capital from

shareholder as well as enhancing networking activities

The chapter provides alternative solution for introduces exchange-traded fund as

another effective investment tool for PVFC Capital It also compares and

contrasts between the two solutions and evaluates which solution is the most

appropriate one

Chapter 6 Recommendation and conclusion

Chapter 6 wraps up the above chapters conducts two action plans to raising

capital for PVFG as well as recommendations to PVFC Capitallsquos top

management board and strategic shareholders

6

CHAPTER 2

BEST PRACTICE A CASE STUDY OF PROFUNDS ULTRASECTOR

OIL amp GAS SVC

21Introduction

Oil amp Gas UltraSector ProFund is an open-end fund incorporated in the USA

The Fund is advised by ProFund Advisors since October 2013

The Fund invests in securities and derivatives that ProFund Advisors believes in

combination should have similar daily return characteristics as one and one-half

times (15x) the daily return of the Index

22Index Benchmark Dow Jones US Oil amp Gas Index

The Index measures the performance of the oil and gas sector of the US equity

market Component companies include among others exploration and

production integrated oil and gas oil equipment and services pipelines

renewable energy equipment companies and alternative fuel producers As of

September 30 2013 the Index included companies with capitalizations between

$9090 million and $3787 billion The average capitalization of the companies

comprising the Index was approximately $212 billion (Source Profund) The

Index is published under the Bloomberg ticker symbol ldquoDJUSENrdquo

Table 21 Average Annual Total Returns as of December 31 2012

Total Index Companies 84 PriceEarnings Ratio 1634 PriceBook Ratio 225 Dividend Yield 205 Average Index Market Capitalization 2486 billion

(Source httpwwwprofundscom)

Table 22 Index Sector Weightings

Index Sector Weightings Weight Oil amp Gas Producers 7196 Oil Equipment Services amp Distribution 2780 Alternative Energy 024

(Source httpwwwprofundscom)

v

Chap V Fund Development Alternative 25

51 Small Scale Start Up 25

52 Support from shareholders 25

53 Advantages of Open-ended Fund 26

54 Expected performance 27

55 PVN-10 exchange-traded fund 28

56 Evaluation of Alternative 28

57 Comparison 31

Chap VI Conclusion amp Recommendation 33

61 Conclusion 33

62 Action Plan 1 Open-ended Fund 34

63 Action Plan 2 Exchange Traded Fund 35

64 Recommendations 37

Appendix 1 39

Appendix 2 40

Appendix 3 41

Appendix 4 42

Appendix 5 43

Appendix 6 44

Appendix 7 45

Appendix 8 46

Reference 47

vi

LIST OF TABLE

Table 11 Asset under management 1

Table 21 Average Annual Total Returns as of December 31 2012 6

Table 22 Index Sector Weightings 6

Table 23 Top 10 Index Companies 7

Table 24 Average Annual Total Returns as of December 31 2012 9

Table 25 Annual Total Returns Summary 9

Table 31 Revenue Structure 19

Table 32 Summarized factors affecting business 20

Table 41 PetroVietnam Growth Open-ended Fund 21

Table 42 PVN-10 Index 23

Table 43 PVN-10 Dividend 24

Table 51 Advantages of Open-ended Fund 26

Table 52 Comparing open-ended fund (PVGF) with PVN-Index ETF 29

Table 53 Disadvantages of ETF 30

Table 54 Conditions for ETF to develop and operate effectively 30

Table 55 Evaluation Summary 32

Table 61 Fund structures of Open-ended fund (Plan 1) 34

Table 62 Fund Raising Plan of Open-ended fund (Plan 1) 35

Table 63 Fund structures of Exchange Traded Fund (Plan 2) 36

Table 64 Fund Raising Plan of Exchange Traded Fund (Plan 2) 37

Table 65 Process of investment management control and coordinate 38

vii

LIST OF FIGURE

Figure 11 Conceptual Framework of the Study 3

Figure 21 Average Annual Total Returns as of December 31 2012 8

Figure 31 The importance of oil and gas sector 12

Figure 32 PVN-Index component by sector 12

Figure 34 PVN Index vs VNIndex amp HNIndex 14

Figure 35 PVN Index vs VN30 amp HNX10 14

Figure 36 Conception of PVGF 15

Figure 37 Market players 16

Figure 38 VNIndex movements in 2013 16

Figure 39 GDP and GDP Growth 17

Figure 310 Trade Balance 17

Figure 311 FDI inflows 18

Figure 312 Interest rates 18

Figure 41 Asset allocation 23

Figure 42 Subsidiaries of PVN 24

Figure 51 Operation of Open-ended Fund 27

Figure 52 Regulation of establishment and management of ETFs 28

viii

LIST OF ABBREVIATIONS

ETF Exchange ndash Traded Fund

FC Fund Certificate

HNX Hanoi Stock Exchange

NAV Net Asset Value

VN30 30 biggest companies in the Vietnam Stock market

VEFF Vietnam Equitization Focused Fund

VIP LLC Vietnam Investment Platform

PVN Petrovietnam Oil amp Gas Group

PVcomBank Vietnam Public Bank

PVFC Capital Petrovietnam Finance Fund Incorporation

PVGF PetroVietnam Growth Open-ended Fund

PVN-Index 32 listed companies of PetroVietnam on two stock

exchanges of Vietnam

PVN-10 Index 10 biggest share of PVN in the Vietnam Stock market

1

CHAPTER 1

INTRODUCTION

11Rationale

PVFC Capital is the exclusive fund management company within PetroVietnam

Oil amp Gas Group (PVN) Established at the very early stage of the fund

management industry of Vietnam PVFC Capital serves as the fund raising and

fund management arm of the Group With expertise in oil and energy sector our

funds and portfolios have unique advantages in addition to wide range of selected

equities

Background of PVFC Capital

The exclusive fund management company within PetroVietnam Group

Establishment 14 December 2007

Chartered capital VND 100 billion (US$5million)

Shareholders

- PVcomBank (merger between Petrovietnam Finance Corporation

amp Western Bank)

- SOVICO (leading Investment Group)

Number of Employees 33

Assets under management US$490 million (~10 trillion VND)

Table 11 Asset under management

Local fund Offshore fund Portfolio management

Size of assets US$ 35

million

US$ 7 million US$ 480 million

Establishment Nov 2011 Aug 2008 2008

Accumulated

NAV growth

+113 +27 13year for FY2012

Source PVFC Capital

In a typical fund management company there are normally two main

departments Business Development Department and Investment Department I

have chance to apply the knowledge acquired and enhance my experience in both

fields here Particularly my main responsibilities as an associate including

operations for investment promotion market researching and customer

relationship development I also participate assist and support investment team in

analysis of investment opportunities daily work of fund management and

portfolio management

2

As an exclusive fund management company of PetroVietnam and a dynamic

member of PVcomBank PVFC Capital receives continued support as well as

inherits significant experience from PVcombank in terms of financial

management and investment and advantages in oil and gas sector

Funds and entrusted assets managed by PVFC Capital are from both foreign and

domestic investors PVFC Capital possesses a proven track record in asset

management and invaluable experience in the oil and energy sector with the total

value of successfully managed assets of more than VND 10000 billion

The company is managing two funds (one local fund and one offshore fund) with

net asset of 105 million US dollars and eleven investment portfolios with total

net value of 480 million US dollars (Source PVFC Capital) We have to deliver

the report monthly quarterly yearly to investors who are very interested in the

updated information of ther net asset value in the fund Beside the macro-

economic and stock market scanning we have to make recommendation to them

in which stock bonds or financial assets should be bought sold or hold

12Problem statement

The biggest problem of PVFC Capital at the moment is difficulties in establishing

a new fund given current situation of the economy Over the last few years after

the booming period Vietnam encounter the stabilization of the macroeconomic

Compare to the previous time investors are more conservative in their invesment

decisions

Based on market conditions and the current activities of PVFC Capital we realize

it is a critical task to raise fund as well as demand for new potential partners in

local and overseas It is our challenges to expand new customer network to

access and exploit more opportunities from potential partners to establish a new

fund

In 2013 PVFC Capitallsquos revenue is composed mainly from extremely active

portfolio management (8645227 USD out of total 1435655 USD revenue) As

of 31122013 the company has been managing 11 (eleven) portfolios in

domestic trusts and two foreign investment portfolio with total Net asset value of

about 450000000 USD (Source PVFC Capital)

Currently only two active funds are under our management which are Vietnam

Equitization Focused Fund (VEFF) amp Vietnam Investment Platform (VIP LLC)

both raising from Japanese investors Revenue from fund management in FY

2013 is 130000 USD contributed only 88 of total revenue (Source PVFC

Capital) For a fund management company this revenue structure needs to be

adjusted in the direction that increasing revenue from fund management

activities besides extremely well-managed and active portfolio management

activities

In addition since 2011 the company has not mobilized new funds after the

success of the fund establishment of VEFF Hence there is urgent need now to

establish new funds making revenue from this activity access to new capital

3

flow from investors in order to invest in opportunities within and outside the

petroleum industry

13Objective of the research

This research has the following objectives

o Review current situation of fund management companies and open-ended

funds in Vietnam market

o Identify the main causative factors of PVFC Capital lsquos unbalanced

revenue structure and difficulties in fund raising

o Evaluate the advantages and out-perform characteristics of PVGF in

compare to other form of fund

o Identify solution for PVFC Capital lsquos top management to raising capital

for this new type of fund

14Conceptual framework of the study

Figure 11 shows the approach to the research Firstly overview of PVFC Capital

and through impact model the main issues was defined Before analyzing the

prospects of PVGF the case study of ProFunds UltraSector Oil amp Gas Svc was

introduced as an example of the best practice of an open-ended fund investing in

oil amp gas index

Figure 11 Conceptual Framework of the Study

PROBLEM DEFINITION

BEST PRACTICE OF PROFUNDS

SITUATIONAL ANALYSIS

IMPACT MODEL

DEVELOPING PVGF

ALTERNATIVE SOLUTIONS amp EVALUATION

RECOMMENDATIONS amp CONCLUSION

4

15Scope of the research and data collection

To get the thorough understanding of the opportunities as well as challenges

investing in PVGF the information was retrieved from top management level

(Head of Department) to each associate in different unit in the organization

The primary information was collected though the questionnaires though internal

meeting and internal seminar with all the staff in the company and though the in-

depth interview with head of three most important department in PVFC Capital

which are Business Development Department Investment Department and

Internal Control Department

The secondary data were collected from

o Company profile

o Annual reports

o MonthlyAnnual Investment Report to investors

o Offering Letter to potential investor

o Updated data of PVN-Index from PSI

o PVFC Capitalrsquos Brochure

o Internal seminar Presentation on PVGF

o Other PVGF-related documents

o Public media (newspaper website magazineshellip)

16Organization of the research study

The research includes 7 chapters and its structure is as follows

Chapter 1 Introduction

This chapter provides a brief introduction the research rationales the main issue

research approach and the research structure

Chapter 2 Best Practice

Case of best practice on investing with open-ended fund in oil amp gas index was

used as examples to illustrate the theory and justification of the researcher

Chapter 3 Situational analysis

Chapter 3 provides a status of fund management companies and open-ended fund

in Vietnam market The chapter also discusses the main causative agents and the

result in the need to mobilize and establish a new fund of PVFC Capital

Chapter 4 Developing PVGF

Chapter 4 introduces the PVGF its investment objective strategy and its

advantages compared to other type of funds

5

Chapter 5 Fund development alternative

Chapter 5 provides solution for introduces the new fund of PVGF into the

Vietnam market such as small-scale starting with utilization of the capital from

shareholder as well as enhancing networking activities

The chapter provides alternative solution for introduces exchange-traded fund as

another effective investment tool for PVFC Capital It also compares and

contrasts between the two solutions and evaluates which solution is the most

appropriate one

Chapter 6 Recommendation and conclusion

Chapter 6 wraps up the above chapters conducts two action plans to raising

capital for PVFG as well as recommendations to PVFC Capitallsquos top

management board and strategic shareholders

6

CHAPTER 2

BEST PRACTICE A CASE STUDY OF PROFUNDS ULTRASECTOR

OIL amp GAS SVC

21Introduction

Oil amp Gas UltraSector ProFund is an open-end fund incorporated in the USA

The Fund is advised by ProFund Advisors since October 2013

The Fund invests in securities and derivatives that ProFund Advisors believes in

combination should have similar daily return characteristics as one and one-half

times (15x) the daily return of the Index

22Index Benchmark Dow Jones US Oil amp Gas Index

The Index measures the performance of the oil and gas sector of the US equity

market Component companies include among others exploration and

production integrated oil and gas oil equipment and services pipelines

renewable energy equipment companies and alternative fuel producers As of

September 30 2013 the Index included companies with capitalizations between

$9090 million and $3787 billion The average capitalization of the companies

comprising the Index was approximately $212 billion (Source Profund) The

Index is published under the Bloomberg ticker symbol ldquoDJUSENrdquo

Table 21 Average Annual Total Returns as of December 31 2012

Total Index Companies 84 PriceEarnings Ratio 1634 PriceBook Ratio 225 Dividend Yield 205 Average Index Market Capitalization 2486 billion

(Source httpwwwprofundscom)

Table 22 Index Sector Weightings

Index Sector Weightings Weight Oil amp Gas Producers 7196 Oil Equipment Services amp Distribution 2780 Alternative Energy 024

(Source httpwwwprofundscom)

vi

LIST OF TABLE

Table 11 Asset under management 1

Table 21 Average Annual Total Returns as of December 31 2012 6

Table 22 Index Sector Weightings 6

Table 23 Top 10 Index Companies 7

Table 24 Average Annual Total Returns as of December 31 2012 9

Table 25 Annual Total Returns Summary 9

Table 31 Revenue Structure 19

Table 32 Summarized factors affecting business 20

Table 41 PetroVietnam Growth Open-ended Fund 21

Table 42 PVN-10 Index 23

Table 43 PVN-10 Dividend 24

Table 51 Advantages of Open-ended Fund 26

Table 52 Comparing open-ended fund (PVGF) with PVN-Index ETF 29

Table 53 Disadvantages of ETF 30

Table 54 Conditions for ETF to develop and operate effectively 30

Table 55 Evaluation Summary 32

Table 61 Fund structures of Open-ended fund (Plan 1) 34

Table 62 Fund Raising Plan of Open-ended fund (Plan 1) 35

Table 63 Fund structures of Exchange Traded Fund (Plan 2) 36

Table 64 Fund Raising Plan of Exchange Traded Fund (Plan 2) 37

Table 65 Process of investment management control and coordinate 38

vii

LIST OF FIGURE

Figure 11 Conceptual Framework of the Study 3

Figure 21 Average Annual Total Returns as of December 31 2012 8

Figure 31 The importance of oil and gas sector 12

Figure 32 PVN-Index component by sector 12

Figure 34 PVN Index vs VNIndex amp HNIndex 14

Figure 35 PVN Index vs VN30 amp HNX10 14

Figure 36 Conception of PVGF 15

Figure 37 Market players 16

Figure 38 VNIndex movements in 2013 16

Figure 39 GDP and GDP Growth 17

Figure 310 Trade Balance 17

Figure 311 FDI inflows 18

Figure 312 Interest rates 18

Figure 41 Asset allocation 23

Figure 42 Subsidiaries of PVN 24

Figure 51 Operation of Open-ended Fund 27

Figure 52 Regulation of establishment and management of ETFs 28

viii

LIST OF ABBREVIATIONS

ETF Exchange ndash Traded Fund

FC Fund Certificate

HNX Hanoi Stock Exchange

NAV Net Asset Value

VN30 30 biggest companies in the Vietnam Stock market

VEFF Vietnam Equitization Focused Fund

VIP LLC Vietnam Investment Platform

PVN Petrovietnam Oil amp Gas Group

PVcomBank Vietnam Public Bank

PVFC Capital Petrovietnam Finance Fund Incorporation

PVGF PetroVietnam Growth Open-ended Fund

PVN-Index 32 listed companies of PetroVietnam on two stock

exchanges of Vietnam

PVN-10 Index 10 biggest share of PVN in the Vietnam Stock market

1

CHAPTER 1

INTRODUCTION

11Rationale

PVFC Capital is the exclusive fund management company within PetroVietnam

Oil amp Gas Group (PVN) Established at the very early stage of the fund

management industry of Vietnam PVFC Capital serves as the fund raising and

fund management arm of the Group With expertise in oil and energy sector our

funds and portfolios have unique advantages in addition to wide range of selected

equities

Background of PVFC Capital

The exclusive fund management company within PetroVietnam Group

Establishment 14 December 2007

Chartered capital VND 100 billion (US$5million)

Shareholders

- PVcomBank (merger between Petrovietnam Finance Corporation

amp Western Bank)

- SOVICO (leading Investment Group)

Number of Employees 33

Assets under management US$490 million (~10 trillion VND)

Table 11 Asset under management

Local fund Offshore fund Portfolio management

Size of assets US$ 35

million

US$ 7 million US$ 480 million

Establishment Nov 2011 Aug 2008 2008

Accumulated

NAV growth

+113 +27 13year for FY2012

Source PVFC Capital

In a typical fund management company there are normally two main

departments Business Development Department and Investment Department I

have chance to apply the knowledge acquired and enhance my experience in both

fields here Particularly my main responsibilities as an associate including

operations for investment promotion market researching and customer

relationship development I also participate assist and support investment team in

analysis of investment opportunities daily work of fund management and

portfolio management

2

As an exclusive fund management company of PetroVietnam and a dynamic

member of PVcomBank PVFC Capital receives continued support as well as

inherits significant experience from PVcombank in terms of financial

management and investment and advantages in oil and gas sector

Funds and entrusted assets managed by PVFC Capital are from both foreign and

domestic investors PVFC Capital possesses a proven track record in asset

management and invaluable experience in the oil and energy sector with the total

value of successfully managed assets of more than VND 10000 billion

The company is managing two funds (one local fund and one offshore fund) with

net asset of 105 million US dollars and eleven investment portfolios with total

net value of 480 million US dollars (Source PVFC Capital) We have to deliver

the report monthly quarterly yearly to investors who are very interested in the

updated information of ther net asset value in the fund Beside the macro-

economic and stock market scanning we have to make recommendation to them

in which stock bonds or financial assets should be bought sold or hold

12Problem statement

The biggest problem of PVFC Capital at the moment is difficulties in establishing

a new fund given current situation of the economy Over the last few years after

the booming period Vietnam encounter the stabilization of the macroeconomic

Compare to the previous time investors are more conservative in their invesment

decisions

Based on market conditions and the current activities of PVFC Capital we realize

it is a critical task to raise fund as well as demand for new potential partners in

local and overseas It is our challenges to expand new customer network to

access and exploit more opportunities from potential partners to establish a new

fund

In 2013 PVFC Capitallsquos revenue is composed mainly from extremely active

portfolio management (8645227 USD out of total 1435655 USD revenue) As

of 31122013 the company has been managing 11 (eleven) portfolios in

domestic trusts and two foreign investment portfolio with total Net asset value of

about 450000000 USD (Source PVFC Capital)

Currently only two active funds are under our management which are Vietnam

Equitization Focused Fund (VEFF) amp Vietnam Investment Platform (VIP LLC)

both raising from Japanese investors Revenue from fund management in FY

2013 is 130000 USD contributed only 88 of total revenue (Source PVFC

Capital) For a fund management company this revenue structure needs to be

adjusted in the direction that increasing revenue from fund management

activities besides extremely well-managed and active portfolio management

activities

In addition since 2011 the company has not mobilized new funds after the

success of the fund establishment of VEFF Hence there is urgent need now to

establish new funds making revenue from this activity access to new capital

3

flow from investors in order to invest in opportunities within and outside the

petroleum industry

13Objective of the research

This research has the following objectives

o Review current situation of fund management companies and open-ended

funds in Vietnam market

o Identify the main causative factors of PVFC Capital lsquos unbalanced

revenue structure and difficulties in fund raising

o Evaluate the advantages and out-perform characteristics of PVGF in

compare to other form of fund

o Identify solution for PVFC Capital lsquos top management to raising capital

for this new type of fund

14Conceptual framework of the study

Figure 11 shows the approach to the research Firstly overview of PVFC Capital

and through impact model the main issues was defined Before analyzing the

prospects of PVGF the case study of ProFunds UltraSector Oil amp Gas Svc was

introduced as an example of the best practice of an open-ended fund investing in

oil amp gas index

Figure 11 Conceptual Framework of the Study

PROBLEM DEFINITION

BEST PRACTICE OF PROFUNDS

SITUATIONAL ANALYSIS

IMPACT MODEL

DEVELOPING PVGF

ALTERNATIVE SOLUTIONS amp EVALUATION

RECOMMENDATIONS amp CONCLUSION

4

15Scope of the research and data collection

To get the thorough understanding of the opportunities as well as challenges

investing in PVGF the information was retrieved from top management level

(Head of Department) to each associate in different unit in the organization

The primary information was collected though the questionnaires though internal

meeting and internal seminar with all the staff in the company and though the in-

depth interview with head of three most important department in PVFC Capital

which are Business Development Department Investment Department and

Internal Control Department

The secondary data were collected from

o Company profile

o Annual reports

o MonthlyAnnual Investment Report to investors

o Offering Letter to potential investor

o Updated data of PVN-Index from PSI

o PVFC Capitalrsquos Brochure

o Internal seminar Presentation on PVGF

o Other PVGF-related documents

o Public media (newspaper website magazineshellip)

16Organization of the research study

The research includes 7 chapters and its structure is as follows

Chapter 1 Introduction

This chapter provides a brief introduction the research rationales the main issue

research approach and the research structure

Chapter 2 Best Practice

Case of best practice on investing with open-ended fund in oil amp gas index was

used as examples to illustrate the theory and justification of the researcher

Chapter 3 Situational analysis

Chapter 3 provides a status of fund management companies and open-ended fund

in Vietnam market The chapter also discusses the main causative agents and the

result in the need to mobilize and establish a new fund of PVFC Capital

Chapter 4 Developing PVGF

Chapter 4 introduces the PVGF its investment objective strategy and its

advantages compared to other type of funds

5

Chapter 5 Fund development alternative

Chapter 5 provides solution for introduces the new fund of PVGF into the

Vietnam market such as small-scale starting with utilization of the capital from

shareholder as well as enhancing networking activities

The chapter provides alternative solution for introduces exchange-traded fund as

another effective investment tool for PVFC Capital It also compares and

contrasts between the two solutions and evaluates which solution is the most

appropriate one

Chapter 6 Recommendation and conclusion

Chapter 6 wraps up the above chapters conducts two action plans to raising

capital for PVFG as well as recommendations to PVFC Capitallsquos top

management board and strategic shareholders

6

CHAPTER 2

BEST PRACTICE A CASE STUDY OF PROFUNDS ULTRASECTOR

OIL amp GAS SVC

21Introduction

Oil amp Gas UltraSector ProFund is an open-end fund incorporated in the USA

The Fund is advised by ProFund Advisors since October 2013

The Fund invests in securities and derivatives that ProFund Advisors believes in

combination should have similar daily return characteristics as one and one-half

times (15x) the daily return of the Index

22Index Benchmark Dow Jones US Oil amp Gas Index

The Index measures the performance of the oil and gas sector of the US equity

market Component companies include among others exploration and

production integrated oil and gas oil equipment and services pipelines

renewable energy equipment companies and alternative fuel producers As of

September 30 2013 the Index included companies with capitalizations between

$9090 million and $3787 billion The average capitalization of the companies

comprising the Index was approximately $212 billion (Source Profund) The

Index is published under the Bloomberg ticker symbol ldquoDJUSENrdquo

Table 21 Average Annual Total Returns as of December 31 2012

Total Index Companies 84 PriceEarnings Ratio 1634 PriceBook Ratio 225 Dividend Yield 205 Average Index Market Capitalization 2486 billion

(Source httpwwwprofundscom)

Table 22 Index Sector Weightings

Index Sector Weightings Weight Oil amp Gas Producers 7196 Oil Equipment Services amp Distribution 2780 Alternative Energy 024

(Source httpwwwprofundscom)

vii

LIST OF FIGURE

Figure 11 Conceptual Framework of the Study 3

Figure 21 Average Annual Total Returns as of December 31 2012 8

Figure 31 The importance of oil and gas sector 12

Figure 32 PVN-Index component by sector 12

Figure 34 PVN Index vs VNIndex amp HNIndex 14

Figure 35 PVN Index vs VN30 amp HNX10 14

Figure 36 Conception of PVGF 15

Figure 37 Market players 16

Figure 38 VNIndex movements in 2013 16

Figure 39 GDP and GDP Growth 17

Figure 310 Trade Balance 17

Figure 311 FDI inflows 18

Figure 312 Interest rates 18

Figure 41 Asset allocation 23

Figure 42 Subsidiaries of PVN 24

Figure 51 Operation of Open-ended Fund 27

Figure 52 Regulation of establishment and management of ETFs 28

viii

LIST OF ABBREVIATIONS

ETF Exchange ndash Traded Fund

FC Fund Certificate

HNX Hanoi Stock Exchange

NAV Net Asset Value

VN30 30 biggest companies in the Vietnam Stock market

VEFF Vietnam Equitization Focused Fund

VIP LLC Vietnam Investment Platform

PVN Petrovietnam Oil amp Gas Group

PVcomBank Vietnam Public Bank

PVFC Capital Petrovietnam Finance Fund Incorporation

PVGF PetroVietnam Growth Open-ended Fund

PVN-Index 32 listed companies of PetroVietnam on two stock

exchanges of Vietnam

PVN-10 Index 10 biggest share of PVN in the Vietnam Stock market

1

CHAPTER 1

INTRODUCTION

11Rationale

PVFC Capital is the exclusive fund management company within PetroVietnam

Oil amp Gas Group (PVN) Established at the very early stage of the fund

management industry of Vietnam PVFC Capital serves as the fund raising and

fund management arm of the Group With expertise in oil and energy sector our

funds and portfolios have unique advantages in addition to wide range of selected

equities

Background of PVFC Capital

The exclusive fund management company within PetroVietnam Group

Establishment 14 December 2007

Chartered capital VND 100 billion (US$5million)

Shareholders

- PVcomBank (merger between Petrovietnam Finance Corporation

amp Western Bank)

- SOVICO (leading Investment Group)

Number of Employees 33

Assets under management US$490 million (~10 trillion VND)

Table 11 Asset under management

Local fund Offshore fund Portfolio management

Size of assets US$ 35

million

US$ 7 million US$ 480 million

Establishment Nov 2011 Aug 2008 2008

Accumulated

NAV growth

+113 +27 13year for FY2012

Source PVFC Capital

In a typical fund management company there are normally two main

departments Business Development Department and Investment Department I

have chance to apply the knowledge acquired and enhance my experience in both

fields here Particularly my main responsibilities as an associate including

operations for investment promotion market researching and customer

relationship development I also participate assist and support investment team in

analysis of investment opportunities daily work of fund management and

portfolio management

2

As an exclusive fund management company of PetroVietnam and a dynamic

member of PVcomBank PVFC Capital receives continued support as well as

inherits significant experience from PVcombank in terms of financial

management and investment and advantages in oil and gas sector

Funds and entrusted assets managed by PVFC Capital are from both foreign and

domestic investors PVFC Capital possesses a proven track record in asset

management and invaluable experience in the oil and energy sector with the total

value of successfully managed assets of more than VND 10000 billion

The company is managing two funds (one local fund and one offshore fund) with

net asset of 105 million US dollars and eleven investment portfolios with total

net value of 480 million US dollars (Source PVFC Capital) We have to deliver

the report monthly quarterly yearly to investors who are very interested in the

updated information of ther net asset value in the fund Beside the macro-

economic and stock market scanning we have to make recommendation to them

in which stock bonds or financial assets should be bought sold or hold

12Problem statement

The biggest problem of PVFC Capital at the moment is difficulties in establishing

a new fund given current situation of the economy Over the last few years after

the booming period Vietnam encounter the stabilization of the macroeconomic

Compare to the previous time investors are more conservative in their invesment

decisions

Based on market conditions and the current activities of PVFC Capital we realize

it is a critical task to raise fund as well as demand for new potential partners in

local and overseas It is our challenges to expand new customer network to

access and exploit more opportunities from potential partners to establish a new

fund

In 2013 PVFC Capitallsquos revenue is composed mainly from extremely active

portfolio management (8645227 USD out of total 1435655 USD revenue) As

of 31122013 the company has been managing 11 (eleven) portfolios in

domestic trusts and two foreign investment portfolio with total Net asset value of

about 450000000 USD (Source PVFC Capital)

Currently only two active funds are under our management which are Vietnam

Equitization Focused Fund (VEFF) amp Vietnam Investment Platform (VIP LLC)

both raising from Japanese investors Revenue from fund management in FY

2013 is 130000 USD contributed only 88 of total revenue (Source PVFC

Capital) For a fund management company this revenue structure needs to be

adjusted in the direction that increasing revenue from fund management

activities besides extremely well-managed and active portfolio management

activities

In addition since 2011 the company has not mobilized new funds after the

success of the fund establishment of VEFF Hence there is urgent need now to

establish new funds making revenue from this activity access to new capital

3

flow from investors in order to invest in opportunities within and outside the

petroleum industry

13Objective of the research

This research has the following objectives

o Review current situation of fund management companies and open-ended

funds in Vietnam market

o Identify the main causative factors of PVFC Capital lsquos unbalanced

revenue structure and difficulties in fund raising

o Evaluate the advantages and out-perform characteristics of PVGF in

compare to other form of fund

o Identify solution for PVFC Capital lsquos top management to raising capital

for this new type of fund

14Conceptual framework of the study

Figure 11 shows the approach to the research Firstly overview of PVFC Capital

and through impact model the main issues was defined Before analyzing the

prospects of PVGF the case study of ProFunds UltraSector Oil amp Gas Svc was

introduced as an example of the best practice of an open-ended fund investing in

oil amp gas index

Figure 11 Conceptual Framework of the Study

PROBLEM DEFINITION

BEST PRACTICE OF PROFUNDS

SITUATIONAL ANALYSIS

IMPACT MODEL

DEVELOPING PVGF

ALTERNATIVE SOLUTIONS amp EVALUATION

RECOMMENDATIONS amp CONCLUSION

4

15Scope of the research and data collection

To get the thorough understanding of the opportunities as well as challenges

investing in PVGF the information was retrieved from top management level

(Head of Department) to each associate in different unit in the organization

The primary information was collected though the questionnaires though internal

meeting and internal seminar with all the staff in the company and though the in-

depth interview with head of three most important department in PVFC Capital

which are Business Development Department Investment Department and

Internal Control Department

The secondary data were collected from

o Company profile

o Annual reports

o MonthlyAnnual Investment Report to investors

o Offering Letter to potential investor

o Updated data of PVN-Index from PSI

o PVFC Capitalrsquos Brochure

o Internal seminar Presentation on PVGF

o Other PVGF-related documents

o Public media (newspaper website magazineshellip)

16Organization of the research study

The research includes 7 chapters and its structure is as follows

Chapter 1 Introduction

This chapter provides a brief introduction the research rationales the main issue

research approach and the research structure

Chapter 2 Best Practice

Case of best practice on investing with open-ended fund in oil amp gas index was

used as examples to illustrate the theory and justification of the researcher

Chapter 3 Situational analysis

Chapter 3 provides a status of fund management companies and open-ended fund

in Vietnam market The chapter also discusses the main causative agents and the

result in the need to mobilize and establish a new fund of PVFC Capital

Chapter 4 Developing PVGF

Chapter 4 introduces the PVGF its investment objective strategy and its

advantages compared to other type of funds

5

Chapter 5 Fund development alternative

Chapter 5 provides solution for introduces the new fund of PVGF into the

Vietnam market such as small-scale starting with utilization of the capital from

shareholder as well as enhancing networking activities

The chapter provides alternative solution for introduces exchange-traded fund as

another effective investment tool for PVFC Capital It also compares and

contrasts between the two solutions and evaluates which solution is the most

appropriate one

Chapter 6 Recommendation and conclusion

Chapter 6 wraps up the above chapters conducts two action plans to raising

capital for PVFG as well as recommendations to PVFC Capitallsquos top

management board and strategic shareholders

6

CHAPTER 2

BEST PRACTICE A CASE STUDY OF PROFUNDS ULTRASECTOR

OIL amp GAS SVC

21Introduction

Oil amp Gas UltraSector ProFund is an open-end fund incorporated in the USA

The Fund is advised by ProFund Advisors since October 2013

The Fund invests in securities and derivatives that ProFund Advisors believes in

combination should have similar daily return characteristics as one and one-half

times (15x) the daily return of the Index

22Index Benchmark Dow Jones US Oil amp Gas Index

The Index measures the performance of the oil and gas sector of the US equity

market Component companies include among others exploration and

production integrated oil and gas oil equipment and services pipelines

renewable energy equipment companies and alternative fuel producers As of

September 30 2013 the Index included companies with capitalizations between

$9090 million and $3787 billion The average capitalization of the companies

comprising the Index was approximately $212 billion (Source Profund) The

Index is published under the Bloomberg ticker symbol ldquoDJUSENrdquo

Table 21 Average Annual Total Returns as of December 31 2012

Total Index Companies 84 PriceEarnings Ratio 1634 PriceBook Ratio 225 Dividend Yield 205 Average Index Market Capitalization 2486 billion

(Source httpwwwprofundscom)

Table 22 Index Sector Weightings

Index Sector Weightings Weight Oil amp Gas Producers 7196 Oil Equipment Services amp Distribution 2780 Alternative Energy 024

(Source httpwwwprofundscom)

viii

LIST OF ABBREVIATIONS

ETF Exchange ndash Traded Fund

FC Fund Certificate

HNX Hanoi Stock Exchange

NAV Net Asset Value

VN30 30 biggest companies in the Vietnam Stock market

VEFF Vietnam Equitization Focused Fund

VIP LLC Vietnam Investment Platform

PVN Petrovietnam Oil amp Gas Group

PVcomBank Vietnam Public Bank

PVFC Capital Petrovietnam Finance Fund Incorporation

PVGF PetroVietnam Growth Open-ended Fund

PVN-Index 32 listed companies of PetroVietnam on two stock

exchanges of Vietnam

PVN-10 Index 10 biggest share of PVN in the Vietnam Stock market

1

CHAPTER 1

INTRODUCTION

11Rationale

PVFC Capital is the exclusive fund management company within PetroVietnam

Oil amp Gas Group (PVN) Established at the very early stage of the fund

management industry of Vietnam PVFC Capital serves as the fund raising and

fund management arm of the Group With expertise in oil and energy sector our

funds and portfolios have unique advantages in addition to wide range of selected

equities

Background of PVFC Capital

The exclusive fund management company within PetroVietnam Group

Establishment 14 December 2007

Chartered capital VND 100 billion (US$5million)

Shareholders

- PVcomBank (merger between Petrovietnam Finance Corporation

amp Western Bank)

- SOVICO (leading Investment Group)

Number of Employees 33

Assets under management US$490 million (~10 trillion VND)

Table 11 Asset under management

Local fund Offshore fund Portfolio management

Size of assets US$ 35

million

US$ 7 million US$ 480 million

Establishment Nov 2011 Aug 2008 2008

Accumulated

NAV growth

+113 +27 13year for FY2012

Source PVFC Capital

In a typical fund management company there are normally two main

departments Business Development Department and Investment Department I

have chance to apply the knowledge acquired and enhance my experience in both

fields here Particularly my main responsibilities as an associate including

operations for investment promotion market researching and customer

relationship development I also participate assist and support investment team in

analysis of investment opportunities daily work of fund management and

portfolio management

2

As an exclusive fund management company of PetroVietnam and a dynamic

member of PVcomBank PVFC Capital receives continued support as well as

inherits significant experience from PVcombank in terms of financial

management and investment and advantages in oil and gas sector

Funds and entrusted assets managed by PVFC Capital are from both foreign and

domestic investors PVFC Capital possesses a proven track record in asset

management and invaluable experience in the oil and energy sector with the total

value of successfully managed assets of more than VND 10000 billion

The company is managing two funds (one local fund and one offshore fund) with

net asset of 105 million US dollars and eleven investment portfolios with total

net value of 480 million US dollars (Source PVFC Capital) We have to deliver

the report monthly quarterly yearly to investors who are very interested in the

updated information of ther net asset value in the fund Beside the macro-

economic and stock market scanning we have to make recommendation to them

in which stock bonds or financial assets should be bought sold or hold

12Problem statement

The biggest problem of PVFC Capital at the moment is difficulties in establishing

a new fund given current situation of the economy Over the last few years after

the booming period Vietnam encounter the stabilization of the macroeconomic

Compare to the previous time investors are more conservative in their invesment

decisions

Based on market conditions and the current activities of PVFC Capital we realize

it is a critical task to raise fund as well as demand for new potential partners in

local and overseas It is our challenges to expand new customer network to

access and exploit more opportunities from potential partners to establish a new

fund

In 2013 PVFC Capitallsquos revenue is composed mainly from extremely active

portfolio management (8645227 USD out of total 1435655 USD revenue) As

of 31122013 the company has been managing 11 (eleven) portfolios in

domestic trusts and two foreign investment portfolio with total Net asset value of

about 450000000 USD (Source PVFC Capital)

Currently only two active funds are under our management which are Vietnam

Equitization Focused Fund (VEFF) amp Vietnam Investment Platform (VIP LLC)

both raising from Japanese investors Revenue from fund management in FY

2013 is 130000 USD contributed only 88 of total revenue (Source PVFC

Capital) For a fund management company this revenue structure needs to be

adjusted in the direction that increasing revenue from fund management

activities besides extremely well-managed and active portfolio management

activities

In addition since 2011 the company has not mobilized new funds after the

success of the fund establishment of VEFF Hence there is urgent need now to

establish new funds making revenue from this activity access to new capital

3

flow from investors in order to invest in opportunities within and outside the

petroleum industry

13Objective of the research

This research has the following objectives

o Review current situation of fund management companies and open-ended

funds in Vietnam market

o Identify the main causative factors of PVFC Capital lsquos unbalanced

revenue structure and difficulties in fund raising

o Evaluate the advantages and out-perform characteristics of PVGF in

compare to other form of fund

o Identify solution for PVFC Capital lsquos top management to raising capital

for this new type of fund

14Conceptual framework of the study

Figure 11 shows the approach to the research Firstly overview of PVFC Capital

and through impact model the main issues was defined Before analyzing the

prospects of PVGF the case study of ProFunds UltraSector Oil amp Gas Svc was

introduced as an example of the best practice of an open-ended fund investing in

oil amp gas index

Figure 11 Conceptual Framework of the Study

PROBLEM DEFINITION

BEST PRACTICE OF PROFUNDS

SITUATIONAL ANALYSIS

IMPACT MODEL

DEVELOPING PVGF

ALTERNATIVE SOLUTIONS amp EVALUATION

RECOMMENDATIONS amp CONCLUSION

4

15Scope of the research and data collection

To get the thorough understanding of the opportunities as well as challenges

investing in PVGF the information was retrieved from top management level

(Head of Department) to each associate in different unit in the organization

The primary information was collected though the questionnaires though internal

meeting and internal seminar with all the staff in the company and though the in-

depth interview with head of three most important department in PVFC Capital

which are Business Development Department Investment Department and

Internal Control Department

The secondary data were collected from

o Company profile

o Annual reports

o MonthlyAnnual Investment Report to investors

o Offering Letter to potential investor

o Updated data of PVN-Index from PSI

o PVFC Capitalrsquos Brochure

o Internal seminar Presentation on PVGF

o Other PVGF-related documents

o Public media (newspaper website magazineshellip)

16Organization of the research study

The research includes 7 chapters and its structure is as follows

Chapter 1 Introduction

This chapter provides a brief introduction the research rationales the main issue

research approach and the research structure

Chapter 2 Best Practice

Case of best practice on investing with open-ended fund in oil amp gas index was

used as examples to illustrate the theory and justification of the researcher

Chapter 3 Situational analysis

Chapter 3 provides a status of fund management companies and open-ended fund

in Vietnam market The chapter also discusses the main causative agents and the

result in the need to mobilize and establish a new fund of PVFC Capital

Chapter 4 Developing PVGF

Chapter 4 introduces the PVGF its investment objective strategy and its

advantages compared to other type of funds

5

Chapter 5 Fund development alternative

Chapter 5 provides solution for introduces the new fund of PVGF into the

Vietnam market such as small-scale starting with utilization of the capital from

shareholder as well as enhancing networking activities

The chapter provides alternative solution for introduces exchange-traded fund as

another effective investment tool for PVFC Capital It also compares and

contrasts between the two solutions and evaluates which solution is the most

appropriate one

Chapter 6 Recommendation and conclusion

Chapter 6 wraps up the above chapters conducts two action plans to raising

capital for PVFG as well as recommendations to PVFC Capitallsquos top

management board and strategic shareholders

6

CHAPTER 2

BEST PRACTICE A CASE STUDY OF PROFUNDS ULTRASECTOR

OIL amp GAS SVC

21Introduction

Oil amp Gas UltraSector ProFund is an open-end fund incorporated in the USA

The Fund is advised by ProFund Advisors since October 2013

The Fund invests in securities and derivatives that ProFund Advisors believes in

combination should have similar daily return characteristics as one and one-half

times (15x) the daily return of the Index

22Index Benchmark Dow Jones US Oil amp Gas Index

The Index measures the performance of the oil and gas sector of the US equity

market Component companies include among others exploration and

production integrated oil and gas oil equipment and services pipelines

renewable energy equipment companies and alternative fuel producers As of

September 30 2013 the Index included companies with capitalizations between

$9090 million and $3787 billion The average capitalization of the companies

comprising the Index was approximately $212 billion (Source Profund) The

Index is published under the Bloomberg ticker symbol ldquoDJUSENrdquo

Table 21 Average Annual Total Returns as of December 31 2012

Total Index Companies 84 PriceEarnings Ratio 1634 PriceBook Ratio 225 Dividend Yield 205 Average Index Market Capitalization 2486 billion

(Source httpwwwprofundscom)

Table 22 Index Sector Weightings

Index Sector Weightings Weight Oil amp Gas Producers 7196 Oil Equipment Services amp Distribution 2780 Alternative Energy 024

(Source httpwwwprofundscom)

1

CHAPTER 1

INTRODUCTION

11Rationale

PVFC Capital is the exclusive fund management company within PetroVietnam

Oil amp Gas Group (PVN) Established at the very early stage of the fund

management industry of Vietnam PVFC Capital serves as the fund raising and

fund management arm of the Group With expertise in oil and energy sector our

funds and portfolios have unique advantages in addition to wide range of selected

equities

Background of PVFC Capital

The exclusive fund management company within PetroVietnam Group

Establishment 14 December 2007

Chartered capital VND 100 billion (US$5million)

Shareholders

- PVcomBank (merger between Petrovietnam Finance Corporation

amp Western Bank)

- SOVICO (leading Investment Group)

Number of Employees 33

Assets under management US$490 million (~10 trillion VND)

Table 11 Asset under management

Local fund Offshore fund Portfolio management

Size of assets US$ 35

million

US$ 7 million US$ 480 million

Establishment Nov 2011 Aug 2008 2008

Accumulated

NAV growth

+113 +27 13year for FY2012

Source PVFC Capital

In a typical fund management company there are normally two main

departments Business Development Department and Investment Department I

have chance to apply the knowledge acquired and enhance my experience in both

fields here Particularly my main responsibilities as an associate including

operations for investment promotion market researching and customer

relationship development I also participate assist and support investment team in

analysis of investment opportunities daily work of fund management and

portfolio management

2

As an exclusive fund management company of PetroVietnam and a dynamic

member of PVcomBank PVFC Capital receives continued support as well as

inherits significant experience from PVcombank in terms of financial

management and investment and advantages in oil and gas sector

Funds and entrusted assets managed by PVFC Capital are from both foreign and

domestic investors PVFC Capital possesses a proven track record in asset

management and invaluable experience in the oil and energy sector with the total

value of successfully managed assets of more than VND 10000 billion

The company is managing two funds (one local fund and one offshore fund) with

net asset of 105 million US dollars and eleven investment portfolios with total

net value of 480 million US dollars (Source PVFC Capital) We have to deliver

the report monthly quarterly yearly to investors who are very interested in the

updated information of ther net asset value in the fund Beside the macro-

economic and stock market scanning we have to make recommendation to them

in which stock bonds or financial assets should be bought sold or hold

12Problem statement

The biggest problem of PVFC Capital at the moment is difficulties in establishing

a new fund given current situation of the economy Over the last few years after

the booming period Vietnam encounter the stabilization of the macroeconomic

Compare to the previous time investors are more conservative in their invesment

decisions

Based on market conditions and the current activities of PVFC Capital we realize

it is a critical task to raise fund as well as demand for new potential partners in

local and overseas It is our challenges to expand new customer network to

access and exploit more opportunities from potential partners to establish a new

fund

In 2013 PVFC Capitallsquos revenue is composed mainly from extremely active

portfolio management (8645227 USD out of total 1435655 USD revenue) As

of 31122013 the company has been managing 11 (eleven) portfolios in

domestic trusts and two foreign investment portfolio with total Net asset value of

about 450000000 USD (Source PVFC Capital)

Currently only two active funds are under our management which are Vietnam

Equitization Focused Fund (VEFF) amp Vietnam Investment Platform (VIP LLC)

both raising from Japanese investors Revenue from fund management in FY

2013 is 130000 USD contributed only 88 of total revenue (Source PVFC

Capital) For a fund management company this revenue structure needs to be

adjusted in the direction that increasing revenue from fund management

activities besides extremely well-managed and active portfolio management

activities

In addition since 2011 the company has not mobilized new funds after the

success of the fund establishment of VEFF Hence there is urgent need now to

establish new funds making revenue from this activity access to new capital

3

flow from investors in order to invest in opportunities within and outside the

petroleum industry

13Objective of the research

This research has the following objectives

o Review current situation of fund management companies and open-ended

funds in Vietnam market

o Identify the main causative factors of PVFC Capital lsquos unbalanced

revenue structure and difficulties in fund raising

o Evaluate the advantages and out-perform characteristics of PVGF in

compare to other form of fund

o Identify solution for PVFC Capital lsquos top management to raising capital

for this new type of fund

14Conceptual framework of the study

Figure 11 shows the approach to the research Firstly overview of PVFC Capital

and through impact model the main issues was defined Before analyzing the

prospects of PVGF the case study of ProFunds UltraSector Oil amp Gas Svc was

introduced as an example of the best practice of an open-ended fund investing in

oil amp gas index

Figure 11 Conceptual Framework of the Study

PROBLEM DEFINITION

BEST PRACTICE OF PROFUNDS

SITUATIONAL ANALYSIS

IMPACT MODEL

DEVELOPING PVGF

ALTERNATIVE SOLUTIONS amp EVALUATION

RECOMMENDATIONS amp CONCLUSION

4

15Scope of the research and data collection

To get the thorough understanding of the opportunities as well as challenges

investing in PVGF the information was retrieved from top management level

(Head of Department) to each associate in different unit in the organization

The primary information was collected though the questionnaires though internal

meeting and internal seminar with all the staff in the company and though the in-

depth interview with head of three most important department in PVFC Capital

which are Business Development Department Investment Department and

Internal Control Department

The secondary data were collected from

o Company profile

o Annual reports

o MonthlyAnnual Investment Report to investors

o Offering Letter to potential investor

o Updated data of PVN-Index from PSI

o PVFC Capitalrsquos Brochure

o Internal seminar Presentation on PVGF

o Other PVGF-related documents

o Public media (newspaper website magazineshellip)

16Organization of the research study

The research includes 7 chapters and its structure is as follows

Chapter 1 Introduction

This chapter provides a brief introduction the research rationales the main issue

research approach and the research structure

Chapter 2 Best Practice

Case of best practice on investing with open-ended fund in oil amp gas index was

used as examples to illustrate the theory and justification of the researcher

Chapter 3 Situational analysis

Chapter 3 provides a status of fund management companies and open-ended fund

in Vietnam market The chapter also discusses the main causative agents and the

result in the need to mobilize and establish a new fund of PVFC Capital

Chapter 4 Developing PVGF

Chapter 4 introduces the PVGF its investment objective strategy and its

advantages compared to other type of funds

5

Chapter 5 Fund development alternative

Chapter 5 provides solution for introduces the new fund of PVGF into the

Vietnam market such as small-scale starting with utilization of the capital from

shareholder as well as enhancing networking activities

The chapter provides alternative solution for introduces exchange-traded fund as

another effective investment tool for PVFC Capital It also compares and

contrasts between the two solutions and evaluates which solution is the most

appropriate one

Chapter 6 Recommendation and conclusion

Chapter 6 wraps up the above chapters conducts two action plans to raising

capital for PVFG as well as recommendations to PVFC Capitallsquos top

management board and strategic shareholders

6

CHAPTER 2

BEST PRACTICE A CASE STUDY OF PROFUNDS ULTRASECTOR

OIL amp GAS SVC

21Introduction

Oil amp Gas UltraSector ProFund is an open-end fund incorporated in the USA

The Fund is advised by ProFund Advisors since October 2013

The Fund invests in securities and derivatives that ProFund Advisors believes in

combination should have similar daily return characteristics as one and one-half

times (15x) the daily return of the Index

22Index Benchmark Dow Jones US Oil amp Gas Index

The Index measures the performance of the oil and gas sector of the US equity

market Component companies include among others exploration and

production integrated oil and gas oil equipment and services pipelines

renewable energy equipment companies and alternative fuel producers As of

September 30 2013 the Index included companies with capitalizations between

$9090 million and $3787 billion The average capitalization of the companies

comprising the Index was approximately $212 billion (Source Profund) The

Index is published under the Bloomberg ticker symbol ldquoDJUSENrdquo

Table 21 Average Annual Total Returns as of December 31 2012

Total Index Companies 84 PriceEarnings Ratio 1634 PriceBook Ratio 225 Dividend Yield 205 Average Index Market Capitalization 2486 billion

(Source httpwwwprofundscom)

Table 22 Index Sector Weightings

Index Sector Weightings Weight Oil amp Gas Producers 7196 Oil Equipment Services amp Distribution 2780 Alternative Energy 024

(Source httpwwwprofundscom)

2

As an exclusive fund management company of PetroVietnam and a dynamic

member of PVcomBank PVFC Capital receives continued support as well as

inherits significant experience from PVcombank in terms of financial

management and investment and advantages in oil and gas sector

Funds and entrusted assets managed by PVFC Capital are from both foreign and

domestic investors PVFC Capital possesses a proven track record in asset

management and invaluable experience in the oil and energy sector with the total

value of successfully managed assets of more than VND 10000 billion

The company is managing two funds (one local fund and one offshore fund) with

net asset of 105 million US dollars and eleven investment portfolios with total

net value of 480 million US dollars (Source PVFC Capital) We have to deliver

the report monthly quarterly yearly to investors who are very interested in the

updated information of ther net asset value in the fund Beside the macro-

economic and stock market scanning we have to make recommendation to them

in which stock bonds or financial assets should be bought sold or hold

12Problem statement

The biggest problem of PVFC Capital at the moment is difficulties in establishing

a new fund given current situation of the economy Over the last few years after

the booming period Vietnam encounter the stabilization of the macroeconomic

Compare to the previous time investors are more conservative in their invesment

decisions

Based on market conditions and the current activities of PVFC Capital we realize

it is a critical task to raise fund as well as demand for new potential partners in

local and overseas It is our challenges to expand new customer network to

access and exploit more opportunities from potential partners to establish a new

fund

In 2013 PVFC Capitallsquos revenue is composed mainly from extremely active

portfolio management (8645227 USD out of total 1435655 USD revenue) As

of 31122013 the company has been managing 11 (eleven) portfolios in

domestic trusts and two foreign investment portfolio with total Net asset value of

about 450000000 USD (Source PVFC Capital)

Currently only two active funds are under our management which are Vietnam

Equitization Focused Fund (VEFF) amp Vietnam Investment Platform (VIP LLC)

both raising from Japanese investors Revenue from fund management in FY

2013 is 130000 USD contributed only 88 of total revenue (Source PVFC

Capital) For a fund management company this revenue structure needs to be

adjusted in the direction that increasing revenue from fund management

activities besides extremely well-managed and active portfolio management

activities

In addition since 2011 the company has not mobilized new funds after the

success of the fund establishment of VEFF Hence there is urgent need now to

establish new funds making revenue from this activity access to new capital

3

flow from investors in order to invest in opportunities within and outside the

petroleum industry

13Objective of the research

This research has the following objectives

o Review current situation of fund management companies and open-ended

funds in Vietnam market

o Identify the main causative factors of PVFC Capital lsquos unbalanced

revenue structure and difficulties in fund raising

o Evaluate the advantages and out-perform characteristics of PVGF in

compare to other form of fund

o Identify solution for PVFC Capital lsquos top management to raising capital

for this new type of fund

14Conceptual framework of the study

Figure 11 shows the approach to the research Firstly overview of PVFC Capital

and through impact model the main issues was defined Before analyzing the

prospects of PVGF the case study of ProFunds UltraSector Oil amp Gas Svc was

introduced as an example of the best practice of an open-ended fund investing in

oil amp gas index

Figure 11 Conceptual Framework of the Study

PROBLEM DEFINITION

BEST PRACTICE OF PROFUNDS

SITUATIONAL ANALYSIS

IMPACT MODEL

DEVELOPING PVGF

ALTERNATIVE SOLUTIONS amp EVALUATION

RECOMMENDATIONS amp CONCLUSION

4

15Scope of the research and data collection

To get the thorough understanding of the opportunities as well as challenges

investing in PVGF the information was retrieved from top management level

(Head of Department) to each associate in different unit in the organization

The primary information was collected though the questionnaires though internal

meeting and internal seminar with all the staff in the company and though the in-

depth interview with head of three most important department in PVFC Capital

which are Business Development Department Investment Department and

Internal Control Department

The secondary data were collected from

o Company profile

o Annual reports

o MonthlyAnnual Investment Report to investors

o Offering Letter to potential investor

o Updated data of PVN-Index from PSI

o PVFC Capitalrsquos Brochure

o Internal seminar Presentation on PVGF

o Other PVGF-related documents

o Public media (newspaper website magazineshellip)

16Organization of the research study

The research includes 7 chapters and its structure is as follows

Chapter 1 Introduction

This chapter provides a brief introduction the research rationales the main issue

research approach and the research structure

Chapter 2 Best Practice

Case of best practice on investing with open-ended fund in oil amp gas index was

used as examples to illustrate the theory and justification of the researcher

Chapter 3 Situational analysis

Chapter 3 provides a status of fund management companies and open-ended fund

in Vietnam market The chapter also discusses the main causative agents and the

result in the need to mobilize and establish a new fund of PVFC Capital

Chapter 4 Developing PVGF

Chapter 4 introduces the PVGF its investment objective strategy and its

advantages compared to other type of funds

5

Chapter 5 Fund development alternative

Chapter 5 provides solution for introduces the new fund of PVGF into the

Vietnam market such as small-scale starting with utilization of the capital from

shareholder as well as enhancing networking activities

The chapter provides alternative solution for introduces exchange-traded fund as

another effective investment tool for PVFC Capital It also compares and

contrasts between the two solutions and evaluates which solution is the most

appropriate one

Chapter 6 Recommendation and conclusion

Chapter 6 wraps up the above chapters conducts two action plans to raising

capital for PVFG as well as recommendations to PVFC Capitallsquos top

management board and strategic shareholders

6

CHAPTER 2

BEST PRACTICE A CASE STUDY OF PROFUNDS ULTRASECTOR

OIL amp GAS SVC

21Introduction

Oil amp Gas UltraSector ProFund is an open-end fund incorporated in the USA

The Fund is advised by ProFund Advisors since October 2013

The Fund invests in securities and derivatives that ProFund Advisors believes in

combination should have similar daily return characteristics as one and one-half

times (15x) the daily return of the Index

22Index Benchmark Dow Jones US Oil amp Gas Index

The Index measures the performance of the oil and gas sector of the US equity

market Component companies include among others exploration and

production integrated oil and gas oil equipment and services pipelines

renewable energy equipment companies and alternative fuel producers As of

September 30 2013 the Index included companies with capitalizations between

$9090 million and $3787 billion The average capitalization of the companies

comprising the Index was approximately $212 billion (Source Profund) The

Index is published under the Bloomberg ticker symbol ldquoDJUSENrdquo

Table 21 Average Annual Total Returns as of December 31 2012

Total Index Companies 84 PriceEarnings Ratio 1634 PriceBook Ratio 225 Dividend Yield 205 Average Index Market Capitalization 2486 billion

