Sustainable  Investingin  Vietnam

Vietnam  Holding  Ltd.TBLI  Asia,  27  May  2010

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Large  universe  of  investable  companies

Quality  of  information  is  spotty  at  best

Government  and  market  regulators  lagging  behind  OECD

Few  offshore  listings

Local  managers  with  limited  ESG  sensitivity

Language  and  cultural  challenges

High  ESG  pressure

Rapidly  increasing  pollution

Neglect  of  human  resource  development

Low  Transparency

The  Emerging  Market  Challenge

2

86  million  population  and  favorable  demographics

Resilient  despite  lower  exports  and  capital  inflow    

Export  mix  and  new  markets  soften  the  blow    

GDP  growth  at  5.5%  in  2009

Attractive  valuation  and  expected  EPS  growth

1,700  State-­‐owned  Enterprises  to  be  privatized

Political  stable  and  low  social  inequality  

Sources: Fitch Report, HSBC, VNHAM, Economist Intelligence Unit

Vietnam

3

4

Economic  Indicators

2005 2006 2007 2008 2009 2010e 2011e

Industrial  production (%  change  y-­‐o-­‐y) 25.5 16 18.2 15.9 8.6 17.5 11.5

Exports    (%  change  y-­‐o-­‐y) 22.5 22.1 22.7 29.9 -­‐10.0 15.0 20.0

Imports (%  change  y-­‐o-­‐y) 15.7 33.4 41.2 28.5 -­‐14.0 26.0 3.0

Total  external  debt (%  of  GDP) 23.8 22.9 23.4 23.6 24.5 25.5 25.0

Source: EIU Vietnam Country Forecast 2010

Limited  2009  damage  to  export  success  story

Agricultural  price  volatility  explains  discrepancy  between  export  vs.  production  growth

Large  amounts  of  imports  linked  to  large  direct  foreign  investments    

External  debt  levels  continue  to  be  very  well  managed

5

Sources: GSO, Bloomberg, Credit Suisse

Foreign  direct  investment  flow  stays  high

Disbursed  FDI  result  in  positive  BOP  

Inflation 9.2%  y-­‐o-­‐y    as  of  30  April,  2010

Foreign  Direct  Investment Inflation

FDI  and  Inflation  

FDI  in %  of  GDP 2007 2008 2009

India 2.1 3.4 2.4E

China 4.0 3.8 1.6E

Vietnam 9.4 10.7 7.8

1,250

1,000

750

500

200

VNIndex

6

Source: Bloomberg 30 Apr 2010

USD bln Market  Cap  (left  axis) Foreign  Market  Share  30Dma  (right  axis)

Price  /  Earnings At  high  2007  :   >  40  

P/E  Growth: >  20%  p.a.  

Investment  Environment

Region Avg Vietnam VNH

17.73 13.04 10.2

Sources: Fitch Report, HSBC, VNHAM, Economist Intelligence Unit

Growth  and  ESG  Development

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GDP  growth  in  past  20  years  second  only  to  China

Accelerates  from  5.3%  in  Q4  2009  to  5.8%  in  Q1  2010  

Growth  causes  ecological  strain  which  is  10  yr  delay  compared  to  China

Deteriorating  water  and  air  quality  

Disclosure  standards  applied  selectively

Poor  monitoring  and  limited  institutions

Developing  regulation  and  political  agenda

Bottom-­‐up  social  and  environmental  awareness  developing  

GDP  Growth  p.a.    -­‐ BRIC  vs.  Vietnam

0

100

200

300

400

500

600

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

China Vietnam India Brazil Russia

7.2%

9.8%

6.6%

3.0%1.7%

Vietnam  Holding  Asset  Management  Ltd.Engagement    |    Analysis    |    ESG  Assessment  

Vietnam  Holding  Ltd.  ASrIA    |    UN  PRI    |    CDP

Value  Approach

Macro  &  Micro

Fundamentals

Due  Diligence

Integration Engagement

Research PartnershipInvestment  Universe

SRI  Strategy

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Sector  AnalysisESG  IndicatorsExclusion  

