VinaCapital Investor Conference 2010 Vietnam Funds. Hiroshi Funaki Head of Research LCF Edmond de Rothschild Securities, October 2010

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1 VinaCapital Investor Conference 2010 Vietnam Funds Hiroshi Funaki Head of Research LCF Edmond de Rothschild Securities, October 2010

2 LCF Edmond de Rothschild Securities Specialist Emerging Markets Funds team established Sales, trading and proprietary research. Proprietary research on over 400 funds Market maker in over 100 funds. Focused list of corporate relationships Relationships with small group of independent asset managers. We have raised over $5 billion for these managers since LCF Edmond de Rothschild Asset Management Multi-manager team has been investing in alternative investment funds for over 40 years.

3 Why are Vietnam funds trading on large discounts?

4 Two years of record inflow into Emerging Markets Emerging market equities have seen record inflows since the Global Financial Crisis $64 billion of inflows in 2009; ~$63 billion in 2010, largely at expense of developed markets Better growth prospects IMF estimates Emerging Market economies will grow 6.4% a year on average to 2014 compared to 2.5% pa for developed markets. Growth driven by long term secular trends such as urbanisation, liberalisation, rising productivity and consumption and better demographics EM surpluses and reserves versus record deficits and debt in DM BRICs now control half of total global reserves Vietnam runs large trade deficit $12.2 billion in 2009; $8.6 billion year to date Undervalued currencies underpinned by real assets, offering better yields Real assets are mainly located in emerging markets Vietnam devalued currency Dec-08; Mar-09; Nov-09; Feb-10; Aug-10

5 Post Global Financial Crisis focus on liquidity Short-term correlations at record highs. Investors are focusing on liquidity post GFC Large proportion of Emerging Market inflows have gone into exchange traded funds (ETFs).

6 Illiquidity discount Templeton Russia & East European Fund invests in liquid listed Russian equity Aurora Russia invests in illiquid Russian private equity

7 Discounts on listed equity funds did not approach 98 crisis lows Templeton Emerging Markets Investment Trust fell to a 39% discount following the Russian devaluation/default in August 1998, compared to a 15% post-gfc

8 AIM-traded Emerging Market Funds hit record lows Average discount fell to 63%; current average discount of 39% Predominantly invested in real estate / private equity

9 Buyers of last resort became forced sellers In previous crises, value/activist hedge funds were the buyers of last resort. These hedge funds were already substantial shareholders when the crisis hit In the years leading up to the Global Financial Crisis, discounts were rare and value hedge funds started buying substantial stakes in new funds at IPO Announced holdings of one major hedge fund pre-crisis: South African Property Opportunities 29% Black Sea Property Fund 28% Evolvence India Fund 27% PME African Infrastructure 21% London Asia Chinese Private Equity 20% Alpha Tiger Property Trust 19% Sofia Property Fund 18% SpeyMill Macau 11% When these hedge funds were hit by redemptions and withdrawal of leverage, they became forced sellers, creating a perfect storm of forced sellers and no buyers. Result was unprecedented discounts; funds trading at discounts to their cash positions.

10 Closed-end funds a cyclical business Funds at premiums: New funds launched Oversupply Contraction of supply (buybacks, open-ending, liquidation etc) Recovery in underlying asset prices Markets / Sentiment turns: Funds at discounts Shareholder base shifts to discount investors

11 Vietnam has been through this cycle before Oct-91 $55m Vietnam Fund launched. Trades at 70% premium ahead of lifting US embargo Feb other closed-end funds launched Aug-93 to Oct-94 Beta Vietnam Fund; Vietnam Frontier Fund; Vietnam Enterprise Investments Ltd; Templeton Vietnam Fund and Lazard Vietnam Fund. All funds liquidated with exception of VEIL. Many funds struggle to invest in absence of stock market. Asia crisis; funds trade at significant discounts Vietnam Fund trades at 40% discount.

12 Second cycle VinaCapital Vietnam Opportunity Fund (below) traded at premium for nearly 5 years Over 35 new Vietnam funds launched Sep-03 $10m Dec-05 $76m Oct-06 $300m Nov-07 $272m

13 Discounts rarely persist: Consolidation has begun Historically, funds or investors will eventually take action to address discounts Buybacks Open-ending Split portfolios Dividend yield Non-reinvestment & distribution Liquidation Vietnam Enterprise Investments Ltd; DWS Vietnam Fund Vietnam Emerging Equity Fund Africa Opportunity Fund; Pacific Alliance China Land; PAX Vietnam Opportunity Fund; PAX; PACL JSM Indochina; ARC Capital Holdings; Yatra Capital; Speymill Macau Indochina Capital Vietnam Fund

14 Summary Some Vietnam Funds remain on exceptionally wide discounts These discounts are unlikely to persist over the medium term Discount narrowing can add substantial outperformance Current discount Outperformance assuming flat NAV and exit at 10% discount VinaCapital Vietnam Opportunity Fund -30% +28% VinaLand -43% +58% Vietnam Infrastructure Ltd -36% +41% Risks Liquidity of fund Valuation of illiquid assets Corporate governance