(Source httpwwwprofundscom)

Table 22 Index Sector Weightings

Index Sector Weightings Weight Oil amp Gas Producers 7196 Oil Equipment Services amp Distribution 2780 Alternative Energy 024

(Source httpwwwprofundscom)

3

flow from investors in order to invest in opportunities within and outside the

petroleum industry

13Objective of the research

This research has the following objectives

o Review current situation of fund management companies and open-ended

funds in Vietnam market

o Identify the main causative factors of PVFC Capital lsquos unbalanced

revenue structure and difficulties in fund raising

o Evaluate the advantages and out-perform characteristics of PVGF in

compare to other form of fund

o Identify solution for PVFC Capital lsquos top management to raising capital

for this new type of fund

14Conceptual framework of the study

Figure 11 shows the approach to the research Firstly overview of PVFC Capital

and through impact model the main issues was defined Before analyzing the

prospects of PVGF the case study of ProFunds UltraSector Oil amp Gas Svc was

introduced as an example of the best practice of an open-ended fund investing in

oil amp gas index

Figure 11 Conceptual Framework of the Study

PROBLEM DEFINITION

BEST PRACTICE OF PROFUNDS

SITUATIONAL ANALYSIS

IMPACT MODEL

DEVELOPING PVGF

ALTERNATIVE SOLUTIONS amp EVALUATION

RECOMMENDATIONS amp CONCLUSION

4

15Scope of the research and data collection

To get the thorough understanding of the opportunities as well as challenges

investing in PVGF the information was retrieved from top management level

(Head of Department) to each associate in different unit in the organization

The primary information was collected though the questionnaires though internal

meeting and internal seminar with all the staff in the company and though the in-

depth interview with head of three most important department in PVFC Capital

which are Business Development Department Investment Department and

Internal Control Department

The secondary data were collected from

o Company profile

o Annual reports

o MonthlyAnnual Investment Report to investors

o Offering Letter to potential investor

o Updated data of PVN-Index from PSI

o PVFC Capitalrsquos Brochure

o Internal seminar Presentation on PVGF

o Other PVGF-related documents

o Public media (newspaper website magazineshellip)

16Organization of the research study

The research includes 7 chapters and its structure is as follows

Chapter 1 Introduction

This chapter provides a brief introduction the research rationales the main issue

research approach and the research structure

Chapter 2 Best Practice

Case of best practice on investing with open-ended fund in oil amp gas index was

used as examples to illustrate the theory and justification of the researcher

Chapter 3 Situational analysis

Chapter 3 provides a status of fund management companies and open-ended fund

in Vietnam market The chapter also discusses the main causative agents and the

result in the need to mobilize and establish a new fund of PVFC Capital

Chapter 4 Developing PVGF

Chapter 4 introduces the PVGF its investment objective strategy and its

advantages compared to other type of funds

5

Chapter 5 Fund development alternative

Chapter 5 provides solution for introduces the new fund of PVGF into the

Vietnam market such as small-scale starting with utilization of the capital from

shareholder as well as enhancing networking activities

The chapter provides alternative solution for introduces exchange-traded fund as

another effective investment tool for PVFC Capital It also compares and

contrasts between the two solutions and evaluates which solution is the most

appropriate one

Chapter 6 Recommendation and conclusion

Chapter 6 wraps up the above chapters conducts two action plans to raising

capital for PVFG as well as recommendations to PVFC Capitallsquos top

management board and strategic shareholders

6

CHAPTER 2

BEST PRACTICE A CASE STUDY OF PROFUNDS ULTRASECTOR

OIL amp GAS SVC

21Introduction

Oil amp Gas UltraSector ProFund is an open-end fund incorporated in the USA

The Fund is advised by ProFund Advisors since October 2013

The Fund invests in securities and derivatives that ProFund Advisors believes in

combination should have similar daily return characteristics as one and one-half

times (15x) the daily return of the Index

22Index Benchmark Dow Jones US Oil amp Gas Index

The Index measures the performance of the oil and gas sector of the US equity

market Component companies include among others exploration and

production integrated oil and gas oil equipment and services pipelines

renewable energy equipment companies and alternative fuel producers As of

September 30 2013 the Index included companies with capitalizations between

$9090 million and $3787 billion The average capitalization of the companies

comprising the Index was approximately $212 billion (Source Profund) The

Index is published under the Bloomberg ticker symbol ldquoDJUSENrdquo

Table 21 Average Annual Total Returns as of December 31 2012

Total Index Companies 84 PriceEarnings Ratio 1634 PriceBook Ratio 225 Dividend Yield 205 Average Index Market Capitalization 2486 billion

(Source httpwwwprofundscom)

Table 22 Index Sector Weightings

Index Sector Weightings Weight Oil amp Gas Producers 7196 Oil Equipment Services amp Distribution 2780 Alternative Energy 024

(Source httpwwwprofundscom)

4

15Scope of the research and data collection

To get the thorough understanding of the opportunities as well as challenges

investing in PVGF the information was retrieved from top management level

(Head of Department) to each associate in different unit in the organization

The primary information was collected though the questionnaires though internal

meeting and internal seminar with all the staff in the company and though the in-

depth interview with head of three most important department in PVFC Capital

which are Business Development Department Investment Department and

Internal Control Department

The secondary data were collected from

o Company profile

o Annual reports

o MonthlyAnnual Investment Report to investors

o Offering Letter to potential investor

o Updated data of PVN-Index from PSI

o PVFC Capitalrsquos Brochure

o Internal seminar Presentation on PVGF

o Other PVGF-related documents

o Public media (newspaper website magazineshellip)

16Organization of the research study

The research includes 7 chapters and its structure is as follows

Chapter 1 Introduction

This chapter provides a brief introduction the research rationales the main issue

research approach and the research structure

Chapter 2 Best Practice

Case of best practice on investing with open-ended fund in oil amp gas index was

used as examples to illustrate the theory and justification of the researcher

Chapter 3 Situational analysis

Chapter 3 provides a status of fund management companies and open-ended fund

in Vietnam market The chapter also discusses the main causative agents and the

result in the need to mobilize and establish a new fund of PVFC Capital

Chapter 4 Developing PVGF

Chapter 4 introduces the PVGF its investment objective strategy and its

advantages compared to other type of funds

5

Chapter 5 Fund development alternative

Chapter 5 provides solution for introduces the new fund of PVGF into the

Vietnam market such as small-scale starting with utilization of the capital from

shareholder as well as enhancing networking activities

The chapter provides alternative solution for introduces exchange-traded fund as

another effective investment tool for PVFC Capital It also compares and

contrasts between the two solutions and evaluates which solution is the most

appropriate one

Chapter 6 Recommendation and conclusion

Chapter 6 wraps up the above chapters conducts two action plans to raising

capital for PVFG as well as recommendations to PVFC Capitallsquos top

management board and strategic shareholders

6

CHAPTER 2

BEST PRACTICE A CASE STUDY OF PROFUNDS ULTRASECTOR

OIL amp GAS SVC

21Introduction

Oil amp Gas UltraSector ProFund is an open-end fund incorporated in the USA

The Fund is advised by ProFund Advisors since October 2013

The Fund invests in securities and derivatives that ProFund Advisors believes in

combination should have similar daily return characteristics as one and one-half

times (15x) the daily return of the Index

22Index Benchmark Dow Jones US Oil amp Gas Index

The Index measures the performance of the oil and gas sector of the US equity

market Component companies include among others exploration and

production integrated oil and gas oil equipment and services pipelines

renewable energy equipment companies and alternative fuel producers As of

September 30 2013 the Index included companies with capitalizations between

$9090 million and $3787 billion The average capitalization of the companies

comprising the Index was approximately $212 billion (Source Profund) The

Index is published under the Bloomberg ticker symbol ldquoDJUSENrdquo

Table 21 Average Annual Total Returns as of December 31 2012

Total Index Companies 84 PriceEarnings Ratio 1634 PriceBook Ratio 225 Dividend Yield 205 Average Index Market Capitalization 2486 billion

(Source httpwwwprofundscom)

Table 22 Index Sector Weightings

Index Sector Weightings Weight Oil amp Gas Producers 7196 Oil Equipment Services amp Distribution 2780 Alternative Energy 024

(Source httpwwwprofundscom)

5

Chapter 5 Fund development alternative

Chapter 5 provides solution for introduces the new fund of PVGF into the

Vietnam market such as small-scale starting with utilization of the capital from

shareholder as well as enhancing networking activities

The chapter provides alternative solution for introduces exchange-traded fund as

another effective investment tool for PVFC Capital It also compares and

contrasts between the two solutions and evaluates which solution is the most

appropriate one

Chapter 6 Recommendation and conclusion

Chapter 6 wraps up the above chapters conducts two action plans to raising

capital for PVFG as well as recommendations to PVFC Capitallsquos top

management board and strategic shareholders

6

CHAPTER 2

BEST PRACTICE A CASE STUDY OF PROFUNDS ULTRASECTOR

OIL amp GAS SVC

21Introduction

Oil amp Gas UltraSector ProFund is an open-end fund incorporated in the USA

The Fund is advised by ProFund Advisors since October 2013

The Fund invests in securities and derivatives that ProFund Advisors believes in

combination should have similar daily return characteristics as one and one-half

times (15x) the daily return of the Index

22Index Benchmark Dow Jones US Oil amp Gas Index

The Index measures the performance of the oil and gas sector of the US equity

market Component companies include among others exploration and

production integrated oil and gas oil equipment and services pipelines

renewable energy equipment companies and alternative fuel producers As of

September 30 2013 the Index included companies with capitalizations between

$9090 million and $3787 billion The average capitalization of the companies

comprising the Index was approximately $212 billion (Source Profund) The

Index is published under the Bloomberg ticker symbol ldquoDJUSENrdquo

Table 21 Average Annual Total Returns as of December 31 2012

Total Index Companies 84 PriceEarnings Ratio 1634 PriceBook Ratio 225 Dividend Yield 205 Average Index Market Capitalization 2486 billion

(Source httpwwwprofundscom)

Table 22 Index Sector Weightings

Index Sector Weightings Weight Oil amp Gas Producers 7196 Oil Equipment Services amp Distribution 2780 Alternative Energy 024

(Source httpwwwprofundscom)

6

CHAPTER 2

BEST PRACTICE A CASE STUDY OF PROFUNDS ULTRASECTOR

OIL amp GAS SVC

21Introduction

Oil amp Gas UltraSector ProFund is an open-end fund incorporated in the USA

The Fund is advised by ProFund Advisors since October 2013

The Fund invests in securities and derivatives that ProFund Advisors believes in

combination should have similar daily return characteristics as one and one-half

times (15x) the daily return of the Index

22Index Benchmark Dow Jones US Oil amp Gas Index

The Index measures the performance of the oil and gas sector of the US equity

market Component companies include among others exploration and

production integrated oil and gas oil equipment and services pipelines

renewable energy equipment companies and alternative fuel producers As of

September 30 2013 the Index included companies with capitalizations between

$9090 million and $3787 billion The average capitalization of the companies

comprising the Index was approximately $212 billion (Source Profund) The

Index is published under the Bloomberg ticker symbol ldquoDJUSENrdquo

Table 21 Average Annual Total Returns as of December 31 2012

Total Index Companies 84 PriceEarnings Ratio 1634 PriceBook Ratio 225 Dividend Yield 205 Average Index Market Capitalization 2486 billion

(Source httpwwwprofundscom)

Table 22 Index Sector Weightings

Index Sector Weightings Weight Oil amp Gas Producers 7196 Oil Equipment Services amp Distribution 2780 Alternative Energy 024

(Source httpwwwprofundscom)

7

Table 23 Top 10 Index Companies

Top 10 Index Companies Weight Exxon Mobil Corp 2070 Chevron Corp 1190 Schlumberger Ltd 735 ConocoPhillips Co 504 Occidental Petroleum Corp 386 EOG Resources Inc 306 Halliburton Co 287 Anadarko Petroleum Corp 265 Phillips 66 Co 218 The Williams Cos Inc 206

(Source httpwwwprofundscom)

23Investment strategy of Oil amp Gas UltraSector ProFund

ProFund Advisors uses a mathematical approach to investing Using this

approach ProFund Advisors determines the type quantity and mix of investment

positions that the Fund should hold to approximate on a daily basis the

performance of one and one-half times (15x) the Index

The Fund may invest in or gain exposure to only a representative sample of the

securities in the Index or to securities or financial instruments not contained in

the Index with the intent of obtaining exposure with aggregate characteristics

similar to those of a multiple of the Index

The Fund seeks to remain fully invested at all times in securities andor financial

instruments that in combination provide leveraged exposure to the Index

without regard to market conditions trends or direction

At the close of the US securities markets on each trading day the Fund will seek

to position its portfolio so that its exposure to the Index is consistent with the

Fundrsquos investment objective The Indexrsquos movements during the day will affect

whether the Fundrsquos portfolio needs to be re-positioned For example if the Index

has risen on a given day net assets of the Fund should rise As a result the

Fundrsquos exposure will need to be increased Conversely if the Index has fallen on

a given day net assets of the Fund should fall As a result the Fundrsquos exposure

will need to be decreased

Because of daily rebalancing and the compounding of each dayrsquos return over

time the return of the Fund for periods longer than a single day will be the result

of each dayrsquos returns compounded over the period which will very likely differ

from one and one-half times (15x) the return of the Index over the same period

(Source Profund) The Fund will lose money if the level of the Index is flat over

time and it is possible that the Fund will lose money over time even if the level

8

of the Index rises as a result of daily rebalancing the Indexrsquos volatility and the

effects of compounding

The Fund will concentrate its investments in a particular industry or group of

industries to approximately the same extent as the Index is so concentrated

As of the close of business on September 30 2013 the Index was concentrated in

the oil and gas industry group which comprised approximately 100 of the

market capitalization of the Index

24Performance amp return of Oil amp Gas UltraSector ProFund

Portfolio Turnover

The Fund pays transaction costs such as commissions when it buys and sells

securities (or ldquoturns overrdquo its portfolio) A higher portfolio turnover may indicate

higher transaction costs and may result in higher taxes when the Fundrsquos shares

are held in a taxable account These costs affect the Fundrsquos performance During

the most recent fiscal year the Fundrsquos annual portfolio turnover rate was 4 of

the average value of its entire portfolio This portfolio turnover rate is calculated

without regard to cash instrument or derivatives transactions If such transactions

were included the Fundrsquos portfolio turnover rate would be significantly higher

Investment Results

The bar chart below shows how the Fundrsquos investment results for Investor Class

shares have varied from year to year and the table shows how the Fundrsquos average

annual total returns for various periods compare with two broad measures of

market performance

Figure 21 Average Annual Total Returns as of December 31 2012

Source ProFunds

Best Quarter (ended 12312010) 3220

Worst Quarter (ended 12312008) -3833

The year-to-date return as of the most recent quarter which ended September 30

2013 was 2387 (Source Profund)

33

46 46

27

46

-56

19 26

0 4

-80

-60

-40

-20

0

20

40

60

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Annual Returns of Investor Class Shares as of December 31 each year

9

Table 24 Average Annual Total Returns as of December 31 2012

One Year Five Years Ten Years Inception

Date

Investor Class Shares 1 -753 1361 061900

Before Taxes

After Texas on

Distributions

361 -753 1342

After Texas on

Distributions and

Sales of Shares

235 -624 1221

Service Class Shares 260 -845 1221 061900

SampP 500 1600 166 710

Down Jones US Oil

amp Gas Index

471 -035 1377

Source ProFunds

Fund Return

The Indexrsquos annualized historical volatility rate for the five-year period ended

September 30 2013 was 3299 The Indexrsquos highest September to September

volatility rate during the five-year period was 5803 (September 30 2009)

The Indexrsquos annualized performance for the five-year period ended September

30 2013 was 1450 (Source Profund)

The table below represents performance and returns of the fund as of 13102014

The investment return and principal value of an investment will fluctuate so that

an investors shares when redeemed may be worth more or less than the original

cost Returns include the reinvestment of dividends and capital gains

Table 25 Annual Total Returns Summary

YTD (as of 10132014) -1264

Average Annual One Year 1518

Average Annual Three Year 2305

Average Annual Five Year 1450

Average Annual Ten Year 1083

Average Annual Since Inception 803

Cumulative Since Inception 20143

Gross Expense Ratio 183

Net Expense Ratio 178

(Source httpwwwprofundscom)

10

25 Summary of this chapter

The success of Oil amp Gas UltraSector Profund has brought huge amount of profit

to Profund Company The investment in the energy index helps Profund having

an operation mechanism as an open-end fund with more diversified product as

well as better risk diversification

In Vietnams stock market there are three exchange-traded funds operating and

simulate Vietnamlsquos stock market index Except Ishare Frontier Market has the

low proportion of asset invested in Vietnam the other two funds are familiar to

investors The Market Vectors Vietnam ETF and DB X-Tracker FTSE Vietnam

have continuously dominated the market over the years As of mid-September

2014 the total assets of The Market Vectors Vietnam ETF reached nearly 630

million USD an increase of 270 times in the last 5 years Similarly X-Tracker

DB FTSE Vietnam has managed 400 million USD assets up 82-times since

2008 (Source Cafef)

Since 2011 Intelligent Financial Research amp Consulting (IFRC) and the

Petrovietnam Securities Incorporation (PSI) ndash a subsidiary of PVN have

collaborated building a PVN-Index which composing of all listed companies in

Vietnamese oil amp gas industry PVN-Index is an index consisting of two groups

of representatives and investment indicators starting year 2008 Representative

groups have again been divided into market index (PVNAllshare PVNAllshare

Continuous PVNAllshare HOSE PVNAllshare HNX) and the sector index (oil

and gas basic materials financial industrial and consumers service) Investment

index which also known as PVN10 including 10 stocks with largest market

capitalization and trading value on Ho Chi Minh Stock Exchange (HOSE) and

Hanoi Stock Exchange (HNX) (Sources wwwpvnindexvn)

PVN-Index appeared on the market since May 82012 but so far there are none

of fund management companies in Vietnam have applied this index The best

practice case of Oil amp Gas UltraSector ProFund indicates that there are many

opportunities and long-term benefits (in term of return and performance) for a

fund management company to establish a open-ended fund which imitates an oil

amp gas sector index (in this case PVN-Index) This type of new fund will

overcome the problem of low liquidity which is inherent disadvantage of open-

ended funds at the same time solve the problematic ldquohigh discount raterdquo of

closed-end funds With this new type of fund which imitates energy sector index

the investor will invest in a basket of index easy to follow and suitable for small

investors non-professional investors or foreign institutional investors (pension

funds insurance funds) Also investing in a basket of securities also limit the

market abuse and manipulation

PVFC Capital could apply the practical case of ProFund to create transparent

investment product flexible trading mechanisms risk diversification and

professional management The application of this fund type also help to attract

new investors new capital flows making it easier to attract more capital sources

from the economy through the primary market In addition if PVFC Capital

could establish a similar successful index fund it also leads to positive behavioral

changes in term of investment culture Rather than investing in individual stocks

separately requires more time to analyze the market and transaction time This is

becoming more difficult as the number of shares listed have increased even up to

thousands of stocks

9

Table 24 Average Annual Total Returns as of December 31 2012

One Year Five Years Ten Years Inception

Date

Investor Class Shares 1 -753 1361 061900

Before Taxes

After Texas on

Distributions

361 -753 1342

After Texas on

Distributions and

Sales of Shares

235 -624 1221

Service Class Shares 260 -845 1221 061900

SampP 500 1600 166 710

Down Jones US Oil

amp Gas Index

471 -035 1377

Source ProFunds

Fund Return

The Indexrsquos annualized historical volatility rate for the five-year period ended

September 30 2013 was 3299 The Indexrsquos highest September to September

volatility rate during the five-year period was 5803 (September 30 2009)

The Indexrsquos annualized performance for the five-year period ended September

30 2013 was 1450 (Source Profund)

The table below represents performance and returns of the fund as of 13102014

The investment return and principal value of an investment will fluctuate so that

an investors shares when redeemed may be worth more or less than the original

cost Returns include the reinvestment of dividends and capital gains

Table 25 Annual Total Returns Summary

YTD (as of 10132014) -1264

Average Annual One Year 1518

Average Annual Three Year 2305

Average Annual Five Year 1450

Average Annual Ten Year 1083

Average Annual Since Inception 803

Cumulative Since Inception 20143

Gross Expense Ratio 183

Net Expense Ratio 178

(Source httpwwwprofundscom)

10

25 Summary of this chapter

The success of Oil amp Gas UltraSector Profund has brought huge amount of profit

to Profund Company The investment in the energy index helps Profund having

an operation mechanism as an open-end fund with more diversified product as

well as better risk diversification

In Vietnams stock market there are three exchange-traded funds operating and

simulate Vietnamlsquos stock market index Except Ishare Frontier Market has the

low proportion of asset invested in Vietnam the other two funds are familiar to

investors The Market Vectors Vietnam ETF and DB X-Tracker FTSE Vietnam

have continuously dominated the market over the years As of mid-September

2014 the total assets of The Market Vectors Vietnam ETF reached nearly 630

million USD an increase of 270 times in the last 5 years Similarly X-Tracker

DB FTSE Vietnam has managed 400 million USD assets up 82-times since

2008 (Source Cafef)

Since 2011 Intelligent Financial Research amp Consulting (IFRC) and the

Petrovietnam Securities Incorporation (PSI) ndash a subsidiary of PVN have

collaborated building a PVN-Index which composing of all listed companies in

Vietnamese oil amp gas industry PVN-Index is an index consisting of two groups

of representatives and investment indicators starting year 2008 Representative

groups have again been divided into market index (PVNAllshare PVNAllshare

Continuous PVNAllshare HOSE PVNAllshare HNX) and the sector index (oil

and gas basic materials financial industrial and consumers service) Investment

index which also known as PVN10 including 10 stocks with largest market

capitalization and trading value on Ho Chi Minh Stock Exchange (HOSE) and

Hanoi Stock Exchange (HNX) (Sources wwwpvnindexvn)

PVN-Index appeared on the market since May 82012 but so far there are none

of fund management companies in Vietnam have applied this index The best

practice case of Oil amp Gas UltraSector ProFund indicates that there are many

opportunities and long-term benefits (in term of return and performance) for a

fund management company to establish a open-ended fund which imitates an oil

amp gas sector index (in this case PVN-Index) This type of new fund will

overcome the problem of low liquidity which is inherent disadvantage of open-

ended funds at the same time solve the problematic ldquohigh discount raterdquo of

closed-end funds With this new type of fund which imitates energy sector index

the investor will invest in a basket of index easy to follow and suitable for small

investors non-professional investors or foreign institutional investors (pension

funds insurance funds) Also investing in a basket of securities also limit the

market abuse and manipulation

PVFC Capital could apply the practical case of ProFund to create transparent

investment product flexible trading mechanisms risk diversification and

professional management The application of this fund type also help to attract

new investors new capital flows making it easier to attract more capital sources

from the economy through the primary market In addition if PVFC Capital

could establish a similar successful index fund it also leads to positive behavioral

changes in term of investment culture Rather than investing in individual stocks

separately requires more time to analyze the market and transaction time This is

becoming more difficult as the number of shares listed have increased even up to

thousands of stocks

10

25 Summary of this chapter

The success of Oil amp Gas UltraSector Profund has brought huge amount of profit

to Profund Company The investment in the energy index helps Profund having

an operation mechanism as an open-end fund with more diversified product as

well as better risk diversification

In Vietnams stock market there are three exchange-traded funds operating and

simulate Vietnamlsquos stock market index Except Ishare Frontier Market has the

low proportion of asset invested in Vietnam the other two funds are familiar to

investors The Market Vectors Vietnam ETF and DB X-Tracker FTSE Vietnam

have continuously dominated the market over the years As of mid-September

2014 the total assets of The Market Vectors Vietnam ETF reached nearly 630

million USD an increase of 270 times in the last 5 years Similarly X-Tracker

DB FTSE Vietnam has managed 400 million USD assets up 82-times since

2008 (Source Cafef)

Since 2011 Intelligent Financial Research amp Consulting (IFRC) and the

Petrovietnam Securities Incorporation (PSI) ndash a subsidiary of PVN have

collaborated building a PVN-Index which composing of all listed companies in

Vietnamese oil amp gas industry PVN-Index is an index consisting of two groups

of representatives and investment indicators starting year 2008 Representative

groups have again been divided into market index (PVNAllshare PVNAllshare

Continuous PVNAllshare HOSE PVNAllshare HNX) and the sector index (oil

and gas basic materials financial industrial and consumers service) Investment

index which also known as PVN10 including 10 stocks with largest market

capitalization and trading value on Ho Chi Minh Stock Exchange (HOSE) and

Hanoi Stock Exchange (HNX) (Sources wwwpvnindexvn)

PVN-Index appeared on the market since May 82012 but so far there are none

of fund management companies in Vietnam have applied this index The best

practice case of Oil amp Gas UltraSector ProFund indicates that there are many

opportunities and long-term benefits (in term of return and performance) for a

fund management company to establish a open-ended fund which imitates an oil

amp gas sector index (in this case PVN-Index) This type of new fund will

overcome the problem of low liquidity which is inherent disadvantage of open-

ended funds at the same time solve the problematic ldquohigh discount raterdquo of

closed-end funds With this new type of fund which imitates energy sector index

the investor will invest in a basket of index easy to follow and suitable for small

investors non-professional investors or foreign institutional investors (pension

funds insurance funds) Also investing in a basket of securities also limit the

market abuse and manipulation

PVFC Capital could apply the practical case of ProFund to create transparent

investment product flexible trading mechanisms risk diversification and

professional management The application of this fund type also help to attract

new investors new capital flows making it easier to attract more capital sources

from the economy through the primary market In addition if PVFC Capital

could establish a similar successful index fund it also leads to positive behavioral

changes in term of investment culture Rather than investing in individual stocks

separately requires more time to analyze the market and transaction time This is

becoming more difficult as the number of shares listed have increased even up to

thousands of stocks

11

CHAPTER 3

SITUATIONAL ANALYSIS

31 Status of fund management companies and Open-ended funds in

Vietnam market

Open-ended Fund is a new type of fund in Vietnam But in the world over 90

of the fund established in the form of open-ended funds The legal basis of the

fund is 1832011TT-BTC Circular - Ministry of Finance which provides the

framework for establishment and management of Open-ended Fund effectively

from 132012 Since then some new fund was established in Vietnam under the

form of Open-ended funds

In the beginning of 2013 only 03 open-end funds were established By the end of

the year there were 08 open-end fund was established (03 of them are former

Closed-end fund and just converted to Open-end funds) Currently there are only

546 fund management companies in the market successfully established Open-

ended fund and 02 companies are in the process of raising capital (See Appendix

1)

General characteristics of the Open-end funds were established as follows

Small scale the Open-ended funds have been established in Vietnam are in small

scale from 50-70 billion VND (minimum size prescribed by the State Security

Commission (SSC) is 50 billion)

The investment objectives to invest primarily in bonds and securities that

generate fixed -income and have low-risk This is consistent with the prudent

investors who aim to preserve capital and investment return just higher than

saving rate Only 2 Open-ended fund invest in listed stocks

32 Oil amp gas sector in Vietnam

PetroVietnam Group (PVN) is the biggest group of Vietnam and it contributes

20 of the countryrsquos annual GDP PVNrsquos annual revenue reached VND 773

trillion (or US$ 37 billion) in 2013

PVN plays a very important part in contributing to Vietnamrsquos state budget In

2013 it contributed VND 195 trillion to the total state budget an increase of

45 compared with 2012 For the first 9 months of 2014 PVN contributed

Oil and Gas sector in general and its exploration and services sector in particular

have robustly developed in the past years and are expected to continue its strong

growth to meet the demand of the socio-economic development of Vietnam

According the master plan of oil and gas sector development for the period of

2006-2025 capital demand to meet with the sector development will be about

US$ 1275 - 1335 billion accounting for 20-22 of the total investment demand

of the whole economy (Source PVN)

PVN has 32 companies (as its subsidiaries) listing on Ho Chi Minh Stock

Exchange and Hanoi Stock Exchange of Vietnam PetroVietnam Securities

Incorporation (PSI) started developing PVN-Index reflecting the performance of

12

these listed PVNrsquos subsidiaries in 2011 and declared PVN-Index in its website in

February 2012 This index meets the international standard and practices and is

expected to be realized and tracked by international financial community

(Source PVN)

Figure 31 The importance of oil and gas sector

Exploration and

Exploitation

76 contracts with foreign partners and

23 offshore contracts

Production 28 oil projects and 10 gas projects

Electricity 13 electricity project

Oil Refinery 4 Oil Refinery projects and 6

Chemical Oil projects

Bio-energy 3 bio-energy projects

(Source httpwwwpvnvn)

Figure 32 PVN-Index component by sector

Source PSI PVFC Capital

12

these listed PVNrsquos subsidiaries in 2011 and declared PVN-Index in its website in

February 2012 This index meets the international standard and practices and is

expected to be realized and tracked by international financial community

(Source PVN)

Figure 31 The importance of oil and gas sector

Exploration and

Exploitation

76 contracts with foreign partners and

23 offshore contracts

Production 28 oil projects and 10 gas projects

Electricity 13 electricity project

Oil Refinery 4 Oil Refinery projects and 6

Chemical Oil projects

Bio-energy 3 bio-energy projects

(Source httpwwwpvnvn)

Figure 32 PVN-Index component by sector

Source PSI PVFC Capital

13

PVN has 32 listed companies on the two stock exchanges of Vietnam

Total capitalization of the 32 listed companies VND 228000 billion equivalent

to 20 total market capitalization (Source PSI)

33 Simulation and performance of PVN Index

Simlation of PetroVietnam ndash Index (PVN-Index) has been developed by

PetroVietnam Securities Company (PSI) since 2012 It represents the

performance of 32 listed companies of PetroVietnam oil amp gas Group (PVN) on

two stock exchanges of VietnamTotal capitalization of the 32 listed companies is

VND 228000 billion (~ US$108 billion) equivalent to 20 total market

capitalization (Source PSI)

One important result in equitization process and re-structure of PVN is the strong

connection with listing PVNrsquos affiliates on stock market These results contribute

important part in the development of Vietnamese stock market as well as help

PVN strengthen the specialization to focus on its core business activities

The stock index family for PVNrsquos member units listed on stock exchange (PVN-

Index family) is another advance in re-structuring process and enhancing the

business activities management of PVN and its affiliates PVN-Index family is

published in Quarter 1-2012 and targeted to following expectations

331 PVN-Index family is one of measurement scale reflecting

business performance of PetroVietnam PVN-Index family particularly in

financial market will better support effective capital mobilization channel for

PVN and affiliates when PVN is strengthening capital raising activities on

domestic and international markets

332 The index will support to enhance the transparency in business

activities management and information releasing of PVN and affiliates

Through taking part in the index companies will be required to publish specific

information about financial situation and business activities The publishing of

these information on website of PVN-Index in two languages Vietnamese-

English and on prestigious financial channel like Bloomberg will create efficient

information provision environment to domestic and international investors and

enhance the transparency

333 PVN-Index family contains a wide range of index type including

tradable index (PVN-10) This is preparation step for investing in index

products - an indispensable trend for Vietnamese stock market in the near

future The development following international standards will help PVN-10 can

easily become trading product with investor when SSC allows to trade new

investment vehicles Financial instruments on tradable index are expected to be

efficient capital mobilization channel with PVN and its affiliates

334 The index family is developed following international standards

to be highly representative and commercialized in international financial

market in particular

14

Each index is calculated as both Price Return Index and Total Return

Index

PVN-Index is calculated both at End of Day and in Real Time

The index is calculated an converted to popular currencies to attract the

interest of international investor The foreign currencies used are USD

EUR and JPY

Stock selection in calculating index has to satisfy some requirements

based on market capitalization and liquidity

PVN-Index use international industry classification license of ICBs

(Industry Classification Benchmarks) from FTSE International Limited

(UK) for companies in the index

The information of index is published on Bloomberg with specific access

code and displayed in real-time time as equity index This procedure

bring back efficiency for international professional investor in tracking

index movement

34 PVN Index performance compared to other indexes

PVN Index always outperformed other indexes 2013 rose by 544 25 times

higher than that of VN-Index and more than 3 times as much as that of HNX-

Index This is one of the strongest point to support the planning of establishing an

open-ended fund imitate this index

Figure 34 PVN Index vs VNIndex amp HNIndex

Source PSI

Figure 35 PVN Index vs VN30 amp HNX10

Source PSI

-20

0

20

40

60

80

100

120

13

2012

23

2012

33

2012

43

2012

53

2012

63

2012

73

2012

83

2012

93

2012

103

2012

113

2012

123

2012

13

2013

23

2013

33

2013

43

2013

53

2013

63

2013

73

2013

83

2013

93

2013

103

2013

113

2013

123

2013

VNIndex HNXIndex PVN Index PVN10 Index

-20

0

20

40

60

80

100

120

13

2012

23

2012

33

2012

43

2012

53

2012

63

2012

73

2012

83

2012

93

2012

103

2012

113

2012

123

2012

13

2013

23

2013

33

2013

43

2013

53

2013

63

2013

73

2013

83

2013

93

2013

103

2013

113

2013

123

2013

VN30 Index HNX30 Index PVN Index PVN10 Index

15

35 Impact model

Figure 36 Conception of PVGF

CONCEPTION OF PVGF

Financial Market Condition

LOCAL

Main Revenue Source

Portfolio Management

Need to establish NEW OPEN - ENDED FUND

Portfolio Management

generate revenue much higher than

Fund Management

1832011TT-BTC Circular

providing guidance on the

establishment organization and

operation of Open-ended Fund

Revenue Structure need to adjust towards more from

Fund management activities

No New Fund established since 2011

Business Development amp Fund Raising face difficulties

Rising but still facing

many difficulties

Investor Confidence

has improved

significantly

OVERSEASSTOCK BONDS

OPEN_ENDED FUND ESTABLISHMENT

Unbalance in revenue

allocation

Internal

External

Collaboration amp Support have not

been exploited from major

shareholders

Has not utilize the

completive advantages

by exploit the

capabilities amp network

from associates within

the Group (PVN

PVcomBank amp Suvico

Group)

The diagram above states the main causative agents and the way it results in the

actual needs to mobilize and establish a new funds in PVFC Capital

Firstly we need to consider the external factors including The status of current

capital markets the confidence of investors and the legal framework for the

establishment and management of a new type of Fund (Open -ended Fund)

36 Financial Market Conditions

There are totally more than 700 listed companies on the two stock exchanges

with total capitalization of USD 459 billion (an increase of USD 94 bil

compared with 2012) equivalent to 31 of GDP

After the peak of 1137 points in February 2007 VN-Index had reduced since

2008 due to the global financial crisis until Quarter II of 2013 when the market

started to rally and enter major recovery uptrends VNIndex grew by 219 in

2013

16

Figure 37 Market players

Source HSX HNX VSD

Figure 38 VNIndex movements in 2013

Source VNDirect

The stock market index in Vietnam is in the rising group in the world as

calculation in the early months of 2013 But the operation of the market is still

facing many difficulties and challenges which effect significantly to the

mobilization of medium and long term capital flow

Unfavorable factors including

- The World economy is forecasted to be complex potentially risky and difficult

to recovery The international financial institutions have lowered their growth

forecasts for major economies such as the US Eurozone China Japan

- The economic policy in the country should implement goals of maintaining

macroeconomic stability control inflation and ensure growth remains higher than

in 2012

- Weak domestic demand competitiveness economic efficiency is low

- The bad debt write-offs and restructuring in banking structure is a big issue and

cannot be handled right away

0

200

400

600

800

2005 2006 2007 2008 2009 2010 2011 2012 2013

Number of securities company

Number of fund manager company

Number of listed company

17

(v) State budget will also be more difficult demand for macroeconomic

stabilization rise but the revenues are limited

37 Confidence of investor

Confidence of foreign investors in Vietnam market has improved significantly

This is due to the effective implementation of monetary policy in Vietnam the

reforms in the banking sector reducing the state budget deficit as well as the

positive changes in the balance of trade and payments

Figure 39 GDP and GDP Growth

Source GSO

The GDP of the country has grown by 25 times in the last 6 years and has

become as one of the fastest growing economies in Asia The annual growth rate

of GDP is about 71 for the period of 2000-2010 (Source General Statistic

Office) Since 2011 Vietnam has achieved this average growth with the aim to

stabilize long term macro-economy

Figure 310 Trade Balance

Source GSO

The country has achieved significantly improved trade balance Vietnam had

trade surplus in two consecutive years of 2012-2013 after 20 years of trade

deficit

0

2

4

6

8

10

000

5000

10000

15000

20000

2007 2008 2009 2010 2011 2012 2013 GDP (billion USD)

-50

0

50

100

150

2007 2008 2009 2010 2011 2012 2013

Import Export Trade balance

18

Figure 311 FDI inflows

Source GSO

The country has reduced registered FDI but increased disbursement

Figure 312 Interest rates

Source GSO

The interest rate has significantly reduced interest rates in the last 2 years

In addition the political debate on the priority issues of resolving state enterprise

reform fighting against corruption have led to many observers believing that the

Government of Vietnam is really act not just talk

With the potential development of the domestic as well as export market

medium-term investors could find investment opportunities in Vietnam very

attractive PVFC Capital believes in those companies which have good

governance clear and well-defined strategic direction will always be attractive to

value investors in their investment basket

38 Legal Framework - Circular 1832011Circular ndash Ministry of Finance

Circular 1832011TT-BTC guidelines on establishment and management Open-

ended Fund issued by the Ministry of Finance marked the development of the

fund management industry and are highly appreciated in many aspects

Firstly the legislation now allows closed-end fund is converted into open-end

funds This is considered a promising direction for the upcoming expiration of

current funds and in the context of high discount rate of fund certificates (the

difference between the price of fund units and the net asset value of fund

certificates)

Secondly the fund is open-platform product designed to connect the stock

market with other markets such as insurance (interlink-products) money (

0

20

40

60

80

2007 2008 2009 2010 2011 2012 2013

Registered capital Disbursement capital

140 130 120 110 90 80 75 70 6

00

50

100

150

19

monetary market funds ) the social security system (pension fund) or connect to

other areas of the market such products index derivative securities bonds (

such as index funds ETFs derivative funds bond funds )

Thirdly open-ended funds with high liquidity low cost will be more attractive

for investors

Considering the Internal factor including Revenue Structure and Support

from shareholders

39 Revenue Structure

Revenue and Cost structure of the Company in fiscal year 2013 are as follows

Table 31 Revenue Structure ITEMS REVENUE

(Unit USD)

EXPENSES

(Unit USD)

Fund Management 70838 363636

Portfolio Management 864227

Depositary 462810

Investment Activities 37780 (28335)

Provision for short term

investment

(105785)

Total 1435655 902007

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

In 2013 PVFC Capitallsquos revenue is composed mainly from extremely active

portfolio management (183 VND biltotal 30 4 VND bil revenue) As of

31122013 the company has been managing 11 (eleven) portfolios in domestic

trusts and two foreign investment portfolio with total net asset value of 9405

billion VND (Source PVFC Capital)

Thus considering target for revenue allocation profit from fund management

activity is not commensurate with the profit from the portfolio management

activities and not commensurate with the potential resources that company is

having in term of administrative governance capacity financial capacity and

customer networks

310 Support from shareholders

Collaboration amp Support have not been exploited from major shareholders PVFC

Capital have strong shareholders (PVN PVcomBank Sovio Group) in the way

that they are big corporation with diversified business There is a shareholder-

relation unit within the company but still operates passively lack of creativity

lack of connectivity and especially lack the ability to communicate timely the

movement of business or constant message of the Executive Board to the

20

shareholders The consequence of this situation is less linkages to the long-term

commitment from shareholders At difficult time the company will likely

become lonely and hard to find the firm support from these strategic

shareholders The support from these giant corporations could attract more

investors to make investment in the company However the company has not

utilized the completive advantages by exploit the capabilities amp network from

associates within these Group (PVN PVcomBank amp Sovico Group)

Table 32 Summarized factors affecting business

Category Factor Description (+-)

External factors Financial Market

Conditions Rising but still facing many

difficulties (+)

Confidence of

investors

Confidence of foreign investors in

Vietnam stock market has improved

significantly due to the government

policies (+)

Legal Framework -

Circular

1832011Circular

Marked the prospect and

development of the fund

management industry (+)

Internal factors Revenue Structure

Unbalance in revenue structure (-)

Revenue is not commensurate with

the profit and with the potential

resources of the company (-)

Support from

shareholders Collaboration amp Support have not

been exploited from major

shareholders (PVN PVcomBank amp

Sovico Group) (-)

21

CHAPTER 4

DEVELOPING THE PVGF

41 Introducing new form of funds (PVGF)

We are currently reasearching and preparing to introduce to investors a new form

of fund - Open-ended Fund This type of fund offers many advantages compare

to the old Close-ended Fund and Member Fund The mechanism is flexible for

invetors since customers can make withdrawal anytime requested It is suitable

for investors who have less knowledge of special stock market and only accept

low risk level The new forms will create opportunities for fund management like

us to access and exploit the potential capital inflow from both local and foreign

partners

From that basis we are constructing the draft of PetroVietnam Growth Open-

ended Fund (PVGF) for the purpose of investing in the shares of companies in

oil and gas industry focusing on the stocks in the PVN-10 Index (10 biggest

share of PVN in the Vietnam Stock market) (See appendix 7) PVFG is Open-

ended Fund and aims to take advantage of the industry and help promote the

company image The main provisions of the proposed fund are as following

Table 41 PetroVietnam Growth Open-ended Fund (Proposed)

Fund Name PetroVietnam Growth Open-ended Fund

Abbreviation PVGF

Form of Fund Funds are established and operated under the current

law of Vietnam

Initial fund size Min 50 billion VND (~ 5000000 Fund units)

Investors Includes institutional and individual investors in

Vietnam and oversea

Fund management

Company

PVFC Capital

Custodian Bank Deutsche Bank (Proposed)

Investment

Objectives

The Fund aims to maximize profits for investors

through investments in oil and gas stocks that have

high returns

Investment

Structure

- Up to 95 of the Net asset value of the Fund in a

basket of stocks in PVN-10 stocks the shares of the

company under the Vietnam Oil and Gas Group (PVN)

that have high liquidity solid fundamental numbers

and attractive dividend rate

- Up to 70 of net asset value of the Fund will invest

in securities which have a fixed interest rate (including

government bonds corporate bonds project bonds )

On the basis of the growth of PVN-10 Index and

assessment of market conditions the fund will

determine the proportion of assets in the portfolio to

ensure profitability and liquidity of funds

Source PVFC Capital

22

42 Investment objective amp strategy

Investment objective The fund aims to maximize profits for investors through

investing in securities of companies with high growth potential in oil and gas

sector

Investment strategy

- Focusing on growth securities in the oil and gas sector particularly those of

PVN-10 Index

- Maximum 95 of the fundrsquos NAV in securities of oil and gas sector

- Maximum 70 of the fundrsquos NAV in fixed income (including government

bonds corporate bonds etchellip)

- Also investing in fixed income markets (government bonds and enterprise

bonds)

Based on the performance of PVN Index the macro-economic situation and

securities market the fundrsquos investment structure will be decided from time to

time in order to ensure its profit as well as liquidity

The Fund shall seek for obtaining a result which is similar to the Index and shall

not implement the defence strategy when the market is reducing and shall not

materialize its profits when the market is pricing too high The passive investing

is aimed to reduce the costs and make closer replication of Index by keeping a

ratio of investment capital turnover lower than the ratio used by the funds which

implement an active investment strategy

The value of investment portfolio of the Fund is often not less than 95 of the

corresponding value of basket of securities of PVN-Index The list of stocks is

screening through the index participation conditions which satisfy the criteria of

free-float ratio market capitalization and trading value When HOSE makes the

rebalancing or unexpected change of PVN-Index portfolio the ratio of the Fundrsquos

assets invested in the securities basket may fluctuate to less than 95 of the

corresponding value of securities basket of PVN-Index

In order to replicate the PVN- Index in principle the Fund must hold all stocks in

a basket of PVN- Index at corresponding ratio However in some cases the Fund

cannot fully buy all the stocks corresponding to the weighting in the Index In

such cases the Fund may choose the method of raising the weighting or reducing

the weighting of certain stocks in the index or buying the stocks not belonged to

the index but have high correlation with PVN- Index to replace the stocks in the

index in order to replicate the closest PVN- Index after deducting the Fundrsquos

expenses PVGF may sell stocks in the basket in advance if it estimates that there

is a possibility of such stock to be out of the basket of PVN- Index or may buy

the stocks which are not currently in the PVN- Index in advance if it estimates

that there is a possibility of such stock to enter in basket of PVN- Index in the

next reviewing session

23

Figure 41 Asset allocation

Source PVFC Capital

43 Characteristics of listed companies in PVN-10 Index

PetroVietnam currently has 32 listed subsidiaries accounting for 20 of the total

market capitalization PVN-Index which was developed by PetroVietnam

Securities Inc (PSI) and launched in 2012 represents the performance of these

listed companies in the two stock exchanges The index meets the international

standards and practice and is expected to be widely used by the investment

professionals In the past two years PVN-Index outperformed other indexes in

Vietnam including VN-Index HNX-Index VN-30 and HNX-30 Specifically in

2013 PVN-Index grew 544 which was 25 times the growth rate of the VN-

Index and more than three times the growth of HNX-Index

In the PVN-Index indexes the PVN-10 is a collection of 10 stocks with the

largest market capitalization and highest liquidity amongst 32 shares of the listed

PVN member companies

Table 42 PVN-10 Index

No Ticker Company name Market price at

2442014

1 GAS PetroVietnam Gas Joint Stock Corporation 97000

2 PVD Petrovietnam Drilling amp Well Services Corporation 83000

3 PVS PetroVietnam Technical Services Corporation 26300

4 DPM PetroVietnam Fertilizer and Chemicals Corporation 35300

5 PVT Petrovietnam Transportation Corporation 14200

6 PVX Petrovietnam Construction Joint Stock Corporation 5200

7 PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

44500

8 PET Petrovietnam General Services Joint Stock

Corporation

17900

9 PGS PetroVietNam Southern Gas Joint Stock Company 29200

10 PVC Drilling Mud Corporation 20800

Source PSI

14

Each index is calculated as both Price Return Index and Total Return

Index

PVN-Index is calculated both at End of Day and in Real Time

The index is calculated an converted to popular currencies to attract the

interest of international investor The foreign currencies used are USD

EUR and JPY

Stock selection in calculating index has to satisfy some requirements

based on market capitalization and liquidity

PVN-Index use international industry classification license of ICBs

(Industry Classification Benchmarks) from FTSE International Limited

(UK) for companies in the index

The information of index is published on Bloomberg with specific access

code and displayed in real-time time as equity index This procedure

bring back efficiency for international professional investor in tracking

index movement

34 PVN Index performance compared to other indexes

PVN Index always outperformed other indexes 2013 rose by 544 25 times

higher than that of VN-Index and more than 3 times as much as that of HNX-

Index This is one of the strongest point to support the planning of establishing an

open-ended fund imitate this index

Figure 34 PVN Index vs VNIndex amp HNIndex

Source PSI

Figure 35 PVN Index vs VN30 amp HNX10

Source PSI

-20

0

20

40

60

80

100

120

13

2012

23

2012

33

2012

43

2012

53

2012

63

2012

73

2012

83

2012

93

2012

103

2012

113

2012

123

2012

13

2013

23

2013

33

2013

43

2013

53

2013

63

2013

73

2013

83

2013

93

2013

103

2013

113

2013

123

2013

VNIndex HNXIndex PVN Index PVN10 Index

-20

0

20

40

60

80

100

120

13

2012

23

2012

33

2012

43

2012

53

2012

63

2012

73

2012

83

2012

93

2012

103

2012

113

2012

123

2012

13

2013

23

2013

33

2013

43

2013

53

2013

63

2013

73

2013

83

2013

93

2013

103

2013

113

2013

123

2013

VN30 Index HNX30 Index PVN Index PVN10 Index

15

35 Impact model

Figure 36 Conception of PVGF

CONCEPTION OF PVGF

Financial Market Condition

LOCAL

Main Revenue Source

Portfolio Management

Need to establish NEW OPEN - ENDED FUND

Portfolio Management

generate revenue much higher than

Fund Management

1832011TT-BTC Circular

providing guidance on the

establishment organization and

operation of Open-ended Fund

Revenue Structure need to adjust towards more from

Fund management activities

No New Fund established since 2011

Business Development amp Fund Raising face difficulties

Rising but still facing

many difficulties

Investor Confidence

has improved

significantly

OVERSEASSTOCK BONDS

OPEN_ENDED FUND ESTABLISHMENT

Unbalance in revenue

allocation

Internal

External

Collaboration amp Support have not

been exploited from major

shareholders

Has not utilize the

completive advantages

by exploit the

capabilities amp network

from associates within

the Group (PVN

PVcomBank amp Suvico

Group)

The diagram above states the main causative agents and the way it results in the

actual needs to mobilize and establish a new funds in PVFC Capital

Firstly we need to consider the external factors including The status of current

capital markets the confidence of investors and the legal framework for the

establishment and management of a new type of Fund (Open -ended Fund)

36 Financial Market Conditions

There are totally more than 700 listed companies on the two stock exchanges

with total capitalization of USD 459 billion (an increase of USD 94 bil

compared with 2012) equivalent to 31 of GDP

After the peak of 1137 points in February 2007 VN-Index had reduced since

2008 due to the global financial crisis until Quarter II of 2013 when the market

started to rally and enter major recovery uptrends VNIndex grew by 219 in

2013

16

Figure 37 Market players

Source HSX HNX VSD

Figure 38 VNIndex movements in 2013

Source VNDirect

The stock market index in Vietnam is in the rising group in the world as

calculation in the early months of 2013 But the operation of the market is still

facing many difficulties and challenges which effect significantly to the

mobilization of medium and long term capital flow

Unfavorable factors including

- The World economy is forecasted to be complex potentially risky and difficult

to recovery The international financial institutions have lowered their growth

forecasts for major economies such as the US Eurozone China Japan

- The economic policy in the country should implement goals of maintaining

macroeconomic stability control inflation and ensure growth remains higher than

in 2012

- Weak domestic demand competitiveness economic efficiency is low

- The bad debt write-offs and restructuring in banking structure is a big issue and

cannot be handled right away

0

200

400

600

800

2005 2006 2007 2008 2009 2010 2011 2012 2013

Number of securities company

Number of fund manager company

Number of listed company

17

(v) State budget will also be more difficult demand for macroeconomic

stabilization rise but the revenues are limited

37 Confidence of investor

Confidence of foreign investors in Vietnam market has improved significantly

This is due to the effective implementation of monetary policy in Vietnam the

reforms in the banking sector reducing the state budget deficit as well as the

positive changes in the balance of trade and payments

Figure 39 GDP and GDP Growth

Source GSO

The GDP of the country has grown by 25 times in the last 6 years and has

become as one of the fastest growing economies in Asia The annual growth rate

of GDP is about 71 for the period of 2000-2010 (Source General Statistic

Office) Since 2011 Vietnam has achieved this average growth with the aim to

stabilize long term macro-economy

Figure 310 Trade Balance

Source GSO

The country has achieved significantly improved trade balance Vietnam had

trade surplus in two consecutive years of 2012-2013 after 20 years of trade

deficit

0

2

4

6

8

10

000

5000

10000

15000

20000

2007 2008 2009 2010 2011 2012 2013 GDP (billion USD)

-50

0

50

100

150

2007 2008 2009 2010 2011 2012 2013

Import Export Trade balance

18

Figure 311 FDI inflows

Source GSO

The country has reduced registered FDI but increased disbursement

Figure 312 Interest rates

Source GSO

The interest rate has significantly reduced interest rates in the last 2 years

In addition the political debate on the priority issues of resolving state enterprise

reform fighting against corruption have led to many observers believing that the

Government of Vietnam is really act not just talk

With the potential development of the domestic as well as export market

medium-term investors could find investment opportunities in Vietnam very

attractive PVFC Capital believes in those companies which have good

governance clear and well-defined strategic direction will always be attractive to

value investors in their investment basket

38 Legal Framework - Circular 1832011Circular ndash Ministry of Finance

Circular 1832011TT-BTC guidelines on establishment and management Open-

ended Fund issued by the Ministry of Finance marked the development of the

fund management industry and are highly appreciated in many aspects

Firstly the legislation now allows closed-end fund is converted into open-end

funds This is considered a promising direction for the upcoming expiration of

current funds and in the context of high discount rate of fund certificates (the

difference between the price of fund units and the net asset value of fund

certificates)

Secondly the fund is open-platform product designed to connect the stock

market with other markets such as insurance (interlink-products) money (

0

20

40

60

80

2007 2008 2009 2010 2011 2012 2013

Registered capital Disbursement capital

140 130 120 110 90 80 75 70 6

00

50

100

150

19

monetary market funds ) the social security system (pension fund) or connect to

other areas of the market such products index derivative securities bonds (

such as index funds ETFs derivative funds bond funds )

Thirdly open-ended funds with high liquidity low cost will be more attractive

for investors

Considering the Internal factor including Revenue Structure and Support

from shareholders

39 Revenue Structure

Revenue and Cost structure of the Company in fiscal year 2013 are as follows

Table 31 Revenue Structure ITEMS REVENUE

(Unit USD)

EXPENSES

(Unit USD)

Fund Management 70838 363636

Portfolio Management 864227

Depositary 462810

Investment Activities 37780 (28335)

Provision for short term

investment

(105785)

Total 1435655 902007

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

In 2013 PVFC Capitallsquos revenue is composed mainly from extremely active

portfolio management (183 VND biltotal 30 4 VND bil revenue) As of

31122013 the company has been managing 11 (eleven) portfolios in domestic

trusts and two foreign investment portfolio with total net asset value of 9405

billion VND (Source PVFC Capital)

Thus considering target for revenue allocation profit from fund management

activity is not commensurate with the profit from the portfolio management

activities and not commensurate with the potential resources that company is

having in term of administrative governance capacity financial capacity and

customer networks

310 Support from shareholders

Collaboration amp Support have not been exploited from major shareholders PVFC

Capital have strong shareholders (PVN PVcomBank Sovio Group) in the way

that they are big corporation with diversified business There is a shareholder-

relation unit within the company but still operates passively lack of creativity

lack of connectivity and especially lack the ability to communicate timely the

movement of business or constant message of the Executive Board to the

20

shareholders The consequence of this situation is less linkages to the long-term

commitment from shareholders At difficult time the company will likely

become lonely and hard to find the firm support from these strategic

shareholders The support from these giant corporations could attract more

investors to make investment in the company However the company has not

utilized the completive advantages by exploit the capabilities amp network from

associates within these Group (PVN PVcomBank amp Sovico Group)

Table 32 Summarized factors affecting business

Category Factor Description (+-)

External factors Financial Market

Conditions Rising but still facing many

difficulties (+)

Confidence of

investors

Confidence of foreign investors in

Vietnam stock market has improved

significantly due to the government

policies (+)

Legal Framework -

Circular

1832011Circular

Marked the prospect and

development of the fund

management industry (+)

Internal factors Revenue Structure

Unbalance in revenue structure (-)

Revenue is not commensurate with

the profit and with the potential

resources of the company (-)

Support from

shareholders Collaboration amp Support have not

been exploited from major

shareholders (PVN PVcomBank amp

Sovico Group) (-)

21

CHAPTER 4

DEVELOPING THE PVGF

41 Introducing new form of funds (PVGF)

We are currently reasearching and preparing to introduce to investors a new form

of fund - Open-ended Fund This type of fund offers many advantages compare

to the old Close-ended Fund and Member Fund The mechanism is flexible for

invetors since customers can make withdrawal anytime requested It is suitable

for investors who have less knowledge of special stock market and only accept

low risk level The new forms will create opportunities for fund management like

us to access and exploit the potential capital inflow from both local and foreign

partners

From that basis we are constructing the draft of PetroVietnam Growth Open-

ended Fund (PVGF) for the purpose of investing in the shares of companies in

oil and gas industry focusing on the stocks in the PVN-10 Index (10 biggest

share of PVN in the Vietnam Stock market) (See appendix 7) PVFG is Open-

ended Fund and aims to take advantage of the industry and help promote the

company image The main provisions of the proposed fund are as following

Table 41 PetroVietnam Growth Open-ended Fund (Proposed)