Key  Issues

Call  ScheduleRequest  for  Disclosure  

Voting  Policy  

Action  Items

Follow-­‐up

Valuation

AnalysisPortfolio

SelectionINrate   VNH  Forum

Return

LeadershipKnow-­‐How

Culture

Investment  Analysis

ESG  and  Financial  analysis

Investment  context

Availability  of  market  data Integrate  ESG  to  investment  process

Key  Issues

Portfolio  Assessment

ESG  Grading

Core  Indicators

Controversial  Practices Proactive and  progressing investees

Product  Screening

Analysis  and  Data  reveal  ESG  awareness

ESG  Integration

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Sector  Approach

Key  Issues Material Investment  Proposal  and  Update

Actionable

Priorities 1.   Investment  Return

2.   Compliance

3.   Risk  :  reputation,  disruption  of  business  etc.  

4.   Opportunities:    differentiation,  new  markets  etc.

Monitor  improvement    through  active  engagement

Investment  Process

10

ESG  Assessment

GRADING SYSTEM

Controversial Practices

Score

Business Ethics

Labour

Human rights

Environment

Governance

Reporting

Sustainability Score

124 CRITERIA

38 CRITERIA

Sustainability Grade

PROACTIVE

IN PROGRESS

PASSIVE

clearly above Industry/region average

average Industry/region

Average Industry/region

Controversial Practices Implications LOW HIGH

BEST

WORSE

PASSIVE

PASSIVE

PASSIVE

Sust

ain

ab

ility

ma

na

ge

me

nt

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Criteria

124  Sustainability  Criteria  

INrate  methodology  

Benchmark

MSCI  Emerging  Markets    Asia  ex  JP

Exclusion

Controversial  Practices  &  Products

Exclusion

Clear  Exclusion

Sin  Stocks

Weapons  and  Defense

Child  Labor  and  Forced  Labor

Nuclear  Energy

Potential  Exclusion

Genetically  Modified  Plant  Organisms  (GMO)

Production  and  R&D

Distribution   0%  Threshold

Usage

Continuous  monitoring  of  controversial  products  and  practices

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5%  Threshold

0%  Threshold

Engagement

Direct  Engagement  

Encouraging  disclosure  of  ESG  topics

Board  member  and  analyst  call  schedule

Monitoring  and  follow-­‐up  on  key  issues

Communicating  rating  and  improvement

Engagement  Cooperation

Investor  opinions  and  information  exchange

Voting  with  likeminded  investors  (investment  pooling)

Filing  AGM  and  EGM  resolutions

Addressing  larger  corporate  audience  for  sector  and  country  issues VNH  Forum  

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Wider  Engagement

VNH  Forum

Building  ESG  awareness  

Senior  executives  from  SOEs    &  VNH  investee  companies

Showcase  global  best  practice

Within  Vietnamese  context

Covered  by  local  media

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Forum Topic Partners  /  Experts Location Participants

Aug  07 Building  Value  with  Corporate  Governance

SCIC  /  HSG Hanoi 125

Apr 08 Strategic  Management

SCIC  /  HSG HCMC 214

Sep  08 Board  Management  Practices

SCIC  /  HSG HanoiHCMC

120

Jun    09 Economic  Crisis  -­‐Lessons  Learnt

HSG HCMC 26

May  10 Long-­‐term  Value  of  Investor  Relations

SCIC,  Bloomberg  /  ASrIA  ,  Boa Viet  Securities,  VCCI,  JW  Thompson

HanoiHCMC

ca.  210

State  Capital  Investment  Corporation  (SCIC)

Addressing  ESG  issues  with  a  large  corporate  audience

VNH  Forum  co-­‐organizer  

Association  of  Sustainable  and  Responsible  Investment  in  Asia  (ASrIA)

ESG  training  workshop

VNH  Forum  partner

Vietnam  Chamber  of  Commerce  and  Industry

Founding  member  of  Business  Council  for  Sustainable  Development  (BCSD)