Fund Name PetroVietnam Growth Open-ended Fund

Abbreviation PVGF

Form of Fund Funds are established and operated under the current

law of Vietnam

Initial fund size Min 50 billion VND (~ 5000000 Fund units)

Investors Includes institutional and individual investors in

Vietnam and oversea

Fund management

Company

PVFC Capital

Custodian Bank Deutsche Bank (Proposed)

Investment

Objectives

The Fund aims to maximize profits for investors

through investments in oil and gas stocks that have

high returns

Investment

Structure

- Up to 95 of the Net asset value of the Fund in a

basket of stocks in PVN-10 stocks the shares of the

company under the Vietnam Oil and Gas Group (PVN)

that have high liquidity solid fundamental numbers

and attractive dividend rate

- Up to 70 of net asset value of the Fund will invest

in securities which have a fixed interest rate (including

government bonds corporate bonds project bonds )

On the basis of the growth of PVN-10 Index and

assessment of market conditions the fund will

determine the proportion of assets in the portfolio to

ensure profitability and liquidity of funds

Source PVFC Capital

22

42 Investment objective amp strategy

Investment objective The fund aims to maximize profits for investors through

investing in securities of companies with high growth potential in oil and gas

sector

Investment strategy

- Focusing on growth securities in the oil and gas sector particularly those of

PVN-10 Index

- Maximum 95 of the fundrsquos NAV in securities of oil and gas sector

- Maximum 70 of the fundrsquos NAV in fixed income (including government

bonds corporate bonds etchellip)

- Also investing in fixed income markets (government bonds and enterprise

bonds)

Based on the performance of PVN Index the macro-economic situation and

securities market the fundrsquos investment structure will be decided from time to

time in order to ensure its profit as well as liquidity

The Fund shall seek for obtaining a result which is similar to the Index and shall

not implement the defence strategy when the market is reducing and shall not

materialize its profits when the market is pricing too high The passive investing

is aimed to reduce the costs and make closer replication of Index by keeping a

ratio of investment capital turnover lower than the ratio used by the funds which

implement an active investment strategy

The value of investment portfolio of the Fund is often not less than 95 of the

corresponding value of basket of securities of PVN-Index The list of stocks is

screening through the index participation conditions which satisfy the criteria of

free-float ratio market capitalization and trading value When HOSE makes the

rebalancing or unexpected change of PVN-Index portfolio the ratio of the Fundrsquos

assets invested in the securities basket may fluctuate to less than 95 of the

corresponding value of securities basket of PVN-Index

In order to replicate the PVN- Index in principle the Fund must hold all stocks in

a basket of PVN- Index at corresponding ratio However in some cases the Fund

cannot fully buy all the stocks corresponding to the weighting in the Index In

such cases the Fund may choose the method of raising the weighting or reducing

the weighting of certain stocks in the index or buying the stocks not belonged to

the index but have high correlation with PVN- Index to replace the stocks in the

index in order to replicate the closest PVN- Index after deducting the Fundrsquos

expenses PVGF may sell stocks in the basket in advance if it estimates that there

is a possibility of such stock to be out of the basket of PVN- Index or may buy

the stocks which are not currently in the PVN- Index in advance if it estimates

that there is a possibility of such stock to enter in basket of PVN- Index in the

next reviewing session

23

Figure 41 Asset allocation

Source PVFC Capital

43 Characteristics of listed companies in PVN-10 Index

PetroVietnam currently has 32 listed subsidiaries accounting for 20 of the total

market capitalization PVN-Index which was developed by PetroVietnam

Securities Inc (PSI) and launched in 2012 represents the performance of these

listed companies in the two stock exchanges The index meets the international

standards and practice and is expected to be widely used by the investment

professionals In the past two years PVN-Index outperformed other indexes in

Vietnam including VN-Index HNX-Index VN-30 and HNX-30 Specifically in

2013 PVN-Index grew 544 which was 25 times the growth rate of the VN-

Index and more than three times the growth of HNX-Index

In the PVN-Index indexes the PVN-10 is a collection of 10 stocks with the

largest market capitalization and highest liquidity amongst 32 shares of the listed

PVN member companies

Table 42 PVN-10 Index

No Ticker Company name Market price at

2442014

1 GAS PetroVietnam Gas Joint Stock Corporation 97000

2 PVD Petrovietnam Drilling amp Well Services Corporation 83000

3 PVS PetroVietnam Technical Services Corporation 26300

4 DPM PetroVietnam Fertilizer and Chemicals Corporation 35300

5 PVT Petrovietnam Transportation Corporation 14200

6 PVX Petrovietnam Construction Joint Stock Corporation 5200

7 PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

44500

8 PET Petrovietnam General Services Joint Stock

Corporation

17900

9 PGS PetroVietNam Southern Gas Joint Stock Company 29200

10 PVC Drilling Mud Corporation 20800

Source PSI

15

35 Impact model

Figure 36 Conception of PVGF

CONCEPTION OF PVGF

Financial Market Condition

LOCAL

Main Revenue Source

Portfolio Management

Need to establish NEW OPEN - ENDED FUND

Portfolio Management

generate revenue much higher than

Fund Management

1832011TT-BTC Circular

providing guidance on the

establishment organization and

operation of Open-ended Fund

Revenue Structure need to adjust towards more from

Fund management activities

No New Fund established since 2011

Business Development amp Fund Raising face difficulties

Rising but still facing

many difficulties

Investor Confidence

has improved

significantly

OVERSEASSTOCK BONDS

OPEN_ENDED FUND ESTABLISHMENT

Unbalance in revenue

allocation

Internal

External

Collaboration amp Support have not

been exploited from major

shareholders

Has not utilize the

completive advantages

by exploit the

capabilities amp network

from associates within

the Group (PVN

PVcomBank amp Suvico

Group)

The diagram above states the main causative agents and the way it results in the

actual needs to mobilize and establish a new funds in PVFC Capital

Firstly we need to consider the external factors including The status of current

capital markets the confidence of investors and the legal framework for the

establishment and management of a new type of Fund (Open -ended Fund)

36 Financial Market Conditions

There are totally more than 700 listed companies on the two stock exchanges

with total capitalization of USD 459 billion (an increase of USD 94 bil

compared with 2012) equivalent to 31 of GDP

After the peak of 1137 points in February 2007 VN-Index had reduced since

2008 due to the global financial crisis until Quarter II of 2013 when the market

started to rally and enter major recovery uptrends VNIndex grew by 219 in

2013

16

Figure 37 Market players

Source HSX HNX VSD

Figure 38 VNIndex movements in 2013

Source VNDirect

The stock market index in Vietnam is in the rising group in the world as

calculation in the early months of 2013 But the operation of the market is still

facing many difficulties and challenges which effect significantly to the

mobilization of medium and long term capital flow

Unfavorable factors including

- The World economy is forecasted to be complex potentially risky and difficult

to recovery The international financial institutions have lowered their growth

forecasts for major economies such as the US Eurozone China Japan

- The economic policy in the country should implement goals of maintaining

macroeconomic stability control inflation and ensure growth remains higher than

in 2012

- Weak domestic demand competitiveness economic efficiency is low

- The bad debt write-offs and restructuring in banking structure is a big issue and

cannot be handled right away

0

200

400

600

800

2005 2006 2007 2008 2009 2010 2011 2012 2013

Number of securities company

Number of fund manager company

Number of listed company

17

(v) State budget will also be more difficult demand for macroeconomic

stabilization rise but the revenues are limited

37 Confidence of investor

Confidence of foreign investors in Vietnam market has improved significantly

This is due to the effective implementation of monetary policy in Vietnam the

reforms in the banking sector reducing the state budget deficit as well as the

positive changes in the balance of trade and payments

Figure 39 GDP and GDP Growth

Source GSO

The GDP of the country has grown by 25 times in the last 6 years and has

become as one of the fastest growing economies in Asia The annual growth rate

of GDP is about 71 for the period of 2000-2010 (Source General Statistic

Office) Since 2011 Vietnam has achieved this average growth with the aim to

stabilize long term macro-economy

Figure 310 Trade Balance

Source GSO

The country has achieved significantly improved trade balance Vietnam had

trade surplus in two consecutive years of 2012-2013 after 20 years of trade

deficit

0

2

4

6

8

10

000

5000

10000

15000

20000

2007 2008 2009 2010 2011 2012 2013 GDP (billion USD)

-50

0

50

100

150

2007 2008 2009 2010 2011 2012 2013

Import Export Trade balance

18

Figure 311 FDI inflows

Source GSO

The country has reduced registered FDI but increased disbursement

Figure 312 Interest rates

Source GSO

The interest rate has significantly reduced interest rates in the last 2 years

In addition the political debate on the priority issues of resolving state enterprise

reform fighting against corruption have led to many observers believing that the

Government of Vietnam is really act not just talk

With the potential development of the domestic as well as export market

medium-term investors could find investment opportunities in Vietnam very

attractive PVFC Capital believes in those companies which have good

governance clear and well-defined strategic direction will always be attractive to

value investors in their investment basket

38 Legal Framework - Circular 1832011Circular ndash Ministry of Finance

Circular 1832011TT-BTC guidelines on establishment and management Open-

ended Fund issued by the Ministry of Finance marked the development of the

fund management industry and are highly appreciated in many aspects

Firstly the legislation now allows closed-end fund is converted into open-end

funds This is considered a promising direction for the upcoming expiration of

current funds and in the context of high discount rate of fund certificates (the

difference between the price of fund units and the net asset value of fund

certificates)

Secondly the fund is open-platform product designed to connect the stock

market with other markets such as insurance (interlink-products) money (

0

20

40

60

80

2007 2008 2009 2010 2011 2012 2013

Registered capital Disbursement capital

140 130 120 110 90 80 75 70 6

00

50

100

150

19

monetary market funds ) the social security system (pension fund) or connect to

other areas of the market such products index derivative securities bonds (

such as index funds ETFs derivative funds bond funds )

Thirdly open-ended funds with high liquidity low cost will be more attractive

for investors

Considering the Internal factor including Revenue Structure and Support

from shareholders

39 Revenue Structure

Revenue and Cost structure of the Company in fiscal year 2013 are as follows

Table 31 Revenue Structure ITEMS REVENUE

(Unit USD)

EXPENSES

(Unit USD)

Fund Management 70838 363636

Portfolio Management 864227

Depositary 462810

Investment Activities 37780 (28335)

Provision for short term

investment

(105785)

Total 1435655 902007

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

In 2013 PVFC Capitallsquos revenue is composed mainly from extremely active

portfolio management (183 VND biltotal 30 4 VND bil revenue) As of

31122013 the company has been managing 11 (eleven) portfolios in domestic

trusts and two foreign investment portfolio with total net asset value of 9405

billion VND (Source PVFC Capital)

Thus considering target for revenue allocation profit from fund management

activity is not commensurate with the profit from the portfolio management

activities and not commensurate with the potential resources that company is

having in term of administrative governance capacity financial capacity and

customer networks

310 Support from shareholders

Collaboration amp Support have not been exploited from major shareholders PVFC

Capital have strong shareholders (PVN PVcomBank Sovio Group) in the way

that they are big corporation with diversified business There is a shareholder-

relation unit within the company but still operates passively lack of creativity

lack of connectivity and especially lack the ability to communicate timely the

movement of business or constant message of the Executive Board to the

20

shareholders The consequence of this situation is less linkages to the long-term

commitment from shareholders At difficult time the company will likely

become lonely and hard to find the firm support from these strategic

shareholders The support from these giant corporations could attract more

investors to make investment in the company However the company has not

utilized the completive advantages by exploit the capabilities amp network from

associates within these Group (PVN PVcomBank amp Sovico Group)

Table 32 Summarized factors affecting business

Category Factor Description (+-)

External factors Financial Market

Conditions Rising but still facing many

difficulties (+)

Confidence of

investors

Confidence of foreign investors in

Vietnam stock market has improved

significantly due to the government

policies (+)

Legal Framework -

Circular

1832011Circular

Marked the prospect and

development of the fund

management industry (+)

Internal factors Revenue Structure

Unbalance in revenue structure (-)

Revenue is not commensurate with

the profit and with the potential

resources of the company (-)

Support from

shareholders Collaboration amp Support have not

been exploited from major

shareholders (PVN PVcomBank amp

Sovico Group) (-)

21

CHAPTER 4

DEVELOPING THE PVGF

41 Introducing new form of funds (PVGF)

We are currently reasearching and preparing to introduce to investors a new form

of fund - Open-ended Fund This type of fund offers many advantages compare

to the old Close-ended Fund and Member Fund The mechanism is flexible for

invetors since customers can make withdrawal anytime requested It is suitable

for investors who have less knowledge of special stock market and only accept

low risk level The new forms will create opportunities for fund management like

us to access and exploit the potential capital inflow from both local and foreign

partners

From that basis we are constructing the draft of PetroVietnam Growth Open-

ended Fund (PVGF) for the purpose of investing in the shares of companies in

oil and gas industry focusing on the stocks in the PVN-10 Index (10 biggest

share of PVN in the Vietnam Stock market) (See appendix 7) PVFG is Open-

ended Fund and aims to take advantage of the industry and help promote the

company image The main provisions of the proposed fund are as following

Table 41 PetroVietnam Growth Open-ended Fund (Proposed)

Fund Name PetroVietnam Growth Open-ended Fund

Abbreviation PVGF

Form of Fund Funds are established and operated under the current

law of Vietnam

Initial fund size Min 50 billion VND (~ 5000000 Fund units)

Investors Includes institutional and individual investors in

Vietnam and oversea

Fund management

Company

PVFC Capital

Custodian Bank Deutsche Bank (Proposed)

Investment

Objectives

The Fund aims to maximize profits for investors

through investments in oil and gas stocks that have

high returns

Investment

Structure

- Up to 95 of the Net asset value of the Fund in a

basket of stocks in PVN-10 stocks the shares of the

company under the Vietnam Oil and Gas Group (PVN)

that have high liquidity solid fundamental numbers

and attractive dividend rate

- Up to 70 of net asset value of the Fund will invest

in securities which have a fixed interest rate (including

government bonds corporate bonds project bonds )

On the basis of the growth of PVN-10 Index and

assessment of market conditions the fund will

determine the proportion of assets in the portfolio to

ensure profitability and liquidity of funds

Source PVFC Capital

22

42 Investment objective amp strategy

Investment objective The fund aims to maximize profits for investors through

investing in securities of companies with high growth potential in oil and gas

sector

Investment strategy

- Focusing on growth securities in the oil and gas sector particularly those of

PVN-10 Index

- Maximum 95 of the fundrsquos NAV in securities of oil and gas sector

- Maximum 70 of the fundrsquos NAV in fixed income (including government

bonds corporate bonds etchellip)

- Also investing in fixed income markets (government bonds and enterprise

bonds)

Based on the performance of PVN Index the macro-economic situation and

securities market the fundrsquos investment structure will be decided from time to

time in order to ensure its profit as well as liquidity

The Fund shall seek for obtaining a result which is similar to the Index and shall

not implement the defence strategy when the market is reducing and shall not

materialize its profits when the market is pricing too high The passive investing

is aimed to reduce the costs and make closer replication of Index by keeping a

ratio of investment capital turnover lower than the ratio used by the funds which

implement an active investment strategy

The value of investment portfolio of the Fund is often not less than 95 of the

corresponding value of basket of securities of PVN-Index The list of stocks is

screening through the index participation conditions which satisfy the criteria of

free-float ratio market capitalization and trading value When HOSE makes the

rebalancing or unexpected change of PVN-Index portfolio the ratio of the Fundrsquos

assets invested in the securities basket may fluctuate to less than 95 of the

corresponding value of securities basket of PVN-Index

In order to replicate the PVN- Index in principle the Fund must hold all stocks in

a basket of PVN- Index at corresponding ratio However in some cases the Fund

cannot fully buy all the stocks corresponding to the weighting in the Index In

such cases the Fund may choose the method of raising the weighting or reducing

the weighting of certain stocks in the index or buying the stocks not belonged to

the index but have high correlation with PVN- Index to replace the stocks in the

index in order to replicate the closest PVN- Index after deducting the Fundrsquos

expenses PVGF may sell stocks in the basket in advance if it estimates that there

is a possibility of such stock to be out of the basket of PVN- Index or may buy

the stocks which are not currently in the PVN- Index in advance if it estimates

that there is a possibility of such stock to enter in basket of PVN- Index in the

next reviewing session

23

Figure 41 Asset allocation

Source PVFC Capital

43 Characteristics of listed companies in PVN-10 Index

PetroVietnam currently has 32 listed subsidiaries accounting for 20 of the total

market capitalization PVN-Index which was developed by PetroVietnam

Securities Inc (PSI) and launched in 2012 represents the performance of these

listed companies in the two stock exchanges The index meets the international

standards and practice and is expected to be widely used by the investment

professionals In the past two years PVN-Index outperformed other indexes in

Vietnam including VN-Index HNX-Index VN-30 and HNX-30 Specifically in

2013 PVN-Index grew 544 which was 25 times the growth rate of the VN-

Index and more than three times the growth of HNX-Index

In the PVN-Index indexes the PVN-10 is a collection of 10 stocks with the

largest market capitalization and highest liquidity amongst 32 shares of the listed

PVN member companies

Table 42 PVN-10 Index

No Ticker Company name Market price at

2442014

1 GAS PetroVietnam Gas Joint Stock Corporation 97000

2 PVD Petrovietnam Drilling amp Well Services Corporation 83000

3 PVS PetroVietnam Technical Services Corporation 26300

4 DPM PetroVietnam Fertilizer and Chemicals Corporation 35300

5 PVT Petrovietnam Transportation Corporation 14200

6 PVX Petrovietnam Construction Joint Stock Corporation 5200

7 PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

44500

8 PET Petrovietnam General Services Joint Stock

Corporation

17900

9 PGS PetroVietNam Southern Gas Joint Stock Company 29200

10 PVC Drilling Mud Corporation 20800

Source PSI

16

Figure 37 Market players

Source HSX HNX VSD

Figure 38 VNIndex movements in 2013

Source VNDirect

The stock market index in Vietnam is in the rising group in the world as

calculation in the early months of 2013 But the operation of the market is still

facing many difficulties and challenges which effect significantly to the

mobilization of medium and long term capital flow

Unfavorable factors including

- The World economy is forecasted to be complex potentially risky and difficult

to recovery The international financial institutions have lowered their growth

forecasts for major economies such as the US Eurozone China Japan

- The economic policy in the country should implement goals of maintaining

macroeconomic stability control inflation and ensure growth remains higher than

in 2012

- Weak domestic demand competitiveness economic efficiency is low

- The bad debt write-offs and restructuring in banking structure is a big issue and

cannot be handled right away

0

200

400

600

800

2005 2006 2007 2008 2009 2010 2011 2012 2013

Number of securities company

Number of fund manager company

Number of listed company

17

(v) State budget will also be more difficult demand for macroeconomic

stabilization rise but the revenues are limited

37 Confidence of investor

Confidence of foreign investors in Vietnam market has improved significantly

This is due to the effective implementation of monetary policy in Vietnam the

reforms in the banking sector reducing the state budget deficit as well as the

positive changes in the balance of trade and payments

Figure 39 GDP and GDP Growth

Source GSO

The GDP of the country has grown by 25 times in the last 6 years and has

become as one of the fastest growing economies in Asia The annual growth rate

of GDP is about 71 for the period of 2000-2010 (Source General Statistic

Office) Since 2011 Vietnam has achieved this average growth with the aim to

stabilize long term macro-economy

Figure 310 Trade Balance

Source GSO

The country has achieved significantly improved trade balance Vietnam had

trade surplus in two consecutive years of 2012-2013 after 20 years of trade

deficit

0

2

4

6

8

10

000

5000

10000

15000

20000

2007 2008 2009 2010 2011 2012 2013 GDP (billion USD)

-50

0

50

100

150

2007 2008 2009 2010 2011 2012 2013

Import Export Trade balance

18

Figure 311 FDI inflows

Source GSO

The country has reduced registered FDI but increased disbursement

Figure 312 Interest rates

Source GSO

The interest rate has significantly reduced interest rates in the last 2 years

In addition the political debate on the priority issues of resolving state enterprise

reform fighting against corruption have led to many observers believing that the

Government of Vietnam is really act not just talk

With the potential development of the domestic as well as export market

medium-term investors could find investment opportunities in Vietnam very

attractive PVFC Capital believes in those companies which have good

governance clear and well-defined strategic direction will always be attractive to

value investors in their investment basket

38 Legal Framework - Circular 1832011Circular ndash Ministry of Finance

Circular 1832011TT-BTC guidelines on establishment and management Open-

ended Fund issued by the Ministry of Finance marked the development of the

fund management industry and are highly appreciated in many aspects

Firstly the legislation now allows closed-end fund is converted into open-end

funds This is considered a promising direction for the upcoming expiration of

current funds and in the context of high discount rate of fund certificates (the

difference between the price of fund units and the net asset value of fund

certificates)

Secondly the fund is open-platform product designed to connect the stock

market with other markets such as insurance (interlink-products) money (

0

20

40

60

80

2007 2008 2009 2010 2011 2012 2013

Registered capital Disbursement capital

140 130 120 110 90 80 75 70 6

00

50

100

150

19

monetary market funds ) the social security system (pension fund) or connect to

other areas of the market such products index derivative securities bonds (

such as index funds ETFs derivative funds bond funds )

Thirdly open-ended funds with high liquidity low cost will be more attractive

for investors

Considering the Internal factor including Revenue Structure and Support

from shareholders

39 Revenue Structure

Revenue and Cost structure of the Company in fiscal year 2013 are as follows

Table 31 Revenue Structure ITEMS REVENUE

(Unit USD)

EXPENSES

(Unit USD)

Fund Management 70838 363636

Portfolio Management 864227

Depositary 462810

Investment Activities 37780 (28335)

Provision for short term

investment

(105785)

Total 1435655 902007

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

In 2013 PVFC Capitallsquos revenue is composed mainly from extremely active

portfolio management (183 VND biltotal 30 4 VND bil revenue) As of

31122013 the company has been managing 11 (eleven) portfolios in domestic

trusts and two foreign investment portfolio with total net asset value of 9405

billion VND (Source PVFC Capital)

Thus considering target for revenue allocation profit from fund management

activity is not commensurate with the profit from the portfolio management

activities and not commensurate with the potential resources that company is

having in term of administrative governance capacity financial capacity and

customer networks

310 Support from shareholders

Collaboration amp Support have not been exploited from major shareholders PVFC

Capital have strong shareholders (PVN PVcomBank Sovio Group) in the way

that they are big corporation with diversified business There is a shareholder-

relation unit within the company but still operates passively lack of creativity

lack of connectivity and especially lack the ability to communicate timely the

movement of business or constant message of the Executive Board to the

20

shareholders The consequence of this situation is less linkages to the long-term

commitment from shareholders At difficult time the company will likely

become lonely and hard to find the firm support from these strategic

shareholders The support from these giant corporations could attract more

investors to make investment in the company However the company has not

utilized the completive advantages by exploit the capabilities amp network from

associates within these Group (PVN PVcomBank amp Sovico Group)

Table 32 Summarized factors affecting business

Category Factor Description (+-)

External factors Financial Market

Conditions Rising but still facing many

difficulties (+)

Confidence of

investors

Confidence of foreign investors in

Vietnam stock market has improved

significantly due to the government

policies (+)

Legal Framework -

Circular

1832011Circular

Marked the prospect and

development of the fund

management industry (+)

Internal factors Revenue Structure

Unbalance in revenue structure (-)

Revenue is not commensurate with

the profit and with the potential

resources of the company (-)

Support from

shareholders Collaboration amp Support have not

been exploited from major

shareholders (PVN PVcomBank amp

Sovico Group) (-)

21

CHAPTER 4

DEVELOPING THE PVGF

41 Introducing new form of funds (PVGF)

We are currently reasearching and preparing to introduce to investors a new form

of fund - Open-ended Fund This type of fund offers many advantages compare

to the old Close-ended Fund and Member Fund The mechanism is flexible for

invetors since customers can make withdrawal anytime requested It is suitable

for investors who have less knowledge of special stock market and only accept

low risk level The new forms will create opportunities for fund management like

us to access and exploit the potential capital inflow from both local and foreign

partners

From that basis we are constructing the draft of PetroVietnam Growth Open-

ended Fund (PVGF) for the purpose of investing in the shares of companies in

oil and gas industry focusing on the stocks in the PVN-10 Index (10 biggest

share of PVN in the Vietnam Stock market) (See appendix 7) PVFG is Open-

ended Fund and aims to take advantage of the industry and help promote the

company image The main provisions of the proposed fund are as following

Table 41 PetroVietnam Growth Open-ended Fund (Proposed)

Fund Name PetroVietnam Growth Open-ended Fund

Abbreviation PVGF

Form of Fund Funds are established and operated under the current

law of Vietnam

Initial fund size Min 50 billion VND (~ 5000000 Fund units)

Investors Includes institutional and individual investors in

Vietnam and oversea

Fund management

Company

PVFC Capital

Custodian Bank Deutsche Bank (Proposed)

Investment

Objectives

The Fund aims to maximize profits for investors

through investments in oil and gas stocks that have

high returns

Investment

Structure

- Up to 95 of the Net asset value of the Fund in a

basket of stocks in PVN-10 stocks the shares of the

company under the Vietnam Oil and Gas Group (PVN)

that have high liquidity solid fundamental numbers

and attractive dividend rate

- Up to 70 of net asset value of the Fund will invest

in securities which have a fixed interest rate (including

government bonds corporate bonds project bonds )

On the basis of the growth of PVN-10 Index and

assessment of market conditions the fund will

determine the proportion of assets in the portfolio to

ensure profitability and liquidity of funds

Source PVFC Capital

22

42 Investment objective amp strategy

Investment objective The fund aims to maximize profits for investors through

investing in securities of companies with high growth potential in oil and gas

sector

Investment strategy

- Focusing on growth securities in the oil and gas sector particularly those of

PVN-10 Index

- Maximum 95 of the fundrsquos NAV in securities of oil and gas sector

- Maximum 70 of the fundrsquos NAV in fixed income (including government

bonds corporate bonds etchellip)

- Also investing in fixed income markets (government bonds and enterprise

bonds)

Based on the performance of PVN Index the macro-economic situation and

securities market the fundrsquos investment structure will be decided from time to

time in order to ensure its profit as well as liquidity

The Fund shall seek for obtaining a result which is similar to the Index and shall

not implement the defence strategy when the market is reducing and shall not

materialize its profits when the market is pricing too high The passive investing

is aimed to reduce the costs and make closer replication of Index by keeping a

ratio of investment capital turnover lower than the ratio used by the funds which

implement an active investment strategy

The value of investment portfolio of the Fund is often not less than 95 of the

corresponding value of basket of securities of PVN-Index The list of stocks is

screening through the index participation conditions which satisfy the criteria of

free-float ratio market capitalization and trading value When HOSE makes the

rebalancing or unexpected change of PVN-Index portfolio the ratio of the Fundrsquos

assets invested in the securities basket may fluctuate to less than 95 of the

corresponding value of securities basket of PVN-Index

In order to replicate the PVN- Index in principle the Fund must hold all stocks in

a basket of PVN- Index at corresponding ratio However in some cases the Fund

cannot fully buy all the stocks corresponding to the weighting in the Index In

such cases the Fund may choose the method of raising the weighting or reducing

the weighting of certain stocks in the index or buying the stocks not belonged to

the index but have high correlation with PVN- Index to replace the stocks in the

index in order to replicate the closest PVN- Index after deducting the Fundrsquos

expenses PVGF may sell stocks in the basket in advance if it estimates that there

is a possibility of such stock to be out of the basket of PVN- Index or may buy

the stocks which are not currently in the PVN- Index in advance if it estimates

that there is a possibility of such stock to enter in basket of PVN- Index in the

next reviewing session

23

Figure 41 Asset allocation

Source PVFC Capital

43 Characteristics of listed companies in PVN-10 Index

PetroVietnam currently has 32 listed subsidiaries accounting for 20 of the total

market capitalization PVN-Index which was developed by PetroVietnam

Securities Inc (PSI) and launched in 2012 represents the performance of these

listed companies in the two stock exchanges The index meets the international

standards and practice and is expected to be widely used by the investment

professionals In the past two years PVN-Index outperformed other indexes in

Vietnam including VN-Index HNX-Index VN-30 and HNX-30 Specifically in

2013 PVN-Index grew 544 which was 25 times the growth rate of the VN-

Index and more than three times the growth of HNX-Index

In the PVN-Index indexes the PVN-10 is a collection of 10 stocks with the

largest market capitalization and highest liquidity amongst 32 shares of the listed

PVN member companies

Table 42 PVN-10 Index

No Ticker Company name Market price at

2442014

1 GAS PetroVietnam Gas Joint Stock Corporation 97000

2 PVD Petrovietnam Drilling amp Well Services Corporation 83000

3 PVS PetroVietnam Technical Services Corporation 26300

4 DPM PetroVietnam Fertilizer and Chemicals Corporation 35300

5 PVT Petrovietnam Transportation Corporation 14200

6 PVX Petrovietnam Construction Joint Stock Corporation 5200

7 PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

44500

8 PET Petrovietnam General Services Joint Stock

Corporation

17900

9 PGS PetroVietNam Southern Gas Joint Stock Company 29200

10 PVC Drilling Mud Corporation 20800

Source PSI

17

(v) State budget will also be more difficult demand for macroeconomic

stabilization rise but the revenues are limited

37 Confidence of investor

Confidence of foreign investors in Vietnam market has improved significantly

This is due to the effective implementation of monetary policy in Vietnam the

reforms in the banking sector reducing the state budget deficit as well as the

positive changes in the balance of trade and payments

Figure 39 GDP and GDP Growth

Source GSO

The GDP of the country has grown by 25 times in the last 6 years and has

become as one of the fastest growing economies in Asia The annual growth rate

of GDP is about 71 for the period of 2000-2010 (Source General Statistic

Office) Since 2011 Vietnam has achieved this average growth with the aim to

stabilize long term macro-economy

Figure 310 Trade Balance

Source GSO

The country has achieved significantly improved trade balance Vietnam had

trade surplus in two consecutive years of 2012-2013 after 20 years of trade

deficit

0

2

4

6

8

10

000

5000

10000

15000

20000

2007 2008 2009 2010 2011 2012 2013 GDP (billion USD)

-50

0

50

100

150

2007 2008 2009 2010 2011 2012 2013

Import Export Trade balance

18

Figure 311 FDI inflows

Source GSO

The country has reduced registered FDI but increased disbursement

Figure 312 Interest rates

Source GSO

The interest rate has significantly reduced interest rates in the last 2 years

In addition the political debate on the priority issues of resolving state enterprise

reform fighting against corruption have led to many observers believing that the

Government of Vietnam is really act not just talk

With the potential development of the domestic as well as export market

medium-term investors could find investment opportunities in Vietnam very

attractive PVFC Capital believes in those companies which have good

governance clear and well-defined strategic direction will always be attractive to

value investors in their investment basket

38 Legal Framework - Circular 1832011Circular ndash Ministry of Finance

Circular 1832011TT-BTC guidelines on establishment and management Open-

ended Fund issued by the Ministry of Finance marked the development of the

fund management industry and are highly appreciated in many aspects

Firstly the legislation now allows closed-end fund is converted into open-end

funds This is considered a promising direction for the upcoming expiration of

current funds and in the context of high discount rate of fund certificates (the

difference between the price of fund units and the net asset value of fund

certificates)

Secondly the fund is open-platform product designed to connect the stock

market with other markets such as insurance (interlink-products) money (

0

20

40

60

80

2007 2008 2009 2010 2011 2012 2013

Registered capital Disbursement capital

140 130 120 110 90 80 75 70 6

00

50

100

150

19

monetary market funds ) the social security system (pension fund) or connect to

other areas of the market such products index derivative securities bonds (

such as index funds ETFs derivative funds bond funds )

Thirdly open-ended funds with high liquidity low cost will be more attractive

for investors

Considering the Internal factor including Revenue Structure and Support

from shareholders

39 Revenue Structure

Revenue and Cost structure of the Company in fiscal year 2013 are as follows

Table 31 Revenue Structure ITEMS REVENUE

(Unit USD)

EXPENSES

(Unit USD)

Fund Management 70838 363636

Portfolio Management 864227

Depositary 462810

Investment Activities 37780 (28335)

Provision for short term

investment

(105785)

Total 1435655 902007

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

In 2013 PVFC Capitallsquos revenue is composed mainly from extremely active

portfolio management (183 VND biltotal 30 4 VND bil revenue) As of

31122013 the company has been managing 11 (eleven) portfolios in domestic

trusts and two foreign investment portfolio with total net asset value of 9405

billion VND (Source PVFC Capital)

Thus considering target for revenue allocation profit from fund management

activity is not commensurate with the profit from the portfolio management

activities and not commensurate with the potential resources that company is

having in term of administrative governance capacity financial capacity and

customer networks

310 Support from shareholders

Collaboration amp Support have not been exploited from major shareholders PVFC

Capital have strong shareholders (PVN PVcomBank Sovio Group) in the way

that they are big corporation with diversified business There is a shareholder-

relation unit within the company but still operates passively lack of creativity

lack of connectivity and especially lack the ability to communicate timely the

movement of business or constant message of the Executive Board to the

20

shareholders The consequence of this situation is less linkages to the long-term

commitment from shareholders At difficult time the company will likely

become lonely and hard to find the firm support from these strategic

shareholders The support from these giant corporations could attract more

investors to make investment in the company However the company has not

utilized the completive advantages by exploit the capabilities amp network from

associates within these Group (PVN PVcomBank amp Sovico Group)

Table 32 Summarized factors affecting business

Category Factor Description (+-)

External factors Financial Market

Conditions Rising but still facing many

difficulties (+)

Confidence of

investors

Confidence of foreign investors in

Vietnam stock market has improved

significantly due to the government

policies (+)

Legal Framework -

Circular

1832011Circular

Marked the prospect and

development of the fund

management industry (+)

Internal factors Revenue Structure

Unbalance in revenue structure (-)

Revenue is not commensurate with

the profit and with the potential

resources of the company (-)

Support from

shareholders Collaboration amp Support have not

been exploited from major

shareholders (PVN PVcomBank amp

Sovico Group) (-)

21

CHAPTER 4

DEVELOPING THE PVGF

41 Introducing new form of funds (PVGF)

We are currently reasearching and preparing to introduce to investors a new form

of fund - Open-ended Fund This type of fund offers many advantages compare

to the old Close-ended Fund and Member Fund The mechanism is flexible for

invetors since customers can make withdrawal anytime requested It is suitable

for investors who have less knowledge of special stock market and only accept

low risk level The new forms will create opportunities for fund management like

us to access and exploit the potential capital inflow from both local and foreign

partners

From that basis we are constructing the draft of PetroVietnam Growth Open-

ended Fund (PVGF) for the purpose of investing in the shares of companies in

oil and gas industry focusing on the stocks in the PVN-10 Index (10 biggest

share of PVN in the Vietnam Stock market) (See appendix 7) PVFG is Open-

ended Fund and aims to take advantage of the industry and help promote the

company image The main provisions of the proposed fund are as following

Table 41 PetroVietnam Growth Open-ended Fund (Proposed)

Fund Name PetroVietnam Growth Open-ended Fund

Abbreviation PVGF

Form of Fund Funds are established and operated under the current

law of Vietnam

Initial fund size Min 50 billion VND (~ 5000000 Fund units)

Investors Includes institutional and individual investors in

Vietnam and oversea

Fund management

Company

PVFC Capital

Custodian Bank Deutsche Bank (Proposed)

Investment

Objectives

The Fund aims to maximize profits for investors

through investments in oil and gas stocks that have

high returns

Investment

Structure

- Up to 95 of the Net asset value of the Fund in a

basket of stocks in PVN-10 stocks the shares of the

company under the Vietnam Oil and Gas Group (PVN)

that have high liquidity solid fundamental numbers

and attractive dividend rate

- Up to 70 of net asset value of the Fund will invest

in securities which have a fixed interest rate (including

government bonds corporate bonds project bonds )

On the basis of the growth of PVN-10 Index and

assessment of market conditions the fund will

determine the proportion of assets in the portfolio to

ensure profitability and liquidity of funds

Source PVFC Capital

22

42 Investment objective amp strategy

Investment objective The fund aims to maximize profits for investors through

investing in securities of companies with high growth potential in oil and gas

sector

Investment strategy

- Focusing on growth securities in the oil and gas sector particularly those of

PVN-10 Index

- Maximum 95 of the fundrsquos NAV in securities of oil and gas sector

- Maximum 70 of the fundrsquos NAV in fixed income (including government

bonds corporate bonds etchellip)

- Also investing in fixed income markets (government bonds and enterprise

bonds)

Based on the performance of PVN Index the macro-economic situation and

securities market the fundrsquos investment structure will be decided from time to

time in order to ensure its profit as well as liquidity

The Fund shall seek for obtaining a result which is similar to the Index and shall

not implement the defence strategy when the market is reducing and shall not

materialize its profits when the market is pricing too high The passive investing

is aimed to reduce the costs and make closer replication of Index by keeping a

ratio of investment capital turnover lower than the ratio used by the funds which

implement an active investment strategy

The value of investment portfolio of the Fund is often not less than 95 of the

corresponding value of basket of securities of PVN-Index The list of stocks is

screening through the index participation conditions which satisfy the criteria of

free-float ratio market capitalization and trading value When HOSE makes the

rebalancing or unexpected change of PVN-Index portfolio the ratio of the Fundrsquos

assets invested in the securities basket may fluctuate to less than 95 of the

corresponding value of securities basket of PVN-Index

In order to replicate the PVN- Index in principle the Fund must hold all stocks in

a basket of PVN- Index at corresponding ratio However in some cases the Fund

cannot fully buy all the stocks corresponding to the weighting in the Index In

such cases the Fund may choose the method of raising the weighting or reducing

the weighting of certain stocks in the index or buying the stocks not belonged to

the index but have high correlation with PVN- Index to replace the stocks in the

index in order to replicate the closest PVN- Index after deducting the Fundrsquos

expenses PVGF may sell stocks in the basket in advance if it estimates that there

is a possibility of such stock to be out of the basket of PVN- Index or may buy

the stocks which are not currently in the PVN- Index in advance if it estimates

that there is a possibility of such stock to enter in basket of PVN- Index in the

next reviewing session

23

Figure 41 Asset allocation

Source PVFC Capital

43 Characteristics of listed companies in PVN-10 Index

PetroVietnam currently has 32 listed subsidiaries accounting for 20 of the total

market capitalization PVN-Index which was developed by PetroVietnam

Securities Inc (PSI) and launched in 2012 represents the performance of these

listed companies in the two stock exchanges The index meets the international

standards and practice and is expected to be widely used by the investment

professionals In the past two years PVN-Index outperformed other indexes in

Vietnam including VN-Index HNX-Index VN-30 and HNX-30 Specifically in

2013 PVN-Index grew 544 which was 25 times the growth rate of the VN-

Index and more than three times the growth of HNX-Index

In the PVN-Index indexes the PVN-10 is a collection of 10 stocks with the

largest market capitalization and highest liquidity amongst 32 shares of the listed

PVN member companies

Table 42 PVN-10 Index

No Ticker Company name Market price at

2442014

1 GAS PetroVietnam Gas Joint Stock Corporation 97000

2 PVD Petrovietnam Drilling amp Well Services Corporation 83000

3 PVS PetroVietnam Technical Services Corporation 26300

4 DPM PetroVietnam Fertilizer and Chemicals Corporation 35300

5 PVT Petrovietnam Transportation Corporation 14200

6 PVX Petrovietnam Construction Joint Stock Corporation 5200

7 PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

44500

8 PET Petrovietnam General Services Joint Stock

Corporation

17900

9 PGS PetroVietNam Southern Gas Joint Stock Company 29200

10 PVC Drilling Mud Corporation 20800

Source PSI

18

Figure 311 FDI inflows

Source GSO

The country has reduced registered FDI but increased disbursement

Figure 312 Interest rates

Source GSO

The interest rate has significantly reduced interest rates in the last 2 years

In addition the political debate on the priority issues of resolving state enterprise

reform fighting against corruption have led to many observers believing that the

Government of Vietnam is really act not just talk

With the potential development of the domestic as well as export market

medium-term investors could find investment opportunities in Vietnam very

attractive PVFC Capital believes in those companies which have good

governance clear and well-defined strategic direction will always be attractive to

value investors in their investment basket

38 Legal Framework - Circular 1832011Circular ndash Ministry of Finance

Circular 1832011TT-BTC guidelines on establishment and management Open-

ended Fund issued by the Ministry of Finance marked the development of the

fund management industry and are highly appreciated in many aspects

Firstly the legislation now allows closed-end fund is converted into open-end

funds This is considered a promising direction for the upcoming expiration of

current funds and in the context of high discount rate of fund certificates (the

difference between the price of fund units and the net asset value of fund

certificates)

Secondly the fund is open-platform product designed to connect the stock

market with other markets such as insurance (interlink-products) money (

0

20

40

60

80

2007 2008 2009 2010 2011 2012 2013

Registered capital Disbursement capital

140 130 120 110 90 80 75 70 6

00

50

100

150

19

monetary market funds ) the social security system (pension fund) or connect to

other areas of the market such products index derivative securities bonds (

such as index funds ETFs derivative funds bond funds )

Thirdly open-ended funds with high liquidity low cost will be more attractive

for investors

Considering the Internal factor including Revenue Structure and Support

from shareholders

39 Revenue Structure

Revenue and Cost structure of the Company in fiscal year 2013 are as follows

Table 31 Revenue Structure ITEMS REVENUE

(Unit USD)

EXPENSES

(Unit USD)

Fund Management 70838 363636

Portfolio Management 864227

Depositary 462810

Investment Activities 37780 (28335)

Provision for short term

investment

(105785)

Total 1435655 902007

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

In 2013 PVFC Capitallsquos revenue is composed mainly from extremely active

portfolio management (183 VND biltotal 30 4 VND bil revenue) As of

31122013 the company has been managing 11 (eleven) portfolios in domestic

trusts and two foreign investment portfolio with total net asset value of 9405

billion VND (Source PVFC Capital)

Thus considering target for revenue allocation profit from fund management

activity is not commensurate with the profit from the portfolio management

activities and not commensurate with the potential resources that company is

having in term of administrative governance capacity financial capacity and

customer networks

310 Support from shareholders

Collaboration amp Support have not been exploited from major shareholders PVFC

Capital have strong shareholders (PVN PVcomBank Sovio Group) in the way

that they are big corporation with diversified business There is a shareholder-

relation unit within the company but still operates passively lack of creativity

lack of connectivity and especially lack the ability to communicate timely the

movement of business or constant message of the Executive Board to the

20

shareholders The consequence of this situation is less linkages to the long-term

commitment from shareholders At difficult time the company will likely

become lonely and hard to find the firm support from these strategic

shareholders The support from these giant corporations could attract more

investors to make investment in the company However the company has not

utilized the completive advantages by exploit the capabilities amp network from

associates within these Group (PVN PVcomBank amp Sovico Group)

Table 32 Summarized factors affecting business

Category Factor Description (+-)

External factors Financial Market

Conditions Rising but still facing many

difficulties (+)

Confidence of

investors

Confidence of foreign investors in

Vietnam stock market has improved

significantly due to the government

policies (+)

Legal Framework -

Circular

1832011Circular

Marked the prospect and

development of the fund

management industry (+)

Internal factors Revenue Structure

Unbalance in revenue structure (-)

Revenue is not commensurate with

the profit and with the potential

resources of the company (-)

Support from

shareholders Collaboration amp Support have not

been exploited from major

shareholders (PVN PVcomBank amp

Sovico Group) (-)

21

CHAPTER 4

DEVELOPING THE PVGF

41 Introducing new form of funds (PVGF)

We are currently reasearching and preparing to introduce to investors a new form

of fund - Open-ended Fund This type of fund offers many advantages compare

to the old Close-ended Fund and Member Fund The mechanism is flexible for

invetors since customers can make withdrawal anytime requested It is suitable

for investors who have less knowledge of special stock market and only accept

low risk level The new forms will create opportunities for fund management like

us to access and exploit the potential capital inflow from both local and foreign

partners

From that basis we are constructing the draft of PetroVietnam Growth Open-

ended Fund (PVGF) for the purpose of investing in the shares of companies in

oil and gas industry focusing on the stocks in the PVN-10 Index (10 biggest

share of PVN in the Vietnam Stock market) (See appendix 7) PVFG is Open-

ended Fund and aims to take advantage of the industry and help promote the

company image The main provisions of the proposed fund are as following

Table 41 PetroVietnam Growth Open-ended Fund (Proposed)

Fund Name PetroVietnam Growth Open-ended Fund

Abbreviation PVGF

Form of Fund Funds are established and operated under the current

law of Vietnam

Initial fund size Min 50 billion VND (~ 5000000 Fund units)

Investors Includes institutional and individual investors in

Vietnam and oversea

Fund management

Company

PVFC Capital

Custodian Bank Deutsche Bank (Proposed)

Investment

Objectives

The Fund aims to maximize profits for investors

through investments in oil and gas stocks that have

high returns

Investment

Structure

- Up to 95 of the Net asset value of the Fund in a

basket of stocks in PVN-10 stocks the shares of the

company under the Vietnam Oil and Gas Group (PVN)

that have high liquidity solid fundamental numbers

and attractive dividend rate

- Up to 70 of net asset value of the Fund will invest

in securities which have a fixed interest rate (including

government bonds corporate bonds project bonds )

On the basis of the growth of PVN-10 Index and

assessment of market conditions the fund will

determine the proportion of assets in the portfolio to

ensure profitability and liquidity of funds

Source PVFC Capital

22

42 Investment objective amp strategy

Investment objective The fund aims to maximize profits for investors through

investing in securities of companies with high growth potential in oil and gas

sector

Investment strategy

- Focusing on growth securities in the oil and gas sector particularly those of

PVN-10 Index

- Maximum 95 of the fundrsquos NAV in securities of oil and gas sector

- Maximum 70 of the fundrsquos NAV in fixed income (including government

bonds corporate bonds etchellip)

- Also investing in fixed income markets (government bonds and enterprise

bonds)

Based on the performance of PVN Index the macro-economic situation and

securities market the fundrsquos investment structure will be decided from time to

time in order to ensure its profit as well as liquidity

The Fund shall seek for obtaining a result which is similar to the Index and shall

not implement the defence strategy when the market is reducing and shall not

materialize its profits when the market is pricing too high The passive investing

is aimed to reduce the costs and make closer replication of Index by keeping a

ratio of investment capital turnover lower than the ratio used by the funds which

implement an active investment strategy

The value of investment portfolio of the Fund is often not less than 95 of the

corresponding value of basket of securities of PVN-Index The list of stocks is

screening through the index participation conditions which satisfy the criteria of

free-float ratio market capitalization and trading value When HOSE makes the

rebalancing or unexpected change of PVN-Index portfolio the ratio of the Fundrsquos

assets invested in the securities basket may fluctuate to less than 95 of the

corresponding value of securities basket of PVN-Index

In order to replicate the PVN- Index in principle the Fund must hold all stocks in

a basket of PVN- Index at corresponding ratio However in some cases the Fund

cannot fully buy all the stocks corresponding to the weighting in the Index In

such cases the Fund may choose the method of raising the weighting or reducing

the weighting of certain stocks in the index or buying the stocks not belonged to

the index but have high correlation with PVN- Index to replace the stocks in the

index in order to replicate the closest PVN- Index after deducting the Fundrsquos

expenses PVGF may sell stocks in the basket in advance if it estimates that there

is a possibility of such stock to be out of the basket of PVN- Index or may buy

the stocks which are not currently in the PVN- Index in advance if it estimates

that there is a possibility of such stock to enter in basket of PVN- Index in the

next reviewing session

23

Figure 41 Asset allocation

Source PVFC Capital

43 Characteristics of listed companies in PVN-10 Index

PetroVietnam currently has 32 listed subsidiaries accounting for 20 of the total

market capitalization PVN-Index which was developed by PetroVietnam

Securities Inc (PSI) and launched in 2012 represents the performance of these

listed companies in the two stock exchanges The index meets the international

standards and practice and is expected to be widely used by the investment

professionals In the past two years PVN-Index outperformed other indexes in

Vietnam including VN-Index HNX-Index VN-30 and HNX-30 Specifically in

2013 PVN-Index grew 544 which was 25 times the growth rate of the VN-

Index and more than three times the growth of HNX-Index

In the PVN-Index indexes the PVN-10 is a collection of 10 stocks with the

largest market capitalization and highest liquidity amongst 32 shares of the listed

PVN member companies

Table 42 PVN-10 Index

No Ticker Company name Market price at

2442014

1 GAS PetroVietnam Gas Joint Stock Corporation 97000

2 PVD Petrovietnam Drilling amp Well Services Corporation 83000

3 PVS PetroVietnam Technical Services Corporation 26300

4 DPM PetroVietnam Fertilizer and Chemicals Corporation 35300

5 PVT Petrovietnam Transportation Corporation 14200

6 PVX Petrovietnam Construction Joint Stock Corporation 5200

7 PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

44500

8 PET Petrovietnam General Services Joint Stock

Corporation

17900

9 PGS PetroVietNam Southern Gas Joint Stock Company 29200

10 PVC Drilling Mud Corporation 20800

Source PSI

19

monetary market funds ) the social security system (pension fund) or connect to

other areas of the market such products index derivative securities bonds (

such as index funds ETFs derivative funds bond funds )

Thirdly open-ended funds with high liquidity low cost will be more attractive

for investors

Considering the Internal factor including Revenue Structure and Support

from shareholders

39 Revenue Structure

Revenue and Cost structure of the Company in fiscal year 2013 are as follows

Table 31 Revenue Structure ITEMS REVENUE

(Unit USD)

EXPENSES

(Unit USD)

Fund Management 70838 363636

Portfolio Management 864227

Depositary 462810

Investment Activities 37780 (28335)

Provision for short term

investment

(105785)

Total 1435655 902007

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

In 2013 PVFC Capitallsquos revenue is composed mainly from extremely active

portfolio management (183 VND biltotal 30 4 VND bil revenue) As of

31122013 the company has been managing 11 (eleven) portfolios in domestic

trusts and two foreign investment portfolio with total net asset value of 9405

billion VND (Source PVFC Capital)

Thus considering target for revenue allocation profit from fund management

activity is not commensurate with the profit from the portfolio management

activities and not commensurate with the potential resources that company is

having in term of administrative governance capacity financial capacity and

customer networks

310 Support from shareholders

Collaboration amp Support have not been exploited from major shareholders PVFC

Capital have strong shareholders (PVN PVcomBank Sovio Group) in the way

that they are big corporation with diversified business There is a shareholder-

relation unit within the company but still operates passively lack of creativity

lack of connectivity and especially lack the ability to communicate timely the

movement of business or constant message of the Executive Board to the

20

shareholders The consequence of this situation is less linkages to the long-term

commitment from shareholders At difficult time the company will likely

become lonely and hard to find the firm support from these strategic

shareholders The support from these giant corporations could attract more

investors to make investment in the company However the company has not

utilized the completive advantages by exploit the capabilities amp network from

associates within these Group (PVN PVcomBank amp Sovico Group)

Table 32 Summarized factors affecting business

Category Factor Description (+-)

External factors Financial Market

Conditions Rising but still facing many

difficulties (+)

Confidence of

investors

Confidence of foreign investors in

Vietnam stock market has improved

significantly due to the government

policies (+)

Legal Framework -

Circular

1832011Circular

Marked the prospect and

development of the fund

management industry (+)

Internal factors Revenue Structure

Unbalance in revenue structure (-)

Revenue is not commensurate with

the profit and with the potential

resources of the company (-)

Support from

shareholders Collaboration amp Support have not

been exploited from major

shareholders (PVN PVcomBank amp

Sovico Group) (-)

21

CHAPTER 4

DEVELOPING THE PVGF

41 Introducing new form of funds (PVGF)

We are currently reasearching and preparing to introduce to investors a new form

of fund - Open-ended Fund This type of fund offers many advantages compare

to the old Close-ended Fund and Member Fund The mechanism is flexible for

invetors since customers can make withdrawal anytime requested It is suitable

for investors who have less knowledge of special stock market and only accept

low risk level The new forms will create opportunities for fund management like

us to access and exploit the potential capital inflow from both local and foreign

partners

From that basis we are constructing the draft of PetroVietnam Growth Open-

ended Fund (PVGF) for the purpose of investing in the shares of companies in

oil and gas industry focusing on the stocks in the PVN-10 Index (10 biggest

share of PVN in the Vietnam Stock market) (See appendix 7) PVFG is Open-

ended Fund and aims to take advantage of the industry and help promote the

company image The main provisions of the proposed fund are as following

Table 41 PetroVietnam Growth Open-ended Fund (Proposed)

Fund Name PetroVietnam Growth Open-ended Fund

Abbreviation PVGF

Form of Fund Funds are established and operated under the current

law of Vietnam

Initial fund size Min 50 billion VND (~ 5000000 Fund units)

Investors Includes institutional and individual investors in

Vietnam and oversea

Fund management

Company

PVFC Capital

Custodian Bank Deutsche Bank (Proposed)

Investment

Objectives

The Fund aims to maximize profits for investors

through investments in oil and gas stocks that have

high returns

Investment

Structure

- Up to 95 of the Net asset value of the Fund in a

basket of stocks in PVN-10 stocks the shares of the

company under the Vietnam Oil and Gas Group (PVN)

that have high liquidity solid fundamental numbers

and attractive dividend rate

- Up to 70 of net asset value of the Fund will invest

in securities which have a fixed interest rate (including

government bonds corporate bonds project bonds )

On the basis of the growth of PVN-10 Index and

assessment of market conditions the fund will

determine the proportion of assets in the portfolio to

ensure profitability and liquidity of funds

Source PVFC Capital

22

42 Investment objective amp strategy

Investment objective The fund aims to maximize profits for investors through

investing in securities of companies with high growth potential in oil and gas

sector

Investment strategy

- Focusing on growth securities in the oil and gas sector particularly those of

PVN-10 Index

- Maximum 95 of the fundrsquos NAV in securities of oil and gas sector

- Maximum 70 of the fundrsquos NAV in fixed income (including government

bonds corporate bonds etchellip)

- Also investing in fixed income markets (government bonds and enterprise

bonds)

Based on the performance of PVN Index the macro-economic situation and

securities market the fundrsquos investment structure will be decided from time to

time in order to ensure its profit as well as liquidity

The Fund shall seek for obtaining a result which is similar to the Index and shall

not implement the defence strategy when the market is reducing and shall not

materialize its profits when the market is pricing too high The passive investing

is aimed to reduce the costs and make closer replication of Index by keeping a

ratio of investment capital turnover lower than the ratio used by the funds which

implement an active investment strategy

The value of investment portfolio of the Fund is often not less than 95 of the

corresponding value of basket of securities of PVN-Index The list of stocks is

screening through the index participation conditions which satisfy the criteria of

free-float ratio market capitalization and trading value When HOSE makes the

rebalancing or unexpected change of PVN-Index portfolio the ratio of the Fundrsquos

assets invested in the securities basket may fluctuate to less than 95 of the

corresponding value of securities basket of PVN-Index

In order to replicate the PVN- Index in principle the Fund must hold all stocks in

a basket of PVN- Index at corresponding ratio However in some cases the Fund

cannot fully buy all the stocks corresponding to the weighting in the Index In

such cases the Fund may choose the method of raising the weighting or reducing

the weighting of certain stocks in the index or buying the stocks not belonged to

the index but have high correlation with PVN- Index to replace the stocks in the

index in order to replicate the closest PVN- Index after deducting the Fundrsquos

expenses PVGF may sell stocks in the basket in advance if it estimates that there

is a possibility of such stock to be out of the basket of PVN- Index or may buy

the stocks which are not currently in the PVN- Index in advance if it estimates

that there is a possibility of such stock to enter in basket of PVN- Index in the

next reviewing session

23

Figure 41 Asset allocation

Source PVFC Capital

43 Characteristics of listed companies in PVN-10 Index

PetroVietnam currently has 32 listed subsidiaries accounting for 20 of the total

market capitalization PVN-Index which was developed by PetroVietnam

Securities Inc (PSI) and launched in 2012 represents the performance of these

listed companies in the two stock exchanges The index meets the international

standards and practice and is expected to be widely used by the investment

professionals In the past two years PVN-Index outperformed other indexes in

Vietnam including VN-Index HNX-Index VN-30 and HNX-30 Specifically in

2013 PVN-Index grew 544 which was 25 times the growth rate of the VN-

Index and more than three times the growth of HNX-Index

In the PVN-Index indexes the PVN-10 is a collection of 10 stocks with the

largest market capitalization and highest liquidity amongst 32 shares of the listed

PVN member companies

Table 42 PVN-10 Index

No Ticker Company name Market price at

2442014

1 GAS PetroVietnam Gas Joint Stock Corporation 97000

2 PVD Petrovietnam Drilling amp Well Services Corporation 83000

3 PVS PetroVietnam Technical Services Corporation 26300

4 DPM PetroVietnam Fertilizer and Chemicals Corporation 35300

5 PVT Petrovietnam Transportation Corporation 14200

6 PVX Petrovietnam Construction Joint Stock Corporation 5200

7 PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

44500

8 PET Petrovietnam General Services Joint Stock

Corporation

17900

9 PGS PetroVietNam Southern Gas Joint Stock Company 29200

10 PVC Drilling Mud Corporation 20800

Source PSI

20

shareholders The consequence of this situation is less linkages to the long-term

commitment from shareholders At difficult time the company will likely

become lonely and hard to find the firm support from these strategic

shareholders The support from these giant corporations could attract more

investors to make investment in the company However the company has not

utilized the completive advantages by exploit the capabilities amp network from

associates within these Group (PVN PVcomBank amp Sovico Group)

Table 32 Summarized factors affecting business

Category Factor Description (+-)

External factors Financial Market

Conditions Rising but still facing many

difficulties (+)

Confidence of

investors

Confidence of foreign investors in

Vietnam stock market has improved

significantly due to the government

policies (+)

Legal Framework -

Circular

1832011Circular

Marked the prospect and

development of the fund

management industry (+)

Internal factors Revenue Structure

Unbalance in revenue structure (-)

Revenue is not commensurate with

the profit and with the potential

resources of the company (-)

Support from

shareholders Collaboration amp Support have not

been exploited from major

shareholders (PVN PVcomBank amp

Sovico Group) (-)

21

CHAPTER 4

DEVELOPING THE PVGF

41 Introducing new form of funds (PVGF)

We are currently reasearching and preparing to introduce to investors a new form

of fund - Open-ended Fund This type of fund offers many advantages compare

to the old Close-ended Fund and Member Fund The mechanism is flexible for

invetors since customers can make withdrawal anytime requested It is suitable

for investors who have less knowledge of special stock market and only accept

low risk level The new forms will create opportunities for fund management like

us to access and exploit the potential capital inflow from both local and foreign

partners

From that basis we are constructing the draft of PetroVietnam Growth Open-

ended Fund (PVGF) for the purpose of investing in the shares of companies in

oil and gas industry focusing on the stocks in the PVN-10 Index (10 biggest

share of PVN in the Vietnam Stock market) (See appendix 7) PVFG is Open-

ended Fund and aims to take advantage of the industry and help promote the

company image The main provisions of the proposed fund are as following

Table 41 PetroVietnam Growth Open-ended Fund (Proposed)

Fund Name PetroVietnam Growth Open-ended Fund

Abbreviation PVGF

Form of Fund Funds are established and operated under the current

law of Vietnam

Initial fund size Min 50 billion VND (~ 5000000 Fund units)

Investors Includes institutional and individual investors in

Vietnam and oversea

Fund management

Company

PVFC Capital

Custodian Bank Deutsche Bank (Proposed)

Investment

Objectives

The Fund aims to maximize profits for investors

through investments in oil and gas stocks that have

high returns

Investment

Structure

- Up to 95 of the Net asset value of the Fund in a

basket of stocks in PVN-10 stocks the shares of the

company under the Vietnam Oil and Gas Group (PVN)

that have high liquidity solid fundamental numbers

and attractive dividend rate

- Up to 70 of net asset value of the Fund will invest

in securities which have a fixed interest rate (including

government bonds corporate bonds project bonds )

On the basis of the growth of PVN-10 Index and

assessment of market conditions the fund will

determine the proportion of assets in the portfolio to

ensure profitability and liquidity of funds

Source PVFC Capital

22

42 Investment objective amp strategy

Investment objective The fund aims to maximize profits for investors through

investing in securities of companies with high growth potential in oil and gas

sector

Investment strategy

- Focusing on growth securities in the oil and gas sector particularly those of

PVN-10 Index

- Maximum 95 of the fundrsquos NAV in securities of oil and gas sector

- Maximum 70 of the fundrsquos NAV in fixed income (including government

bonds corporate bonds etchellip)

- Also investing in fixed income markets (government bonds and enterprise

bonds)

Based on the performance of PVN Index the macro-economic situation and

securities market the fundrsquos investment structure will be decided from time to

time in order to ensure its profit as well as liquidity

The Fund shall seek for obtaining a result which is similar to the Index and shall

not implement the defence strategy when the market is reducing and shall not

materialize its profits when the market is pricing too high The passive investing

is aimed to reduce the costs and make closer replication of Index by keeping a

ratio of investment capital turnover lower than the ratio used by the funds which

implement an active investment strategy

The value of investment portfolio of the Fund is often not less than 95 of the

corresponding value of basket of securities of PVN-Index The list of stocks is

screening through the index participation conditions which satisfy the criteria of

free-float ratio market capitalization and trading value When HOSE makes the

rebalancing or unexpected change of PVN-Index portfolio the ratio of the Fundrsquos

assets invested in the securities basket may fluctuate to less than 95 of the

corresponding value of securities basket of PVN-Index

In order to replicate the PVN- Index in principle the Fund must hold all stocks in

a basket of PVN- Index at corresponding ratio However in some cases the Fund

cannot fully buy all the stocks corresponding to the weighting in the Index In

such cases the Fund may choose the method of raising the weighting or reducing

the weighting of certain stocks in the index or buying the stocks not belonged to

the index but have high correlation with PVN- Index to replace the stocks in the

index in order to replicate the closest PVN- Index after deducting the Fundrsquos

expenses PVGF may sell stocks in the basket in advance if it estimates that there

is a possibility of such stock to be out of the basket of PVN- Index or may buy

the stocks which are not currently in the PVN- Index in advance if it estimates

that there is a possibility of such stock to enter in basket of PVN- Index in the

next reviewing session

23

Figure 41 Asset allocation

Source PVFC Capital

43 Characteristics of listed companies in PVN-10 Index

PetroVietnam currently has 32 listed subsidiaries accounting for 20 of the total

market capitalization PVN-Index which was developed by PetroVietnam

Securities Inc (PSI) and launched in 2012 represents the performance of these

listed companies in the two stock exchanges The index meets the international

standards and practice and is expected to be widely used by the investment

professionals In the past two years PVN-Index outperformed other indexes in

Vietnam including VN-Index HNX-Index VN-30 and HNX-30 Specifically in

2013 PVN-Index grew 544 which was 25 times the growth rate of the VN-

Index and more than three times the growth of HNX-Index

In the PVN-Index indexes the PVN-10 is a collection of 10 stocks with the

largest market capitalization and highest liquidity amongst 32 shares of the listed

PVN member companies

Table 42 PVN-10 Index

No Ticker Company name Market price at

2442014

1 GAS PetroVietnam Gas Joint Stock Corporation 97000

2 PVD Petrovietnam Drilling amp Well Services Corporation 83000

3 PVS PetroVietnam Technical Services Corporation 26300

4 DPM PetroVietnam Fertilizer and Chemicals Corporation 35300

5 PVT Petrovietnam Transportation Corporation 14200

6 PVX Petrovietnam Construction Joint Stock Corporation 5200

7 PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

44500

8 PET Petrovietnam General Services Joint Stock

Corporation

17900

9 PGS PetroVietNam Southern Gas Joint Stock Company 29200

10 PVC Drilling Mud Corporation 20800

Source PSI

21

CHAPTER 4

DEVELOPING THE PVGF

41 Introducing new form of funds (PVGF)

We are currently reasearching and preparing to introduce to investors a new form

of fund - Open-ended Fund This type of fund offers many advantages compare

to the old Close-ended Fund and Member Fund The mechanism is flexible for

invetors since customers can make withdrawal anytime requested It is suitable

for investors who have less knowledge of special stock market and only accept

low risk level The new forms will create opportunities for fund management like

us to access and exploit the potential capital inflow from both local and foreign

partners

From that basis we are constructing the draft of PetroVietnam Growth Open-

ended Fund (PVGF) for the purpose of investing in the shares of companies in

oil and gas industry focusing on the stocks in the PVN-10 Index (10 biggest

share of PVN in the Vietnam Stock market) (See appendix 7) PVFG is Open-

ended Fund and aims to take advantage of the industry and help promote the

company image The main provisions of the proposed fund are as following

Table 41 PetroVietnam Growth Open-ended Fund (Proposed)

Fund Name PetroVietnam Growth Open-ended Fund

Abbreviation PVGF

Form of Fund Funds are established and operated under the current

law of Vietnam

Initial fund size Min 50 billion VND (~ 5000000 Fund units)

Investors Includes institutional and individual investors in

Vietnam and oversea

Fund management

Company

PVFC Capital

Custodian Bank Deutsche Bank (Proposed)

Investment

Objectives

The Fund aims to maximize profits for investors

through investments in oil and gas stocks that have

high returns

Investment

Structure

- Up to 95 of the Net asset value of the Fund in a

basket of stocks in PVN-10 stocks the shares of the

company under the Vietnam Oil and Gas Group (PVN)

that have high liquidity solid fundamental numbers

and attractive dividend rate

- Up to 70 of net asset value of the Fund will invest

in securities which have a fixed interest rate (including

government bonds corporate bonds project bonds )

On the basis of the growth of PVN-10 Index and

assessment of market conditions the fund will

determine the proportion of assets in the portfolio to

ensure profitability and liquidity of funds

Source PVFC Capital

22

42 Investment objective amp strategy

Investment objective The fund aims to maximize profits for investors through

investing in securities of companies with high growth potential in oil and gas

sector

Investment strategy

- Focusing on growth securities in the oil and gas sector particularly those of

PVN-10 Index

- Maximum 95 of the fundrsquos NAV in securities of oil and gas sector

- Maximum 70 of the fundrsquos NAV in fixed income (including government

bonds corporate bonds etchellip)

- Also investing in fixed income markets (government bonds and enterprise

bonds)

Based on the performance of PVN Index the macro-economic situation and

securities market the fundrsquos investment structure will be decided from time to

time in order to ensure its profit as well as liquidity

The Fund shall seek for obtaining a result which is similar to the Index and shall

not implement the defence strategy when the market is reducing and shall not

materialize its profits when the market is pricing too high The passive investing

is aimed to reduce the costs and make closer replication of Index by keeping a

ratio of investment capital turnover lower than the ratio used by the funds which

implement an active investment strategy

The value of investment portfolio of the Fund is often not less than 95 of the

corresponding value of basket of securities of PVN-Index The list of stocks is

screening through the index participation conditions which satisfy the criteria of

free-float ratio market capitalization and trading value When HOSE makes the

rebalancing or unexpected change of PVN-Index portfolio the ratio of the Fundrsquos

assets invested in the securities basket may fluctuate to less than 95 of the

corresponding value of securities basket of PVN-Index

In order to replicate the PVN- Index in principle the Fund must hold all stocks in

a basket of PVN- Index at corresponding ratio However in some cases the Fund

cannot fully buy all the stocks corresponding to the weighting in the Index In

such cases the Fund may choose the method of raising the weighting or reducing

the weighting of certain stocks in the index or buying the stocks not belonged to

the index but have high correlation with PVN- Index to replace the stocks in the

index in order to replicate the closest PVN- Index after deducting the Fundrsquos

expenses PVGF may sell stocks in the basket in advance if it estimates that there

is a possibility of such stock to be out of the basket of PVN- Index or may buy

the stocks which are not currently in the PVN- Index in advance if it estimates

that there is a possibility of such stock to enter in basket of PVN- Index in the

next reviewing session

23

Figure 41 Asset allocation

Source PVFC Capital

43 Characteristics of listed companies in PVN-10 Index

PetroVietnam currently has 32 listed subsidiaries accounting for 20 of the total

market capitalization PVN-Index which was developed by PetroVietnam

Securities Inc (PSI) and launched in 2012 represents the performance of these

listed companies in the two stock exchanges The index meets the international

standards and practice and is expected to be widely used by the investment

professionals In the past two years PVN-Index outperformed other indexes in

Vietnam including VN-Index HNX-Index VN-30 and HNX-30 Specifically in

2013 PVN-Index grew 544 which was 25 times the growth rate of the VN-

Index and more than three times the growth of HNX-Index

In the PVN-Index indexes the PVN-10 is a collection of 10 stocks with the

largest market capitalization and highest liquidity amongst 32 shares of the listed

PVN member companies

Table 42 PVN-10 Index

No Ticker Company name Market price at

2442014

1 GAS PetroVietnam Gas Joint Stock Corporation 97000

2 PVD Petrovietnam Drilling amp Well Services Corporation 83000

3 PVS PetroVietnam Technical Services Corporation 26300

4 DPM PetroVietnam Fertilizer and Chemicals Corporation 35300

5 PVT Petrovietnam Transportation Corporation 14200

6 PVX Petrovietnam Construction Joint Stock Corporation 5200

7 PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

44500

8 PET Petrovietnam General Services Joint Stock

Corporation

17900

9 PGS PetroVietNam Southern Gas Joint Stock Company 29200

10 PVC Drilling Mud Corporation 20800

Source PSI

22

42 Investment objective amp strategy

Investment objective The fund aims to maximize profits for investors through

investing in securities of companies with high growth potential in oil and gas

sector

Investment strategy

- Focusing on growth securities in the oil and gas sector particularly those of

PVN-10 Index

- Maximum 95 of the fundrsquos NAV in securities of oil and gas sector

- Maximum 70 of the fundrsquos NAV in fixed income (including government

bonds corporate bonds etchellip)

- Also investing in fixed income markets (government bonds and enterprise

bonds)

Based on the performance of PVN Index the macro-economic situation and

securities market the fundrsquos investment structure will be decided from time to

time in order to ensure its profit as well as liquidity

The Fund shall seek for obtaining a result which is similar to the Index and shall

not implement the defence strategy when the market is reducing and shall not

materialize its profits when the market is pricing too high The passive investing

is aimed to reduce the costs and make closer replication of Index by keeping a

ratio of investment capital turnover lower than the ratio used by the funds which

implement an active investment strategy

The value of investment portfolio of the Fund is often not less than 95 of the

corresponding value of basket of securities of PVN-Index The list of stocks is

screening through the index participation conditions which satisfy the criteria of

free-float ratio market capitalization and trading value When HOSE makes the

rebalancing or unexpected change of PVN-Index portfolio the ratio of the Fundrsquos

assets invested in the securities basket may fluctuate to less than 95 of the

corresponding value of securities basket of PVN-Index

In order to replicate the PVN- Index in principle the Fund must hold all stocks in

a basket of PVN- Index at corresponding ratio However in some cases the Fund

cannot fully buy all the stocks corresponding to the weighting in the Index In

such cases the Fund may choose the method of raising the weighting or reducing

the weighting of certain stocks in the index or buying the stocks not belonged to

the index but have high correlation with PVN- Index to replace the stocks in the

index in order to replicate the closest PVN- Index after deducting the Fundrsquos

expenses PVGF may sell stocks in the basket in advance if it estimates that there

is a possibility of such stock to be out of the basket of PVN- Index or may buy

the stocks which are not currently in the PVN- Index in advance if it estimates

that there is a possibility of such stock to enter in basket of PVN- Index in the

next reviewing session

23

Figure 41 Asset allocation

Source PVFC Capital

43 Characteristics of listed companies in PVN-10 Index

PetroVietnam currently has 32 listed subsidiaries accounting for 20 of the total

market capitalization PVN-Index which was developed by PetroVietnam

Securities Inc (PSI) and launched in 2012 represents the performance of these

listed companies in the two stock exchanges The index meets the international

standards and practice and is expected to be widely used by the investment

professionals In the past two years PVN-Index outperformed other indexes in

Vietnam including VN-Index HNX-Index VN-30 and HNX-30 Specifically in

2013 PVN-Index grew 544 which was 25 times the growth rate of the VN-

Index and more than three times the growth of HNX-Index

In the PVN-Index indexes the PVN-10 is a collection of 10 stocks with the

largest market capitalization and highest liquidity amongst 32 shares of the listed

PVN member companies

Table 42 PVN-10 Index

No Ticker Company name Market price at

2442014

1 GAS PetroVietnam Gas Joint Stock Corporation 97000

2 PVD Petrovietnam Drilling amp Well Services Corporation 83000

3 PVS PetroVietnam Technical Services Corporation 26300

4 DPM PetroVietnam Fertilizer and Chemicals Corporation 35300

5 PVT Petrovietnam Transportation Corporation 14200

6 PVX Petrovietnam Construction Joint Stock Corporation 5200

7 PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

44500

8 PET Petrovietnam General Services Joint Stock

Corporation

17900

9 PGS PetroVietNam Southern Gas Joint Stock Company 29200

10 PVC Drilling Mud Corporation 20800

Source PSI

23

Figure 41 Asset allocation

Source PVFC Capital

43 Characteristics of listed companies in PVN-10 Index

PetroVietnam currently has 32 listed subsidiaries accounting for 20 of the total

market capitalization PVN-Index which was developed by PetroVietnam

Securities Inc (PSI) and launched in 2012 represents the performance of these

listed companies in the two stock exchanges The index meets the international

standards and practice and is expected to be widely used by the investment

professionals In the past two years PVN-Index outperformed other indexes in

Vietnam including VN-Index HNX-Index VN-30 and HNX-30 Specifically in

2013 PVN-Index grew 544 which was 25 times the growth rate of the VN-

Index and more than three times the growth of HNX-Index

In the PVN-Index indexes the PVN-10 is a collection of 10 stocks with the

largest market capitalization and highest liquidity amongst 32 shares of the listed

PVN member companies

Table 42 PVN-10 Index

No Ticker Company name Market price at

2442014

1 GAS PetroVietnam Gas Joint Stock Corporation 97000

2 PVD Petrovietnam Drilling amp Well Services Corporation 83000

3 PVS PetroVietnam Technical Services Corporation 26300

4 DPM PetroVietnam Fertilizer and Chemicals Corporation 35300

5 PVT Petrovietnam Transportation Corporation 14200

6 PVX Petrovietnam Construction Joint Stock Corporation 5200

7 PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

44500

8 PET Petrovietnam General Services Joint Stock

Corporation

17900

9 PGS PetroVietNam Southern Gas Joint Stock Company 29200

10 PVC Drilling Mud Corporation 20800

Source PSI

24

Key Success Factors of Investment in PVN-Index

431 Big market capitalization 32 listed companies of PetroVietnam account

for more than 20 of the total market capitalization In particular 4 out of

10 stocks in PVN-10 Index are among top 30 stocks with the largest

capitalization of the market

432 High liquidity The average trading volume of the stocks in PVN-10 Index

is 17 million shares per day which is at very high liquidity level compared

to other shares on the market

433 Subsidiaries in the value chain of oil and gas sector

Figure 42 Subsidiaries of PVN

Source PVN

434 Positive business results substantial financial position average PE of

10 stocks of PVN-10 is 999 average PB is 184

435 High dividend payout 7 out of 10 companies of PVN-10 Index have high

dividend payment with DPM GAS PVD and PGD ranking the best

(dividend yield gt 10)

Table 43 PVN-10 Dividend Ticker Company names 2012rsquos 2013rsquos

PVS PetroVietnam Technical Services Corporation 15 12

PVD Petrovietnam Drilling amp Well Services Corporation 20 30

DPM PetroVietnam Fertilizer and Chemicals Corporation 45 50

GAS PetroVietnam Gas Joint Stock Corporation 30 42

PVT Petrovietnam Transportation Corporation 0 10

PVX Petrovietnam Construction Joint Stock Corporation 0 0

PGD PetroVietNam Low Pressure Gas Distribution Joint Stock

Company

30 20

PET Petrovietnam General Services Joint Stock Corporation 0 16

PGS PetroVietNam Southern Gas Joint Stock Company 12 15

PVC Drilling Mud Corporation 10 10

Source PSI

PetroVietnam Technical Services

Corporation (PVS)

Distribution

amp Services

Equipment

supplying

services

Petrochemis

try

Exploration

amp

Exploitatio

n

PetroVietnam Exploration

Production Corporation (PVEP) Joint Venture

VietsovPetro

(VSP)

PetroVietnam Gas Joint

Stock Corporation (Gas)

PetroVietnam

Southern Gas JSC

(PGS)

PetroVietnam Low Pressure

Gas Distribution JSC (PGD)

PetroVietnam Drilling and Well

Services JSC (PVD)

Drilling Mud Corporation

(PVC)

PetroVietnam Fertilizer and

Chemical Corporation (DPM)

PetroVietnam

Transportation

Corporation (PVT)

Transporta

tion

25

CHAPTER 5

FUND DEVELOPMENT ALTERNATIVE

51 Small Scale Start Up

We could propose small-scale fund to the potential investors in the first phase

of the fund establishment The minium required charter capital of a fund in

Vietnam is about 50 bil VND (equivalent to about 23 mil US dollars) This

could offer to foreign investor who wil not be troubled by that amount of

contribution Initially we propose a small scale fund But after operation we

will invariably increase the fund size on the basis of growth and efficiency of

the fund

Contrary to proactive investing is passive investment Preference of investors

for Index Fund is rising around the world (even faster than open-ended

funds) The reason is derived from the theory of financial EMH (efficient

market hypothesis) That is investors cannot outsmart the market and if

you cannot beat the market then better go with it

Targeted potential investors for PVGF

- Investors who prefer lower risk levels Low level of risk of the PVGF is

shown in three dimensions First the fund exists in the form of a structured

stock portfolio eliminates most of the non-systematic risk Second to be

selected in the basket index stocks must pass the conditions relating to

transparency and business performance And third if compared with the

current investment channels (such as passive equity investments with high

risk level less attractive saving interest rates real estate investment with

very poor liquidity ) the PVGF represents a more balance and harmony

between risk and profit

- Foreigners who want to invest generally in energy sector PVGF suitable

for investors are only interested in having a common investment in

Vietnam Oil amp Gas sector and not focus on the specific stocks to invest

This is a very popular way of investing in the world often by large

financial institutions pension funds insurance companies With most

foreign investors with very positive evaluation and positive outlook on

Vietnams economic prospects PVGF could help them penetrate the door

and join Vietnam market in a quick least expensive and safest way In

other words PVGF could become a new approach channel for foreign

capital flows into Vietnamlsquos energy sector

52 Support from shareholders

In its early stage of fund establishment counterpart fund from PVFC Capital

and from its major shareholder is critical to create the trust attracting the

participation from potential investors We could utilize the companyrsquos charter

capital and mobilize the support from major shareholders in the initial phase

of fund establishment Because they are big corporation in their own sector

the support from these giant corporation could attract more investors to make

investment in our company

26

We should make proposals to parent-company (here in the case is

PVcomBank and PVN) to get more support from other subsidiaries

associates and partners within Petrovietnam Group PVN is the biggest

corporation in Vietnam that have hundreds of subsidiaries They operate in

vast arrays of fields from upstream to downstream If we could exploit the

tighter relations and boost the cooperation level with these companies within

PVN Group it could be the company lsquos competitve advantages to get access

to new capital flow since PVN already has a very strong and diversified

netwotking

53 Adantages of Open-ended Fund

New form of open-ended fund is very flexible for the withdrawal which will

open up opportunities for PVFC Capital to access and exploit the potential of

new capital inflows from foreign partners following the success of the fund

VIP LLC amp VEFF VIP LLC is an offshore fund It is an investment

mechanism for Japanese investors to invest in Vietnam created by PVFC

Capital and its Japanese partner as the fundrsquos distributor in Japan VIP LLC

was established in 2008 with the initial fund size of approximately US$ 5

million The fund successfully closed in June 2014 with the average annual

growth rate being 9 of Net Asset Value throughout its life (Source PVFC

Capital)

VEFF is a local member fund When it was established in 2011 PVFC

Capital was proud that it was the only fund born in that year due to the

economic difficulties of the year The initial fund size is approximately US$

35 million with fund term of 5 years for phase one With its investment

objectives of taking the advantages of the equitization process in Vietnam in

general and within the PVN Group in particular the fund has achieved the

growth of 236 since its establishment (Source PVFC Capital)

Table 51 Advantages of Open-ended Fund

Simple to

understand

Passive management to match markets provide

investment returns to match the return of index

benchmark

Share price is traded around fundrsquos NAV Any

differences will be balanced by arbitrage trades

High liquidity

Fund unit could be either traded on the stock exchange

or bought back by Fund Management Company

through exchange transactions

Flexibility

Investors can redeem a part of or the whole investment

capital Fund Management Company has the

responsibility to buy back fund units at the trading

price equivalent to NAV per fund unit

Transparency

Only invest in stocks of index benchmark websites

provide full daily disclosure

Open-ended funds must invest in assets with high

liquidity

Open-ended funds must regularly publish its net asset

value on the website of the fund management

company

27

Reasonable size of

investment capital

With a reasonable size of investment capital (VND 02

million) investors can be the fundrsquos shareholders

holding part of big-cap securities in the market

Cost Effective Low management fee transaction fees only when

trading on exchange

Simple to

understand

Passive management to match markets provide

investment returns to match the return of index

benchmark

Share price is traded around fundrsquos NAV Any

differences will be balanced by arbitrage trades

High liquidity

Fund unit could be either traded on the stock exchange

or bought back by Fund Management Company

through exchange transactions

Flexibility Easy to buy flexibility to buy and sell

Competitive

management fee 1 percent per year

Figure 51 Operation of Open-ended Fund

(Source PVFC Capital)

54 Expected performance

The fund follows active investment policy which will be flexible in adjusting

the asset allocation into stocks or fixed income instrument to ensure expected

return for the fund

In bull market (market on uptrend) 18 year This is a modest profit

expectations based on the lowest growth rate of PVN-10 Index in the years

with market growth

In bear market (market on downtrend) 9 year This is based on the

average growth rate of PVN-10 Index in the past 5 years (from 2008 to the

present) when the market had undergone both cycles of growth and

recession (Source PVFC Capital)

28

55 PVN-10 exchange-traded fund

Exchange Traded Fund (ETF) is a form of passive investment fund imitate

on a particular index Accordingly fund managers do not actively restructure

funds portfolio but just hold onto the securities basket of index ETF fund

certificate is listed and traded on the Stock Exchange

There are many types of ETFs ETF imitates stock index index of debt

instruments index of commodity Currency Index

PVFC Capital could establish an ETF imitates PVN 10 Index as an alternative

solution for open-ended fund (see Table 52 for the advantages of ETF)

PVN-10 Index has clear and specific objectives highly representative for

energy oil amp gas sector

Currently there are only two foreign ETFs investing in the Vietnam Stock

Market FTSE Vietnam Index ETF and Market Vectors Vietnam ETF

(VNM) For example FTSE Vietnam Index ETF imitates FTSE Vietnam

All-Share Index which include leading companies accounting for 90 of

total market capitalization in Vietnam (~ 42 companies) But these two ETFs

investing in Vietnam stock market are both foreign funds and listed in Europe

stock exchange market

The legal base for ETFs in Vietnam is Circular 2292012TT-BTC by

Ministry of Finance guiding the establishment and management of the

Exchange Traded Fund (ETF) The purpose of the Circular is attract

investment capital into new investment tool develop stock market

sustainablely

Figure 5 2 Regulation of establishment and management of ETFs

(Source PVFC Capital)

29

56 Evaluation of Alternative

This part is about to have a deep look into each solution and find out

advantages and disadvantages of each solution

There are some advantages of scenario using ETF over Open-ended Fund

when PVFC Capital establish PVN10 Index under ETF form as following

Table 52 Comparing open-ended fund (PVGF) with

PVN-Index ETF (Alternative)

Open-ended Fund (PVGF) ETF (Alternative)

High liquidity Fund Certificates (FCs) are

not traded on the Stock

Exchange but investors can

request redemption from

Fund Management Company

Trading frequency at least 2

timesmonth

ETF shares could be

either traded on the stock

exchange or bought back

by Fund Management

Company through

exchange transactions

Price tracking

closely

movement of

NAV

The trading price is NAVFCs

ETF share price is traded

around fundrsquos NAV Any

differences will be

balanced by arbitrage

trades

Lower costs

Proactive Investment Strategy

and higher management amp

research cost

Investments in liquid assets

The fund is managed

passively tracking the

performance of a certain

underlying asset

Risk and profit

equivalent to the risk and

profitability of simulated

index

High capital

utilization

Always keep an amount of

cash or liquid assets to buy

back FCs upon investors lsquos

request

The fund could invest all

of its capital

Flexible

funding or

redeeming

process

Deposit and withdrawal

procedures are fast and

flexible

Just need to pass the approval

of the Board of

Representatives

High flexibility

Investors only needs to

send share buyingselling

orders to Fund

Management company

High

transparence

- Report periodically sends

to investors monthly

quarterly and annually

- Published on the company

website

Summary report financial

reports statistical reports

transaction fees activity

- Frequency of required

information release is

more than that of both

close-end and open-

ended funds

- Publish reference

index on website of

Stock exchange

30

reports

- Publish tracking error

on website of fund

management company

weekly

However alternative solution of establishing a ETF imitates PVN-10 Index also

contains disadvantages as discussed in following table

Table 53 Disadvantages of ETF (alternative solution)

PVN-Index ETF

Passive investment

strategy

Only suitable for investors prefer passive

investment strategy Not suitable for investors who

prefer research amp analysis stock picking and

making investment decision

Difficult to obtain

superior profits

Even if the market in the strong growth stage it is

difficult to earn a higher profit than market

Difficult to manage

uncertainty in

simulation

It is difficult to minimize tracking error due to high

frequency of corporate events such as MampA

bonus shares share split The difficulty is more

severe in low liquidity market

In addition the development of ETF in Vietnam market is depend on many other

external factors as identified in the below table

Table 54 Conditions for ETF to develop and operate effectively

Development of

reference indexes

Development of indexes that are managed and

approved by the Stock Exchanges in order to

create market diversity Currently the index of the

Stock Exchange was relatively poor with only 4

indexs (VNIndex HNX-Index VN30 and HNX30)

Technology

infrastructure from

authorities

The Stock Exchanges VSD need to

improvecomplete IT infrastructure for the

operation of the ETF funds and the index

Additional legal

provisions

Additional provisions allow securities borrowing

and lending

Upgrading technology

capability of Fund

Fund Management Company must have sufficient

technology capacity to maintain and operate

structucred portfolio closely follow the reference

31

Management Company index to avoid false tracking errors and also to

ensure compliance with the restrictions on

investment in securities law

Selecting the

appropriate timing for

fund establishment

Selecting the appropriate timing for fund

establishment when the reference index is low and

there is growth potential in the future

In addition market liquidity have to be at a high

level to ensure the funds portfolio closely follow

portfolio of reference index

Enhancing awareness

from individual

investors

Investors should be aware that ETF is an effective

investment tool where nvestors can easily

assessevaluate the fund operation through

fluctuations of the reference index

57 Comparison

Vietnams stock market will continue to thrive and ETF certificates will be more

interested by amateur investors since selected stocks from the list are mostly

good stocks industry leaders as well as profitability is able to pass growth of the

VN-index This time is appropriate for the advent of the ETF Since the

establishment of this fund will not only increase the liquidity of the market but

also to meet the needs of non-professional investors in Vietnam

Whether open or closed-end funds the investment efficiency of fund should be at

top priority so the ETF expert with reputable fund manager or portfolio selection

includes many good stocks as well as timing to buy on cheap price must be in

primary concerns

Certainly in the short term with limited understanding of the major investors the

ETFs will not be well received but in the longer term the ETF will be much

more attractive not only to the institutional investors but also for individual

investors

There are some argument supports why ETF is not the priority solution

- Firstly investors especially small investors it is difficult to track the

movement of the index outside VN-Index VN30 the HNX-Index and

HNX30 Only a few brokers have a price list for each index excluding the

aforementioned index Their historical data also cannot be looked up If

there are no tools supporting analysis the data can be incomplete and only

accurate at a certain stage

- Second the security companies only focus on key indicators like VN-

Index VN30 the HNX-Index and HNX30 they hardly ever mention

other indicators

- Third if possible looking at the chart of the index investors will see that

the market index on the same floor have a very high correlation with each

other

- In terms of applications not only PVN-Index but also the many official

index of HOSE and HNX has not been used much except that the

32

Vietnam Fund Management (VFM) used VN30 Index as a reference for

their first ETF

- Operating environment for ETFs is also incomplete no market maker and

securities borrowing mechanism

However with an attitude of no one can win the market many investors

including individuals have chosen to invest in an ETF in several different

segments to get a market portfolio Therefore ETFs still the alternative but it

very much depends on the market timing and condition of the Vietnam stock

market

Evaluating risk investing in ETFs with examples

- Market risk the biggest risk from the ETFs is the market risk When the

market goes up and also goes down ETF basket is tied to the underlying

asset and will fluctuate with the market the same way

- The risk of diversity in the world there are currently 1500 active ETFs

and investors is facing with too many choices in the same field For

example in the past year the best ETF in biotechnology industry

(biotech) and the worst ETF of this industry had more than 18 of

distance Because one ETF holds companies that have the potential cure

to cancer while other ETF bet on companies in the life sciences sector

which leads to different results even though these companies are the same

field of biotechnology

- Transaction Risk ETF transaction prices based on supply and demand

Therefore it depends on the differences in trading (the bid-ask spread)

which is similar to stocks Thus ETFs with greater liquidity will have

lower price gap (spread) In contrast the less liquid ETFs will have a

higher spread (possibly from 2- 4) thus reducing profits or increasing

costs when taking a position in sellingbuying ETFs

- Basic indicators Risk most ETFs are simulated by a certain indicators and

trading is close to net asset value But sometimes the price cannot cling to

this indicator For example when the Arab war happens Egypt stock-

exchange closed for a short time the Market Vector Egypt ETF (EGPT)

was still trading and investors bet that the Egyptian market will open

everything will be resolved well and then they push this ETF at higher

price (the premium) But when the market reopened the market was

silence and ETFs have become too expensive

Table 55 Evaluation Summary

In short-term

(Solution)

PVGF Establishing Open-ended Fund investing

in PVN-10 Index Noted that The performance

of PVN-Index has always outperformed other

index (HNX30 or VN30)

In Long-term

(Alternative)

ETF Establishing exchange-traded fund (ETF)

imitates PVN-10 Index (consider and depend on

the external amp internal factors)

33

CHAPTER 6

CONCLUSION amp RECOMMENDATION

61 Conclusion

In conclusion the company is encountering challenges in which are how to

raise more funds and how to expand the business network given current

market situation To resolve the constraints there are few solution were

proposed small-scale starting with utilization of the capital from shareholder

introduction and formulation of new fund as well as enhancing networking

activities

While the stock market fluctuates with many negative trends in recent years

causing concern for investors the new open-end fund with focusing on the

basket of PVN Index 10 with the advantage of high liquidity low risk and

interest return will likely attract the attention of investors In the past two

years PVN-10 Index has obtained an outstanding growth compared with that

of VN-Index VN-30 Index HNX-Index vagrave HNX-30 Index

In addition to the general advantages of open-ended funds which are highly

liquidity transparence the investment capital is very suitable for all investors

With only 5 million VND (~23585 USD) investors are able to buy fund

certificates to invest in stocks with great value PVGF can bring better profit

than the market by proactive investment strategy focusing on the oil and gas

sector that all stocks are highly liquid attractive potentially faster recovery

when the economy flourishes

The establishment of open-ended funds through mobilizing funds from

members of the Group will concentrate financial and information resources

From that the fund could invest in corporate bonds within associate and

affiliates of PVN members The participation of shareholders such as

PVcomBank and companies within PVN Group in the proposed fund will

provide trust for investors attract the contribution from partners

The establishment of PVGF beside goals of bringing a new product to the

market also aims to build image of a multi-functional fund management

company of PVFC Capital with diverse types of funds and portfolio and to

help increase scale of capital under management

62 Action Plan 1 Open-ended Fund

621 Fund Structure

34

Table 61 Fund structures of Open-ended fund (Plan 1)

The name (expected) Petrovietnam Open-ended Growth Fund (PVGF)

Forms of funds Open-ended funds are established and operated under the

current law of Vietnam

Note Fund Certificates (FCs) are not listed on the Stock

Exchange but was acquired back by Fund Management

Company on the primary market

Fund size 50 billion VND (~ 5000000 fund certificates)

Investors Includes foreign and local investors both legal entities or

individuals

Fund Management

Company

PVFC Capital

Supervision Bank HSBC or Deutsche Bank

Investment

Objectives

The Fund aims to maximize profits for investors through

investments in oil and gas stocks that have high returns

Asset allocation - Up to 95 of the Net asset value of the Fund in a basket

of stocks in PVN-10 stocks the shares of the company

under the Vietnam Oil and Gas Group (PVN) that have

high liquidity solid fundamental numbers and attractive

dividend rate

- Up to 70 of net asset value of the Fund will invest in

securities which have a fixed interest rate (including

government bonds corporate bonds project bonds )

On the basis of the growth of PVN-10 Index and

assessment of market conditions the fund will determine

the proportion of assets in the portfolio to ensure

profitability and liquidity of funds

Investment

restrictions

- Cannot invest more than 10 of the net asset value of

the Fund in securities of one single issuing organization

- Cannot invest more than 30 of the net asset value of

the Fund in the total outstanding shares of one single

issuing organization

- The structure of the funds investments is permitted that

deviation shall not exceed fifteen percent (15) than the

prescribed regulation

Expected time of

fund establishment

Quarter 1 - 2 2015

622 Fund Raising Plan

With the objectives of fund as described above PVFC Capital determine that

investors will be the low-risk taker with the amount of cash and desire to invest

to achieve higher returns than bank interest rates which are very low during this

35

time (~ 7 year) At the same time they need to ensure capital adequacy with

interest rate target of about 8-10year

The investment objective of the fund is the same as the goal of using the charter

capital of the company Therefore PVFC Capital should contribute charter

capital as counterpart funds in the fund to give confidence to investors

Table 62 Fund Raising Plan of Open-ended fund (Plan 1)

Investors Capital raising Mobilization

target (VND

billion)

of

Fund

PVFC Capital The charter capital

as counterpart funds

10 20

PVcomBank The charter capital

as counterpart funds

5 10

The companies in the oil amp gas

sector within PVN Group such

as DPM PTSC PV Oil PVD

10 20

Foreign investors Idle cash 20 20 -

40

Mobilizing from individuals

- Individuals from PVFC

Capital

- Individuals from PVcomBank

(to ensure the adequate number

of more than 100 investors)

Idle cash

- around 30

individuals

- - around 70

individuals

5

10

TOTAL 50 100

63 Action Plan 2 Exchange Traded Fund

631 Fund Structure

In the current situation that capital raising is facing many difficulties due to the

fact that stock market implicit many risky factors PVFC Capital determine that

in the first phase of the fund establishment fund size will be in small scale of 50

billion VND which is the minimum fund size prescribed by the State Securities

Commission Once fund operates on the basis of fund effectiveness PVFC

Capital can increase the size of the fund

ETFs structured as follows

36

Table 63 Fund structures of Exchange Traded Fund (Plan 2)

The name (expected) PVFCC PVN-10 Index ETF

Abbreviation PVN-10 ETF Fund

Forms of funds Exchange traded fund (ETF) is established and

operated under the current law of Vietnam

Reference Index PVN-10 Index

Investment objectives Passive investment strategy simulation of PVN-10

index in order to achieve the Funds growth equivalent

to growth rate of the index

Portfolio Investments in shares in the portfolio of PVN-10

index In particular the portfolio will include 10

stocks in the PVN-10 index with structure and

proportion accordingly to ensure the specified

deviation

Fund size In the first stage at least 50 billion VND (~ 5000000

fund certificates)

In the capital raising stage after 6 months of

operation will increase its capital to 100 billion VND

Investors Foreign and local investors legal entitiesindividuals

Fund management

comapny

PVFC Capital

Fund establishing

members

- Petrovietnam Securities Incorporation (PSI)

- Custodian Bank

Supervison Bank HSBC or Deutsche Bank

Expected time of fund

establishment

Quater 1 2015

632 Capital Raising Plan

PVFC Capital determines that raising capital initially for the fund will require

counterpart funds from the charter capital of the PVFC Capital contributing

capital from PVcomBank PSI and companies within PVN Group PVcomBanks

participation as well as other unit of the group will create confidence and attract

the participation of other investors to raise additional capital in future for the

fund

Thus PVFC Capital plans fund raising for early stage as follows

37

Table 64 Fund Raising Plan of Exchange Traded Fund (Plan 2)

Investors Capital raising Mobilization

target (VND

billion)

of

Fund

PVFC Capital The charter capital

as counterpart funds

10 20

PVcomBank counterpart funds 5 10

PSI counterpart funds 5 - 10 10 -

20

The companies in the oil amp gas

sector within PVN Group such

as DPM PTSC PV Oil PVD

15 - 20 30 -

40

Foreign investors Idle cash 10 20

TOTAL 50 - 60 100

64 Recommendation

The establishment of a fund with small scale initially but increase fund size

after a duration of operation based on its efficiency In its early stage of

establishing funds counterpart funds from PVFC Capital and some strategic

investor is critical to create the basis for trust investors attracting the

participation of others

Therefore there are some recommendations that PVFC Capitallsquos

management board should consider

- Approved plans to establishing PVGF as discussed above with action plan

(how to do) in details

- Approved using the company lsquos chartered capital to contribute to the

PVGF

- Recommend shareholders (SOVICO Group PVcomBank) support fund

establishment particularly

Report to PVcomBank (mother-company of PVFC Capital) the

proposal of contributing capital plan and support PVFC Capital

approach and working with subsidiaries affiliates partners of

PVcomBank to raise more capital

Recommend to SOVICO Group and HD Bank (within the

SOVICO Group and same owners) and other companies within

SOVICO network participating in the fund raising process

The responsibility of the PVFC Capital executives in managing a new open-

ended fund (PVGF) would be guided by an articulated set of criteria The specific

steps of the investment process of PVGF would be carefully constructed to

ensure PVGF investment activities comply with current laws and investment

management agreement

38

Table 65 Process of investment management control and coordinate

Activities Performer

Step 1

PVFC Capital Board of

Fund Representatives

Step 2

Board of Fund

Representatives

Step 3

Board of Fund

Representatives

Step 4

Board of Fund

Representatives

Step 5

Board of Fund

Representatives

Source PVFC Capital Step 1 Propose investment

- Based on the market assessment or on the recommendation of members from

Board of Fund Representatives PVFC Capital will make investment proposals to

the Board for approval

- Proposal must outline clearly the investment opportunities volume price range

duration

Step 2 Investment approval

Within 3 working days the Board of Fund Representatives resubmit results of

investment approval to PVFC Capital

Step 3 Implement the Investment

PVFC Capital is responsible for distributing the necessary resources and

coordinate with relevant parties such as custodian banks securities companies

brokers to implement investment proposals which was approved

Step 4 Tracking Portfolio

PVFC Capital is responsible for monitoring the investments in the PVGFs

portfolio update the information related to investments and investment

companies If there is positive or negative news about the market PVFC Capital

shall report immediately to the investor to restructure the portfolio or close

investment status and wait for new signals

Step 5 Report and after-investment management

PVFC Capital shall periodically report (monthlyquarterlyyearly) on the active

status of management portfolio and evaluate the effectiveness of the portfolio to

the Board of Fund Representatives Since then PVFC Capital proposes to adjust

the portfolio (if necessary) to achieve investment objectives of the fund

The prospect of the PVGF will come from the commitment of the whole team

from the top of Management Board to every Department staff With the favorable

external factors such as the improved economy and prospective business

environment particularly in the capital market the challenges could be overcome

to achieve the companylsquos mission

Propose investment Investment approval

Implement the Investment

Tracking Portfolio Investment

Periodic reports Portfolio Investment

Ask for additional information (if necessary)

39

Appendix 1

List of Open-end Fund in Vietnam (as of July 2014)

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

No

Fund Name Fund

Manager License

Establish

ment

Scale

(bil

VND)

Invest

ment

Obj

1

MB Capital

Vietnam Bond

Fund

MB

Capital 01GCN-UBCK 1332013

54 Bond

2

VinaWealth

Enhanced

Fixed Income

Fund

Vinawealth 02GCN-UBCK 142013

54 Bond

3

Vietnam

Active Fund

(VFMVFA)

Vinafund 03GCN-UBCK 1842013

240 Stock

4

Vietnam Fund

Bond (VFB) Vinafund 04GCN-UBCK 2452013

100 Bond

5

Vietnam Fund

1 (VFMVF1) Vinafund 05GCN-UBCK 8102013 1000 Stock

6

Vietnam Fund

4 (VFMVF4) Vinafund 06GCN-UBCK 16122013

806 Stock

7

Vietcombank

Tactical

Balanced Fund

- VCBF

VCBF 07GCN-UBCK 24122013

60 Bond

8

Baoviet Equity

Dynamic

Open-ended

Fund

(BVFED)

BVF 08GCN-UBCK 812014

71

Stock

bond

9

Viet Capital

Balanced

Fund

(VCAMBF)

Bản Việt

Capital Offering since

1012014 Bond

10

Eastspring

Investments

Fund (ENF)

Eastspring

Investments

Offering since

24122013

Stock

Bond

40

Appendix 2

PERFORMANCE OF MB Capital Vietnam Bond Fund (as of July 2014)

Bond Holdings

Fund Activities

By the end of July NAV of MBBF increased by 082 compared to the same

period last month Thus in the first 7 months of the year NAV of the fund

increased by 606 with an annualize rate of 1038 The contribution for

positive return in this month were from realized and unrealized gains from term

deposits and interest payments

Fund Strategy

MBBF seeks to maximize total return while preserving investorrsquos principal by

investing in bonds and other debt instruments issued in Vietnam

The Fund will seek to achieve the Fundrsquos objective by investing in a diversified

portfolio of debt instruments including government bonds government-

guaranteed bonds bank-insured corporate bonds collateral-backed corporate

bonds corporate bonds certificates of deposit and cash deposit contracts

Source Military Bank (MB Bank)

41

Appendix 3

PERFORMANCE OF Vietnam Active Fund (VFMVFA) (as of July 2014)

Source Vinafund

Investment Objectives

The main objective of VFMVFA would be to capture

medium to long-term capital appreciation on

Vietnam market accompanied by capital

preservation during adverse market conditions based

on the main strategy of trend-following which is one

of Quantitative Investment method

42

Appendix 4

PERFORMANCE OF VIETNAM FUND 1 (VFMVF1) (as of July 2014)

Source Vinafund

Investment Objectives The objective of

VFMVF1 is to seek long-term earnings from

equity growth and income through investing into

a balanced and diversified portfolio including

equity convertible and debt securities in

Vietnam

43

Appendix 5

Performance of VCBF Tactical Balanced Fund (as of July 2014)

VCBF Factsheet

Performance of NAV

Source VCBF

44

Appendix 6

PERFORMANCE OF EASTSPRING INVESTMENTS FUND (ENF) (as of October 2014)

Source Eastspring Investments Vietnam

Eastspring Investments Vietnam Navigator Fund

(theldquoNavigator Fundrdquo or ldquoENFrdquo) is Mutual Fund

licensed by Vietnam State Securities Commission

under license No 09GCN-UBCK

(March 25th 2014)

Fund Manager Eastspring Investments Fund

Management Limited Liability Company

(ldquoEastspring Investments Vietnamrdquo)

45

Appendix 7

Reference Index PVN10

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

Full name PVN 10

PVN 10 index is designed to be a tradable index It

represents the largest and most liquid stocks on Ho Chi

Minh (HSX) and Hanoi (HNX) Stock Exchanges

Price or

Total Return Total return

UCITS IV

Compliant Yes

Constituent

numbers 10

Capping 15

INDEX COMPOSITION

Ticker Company Name Weight

PVD Petrovietnam Drilling amp Well Services Corporation 1831

GAS PetroVietnam Gas Joint Stock Corporation 1757

PVS PetroVietnam Technical Services Corporation 1478

DPM PetroVietnam Fertilizer and Chemicals Corporation 1379

PET Petrovietnam General Services Joint Stock

Corporation

766

PVX Petrovietnam Construction Joint Stock Corporation 681

PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

635

PVF Petrovietnam Finance Joint Stock Corporation 602

PVT Petrovietnam Transportation Corporation 561

PGS PetroVietNam Southern Gas Joint Stock Company 410

Qualification

criteria

Liquidity amp

Market cap

Composition

review Semester

Shares

review Quarterly

Free float

review Quarterly

Free float

banding 5 up

Base value 1000

Base date 2008-12-31

Historical

since 2008-12-31

Launching

date

382012

Internal code PVN10

Bloomberg PVN10TR

26

We should make proposals to parent-company (here in the case is

PVcomBank and PVN) to get more support from other subsidiaries

associates and partners within Petrovietnam Group PVN is the biggest

corporation in Vietnam that have hundreds of subsidiaries They operate in

vast arrays of fields from upstream to downstream If we could exploit the

tighter relations and boost the cooperation level with these companies within

PVN Group it could be the company lsquos competitve advantages to get access

to new capital flow since PVN already has a very strong and diversified

netwotking

53 Adantages of Open-ended Fund

New form of open-ended fund is very flexible for the withdrawal which will

open up opportunities for PVFC Capital to access and exploit the potential of

new capital inflows from foreign partners following the success of the fund

VIP LLC amp VEFF VIP LLC is an offshore fund It is an investment

mechanism for Japanese investors to invest in Vietnam created by PVFC

Capital and its Japanese partner as the fundrsquos distributor in Japan VIP LLC

was established in 2008 with the initial fund size of approximately US$ 5

million The fund successfully closed in June 2014 with the average annual

growth rate being 9 of Net Asset Value throughout its life (Source PVFC

Capital)

VEFF is a local member fund When it was established in 2011 PVFC

Capital was proud that it was the only fund born in that year due to the

economic difficulties of the year The initial fund size is approximately US$

35 million with fund term of 5 years for phase one With its investment

objectives of taking the advantages of the equitization process in Vietnam in

general and within the PVN Group in particular the fund has achieved the

growth of 236 since its establishment (Source PVFC Capital)

Table 51 Advantages of Open-ended Fund

Simple to

understand

Passive management to match markets provide

investment returns to match the return of index

benchmark

Share price is traded around fundrsquos NAV Any

differences will be balanced by arbitrage trades

High liquidity

Fund unit could be either traded on the stock exchange

or bought back by Fund Management Company

through exchange transactions

Flexibility

Investors can redeem a part of or the whole investment

capital Fund Management Company has the

responsibility to buy back fund units at the trading

price equivalent to NAV per fund unit

Transparency

Only invest in stocks of index benchmark websites

provide full daily disclosure

Open-ended funds must invest in assets with high

liquidity

Open-ended funds must regularly publish its net asset

value on the website of the fund management

company

27

Reasonable size of

investment capital

With a reasonable size of investment capital (VND 02

million) investors can be the fundrsquos shareholders

holding part of big-cap securities in the market

Cost Effective Low management fee transaction fees only when

trading on exchange

Simple to

understand

Passive management to match markets provide

investment returns to match the return of index

benchmark

Share price is traded around fundrsquos NAV Any

differences will be balanced by arbitrage trades

High liquidity

Fund unit could be either traded on the stock exchange

or bought back by Fund Management Company

through exchange transactions

Flexibility Easy to buy flexibility to buy and sell

Competitive

management fee 1 percent per year

Figure 51 Operation of Open-ended Fund

(Source PVFC Capital)

54 Expected performance

The fund follows active investment policy which will be flexible in adjusting

the asset allocation into stocks or fixed income instrument to ensure expected

return for the fund

In bull market (market on uptrend) 18 year This is a modest profit

expectations based on the lowest growth rate of PVN-10 Index in the years

with market growth

In bear market (market on downtrend) 9 year This is based on the

average growth rate of PVN-10 Index in the past 5 years (from 2008 to the

present) when the market had undergone both cycles of growth and

recession (Source PVFC Capital)

28

55 PVN-10 exchange-traded fund

Exchange Traded Fund (ETF) is a form of passive investment fund imitate

on a particular index Accordingly fund managers do not actively restructure

funds portfolio but just hold onto the securities basket of index ETF fund

certificate is listed and traded on the Stock Exchange

There are many types of ETFs ETF imitates stock index index of debt

instruments index of commodity Currency Index

PVFC Capital could establish an ETF imitates PVN 10 Index as an alternative

solution for open-ended fund (see Table 52 for the advantages of ETF)

PVN-10 Index has clear and specific objectives highly representative for

energy oil amp gas sector

Currently there are only two foreign ETFs investing in the Vietnam Stock

Market FTSE Vietnam Index ETF and Market Vectors Vietnam ETF

(VNM) For example FTSE Vietnam Index ETF imitates FTSE Vietnam

All-Share Index which include leading companies accounting for 90 of

total market capitalization in Vietnam (~ 42 companies) But these two ETFs

investing in Vietnam stock market are both foreign funds and listed in Europe

stock exchange market

The legal base for ETFs in Vietnam is Circular 2292012TT-BTC by

Ministry of Finance guiding the establishment and management of the

Exchange Traded Fund (ETF) The purpose of the Circular is attract

investment capital into new investment tool develop stock market

sustainablely

Figure 5 2 Regulation of establishment and management of ETFs

(Source PVFC Capital)

29

56 Evaluation of Alternative

This part is about to have a deep look into each solution and find out

advantages and disadvantages of each solution

There are some advantages of scenario using ETF over Open-ended Fund

when PVFC Capital establish PVN10 Index under ETF form as following

Table 52 Comparing open-ended fund (PVGF) with

PVN-Index ETF (Alternative)

Open-ended Fund (PVGF) ETF (Alternative)

High liquidity Fund Certificates (FCs) are

not traded on the Stock

Exchange but investors can

request redemption from

Fund Management Company

Trading frequency at least 2

timesmonth

ETF shares could be

either traded on the stock

exchange or bought back

by Fund Management

Company through

exchange transactions

Price tracking

closely

movement of

NAV

The trading price is NAVFCs

ETF share price is traded

around fundrsquos NAV Any

differences will be

balanced by arbitrage

trades

Lower costs

Proactive Investment Strategy

and higher management amp

research cost

Investments in liquid assets

The fund is managed

passively tracking the

performance of a certain

underlying asset

Risk and profit

equivalent to the risk and

profitability of simulated

index

High capital

utilization

Always keep an amount of

cash or liquid assets to buy

back FCs upon investors lsquos

request

The fund could invest all

of its capital

Flexible

funding or

redeeming

process

Deposit and withdrawal

procedures are fast and

flexible

Just need to pass the approval

of the Board of

Representatives

High flexibility

Investors only needs to

send share buyingselling

orders to Fund

Management company

High

transparence

- Report periodically sends

to investors monthly

quarterly and annually

- Published on the company

website

Summary report financial

reports statistical reports

transaction fees activity

- Frequency of required

information release is

more than that of both

close-end and open-

ended funds

- Publish reference

index on website of

Stock exchange

30

reports

- Publish tracking error

on website of fund

management company

weekly

However alternative solution of establishing a ETF imitates PVN-10 Index also

contains disadvantages as discussed in following table

Table 53 Disadvantages of ETF (alternative solution)

PVN-Index ETF

Passive investment

strategy

Only suitable for investors prefer passive

investment strategy Not suitable for investors who

prefer research amp analysis stock picking and

making investment decision

Difficult to obtain

superior profits

Even if the market in the strong growth stage it is

difficult to earn a higher profit than market

Difficult to manage

uncertainty in

simulation

It is difficult to minimize tracking error due to high

frequency of corporate events such as MampA

bonus shares share split The difficulty is more

severe in low liquidity market

In addition the development of ETF in Vietnam market is depend on many other

external factors as identified in the below table

Table 54 Conditions for ETF to develop and operate effectively

Development of

reference indexes

Development of indexes that are managed and

approved by the Stock Exchanges in order to

create market diversity Currently the index of the

Stock Exchange was relatively poor with only 4

indexs (VNIndex HNX-Index VN30 and HNX30)