VNH  Forum  partner

Vietnam  Cleaner  Production  Centre  (VNCPC)

Green  Credit  Trust  Fund

Marketing  assistance

Associations  and  Partnership

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16

Performance  factors:

Value  Investment  style

Sourcing  in  over-­‐the-­‐counter  market

Corporate  Governance  emphasis  

VNH  Portfolio

25.9%

15.8%

15.6%

7.8%

7.1% 6.5%

5.5%

4.7%

4.1%

2.3%

2.1%1.6%

1.0%

Distribution

Agro-­‐chemicals  &  fertilizer Construction  &  Materials

Food  &  Beverage Health  Care

Industrial  Goods  &  Services Banks

Oil  &  Gas Automobiles  &  Parts

Personal  &  Household  Goods Utilities

Retail Financial  Services

Insurance

-­‐80%

-­‐60%

-­‐40%

-­‐20%

0%

20%

40%

Jul                                                  07

Sep                                                  07

Nov                                                  07

Jan                                                  08

Mar                                                  08

May                                                  08

Jul                                                  08

Sep                                                  08

Nov                                                  08

Jan                                                  09

Mar                                                  09

May                                                  09

Jul                                                  09

Sep                                                  09

Nov                                                  09

Jan                                                  10

Mar                                                  10

May                                                  10

Return  on  NAV Vietnam  Holding  -­‐32%   DWS  Vietnam  -­‐43%  

PXP  Vietnam  -­‐46%   Dragon  VEIL  -­‐55%  

FTSE  ETFs  -­‐44%  

VNH  Foundation

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Corporate  Social  Responsibility

Segregates  profits  from  philanthropy

Separate  staff  &  board  

Identify  projects  for  maximum  benefit

Initial  focus on  Agent  Orange  victims

Identifying  donors  with  similar  objective

100%  of co-­‐ contributions flow to projects

Swiss  supervision  and  Swiss  tax  exemptions  for  donors

Background

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History

Founders: VietNam Holding  Asset  Mgmt  Ltd.  /    Juerg Vontobel

Objective:   Children-­‐related  philanthropy  in  South-­‐East  Asia

Incorporated: June  2007  in  Zurich,  Switzerland

Board:   1  Executive  member,  3  independent  members,  no  overlap  to  investment

Financials

Expenditures  to  date:

VNHAM  Donations:

Third-­‐party  Donations:

Projects

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Scholarships  in  Ninh Tuan  Province

Ninhprimary  schools.

Orthopaedic  Hospital  in  Danang

Equipment  donation  to  increase  annual  operation  capacity  increase  from  780  to  4000.  Training  by  staff  of  Bruderholz  Hospital,  Basel  Land CH.

Handicapped  Children  in  Quang  Tri  Province

Corrective  orthopaedic  surgery  for  173  children  in  former  DMZ.    Operations  performed  in  Danang.  

Children  Home  in  Songklah Province,  Thailand

Building  and  financing  a  functional  centre  for  30  homeless  children  and  HIV  orphans.  

Keeping  with  our  diversified  value  approach

Integrate  ESG  assessment  on  material  issues

Actively  promote  best  practices

Introduce  systematic  SRI  approach  to  Vietnam

We  improve  value  for  shareholders

Actively  engaging  with  enterprises

Promoting  ESG  awareness  in  Vietnam

Achieving  superior  investment  returns

Financially  supporting  our  VNH  Foundation    

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Contact

VIETNAM  HOLDING  ASSET  MANAGEMENT  LTD.

Ho  Chi  Minh  City1202  Fideco Tower81-­‐85  Ham  Nghi,  District  1VietnamTel.    +84  83  823  0465Fax.    +84  83  823  4792

ZurichGartenstrasse 19CH  -­‐ 8002SwitzerlandTel.    +41  43  500  2810Fax.    +  41  43  500  2815

www.vietnamholding.com |    info@vnham.com

Thank  you