Technology

infrastructure from

authorities

The Stock Exchanges VSD need to

improvecomplete IT infrastructure for the

operation of the ETF funds and the index

Additional legal

provisions

Additional provisions allow securities borrowing

and lending

Upgrading technology

capability of Fund

Fund Management Company must have sufficient

technology capacity to maintain and operate

structucred portfolio closely follow the reference

31

Management Company index to avoid false tracking errors and also to

ensure compliance with the restrictions on

investment in securities law

Selecting the

appropriate timing for

fund establishment

Selecting the appropriate timing for fund

establishment when the reference index is low and

there is growth potential in the future

In addition market liquidity have to be at a high

level to ensure the funds portfolio closely follow

portfolio of reference index

Enhancing awareness

from individual

investors

Investors should be aware that ETF is an effective

investment tool where nvestors can easily

assessevaluate the fund operation through

fluctuations of the reference index

57 Comparison

Vietnams stock market will continue to thrive and ETF certificates will be more

interested by amateur investors since selected stocks from the list are mostly

good stocks industry leaders as well as profitability is able to pass growth of the

VN-index This time is appropriate for the advent of the ETF Since the

establishment of this fund will not only increase the liquidity of the market but

also to meet the needs of non-professional investors in Vietnam

Whether open or closed-end funds the investment efficiency of fund should be at

top priority so the ETF expert with reputable fund manager or portfolio selection

includes many good stocks as well as timing to buy on cheap price must be in

primary concerns

Certainly in the short term with limited understanding of the major investors the

ETFs will not be well received but in the longer term the ETF will be much

more attractive not only to the institutional investors but also for individual

investors

There are some argument supports why ETF is not the priority solution

- Firstly investors especially small investors it is difficult to track the

movement of the index outside VN-Index VN30 the HNX-Index and

HNX30 Only a few brokers have a price list for each index excluding the

aforementioned index Their historical data also cannot be looked up If

there are no tools supporting analysis the data can be incomplete and only

accurate at a certain stage

- Second the security companies only focus on key indicators like VN-

Index VN30 the HNX-Index and HNX30 they hardly ever mention

other indicators

- Third if possible looking at the chart of the index investors will see that

the market index on the same floor have a very high correlation with each

other

- In terms of applications not only PVN-Index but also the many official

index of HOSE and HNX has not been used much except that the

32

Vietnam Fund Management (VFM) used VN30 Index as a reference for

their first ETF

- Operating environment for ETFs is also incomplete no market maker and

securities borrowing mechanism

However with an attitude of no one can win the market many investors

including individuals have chosen to invest in an ETF in several different

segments to get a market portfolio Therefore ETFs still the alternative but it

very much depends on the market timing and condition of the Vietnam stock

market

Evaluating risk investing in ETFs with examples

- Market risk the biggest risk from the ETFs is the market risk When the

market goes up and also goes down ETF basket is tied to the underlying

asset and will fluctuate with the market the same way

- The risk of diversity in the world there are currently 1500 active ETFs

and investors is facing with too many choices in the same field For

example in the past year the best ETF in biotechnology industry

(biotech) and the worst ETF of this industry had more than 18 of

distance Because one ETF holds companies that have the potential cure

to cancer while other ETF bet on companies in the life sciences sector

which leads to different results even though these companies are the same

field of biotechnology

- Transaction Risk ETF transaction prices based on supply and demand

Therefore it depends on the differences in trading (the bid-ask spread)

which is similar to stocks Thus ETFs with greater liquidity will have

lower price gap (spread) In contrast the less liquid ETFs will have a

higher spread (possibly from 2- 4) thus reducing profits or increasing

costs when taking a position in sellingbuying ETFs

- Basic indicators Risk most ETFs are simulated by a certain indicators and

trading is close to net asset value But sometimes the price cannot cling to

this indicator For example when the Arab war happens Egypt stock-

exchange closed for a short time the Market Vector Egypt ETF (EGPT)

was still trading and investors bet that the Egyptian market will open

everything will be resolved well and then they push this ETF at higher

price (the premium) But when the market reopened the market was

silence and ETFs have become too expensive

Table 55 Evaluation Summary

In short-term

(Solution)

PVGF Establishing Open-ended Fund investing

in PVN-10 Index Noted that The performance

of PVN-Index has always outperformed other

index (HNX30 or VN30)

In Long-term

(Alternative)

ETF Establishing exchange-traded fund (ETF)

imitates PVN-10 Index (consider and depend on

the external amp internal factors)

33

CHAPTER 6

CONCLUSION amp RECOMMENDATION

61 Conclusion

In conclusion the company is encountering challenges in which are how to

raise more funds and how to expand the business network given current

market situation To resolve the constraints there are few solution were

proposed small-scale starting with utilization of the capital from shareholder

introduction and formulation of new fund as well as enhancing networking

activities

While the stock market fluctuates with many negative trends in recent years

causing concern for investors the new open-end fund with focusing on the

basket of PVN Index 10 with the advantage of high liquidity low risk and

interest return will likely attract the attention of investors In the past two

years PVN-10 Index has obtained an outstanding growth compared with that

of VN-Index VN-30 Index HNX-Index vagrave HNX-30 Index

In addition to the general advantages of open-ended funds which are highly

liquidity transparence the investment capital is very suitable for all investors

With only 5 million VND (~23585 USD) investors are able to buy fund

certificates to invest in stocks with great value PVGF can bring better profit

than the market by proactive investment strategy focusing on the oil and gas

sector that all stocks are highly liquid attractive potentially faster recovery

when the economy flourishes

The establishment of open-ended funds through mobilizing funds from

members of the Group will concentrate financial and information resources

From that the fund could invest in corporate bonds within associate and

affiliates of PVN members The participation of shareholders such as

PVcomBank and companies within PVN Group in the proposed fund will

provide trust for investors attract the contribution from partners

The establishment of PVGF beside goals of bringing a new product to the

market also aims to build image of a multi-functional fund management

company of PVFC Capital with diverse types of funds and portfolio and to

help increase scale of capital under management

62 Action Plan 1 Open-ended Fund

621 Fund Structure

34

Table 61 Fund structures of Open-ended fund (Plan 1)

The name (expected) Petrovietnam Open-ended Growth Fund (PVGF)

Forms of funds Open-ended funds are established and operated under the

current law of Vietnam

Note Fund Certificates (FCs) are not listed on the Stock

Exchange but was acquired back by Fund Management

Company on the primary market

Fund size 50 billion VND (~ 5000000 fund certificates)

Investors Includes foreign and local investors both legal entities or

individuals

Fund Management

Company

PVFC Capital

Supervision Bank HSBC or Deutsche Bank

Investment

Objectives

The Fund aims to maximize profits for investors through

investments in oil and gas stocks that have high returns

Asset allocation - Up to 95 of the Net asset value of the Fund in a basket

of stocks in PVN-10 stocks the shares of the company

under the Vietnam Oil and Gas Group (PVN) that have

high liquidity solid fundamental numbers and attractive

dividend rate

- Up to 70 of net asset value of the Fund will invest in

securities which have a fixed interest rate (including

government bonds corporate bonds project bonds )

On the basis of the growth of PVN-10 Index and

assessment of market conditions the fund will determine

the proportion of assets in the portfolio to ensure

profitability and liquidity of funds

Investment

restrictions

- Cannot invest more than 10 of the net asset value of

the Fund in securities of one single issuing organization

- Cannot invest more than 30 of the net asset value of

the Fund in the total outstanding shares of one single

issuing organization

- The structure of the funds investments is permitted that

deviation shall not exceed fifteen percent (15) than the

prescribed regulation

Expected time of

fund establishment

Quarter 1 - 2 2015

622 Fund Raising Plan

With the objectives of fund as described above PVFC Capital determine that

investors will be the low-risk taker with the amount of cash and desire to invest

to achieve higher returns than bank interest rates which are very low during this

35

time (~ 7 year) At the same time they need to ensure capital adequacy with

interest rate target of about 8-10year

The investment objective of the fund is the same as the goal of using the charter

capital of the company Therefore PVFC Capital should contribute charter

capital as counterpart funds in the fund to give confidence to investors

Table 62 Fund Raising Plan of Open-ended fund (Plan 1)

Investors Capital raising Mobilization

target (VND

billion)

of

Fund

PVFC Capital The charter capital

as counterpart funds

10 20

PVcomBank The charter capital

as counterpart funds

5 10

The companies in the oil amp gas

sector within PVN Group such

as DPM PTSC PV Oil PVD

10 20

Foreign investors Idle cash 20 20 -

40

Mobilizing from individuals

- Individuals from PVFC

Capital

- Individuals from PVcomBank

(to ensure the adequate number

of more than 100 investors)

Idle cash

- around 30

individuals

- - around 70

individuals

5

10

TOTAL 50 100

63 Action Plan 2 Exchange Traded Fund

631 Fund Structure

In the current situation that capital raising is facing many difficulties due to the

fact that stock market implicit many risky factors PVFC Capital determine that

in the first phase of the fund establishment fund size will be in small scale of 50

billion VND which is the minimum fund size prescribed by the State Securities

Commission Once fund operates on the basis of fund effectiveness PVFC

Capital can increase the size of the fund

ETFs structured as follows

36

Table 63 Fund structures of Exchange Traded Fund (Plan 2)

The name (expected) PVFCC PVN-10 Index ETF

Abbreviation PVN-10 ETF Fund

Forms of funds Exchange traded fund (ETF) is established and

operated under the current law of Vietnam

Reference Index PVN-10 Index

Investment objectives Passive investment strategy simulation of PVN-10

index in order to achieve the Funds growth equivalent

to growth rate of the index

Portfolio Investments in shares in the portfolio of PVN-10

index In particular the portfolio will include 10

stocks in the PVN-10 index with structure and

proportion accordingly to ensure the specified

deviation

Fund size In the first stage at least 50 billion VND (~ 5000000

fund certificates)

In the capital raising stage after 6 months of

operation will increase its capital to 100 billion VND

Investors Foreign and local investors legal entitiesindividuals

Fund management

comapny

PVFC Capital

Fund establishing

members

- Petrovietnam Securities Incorporation (PSI)

- Custodian Bank

Supervison Bank HSBC or Deutsche Bank

Expected time of fund

establishment

Quater 1 2015

632 Capital Raising Plan

PVFC Capital determines that raising capital initially for the fund will require

counterpart funds from the charter capital of the PVFC Capital contributing

capital from PVcomBank PSI and companies within PVN Group PVcomBanks

participation as well as other unit of the group will create confidence and attract

the participation of other investors to raise additional capital in future for the

fund

Thus PVFC Capital plans fund raising for early stage as follows

37

Table 64 Fund Raising Plan of Exchange Traded Fund (Plan 2)

Investors Capital raising Mobilization

target (VND

billion)

of

Fund

PVFC Capital The charter capital

as counterpart funds

10 20

PVcomBank counterpart funds 5 10

PSI counterpart funds 5 - 10 10 -

20

The companies in the oil amp gas

sector within PVN Group such

as DPM PTSC PV Oil PVD

15 - 20 30 -

40

Foreign investors Idle cash 10 20

TOTAL 50 - 60 100

64 Recommendation

The establishment of a fund with small scale initially but increase fund size

after a duration of operation based on its efficiency In its early stage of

establishing funds counterpart funds from PVFC Capital and some strategic

investor is critical to create the basis for trust investors attracting the

participation of others

Therefore there are some recommendations that PVFC Capitallsquos

management board should consider

- Approved plans to establishing PVGF as discussed above with action plan

(how to do) in details

- Approved using the company lsquos chartered capital to contribute to the

PVGF

- Recommend shareholders (SOVICO Group PVcomBank) support fund

establishment particularly

Report to PVcomBank (mother-company of PVFC Capital) the

proposal of contributing capital plan and support PVFC Capital

approach and working with subsidiaries affiliates partners of

PVcomBank to raise more capital

Recommend to SOVICO Group and HD Bank (within the

SOVICO Group and same owners) and other companies within

SOVICO network participating in the fund raising process

The responsibility of the PVFC Capital executives in managing a new open-

ended fund (PVGF) would be guided by an articulated set of criteria The specific

steps of the investment process of PVGF would be carefully constructed to

ensure PVGF investment activities comply with current laws and investment

management agreement

38

Table 65 Process of investment management control and coordinate

Activities Performer

Step 1

PVFC Capital Board of

Fund Representatives

Step 2

Board of Fund

Representatives

Step 3

Board of Fund

Representatives

Step 4

Board of Fund

Representatives

Step 5

Board of Fund

Representatives

Source PVFC Capital Step 1 Propose investment

- Based on the market assessment or on the recommendation of members from

Board of Fund Representatives PVFC Capital will make investment proposals to

the Board for approval

- Proposal must outline clearly the investment opportunities volume price range

duration

Step 2 Investment approval

Within 3 working days the Board of Fund Representatives resubmit results of

investment approval to PVFC Capital

Step 3 Implement the Investment

PVFC Capital is responsible for distributing the necessary resources and

coordinate with relevant parties such as custodian banks securities companies

brokers to implement investment proposals which was approved

Step 4 Tracking Portfolio

PVFC Capital is responsible for monitoring the investments in the PVGFs

portfolio update the information related to investments and investment

companies If there is positive or negative news about the market PVFC Capital

shall report immediately to the investor to restructure the portfolio or close

investment status and wait for new signals

Step 5 Report and after-investment management

PVFC Capital shall periodically report (monthlyquarterlyyearly) on the active

status of management portfolio and evaluate the effectiveness of the portfolio to

the Board of Fund Representatives Since then PVFC Capital proposes to adjust

the portfolio (if necessary) to achieve investment objectives of the fund

The prospect of the PVGF will come from the commitment of the whole team

from the top of Management Board to every Department staff With the favorable

external factors such as the improved economy and prospective business

environment particularly in the capital market the challenges could be overcome

to achieve the companylsquos mission

Propose investment Investment approval

Implement the Investment

Tracking Portfolio Investment

Periodic reports Portfolio Investment

Ask for additional information (if necessary)

39

Appendix 1

List of Open-end Fund in Vietnam (as of July 2014)

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

No

Fund Name Fund

Manager License

Establish

ment

Scale

(bil

VND)

Invest

ment

Obj

1

MB Capital

Vietnam Bond

Fund

MB

Capital 01GCN-UBCK 1332013

54 Bond

2

VinaWealth

Enhanced

Fixed Income

Fund

Vinawealth 02GCN-UBCK 142013

54 Bond

3

Vietnam

Active Fund

(VFMVFA)

Vinafund 03GCN-UBCK 1842013

240 Stock

4

Vietnam Fund

Bond (VFB) Vinafund 04GCN-UBCK 2452013

100 Bond

5

Vietnam Fund

1 (VFMVF1) Vinafund 05GCN-UBCK 8102013 1000 Stock

6

Vietnam Fund

4 (VFMVF4) Vinafund 06GCN-UBCK 16122013

806 Stock

7

Vietcombank

Tactical

Balanced Fund

- VCBF

VCBF 07GCN-UBCK 24122013

60 Bond

8

Baoviet Equity

Dynamic

Open-ended

Fund

(BVFED)

BVF 08GCN-UBCK 812014

71

Stock

bond

9

Viet Capital

Balanced

Fund

(VCAMBF)

Bản Việt

Capital Offering since

1012014 Bond

10

Eastspring

Investments

Fund (ENF)

Eastspring

Investments

Offering since

24122013

Stock

Bond

40

Appendix 2

PERFORMANCE OF MB Capital Vietnam Bond Fund (as of July 2014)

Bond Holdings

Fund Activities

By the end of July NAV of MBBF increased by 082 compared to the same

period last month Thus in the first 7 months of the year NAV of the fund

increased by 606 with an annualize rate of 1038 The contribution for

positive return in this month were from realized and unrealized gains from term

deposits and interest payments

Fund Strategy

MBBF seeks to maximize total return while preserving investorrsquos principal by

investing in bonds and other debt instruments issued in Vietnam

The Fund will seek to achieve the Fundrsquos objective by investing in a diversified

portfolio of debt instruments including government bonds government-

guaranteed bonds bank-insured corporate bonds collateral-backed corporate

bonds corporate bonds certificates of deposit and cash deposit contracts

Source Military Bank (MB Bank)

41

Appendix 3

PERFORMANCE OF Vietnam Active Fund (VFMVFA) (as of July 2014)

Source Vinafund

Investment Objectives

The main objective of VFMVFA would be to capture

medium to long-term capital appreciation on

Vietnam market accompanied by capital

preservation during adverse market conditions based

on the main strategy of trend-following which is one

of Quantitative Investment method

42

Appendix 4

PERFORMANCE OF VIETNAM FUND 1 (VFMVF1) (as of July 2014)

Source Vinafund

Investment Objectives The objective of

VFMVF1 is to seek long-term earnings from

equity growth and income through investing into

a balanced and diversified portfolio including

equity convertible and debt securities in

Vietnam

43

Appendix 5

Performance of VCBF Tactical Balanced Fund (as of July 2014)

VCBF Factsheet

Performance of NAV

Source VCBF

44

Appendix 6

PERFORMANCE OF EASTSPRING INVESTMENTS FUND (ENF) (as of October 2014)

Source Eastspring Investments Vietnam

Eastspring Investments Vietnam Navigator Fund

(theldquoNavigator Fundrdquo or ldquoENFrdquo) is Mutual Fund

licensed by Vietnam State Securities Commission

under license No 09GCN-UBCK

(March 25th 2014)

Fund Manager Eastspring Investments Fund

Management Limited Liability Company

(ldquoEastspring Investments Vietnamrdquo)

45

Appendix 7

Reference Index PVN10

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

Full name PVN 10

PVN 10 index is designed to be a tradable index It

represents the largest and most liquid stocks on Ho Chi

Minh (HSX) and Hanoi (HNX) Stock Exchanges

Price or

Total Return Total return

UCITS IV

Compliant Yes

Constituent

numbers 10

Capping 15

INDEX COMPOSITION

Ticker Company Name Weight

PVD Petrovietnam Drilling amp Well Services Corporation 1831

GAS PetroVietnam Gas Joint Stock Corporation 1757

PVS PetroVietnam Technical Services Corporation 1478

DPM PetroVietnam Fertilizer and Chemicals Corporation 1379

PET Petrovietnam General Services Joint Stock

Corporation

766

PVX Petrovietnam Construction Joint Stock Corporation 681

PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

635

PVF Petrovietnam Finance Joint Stock Corporation 602

PVT Petrovietnam Transportation Corporation 561

PGS PetroVietNam Southern Gas Joint Stock Company 410

Qualification

criteria

Liquidity amp

Market cap

Composition

review Semester

Shares

review Quarterly

Free float

review Quarterly

Free float

banding 5 up

Base value 1000

Base date 2008-12-31

Historical

since 2008-12-31

Launching

date

382012

Internal code PVN10

Bloomberg PVN10TR

27

Reasonable size of

investment capital

With a reasonable size of investment capital (VND 02

million) investors can be the fundrsquos shareholders

holding part of big-cap securities in the market

Cost Effective Low management fee transaction fees only when

trading on exchange

Simple to

understand

Passive management to match markets provide

investment returns to match the return of index

benchmark

Share price is traded around fundrsquos NAV Any

differences will be balanced by arbitrage trades

High liquidity

Fund unit could be either traded on the stock exchange

or bought back by Fund Management Company

through exchange transactions

Flexibility Easy to buy flexibility to buy and sell

Competitive

management fee 1 percent per year

Figure 51 Operation of Open-ended Fund

(Source PVFC Capital)

54 Expected performance

The fund follows active investment policy which will be flexible in adjusting

the asset allocation into stocks or fixed income instrument to ensure expected

return for the fund

In bull market (market on uptrend) 18 year This is a modest profit

expectations based on the lowest growth rate of PVN-10 Index in the years

with market growth

In bear market (market on downtrend) 9 year This is based on the

average growth rate of PVN-10 Index in the past 5 years (from 2008 to the

present) when the market had undergone both cycles of growth and

recession (Source PVFC Capital)

28

55 PVN-10 exchange-traded fund

Exchange Traded Fund (ETF) is a form of passive investment fund imitate

on a particular index Accordingly fund managers do not actively restructure

funds portfolio but just hold onto the securities basket of index ETF fund

certificate is listed and traded on the Stock Exchange

There are many types of ETFs ETF imitates stock index index of debt

instruments index of commodity Currency Index

PVFC Capital could establish an ETF imitates PVN 10 Index as an alternative

solution for open-ended fund (see Table 52 for the advantages of ETF)

PVN-10 Index has clear and specific objectives highly representative for

energy oil amp gas sector

Currently there are only two foreign ETFs investing in the Vietnam Stock

Market FTSE Vietnam Index ETF and Market Vectors Vietnam ETF

(VNM) For example FTSE Vietnam Index ETF imitates FTSE Vietnam

All-Share Index which include leading companies accounting for 90 of

total market capitalization in Vietnam (~ 42 companies) But these two ETFs

investing in Vietnam stock market are both foreign funds and listed in Europe

stock exchange market

The legal base for ETFs in Vietnam is Circular 2292012TT-BTC by

Ministry of Finance guiding the establishment and management of the

Exchange Traded Fund (ETF) The purpose of the Circular is attract

investment capital into new investment tool develop stock market

sustainablely

Figure 5 2 Regulation of establishment and management of ETFs

(Source PVFC Capital)

29

56 Evaluation of Alternative

This part is about to have a deep look into each solution and find out

advantages and disadvantages of each solution

There are some advantages of scenario using ETF over Open-ended Fund

when PVFC Capital establish PVN10 Index under ETF form as following

Table 52 Comparing open-ended fund (PVGF) with

PVN-Index ETF (Alternative)

Open-ended Fund (PVGF) ETF (Alternative)

High liquidity Fund Certificates (FCs) are

not traded on the Stock

Exchange but investors can

request redemption from

Fund Management Company

Trading frequency at least 2

timesmonth

ETF shares could be

either traded on the stock

exchange or bought back

by Fund Management

Company through

exchange transactions

Price tracking

closely

movement of

NAV

The trading price is NAVFCs

ETF share price is traded

around fundrsquos NAV Any

differences will be

balanced by arbitrage

trades

Lower costs

Proactive Investment Strategy

and higher management amp

research cost

Investments in liquid assets

The fund is managed

passively tracking the

performance of a certain

underlying asset

Risk and profit

equivalent to the risk and

profitability of simulated

index

High capital

utilization

Always keep an amount of

cash or liquid assets to buy

back FCs upon investors lsquos

request

The fund could invest all

of its capital

Flexible

funding or

redeeming

process

Deposit and withdrawal

procedures are fast and

flexible

Just need to pass the approval

of the Board of

Representatives

High flexibility

Investors only needs to

send share buyingselling

orders to Fund

Management company

High

transparence

- Report periodically sends

to investors monthly

quarterly and annually

- Published on the company

website

Summary report financial

reports statistical reports

transaction fees activity

- Frequency of required

information release is

more than that of both

close-end and open-

ended funds

- Publish reference

index on website of

Stock exchange

30

reports

- Publish tracking error

on website of fund

management company

weekly

However alternative solution of establishing a ETF imitates PVN-10 Index also

contains disadvantages as discussed in following table

Table 53 Disadvantages of ETF (alternative solution)

PVN-Index ETF

Passive investment

strategy

Only suitable for investors prefer passive

investment strategy Not suitable for investors who

prefer research amp analysis stock picking and

making investment decision

Difficult to obtain

superior profits

Even if the market in the strong growth stage it is

difficult to earn a higher profit than market

Difficult to manage

uncertainty in

simulation

It is difficult to minimize tracking error due to high

frequency of corporate events such as MampA

bonus shares share split The difficulty is more

severe in low liquidity market

In addition the development of ETF in Vietnam market is depend on many other

external factors as identified in the below table

Table 54 Conditions for ETF to develop and operate effectively

Development of

reference indexes

Development of indexes that are managed and

approved by the Stock Exchanges in order to

create market diversity Currently the index of the

Stock Exchange was relatively poor with only 4

indexs (VNIndex HNX-Index VN30 and HNX30)

Technology

infrastructure from

authorities

The Stock Exchanges VSD need to

improvecomplete IT infrastructure for the

operation of the ETF funds and the index

Additional legal

provisions

Additional provisions allow securities borrowing

and lending

Upgrading technology

capability of Fund

Fund Management Company must have sufficient

technology capacity to maintain and operate

structucred portfolio closely follow the reference

31

Management Company index to avoid false tracking errors and also to

ensure compliance with the restrictions on

investment in securities law

Selecting the

appropriate timing for

fund establishment

Selecting the appropriate timing for fund

establishment when the reference index is low and

there is growth potential in the future

In addition market liquidity have to be at a high

level to ensure the funds portfolio closely follow

portfolio of reference index

Enhancing awareness

from individual

investors

Investors should be aware that ETF is an effective

investment tool where nvestors can easily

assessevaluate the fund operation through

fluctuations of the reference index

57 Comparison

Vietnams stock market will continue to thrive and ETF certificates will be more

interested by amateur investors since selected stocks from the list are mostly

good stocks industry leaders as well as profitability is able to pass growth of the

VN-index This time is appropriate for the advent of the ETF Since the

establishment of this fund will not only increase the liquidity of the market but

also to meet the needs of non-professional investors in Vietnam

Whether open or closed-end funds the investment efficiency of fund should be at

top priority so the ETF expert with reputable fund manager or portfolio selection

includes many good stocks as well as timing to buy on cheap price must be in

primary concerns

Certainly in the short term with limited understanding of the major investors the

ETFs will not be well received but in the longer term the ETF will be much

more attractive not only to the institutional investors but also for individual

investors

There are some argument supports why ETF is not the priority solution

- Firstly investors especially small investors it is difficult to track the

movement of the index outside VN-Index VN30 the HNX-Index and

HNX30 Only a few brokers have a price list for each index excluding the

aforementioned index Their historical data also cannot be looked up If

there are no tools supporting analysis the data can be incomplete and only

accurate at a certain stage

- Second the security companies only focus on key indicators like VN-

Index VN30 the HNX-Index and HNX30 they hardly ever mention

other indicators

- Third if possible looking at the chart of the index investors will see that

the market index on the same floor have a very high correlation with each

other

- In terms of applications not only PVN-Index but also the many official

index of HOSE and HNX has not been used much except that the

32

Vietnam Fund Management (VFM) used VN30 Index as a reference for

their first ETF

- Operating environment for ETFs is also incomplete no market maker and

securities borrowing mechanism

However with an attitude of no one can win the market many investors

including individuals have chosen to invest in an ETF in several different

segments to get a market portfolio Therefore ETFs still the alternative but it

very much depends on the market timing and condition of the Vietnam stock

market

Evaluating risk investing in ETFs with examples

- Market risk the biggest risk from the ETFs is the market risk When the

market goes up and also goes down ETF basket is tied to the underlying

asset and will fluctuate with the market the same way

- The risk of diversity in the world there are currently 1500 active ETFs

and investors is facing with too many choices in the same field For

example in the past year the best ETF in biotechnology industry

(biotech) and the worst ETF of this industry had more than 18 of

distance Because one ETF holds companies that have the potential cure

to cancer while other ETF bet on companies in the life sciences sector

which leads to different results even though these companies are the same

field of biotechnology

- Transaction Risk ETF transaction prices based on supply and demand

Therefore it depends on the differences in trading (the bid-ask spread)

which is similar to stocks Thus ETFs with greater liquidity will have

lower price gap (spread) In contrast the less liquid ETFs will have a

higher spread (possibly from 2- 4) thus reducing profits or increasing

costs when taking a position in sellingbuying ETFs

- Basic indicators Risk most ETFs are simulated by a certain indicators and

trading is close to net asset value But sometimes the price cannot cling to

this indicator For example when the Arab war happens Egypt stock-

exchange closed for a short time the Market Vector Egypt ETF (EGPT)

was still trading and investors bet that the Egyptian market will open

everything will be resolved well and then they push this ETF at higher

price (the premium) But when the market reopened the market was

silence and ETFs have become too expensive

Table 55 Evaluation Summary

In short-term

(Solution)

PVGF Establishing Open-ended Fund investing

in PVN-10 Index Noted that The performance

of PVN-Index has always outperformed other

index (HNX30 or VN30)

In Long-term

(Alternative)

ETF Establishing exchange-traded fund (ETF)

imitates PVN-10 Index (consider and depend on

the external amp internal factors)

33

CHAPTER 6

CONCLUSION amp RECOMMENDATION

61 Conclusion

In conclusion the company is encountering challenges in which are how to

raise more funds and how to expand the business network given current

market situation To resolve the constraints there are few solution were

proposed small-scale starting with utilization of the capital from shareholder

introduction and formulation of new fund as well as enhancing networking

activities

While the stock market fluctuates with many negative trends in recent years

causing concern for investors the new open-end fund with focusing on the

basket of PVN Index 10 with the advantage of high liquidity low risk and

interest return will likely attract the attention of investors In the past two

years PVN-10 Index has obtained an outstanding growth compared with that

of VN-Index VN-30 Index HNX-Index vagrave HNX-30 Index

In addition to the general advantages of open-ended funds which are highly

liquidity transparence the investment capital is very suitable for all investors

With only 5 million VND (~23585 USD) investors are able to buy fund

certificates to invest in stocks with great value PVGF can bring better profit

than the market by proactive investment strategy focusing on the oil and gas

sector that all stocks are highly liquid attractive potentially faster recovery

when the economy flourishes

The establishment of open-ended funds through mobilizing funds from

members of the Group will concentrate financial and information resources

From that the fund could invest in corporate bonds within associate and

affiliates of PVN members The participation of shareholders such as

PVcomBank and companies within PVN Group in the proposed fund will

provide trust for investors attract the contribution from partners

The establishment of PVGF beside goals of bringing a new product to the

market also aims to build image of a multi-functional fund management

company of PVFC Capital with diverse types of funds and portfolio and to

help increase scale of capital under management

62 Action Plan 1 Open-ended Fund

621 Fund Structure

34

Table 61 Fund structures of Open-ended fund (Plan 1)

The name (expected) Petrovietnam Open-ended Growth Fund (PVGF)

Forms of funds Open-ended funds are established and operated under the

current law of Vietnam

Note Fund Certificates (FCs) are not listed on the Stock

Exchange but was acquired back by Fund Management

Company on the primary market

Fund size 50 billion VND (~ 5000000 fund certificates)

Investors Includes foreign and local investors both legal entities or

individuals

Fund Management

Company

PVFC Capital

Supervision Bank HSBC or Deutsche Bank

Investment

Objectives

The Fund aims to maximize profits for investors through

investments in oil and gas stocks that have high returns

Asset allocation - Up to 95 of the Net asset value of the Fund in a basket

of stocks in PVN-10 stocks the shares of the company

under the Vietnam Oil and Gas Group (PVN) that have

high liquidity solid fundamental numbers and attractive

dividend rate

- Up to 70 of net asset value of the Fund will invest in

securities which have a fixed interest rate (including

government bonds corporate bonds project bonds )

On the basis of the growth of PVN-10 Index and

assessment of market conditions the fund will determine

the proportion of assets in the portfolio to ensure

profitability and liquidity of funds

Investment

restrictions

- Cannot invest more than 10 of the net asset value of

the Fund in securities of one single issuing organization

- Cannot invest more than 30 of the net asset value of

the Fund in the total outstanding shares of one single

issuing organization

- The structure of the funds investments is permitted that

deviation shall not exceed fifteen percent (15) than the

prescribed regulation

Expected time of

fund establishment

Quarter 1 - 2 2015

622 Fund Raising Plan

With the objectives of fund as described above PVFC Capital determine that

investors will be the low-risk taker with the amount of cash and desire to invest

to achieve higher returns than bank interest rates which are very low during this

35

time (~ 7 year) At the same time they need to ensure capital adequacy with

interest rate target of about 8-10year

The investment objective of the fund is the same as the goal of using the charter

capital of the company Therefore PVFC Capital should contribute charter

capital as counterpart funds in the fund to give confidence to investors

Table 62 Fund Raising Plan of Open-ended fund (Plan 1)

Investors Capital raising Mobilization

target (VND

billion)

of

Fund

PVFC Capital The charter capital

as counterpart funds

10 20

PVcomBank The charter capital

as counterpart funds

5 10

The companies in the oil amp gas

sector within PVN Group such

as DPM PTSC PV Oil PVD

10 20

Foreign investors Idle cash 20 20 -

40

Mobilizing from individuals

- Individuals from PVFC

Capital

- Individuals from PVcomBank

(to ensure the adequate number

of more than 100 investors)

Idle cash

- around 30

individuals

- - around 70

individuals

5

10

TOTAL 50 100

63 Action Plan 2 Exchange Traded Fund

631 Fund Structure

In the current situation that capital raising is facing many difficulties due to the

fact that stock market implicit many risky factors PVFC Capital determine that

in the first phase of the fund establishment fund size will be in small scale of 50

billion VND which is the minimum fund size prescribed by the State Securities

Commission Once fund operates on the basis of fund effectiveness PVFC

Capital can increase the size of the fund

ETFs structured as follows

36

Table 63 Fund structures of Exchange Traded Fund (Plan 2)

The name (expected) PVFCC PVN-10 Index ETF

Abbreviation PVN-10 ETF Fund

Forms of funds Exchange traded fund (ETF) is established and

operated under the current law of Vietnam

Reference Index PVN-10 Index

Investment objectives Passive investment strategy simulation of PVN-10

index in order to achieve the Funds growth equivalent

to growth rate of the index

Portfolio Investments in shares in the portfolio of PVN-10

index In particular the portfolio will include 10

stocks in the PVN-10 index with structure and

proportion accordingly to ensure the specified

deviation

Fund size In the first stage at least 50 billion VND (~ 5000000

fund certificates)

In the capital raising stage after 6 months of

operation will increase its capital to 100 billion VND

Investors Foreign and local investors legal entitiesindividuals

Fund management

comapny

PVFC Capital

Fund establishing

members

- Petrovietnam Securities Incorporation (PSI)

- Custodian Bank

Supervison Bank HSBC or Deutsche Bank

Expected time of fund

establishment

Quater 1 2015

632 Capital Raising Plan

PVFC Capital determines that raising capital initially for the fund will require

counterpart funds from the charter capital of the PVFC Capital contributing

capital from PVcomBank PSI and companies within PVN Group PVcomBanks

participation as well as other unit of the group will create confidence and attract

the participation of other investors to raise additional capital in future for the

fund

Thus PVFC Capital plans fund raising for early stage as follows

37

Table 64 Fund Raising Plan of Exchange Traded Fund (Plan 2)

Investors Capital raising Mobilization

target (VND

billion)

of

Fund

PVFC Capital The charter capital

as counterpart funds

10 20

PVcomBank counterpart funds 5 10

PSI counterpart funds 5 - 10 10 -

20

The companies in the oil amp gas

sector within PVN Group such

as DPM PTSC PV Oil PVD

15 - 20 30 -

40

Foreign investors Idle cash 10 20

TOTAL 50 - 60 100

64 Recommendation

The establishment of a fund with small scale initially but increase fund size

after a duration of operation based on its efficiency In its early stage of

establishing funds counterpart funds from PVFC Capital and some strategic

investor is critical to create the basis for trust investors attracting the

participation of others

Therefore there are some recommendations that PVFC Capitallsquos

management board should consider

- Approved plans to establishing PVGF as discussed above with action plan

(how to do) in details

- Approved using the company lsquos chartered capital to contribute to the

PVGF

- Recommend shareholders (SOVICO Group PVcomBank) support fund

establishment particularly

Report to PVcomBank (mother-company of PVFC Capital) the

proposal of contributing capital plan and support PVFC Capital

approach and working with subsidiaries affiliates partners of

PVcomBank to raise more capital

Recommend to SOVICO Group and HD Bank (within the

SOVICO Group and same owners) and other companies within

SOVICO network participating in the fund raising process

The responsibility of the PVFC Capital executives in managing a new open-

ended fund (PVGF) would be guided by an articulated set of criteria The specific

steps of the investment process of PVGF would be carefully constructed to

ensure PVGF investment activities comply with current laws and investment

management agreement

38

Table 65 Process of investment management control and coordinate

Activities Performer

Step 1

PVFC Capital Board of

Fund Representatives

Step 2

Board of Fund

Representatives

Step 3

Board of Fund

Representatives

Step 4

Board of Fund

Representatives

Step 5

Board of Fund

Representatives

Source PVFC Capital Step 1 Propose investment

- Based on the market assessment or on the recommendation of members from

Board of Fund Representatives PVFC Capital will make investment proposals to

the Board for approval

- Proposal must outline clearly the investment opportunities volume price range

duration

Step 2 Investment approval

Within 3 working days the Board of Fund Representatives resubmit results of

investment approval to PVFC Capital

Step 3 Implement the Investment

PVFC Capital is responsible for distributing the necessary resources and

coordinate with relevant parties such as custodian banks securities companies

brokers to implement investment proposals which was approved

Step 4 Tracking Portfolio

PVFC Capital is responsible for monitoring the investments in the PVGFs

portfolio update the information related to investments and investment

companies If there is positive or negative news about the market PVFC Capital

shall report immediately to the investor to restructure the portfolio or close

investment status and wait for new signals

Step 5 Report and after-investment management

PVFC Capital shall periodically report (monthlyquarterlyyearly) on the active

status of management portfolio and evaluate the effectiveness of the portfolio to

the Board of Fund Representatives Since then PVFC Capital proposes to adjust

the portfolio (if necessary) to achieve investment objectives of the fund

The prospect of the PVGF will come from the commitment of the whole team

from the top of Management Board to every Department staff With the favorable

external factors such as the improved economy and prospective business

environment particularly in the capital market the challenges could be overcome

to achieve the companylsquos mission

Propose investment Investment approval

Implement the Investment

Tracking Portfolio Investment

Periodic reports Portfolio Investment

Ask for additional information (if necessary)

39

Appendix 1

List of Open-end Fund in Vietnam (as of July 2014)

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

No

Fund Name Fund

Manager License

Establish

ment

Scale

(bil

VND)

Invest

ment

Obj

1

MB Capital

Vietnam Bond

Fund

MB

Capital 01GCN-UBCK 1332013

54 Bond

2

VinaWealth

Enhanced

Fixed Income

Fund

Vinawealth 02GCN-UBCK 142013

54 Bond

3

Vietnam

Active Fund

(VFMVFA)

Vinafund 03GCN-UBCK 1842013

240 Stock

4

Vietnam Fund

Bond (VFB) Vinafund 04GCN-UBCK 2452013

100 Bond

5

Vietnam Fund

1 (VFMVF1) Vinafund 05GCN-UBCK 8102013 1000 Stock

6

Vietnam Fund

4 (VFMVF4) Vinafund 06GCN-UBCK 16122013

806 Stock

7

Vietcombank

Tactical

Balanced Fund

- VCBF

VCBF 07GCN-UBCK 24122013

60 Bond

8

Baoviet Equity

Dynamic

Open-ended

Fund

(BVFED)

BVF 08GCN-UBCK 812014

71

Stock

bond

9

Viet Capital

Balanced

Fund

(VCAMBF)

Bản Việt

Capital Offering since

1012014 Bond

10

Eastspring

Investments

Fund (ENF)

Eastspring

Investments

Offering since

24122013

Stock

Bond

40

Appendix 2

PERFORMANCE OF MB Capital Vietnam Bond Fund (as of July 2014)

Bond Holdings

Fund Activities

By the end of July NAV of MBBF increased by 082 compared to the same

period last month Thus in the first 7 months of the year NAV of the fund

increased by 606 with an annualize rate of 1038 The contribution for

positive return in this month were from realized and unrealized gains from term

deposits and interest payments

Fund Strategy

MBBF seeks to maximize total return while preserving investorrsquos principal by

investing in bonds and other debt instruments issued in Vietnam

The Fund will seek to achieve the Fundrsquos objective by investing in a diversified

portfolio of debt instruments including government bonds government-

guaranteed bonds bank-insured corporate bonds collateral-backed corporate

bonds corporate bonds certificates of deposit and cash deposit contracts

Source Military Bank (MB Bank)

41

Appendix 3

PERFORMANCE OF Vietnam Active Fund (VFMVFA) (as of July 2014)

Source Vinafund

Investment Objectives

The main objective of VFMVFA would be to capture

medium to long-term capital appreciation on

Vietnam market accompanied by capital

preservation during adverse market conditions based

on the main strategy of trend-following which is one

of Quantitative Investment method

42

Appendix 4

PERFORMANCE OF VIETNAM FUND 1 (VFMVF1) (as of July 2014)

Source Vinafund

Investment Objectives The objective of

VFMVF1 is to seek long-term earnings from

equity growth and income through investing into

a balanced and diversified portfolio including

equity convertible and debt securities in

Vietnam

43

Appendix 5

Performance of VCBF Tactical Balanced Fund (as of July 2014)

VCBF Factsheet

Performance of NAV

Source VCBF

44

Appendix 6

PERFORMANCE OF EASTSPRING INVESTMENTS FUND (ENF) (as of October 2014)

Source Eastspring Investments Vietnam

Eastspring Investments Vietnam Navigator Fund

(theldquoNavigator Fundrdquo or ldquoENFrdquo) is Mutual Fund

licensed by Vietnam State Securities Commission

under license No 09GCN-UBCK

(March 25th 2014)

Fund Manager Eastspring Investments Fund

Management Limited Liability Company

(ldquoEastspring Investments Vietnamrdquo)

45

Appendix 7

Reference Index PVN10

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

Full name PVN 10

PVN 10 index is designed to be a tradable index It

represents the largest and most liquid stocks on Ho Chi

Minh (HSX) and Hanoi (HNX) Stock Exchanges

Price or

Total Return Total return

UCITS IV

Compliant Yes

Constituent

numbers 10

Capping 15

INDEX COMPOSITION

Ticker Company Name Weight

PVD Petrovietnam Drilling amp Well Services Corporation 1831

GAS PetroVietnam Gas Joint Stock Corporation 1757

PVS PetroVietnam Technical Services Corporation 1478

DPM PetroVietnam Fertilizer and Chemicals Corporation 1379

PET Petrovietnam General Services Joint Stock

Corporation

766

PVX Petrovietnam Construction Joint Stock Corporation 681

PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

635

PVF Petrovietnam Finance Joint Stock Corporation 602

PVT Petrovietnam Transportation Corporation 561

PGS PetroVietNam Southern Gas Joint Stock Company 410

Qualification

criteria

Liquidity amp

Market cap

Composition

review Semester

Shares

review Quarterly

Free float

review Quarterly

Free float

banding 5 up

Base value 1000

Base date 2008-12-31

Historical

since 2008-12-31

Launching

date

382012

Internal code PVN10

Bloomberg PVN10TR

28

55 PVN-10 exchange-traded fund

Exchange Traded Fund (ETF) is a form of passive investment fund imitate

on a particular index Accordingly fund managers do not actively restructure

funds portfolio but just hold onto the securities basket of index ETF fund

certificate is listed and traded on the Stock Exchange

There are many types of ETFs ETF imitates stock index index of debt

instruments index of commodity Currency Index

PVFC Capital could establish an ETF imitates PVN 10 Index as an alternative

solution for open-ended fund (see Table 52 for the advantages of ETF)

PVN-10 Index has clear and specific objectives highly representative for

energy oil amp gas sector

Currently there are only two foreign ETFs investing in the Vietnam Stock

Market FTSE Vietnam Index ETF and Market Vectors Vietnam ETF

(VNM) For example FTSE Vietnam Index ETF imitates FTSE Vietnam

All-Share Index which include leading companies accounting for 90 of

total market capitalization in Vietnam (~ 42 companies) But these two ETFs

investing in Vietnam stock market are both foreign funds and listed in Europe

stock exchange market

The legal base for ETFs in Vietnam is Circular 2292012TT-BTC by

Ministry of Finance guiding the establishment and management of the

Exchange Traded Fund (ETF) The purpose of the Circular is attract

investment capital into new investment tool develop stock market

sustainablely

Figure 5 2 Regulation of establishment and management of ETFs

(Source PVFC Capital)

29

56 Evaluation of Alternative

This part is about to have a deep look into each solution and find out

advantages and disadvantages of each solution

There are some advantages of scenario using ETF over Open-ended Fund

when PVFC Capital establish PVN10 Index under ETF form as following

Table 52 Comparing open-ended fund (PVGF) with

PVN-Index ETF (Alternative)

Open-ended Fund (PVGF) ETF (Alternative)

High liquidity Fund Certificates (FCs) are

not traded on the Stock

Exchange but investors can

request redemption from

Fund Management Company

Trading frequency at least 2

timesmonth

ETF shares could be

either traded on the stock

exchange or bought back

by Fund Management

Company through

exchange transactions

Price tracking

closely

movement of

NAV

The trading price is NAVFCs

ETF share price is traded

around fundrsquos NAV Any

differences will be

balanced by arbitrage

trades

Lower costs

Proactive Investment Strategy

and higher management amp

research cost

Investments in liquid assets

The fund is managed

passively tracking the

performance of a certain

underlying asset

Risk and profit

equivalent to the risk and

profitability of simulated

index

High capital

utilization

Always keep an amount of

cash or liquid assets to buy

back FCs upon investors lsquos

request

The fund could invest all

of its capital

Flexible

funding or

redeeming

process

Deposit and withdrawal

procedures are fast and

flexible

Just need to pass the approval

of the Board of

Representatives

High flexibility

Investors only needs to

send share buyingselling

orders to Fund

Management company

High

transparence

- Report periodically sends

to investors monthly

quarterly and annually

- Published on the company

website

Summary report financial

reports statistical reports

transaction fees activity

- Frequency of required

information release is

more than that of both

close-end and open-

ended funds

- Publish reference

index on website of

Stock exchange

30

reports

- Publish tracking error

on website of fund

management company

weekly

However alternative solution of establishing a ETF imitates PVN-10 Index also

contains disadvantages as discussed in following table

Table 53 Disadvantages of ETF (alternative solution)

PVN-Index ETF

Passive investment

strategy

Only suitable for investors prefer passive

investment strategy Not suitable for investors who

prefer research amp analysis stock picking and

making investment decision

Difficult to obtain

superior profits

Even if the market in the strong growth stage it is

difficult to earn a higher profit than market

Difficult to manage

uncertainty in

simulation

It is difficult to minimize tracking error due to high

frequency of corporate events such as MampA

bonus shares share split The difficulty is more

severe in low liquidity market

In addition the development of ETF in Vietnam market is depend on many other

external factors as identified in the below table

Table 54 Conditions for ETF to develop and operate effectively

Development of

reference indexes

Development of indexes that are managed and

approved by the Stock Exchanges in order to

create market diversity Currently the index of the

Stock Exchange was relatively poor with only 4

indexs (VNIndex HNX-Index VN30 and HNX30)

Technology

infrastructure from

authorities

The Stock Exchanges VSD need to

improvecomplete IT infrastructure for the

operation of the ETF funds and the index

Additional legal

provisions

Additional provisions allow securities borrowing

and lending

Upgrading technology

capability of Fund

Fund Management Company must have sufficient

technology capacity to maintain and operate

structucred portfolio closely follow the reference

31

Management Company index to avoid false tracking errors and also to

ensure compliance with the restrictions on

investment in securities law

Selecting the

appropriate timing for

fund establishment

Selecting the appropriate timing for fund

establishment when the reference index is low and

there is growth potential in the future

In addition market liquidity have to be at a high

level to ensure the funds portfolio closely follow

portfolio of reference index

Enhancing awareness

from individual

investors

Investors should be aware that ETF is an effective

investment tool where nvestors can easily

assessevaluate the fund operation through

fluctuations of the reference index

57 Comparison

Vietnams stock market will continue to thrive and ETF certificates will be more

interested by amateur investors since selected stocks from the list are mostly

good stocks industry leaders as well as profitability is able to pass growth of the

VN-index This time is appropriate for the advent of the ETF Since the

establishment of this fund will not only increase the liquidity of the market but

also to meet the needs of non-professional investors in Vietnam

Whether open or closed-end funds the investment efficiency of fund should be at

top priority so the ETF expert with reputable fund manager or portfolio selection

includes many good stocks as well as timing to buy on cheap price must be in

primary concerns

Certainly in the short term with limited understanding of the major investors the

ETFs will not be well received but in the longer term the ETF will be much

more attractive not only to the institutional investors but also for individual

investors

There are some argument supports why ETF is not the priority solution

- Firstly investors especially small investors it is difficult to track the

movement of the index outside VN-Index VN30 the HNX-Index and

HNX30 Only a few brokers have a price list for each index excluding the

aforementioned index Their historical data also cannot be looked up If

there are no tools supporting analysis the data can be incomplete and only

accurate at a certain stage

- Second the security companies only focus on key indicators like VN-

Index VN30 the HNX-Index and HNX30 they hardly ever mention

other indicators

- Third if possible looking at the chart of the index investors will see that

the market index on the same floor have a very high correlation with each

other

- In terms of applications not only PVN-Index but also the many official

index of HOSE and HNX has not been used much except that the

32

Vietnam Fund Management (VFM) used VN30 Index as a reference for

their first ETF

- Operating environment for ETFs is also incomplete no market maker and

securities borrowing mechanism

However with an attitude of no one can win the market many investors

including individuals have chosen to invest in an ETF in several different

segments to get a market portfolio Therefore ETFs still the alternative but it

very much depends on the market timing and condition of the Vietnam stock

market

Evaluating risk investing in ETFs with examples

- Market risk the biggest risk from the ETFs is the market risk When the

market goes up and also goes down ETF basket is tied to the underlying

asset and will fluctuate with the market the same way

- The risk of diversity in the world there are currently 1500 active ETFs

and investors is facing with too many choices in the same field For

example in the past year the best ETF in biotechnology industry

(biotech) and the worst ETF of this industry had more than 18 of

distance Because one ETF holds companies that have the potential cure

to cancer while other ETF bet on companies in the life sciences sector

which leads to different results even though these companies are the same

field of biotechnology

- Transaction Risk ETF transaction prices based on supply and demand

Therefore it depends on the differences in trading (the bid-ask spread)

which is similar to stocks Thus ETFs with greater liquidity will have

lower price gap (spread) In contrast the less liquid ETFs will have a

higher spread (possibly from 2- 4) thus reducing profits or increasing

costs when taking a position in sellingbuying ETFs

- Basic indicators Risk most ETFs are simulated by a certain indicators and

trading is close to net asset value But sometimes the price cannot cling to

this indicator For example when the Arab war happens Egypt stock-

exchange closed for a short time the Market Vector Egypt ETF (EGPT)

was still trading and investors bet that the Egyptian market will open

everything will be resolved well and then they push this ETF at higher

price (the premium) But when the market reopened the market was

silence and ETFs have become too expensive

Table 55 Evaluation Summary

In short-term

(Solution)

PVGF Establishing Open-ended Fund investing

in PVN-10 Index Noted that The performance

of PVN-Index has always outperformed other

index (HNX30 or VN30)

In Long-term

(Alternative)

ETF Establishing exchange-traded fund (ETF)

imitates PVN-10 Index (consider and depend on

the external amp internal factors)

33

CHAPTER 6

CONCLUSION amp RECOMMENDATION

61 Conclusion

In conclusion the company is encountering challenges in which are how to

raise more funds and how to expand the business network given current

market situation To resolve the constraints there are few solution were

proposed small-scale starting with utilization of the capital from shareholder

introduction and formulation of new fund as well as enhancing networking

activities

While the stock market fluctuates with many negative trends in recent years

causing concern for investors the new open-end fund with focusing on the

basket of PVN Index 10 with the advantage of high liquidity low risk and

interest return will likely attract the attention of investors In the past two

years PVN-10 Index has obtained an outstanding growth compared with that

of VN-Index VN-30 Index HNX-Index vagrave HNX-30 Index

In addition to the general advantages of open-ended funds which are highly

liquidity transparence the investment capital is very suitable for all investors

With only 5 million VND (~23585 USD) investors are able to buy fund

certificates to invest in stocks with great value PVGF can bring better profit

than the market by proactive investment strategy focusing on the oil and gas

sector that all stocks are highly liquid attractive potentially faster recovery

when the economy flourishes

The establishment of open-ended funds through mobilizing funds from

members of the Group will concentrate financial and information resources

From that the fund could invest in corporate bonds within associate and

affiliates of PVN members The participation of shareholders such as

PVcomBank and companies within PVN Group in the proposed fund will

provide trust for investors attract the contribution from partners

The establishment of PVGF beside goals of bringing a new product to the

market also aims to build image of a multi-functional fund management

company of PVFC Capital with diverse types of funds and portfolio and to

help increase scale of capital under management

62 Action Plan 1 Open-ended Fund

621 Fund Structure

34

Table 61 Fund structures of Open-ended fund (Plan 1)

The name (expected) Petrovietnam Open-ended Growth Fund (PVGF)

Forms of funds Open-ended funds are established and operated under the

current law of Vietnam

Note Fund Certificates (FCs) are not listed on the Stock

Exchange but was acquired back by Fund Management

Company on the primary market

Fund size 50 billion VND (~ 5000000 fund certificates)

Investors Includes foreign and local investors both legal entities or

individuals

Fund Management

Company

PVFC Capital

Supervision Bank HSBC or Deutsche Bank

Investment

Objectives

The Fund aims to maximize profits for investors through

investments in oil and gas stocks that have high returns

Asset allocation - Up to 95 of the Net asset value of the Fund in a basket

of stocks in PVN-10 stocks the shares of the company

under the Vietnam Oil and Gas Group (PVN) that have

high liquidity solid fundamental numbers and attractive

dividend rate

- Up to 70 of net asset value of the Fund will invest in

securities which have a fixed interest rate (including

government bonds corporate bonds project bonds )

On the basis of the growth of PVN-10 Index and

assessment of market conditions the fund will determine

the proportion of assets in the portfolio to ensure

profitability and liquidity of funds

Investment

restrictions

- Cannot invest more than 10 of the net asset value of

the Fund in securities of one single issuing organization

- Cannot invest more than 30 of the net asset value of

the Fund in the total outstanding shares of one single

issuing organization

- The structure of the funds investments is permitted that

deviation shall not exceed fifteen percent (15) than the

prescribed regulation

Expected time of

fund establishment

Quarter 1 - 2 2015

622 Fund Raising Plan

With the objectives of fund as described above PVFC Capital determine that

investors will be the low-risk taker with the amount of cash and desire to invest

to achieve higher returns than bank interest rates which are very low during this

35

time (~ 7 year) At the same time they need to ensure capital adequacy with

interest rate target of about 8-10year

The investment objective of the fund is the same as the goal of using the charter

capital of the company Therefore PVFC Capital should contribute charter

capital as counterpart funds in the fund to give confidence to investors

Table 62 Fund Raising Plan of Open-ended fund (Plan 1)

Investors Capital raising Mobilization

target (VND

billion)

of

Fund

PVFC Capital The charter capital

as counterpart funds

10 20

PVcomBank The charter capital

as counterpart funds

5 10

The companies in the oil amp gas

sector within PVN Group such

as DPM PTSC PV Oil PVD

10 20

Foreign investors Idle cash 20 20 -

40

Mobilizing from individuals

- Individuals from PVFC

Capital

- Individuals from PVcomBank

(to ensure the adequate number

of more than 100 investors)

Idle cash

- around 30

individuals

- - around 70

individuals

5

10

TOTAL 50 100

63 Action Plan 2 Exchange Traded Fund

631 Fund Structure

In the current situation that capital raising is facing many difficulties due to the

fact that stock market implicit many risky factors PVFC Capital determine that

in the first phase of the fund establishment fund size will be in small scale of 50

billion VND which is the minimum fund size prescribed by the State Securities

Commission Once fund operates on the basis of fund effectiveness PVFC

Capital can increase the size of the fund

ETFs structured as follows

36

Table 63 Fund structures of Exchange Traded Fund (Plan 2)

The name (expected) PVFCC PVN-10 Index ETF

Abbreviation PVN-10 ETF Fund

Forms of funds Exchange traded fund (ETF) is established and

operated under the current law of Vietnam

Reference Index PVN-10 Index

Investment objectives Passive investment strategy simulation of PVN-10

index in order to achieve the Funds growth equivalent

to growth rate of the index

Portfolio Investments in shares in the portfolio of PVN-10

index In particular the portfolio will include 10

stocks in the PVN-10 index with structure and

proportion accordingly to ensure the specified

deviation

Fund size In the first stage at least 50 billion VND (~ 5000000

fund certificates)

In the capital raising stage after 6 months of

operation will increase its capital to 100 billion VND

Investors Foreign and local investors legal entitiesindividuals

Fund management

comapny

PVFC Capital

Fund establishing

members

- Petrovietnam Securities Incorporation (PSI)

- Custodian Bank

Supervison Bank HSBC or Deutsche Bank

Expected time of fund

establishment

Quater 1 2015

632 Capital Raising Plan

PVFC Capital determines that raising capital initially for the fund will require

counterpart funds from the charter capital of the PVFC Capital contributing

capital from PVcomBank PSI and companies within PVN Group PVcomBanks

participation as well as other unit of the group will create confidence and attract

the participation of other investors to raise additional capital in future for the

fund

Thus PVFC Capital plans fund raising for early stage as follows

37

Table 64 Fund Raising Plan of Exchange Traded Fund (Plan 2)

Investors Capital raising Mobilization

target (VND

billion)

of

Fund

PVFC Capital The charter capital

as counterpart funds

10 20

PVcomBank counterpart funds 5 10

PSI counterpart funds 5 - 10 10 -

20

The companies in the oil amp gas

sector within PVN Group such

as DPM PTSC PV Oil PVD

15 - 20 30 -

40

Foreign investors Idle cash 10 20

TOTAL 50 - 60 100

64 Recommendation

The establishment of a fund with small scale initially but increase fund size

after a duration of operation based on its efficiency In its early stage of

establishing funds counterpart funds from PVFC Capital and some strategic

investor is critical to create the basis for trust investors attracting the

participation of others

Therefore there are some recommendations that PVFC Capitallsquos

management board should consider

- Approved plans to establishing PVGF as discussed above with action plan

(how to do) in details

- Approved using the company lsquos chartered capital to contribute to the

PVGF

- Recommend shareholders (SOVICO Group PVcomBank) support fund

establishment particularly

Report to PVcomBank (mother-company of PVFC Capital) the

proposal of contributing capital plan and support PVFC Capital

approach and working with subsidiaries affiliates partners of

PVcomBank to raise more capital

Recommend to SOVICO Group and HD Bank (within the

SOVICO Group and same owners) and other companies within

SOVICO network participating in the fund raising process

The responsibility of the PVFC Capital executives in managing a new open-

ended fund (PVGF) would be guided by an articulated set of criteria The specific

steps of the investment process of PVGF would be carefully constructed to

ensure PVGF investment activities comply with current laws and investment

management agreement

38

Table 65 Process of investment management control and coordinate

Activities Performer

Step 1

PVFC Capital Board of

Fund Representatives

Step 2

Board of Fund

Representatives

Step 3

Board of Fund

Representatives

Step 4

Board of Fund

Representatives

Step 5

Board of Fund

Representatives

Source PVFC Capital Step 1 Propose investment

- Based on the market assessment or on the recommendation of members from

Board of Fund Representatives PVFC Capital will make investment proposals to

the Board for approval

- Proposal must outline clearly the investment opportunities volume price range

duration

Step 2 Investment approval

Within 3 working days the Board of Fund Representatives resubmit results of

investment approval to PVFC Capital

Step 3 Implement the Investment

PVFC Capital is responsible for distributing the necessary resources and

coordinate with relevant parties such as custodian banks securities companies

brokers to implement investment proposals which was approved

Step 4 Tracking Portfolio

PVFC Capital is responsible for monitoring the investments in the PVGFs

portfolio update the information related to investments and investment

companies If there is positive or negative news about the market PVFC Capital

shall report immediately to the investor to restructure the portfolio or close

investment status and wait for new signals

Step 5 Report and after-investment management

PVFC Capital shall periodically report (monthlyquarterlyyearly) on the active

status of management portfolio and evaluate the effectiveness of the portfolio to

the Board of Fund Representatives Since then PVFC Capital proposes to adjust

the portfolio (if necessary) to achieve investment objectives of the fund

The prospect of the PVGF will come from the commitment of the whole team

from the top of Management Board to every Department staff With the favorable

external factors such as the improved economy and prospective business

environment particularly in the capital market the challenges could be overcome

to achieve the companylsquos mission

Propose investment Investment approval

Implement the Investment

Tracking Portfolio Investment

Periodic reports Portfolio Investment

Ask for additional information (if necessary)

39

Appendix 1

List of Open-end Fund in Vietnam (as of July 2014)

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

No

Fund Name Fund

Manager License

Establish

ment

Scale

(bil

VND)

Invest

ment

Obj

1

MB Capital

Vietnam Bond

Fund

MB

Capital 01GCN-UBCK 1332013

54 Bond

2

VinaWealth

Enhanced

Fixed Income

Fund

Vinawealth 02GCN-UBCK 142013

54 Bond

3

Vietnam

Active Fund

(VFMVFA)

Vinafund 03GCN-UBCK 1842013

240 Stock

4

Vietnam Fund

Bond (VFB) Vinafund 04GCN-UBCK 2452013

100 Bond

5

Vietnam Fund

1 (VFMVF1) Vinafund 05GCN-UBCK 8102013 1000 Stock

6

Vietnam Fund

4 (VFMVF4) Vinafund 06GCN-UBCK 16122013

806 Stock

7

Vietcombank

Tactical

Balanced Fund

- VCBF

VCBF 07GCN-UBCK 24122013

60 Bond

8

Baoviet Equity

Dynamic

Open-ended

Fund

(BVFED)

BVF 08GCN-UBCK 812014

71

Stock

bond

9

Viet Capital

Balanced

Fund

(VCAMBF)

Bản Việt

Capital Offering since

1012014 Bond

10

Eastspring

Investments

Fund (ENF)

Eastspring

Investments

Offering since

24122013

Stock

Bond

40

Appendix 2

PERFORMANCE OF MB Capital Vietnam Bond Fund (as of July 2014)

Bond Holdings

Fund Activities

By the end of July NAV of MBBF increased by 082 compared to the same

period last month Thus in the first 7 months of the year NAV of the fund

increased by 606 with an annualize rate of 1038 The contribution for

positive return in this month were from realized and unrealized gains from term

deposits and interest payments

Fund Strategy

MBBF seeks to maximize total return while preserving investorrsquos principal by

investing in bonds and other debt instruments issued in Vietnam

The Fund will seek to achieve the Fundrsquos objective by investing in a diversified

portfolio of debt instruments including government bonds government-

guaranteed bonds bank-insured corporate bonds collateral-backed corporate

bonds corporate bonds certificates of deposit and cash deposit contracts

Source Military Bank (MB Bank)

41

Appendix 3

PERFORMANCE OF Vietnam Active Fund (VFMVFA) (as of July 2014)

Source Vinafund

Investment Objectives

The main objective of VFMVFA would be to capture

medium to long-term capital appreciation on

Vietnam market accompanied by capital

preservation during adverse market conditions based

on the main strategy of trend-following which is one

of Quantitative Investment method

42

Appendix 4

PERFORMANCE OF VIETNAM FUND 1 (VFMVF1) (as of July 2014)

Source Vinafund

Investment Objectives The objective of

VFMVF1 is to seek long-term earnings from

equity growth and income through investing into

a balanced and diversified portfolio including

equity convertible and debt securities in

Vietnam

43

Appendix 5

Performance of VCBF Tactical Balanced Fund (as of July 2014)

VCBF Factsheet

Performance of NAV

Source VCBF

44

Appendix 6

PERFORMANCE OF EASTSPRING INVESTMENTS FUND (ENF) (as of October 2014)

Source Eastspring Investments Vietnam

Eastspring Investments Vietnam Navigator Fund

(theldquoNavigator Fundrdquo or ldquoENFrdquo) is Mutual Fund

licensed by Vietnam State Securities Commission

under license No 09GCN-UBCK

(March 25th 2014)

Fund Manager Eastspring Investments Fund

Management Limited Liability Company

(ldquoEastspring Investments Vietnamrdquo)

45

Appendix 7

Reference Index PVN10

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

Full name PVN 10

PVN 10 index is designed to be a tradable index It

represents the largest and most liquid stocks on Ho Chi

Minh (HSX) and Hanoi (HNX) Stock Exchanges

Price or

Total Return Total return

UCITS IV

Compliant Yes

Constituent

numbers 10

Capping 15

INDEX COMPOSITION

Ticker Company Name Weight

PVD Petrovietnam Drilling amp Well Services Corporation 1831

GAS PetroVietnam Gas Joint Stock Corporation 1757

PVS PetroVietnam Technical Services Corporation 1478

DPM PetroVietnam Fertilizer and Chemicals Corporation 1379

PET Petrovietnam General Services Joint Stock

Corporation

766

PVX Petrovietnam Construction Joint Stock Corporation 681

PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

635

PVF Petrovietnam Finance Joint Stock Corporation 602

PVT Petrovietnam Transportation Corporation 561

PGS PetroVietNam Southern Gas Joint Stock Company 410

Qualification

criteria

Liquidity amp

Market cap

Composition

review Semester

Shares

review Quarterly

Free float

review Quarterly

Free float

banding 5 up

Base value 1000

Base date 2008-12-31

Historical

since 2008-12-31

Launching

date

382012

Internal code PVN10

Bloomberg PVN10TR

29

56 Evaluation of Alternative

This part is about to have a deep look into each solution and find out

advantages and disadvantages of each solution

There are some advantages of scenario using ETF over Open-ended Fund

when PVFC Capital establish PVN10 Index under ETF form as following

Table 52 Comparing open-ended fund (PVGF) with

PVN-Index ETF (Alternative)

Open-ended Fund (PVGF) ETF (Alternative)

High liquidity Fund Certificates (FCs) are

not traded on the Stock

Exchange but investors can

request redemption from

Fund Management Company

Trading frequency at least 2

timesmonth

ETF shares could be

either traded on the stock

exchange or bought back

by Fund Management

Company through

exchange transactions

Price tracking

closely

movement of

NAV

The trading price is NAVFCs

ETF share price is traded

around fundrsquos NAV Any

differences will be

balanced by arbitrage

trades

Lower costs

Proactive Investment Strategy

and higher management amp

research cost

Investments in liquid assets

The fund is managed

passively tracking the

performance of a certain

underlying asset

Risk and profit

equivalent to the risk and

profitability of simulated

index

High capital

utilization

Always keep an amount of

cash or liquid assets to buy

back FCs upon investors lsquos

request

The fund could invest all

of its capital

Flexible

funding or

redeeming

process

Deposit and withdrawal

procedures are fast and

flexible

Just need to pass the approval

of the Board of

Representatives

High flexibility

Investors only needs to

send share buyingselling

orders to Fund

Management company

High

transparence

- Report periodically sends

to investors monthly

quarterly and annually

- Published on the company

website

Summary report financial

reports statistical reports

transaction fees activity

- Frequency of required

information release is

more than that of both

close-end and open-

ended funds

- Publish reference

index on website of

Stock exchange

30

reports

- Publish tracking error

on website of fund

management company

weekly

However alternative solution of establishing a ETF imitates PVN-10 Index also

contains disadvantages as discussed in following table

Table 53 Disadvantages of ETF (alternative solution)

PVN-Index ETF

Passive investment

strategy

Only suitable for investors prefer passive

investment strategy Not suitable for investors who

prefer research amp analysis stock picking and

making investment decision

Difficult to obtain

superior profits

Even if the market in the strong growth stage it is

difficult to earn a higher profit than market

Difficult to manage

uncertainty in

simulation

It is difficult to minimize tracking error due to high

frequency of corporate events such as MampA

bonus shares share split The difficulty is more

severe in low liquidity market

In addition the development of ETF in Vietnam market is depend on many other

external factors as identified in the below table

Table 54 Conditions for ETF to develop and operate effectively

Development of

reference indexes

Development of indexes that are managed and

approved by the Stock Exchanges in order to

create market diversity Currently the index of the

Stock Exchange was relatively poor with only 4

indexs (VNIndex HNX-Index VN30 and HNX30)

Technology

infrastructure from

authorities

The Stock Exchanges VSD need to

improvecomplete IT infrastructure for the

operation of the ETF funds and the index

Additional legal

provisions

Additional provisions allow securities borrowing

and lending

Upgrading technology

capability of Fund

Fund Management Company must have sufficient

technology capacity to maintain and operate

structucred portfolio closely follow the reference

31

Management Company index to avoid false tracking errors and also to

ensure compliance with the restrictions on

investment in securities law

Selecting the

appropriate timing for

fund establishment

Selecting the appropriate timing for fund

establishment when the reference index is low and

there is growth potential in the future

In addition market liquidity have to be at a high

level to ensure the funds portfolio closely follow

portfolio of reference index

Enhancing awareness

from individual

investors

Investors should be aware that ETF is an effective

investment tool where nvestors can easily

assessevaluate the fund operation through

fluctuations of the reference index

57 Comparison

Vietnams stock market will continue to thrive and ETF certificates will be more

interested by amateur investors since selected stocks from the list are mostly

good stocks industry leaders as well as profitability is able to pass growth of the

VN-index This time is appropriate for the advent of the ETF Since the

establishment of this fund will not only increase the liquidity of the market but

also to meet the needs of non-professional investors in Vietnam

Whether open or closed-end funds the investment efficiency of fund should be at

top priority so the ETF expert with reputable fund manager or portfolio selection

includes many good stocks as well as timing to buy on cheap price must be in

primary concerns

Certainly in the short term with limited understanding of the major investors the

ETFs will not be well received but in the longer term the ETF will be much

more attractive not only to the institutional investors but also for individual

investors

There are some argument supports why ETF is not the priority solution

- Firstly investors especially small investors it is difficult to track the

movement of the index outside VN-Index VN30 the HNX-Index and

HNX30 Only a few brokers have a price list for each index excluding the

aforementioned index Their historical data also cannot be looked up If

there are no tools supporting analysis the data can be incomplete and only

accurate at a certain stage

- Second the security companies only focus on key indicators like VN-

Index VN30 the HNX-Index and HNX30 they hardly ever mention

other indicators

- Third if possible looking at the chart of the index investors will see that

the market index on the same floor have a very high correlation with each

other

- In terms of applications not only PVN-Index but also the many official

index of HOSE and HNX has not been used much except that the

32

Vietnam Fund Management (VFM) used VN30 Index as a reference for

their first ETF

- Operating environment for ETFs is also incomplete no market maker and

securities borrowing mechanism

However with an attitude of no one can win the market many investors

including individuals have chosen to invest in an ETF in several different

segments to get a market portfolio Therefore ETFs still the alternative but it

very much depends on the market timing and condition of the Vietnam stock

market

Evaluating risk investing in ETFs with examples

- Market risk the biggest risk from the ETFs is the market risk When the

market goes up and also goes down ETF basket is tied to the underlying

asset and will fluctuate with the market the same way

- The risk of diversity in the world there are currently 1500 active ETFs

and investors is facing with too many choices in the same field For

example in the past year the best ETF in biotechnology industry

(biotech) and the worst ETF of this industry had more than 18 of

distance Because one ETF holds companies that have the potential cure

to cancer while other ETF bet on companies in the life sciences sector

which leads to different results even though these companies are the same

field of biotechnology

- Transaction Risk ETF transaction prices based on supply and demand

Therefore it depends on the differences in trading (the bid-ask spread)

which is similar to stocks Thus ETFs with greater liquidity will have

lower price gap (spread) In contrast the less liquid ETFs will have a

higher spread (possibly from 2- 4) thus reducing profits or increasing

costs when taking a position in sellingbuying ETFs

- Basic indicators Risk most ETFs are simulated by a certain indicators and

trading is close to net asset value But sometimes the price cannot cling to

this indicator For example when the Arab war happens Egypt stock-

exchange closed for a short time the Market Vector Egypt ETF (EGPT)

was still trading and investors bet that the Egyptian market will open

everything will be resolved well and then they push this ETF at higher

price (the premium) But when the market reopened the market was

silence and ETFs have become too expensive

Table 55 Evaluation Summary

In short-term

(Solution)

PVGF Establishing Open-ended Fund investing

in PVN-10 Index Noted that The performance

of PVN-Index has always outperformed other

index (HNX30 or VN30)

In Long-term

(Alternative)

ETF Establishing exchange-traded fund (ETF)

imitates PVN-10 Index (consider and depend on

the external amp internal factors)

33

CHAPTER 6

CONCLUSION amp RECOMMENDATION

61 Conclusion

In conclusion the company is encountering challenges in which are how to

raise more funds and how to expand the business network given current

market situation To resolve the constraints there are few solution were

proposed small-scale starting with utilization of the capital from shareholder

introduction and formulation of new fund as well as enhancing networking

activities

While the stock market fluctuates with many negative trends in recent years

causing concern for investors the new open-end fund with focusing on the

basket of PVN Index 10 with the advantage of high liquidity low risk and

interest return will likely attract the attention of investors In the past two

years PVN-10 Index has obtained an outstanding growth compared with that

of VN-Index VN-30 Index HNX-Index vagrave HNX-30 Index

In addition to the general advantages of open-ended funds which are highly

liquidity transparence the investment capital is very suitable for all investors

With only 5 million VND (~23585 USD) investors are able to buy fund

certificates to invest in stocks with great value PVGF can bring better profit

than the market by proactive investment strategy focusing on the oil and gas

sector that all stocks are highly liquid attractive potentially faster recovery

when the economy flourishes

The establishment of open-ended funds through mobilizing funds from

members of the Group will concentrate financial and information resources

From that the fund could invest in corporate bonds within associate and

affiliates of PVN members The participation of shareholders such as

PVcomBank and companies within PVN Group in the proposed fund will

provide trust for investors attract the contribution from partners

The establishment of PVGF beside goals of bringing a new product to the

market also aims to build image of a multi-functional fund management

company of PVFC Capital with diverse types of funds and portfolio and to

help increase scale of capital under management

62 Action Plan 1 Open-ended Fund

621 Fund Structure

34

Table 61 Fund structures of Open-ended fund (Plan 1)

The name (expected) Petrovietnam Open-ended Growth Fund (PVGF)

Forms of funds Open-ended funds are established and operated under the

current law of Vietnam

Note Fund Certificates (FCs) are not listed on the Stock

Exchange but was acquired back by Fund Management

Company on the primary market

Fund size 50 billion VND (~ 5000000 fund certificates)

Investors Includes foreign and local investors both legal entities or

individuals

Fund Management

Company

PVFC Capital

Supervision Bank HSBC or Deutsche Bank

Investment

Objectives

The Fund aims to maximize profits for investors through

investments in oil and gas stocks that have high returns

Asset allocation - Up to 95 of the Net asset value of the Fund in a basket

of stocks in PVN-10 stocks the shares of the company

under the Vietnam Oil and Gas Group (PVN) that have

high liquidity solid fundamental numbers and attractive

dividend rate

- Up to 70 of net asset value of the Fund will invest in

securities which have a fixed interest rate (including

government bonds corporate bonds project bonds )

On the basis of the growth of PVN-10 Index and

assessment of market conditions the fund will determine

the proportion of assets in the portfolio to ensure

profitability and liquidity of funds

Investment

restrictions

- Cannot invest more than 10 of the net asset value of

the Fund in securities of one single issuing organization

- Cannot invest more than 30 of the net asset value of

the Fund in the total outstanding shares of one single

issuing organization

- The structure of the funds investments is permitted that

deviation shall not exceed fifteen percent (15) than the

prescribed regulation

Expected time of

fund establishment

Quarter 1 - 2 2015

622 Fund Raising Plan

With the objectives of fund as described above PVFC Capital determine that

investors will be the low-risk taker with the amount of cash and desire to invest

to achieve higher returns than bank interest rates which are very low during this

35

time (~ 7 year) At the same time they need to ensure capital adequacy with

interest rate target of about 8-10year

The investment objective of the fund is the same as the goal of using the charter

capital of the company Therefore PVFC Capital should contribute charter

capital as counterpart funds in the fund to give confidence to investors

Table 62 Fund Raising Plan of Open-ended fund (Plan 1)

Investors Capital raising Mobilization

target (VND

billion)

of

Fund

PVFC Capital The charter capital

as counterpart funds

10 20

PVcomBank The charter capital

as counterpart funds

5 10

The companies in the oil amp gas

sector within PVN Group such

as DPM PTSC PV Oil PVD

10 20

Foreign investors Idle cash 20 20 -

40

Mobilizing from individuals

- Individuals from PVFC

Capital

- Individuals from PVcomBank

(to ensure the adequate number

of more than 100 investors)

Idle cash

- around 30

individuals

- - around 70

individuals

5

10

TOTAL 50 100

63 Action Plan 2 Exchange Traded Fund

631 Fund Structure

In the current situation that capital raising is facing many difficulties due to the

fact that stock market implicit many risky factors PVFC Capital determine that

in the first phase of the fund establishment fund size will be in small scale of 50

billion VND which is the minimum fund size prescribed by the State Securities

Commission Once fund operates on the basis of fund effectiveness PVFC

Capital can increase the size of the fund

ETFs structured as follows

36

Table 63 Fund structures of Exchange Traded Fund (Plan 2)

The name (expected) PVFCC PVN-10 Index ETF

Abbreviation PVN-10 ETF Fund

Forms of funds Exchange traded fund (ETF) is established and

operated under the current law of Vietnam

Reference Index PVN-10 Index

Investment objectives Passive investment strategy simulation of PVN-10

index in order to achieve the Funds growth equivalent

to growth rate of the index

Portfolio Investments in shares in the portfolio of PVN-10

index In particular the portfolio will include 10

stocks in the PVN-10 index with structure and

proportion accordingly to ensure the specified

deviation

Fund size In the first stage at least 50 billion VND (~ 5000000

fund certificates)

In the capital raising stage after 6 months of

operation will increase its capital to 100 billion VND

Investors Foreign and local investors legal entitiesindividuals

Fund management

comapny

PVFC Capital

Fund establishing

members

- Petrovietnam Securities Incorporation (PSI)

- Custodian Bank

Supervison Bank HSBC or Deutsche Bank

Expected time of fund

establishment

Quater 1 2015

632 Capital Raising Plan

PVFC Capital determines that raising capital initially for the fund will require

counterpart funds from the charter capital of the PVFC Capital contributing

capital from PVcomBank PSI and companies within PVN Group PVcomBanks

participation as well as other unit of the group will create confidence and attract

the participation of other investors to raise additional capital in future for the

fund

Thus PVFC Capital plans fund raising for early stage as follows

37

Table 64 Fund Raising Plan of Exchange Traded Fund (Plan 2)

Investors Capital raising Mobilization

target (VND

billion)

of

Fund

PVFC Capital The charter capital

as counterpart funds

10 20

PVcomBank counterpart funds 5 10

PSI counterpart funds 5 - 10 10 -

20

The companies in the oil amp gas

sector within PVN Group such

as DPM PTSC PV Oil PVD

15 - 20 30 -

40

Foreign investors Idle cash 10 20

TOTAL 50 - 60 100

64 Recommendation

The establishment of a fund with small scale initially but increase fund size

after a duration of operation based on its efficiency In its early stage of

establishing funds counterpart funds from PVFC Capital and some strategic

investor is critical to create the basis for trust investors attracting the

participation of others

Therefore there are some recommendations that PVFC Capitallsquos

management board should consider

- Approved plans to establishing PVGF as discussed above with action plan

(how to do) in details

- Approved using the company lsquos chartered capital to contribute to the

PVGF

- Recommend shareholders (SOVICO Group PVcomBank) support fund

establishment particularly

Report to PVcomBank (mother-company of PVFC Capital) the

proposal of contributing capital plan and support PVFC Capital

approach and working with subsidiaries affiliates partners of

PVcomBank to raise more capital

Recommend to SOVICO Group and HD Bank (within the

SOVICO Group and same owners) and other companies within

SOVICO network participating in the fund raising process

The responsibility of the PVFC Capital executives in managing a new open-

ended fund (PVGF) would be guided by an articulated set of criteria The specific

steps of the investment process of PVGF would be carefully constructed to

ensure PVGF investment activities comply with current laws and investment

management agreement

38

Table 65 Process of investment management control and coordinate

Activities Performer

Step 1

PVFC Capital Board of

Fund Representatives

Step 2

Board of Fund

Representatives

Step 3

Board of Fund

Representatives

Step 4

Board of Fund

Representatives

Step 5

Board of Fund

Representatives

Source PVFC Capital Step 1 Propose investment

- Based on the market assessment or on the recommendation of members from

Board of Fund Representatives PVFC Capital will make investment proposals to

the Board for approval

- Proposal must outline clearly the investment opportunities volume price range

duration

Step 2 Investment approval

Within 3 working days the Board of Fund Representatives resubmit results of

investment approval to PVFC Capital

Step 3 Implement the Investment

PVFC Capital is responsible for distributing the necessary resources and

coordinate with relevant parties such as custodian banks securities companies

brokers to implement investment proposals which was approved

Step 4 Tracking Portfolio

PVFC Capital is responsible for monitoring the investments in the PVGFs

portfolio update the information related to investments and investment

companies If there is positive or negative news about the market PVFC Capital

shall report immediately to the investor to restructure the portfolio or close

investment status and wait for new signals

Step 5 Report and after-investment management

PVFC Capital shall periodically report (monthlyquarterlyyearly) on the active

status of management portfolio and evaluate the effectiveness of the portfolio to

the Board of Fund Representatives Since then PVFC Capital proposes to adjust

the portfolio (if necessary) to achieve investment objectives of the fund

The prospect of the PVGF will come from the commitment of the whole team

from the top of Management Board to every Department staff With the favorable

external factors such as the improved economy and prospective business

environment particularly in the capital market the challenges could be overcome

to achieve the companylsquos mission

Propose investment Investment approval

Implement the Investment

Tracking Portfolio Investment

Periodic reports Portfolio Investment

Ask for additional information (if necessary)

39

Appendix 1

List of Open-end Fund in Vietnam (as of July 2014)

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

No

Fund Name Fund

Manager License

Establish

ment

Scale

(bil

VND)

Invest

ment

Obj

1

MB Capital

Vietnam Bond

Fund

MB

Capital 01GCN-UBCK 1332013

54 Bond

2

VinaWealth

Enhanced

Fixed Income

Fund

Vinawealth 02GCN-UBCK 142013

54 Bond

3

Vietnam

Active Fund

(VFMVFA)

Vinafund 03GCN-UBCK 1842013

240 Stock

4

Vietnam Fund

Bond (VFB) Vinafund 04GCN-UBCK 2452013

100 Bond

5

Vietnam Fund

1 (VFMVF1) Vinafund 05GCN-UBCK 8102013 1000 Stock

6

Vietnam Fund

4 (VFMVF4) Vinafund 06GCN-UBCK 16122013

806 Stock

7

Vietcombank

Tactical

Balanced Fund

- VCBF

VCBF 07GCN-UBCK 24122013

60 Bond

8

Baoviet Equity

Dynamic

Open-ended

Fund

(BVFED)

BVF 08GCN-UBCK 812014

71

Stock

bond

9

Viet Capital

Balanced

Fund

(VCAMBF)

Bản Việt

Capital Offering since

1012014 Bond

10

Eastspring

Investments

Fund (ENF)

Eastspring

Investments

Offering since

24122013

Stock

Bond

40

Appendix 2

PERFORMANCE OF MB Capital Vietnam Bond Fund (as of July 2014)

Bond Holdings

Fund Activities

By the end of July NAV of MBBF increased by 082 compared to the same

period last month Thus in the first 7 months of the year NAV of the fund

increased by 606 with an annualize rate of 1038 The contribution for

positive return in this month were from realized and unrealized gains from term

deposits and interest payments

Fund Strategy

MBBF seeks to maximize total return while preserving investorrsquos principal by

investing in bonds and other debt instruments issued in Vietnam

The Fund will seek to achieve the Fundrsquos objective by investing in a diversified

portfolio of debt instruments including government bonds government-

guaranteed bonds bank-insured corporate bonds collateral-backed corporate

bonds corporate bonds certificates of deposit and cash deposit contracts

Source Military Bank (MB Bank)

41

Appendix 3

PERFORMANCE OF Vietnam Active Fund (VFMVFA) (as of July 2014)

Source Vinafund

Investment Objectives

The main objective of VFMVFA would be to capture

medium to long-term capital appreciation on

Vietnam market accompanied by capital

preservation during adverse market conditions based

on the main strategy of trend-following which is one

of Quantitative Investment method

42

Appendix 4

PERFORMANCE OF VIETNAM FUND 1 (VFMVF1) (as of July 2014)

Source Vinafund

Investment Objectives The objective of

VFMVF1 is to seek long-term earnings from

equity growth and income through investing into

a balanced and diversified portfolio including

equity convertible and debt securities in

Vietnam

43

Appendix 5

Performance of VCBF Tactical Balanced Fund (as of July 2014)

VCBF Factsheet

Performance of NAV

Source VCBF

44

Appendix 6

PERFORMANCE OF EASTSPRING INVESTMENTS FUND (ENF) (as of October 2014)

Source Eastspring Investments Vietnam

Eastspring Investments Vietnam Navigator Fund

(theldquoNavigator Fundrdquo or ldquoENFrdquo) is Mutual Fund

licensed by Vietnam State Securities Commission

under license No 09GCN-UBCK

(March 25th 2014)

Fund Manager Eastspring Investments Fund

Management Limited Liability Company

(ldquoEastspring Investments Vietnamrdquo)

45

Appendix 7

Reference Index PVN10

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

Full name PVN 10

PVN 10 index is designed to be a tradable index It

represents the largest and most liquid stocks on Ho Chi

Minh (HSX) and Hanoi (HNX) Stock Exchanges

Price or

Total Return Total return

UCITS IV

Compliant Yes

Constituent

numbers 10

Capping 15

INDEX COMPOSITION

Ticker Company Name Weight

PVD Petrovietnam Drilling amp Well Services Corporation 1831

GAS PetroVietnam Gas Joint Stock Corporation 1757

PVS PetroVietnam Technical Services Corporation 1478

DPM PetroVietnam Fertilizer and Chemicals Corporation 1379

PET Petrovietnam General Services Joint Stock

Corporation

766

PVX Petrovietnam Construction Joint Stock Corporation 681

PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

635

PVF Petrovietnam Finance Joint Stock Corporation 602

PVT Petrovietnam Transportation Corporation 561

PGS PetroVietNam Southern Gas Joint Stock Company 410

Qualification

criteria

Liquidity amp

Market cap

Composition

review Semester

Shares

review Quarterly

Free float

review Quarterly

Free float

banding 5 up

Base value 1000

Base date 2008-12-31

Historical

since 2008-12-31

Launching

date

382012

Internal code PVN10

Bloomberg PVN10TR

30

reports

- Publish tracking error

on website of fund

management company

weekly

However alternative solution of establishing a ETF imitates PVN-10 Index also

contains disadvantages as discussed in following table

Table 53 Disadvantages of ETF (alternative solution)

PVN-Index ETF

Passive investment

strategy

Only suitable for investors prefer passive

investment strategy Not suitable for investors who

prefer research amp analysis stock picking and

making investment decision

Difficult to obtain

superior profits

Even if the market in the strong growth stage it is

difficult to earn a higher profit than market

Difficult to manage

uncertainty in

simulation

It is difficult to minimize tracking error due to high

frequency of corporate events such as MampA

bonus shares share split The difficulty is more

severe in low liquidity market

In addition the development of ETF in Vietnam market is depend on many other

external factors as identified in the below table

Table 54 Conditions for ETF to develop and operate effectively

Development of

reference indexes

Development of indexes that are managed and

approved by the Stock Exchanges in order to

create market diversity Currently the index of the

Stock Exchange was relatively poor with only 4

indexs (VNIndex HNX-Index VN30 and HNX30)

Technology

infrastructure from

authorities

The Stock Exchanges VSD need to

improvecomplete IT infrastructure for the

operation of the ETF funds and the index

Additional legal

provisions

Additional provisions allow securities borrowing

and lending

Upgrading technology

capability of Fund

Fund Management Company must have sufficient

technology capacity to maintain and operate

structucred portfolio closely follow the reference

31

Management Company index to avoid false tracking errors and also to

ensure compliance with the restrictions on

investment in securities law

Selecting the

appropriate timing for

fund establishment

Selecting the appropriate timing for fund

establishment when the reference index is low and

there is growth potential in the future

In addition market liquidity have to be at a high

level to ensure the funds portfolio closely follow

portfolio of reference index

Enhancing awareness

from individual

investors

Investors should be aware that ETF is an effective

investment tool where nvestors can easily

assessevaluate the fund operation through

fluctuations of the reference index

57 Comparison

Vietnams stock market will continue to thrive and ETF certificates will be more

interested by amateur investors since selected stocks from the list are mostly

good stocks industry leaders as well as profitability is able to pass growth of the

VN-index This time is appropriate for the advent of the ETF Since the

establishment of this fund will not only increase the liquidity of the market but

also to meet the needs of non-professional investors in Vietnam

Whether open or closed-end funds the investment efficiency of fund should be at

top priority so the ETF expert with reputable fund manager or portfolio selection

includes many good stocks as well as timing to buy on cheap price must be in

primary concerns

Certainly in the short term with limited understanding of the major investors the

ETFs will not be well received but in the longer term the ETF will be much

more attractive not only to the institutional investors but also for individual

investors

There are some argument supports why ETF is not the priority solution

- Firstly investors especially small investors it is difficult to track the

movement of the index outside VN-Index VN30 the HNX-Index and

HNX30 Only a few brokers have a price list for each index excluding the

aforementioned index Their historical data also cannot be looked up If

there are no tools supporting analysis the data can be incomplete and only

accurate at a certain stage

- Second the security companies only focus on key indicators like VN-

Index VN30 the HNX-Index and HNX30 they hardly ever mention

other indicators

- Third if possible looking at the chart of the index investors will see that

the market index on the same floor have a very high correlation with each

other

- In terms of applications not only PVN-Index but also the many official

index of HOSE and HNX has not been used much except that the

32

Vietnam Fund Management (VFM) used VN30 Index as a reference for

their first ETF

- Operating environment for ETFs is also incomplete no market maker and

securities borrowing mechanism

However with an attitude of no one can win the market many investors

including individuals have chosen to invest in an ETF in several different

segments to get a market portfolio Therefore ETFs still the alternative but it

very much depends on the market timing and condition of the Vietnam stock

market

Evaluating risk investing in ETFs with examples

- Market risk the biggest risk from the ETFs is the market risk When the

market goes up and also goes down ETF basket is tied to the underlying

asset and will fluctuate with the market the same way

- The risk of diversity in the world there are currently 1500 active ETFs

and investors is facing with too many choices in the same field For

example in the past year the best ETF in biotechnology industry

(biotech) and the worst ETF of this industry had more than 18 of

distance Because one ETF holds companies that have the potential cure

to cancer while other ETF bet on companies in the life sciences sector

which leads to different results even though these companies are the same

field of biotechnology

- Transaction Risk ETF transaction prices based on supply and demand

Therefore it depends on the differences in trading (the bid-ask spread)

which is similar to stocks Thus ETFs with greater liquidity will have

lower price gap (spread) In contrast the less liquid ETFs will have a

higher spread (possibly from 2- 4) thus reducing profits or increasing

costs when taking a position in sellingbuying ETFs

- Basic indicators Risk most ETFs are simulated by a certain indicators and

trading is close to net asset value But sometimes the price cannot cling to

this indicator For example when the Arab war happens Egypt stock-

exchange closed for a short time the Market Vector Egypt ETF (EGPT)

was still trading and investors bet that the Egyptian market will open

everything will be resolved well and then they push this ETF at higher

price (the premium) But when the market reopened the market was

silence and ETFs have become too expensive

Table 55 Evaluation Summary

In short-term

(Solution)

PVGF Establishing Open-ended Fund investing

in PVN-10 Index Noted that The performance

of PVN-Index has always outperformed other

index (HNX30 or VN30)

In Long-term

(Alternative)

ETF Establishing exchange-traded fund (ETF)

imitates PVN-10 Index (consider and depend on

the external amp internal factors)

33

CHAPTER 6

CONCLUSION amp RECOMMENDATION

61 Conclusion

In conclusion the company is encountering challenges in which are how to

raise more funds and how to expand the business network given current

market situation To resolve the constraints there are few solution were

proposed small-scale starting with utilization of the capital from shareholder

introduction and formulation of new fund as well as enhancing networking

activities

While the stock market fluctuates with many negative trends in recent years

causing concern for investors the new open-end fund with focusing on the

basket of PVN Index 10 with the advantage of high liquidity low risk and

interest return will likely attract the attention of investors In the past two

years PVN-10 Index has obtained an outstanding growth compared with that

of VN-Index VN-30 Index HNX-Index vagrave HNX-30 Index

In addition to the general advantages of open-ended funds which are highly

liquidity transparence the investment capital is very suitable for all investors

With only 5 million VND (~23585 USD) investors are able to buy fund

certificates to invest in stocks with great value PVGF can bring better profit

than the market by proactive investment strategy focusing on the oil and gas

sector that all stocks are highly liquid attractive potentially faster recovery

when the economy flourishes

The establishment of open-ended funds through mobilizing funds from

members of the Group will concentrate financial and information resources

From that the fund could invest in corporate bonds within associate and

affiliates of PVN members The participation of shareholders such as

PVcomBank and companies within PVN Group in the proposed fund will

provide trust for investors attract the contribution from partners

The establishment of PVGF beside goals of bringing a new product to the

market also aims to build image of a multi-functional fund management

company of PVFC Capital with diverse types of funds and portfolio and to

help increase scale of capital under management

62 Action Plan 1 Open-ended Fund

621 Fund Structure

34

Table 61 Fund structures of Open-ended fund (Plan 1)

The name (expected) Petrovietnam Open-ended Growth Fund (PVGF)

Forms of funds Open-ended funds are established and operated under the

current law of Vietnam

Note Fund Certificates (FCs) are not listed on the Stock

Exchange but was acquired back by Fund Management

Company on the primary market

Fund size 50 billion VND (~ 5000000 fund certificates)

Investors Includes foreign and local investors both legal entities or

individuals

Fund Management

Company

PVFC Capital

Supervision Bank HSBC or Deutsche Bank

Investment

Objectives

The Fund aims to maximize profits for investors through

investments in oil and gas stocks that have high returns

Asset allocation - Up to 95 of the Net asset value of the Fund in a basket

of stocks in PVN-10 stocks the shares of the company

under the Vietnam Oil and Gas Group (PVN) that have

high liquidity solid fundamental numbers and attractive

dividend rate

- Up to 70 of net asset value of the Fund will invest in

securities which have a fixed interest rate (including

government bonds corporate bonds project bonds )

On the basis of the growth of PVN-10 Index and

assessment of market conditions the fund will determine

the proportion of assets in the portfolio to ensure

profitability and liquidity of funds

Investment

restrictions

- Cannot invest more than 10 of the net asset value of

the Fund in securities of one single issuing organization

- Cannot invest more than 30 of the net asset value of

the Fund in the total outstanding shares of one single

issuing organization

- The structure of the funds investments is permitted that

deviation shall not exceed fifteen percent (15) than the

prescribed regulation

Expected time of

fund establishment

Quarter 1 - 2 2015

622 Fund Raising Plan

With the objectives of fund as described above PVFC Capital determine that

investors will be the low-risk taker with the amount of cash and desire to invest

to achieve higher returns than bank interest rates which are very low during this

35

time (~ 7 year) At the same time they need to ensure capital adequacy with

interest rate target of about 8-10year

The investment objective of the fund is the same as the goal of using the charter

capital of the company Therefore PVFC Capital should contribute charter

capital as counterpart funds in the fund to give confidence to investors

Table 62 Fund Raising Plan of Open-ended fund (Plan 1)

Investors Capital raising Mobilization

target (VND

billion)

of

Fund

PVFC Capital The charter capital

as counterpart funds

10 20

PVcomBank The charter capital

as counterpart funds

5 10

The companies in the oil amp gas

sector within PVN Group such

as DPM PTSC PV Oil PVD

10 20

Foreign investors Idle cash 20 20 -

40

Mobilizing from individuals

- Individuals from PVFC

Capital

- Individuals from PVcomBank

(to ensure the adequate number

of more than 100 investors)

Idle cash

- around 30

individuals

- - around 70

individuals

5

10

TOTAL 50 100

63 Action Plan 2 Exchange Traded Fund

631 Fund Structure

In the current situation that capital raising is facing many difficulties due to the

fact that stock market implicit many risky factors PVFC Capital determine that

in the first phase of the fund establishment fund size will be in small scale of 50

billion VND which is the minimum fund size prescribed by the State Securities

Commission Once fund operates on the basis of fund effectiveness PVFC

Capital can increase the size of the fund

ETFs structured as follows

36

Table 63 Fund structures of Exchange Traded Fund (Plan 2)

The name (expected) PVFCC PVN-10 Index ETF

Abbreviation PVN-10 ETF Fund

Forms of funds Exchange traded fund (ETF) is established and

operated under the current law of Vietnam

Reference Index PVN-10 Index

Investment objectives Passive investment strategy simulation of PVN-10

index in order to achieve the Funds growth equivalent

to growth rate of the index

Portfolio Investments in shares in the portfolio of PVN-10

index In particular the portfolio will include 10

stocks in the PVN-10 index with structure and

proportion accordingly to ensure the specified

deviation

Fund size In the first stage at least 50 billion VND (~ 5000000

fund certificates)

In the capital raising stage after 6 months of

operation will increase its capital to 100 billion VND

Investors Foreign and local investors legal entitiesindividuals

Fund management

comapny

PVFC Capital

Fund establishing

members

- Petrovietnam Securities Incorporation (PSI)

- Custodian Bank

Supervison Bank HSBC or Deutsche Bank

Expected time of fund

establishment

Quater 1 2015

632 Capital Raising Plan

PVFC Capital determines that raising capital initially for the fund will require

counterpart funds from the charter capital of the PVFC Capital contributing

capital from PVcomBank PSI and companies within PVN Group PVcomBanks

participation as well as other unit of the group will create confidence and attract

the participation of other investors to raise additional capital in future for the

fund

Thus PVFC Capital plans fund raising for early stage as follows

37

Table 64 Fund Raising Plan of Exchange Traded Fund (Plan 2)

Investors Capital raising Mobilization

target (VND

billion)

of

Fund

PVFC Capital The charter capital

as counterpart funds

10 20

PVcomBank counterpart funds 5 10

PSI counterpart funds 5 - 10 10 -

20

The companies in the oil amp gas

sector within PVN Group such

as DPM PTSC PV Oil PVD

15 - 20 30 -

40

Foreign investors Idle cash 10 20

TOTAL 50 - 60 100

64 Recommendation

The establishment of a fund with small scale initially but increase fund size

after a duration of operation based on its efficiency In its early stage of

establishing funds counterpart funds from PVFC Capital and some strategic

investor is critical to create the basis for trust investors attracting the

participation of others

Therefore there are some recommendations that PVFC Capitallsquos

management board should consider

- Approved plans to establishing PVGF as discussed above with action plan

(how to do) in details

- Approved using the company lsquos chartered capital to contribute to the

PVGF

- Recommend shareholders (SOVICO Group PVcomBank) support fund

establishment particularly

Report to PVcomBank (mother-company of PVFC Capital) the

proposal of contributing capital plan and support PVFC Capital

approach and working with subsidiaries affiliates partners of

PVcomBank to raise more capital

Recommend to SOVICO Group and HD Bank (within the

SOVICO Group and same owners) and other companies within

SOVICO network participating in the fund raising process

The responsibility of the PVFC Capital executives in managing a new open-

ended fund (PVGF) would be guided by an articulated set of criteria The specific

steps of the investment process of PVGF would be carefully constructed to

ensure PVGF investment activities comply with current laws and investment

management agreement

38

Table 65 Process of investment management control and coordinate

Activities Performer

Step 1

PVFC Capital Board of

Fund Representatives

Step 2

Board of Fund

Representatives

Step 3

Board of Fund

Representatives

Step 4

Board of Fund

Representatives

Step 5

Board of Fund

Representatives

Source PVFC Capital Step 1 Propose investment

- Based on the market assessment or on the recommendation of members from

Board of Fund Representatives PVFC Capital will make investment proposals to

the Board for approval

- Proposal must outline clearly the investment opportunities volume price range

duration

Step 2 Investment approval

Within 3 working days the Board of Fund Representatives resubmit results of

investment approval to PVFC Capital

Step 3 Implement the Investment

PVFC Capital is responsible for distributing the necessary resources and

coordinate with relevant parties such as custodian banks securities companies

brokers to implement investment proposals which was approved

Step 4 Tracking Portfolio

PVFC Capital is responsible for monitoring the investments in the PVGFs

portfolio update the information related to investments and investment

companies If there is positive or negative news about the market PVFC Capital

shall report immediately to the investor to restructure the portfolio or close

investment status and wait for new signals

Step 5 Report and after-investment management

PVFC Capital shall periodically report (monthlyquarterlyyearly) on the active

status of management portfolio and evaluate the effectiveness of the portfolio to

the Board of Fund Representatives Since then PVFC Capital proposes to adjust

the portfolio (if necessary) to achieve investment objectives of the fund

The prospect of the PVGF will come from the commitment of the whole team

from the top of Management Board to every Department staff With the favorable

external factors such as the improved economy and prospective business

environment particularly in the capital market the challenges could be overcome

to achieve the companylsquos mission

Propose investment Investment approval

Implement the Investment

Tracking Portfolio Investment

Periodic reports Portfolio Investment

Ask for additional information (if necessary)

39

Appendix 1

List of Open-end Fund in Vietnam (as of July 2014)

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

No

Fund Name Fund

Manager License

Establish

ment

Scale

(bil

VND)

Invest

ment

Obj

1

MB Capital

Vietnam Bond

Fund

MB

Capital 01GCN-UBCK 1332013

54 Bond

2

VinaWealth

Enhanced

Fixed Income

Fund

Vinawealth 02GCN-UBCK 142013

54 Bond

3

Vietnam

Active Fund

(VFMVFA)

Vinafund 03GCN-UBCK 1842013

240 Stock

4

Vietnam Fund

Bond (VFB) Vinafund 04GCN-UBCK 2452013

100 Bond

5

Vietnam Fund

1 (VFMVF1) Vinafund 05GCN-UBCK 8102013 1000 Stock

6

Vietnam Fund

4 (VFMVF4) Vinafund 06GCN-UBCK 16122013

806 Stock

7

Vietcombank

Tactical

Balanced Fund

- VCBF

VCBF 07GCN-UBCK 24122013

60 Bond

8

Baoviet Equity

Dynamic

Open-ended

Fund

(BVFED)

BVF 08GCN-UBCK 812014

71

Stock

bond

9

Viet Capital

Balanced

Fund

(VCAMBF)

Bản Việt

Capital Offering since

1012014 Bond

10

Eastspring

Investments

Fund (ENF)

Eastspring

Investments

Offering since

24122013

Stock

Bond

40

Appendix 2

PERFORMANCE OF MB Capital Vietnam Bond Fund (as of July 2014)

Bond Holdings

Fund Activities

By the end of July NAV of MBBF increased by 082 compared to the same

period last month Thus in the first 7 months of the year NAV of the fund

increased by 606 with an annualize rate of 1038 The contribution for

positive return in this month were from realized and unrealized gains from term

deposits and interest payments

Fund Strategy

MBBF seeks to maximize total return while preserving investorrsquos principal by

investing in bonds and other debt instruments issued in Vietnam

The Fund will seek to achieve the Fundrsquos objective by investing in a diversified

portfolio of debt instruments including government bonds government-

guaranteed bonds bank-insured corporate bonds collateral-backed corporate

bonds corporate bonds certificates of deposit and cash deposit contracts

Source Military Bank (MB Bank)

41

Appendix 3

PERFORMANCE OF Vietnam Active Fund (VFMVFA) (as of July 2014)

Source Vinafund

Investment Objectives

The main objective of VFMVFA would be to capture

medium to long-term capital appreciation on

Vietnam market accompanied by capital

preservation during adverse market conditions based

on the main strategy of trend-following which is one

of Quantitative Investment method

42

Appendix 4

PERFORMANCE OF VIETNAM FUND 1 (VFMVF1) (as of July 2014)

Source Vinafund

Investment Objectives The objective of

VFMVF1 is to seek long-term earnings from

equity growth and income through investing into

a balanced and diversified portfolio including

equity convertible and debt securities in

Vietnam

43

Appendix 5

Performance of VCBF Tactical Balanced Fund (as of July 2014)

VCBF Factsheet

Performance of NAV

Source VCBF

44

Appendix 6

PERFORMANCE OF EASTSPRING INVESTMENTS FUND (ENF) (as of October 2014)

Source Eastspring Investments Vietnam

Eastspring Investments Vietnam Navigator Fund

(theldquoNavigator Fundrdquo or ldquoENFrdquo) is Mutual Fund

licensed by Vietnam State Securities Commission

under license No 09GCN-UBCK

(March 25th 2014)

Fund Manager Eastspring Investments Fund

Management Limited Liability Company

(ldquoEastspring Investments Vietnamrdquo)

45

Appendix 7

Reference Index PVN10

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

Full name PVN 10

PVN 10 index is designed to be a tradable index It

represents the largest and most liquid stocks on Ho Chi

Minh (HSX) and Hanoi (HNX) Stock Exchanges

Price or

Total Return Total return

UCITS IV

Compliant Yes

Constituent

numbers 10

Capping 15

INDEX COMPOSITION

Ticker Company Name Weight

PVD Petrovietnam Drilling amp Well Services Corporation 1831

GAS PetroVietnam Gas Joint Stock Corporation 1757

PVS PetroVietnam Technical Services Corporation 1478

DPM PetroVietnam Fertilizer and Chemicals Corporation 1379

PET Petrovietnam General Services Joint Stock

Corporation

766

PVX Petrovietnam Construction Joint Stock Corporation 681

PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

635

PVF Petrovietnam Finance Joint Stock Corporation 602

PVT Petrovietnam Transportation Corporation 561

PGS PetroVietNam Southern Gas Joint Stock Company 410

Qualification

criteria

Liquidity amp

Market cap

Composition

review Semester

Shares

review Quarterly

Free float

review Quarterly

Free float

banding 5 up

Base value 1000

Base date 2008-12-31

Historical

since 2008-12-31

Launching

date

382012

Internal code PVN10

Bloomberg PVN10TR

31

Management Company index to avoid false tracking errors and also to

ensure compliance with the restrictions on

investment in securities law

Selecting the

appropriate timing for

fund establishment

Selecting the appropriate timing for fund

establishment when the reference index is low and

there is growth potential in the future

In addition market liquidity have to be at a high

level to ensure the funds portfolio closely follow

portfolio of reference index

Enhancing awareness

from individual

investors

Investors should be aware that ETF is an effective

investment tool where nvestors can easily

assessevaluate the fund operation through

fluctuations of the reference index

57 Comparison

Vietnams stock market will continue to thrive and ETF certificates will be more

interested by amateur investors since selected stocks from the list are mostly

good stocks industry leaders as well as profitability is able to pass growth of the

VN-index This time is appropriate for the advent of the ETF Since the

establishment of this fund will not only increase the liquidity of the market but

also to meet the needs of non-professional investors in Vietnam

Whether open or closed-end funds the investment efficiency of fund should be at

top priority so the ETF expert with reputable fund manager or portfolio selection

includes many good stocks as well as timing to buy on cheap price must be in

primary concerns

Certainly in the short term with limited understanding of the major investors the

ETFs will not be well received but in the longer term the ETF will be much

more attractive not only to the institutional investors but also for individual

investors

There are some argument supports why ETF is not the priority solution

- Firstly investors especially small investors it is difficult to track the

movement of the index outside VN-Index VN30 the HNX-Index and

HNX30 Only a few brokers have a price list for each index excluding the

aforementioned index Their historical data also cannot be looked up If

there are no tools supporting analysis the data can be incomplete and only

accurate at a certain stage

- Second the security companies only focus on key indicators like VN-

Index VN30 the HNX-Index and HNX30 they hardly ever mention

other indicators

- Third if possible looking at the chart of the index investors will see that

the market index on the same floor have a very high correlation with each

other

- In terms of applications not only PVN-Index but also the many official

index of HOSE and HNX has not been used much except that the

32

Vietnam Fund Management (VFM) used VN30 Index as a reference for

their first ETF

- Operating environment for ETFs is also incomplete no market maker and

securities borrowing mechanism

However with an attitude of no one can win the market many investors

including individuals have chosen to invest in an ETF in several different

segments to get a market portfolio Therefore ETFs still the alternative but it

very much depends on the market timing and condition of the Vietnam stock

market

Evaluating risk investing in ETFs with examples

- Market risk the biggest risk from the ETFs is the market risk When the

market goes up and also goes down ETF basket is tied to the underlying

asset and will fluctuate with the market the same way

- The risk of diversity in the world there are currently 1500 active ETFs

and investors is facing with too many choices in the same field For

example in the past year the best ETF in biotechnology industry

(biotech) and the worst ETF of this industry had more than 18 of

distance Because one ETF holds companies that have the potential cure

to cancer while other ETF bet on companies in the life sciences sector

which leads to different results even though these companies are the same

field of biotechnology

- Transaction Risk ETF transaction prices based on supply and demand

Therefore it depends on the differences in trading (the bid-ask spread)

which is similar to stocks Thus ETFs with greater liquidity will have

lower price gap (spread) In contrast the less liquid ETFs will have a

higher spread (possibly from 2- 4) thus reducing profits or increasing

costs when taking a position in sellingbuying ETFs

- Basic indicators Risk most ETFs are simulated by a certain indicators and

trading is close to net asset value But sometimes the price cannot cling to

this indicator For example when the Arab war happens Egypt stock-

exchange closed for a short time the Market Vector Egypt ETF (EGPT)

was still trading and investors bet that the Egyptian market will open

everything will be resolved well and then they push this ETF at higher

price (the premium) But when the market reopened the market was

silence and ETFs have become too expensive

Table 55 Evaluation Summary

In short-term

(Solution)

PVGF Establishing Open-ended Fund investing

in PVN-10 Index Noted that The performance

of PVN-Index has always outperformed other

index (HNX30 or VN30)

In Long-term

(Alternative)

ETF Establishing exchange-traded fund (ETF)

imitates PVN-10 Index (consider and depend on

the external amp internal factors)

33

CHAPTER 6

CONCLUSION amp RECOMMENDATION

61 Conclusion

In conclusion the company is encountering challenges in which are how to

raise more funds and how to expand the business network given current

market situation To resolve the constraints there are few solution were

proposed small-scale starting with utilization of the capital from shareholder

introduction and formulation of new fund as well as enhancing networking

activities

While the stock market fluctuates with many negative trends in recent years

causing concern for investors the new open-end fund with focusing on the

basket of PVN Index 10 with the advantage of high liquidity low risk and

interest return will likely attract the attention of investors In the past two

years PVN-10 Index has obtained an outstanding growth compared with that

of VN-Index VN-30 Index HNX-Index vagrave HNX-30 Index

In addition to the general advantages of open-ended funds which are highly

liquidity transparence the investment capital is very suitable for all investors

With only 5 million VND (~23585 USD) investors are able to buy fund

certificates to invest in stocks with great value PVGF can bring better profit

than the market by proactive investment strategy focusing on the oil and gas

sector that all stocks are highly liquid attractive potentially faster recovery

when the economy flourishes

The establishment of open-ended funds through mobilizing funds from

members of the Group will concentrate financial and information resources

From that the fund could invest in corporate bonds within associate and

affiliates of PVN members The participation of shareholders such as

PVcomBank and companies within PVN Group in the proposed fund will

provide trust for investors attract the contribution from partners

The establishment of PVGF beside goals of bringing a new product to the

market also aims to build image of a multi-functional fund management

company of PVFC Capital with diverse types of funds and portfolio and to

help increase scale of capital under management

62 Action Plan 1 Open-ended Fund

621 Fund Structure

34

Table 61 Fund structures of Open-ended fund (Plan 1)

The name (expected) Petrovietnam Open-ended Growth Fund (PVGF)

Forms of funds Open-ended funds are established and operated under the

current law of Vietnam

Note Fund Certificates (FCs) are not listed on the Stock

Exchange but was acquired back by Fund Management

Company on the primary market

Fund size 50 billion VND (~ 5000000 fund certificates)

Investors Includes foreign and local investors both legal entities or

individuals

Fund Management

Company

PVFC Capital

Supervision Bank HSBC or Deutsche Bank

Investment

Objectives

The Fund aims to maximize profits for investors through

investments in oil and gas stocks that have high returns

Asset allocation - Up to 95 of the Net asset value of the Fund in a basket

of stocks in PVN-10 stocks the shares of the company

under the Vietnam Oil and Gas Group (PVN) that have

high liquidity solid fundamental numbers and attractive

dividend rate

- Up to 70 of net asset value of the Fund will invest in

securities which have a fixed interest rate (including

government bonds corporate bonds project bonds )

On the basis of the growth of PVN-10 Index and

assessment of market conditions the fund will determine

the proportion of assets in the portfolio to ensure

profitability and liquidity of funds

Investment

restrictions

- Cannot invest more than 10 of the net asset value of

the Fund in securities of one single issuing organization

- Cannot invest more than 30 of the net asset value of

the Fund in the total outstanding shares of one single

issuing organization

- The structure of the funds investments is permitted that

deviation shall not exceed fifteen percent (15) than the

prescribed regulation

Expected time of

fund establishment

Quarter 1 - 2 2015

622 Fund Raising Plan

With the objectives of fund as described above PVFC Capital determine that

investors will be the low-risk taker with the amount of cash and desire to invest

to achieve higher returns than bank interest rates which are very low during this

35

time (~ 7 year) At the same time they need to ensure capital adequacy with

interest rate target of about 8-10year

The investment objective of the fund is the same as the goal of using the charter

capital of the company Therefore PVFC Capital should contribute charter

capital as counterpart funds in the fund to give confidence to investors

Table 62 Fund Raising Plan of Open-ended fund (Plan 1)

Investors Capital raising Mobilization

target (VND

billion)

of

Fund

PVFC Capital The charter capital

as counterpart funds

10 20

PVcomBank The charter capital

as counterpart funds

5 10

The companies in the oil amp gas

sector within PVN Group such

as DPM PTSC PV Oil PVD

10 20

Foreign investors Idle cash 20 20 -

40

Mobilizing from individuals

- Individuals from PVFC

Capital

- Individuals from PVcomBank

(to ensure the adequate number

of more than 100 investors)

Idle cash

- around 30

individuals

- - around 70

individuals

5

10

TOTAL 50 100

63 Action Plan 2 Exchange Traded Fund

631 Fund Structure

In the current situation that capital raising is facing many difficulties due to the

fact that stock market implicit many risky factors PVFC Capital determine that

in the first phase of the fund establishment fund size will be in small scale of 50

billion VND which is the minimum fund size prescribed by the State Securities

Commission Once fund operates on the basis of fund effectiveness PVFC

Capital can increase the size of the fund

ETFs structured as follows

36

Table 63 Fund structures of Exchange Traded Fund (Plan 2)

The name (expected) PVFCC PVN-10 Index ETF

Abbreviation PVN-10 ETF Fund

Forms of funds Exchange traded fund (ETF) is established and

operated under the current law of Vietnam

Reference Index PVN-10 Index

Investment objectives Passive investment strategy simulation of PVN-10

index in order to achieve the Funds growth equivalent

to growth rate of the index

Portfolio Investments in shares in the portfolio of PVN-10

index In particular the portfolio will include 10

stocks in the PVN-10 index with structure and

proportion accordingly to ensure the specified

deviation

Fund size In the first stage at least 50 billion VND (~ 5000000

fund certificates)

In the capital raising stage after 6 months of

operation will increase its capital to 100 billion VND

Investors Foreign and local investors legal entitiesindividuals

Fund management

comapny

PVFC Capital

Fund establishing

members

- Petrovietnam Securities Incorporation (PSI)

- Custodian Bank

Supervison Bank HSBC or Deutsche Bank

Expected time of fund

establishment

Quater 1 2015

632 Capital Raising Plan

PVFC Capital determines that raising capital initially for the fund will require

counterpart funds from the charter capital of the PVFC Capital contributing

capital from PVcomBank PSI and companies within PVN Group PVcomBanks

participation as well as other unit of the group will create confidence and attract

the participation of other investors to raise additional capital in future for the

fund

Thus PVFC Capital plans fund raising for early stage as follows

37

Table 64 Fund Raising Plan of Exchange Traded Fund (Plan 2)

Investors Capital raising Mobilization

target (VND

billion)

of

Fund

PVFC Capital The charter capital

as counterpart funds

10 20

PVcomBank counterpart funds 5 10

PSI counterpart funds 5 - 10 10 -

20

The companies in the oil amp gas

sector within PVN Group such

as DPM PTSC PV Oil PVD

15 - 20 30 -

40

Foreign investors Idle cash 10 20

TOTAL 50 - 60 100

64 Recommendation

The establishment of a fund with small scale initially but increase fund size

after a duration of operation based on its efficiency In its early stage of

establishing funds counterpart funds from PVFC Capital and some strategic

investor is critical to create the basis for trust investors attracting the

participation of others

Therefore there are some recommendations that PVFC Capitallsquos

management board should consider

- Approved plans to establishing PVGF as discussed above with action plan

(how to do) in details

- Approved using the company lsquos chartered capital to contribute to the

PVGF

- Recommend shareholders (SOVICO Group PVcomBank) support fund

establishment particularly

Report to PVcomBank (mother-company of PVFC Capital) the

proposal of contributing capital plan and support PVFC Capital

approach and working with subsidiaries affiliates partners of

PVcomBank to raise more capital

Recommend to SOVICO Group and HD Bank (within the

SOVICO Group and same owners) and other companies within

SOVICO network participating in the fund raising process

The responsibility of the PVFC Capital executives in managing a new open-

ended fund (PVGF) would be guided by an articulated set of criteria The specific

steps of the investment process of PVGF would be carefully constructed to

ensure PVGF investment activities comply with current laws and investment

management agreement

38

Table 65 Process of investment management control and coordinate

Activities Performer

Step 1

PVFC Capital Board of

Fund Representatives

Step 2

Board of Fund

Representatives

Step 3

Board of Fund

Representatives

Step 4

Board of Fund

Representatives

Step 5

Board of Fund

Representatives

Source PVFC Capital Step 1 Propose investment

- Based on the market assessment or on the recommendation of members from

Board of Fund Representatives PVFC Capital will make investment proposals to

the Board for approval

- Proposal must outline clearly the investment opportunities volume price range

duration

Step 2 Investment approval

Within 3 working days the Board of Fund Representatives resubmit results of

investment approval to PVFC Capital

Step 3 Implement the Investment

PVFC Capital is responsible for distributing the necessary resources and

coordinate with relevant parties such as custodian banks securities companies

brokers to implement investment proposals which was approved

Step 4 Tracking Portfolio

PVFC Capital is responsible for monitoring the investments in the PVGFs

portfolio update the information related to investments and investment

companies If there is positive or negative news about the market PVFC Capital

shall report immediately to the investor to restructure the portfolio or close

investment status and wait for new signals

Step 5 Report and after-investment management

PVFC Capital shall periodically report (monthlyquarterlyyearly) on the active

status of management portfolio and evaluate the effectiveness of the portfolio to

the Board of Fund Representatives Since then PVFC Capital proposes to adjust

the portfolio (if necessary) to achieve investment objectives of the fund

The prospect of the PVGF will come from the commitment of the whole team

from the top of Management Board to every Department staff With the favorable

external factors such as the improved economy and prospective business

environment particularly in the capital market the challenges could be overcome

to achieve the companylsquos mission

Propose investment Investment approval

Implement the Investment

Tracking Portfolio Investment

Periodic reports Portfolio Investment

Ask for additional information (if necessary)

39

Appendix 1

List of Open-end Fund in Vietnam (as of July 2014)

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

No

Fund Name Fund

Manager License

Establish

ment

Scale

(bil

VND)

Invest

ment

Obj

1

MB Capital

Vietnam Bond

Fund

MB

Capital 01GCN-UBCK 1332013

54 Bond

2

VinaWealth

Enhanced

Fixed Income

Fund

Vinawealth 02GCN-UBCK 142013

54 Bond

3

Vietnam

Active Fund

(VFMVFA)

Vinafund 03GCN-UBCK 1842013

240 Stock

4

Vietnam Fund

Bond (VFB) Vinafund 04GCN-UBCK 2452013

100 Bond

5

Vietnam Fund

1 (VFMVF1) Vinafund 05GCN-UBCK 8102013 1000 Stock

6

Vietnam Fund

4 (VFMVF4) Vinafund 06GCN-UBCK 16122013

806 Stock

7

Vietcombank

Tactical

Balanced Fund

- VCBF

VCBF 07GCN-UBCK 24122013

60 Bond

8

Baoviet Equity

Dynamic

Open-ended

Fund

(BVFED)

BVF 08GCN-UBCK 812014

71

Stock

bond

9

Viet Capital

Balanced

Fund

(VCAMBF)

Bản Việt

Capital Offering since

1012014 Bond

10

Eastspring

Investments

Fund (ENF)

Eastspring

Investments

Offering since

24122013

Stock

Bond

40

Appendix 2

PERFORMANCE OF MB Capital Vietnam Bond Fund (as of July 2014)

Bond Holdings

Fund Activities

By the end of July NAV of MBBF increased by 082 compared to the same

period last month Thus in the first 7 months of the year NAV of the fund

increased by 606 with an annualize rate of 1038 The contribution for

positive return in this month were from realized and unrealized gains from term

deposits and interest payments

Fund Strategy

MBBF seeks to maximize total return while preserving investorrsquos principal by

investing in bonds and other debt instruments issued in Vietnam

The Fund will seek to achieve the Fundrsquos objective by investing in a diversified

portfolio of debt instruments including government bonds government-

guaranteed bonds bank-insured corporate bonds collateral-backed corporate

bonds corporate bonds certificates of deposit and cash deposit contracts

Source Military Bank (MB Bank)

41

Appendix 3

PERFORMANCE OF Vietnam Active Fund (VFMVFA) (as of July 2014)

Source Vinafund

Investment Objectives

The main objective of VFMVFA would be to capture

medium to long-term capital appreciation on

Vietnam market accompanied by capital

preservation during adverse market conditions based

on the main strategy of trend-following which is one

of Quantitative Investment method

42

Appendix 4

PERFORMANCE OF VIETNAM FUND 1 (VFMVF1) (as of July 2014)

Source Vinafund

Investment Objectives The objective of

VFMVF1 is to seek long-term earnings from

equity growth and income through investing into

a balanced and diversified portfolio including

equity convertible and debt securities in

Vietnam

43

Appendix 5

Performance of VCBF Tactical Balanced Fund (as of July 2014)

VCBF Factsheet

Performance of NAV

Source VCBF

44

Appendix 6

PERFORMANCE OF EASTSPRING INVESTMENTS FUND (ENF) (as of October 2014)

Source Eastspring Investments Vietnam

Eastspring Investments Vietnam Navigator Fund

(theldquoNavigator Fundrdquo or ldquoENFrdquo) is Mutual Fund

licensed by Vietnam State Securities Commission

under license No 09GCN-UBCK

(March 25th 2014)

Fund Manager Eastspring Investments Fund

Management Limited Liability Company

(ldquoEastspring Investments Vietnamrdquo)

45

Appendix 7

Reference Index PVN10

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

Full name PVN 10

PVN 10 index is designed to be a tradable index It

represents the largest and most liquid stocks on Ho Chi

Minh (HSX) and Hanoi (HNX) Stock Exchanges

Price or

Total Return Total return

UCITS IV

Compliant Yes

Constituent

numbers 10

Capping 15

INDEX COMPOSITION

Ticker Company Name Weight

PVD Petrovietnam Drilling amp Well Services Corporation 1831

GAS PetroVietnam Gas Joint Stock Corporation 1757

PVS PetroVietnam Technical Services Corporation 1478

DPM PetroVietnam Fertilizer and Chemicals Corporation 1379

PET Petrovietnam General Services Joint Stock

Corporation

766

PVX Petrovietnam Construction Joint Stock Corporation 681

PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

635

PVF Petrovietnam Finance Joint Stock Corporation 602

PVT Petrovietnam Transportation Corporation 561

PGS PetroVietNam Southern Gas Joint Stock Company 410

Qualification

criteria

Liquidity amp

Market cap

Composition

review Semester

Shares

review Quarterly

Free float

review Quarterly

Free float

banding 5 up

Base value 1000

Base date 2008-12-31

Historical

since 2008-12-31

Launching

date

382012

Internal code PVN10

Bloomberg PVN10TR

32

Vietnam Fund Management (VFM) used VN30 Index as a reference for

their first ETF

- Operating environment for ETFs is also incomplete no market maker and

securities borrowing mechanism

However with an attitude of no one can win the market many investors

including individuals have chosen to invest in an ETF in several different

segments to get a market portfolio Therefore ETFs still the alternative but it

very much depends on the market timing and condition of the Vietnam stock

market

Evaluating risk investing in ETFs with examples

- Market risk the biggest risk from the ETFs is the market risk When the

market goes up and also goes down ETF basket is tied to the underlying

asset and will fluctuate with the market the same way

- The risk of diversity in the world there are currently 1500 active ETFs

and investors is facing with too many choices in the same field For

example in the past year the best ETF in biotechnology industry

(biotech) and the worst ETF of this industry had more than 18 of

distance Because one ETF holds companies that have the potential cure

to cancer while other ETF bet on companies in the life sciences sector

which leads to different results even though these companies are the same

field of biotechnology

- Transaction Risk ETF transaction prices based on supply and demand

Therefore it depends on the differences in trading (the bid-ask spread)

which is similar to stocks Thus ETFs with greater liquidity will have

lower price gap (spread) In contrast the less liquid ETFs will have a

higher spread (possibly from 2- 4) thus reducing profits or increasing

costs when taking a position in sellingbuying ETFs

- Basic indicators Risk most ETFs are simulated by a certain indicators and

trading is close to net asset value But sometimes the price cannot cling to

this indicator For example when the Arab war happens Egypt stock-

exchange closed for a short time the Market Vector Egypt ETF (EGPT)

was still trading and investors bet that the Egyptian market will open

everything will be resolved well and then they push this ETF at higher

price (the premium) But when the market reopened the market was

silence and ETFs have become too expensive

Table 55 Evaluation Summary

In short-term

(Solution)

PVGF Establishing Open-ended Fund investing

in PVN-10 Index Noted that The performance

of PVN-Index has always outperformed other

index (HNX30 or VN30)

In Long-term

(Alternative)

ETF Establishing exchange-traded fund (ETF)

imitates PVN-10 Index (consider and depend on

the external amp internal factors)

33

CHAPTER 6

CONCLUSION amp RECOMMENDATION

61 Conclusion

In conclusion the company is encountering challenges in which are how to

raise more funds and how to expand the business network given current

market situation To resolve the constraints there are few solution were

proposed small-scale starting with utilization of the capital from shareholder

introduction and formulation of new fund as well as enhancing networking

activities

While the stock market fluctuates with many negative trends in recent years

causing concern for investors the new open-end fund with focusing on the

basket of PVN Index 10 with the advantage of high liquidity low risk and

interest return will likely attract the attention of investors In the past two

years PVN-10 Index has obtained an outstanding growth compared with that

of VN-Index VN-30 Index HNX-Index vagrave HNX-30 Index

In addition to the general advantages of open-ended funds which are highly

liquidity transparence the investment capital is very suitable for all investors

With only 5 million VND (~23585 USD) investors are able to buy fund

certificates to invest in stocks with great value PVGF can bring better profit

than the market by proactive investment strategy focusing on the oil and gas

sector that all stocks are highly liquid attractive potentially faster recovery

when the economy flourishes

The establishment of open-ended funds through mobilizing funds from

members of the Group will concentrate financial and information resources

From that the fund could invest in corporate bonds within associate and

affiliates of PVN members The participation of shareholders such as

PVcomBank and companies within PVN Group in the proposed fund will

provide trust for investors attract the contribution from partners

The establishment of PVGF beside goals of bringing a new product to the

market also aims to build image of a multi-functional fund management

company of PVFC Capital with diverse types of funds and portfolio and to

help increase scale of capital under management

62 Action Plan 1 Open-ended Fund

621 Fund Structure

34

Table 61 Fund structures of Open-ended fund (Plan 1)

The name (expected) Petrovietnam Open-ended Growth Fund (PVGF)

Forms of funds Open-ended funds are established and operated under the

current law of Vietnam

Note Fund Certificates (FCs) are not listed on the Stock

Exchange but was acquired back by Fund Management

Company on the primary market

Fund size 50 billion VND (~ 5000000 fund certificates)

Investors Includes foreign and local investors both legal entities or

individuals

Fund Management

Company

PVFC Capital

Supervision Bank HSBC or Deutsche Bank

Investment

Objectives

The Fund aims to maximize profits for investors through

investments in oil and gas stocks that have high returns

Asset allocation - Up to 95 of the Net asset value of the Fund in a basket

of stocks in PVN-10 stocks the shares of the company

under the Vietnam Oil and Gas Group (PVN) that have

high liquidity solid fundamental numbers and attractive

dividend rate

- Up to 70 of net asset value of the Fund will invest in

securities which have a fixed interest rate (including

government bonds corporate bonds project bonds )

On the basis of the growth of PVN-10 Index and

assessment of market conditions the fund will determine

the proportion of assets in the portfolio to ensure

profitability and liquidity of funds

Investment

restrictions

- Cannot invest more than 10 of the net asset value of

the Fund in securities of one single issuing organization

- Cannot invest more than 30 of the net asset value of

the Fund in the total outstanding shares of one single

issuing organization

- The structure of the funds investments is permitted that

deviation shall not exceed fifteen percent (15) than the

prescribed regulation

Expected time of

fund establishment

Quarter 1 - 2 2015

622 Fund Raising Plan

With the objectives of fund as described above PVFC Capital determine that

investors will be the low-risk taker with the amount of cash and desire to invest

to achieve higher returns than bank interest rates which are very low during this

35

time (~ 7 year) At the same time they need to ensure capital adequacy with

interest rate target of about 8-10year

The investment objective of the fund is the same as the goal of using the charter

capital of the company Therefore PVFC Capital should contribute charter

capital as counterpart funds in the fund to give confidence to investors

Table 62 Fund Raising Plan of Open-ended fund (Plan 1)

Investors Capital raising Mobilization

target (VND

billion)

of

Fund

PVFC Capital The charter capital

as counterpart funds

10 20

PVcomBank The charter capital

as counterpart funds

5 10

The companies in the oil amp gas

sector within PVN Group such

as DPM PTSC PV Oil PVD

10 20

Foreign investors Idle cash 20 20 -

40

Mobilizing from individuals

- Individuals from PVFC

Capital

- Individuals from PVcomBank

(to ensure the adequate number

of more than 100 investors)

Idle cash

- around 30

individuals

- - around 70

individuals

5

10

TOTAL 50 100

63 Action Plan 2 Exchange Traded Fund

631 Fund Structure

In the current situation that capital raising is facing many difficulties due to the

fact that stock market implicit many risky factors PVFC Capital determine that

in the first phase of the fund establishment fund size will be in small scale of 50

billion VND which is the minimum fund size prescribed by the State Securities

Commission Once fund operates on the basis of fund effectiveness PVFC

Capital can increase the size of the fund

ETFs structured as follows

36

Table 63 Fund structures of Exchange Traded Fund (Plan 2)

The name (expected) PVFCC PVN-10 Index ETF

Abbreviation PVN-10 ETF Fund

Forms of funds Exchange traded fund (ETF) is established and

operated under the current law of Vietnam

Reference Index PVN-10 Index

Investment objectives Passive investment strategy simulation of PVN-10

index in order to achieve the Funds growth equivalent

to growth rate of the index

Portfolio Investments in shares in the portfolio of PVN-10

index In particular the portfolio will include 10

stocks in the PVN-10 index with structure and

proportion accordingly to ensure the specified

deviation

Fund size In the first stage at least 50 billion VND (~ 5000000

fund certificates)

In the capital raising stage after 6 months of

operation will increase its capital to 100 billion VND

Investors Foreign and local investors legal entitiesindividuals

Fund management

comapny

PVFC Capital

Fund establishing

members

- Petrovietnam Securities Incorporation (PSI)

- Custodian Bank

Supervison Bank HSBC or Deutsche Bank

Expected time of fund

establishment

Quater 1 2015

632 Capital Raising Plan

PVFC Capital determines that raising capital initially for the fund will require

counterpart funds from the charter capital of the PVFC Capital contributing

capital from PVcomBank PSI and companies within PVN Group PVcomBanks

participation as well as other unit of the group will create confidence and attract

the participation of other investors to raise additional capital in future for the

fund

Thus PVFC Capital plans fund raising for early stage as follows

37

Table 64 Fund Raising Plan of Exchange Traded Fund (Plan 2)

Investors Capital raising Mobilization

target (VND

billion)

of

Fund

PVFC Capital The charter capital

as counterpart funds

10 20

PVcomBank counterpart funds 5 10

PSI counterpart funds 5 - 10 10 -

20

The companies in the oil amp gas

sector within PVN Group such

as DPM PTSC PV Oil PVD

15 - 20 30 -

40

Foreign investors Idle cash 10 20

TOTAL 50 - 60 100

64 Recommendation

The establishment of a fund with small scale initially but increase fund size

after a duration of operation based on its efficiency In its early stage of

establishing funds counterpart funds from PVFC Capital and some strategic

investor is critical to create the basis for trust investors attracting the

participation of others

Therefore there are some recommendations that PVFC Capitallsquos

management board should consider

- Approved plans to establishing PVGF as discussed above with action plan

(how to do) in details

- Approved using the company lsquos chartered capital to contribute to the

PVGF

- Recommend shareholders (SOVICO Group PVcomBank) support fund

establishment particularly

Report to PVcomBank (mother-company of PVFC Capital) the

proposal of contributing capital plan and support PVFC Capital

approach and working with subsidiaries affiliates partners of

PVcomBank to raise more capital

Recommend to SOVICO Group and HD Bank (within the

SOVICO Group and same owners) and other companies within

SOVICO network participating in the fund raising process

The responsibility of the PVFC Capital executives in managing a new open-

ended fund (PVGF) would be guided by an articulated set of criteria The specific

steps of the investment process of PVGF would be carefully constructed to

ensure PVGF investment activities comply with current laws and investment

management agreement

38

Table 65 Process of investment management control and coordinate

Activities Performer

Step 1

PVFC Capital Board of

Fund Representatives

Step 2

Board of Fund

Representatives

Step 3

Board of Fund

Representatives

Step 4

Board of Fund

Representatives

Step 5

Board of Fund

Representatives

Source PVFC Capital Step 1 Propose investment

- Based on the market assessment or on the recommendation of members from

Board of Fund Representatives PVFC Capital will make investment proposals to

the Board for approval

- Proposal must outline clearly the investment opportunities volume price range

duration

Step 2 Investment approval

Within 3 working days the Board of Fund Representatives resubmit results of

investment approval to PVFC Capital

Step 3 Implement the Investment

PVFC Capital is responsible for distributing the necessary resources and

coordinate with relevant parties such as custodian banks securities companies

brokers to implement investment proposals which was approved

Step 4 Tracking Portfolio

PVFC Capital is responsible for monitoring the investments in the PVGFs

portfolio update the information related to investments and investment

companies If there is positive or negative news about the market PVFC Capital

shall report immediately to the investor to restructure the portfolio or close

investment status and wait for new signals

Step 5 Report and after-investment management

PVFC Capital shall periodically report (monthlyquarterlyyearly) on the active

status of management portfolio and evaluate the effectiveness of the portfolio to

the Board of Fund Representatives Since then PVFC Capital proposes to adjust

the portfolio (if necessary) to achieve investment objectives of the fund

The prospect of the PVGF will come from the commitment of the whole team

from the top of Management Board to every Department staff With the favorable

external factors such as the improved economy and prospective business

environment particularly in the capital market the challenges could be overcome

to achieve the companylsquos mission

Propose investment Investment approval

Implement the Investment

Tracking Portfolio Investment

Periodic reports Portfolio Investment

Ask for additional information (if necessary)

39

Appendix 1

List of Open-end Fund in Vietnam (as of July 2014)

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

No

Fund Name Fund

Manager License

Establish

ment

Scale

(bil

VND)

Invest

ment

Obj

1

MB Capital

Vietnam Bond

Fund

MB

Capital 01GCN-UBCK 1332013

54 Bond

2

VinaWealth

Enhanced

Fixed Income

Fund

Vinawealth 02GCN-UBCK 142013

54 Bond

3

Vietnam

Active Fund

(VFMVFA)

Vinafund 03GCN-UBCK 1842013

240 Stock

4

Vietnam Fund

Bond (VFB) Vinafund 04GCN-UBCK 2452013

100 Bond

5

Vietnam Fund

1 (VFMVF1) Vinafund 05GCN-UBCK 8102013 1000 Stock

6

Vietnam Fund

4 (VFMVF4) Vinafund 06GCN-UBCK 16122013

806 Stock

7

Vietcombank

Tactical

Balanced Fund

- VCBF

VCBF 07GCN-UBCK 24122013

60 Bond

8

Baoviet Equity

Dynamic

Open-ended

Fund

(BVFED)

BVF 08GCN-UBCK 812014

71

Stock

bond

9

Viet Capital

Balanced

Fund

(VCAMBF)

Bản Việt

Capital Offering since

1012014 Bond

10

Eastspring

Investments

Fund (ENF)

Eastspring

Investments

Offering since

24122013

Stock

Bond

40

Appendix 2

PERFORMANCE OF MB Capital Vietnam Bond Fund (as of July 2014)

Bond Holdings

Fund Activities

By the end of July NAV of MBBF increased by 082 compared to the same

period last month Thus in the first 7 months of the year NAV of the fund

increased by 606 with an annualize rate of 1038 The contribution for

positive return in this month were from realized and unrealized gains from term

deposits and interest payments

Fund Strategy

MBBF seeks to maximize total return while preserving investorrsquos principal by

investing in bonds and other debt instruments issued in Vietnam

The Fund will seek to achieve the Fundrsquos objective by investing in a diversified

portfolio of debt instruments including government bonds government-

guaranteed bonds bank-insured corporate bonds collateral-backed corporate

bonds corporate bonds certificates of deposit and cash deposit contracts

Source Military Bank (MB Bank)

41

Appendix 3

PERFORMANCE OF Vietnam Active Fund (VFMVFA) (as of July 2014)

Source Vinafund

Investment Objectives

The main objective of VFMVFA would be to capture

medium to long-term capital appreciation on

Vietnam market accompanied by capital

preservation during adverse market conditions based

on the main strategy of trend-following which is one

of Quantitative Investment method

42

Appendix 4

PERFORMANCE OF VIETNAM FUND 1 (VFMVF1) (as of July 2014)

Source Vinafund

Investment Objectives The objective of

VFMVF1 is to seek long-term earnings from

equity growth and income through investing into

a balanced and diversified portfolio including

equity convertible and debt securities in

Vietnam

43

Appendix 5

Performance of VCBF Tactical Balanced Fund (as of July 2014)

VCBF Factsheet

Performance of NAV

Source VCBF

44

Appendix 6

PERFORMANCE OF EASTSPRING INVESTMENTS FUND (ENF) (as of October 2014)

Source Eastspring Investments Vietnam

Eastspring Investments Vietnam Navigator Fund

(theldquoNavigator Fundrdquo or ldquoENFrdquo) is Mutual Fund

licensed by Vietnam State Securities Commission

under license No 09GCN-UBCK

(March 25th 2014)

Fund Manager Eastspring Investments Fund

Management Limited Liability Company

(ldquoEastspring Investments Vietnamrdquo)

45

Appendix 7

Reference Index PVN10

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

Full name PVN 10

PVN 10 index is designed to be a tradable index It

represents the largest and most liquid stocks on Ho Chi

Minh (HSX) and Hanoi (HNX) Stock Exchanges

Price or

Total Return Total return

UCITS IV

Compliant Yes

Constituent

numbers 10

Capping 15

INDEX COMPOSITION

Ticker Company Name Weight

PVD Petrovietnam Drilling amp Well Services Corporation 1831

GAS PetroVietnam Gas Joint Stock Corporation 1757

PVS PetroVietnam Technical Services Corporation 1478

DPM PetroVietnam Fertilizer and Chemicals Corporation 1379

PET Petrovietnam General Services Joint Stock

Corporation

766

PVX Petrovietnam Construction Joint Stock Corporation 681

PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

635

PVF Petrovietnam Finance Joint Stock Corporation 602

PVT Petrovietnam Transportation Corporation 561

PGS PetroVietNam Southern Gas Joint Stock Company 410

Qualification

criteria

Liquidity amp

Market cap

Composition

review Semester

Shares

review Quarterly

Free float

review Quarterly

Free float

banding 5 up

Base value 1000

Base date 2008-12-31

Historical

since 2008-12-31

Launching

date

382012

Internal code PVN10

Bloomberg PVN10TR

33

CHAPTER 6

CONCLUSION amp RECOMMENDATION

61 Conclusion

In conclusion the company is encountering challenges in which are how to

raise more funds and how to expand the business network given current

market situation To resolve the constraints there are few solution were

proposed small-scale starting with utilization of the capital from shareholder

introduction and formulation of new fund as well as enhancing networking

activities

While the stock market fluctuates with many negative trends in recent years

causing concern for investors the new open-end fund with focusing on the

basket of PVN Index 10 with the advantage of high liquidity low risk and

interest return will likely attract the attention of investors In the past two

years PVN-10 Index has obtained an outstanding growth compared with that

of VN-Index VN-30 Index HNX-Index vagrave HNX-30 Index

In addition to the general advantages of open-ended funds which are highly

liquidity transparence the investment capital is very suitable for all investors

With only 5 million VND (~23585 USD) investors are able to buy fund

certificates to invest in stocks with great value PVGF can bring better profit

than the market by proactive investment strategy focusing on the oil and gas

sector that all stocks are highly liquid attractive potentially faster recovery

when the economy flourishes

The establishment of open-ended funds through mobilizing funds from

members of the Group will concentrate financial and information resources

From that the fund could invest in corporate bonds within associate and

affiliates of PVN members The participation of shareholders such as

PVcomBank and companies within PVN Group in the proposed fund will

provide trust for investors attract the contribution from partners

The establishment of PVGF beside goals of bringing a new product to the

market also aims to build image of a multi-functional fund management

company of PVFC Capital with diverse types of funds and portfolio and to

help increase scale of capital under management

62 Action Plan 1 Open-ended Fund

621 Fund Structure

34

Table 61 Fund structures of Open-ended fund (Plan 1)

The name (expected) Petrovietnam Open-ended Growth Fund (PVGF)

Forms of funds Open-ended funds are established and operated under the

current law of Vietnam

Note Fund Certificates (FCs) are not listed on the Stock

Exchange but was acquired back by Fund Management

Company on the primary market

Fund size 50 billion VND (~ 5000000 fund certificates)

Investors Includes foreign and local investors both legal entities or

individuals

Fund Management

Company

PVFC Capital

Supervision Bank HSBC or Deutsche Bank

Investment

Objectives

The Fund aims to maximize profits for investors through

investments in oil and gas stocks that have high returns

Asset allocation - Up to 95 of the Net asset value of the Fund in a basket

of stocks in PVN-10 stocks the shares of the company

under the Vietnam Oil and Gas Group (PVN) that have

high liquidity solid fundamental numbers and attractive

dividend rate

- Up to 70 of net asset value of the Fund will invest in

securities which have a fixed interest rate (including

government bonds corporate bonds project bonds )

On the basis of the growth of PVN-10 Index and

assessment of market conditions the fund will determine

the proportion of assets in the portfolio to ensure

profitability and liquidity of funds

Investment

restrictions

- Cannot invest more than 10 of the net asset value of

the Fund in securities of one single issuing organization

- Cannot invest more than 30 of the net asset value of

the Fund in the total outstanding shares of one single

issuing organization

- The structure of the funds investments is permitted that

deviation shall not exceed fifteen percent (15) than the

prescribed regulation

Expected time of

fund establishment

Quarter 1 - 2 2015

622 Fund Raising Plan

With the objectives of fund as described above PVFC Capital determine that

investors will be the low-risk taker with the amount of cash and desire to invest

to achieve higher returns than bank interest rates which are very low during this

35

time (~ 7 year) At the same time they need to ensure capital adequacy with

interest rate target of about 8-10year

The investment objective of the fund is the same as the goal of using the charter

capital of the company Therefore PVFC Capital should contribute charter

capital as counterpart funds in the fund to give confidence to investors

Table 62 Fund Raising Plan of Open-ended fund (Plan 1)

Investors Capital raising Mobilization

target (VND

billion)

of

Fund

PVFC Capital The charter capital

as counterpart funds

10 20

PVcomBank The charter capital

as counterpart funds

5 10

The companies in the oil amp gas

sector within PVN Group such

as DPM PTSC PV Oil PVD

10 20

Foreign investors Idle cash 20 20 -

40

Mobilizing from individuals

- Individuals from PVFC

Capital

- Individuals from PVcomBank

(to ensure the adequate number

of more than 100 investors)

Idle cash

- around 30

individuals

- - around 70

individuals

5

10

TOTAL 50 100

63 Action Plan 2 Exchange Traded Fund

631 Fund Structure

In the current situation that capital raising is facing many difficulties due to the

fact that stock market implicit many risky factors PVFC Capital determine that

in the first phase of the fund establishment fund size will be in small scale of 50

billion VND which is the minimum fund size prescribed by the State Securities

Commission Once fund operates on the basis of fund effectiveness PVFC

Capital can increase the size of the fund

ETFs structured as follows

36

Table 63 Fund structures of Exchange Traded Fund (Plan 2)

The name (expected) PVFCC PVN-10 Index ETF

Abbreviation PVN-10 ETF Fund

Forms of funds Exchange traded fund (ETF) is established and

operated under the current law of Vietnam

Reference Index PVN-10 Index

Investment objectives Passive investment strategy simulation of PVN-10

index in order to achieve the Funds growth equivalent

to growth rate of the index

Portfolio Investments in shares in the portfolio of PVN-10

index In particular the portfolio will include 10

stocks in the PVN-10 index with structure and

proportion accordingly to ensure the specified

deviation

Fund size In the first stage at least 50 billion VND (~ 5000000

fund certificates)

In the capital raising stage after 6 months of

operation will increase its capital to 100 billion VND

Investors Foreign and local investors legal entitiesindividuals

Fund management

comapny

PVFC Capital

Fund establishing

members

- Petrovietnam Securities Incorporation (PSI)

- Custodian Bank

Supervison Bank HSBC or Deutsche Bank

Expected time of fund

establishment

Quater 1 2015

632 Capital Raising Plan

PVFC Capital determines that raising capital initially for the fund will require

counterpart funds from the charter capital of the PVFC Capital contributing

capital from PVcomBank PSI and companies within PVN Group PVcomBanks

participation as well as other unit of the group will create confidence and attract

the participation of other investors to raise additional capital in future for the

fund

Thus PVFC Capital plans fund raising for early stage as follows

37

Table 64 Fund Raising Plan of Exchange Traded Fund (Plan 2)

Investors Capital raising Mobilization

target (VND

billion)

of

Fund

PVFC Capital The charter capital

as counterpart funds

10 20

PVcomBank counterpart funds 5 10

PSI counterpart funds 5 - 10 10 -

20

The companies in the oil amp gas

sector within PVN Group such

as DPM PTSC PV Oil PVD

15 - 20 30 -

40

Foreign investors Idle cash 10 20

TOTAL 50 - 60 100

64 Recommendation

The establishment of a fund with small scale initially but increase fund size

after a duration of operation based on its efficiency In its early stage of

establishing funds counterpart funds from PVFC Capital and some strategic

investor is critical to create the basis for trust investors attracting the

participation of others

Therefore there are some recommendations that PVFC Capitallsquos

management board should consider

- Approved plans to establishing PVGF as discussed above with action plan

(how to do) in details

- Approved using the company lsquos chartered capital to contribute to the

PVGF

- Recommend shareholders (SOVICO Group PVcomBank) support fund

establishment particularly

Report to PVcomBank (mother-company of PVFC Capital) the

proposal of contributing capital plan and support PVFC Capital

approach and working with subsidiaries affiliates partners of

PVcomBank to raise more capital

Recommend to SOVICO Group and HD Bank (within the

SOVICO Group and same owners) and other companies within

SOVICO network participating in the fund raising process

The responsibility of the PVFC Capital executives in managing a new open-

ended fund (PVGF) would be guided by an articulated set of criteria The specific

steps of the investment process of PVGF would be carefully constructed to

ensure PVGF investment activities comply with current laws and investment

management agreement

38

Table 65 Process of investment management control and coordinate

Activities Performer

Step 1

PVFC Capital Board of

Fund Representatives

Step 2

Board of Fund

Representatives

Step 3

Board of Fund

Representatives

Step 4

Board of Fund

Representatives

Step 5

Board of Fund

Representatives

Source PVFC Capital Step 1 Propose investment

- Based on the market assessment or on the recommendation of members from

Board of Fund Representatives PVFC Capital will make investment proposals to

the Board for approval

- Proposal must outline clearly the investment opportunities volume price range

duration

Step 2 Investment approval

Within 3 working days the Board of Fund Representatives resubmit results of

investment approval to PVFC Capital

Step 3 Implement the Investment

PVFC Capital is responsible for distributing the necessary resources and

coordinate with relevant parties such as custodian banks securities companies

brokers to implement investment proposals which was approved

Step 4 Tracking Portfolio

PVFC Capital is responsible for monitoring the investments in the PVGFs

portfolio update the information related to investments and investment

companies If there is positive or negative news about the market PVFC Capital

shall report immediately to the investor to restructure the portfolio or close

investment status and wait for new signals

Step 5 Report and after-investment management

PVFC Capital shall periodically report (monthlyquarterlyyearly) on the active

status of management portfolio and evaluate the effectiveness of the portfolio to

the Board of Fund Representatives Since then PVFC Capital proposes to adjust

the portfolio (if necessary) to achieve investment objectives of the fund

The prospect of the PVGF will come from the commitment of the whole team

from the top of Management Board to every Department staff With the favorable

external factors such as the improved economy and prospective business

environment particularly in the capital market the challenges could be overcome

to achieve the companylsquos mission

Propose investment Investment approval

Implement the Investment

Tracking Portfolio Investment

Periodic reports Portfolio Investment

Ask for additional information (if necessary)

39

Appendix 1

List of Open-end Fund in Vietnam (as of July 2014)

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

No

Fund Name Fund

Manager License

Establish

ment

Scale

(bil

VND)

Invest

ment

Obj

1

MB Capital

Vietnam Bond

Fund

MB

Capital 01GCN-UBCK 1332013

54 Bond

2

VinaWealth

Enhanced

Fixed Income

Fund

Vinawealth 02GCN-UBCK 142013

54 Bond

3

Vietnam

Active Fund

(VFMVFA)

Vinafund 03GCN-UBCK 1842013

240 Stock

4

Vietnam Fund

Bond (VFB) Vinafund 04GCN-UBCK 2452013

100 Bond

5

Vietnam Fund

1 (VFMVF1) Vinafund 05GCN-UBCK 8102013 1000 Stock

6

Vietnam Fund

4 (VFMVF4) Vinafund 06GCN-UBCK 16122013

806 Stock

7

Vietcombank

Tactical

Balanced Fund

- VCBF

VCBF 07GCN-UBCK 24122013

60 Bond

8

Baoviet Equity

Dynamic

Open-ended

Fund

(BVFED)

BVF 08GCN-UBCK 812014

71

Stock

bond

9

Viet Capital

Balanced

Fund

(VCAMBF)

Bản Việt

Capital Offering since

1012014 Bond

10

Eastspring

Investments

Fund (ENF)

Eastspring

Investments

Offering since

24122013

Stock

Bond

40

Appendix 2

PERFORMANCE OF MB Capital Vietnam Bond Fund (as of July 2014)

Bond Holdings

Fund Activities

By the end of July NAV of MBBF increased by 082 compared to the same

period last month Thus in the first 7 months of the year NAV of the fund

increased by 606 with an annualize rate of 1038 The contribution for

positive return in this month were from realized and unrealized gains from term

deposits and interest payments

Fund Strategy

MBBF seeks to maximize total return while preserving investorrsquos principal by

investing in bonds and other debt instruments issued in Vietnam

The Fund will seek to achieve the Fundrsquos objective by investing in a diversified

portfolio of debt instruments including government bonds government-

guaranteed bonds bank-insured corporate bonds collateral-backed corporate

bonds corporate bonds certificates of deposit and cash deposit contracts

Source Military Bank (MB Bank)

41

Appendix 3

PERFORMANCE OF Vietnam Active Fund (VFMVFA) (as of July 2014)

Source Vinafund

Investment Objectives

The main objective of VFMVFA would be to capture

medium to long-term capital appreciation on

Vietnam market accompanied by capital

preservation during adverse market conditions based

on the main strategy of trend-following which is one

of Quantitative Investment method

42

Appendix 4

PERFORMANCE OF VIETNAM FUND 1 (VFMVF1) (as of July 2014)

Source Vinafund

Investment Objectives The objective of

VFMVF1 is to seek long-term earnings from

equity growth and income through investing into

a balanced and diversified portfolio including

equity convertible and debt securities in

Vietnam

43

Appendix 5

Performance of VCBF Tactical Balanced Fund (as of July 2014)

VCBF Factsheet

Performance of NAV

Source VCBF

44

Appendix 6

PERFORMANCE OF EASTSPRING INVESTMENTS FUND (ENF) (as of October 2014)

Source Eastspring Investments Vietnam

Eastspring Investments Vietnam Navigator Fund

(theldquoNavigator Fundrdquo or ldquoENFrdquo) is Mutual Fund

licensed by Vietnam State Securities Commission

under license No 09GCN-UBCK

(March 25th 2014)

Fund Manager Eastspring Investments Fund

Management Limited Liability Company

(ldquoEastspring Investments Vietnamrdquo)

45

Appendix 7

Reference Index PVN10

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

Full name PVN 10

PVN 10 index is designed to be a tradable index It

represents the largest and most liquid stocks on Ho Chi

Minh (HSX) and Hanoi (HNX) Stock Exchanges

Price or

Total Return Total return

UCITS IV

Compliant Yes

Constituent

numbers 10

Capping 15

INDEX COMPOSITION

Ticker Company Name Weight

PVD Petrovietnam Drilling amp Well Services Corporation 1831

GAS PetroVietnam Gas Joint Stock Corporation 1757

PVS PetroVietnam Technical Services Corporation 1478

DPM PetroVietnam Fertilizer and Chemicals Corporation 1379

PET Petrovietnam General Services Joint Stock

Corporation

766

PVX Petrovietnam Construction Joint Stock Corporation 681

PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

635

PVF Petrovietnam Finance Joint Stock Corporation 602

PVT Petrovietnam Transportation Corporation 561

PGS PetroVietNam Southern Gas Joint Stock Company 410

Qualification

criteria

Liquidity amp

Market cap

Composition

review Semester

Shares

review Quarterly

Free float

review Quarterly

Free float

banding 5 up

Base value 1000

Base date 2008-12-31

Historical

since 2008-12-31

Launching

date

382012

Internal code PVN10

Bloomberg PVN10TR

34

Table 61 Fund structures of Open-ended fund (Plan 1)

The name (expected) Petrovietnam Open-ended Growth Fund (PVGF)

Forms of funds Open-ended funds are established and operated under the

current law of Vietnam

Note Fund Certificates (FCs) are not listed on the Stock

Exchange but was acquired back by Fund Management

Company on the primary market

Fund size 50 billion VND (~ 5000000 fund certificates)

Investors Includes foreign and local investors both legal entities or

individuals

Fund Management

Company

PVFC Capital

Supervision Bank HSBC or Deutsche Bank

Investment

Objectives

The Fund aims to maximize profits for investors through

investments in oil and gas stocks that have high returns

Asset allocation - Up to 95 of the Net asset value of the Fund in a basket

of stocks in PVN-10 stocks the shares of the company

under the Vietnam Oil and Gas Group (PVN) that have

high liquidity solid fundamental numbers and attractive

dividend rate

- Up to 70 of net asset value of the Fund will invest in

securities which have a fixed interest rate (including

government bonds corporate bonds project bonds )

On the basis of the growth of PVN-10 Index and

assessment of market conditions the fund will determine

the proportion of assets in the portfolio to ensure

profitability and liquidity of funds

Investment

restrictions

- Cannot invest more than 10 of the net asset value of

the Fund in securities of one single issuing organization

- Cannot invest more than 30 of the net asset value of

the Fund in the total outstanding shares of one single

issuing organization

- The structure of the funds investments is permitted that

deviation shall not exceed fifteen percent (15) than the

prescribed regulation

Expected time of

fund establishment

Quarter 1 - 2 2015

622 Fund Raising Plan

With the objectives of fund as described above PVFC Capital determine that

investors will be the low-risk taker with the amount of cash and desire to invest

to achieve higher returns than bank interest rates which are very low during this

35

time (~ 7 year) At the same time they need to ensure capital adequacy with

interest rate target of about 8-10year

The investment objective of the fund is the same as the goal of using the charter

capital of the company Therefore PVFC Capital should contribute charter

capital as counterpart funds in the fund to give confidence to investors

Table 62 Fund Raising Plan of Open-ended fund (Plan 1)

Investors Capital raising Mobilization

target (VND

billion)

of

Fund

PVFC Capital The charter capital

as counterpart funds

10 20

PVcomBank The charter capital

as counterpart funds

5 10

The companies in the oil amp gas

sector within PVN Group such

as DPM PTSC PV Oil PVD

10 20

Foreign investors Idle cash 20 20 -

40

Mobilizing from individuals

- Individuals from PVFC

Capital

- Individuals from PVcomBank

(to ensure the adequate number

of more than 100 investors)

Idle cash

- around 30

individuals

- - around 70

individuals

5

10

TOTAL 50 100

63 Action Plan 2 Exchange Traded Fund

631 Fund Structure

In the current situation that capital raising is facing many difficulties due to the

fact that stock market implicit many risky factors PVFC Capital determine that

in the first phase of the fund establishment fund size will be in small scale of 50

billion VND which is the minimum fund size prescribed by the State Securities

Commission Once fund operates on the basis of fund effectiveness PVFC

Capital can increase the size of the fund

ETFs structured as follows

36

Table 63 Fund structures of Exchange Traded Fund (Plan 2)

The name (expected) PVFCC PVN-10 Index ETF

Abbreviation PVN-10 ETF Fund

Forms of funds Exchange traded fund (ETF) is established and

operated under the current law of Vietnam

Reference Index PVN-10 Index

Investment objectives Passive investment strategy simulation of PVN-10

index in order to achieve the Funds growth equivalent

to growth rate of the index

Portfolio Investments in shares in the portfolio of PVN-10

index In particular the portfolio will include 10

stocks in the PVN-10 index with structure and

proportion accordingly to ensure the specified

deviation

Fund size In the first stage at least 50 billion VND (~ 5000000

fund certificates)

In the capital raising stage after 6 months of

operation will increase its capital to 100 billion VND

Investors Foreign and local investors legal entitiesindividuals

Fund management

comapny

PVFC Capital

Fund establishing

members

- Petrovietnam Securities Incorporation (PSI)

- Custodian Bank

Supervison Bank HSBC or Deutsche Bank

Expected time of fund

establishment

Quater 1 2015

632 Capital Raising Plan

PVFC Capital determines that raising capital initially for the fund will require

counterpart funds from the charter capital of the PVFC Capital contributing

capital from PVcomBank PSI and companies within PVN Group PVcomBanks

participation as well as other unit of the group will create confidence and attract

the participation of other investors to raise additional capital in future for the

fund

Thus PVFC Capital plans fund raising for early stage as follows

37

Table 64 Fund Raising Plan of Exchange Traded Fund (Plan 2)

Investors Capital raising Mobilization

target (VND

billion)

of

Fund

PVFC Capital The charter capital

as counterpart funds

10 20

PVcomBank counterpart funds 5 10

PSI counterpart funds 5 - 10 10 -

20

The companies in the oil amp gas

sector within PVN Group such

as DPM PTSC PV Oil PVD

15 - 20 30 -

40

Foreign investors Idle cash 10 20

TOTAL 50 - 60 100

64 Recommendation

The establishment of a fund with small scale initially but increase fund size

after a duration of operation based on its efficiency In its early stage of

establishing funds counterpart funds from PVFC Capital and some strategic

investor is critical to create the basis for trust investors attracting the

participation of others

Therefore there are some recommendations that PVFC Capitallsquos

management board should consider

- Approved plans to establishing PVGF as discussed above with action plan

(how to do) in details

- Approved using the company lsquos chartered capital to contribute to the

PVGF

- Recommend shareholders (SOVICO Group PVcomBank) support fund

establishment particularly

Report to PVcomBank (mother-company of PVFC Capital) the

proposal of contributing capital plan and support PVFC Capital

approach and working with subsidiaries affiliates partners of

PVcomBank to raise more capital

Recommend to SOVICO Group and HD Bank (within the

SOVICO Group and same owners) and other companies within

SOVICO network participating in the fund raising process

The responsibility of the PVFC Capital executives in managing a new open-

ended fund (PVGF) would be guided by an articulated set of criteria The specific

steps of the investment process of PVGF would be carefully constructed to

ensure PVGF investment activities comply with current laws and investment

management agreement

38

Table 65 Process of investment management control and coordinate

Activities Performer

Step 1

PVFC Capital Board of

Fund Representatives

Step 2

Board of Fund

Representatives

Step 3

Board of Fund

Representatives

Step 4

Board of Fund

Representatives

Step 5

Board of Fund

Representatives

Source PVFC Capital Step 1 Propose investment

- Based on the market assessment or on the recommendation of members from

Board of Fund Representatives PVFC Capital will make investment proposals to

the Board for approval

- Proposal must outline clearly the investment opportunities volume price range

duration

Step 2 Investment approval

Within 3 working days the Board of Fund Representatives resubmit results of

investment approval to PVFC Capital

Step 3 Implement the Investment

PVFC Capital is responsible for distributing the necessary resources and

coordinate with relevant parties such as custodian banks securities companies

brokers to implement investment proposals which was approved

Step 4 Tracking Portfolio

PVFC Capital is responsible for monitoring the investments in the PVGFs

portfolio update the information related to investments and investment

companies If there is positive or negative news about the market PVFC Capital

shall report immediately to the investor to restructure the portfolio or close

investment status and wait for new signals

Step 5 Report and after-investment management

PVFC Capital shall periodically report (monthlyquarterlyyearly) on the active

status of management portfolio and evaluate the effectiveness of the portfolio to

the Board of Fund Representatives Since then PVFC Capital proposes to adjust

the portfolio (if necessary) to achieve investment objectives of the fund

The prospect of the PVGF will come from the commitment of the whole team

from the top of Management Board to every Department staff With the favorable

external factors such as the improved economy and prospective business

environment particularly in the capital market the challenges could be overcome

to achieve the companylsquos mission

Propose investment Investment approval

Implement the Investment

Tracking Portfolio Investment

Periodic reports Portfolio Investment

Ask for additional information (if necessary)

39

Appendix 1

List of Open-end Fund in Vietnam (as of July 2014)

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

No

Fund Name Fund

Manager License

Establish

ment

Scale

(bil

VND)

Invest

ment

Obj

1

MB Capital

Vietnam Bond

Fund

MB

Capital 01GCN-UBCK 1332013

54 Bond

2

VinaWealth

Enhanced

Fixed Income

Fund

Vinawealth 02GCN-UBCK 142013

54 Bond

3

Vietnam

Active Fund

(VFMVFA)

Vinafund 03GCN-UBCK 1842013

240 Stock

4

Vietnam Fund

Bond (VFB) Vinafund 04GCN-UBCK 2452013

100 Bond

5

Vietnam Fund

1 (VFMVF1) Vinafund 05GCN-UBCK 8102013 1000 Stock

6

Vietnam Fund

4 (VFMVF4) Vinafund 06GCN-UBCK 16122013

806 Stock

7

Vietcombank

Tactical

Balanced Fund

- VCBF

VCBF 07GCN-UBCK 24122013

60 Bond

8

Baoviet Equity

Dynamic

Open-ended

Fund

(BVFED)

BVF 08GCN-UBCK 812014

71

Stock

bond

9

Viet Capital

Balanced

Fund

(VCAMBF)

Bản Việt

Capital Offering since

1012014 Bond

10

Eastspring

Investments

Fund (ENF)

Eastspring

Investments

Offering since

24122013

Stock

Bond

40

Appendix 2

PERFORMANCE OF MB Capital Vietnam Bond Fund (as of July 2014)

Bond Holdings

Fund Activities

By the end of July NAV of MBBF increased by 082 compared to the same

period last month Thus in the first 7 months of the year NAV of the fund

increased by 606 with an annualize rate of 1038 The contribution for

positive return in this month were from realized and unrealized gains from term

deposits and interest payments

Fund Strategy

MBBF seeks to maximize total return while preserving investorrsquos principal by

investing in bonds and other debt instruments issued in Vietnam

The Fund will seek to achieve the Fundrsquos objective by investing in a diversified

portfolio of debt instruments including government bonds government-

guaranteed bonds bank-insured corporate bonds collateral-backed corporate

bonds corporate bonds certificates of deposit and cash deposit contracts

Source Military Bank (MB Bank)

41

Appendix 3

PERFORMANCE OF Vietnam Active Fund (VFMVFA) (as of July 2014)

Source Vinafund

Investment Objectives

The main objective of VFMVFA would be to capture

medium to long-term capital appreciation on

Vietnam market accompanied by capital

preservation during adverse market conditions based

on the main strategy of trend-following which is one

of Quantitative Investment method

42

Appendix 4

PERFORMANCE OF VIETNAM FUND 1 (VFMVF1) (as of July 2014)

Source Vinafund

Investment Objectives The objective of

VFMVF1 is to seek long-term earnings from

equity growth and income through investing into

a balanced and diversified portfolio including

equity convertible and debt securities in

Vietnam

43

Appendix 5

Performance of VCBF Tactical Balanced Fund (as of July 2014)

VCBF Factsheet

Performance of NAV

Source VCBF

44

Appendix 6

PERFORMANCE OF EASTSPRING INVESTMENTS FUND (ENF) (as of October 2014)

Source Eastspring Investments Vietnam

Eastspring Investments Vietnam Navigator Fund

(theldquoNavigator Fundrdquo or ldquoENFrdquo) is Mutual Fund

licensed by Vietnam State Securities Commission

under license No 09GCN-UBCK

(March 25th 2014)

Fund Manager Eastspring Investments Fund

Management Limited Liability Company

(ldquoEastspring Investments Vietnamrdquo)

45

Appendix 7

Reference Index PVN10

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

Full name PVN 10

PVN 10 index is designed to be a tradable index It

represents the largest and most liquid stocks on Ho Chi

Minh (HSX) and Hanoi (HNX) Stock Exchanges

Price or

Total Return Total return

UCITS IV

Compliant Yes

Constituent

numbers 10

Capping 15

INDEX COMPOSITION

Ticker Company Name Weight

PVD Petrovietnam Drilling amp Well Services Corporation 1831

GAS PetroVietnam Gas Joint Stock Corporation 1757

PVS PetroVietnam Technical Services Corporation 1478

DPM PetroVietnam Fertilizer and Chemicals Corporation 1379

PET Petrovietnam General Services Joint Stock

Corporation

766

PVX Petrovietnam Construction Joint Stock Corporation 681

PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

635

PVF Petrovietnam Finance Joint Stock Corporation 602

PVT Petrovietnam Transportation Corporation 561

PGS PetroVietNam Southern Gas Joint Stock Company 410

Qualification

criteria

Liquidity amp

Market cap

Composition

review Semester

Shares

review Quarterly

Free float

review Quarterly

Free float

banding 5 up

Base value 1000

Base date 2008-12-31

Historical

since 2008-12-31

Launching

date

382012

Internal code PVN10

Bloomberg PVN10TR

35

time (~ 7 year) At the same time they need to ensure capital adequacy with

interest rate target of about 8-10year

The investment objective of the fund is the same as the goal of using the charter

capital of the company Therefore PVFC Capital should contribute charter

capital as counterpart funds in the fund to give confidence to investors

Table 62 Fund Raising Plan of Open-ended fund (Plan 1)

Investors Capital raising Mobilization

target (VND

billion)

of

Fund

PVFC Capital The charter capital

as counterpart funds

10 20

PVcomBank The charter capital

as counterpart funds

5 10

The companies in the oil amp gas

sector within PVN Group such

as DPM PTSC PV Oil PVD

10 20

Foreign investors Idle cash 20 20 -

40

Mobilizing from individuals

- Individuals from PVFC

Capital

- Individuals from PVcomBank

(to ensure the adequate number

of more than 100 investors)

Idle cash

- around 30

individuals

- - around 70

individuals

5

10

TOTAL 50 100

63 Action Plan 2 Exchange Traded Fund

631 Fund Structure

In the current situation that capital raising is facing many difficulties due to the

fact that stock market implicit many risky factors PVFC Capital determine that

in the first phase of the fund establishment fund size will be in small scale of 50

billion VND which is the minimum fund size prescribed by the State Securities

Commission Once fund operates on the basis of fund effectiveness PVFC

Capital can increase the size of the fund

ETFs structured as follows

36

Table 63 Fund structures of Exchange Traded Fund (Plan 2)

The name (expected) PVFCC PVN-10 Index ETF

Abbreviation PVN-10 ETF Fund

Forms of funds Exchange traded fund (ETF) is established and

operated under the current law of Vietnam

Reference Index PVN-10 Index

Investment objectives Passive investment strategy simulation of PVN-10

index in order to achieve the Funds growth equivalent

to growth rate of the index

Portfolio Investments in shares in the portfolio of PVN-10

index In particular the portfolio will include 10

stocks in the PVN-10 index with structure and

proportion accordingly to ensure the specified

deviation

Fund size In the first stage at least 50 billion VND (~ 5000000

fund certificates)

In the capital raising stage after 6 months of

operation will increase its capital to 100 billion VND

Investors Foreign and local investors legal entitiesindividuals

Fund management

comapny

PVFC Capital

Fund establishing

members

- Petrovietnam Securities Incorporation (PSI)

- Custodian Bank

Supervison Bank HSBC or Deutsche Bank

Expected time of fund

establishment

Quater 1 2015

632 Capital Raising Plan

PVFC Capital determines that raising capital initially for the fund will require

counterpart funds from the charter capital of the PVFC Capital contributing

capital from PVcomBank PSI and companies within PVN Group PVcomBanks

participation as well as other unit of the group will create confidence and attract

the participation of other investors to raise additional capital in future for the

fund

Thus PVFC Capital plans fund raising for early stage as follows

37

Table 64 Fund Raising Plan of Exchange Traded Fund (Plan 2)

Investors Capital raising Mobilization

target (VND

billion)

of

Fund

PVFC Capital The charter capital

as counterpart funds

10 20

PVcomBank counterpart funds 5 10

PSI counterpart funds 5 - 10 10 -

20

The companies in the oil amp gas

sector within PVN Group such

as DPM PTSC PV Oil PVD

15 - 20 30 -

40

Foreign investors Idle cash 10 20

TOTAL 50 - 60 100

64 Recommendation

The establishment of a fund with small scale initially but increase fund size

after a duration of operation based on its efficiency In its early stage of

establishing funds counterpart funds from PVFC Capital and some strategic

investor is critical to create the basis for trust investors attracting the

participation of others

Therefore there are some recommendations that PVFC Capitallsquos

management board should consider

- Approved plans to establishing PVGF as discussed above with action plan

(how to do) in details

- Approved using the company lsquos chartered capital to contribute to the

PVGF

- Recommend shareholders (SOVICO Group PVcomBank) support fund

establishment particularly

Report to PVcomBank (mother-company of PVFC Capital) the

proposal of contributing capital plan and support PVFC Capital

approach and working with subsidiaries affiliates partners of

PVcomBank to raise more capital

Recommend to SOVICO Group and HD Bank (within the

SOVICO Group and same owners) and other companies within

SOVICO network participating in the fund raising process

The responsibility of the PVFC Capital executives in managing a new open-

ended fund (PVGF) would be guided by an articulated set of criteria The specific

steps of the investment process of PVGF would be carefully constructed to

ensure PVGF investment activities comply with current laws and investment

management agreement

38

Table 65 Process of investment management control and coordinate

Activities Performer

Step 1

PVFC Capital Board of

Fund Representatives

Step 2

Board of Fund

Representatives

Step 3

Board of Fund

Representatives

Step 4

Board of Fund

Representatives

Step 5

Board of Fund

Representatives

Source PVFC Capital Step 1 Propose investment

- Based on the market assessment or on the recommendation of members from

Board of Fund Representatives PVFC Capital will make investment proposals to

the Board for approval

- Proposal must outline clearly the investment opportunities volume price range

duration

Step 2 Investment approval

Within 3 working days the Board of Fund Representatives resubmit results of

investment approval to PVFC Capital

Step 3 Implement the Investment

PVFC Capital is responsible for distributing the necessary resources and

coordinate with relevant parties such as custodian banks securities companies

brokers to implement investment proposals which was approved

Step 4 Tracking Portfolio

PVFC Capital is responsible for monitoring the investments in the PVGFs

portfolio update the information related to investments and investment

companies If there is positive or negative news about the market PVFC Capital

shall report immediately to the investor to restructure the portfolio or close

investment status and wait for new signals

Step 5 Report and after-investment management

PVFC Capital shall periodically report (monthlyquarterlyyearly) on the active

status of management portfolio and evaluate the effectiveness of the portfolio to

the Board of Fund Representatives Since then PVFC Capital proposes to adjust

the portfolio (if necessary) to achieve investment objectives of the fund

The prospect of the PVGF will come from the commitment of the whole team

from the top of Management Board to every Department staff With the favorable

external factors such as the improved economy and prospective business

environment particularly in the capital market the challenges could be overcome

to achieve the companylsquos mission

Propose investment Investment approval

Implement the Investment

Tracking Portfolio Investment

Periodic reports Portfolio Investment

Ask for additional information (if necessary)

39

Appendix 1

List of Open-end Fund in Vietnam (as of July 2014)

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

No

Fund Name Fund

Manager License

Establish

ment

Scale

(bil

VND)

Invest

ment

Obj

1

MB Capital

Vietnam Bond

Fund

MB

Capital 01GCN-UBCK 1332013

54 Bond

2

VinaWealth

Enhanced

Fixed Income

Fund

Vinawealth 02GCN-UBCK 142013

54 Bond

3

Vietnam

Active Fund

(VFMVFA)

Vinafund 03GCN-UBCK 1842013

240 Stock

4

Vietnam Fund

Bond (VFB) Vinafund 04GCN-UBCK 2452013

100 Bond

5

Vietnam Fund

1 (VFMVF1) Vinafund 05GCN-UBCK 8102013 1000 Stock

6

Vietnam Fund

4 (VFMVF4) Vinafund 06GCN-UBCK 16122013

806 Stock

7

Vietcombank

Tactical

Balanced Fund

- VCBF

VCBF 07GCN-UBCK 24122013

60 Bond

8

Baoviet Equity

Dynamic

Open-ended

Fund

(BVFED)

BVF 08GCN-UBCK 812014

71

Stock

bond

9

Viet Capital

Balanced

Fund

(VCAMBF)

Bản Việt

Capital Offering since

1012014 Bond

10

Eastspring

Investments

Fund (ENF)

Eastspring

Investments

Offering since

24122013

Stock

Bond

40

Appendix 2

PERFORMANCE OF MB Capital Vietnam Bond Fund (as of July 2014)

Bond Holdings

Fund Activities

By the end of July NAV of MBBF increased by 082 compared to the same

period last month Thus in the first 7 months of the year NAV of the fund

increased by 606 with an annualize rate of 1038 The contribution for

positive return in this month were from realized and unrealized gains from term

deposits and interest payments

Fund Strategy

MBBF seeks to maximize total return while preserving investorrsquos principal by

investing in bonds and other debt instruments issued in Vietnam

The Fund will seek to achieve the Fundrsquos objective by investing in a diversified

portfolio of debt instruments including government bonds government-

guaranteed bonds bank-insured corporate bonds collateral-backed corporate

bonds corporate bonds certificates of deposit and cash deposit contracts

Source Military Bank (MB Bank)

41

Appendix 3

PERFORMANCE OF Vietnam Active Fund (VFMVFA) (as of July 2014)

Source Vinafund

Investment Objectives

The main objective of VFMVFA would be to capture

medium to long-term capital appreciation on

Vietnam market accompanied by capital

preservation during adverse market conditions based

on the main strategy of trend-following which is one

of Quantitative Investment method

42

Appendix 4

PERFORMANCE OF VIETNAM FUND 1 (VFMVF1) (as of July 2014)

Source Vinafund

Investment Objectives The objective of

VFMVF1 is to seek long-term earnings from

equity growth and income through investing into

a balanced and diversified portfolio including

equity convertible and debt securities in

Vietnam

43

Appendix 5

Performance of VCBF Tactical Balanced Fund (as of July 2014)

VCBF Factsheet

Performance of NAV

Source VCBF

44

Appendix 6

PERFORMANCE OF EASTSPRING INVESTMENTS FUND (ENF) (as of October 2014)

Source Eastspring Investments Vietnam

Eastspring Investments Vietnam Navigator Fund

(theldquoNavigator Fundrdquo or ldquoENFrdquo) is Mutual Fund

licensed by Vietnam State Securities Commission

under license No 09GCN-UBCK

(March 25th 2014)

Fund Manager Eastspring Investments Fund

Management Limited Liability Company

(ldquoEastspring Investments Vietnamrdquo)

45

Appendix 7

Reference Index PVN10

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

Full name PVN 10

PVN 10 index is designed to be a tradable index It

represents the largest and most liquid stocks on Ho Chi

Minh (HSX) and Hanoi (HNX) Stock Exchanges

Price or

Total Return Total return

UCITS IV

Compliant Yes

Constituent

numbers 10

Capping 15

INDEX COMPOSITION

Ticker Company Name Weight

PVD Petrovietnam Drilling amp Well Services Corporation 1831

GAS PetroVietnam Gas Joint Stock Corporation 1757

PVS PetroVietnam Technical Services Corporation 1478

DPM PetroVietnam Fertilizer and Chemicals Corporation 1379

PET Petrovietnam General Services Joint Stock

Corporation

766

PVX Petrovietnam Construction Joint Stock Corporation 681

PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

635

PVF Petrovietnam Finance Joint Stock Corporation 602

PVT Petrovietnam Transportation Corporation 561

PGS PetroVietNam Southern Gas Joint Stock Company 410

Qualification

criteria

Liquidity amp

Market cap

Composition

review Semester

Shares

review Quarterly

Free float

review Quarterly

Free float

banding 5 up

Base value 1000

Base date 2008-12-31

Historical

since 2008-12-31

Launching

date

382012

Internal code PVN10

Bloomberg PVN10TR

36

Table 63 Fund structures of Exchange Traded Fund (Plan 2)

The name (expected) PVFCC PVN-10 Index ETF

Abbreviation PVN-10 ETF Fund

Forms of funds Exchange traded fund (ETF) is established and

operated under the current law of Vietnam

Reference Index PVN-10 Index

Investment objectives Passive investment strategy simulation of PVN-10

index in order to achieve the Funds growth equivalent

to growth rate of the index

Portfolio Investments in shares in the portfolio of PVN-10

index In particular the portfolio will include 10

stocks in the PVN-10 index with structure and

proportion accordingly to ensure the specified

deviation

Fund size In the first stage at least 50 billion VND (~ 5000000

fund certificates)

In the capital raising stage after 6 months of

operation will increase its capital to 100 billion VND

Investors Foreign and local investors legal entitiesindividuals

Fund management

comapny

PVFC Capital

Fund establishing

members

- Petrovietnam Securities Incorporation (PSI)

- Custodian Bank

Supervison Bank HSBC or Deutsche Bank

Expected time of fund

establishment

Quater 1 2015

632 Capital Raising Plan

PVFC Capital determines that raising capital initially for the fund will require

counterpart funds from the charter capital of the PVFC Capital contributing

capital from PVcomBank PSI and companies within PVN Group PVcomBanks

participation as well as other unit of the group will create confidence and attract

the participation of other investors to raise additional capital in future for the

fund

Thus PVFC Capital plans fund raising for early stage as follows

37

Table 64 Fund Raising Plan of Exchange Traded Fund (Plan 2)

Investors Capital raising Mobilization

target (VND

billion)

of

Fund

PVFC Capital The charter capital

as counterpart funds

10 20

PVcomBank counterpart funds 5 10

PSI counterpart funds 5 - 10 10 -

20

The companies in the oil amp gas

sector within PVN Group such

as DPM PTSC PV Oil PVD

15 - 20 30 -

40

Foreign investors Idle cash 10 20

TOTAL 50 - 60 100

64 Recommendation

The establishment of a fund with small scale initially but increase fund size

after a duration of operation based on its efficiency In its early stage of

establishing funds counterpart funds from PVFC Capital and some strategic

investor is critical to create the basis for trust investors attracting the

participation of others

Therefore there are some recommendations that PVFC Capitallsquos

management board should consider

- Approved plans to establishing PVGF as discussed above with action plan

(how to do) in details

- Approved using the company lsquos chartered capital to contribute to the

PVGF

- Recommend shareholders (SOVICO Group PVcomBank) support fund

establishment particularly

Report to PVcomBank (mother-company of PVFC Capital) the

proposal of contributing capital plan and support PVFC Capital

approach and working with subsidiaries affiliates partners of

PVcomBank to raise more capital

Recommend to SOVICO Group and HD Bank (within the

SOVICO Group and same owners) and other companies within

SOVICO network participating in the fund raising process

The responsibility of the PVFC Capital executives in managing a new open-

ended fund (PVGF) would be guided by an articulated set of criteria The specific

steps of the investment process of PVGF would be carefully constructed to

ensure PVGF investment activities comply with current laws and investment

management agreement

38

Table 65 Process of investment management control and coordinate

Activities Performer

Step 1

PVFC Capital Board of

Fund Representatives

Step 2

Board of Fund

Representatives

Step 3

Board of Fund

Representatives

Step 4

Board of Fund

Representatives

Step 5

Board of Fund

Representatives

Source PVFC Capital Step 1 Propose investment

- Based on the market assessment or on the recommendation of members from

Board of Fund Representatives PVFC Capital will make investment proposals to

the Board for approval

- Proposal must outline clearly the investment opportunities volume price range

duration

Step 2 Investment approval

Within 3 working days the Board of Fund Representatives resubmit results of

investment approval to PVFC Capital

Step 3 Implement the Investment

PVFC Capital is responsible for distributing the necessary resources and

coordinate with relevant parties such as custodian banks securities companies

brokers to implement investment proposals which was approved

Step 4 Tracking Portfolio

PVFC Capital is responsible for monitoring the investments in the PVGFs

portfolio update the information related to investments and investment

companies If there is positive or negative news about the market PVFC Capital

shall report immediately to the investor to restructure the portfolio or close

investment status and wait for new signals

Step 5 Report and after-investment management

PVFC Capital shall periodically report (monthlyquarterlyyearly) on the active

status of management portfolio and evaluate the effectiveness of the portfolio to

the Board of Fund Representatives Since then PVFC Capital proposes to adjust

the portfolio (if necessary) to achieve investment objectives of the fund

The prospect of the PVGF will come from the commitment of the whole team

from the top of Management Board to every Department staff With the favorable

external factors such as the improved economy and prospective business

environment particularly in the capital market the challenges could be overcome

to achieve the companylsquos mission

Propose investment Investment approval

Implement the Investment

Tracking Portfolio Investment

Periodic reports Portfolio Investment

Ask for additional information (if necessary)

39

Appendix 1

List of Open-end Fund in Vietnam (as of July 2014)

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

No

Fund Name Fund

Manager License

Establish

ment

Scale

(bil

VND)

Invest

ment

Obj

1

MB Capital

Vietnam Bond

Fund

MB

Capital 01GCN-UBCK 1332013

54 Bond

2

VinaWealth

Enhanced

Fixed Income

Fund

Vinawealth 02GCN-UBCK 142013

54 Bond

3

Vietnam

Active Fund

(VFMVFA)

Vinafund 03GCN-UBCK 1842013

240 Stock

4

Vietnam Fund

Bond (VFB) Vinafund 04GCN-UBCK 2452013

100 Bond

5

Vietnam Fund

1 (VFMVF1) Vinafund 05GCN-UBCK 8102013 1000 Stock

6

Vietnam Fund

4 (VFMVF4) Vinafund 06GCN-UBCK 16122013

806 Stock

7

Vietcombank

Tactical

Balanced Fund

- VCBF

VCBF 07GCN-UBCK 24122013

60 Bond

8

Baoviet Equity

Dynamic

Open-ended

Fund

(BVFED)

BVF 08GCN-UBCK 812014

71

Stock

bond

9

Viet Capital

Balanced

Fund

(VCAMBF)

Bản Việt

Capital Offering since

1012014 Bond

10

Eastspring

Investments

Fund (ENF)

Eastspring

Investments

Offering since

24122013

Stock

Bond

40

Appendix 2

PERFORMANCE OF MB Capital Vietnam Bond Fund (as of July 2014)

Bond Holdings

Fund Activities

By the end of July NAV of MBBF increased by 082 compared to the same

period last month Thus in the first 7 months of the year NAV of the fund

increased by 606 with an annualize rate of 1038 The contribution for

positive return in this month were from realized and unrealized gains from term

deposits and interest payments

Fund Strategy

MBBF seeks to maximize total return while preserving investorrsquos principal by

investing in bonds and other debt instruments issued in Vietnam

The Fund will seek to achieve the Fundrsquos objective by investing in a diversified

portfolio of debt instruments including government bonds government-

guaranteed bonds bank-insured corporate bonds collateral-backed corporate

bonds corporate bonds certificates of deposit and cash deposit contracts

Source Military Bank (MB Bank)

41

Appendix 3

PERFORMANCE OF Vietnam Active Fund (VFMVFA) (as of July 2014)

Source Vinafund

Investment Objectives

The main objective of VFMVFA would be to capture

medium to long-term capital appreciation on

Vietnam market accompanied by capital

preservation during adverse market conditions based

on the main strategy of trend-following which is one

of Quantitative Investment method

42

Appendix 4

PERFORMANCE OF VIETNAM FUND 1 (VFMVF1) (as of July 2014)

Source Vinafund

Investment Objectives The objective of

VFMVF1 is to seek long-term earnings from

equity growth and income through investing into

a balanced and diversified portfolio including

equity convertible and debt securities in

Vietnam

43

Appendix 5

Performance of VCBF Tactical Balanced Fund (as of July 2014)

VCBF Factsheet

Performance of NAV

Source VCBF

44

Appendix 6

PERFORMANCE OF EASTSPRING INVESTMENTS FUND (ENF) (as of October 2014)

Source Eastspring Investments Vietnam

Eastspring Investments Vietnam Navigator Fund

(theldquoNavigator Fundrdquo or ldquoENFrdquo) is Mutual Fund

licensed by Vietnam State Securities Commission

under license No 09GCN-UBCK

(March 25th 2014)

Fund Manager Eastspring Investments Fund

Management Limited Liability Company

(ldquoEastspring Investments Vietnamrdquo)

45

Appendix 7

Reference Index PVN10

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

Full name PVN 10

PVN 10 index is designed to be a tradable index It

represents the largest and most liquid stocks on Ho Chi

Minh (HSX) and Hanoi (HNX) Stock Exchanges

Price or

Total Return Total return

UCITS IV

Compliant Yes

Constituent

numbers 10

Capping 15

INDEX COMPOSITION

Ticker Company Name Weight

PVD Petrovietnam Drilling amp Well Services Corporation 1831

GAS PetroVietnam Gas Joint Stock Corporation 1757

PVS PetroVietnam Technical Services Corporation 1478

DPM PetroVietnam Fertilizer and Chemicals Corporation 1379

PET Petrovietnam General Services Joint Stock

Corporation

766

PVX Petrovietnam Construction Joint Stock Corporation 681

PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

635

PVF Petrovietnam Finance Joint Stock Corporation 602

PVT Petrovietnam Transportation Corporation 561

PGS PetroVietNam Southern Gas Joint Stock Company 410

Qualification

criteria

Liquidity amp

Market cap

Composition

review Semester

Shares

review Quarterly

Free float

review Quarterly

Free float

banding 5 up

Base value 1000

Base date 2008-12-31

Historical

since 2008-12-31

Launching

date

382012

Internal code PVN10

Bloomberg PVN10TR

37

Table 64 Fund Raising Plan of Exchange Traded Fund (Plan 2)

Investors Capital raising Mobilization

target (VND

billion)

of

Fund

PVFC Capital The charter capital

as counterpart funds

10 20

PVcomBank counterpart funds 5 10

PSI counterpart funds 5 - 10 10 -

20

The companies in the oil amp gas

sector within PVN Group such

as DPM PTSC PV Oil PVD

15 - 20 30 -

40

Foreign investors Idle cash 10 20

TOTAL 50 - 60 100

64 Recommendation

The establishment of a fund with small scale initially but increase fund size

after a duration of operation based on its efficiency In its early stage of

establishing funds counterpart funds from PVFC Capital and some strategic

investor is critical to create the basis for trust investors attracting the

participation of others

Therefore there are some recommendations that PVFC Capitallsquos

management board should consider

- Approved plans to establishing PVGF as discussed above with action plan

(how to do) in details

- Approved using the company lsquos chartered capital to contribute to the

PVGF

- Recommend shareholders (SOVICO Group PVcomBank) support fund

establishment particularly

Report to PVcomBank (mother-company of PVFC Capital) the

proposal of contributing capital plan and support PVFC Capital

approach and working with subsidiaries affiliates partners of

PVcomBank to raise more capital

Recommend to SOVICO Group and HD Bank (within the

SOVICO Group and same owners) and other companies within

SOVICO network participating in the fund raising process

The responsibility of the PVFC Capital executives in managing a new open-

ended fund (PVGF) would be guided by an articulated set of criteria The specific

steps of the investment process of PVGF would be carefully constructed to

ensure PVGF investment activities comply with current laws and investment

management agreement

38

Table 65 Process of investment management control and coordinate

Activities Performer

Step 1

PVFC Capital Board of

Fund Representatives

Step 2

Board of Fund

Representatives

Step 3

Board of Fund

Representatives

Step 4

Board of Fund

Representatives

Step 5

Board of Fund

Representatives

Source PVFC Capital Step 1 Propose investment

- Based on the market assessment or on the recommendation of members from

Board of Fund Representatives PVFC Capital will make investment proposals to

the Board for approval

- Proposal must outline clearly the investment opportunities volume price range

duration

Step 2 Investment approval

Within 3 working days the Board of Fund Representatives resubmit results of

investment approval to PVFC Capital

Step 3 Implement the Investment

PVFC Capital is responsible for distributing the necessary resources and

coordinate with relevant parties such as custodian banks securities companies

brokers to implement investment proposals which was approved

Step 4 Tracking Portfolio

PVFC Capital is responsible for monitoring the investments in the PVGFs

portfolio update the information related to investments and investment

companies If there is positive or negative news about the market PVFC Capital

shall report immediately to the investor to restructure the portfolio or close

investment status and wait for new signals

Step 5 Report and after-investment management

PVFC Capital shall periodically report (monthlyquarterlyyearly) on the active

status of management portfolio and evaluate the effectiveness of the portfolio to

the Board of Fund Representatives Since then PVFC Capital proposes to adjust

the portfolio (if necessary) to achieve investment objectives of the fund

The prospect of the PVGF will come from the commitment of the whole team

from the top of Management Board to every Department staff With the favorable

external factors such as the improved economy and prospective business

environment particularly in the capital market the challenges could be overcome

to achieve the companylsquos mission

Propose investment Investment approval

Implement the Investment

Tracking Portfolio Investment

Periodic reports Portfolio Investment

Ask for additional information (if necessary)

39

Appendix 1

List of Open-end Fund in Vietnam (as of July 2014)

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

No

Fund Name Fund

Manager License

Establish

ment

Scale

(bil

VND)

Invest

ment

Obj

1

MB Capital

Vietnam Bond

Fund

MB

Capital 01GCN-UBCK 1332013

54 Bond

2

VinaWealth

Enhanced

Fixed Income

Fund

Vinawealth 02GCN-UBCK 142013

54 Bond

3

Vietnam

Active Fund

(VFMVFA)

Vinafund 03GCN-UBCK 1842013

240 Stock

4

Vietnam Fund

Bond (VFB) Vinafund 04GCN-UBCK 2452013

100 Bond

5

Vietnam Fund

1 (VFMVF1) Vinafund 05GCN-UBCK 8102013 1000 Stock

6

Vietnam Fund

4 (VFMVF4) Vinafund 06GCN-UBCK 16122013

806 Stock

7

Vietcombank

Tactical

Balanced Fund

- VCBF

VCBF 07GCN-UBCK 24122013

60 Bond

8

Baoviet Equity

Dynamic

Open-ended

Fund

(BVFED)

BVF 08GCN-UBCK 812014

71

Stock

bond

9

Viet Capital

Balanced

Fund

(VCAMBF)

Bản Việt

Capital Offering since

1012014 Bond

10

Eastspring

Investments

Fund (ENF)

Eastspring

Investments

Offering since

24122013

Stock

Bond

40

Appendix 2

PERFORMANCE OF MB Capital Vietnam Bond Fund (as of July 2014)

Bond Holdings

Fund Activities

By the end of July NAV of MBBF increased by 082 compared to the same

period last month Thus in the first 7 months of the year NAV of the fund

increased by 606 with an annualize rate of 1038 The contribution for

positive return in this month were from realized and unrealized gains from term

deposits and interest payments

Fund Strategy

MBBF seeks to maximize total return while preserving investorrsquos principal by

investing in bonds and other debt instruments issued in Vietnam

The Fund will seek to achieve the Fundrsquos objective by investing in a diversified

portfolio of debt instruments including government bonds government-

guaranteed bonds bank-insured corporate bonds collateral-backed corporate

bonds corporate bonds certificates of deposit and cash deposit contracts

Source Military Bank (MB Bank)

41

Appendix 3

PERFORMANCE OF Vietnam Active Fund (VFMVFA) (as of July 2014)

Source Vinafund

Investment Objectives

The main objective of VFMVFA would be to capture

medium to long-term capital appreciation on

Vietnam market accompanied by capital

preservation during adverse market conditions based

on the main strategy of trend-following which is one

of Quantitative Investment method

42

Appendix 4

PERFORMANCE OF VIETNAM FUND 1 (VFMVF1) (as of July 2014)

Source Vinafund

Investment Objectives The objective of

VFMVF1 is to seek long-term earnings from

equity growth and income through investing into

a balanced and diversified portfolio including

equity convertible and debt securities in

Vietnam

43

Appendix 5

Performance of VCBF Tactical Balanced Fund (as of July 2014)

VCBF Factsheet

Performance of NAV

Source VCBF

44

Appendix 6

PERFORMANCE OF EASTSPRING INVESTMENTS FUND (ENF) (as of October 2014)

Source Eastspring Investments Vietnam

Eastspring Investments Vietnam Navigator Fund

(theldquoNavigator Fundrdquo or ldquoENFrdquo) is Mutual Fund

licensed by Vietnam State Securities Commission

under license No 09GCN-UBCK

(March 25th 2014)

Fund Manager Eastspring Investments Fund

Management Limited Liability Company

(ldquoEastspring Investments Vietnamrdquo)

45

Appendix 7

Reference Index PVN10

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

Full name PVN 10

PVN 10 index is designed to be a tradable index It

represents the largest and most liquid stocks on Ho Chi

Minh (HSX) and Hanoi (HNX) Stock Exchanges

Price or

Total Return Total return

UCITS IV

Compliant Yes

Constituent

numbers 10

Capping 15

INDEX COMPOSITION

Ticker Company Name Weight

PVD Petrovietnam Drilling amp Well Services Corporation 1831

GAS PetroVietnam Gas Joint Stock Corporation 1757

PVS PetroVietnam Technical Services Corporation 1478

DPM PetroVietnam Fertilizer and Chemicals Corporation 1379

PET Petrovietnam General Services Joint Stock

Corporation

766

PVX Petrovietnam Construction Joint Stock Corporation 681

PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

635

PVF Petrovietnam Finance Joint Stock Corporation 602

PVT Petrovietnam Transportation Corporation 561

PGS PetroVietNam Southern Gas Joint Stock Company 410

Qualification

criteria

Liquidity amp

Market cap

Composition

review Semester

Shares

review Quarterly

Free float

review Quarterly

Free float

banding 5 up

Base value 1000

Base date 2008-12-31

Historical

since 2008-12-31

Launching

date

382012

Internal code PVN10

Bloomberg PVN10TR

38

Table 65 Process of investment management control and coordinate

Activities Performer

Step 1

PVFC Capital Board of

Fund Representatives

Step 2

Board of Fund

Representatives

Step 3

Board of Fund

Representatives

Step 4

Board of Fund

Representatives

Step 5

Board of Fund

Representatives

Source PVFC Capital Step 1 Propose investment

- Based on the market assessment or on the recommendation of members from

Board of Fund Representatives PVFC Capital will make investment proposals to

the Board for approval

- Proposal must outline clearly the investment opportunities volume price range

duration

Step 2 Investment approval

Within 3 working days the Board of Fund Representatives resubmit results of

investment approval to PVFC Capital

Step 3 Implement the Investment

PVFC Capital is responsible for distributing the necessary resources and

coordinate with relevant parties such as custodian banks securities companies

brokers to implement investment proposals which was approved

Step 4 Tracking Portfolio

PVFC Capital is responsible for monitoring the investments in the PVGFs

portfolio update the information related to investments and investment

companies If there is positive or negative news about the market PVFC Capital

shall report immediately to the investor to restructure the portfolio or close

investment status and wait for new signals

Step 5 Report and after-investment management

PVFC Capital shall periodically report (monthlyquarterlyyearly) on the active

status of management portfolio and evaluate the effectiveness of the portfolio to

the Board of Fund Representatives Since then PVFC Capital proposes to adjust

the portfolio (if necessary) to achieve investment objectives of the fund

The prospect of the PVGF will come from the commitment of the whole team

from the top of Management Board to every Department staff With the favorable

external factors such as the improved economy and prospective business

environment particularly in the capital market the challenges could be overcome

to achieve the companylsquos mission

Propose investment Investment approval

Implement the Investment

Tracking Portfolio Investment

Periodic reports Portfolio Investment

Ask for additional information (if necessary)

39

Appendix 1

List of Open-end Fund in Vietnam (as of July 2014)

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

No

Fund Name Fund

Manager License

Establish

ment

Scale

(bil

VND)

Invest

ment

Obj

1

MB Capital

Vietnam Bond

Fund

MB

Capital 01GCN-UBCK 1332013

54 Bond

2

VinaWealth

Enhanced

Fixed Income

Fund

Vinawealth 02GCN-UBCK 142013

54 Bond

3

Vietnam

Active Fund

(VFMVFA)

Vinafund 03GCN-UBCK 1842013

240 Stock

4

Vietnam Fund

Bond (VFB) Vinafund 04GCN-UBCK 2452013

100 Bond

5

Vietnam Fund

1 (VFMVF1) Vinafund 05GCN-UBCK 8102013 1000 Stock

6

Vietnam Fund

4 (VFMVF4) Vinafund 06GCN-UBCK 16122013

806 Stock

7

Vietcombank

Tactical

Balanced Fund

- VCBF

VCBF 07GCN-UBCK 24122013

60 Bond

8

Baoviet Equity

Dynamic

Open-ended

Fund

(BVFED)

BVF 08GCN-UBCK 812014

71

Stock

bond

9

Viet Capital

Balanced

Fund

(VCAMBF)

Bản Việt

Capital Offering since

1012014 Bond

10

Eastspring

Investments

Fund (ENF)

Eastspring

Investments

Offering since

24122013

Stock

Bond

40

Appendix 2

PERFORMANCE OF MB Capital Vietnam Bond Fund (as of July 2014)

Bond Holdings

Fund Activities

By the end of July NAV of MBBF increased by 082 compared to the same

period last month Thus in the first 7 months of the year NAV of the fund

increased by 606 with an annualize rate of 1038 The contribution for

positive return in this month were from realized and unrealized gains from term

deposits and interest payments

Fund Strategy

MBBF seeks to maximize total return while preserving investorrsquos principal by

investing in bonds and other debt instruments issued in Vietnam

The Fund will seek to achieve the Fundrsquos objective by investing in a diversified

portfolio of debt instruments including government bonds government-

guaranteed bonds bank-insured corporate bonds collateral-backed corporate

bonds corporate bonds certificates of deposit and cash deposit contracts

Source Military Bank (MB Bank)

41

Appendix 3

PERFORMANCE OF Vietnam Active Fund (VFMVFA) (as of July 2014)

Source Vinafund

Investment Objectives

The main objective of VFMVFA would be to capture

medium to long-term capital appreciation on

Vietnam market accompanied by capital

preservation during adverse market conditions based

on the main strategy of trend-following which is one

of Quantitative Investment method

42

Appendix 4

PERFORMANCE OF VIETNAM FUND 1 (VFMVF1) (as of July 2014)

Source Vinafund

Investment Objectives The objective of

VFMVF1 is to seek long-term earnings from

equity growth and income through investing into

a balanced and diversified portfolio including

equity convertible and debt securities in

Vietnam

43

Appendix 5

Performance of VCBF Tactical Balanced Fund (as of July 2014)

VCBF Factsheet

Performance of NAV

Source VCBF

44

Appendix 6

PERFORMANCE OF EASTSPRING INVESTMENTS FUND (ENF) (as of October 2014)

Source Eastspring Investments Vietnam

Eastspring Investments Vietnam Navigator Fund

(theldquoNavigator Fundrdquo or ldquoENFrdquo) is Mutual Fund

licensed by Vietnam State Securities Commission

under license No 09GCN-UBCK

(March 25th 2014)

Fund Manager Eastspring Investments Fund

Management Limited Liability Company

(ldquoEastspring Investments Vietnamrdquo)

45

Appendix 7

Reference Index PVN10

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

Full name PVN 10

PVN 10 index is designed to be a tradable index It

represents the largest and most liquid stocks on Ho Chi

Minh (HSX) and Hanoi (HNX) Stock Exchanges

Price or

Total Return Total return

UCITS IV

Compliant Yes

Constituent

numbers 10

Capping 15

INDEX COMPOSITION

Ticker Company Name Weight

PVD Petrovietnam Drilling amp Well Services Corporation 1831

GAS PetroVietnam Gas Joint Stock Corporation 1757

PVS PetroVietnam Technical Services Corporation 1478

DPM PetroVietnam Fertilizer and Chemicals Corporation 1379

PET Petrovietnam General Services Joint Stock

Corporation

766

PVX Petrovietnam Construction Joint Stock Corporation 681

PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

635

PVF Petrovietnam Finance Joint Stock Corporation 602

PVT Petrovietnam Transportation Corporation 561

PGS PetroVietNam Southern Gas Joint Stock Company 410

Qualification

criteria

Liquidity amp

Market cap

Composition

review Semester

Shares

review Quarterly

Free float

review Quarterly

Free float

banding 5 up

Base value 1000

Base date 2008-12-31

Historical

since 2008-12-31

Launching

date

382012

Internal code PVN10

Bloomberg PVN10TR

39

Appendix 1

List of Open-end Fund in Vietnam (as of July 2014)

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

No

Fund Name Fund

Manager License

Establish

ment

Scale

(bil

VND)

Invest

ment

Obj

1

MB Capital

Vietnam Bond

Fund

MB

Capital 01GCN-UBCK 1332013

54 Bond

2

VinaWealth

Enhanced

Fixed Income

Fund

Vinawealth 02GCN-UBCK 142013

54 Bond

3

Vietnam

Active Fund

(VFMVFA)

Vinafund 03GCN-UBCK 1842013

240 Stock

4

Vietnam Fund

Bond (VFB) Vinafund 04GCN-UBCK 2452013

100 Bond

5

Vietnam Fund

1 (VFMVF1) Vinafund 05GCN-UBCK 8102013 1000 Stock

6

Vietnam Fund

4 (VFMVF4) Vinafund 06GCN-UBCK 16122013

806 Stock

7

Vietcombank

Tactical

Balanced Fund

- VCBF

VCBF 07GCN-UBCK 24122013

60 Bond

8

Baoviet Equity

Dynamic

Open-ended

Fund

(BVFED)

BVF 08GCN-UBCK 812014

71

Stock

bond

9

Viet Capital

Balanced

Fund

(VCAMBF)

Bản Việt

Capital Offering since

1012014 Bond

10

Eastspring

Investments

Fund (ENF)

Eastspring

Investments

Offering since

24122013

Stock

Bond

40

Appendix 2

PERFORMANCE OF MB Capital Vietnam Bond Fund (as of July 2014)

Bond Holdings

Fund Activities

By the end of July NAV of MBBF increased by 082 compared to the same

period last month Thus in the first 7 months of the year NAV of the fund

increased by 606 with an annualize rate of 1038 The contribution for

positive return in this month were from realized and unrealized gains from term

deposits and interest payments

Fund Strategy

MBBF seeks to maximize total return while preserving investorrsquos principal by

investing in bonds and other debt instruments issued in Vietnam

The Fund will seek to achieve the Fundrsquos objective by investing in a diversified

portfolio of debt instruments including government bonds government-

guaranteed bonds bank-insured corporate bonds collateral-backed corporate

bonds corporate bonds certificates of deposit and cash deposit contracts

Source Military Bank (MB Bank)

41

Appendix 3

PERFORMANCE OF Vietnam Active Fund (VFMVFA) (as of July 2014)

Source Vinafund

Investment Objectives

The main objective of VFMVFA would be to capture

medium to long-term capital appreciation on

Vietnam market accompanied by capital

preservation during adverse market conditions based

on the main strategy of trend-following which is one

of Quantitative Investment method

42

Appendix 4

PERFORMANCE OF VIETNAM FUND 1 (VFMVF1) (as of July 2014)

Source Vinafund

Investment Objectives The objective of

VFMVF1 is to seek long-term earnings from

equity growth and income through investing into

a balanced and diversified portfolio including

equity convertible and debt securities in

Vietnam

43

Appendix 5

Performance of VCBF Tactical Balanced Fund (as of July 2014)

VCBF Factsheet

Performance of NAV

Source VCBF

44

Appendix 6

PERFORMANCE OF EASTSPRING INVESTMENTS FUND (ENF) (as of October 2014)

Source Eastspring Investments Vietnam

Eastspring Investments Vietnam Navigator Fund

(theldquoNavigator Fundrdquo or ldquoENFrdquo) is Mutual Fund

licensed by Vietnam State Securities Commission

under license No 09GCN-UBCK

(March 25th 2014)

Fund Manager Eastspring Investments Fund

Management Limited Liability Company

(ldquoEastspring Investments Vietnamrdquo)

45

Appendix 7

Reference Index PVN10

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

Full name PVN 10

PVN 10 index is designed to be a tradable index It

represents the largest and most liquid stocks on Ho Chi

Minh (HSX) and Hanoi (HNX) Stock Exchanges

Price or

Total Return Total return

UCITS IV

Compliant Yes

Constituent

numbers 10

Capping 15

INDEX COMPOSITION

Ticker Company Name Weight

PVD Petrovietnam Drilling amp Well Services Corporation 1831

GAS PetroVietnam Gas Joint Stock Corporation 1757

PVS PetroVietnam Technical Services Corporation 1478

DPM PetroVietnam Fertilizer and Chemicals Corporation 1379

PET Petrovietnam General Services Joint Stock

Corporation

766

PVX Petrovietnam Construction Joint Stock Corporation 681

PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

635

PVF Petrovietnam Finance Joint Stock Corporation 602

PVT Petrovietnam Transportation Corporation 561

PGS PetroVietNam Southern Gas Joint Stock Company 410

Qualification

criteria

Liquidity amp

Market cap

Composition

review Semester

Shares

review Quarterly

Free float

review Quarterly

Free float

banding 5 up

Base value 1000

Base date 2008-12-31

Historical

since 2008-12-31

Launching

date

382012

Internal code PVN10

Bloomberg PVN10TR

40

Appendix 2

PERFORMANCE OF MB Capital Vietnam Bond Fund (as of July 2014)

Bond Holdings

Fund Activities

By the end of July NAV of MBBF increased by 082 compared to the same

period last month Thus in the first 7 months of the year NAV of the fund

increased by 606 with an annualize rate of 1038 The contribution for

positive return in this month were from realized and unrealized gains from term

deposits and interest payments

Fund Strategy

MBBF seeks to maximize total return while preserving investorrsquos principal by

investing in bonds and other debt instruments issued in Vietnam

The Fund will seek to achieve the Fundrsquos objective by investing in a diversified

portfolio of debt instruments including government bonds government-

guaranteed bonds bank-insured corporate bonds collateral-backed corporate

bonds corporate bonds certificates of deposit and cash deposit contracts

Source Military Bank (MB Bank)

41

Appendix 3

PERFORMANCE OF Vietnam Active Fund (VFMVFA) (as of July 2014)

Source Vinafund

Investment Objectives

The main objective of VFMVFA would be to capture

medium to long-term capital appreciation on

Vietnam market accompanied by capital

preservation during adverse market conditions based

on the main strategy of trend-following which is one

of Quantitative Investment method

42

Appendix 4

PERFORMANCE OF VIETNAM FUND 1 (VFMVF1) (as of July 2014)

Source Vinafund

Investment Objectives The objective of

VFMVF1 is to seek long-term earnings from

equity growth and income through investing into

a balanced and diversified portfolio including

equity convertible and debt securities in

Vietnam

43

Appendix 5

Performance of VCBF Tactical Balanced Fund (as of July 2014)

VCBF Factsheet

Performance of NAV

Source VCBF

44

Appendix 6

PERFORMANCE OF EASTSPRING INVESTMENTS FUND (ENF) (as of October 2014)

Source Eastspring Investments Vietnam

Eastspring Investments Vietnam Navigator Fund

(theldquoNavigator Fundrdquo or ldquoENFrdquo) is Mutual Fund

licensed by Vietnam State Securities Commission

under license No 09GCN-UBCK

(March 25th 2014)

Fund Manager Eastspring Investments Fund

Management Limited Liability Company

(ldquoEastspring Investments Vietnamrdquo)

45

Appendix 7

Reference Index PVN10

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

Full name PVN 10

PVN 10 index is designed to be a tradable index It

represents the largest and most liquid stocks on Ho Chi

Minh (HSX) and Hanoi (HNX) Stock Exchanges

Price or

Total Return Total return

UCITS IV

Compliant Yes

Constituent

numbers 10

Capping 15

INDEX COMPOSITION

Ticker Company Name Weight

PVD Petrovietnam Drilling amp Well Services Corporation 1831

GAS PetroVietnam Gas Joint Stock Corporation 1757

PVS PetroVietnam Technical Services Corporation 1478

DPM PetroVietnam Fertilizer and Chemicals Corporation 1379

PET Petrovietnam General Services Joint Stock

Corporation

766

PVX Petrovietnam Construction Joint Stock Corporation 681

PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

635

PVF Petrovietnam Finance Joint Stock Corporation 602

PVT Petrovietnam Transportation Corporation 561

PGS PetroVietNam Southern Gas Joint Stock Company 410

Qualification

criteria

Liquidity amp

Market cap

Composition

review Semester

Shares

review Quarterly

Free float

review Quarterly

Free float

banding 5 up

Base value 1000

Base date 2008-12-31

Historical

since 2008-12-31

Launching

date

382012

Internal code PVN10

Bloomberg PVN10TR

41

Appendix 3

PERFORMANCE OF Vietnam Active Fund (VFMVFA) (as of July 2014)

Source Vinafund

Investment Objectives

The main objective of VFMVFA would be to capture

medium to long-term capital appreciation on

Vietnam market accompanied by capital

preservation during adverse market conditions based

on the main strategy of trend-following which is one

of Quantitative Investment method

42

Appendix 4

PERFORMANCE OF VIETNAM FUND 1 (VFMVF1) (as of July 2014)

Source Vinafund

Investment Objectives The objective of

VFMVF1 is to seek long-term earnings from

equity growth and income through investing into

a balanced and diversified portfolio including

equity convertible and debt securities in

Vietnam

43

Appendix 5

Performance of VCBF Tactical Balanced Fund (as of July 2014)

VCBF Factsheet

Performance of NAV

Source VCBF

44

Appendix 6

PERFORMANCE OF EASTSPRING INVESTMENTS FUND (ENF) (as of October 2014)

Source Eastspring Investments Vietnam

Eastspring Investments Vietnam Navigator Fund

(theldquoNavigator Fundrdquo or ldquoENFrdquo) is Mutual Fund

licensed by Vietnam State Securities Commission

under license No 09GCN-UBCK

(March 25th 2014)

Fund Manager Eastspring Investments Fund

Management Limited Liability Company

(ldquoEastspring Investments Vietnamrdquo)

45

Appendix 7

Reference Index PVN10

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

Full name PVN 10

PVN 10 index is designed to be a tradable index It

represents the largest and most liquid stocks on Ho Chi

Minh (HSX) and Hanoi (HNX) Stock Exchanges

Price or

Total Return Total return

UCITS IV

Compliant Yes

Constituent

numbers 10

Capping 15

INDEX COMPOSITION

Ticker Company Name Weight

PVD Petrovietnam Drilling amp Well Services Corporation 1831

GAS PetroVietnam Gas Joint Stock Corporation 1757

PVS PetroVietnam Technical Services Corporation 1478

DPM PetroVietnam Fertilizer and Chemicals Corporation 1379

PET Petrovietnam General Services Joint Stock

Corporation

766

PVX Petrovietnam Construction Joint Stock Corporation 681

PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

635

PVF Petrovietnam Finance Joint Stock Corporation 602

PVT Petrovietnam Transportation Corporation 561

PGS PetroVietNam Southern Gas Joint Stock Company 410

Qualification

criteria

Liquidity amp

Market cap

Composition

review Semester

Shares

review Quarterly

Free float

review Quarterly

Free float

banding 5 up

Base value 1000

Base date 2008-12-31

Historical

since 2008-12-31

Launching

date

382012

Internal code PVN10

Bloomberg PVN10TR

42

Appendix 4

PERFORMANCE OF VIETNAM FUND 1 (VFMVF1) (as of July 2014)

Source Vinafund

Investment Objectives The objective of

VFMVF1 is to seek long-term earnings from

equity growth and income through investing into

a balanced and diversified portfolio including

equity convertible and debt securities in

Vietnam

43

Appendix 5

Performance of VCBF Tactical Balanced Fund (as of July 2014)

VCBF Factsheet

Performance of NAV

Source VCBF

44

Appendix 6

PERFORMANCE OF EASTSPRING INVESTMENTS FUND (ENF) (as of October 2014)

Source Eastspring Investments Vietnam

Eastspring Investments Vietnam Navigator Fund

(theldquoNavigator Fundrdquo or ldquoENFrdquo) is Mutual Fund

licensed by Vietnam State Securities Commission

under license No 09GCN-UBCK

(March 25th 2014)

Fund Manager Eastspring Investments Fund

Management Limited Liability Company

(ldquoEastspring Investments Vietnamrdquo)

45

Appendix 7

Reference Index PVN10

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

Full name PVN 10

PVN 10 index is designed to be a tradable index It

represents the largest and most liquid stocks on Ho Chi

Minh (HSX) and Hanoi (HNX) Stock Exchanges

Price or

Total Return Total return

UCITS IV

Compliant Yes

Constituent

numbers 10

Capping 15

INDEX COMPOSITION

Ticker Company Name Weight

PVD Petrovietnam Drilling amp Well Services Corporation 1831

GAS PetroVietnam Gas Joint Stock Corporation 1757

PVS PetroVietnam Technical Services Corporation 1478

DPM PetroVietnam Fertilizer and Chemicals Corporation 1379

PET Petrovietnam General Services Joint Stock

Corporation

766

PVX Petrovietnam Construction Joint Stock Corporation 681

PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

635

PVF Petrovietnam Finance Joint Stock Corporation 602

PVT Petrovietnam Transportation Corporation 561

PGS PetroVietNam Southern Gas Joint Stock Company 410

Qualification

criteria

Liquidity amp

Market cap

Composition

review Semester

Shares

review Quarterly

Free float

review Quarterly

Free float

banding 5 up

Base value 1000

Base date 2008-12-31

Historical

since 2008-12-31

Launching

date

382012

Internal code PVN10

Bloomberg PVN10TR

43

Appendix 5

Performance of VCBF Tactical Balanced Fund (as of July 2014)

VCBF Factsheet

Performance of NAV

Source VCBF

44

Appendix 6

PERFORMANCE OF EASTSPRING INVESTMENTS FUND (ENF) (as of October 2014)

Source Eastspring Investments Vietnam

Eastspring Investments Vietnam Navigator Fund

(theldquoNavigator Fundrdquo or ldquoENFrdquo) is Mutual Fund

licensed by Vietnam State Securities Commission

under license No 09GCN-UBCK

(March 25th 2014)

Fund Manager Eastspring Investments Fund

Management Limited Liability Company

(ldquoEastspring Investments Vietnamrdquo)

45

Appendix 7

Reference Index PVN10

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

Full name PVN 10

PVN 10 index is designed to be a tradable index It

represents the largest and most liquid stocks on Ho Chi

Minh (HSX) and Hanoi (HNX) Stock Exchanges

Price or

Total Return Total return

UCITS IV

Compliant Yes

Constituent

numbers 10

Capping 15

INDEX COMPOSITION

Ticker Company Name Weight

PVD Petrovietnam Drilling amp Well Services Corporation 1831

GAS PetroVietnam Gas Joint Stock Corporation 1757

PVS PetroVietnam Technical Services Corporation 1478

DPM PetroVietnam Fertilizer and Chemicals Corporation 1379

PET Petrovietnam General Services Joint Stock

Corporation

766

PVX Petrovietnam Construction Joint Stock Corporation 681

PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

635

PVF Petrovietnam Finance Joint Stock Corporation 602

PVT Petrovietnam Transportation Corporation 561

PGS PetroVietNam Southern Gas Joint Stock Company 410

Qualification

criteria

Liquidity amp

Market cap

Composition

review Semester

Shares

review Quarterly

Free float

review Quarterly

Free float

banding 5 up

Base value 1000

Base date 2008-12-31

Historical

since 2008-12-31

Launching

date

382012

Internal code PVN10

Bloomberg PVN10TR

44

Appendix 6

PERFORMANCE OF EASTSPRING INVESTMENTS FUND (ENF) (as of October 2014)

Source Eastspring Investments Vietnam

Eastspring Investments Vietnam Navigator Fund

(theldquoNavigator Fundrdquo or ldquoENFrdquo) is Mutual Fund

licensed by Vietnam State Securities Commission

under license No 09GCN-UBCK

(March 25th 2014)

Fund Manager Eastspring Investments Fund

Management Limited Liability Company

(ldquoEastspring Investments Vietnamrdquo)

45

Appendix 7

Reference Index PVN10

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

Full name PVN 10

PVN 10 index is designed to be a tradable index It

represents the largest and most liquid stocks on Ho Chi

Minh (HSX) and Hanoi (HNX) Stock Exchanges

Price or

Total Return Total return

UCITS IV

Compliant Yes

Constituent

numbers 10

Capping 15

INDEX COMPOSITION

Ticker Company Name Weight

PVD Petrovietnam Drilling amp Well Services Corporation 1831

GAS PetroVietnam Gas Joint Stock Corporation 1757

PVS PetroVietnam Technical Services Corporation 1478

DPM PetroVietnam Fertilizer and Chemicals Corporation 1379

PET Petrovietnam General Services Joint Stock

Corporation

766

PVX Petrovietnam Construction Joint Stock Corporation 681

PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

635

PVF Petrovietnam Finance Joint Stock Corporation 602

PVT Petrovietnam Transportation Corporation 561

PGS PetroVietNam Southern Gas Joint Stock Company 410

Qualification

criteria

Liquidity amp

Market cap

Composition

review Semester

Shares

review Quarterly

Free float

review Quarterly

Free float

banding 5 up

Base value 1000

Base date 2008-12-31

Historical

since 2008-12-31

Launching

date

382012

Internal code PVN10

Bloomberg PVN10TR

45

Appendix 7

Reference Index PVN10

Source Petrovietnam Finance Fund Incorporation (PVFC Capital)

Full name PVN 10

PVN 10 index is designed to be a tradable index It

represents the largest and most liquid stocks on Ho Chi

Minh (HSX) and Hanoi (HNX) Stock Exchanges

Price or

Total Return Total return

UCITS IV

Compliant Yes

Constituent

numbers 10

Capping 15

INDEX COMPOSITION

Ticker Company Name Weight

PVD Petrovietnam Drilling amp Well Services Corporation 1831

GAS PetroVietnam Gas Joint Stock Corporation 1757

PVS PetroVietnam Technical Services Corporation 1478

DPM PetroVietnam Fertilizer and Chemicals Corporation 1379

PET Petrovietnam General Services Joint Stock

Corporation

766

PVX Petrovietnam Construction Joint Stock Corporation 681

PGD PetroVietNam Low Pressure Gas Distribution Joint

Stock Company

635

PVF Petrovietnam Finance Joint Stock Corporation 602

PVT Petrovietnam Transportation Corporation 561

PGS PetroVietNam Southern Gas Joint Stock Company 410

Qualification

criteria

Liquidity amp

Market cap

Composition

review Semester

Shares

review Quarterly

Free float

review Quarterly

Free float

banding 5 up

Base value 1000

Base date 2008-12-31

Historical

since 2008-12-31

Launching

date

382012

Internal code PVN10

Bloomberg PVN10TR

46

Appendix 8

Vietnam Stock Market in the period 2012-2013

Source State Securities Commission (SSC)

Vietnam Stock Market in the period 2012-2013

2013 2012 IncreaseDecrease

VN ndash Index

(8102013) (points)

50222 41835 205

Market Capitalization

(as of 31082013)

(VND bil)

881960 764946 1530

Liquidity (first 09

months of 2013)

Volume 16959937386 20060315484 -1546

Value (VND bil) 224724 259195 -1330

No of Investor

Account (as of

31072013)

Total 1268133

Local 1252727

Individual 1247732

Institutional 4995

Overseas 15406

Individual 13856

Institutional 1550

CPI Index (092013

compared to the

beginning of the year

2013)

463

47

REFERENCE

Reference website

httpcafefvn

httpwwweastspringcomvnvn

httpwwwprofundscom

httpwwwpvnvn

httpwwwpvnindexvn

httppvfccapitalcomvn

httpwwwgsogovvn

httpmbcapitalcomvn

httpwwwsscgovvnubck

httpwwwvcbfcomen

httpvinafundcom

47

REFERENCE

Reference website

httpcafefvn

httpwwweastspringcomvnvn

httpwwwprofundscom

httpwwwpvnvn

httpwwwpvnindexvn

httppvfccapitalcomvn

httpwwwgsogovvn

httpmbcapitalcomvn

httpwwwsscgovvnubck

httpwwwvcbfcomen

httpvinafundcom

48

Reference journals amp book

Nguyen D K (2012) Value Analysis Connecting (VAC) method and

evaluationf traffic safety projects performance The Vietnam Bridge and Road

Journal 4 p50-53

Nguyen D K (2012 August) Paper ID SCS12-019 ldquoValue Analysis

Connecting (VAC) method and evaluation of traffic safety projects performancerdquo

Main Symposium Session 5th ATRANS Symposium held by the Asian

Transportation Research Society Bangkok 24 August 2012

Nguyen D K (2012) Value Incremental Comprehension (VIC) nomograph to

evaluate socio-economic effectiveness of traffic safety projects The Transport

Journal 4 p52-53

Nguyen D K (2012 August) Paper ID SCS12-020 ldquoValue Incremental

Comprehension (VIC) nomograph to evaluate socio-economic effectiveness of

traffic safety projectsrdquo Main Symposium Session 5th ATRANS Symposium held

by the Asian Transportation Research Society Bangkok 24 August 2012

Nguyen D K (2012 September) Value Analysis Connecting (VAC) method amp

Value Incremental Comprehension (VIC) nomograph APEC Workshop on

Improving Traffic Safety Data Systems co-organised by US Department of

Transportation -NHTSA and MoT amp NTSC Hanoi September 2012

Nguyen D K Nguyen H T amp Le L T (2012 August) VAC Method amp VIC

Nonograph for Socio-Economic Evaluation of Project (ISBN 978-3-659-22173-

6) LAP - LAMBERT Academic Publishing Germany

Nguyen D K (2012) Nummary Tactical Keynote (NTK) solution amp attracting

Public Private Partnership (PPP) investment in road infrastructure in Vietnam

The Transport Journal 9 p13-15

Nguyen D K (2012) ldquoLinear Pragmatize Supply Demandrdquo (LPSD) algorithm amp

optimize locally funds of Public Private Partnership (PPP) in road infrastructure

projects The Vietnam Bridge and Road Journal 10 p40-44

Nguyen D K (2012) Nummary Tactical Keynote Plus (NTK+) algorithm amp

Public-Private Partnership (PPP) investment projectin road infrastructure

projects The Transport Journal 12 p49-52