chapter 6 SECURITIES INVESTMENT FUND

06/08/2011 B02003 - Securities Investment Fund The fund management company • The fund management company can carry out the following professional competences: – Investment fund managemen

06/08/2011 B02003 - Securities Investment

Chapter 6

Securities investment fund

• Securities investment fund means a

fund established from capital contributions

by investors with the objective of making profits by investing insecurities whereby

the investors do not have day-to-day

control over the investment decision

making of the fund

Manage investment professionally.

Save trading costs

Benefits of investment via Fund.

• For enterprises using the fund:

 Have chance to attract the fund at lower costs when borrowing via banking system.

 Preserve their autonomy in business operations without being governed as major shareholders

of the enterprise because investment into

enterprises via investment fund is limited.

06/08/2011 B02003 - Securities Investment

Participants

• The fund management company

• The supervisor bank

• Investors

The fund management company

• The fund management company manages the stock investment fund

• The company is established under the operating license issued by State Securities Commission and is organized as a joint stock company or a limited company with the minimum legal capital

of 25 billion VND.

• During the time of operation, the fund

management company is able to set up and

manage many fund simultaneously.

06/08/2011 B02003 - Securities Investment

Fund

The fund management company

• The fund management company can carry out the following professional

competences:

– Investment fund management

(mobilizing, managing the capital and

assets, managing portfolio)

– Investment consultant and financial

consultant

– Analysis services which support

investment

The supervisor bank:

• The supervisor bank maintains and

deposits assets of securities investment

fund and supervises the fund management company to ensure benefits of investors

• To be a supervisor bank, it is necessary to

be a commercial bank which operates

legally in Vietnam and is issued the

depository license by State Securities

Commission Vietnam

06/08/2011 B02003 - Securities Investment

Investors

Investors have rights to:

• Benefit from investment activities of

security investment fund in proportion to

their contributed capital rates

• Enjoy assets which are legally divided from the liquidation of security investment fund

• Ask the fund management company or

supervisor bank for buying back the

certificate of opening fund

Investors have rights to:

• Sue the fund management and supervisor bank

or related organizations if they violate their legal rights and benefits.

• Implement their rights through the festival of

06/08/2011 B02003 - Securities Investment

Investors

Investors have duties to:

• Execute decisions of Festival of investors

• Pay enough money to by their certificates

of fund

• Other duties are defined in regulations of security investment fund

• Based on method of organizing:

– Company-formed investment fund

– Trust-formed investment fund

06/08/2011 B02003 - Securities Investment

Fund

Based on scale, method and nature of money

contribution

Closed-end fund Open-end fund

Only raise capital once through

security sales to the public.

Always issue new shares to increase the capital

Are not allowed to issue any

types of share to raise the

capital

Always issued more shares

Do not buy back issued shares Are ready to buy back issued

shares Fund Certificates are often

posted and traded on the stock

Based on the mobilized capital

Public fund Member fund

Mobilizing capital by

issuing widely to public

Mobilizing capital by issuing separately to small groups of investor.

Small investors with

limited knowledge about

the stock market.

Large investors who are financial institutions or economical corporations.

06/08/2011 B02003 - Securities Investment

Based on the methods of organizing

Company-formed investment fund Trust-formed investment fund

The fund is considered as the legal

entity and shareholder who contributes

money to elect Fund Board of Directors

is not considered as the legal entity but capital common fund of investors

Fund Board of Directors hire the fund

management company and supervisor

bank Fund Board of Directors

supervises operations of these

organizations.

Investors share capital to hire a professor to manage the profitable investment fund.

The fund management company

appoints its staff to run and use the

capital of fund to invest into securities

or other profitable assets.

The fund management company uses the capital to invest into profitable areas effectively.

The supervisor bank plays roles in

maintaining assets, exchanging

securities for the fund when executing

transactions.

The supervisor bank supervises operations of the fund management company, preserving capital and assets

of investors.

6.3 Activities of investment fund

6.3.1 Activities of mobilizing capital/ raising fund

6.3.2 Investment activities

06/08/2011 B02003 - Securities Investment

6.3.1 Activities of raising fund of investment

fund

• Mode of issuing

• Fixed issuing price

• Valuate issuing price

Modes of issuing

• Company investment fund: issuing

shares to raise capital

• Contract investment fund: the amount of

anticipated capital to establish the fund is divided into units and the fund will issue

the fund certificate

06/08/2011 B02003 - Securities Investment

Valuate issuing price

• Net asset value of the fund (NAV)

• Value of certificate of fund

• Load of fund certificate

• Offering price of fund certificate

Net asset value of the fund

• NAV = The amount of asset value and investments of the fund – debts must be paid

06/08/2011 B02003 - Securities Investment

Valuation of issuance

• Net asset value of the fund

• Fund certificate value

• Load of fund certificate

• Offering price of fund certificate

Fund’s certificate value

• The value of each fund certificate/share of the investment fund = NAV / the amount of current certificates( shares)

06/08/2011 B02003 - Securities Investment

Load of fund certificate

• Load of fund certificate is the percentage

of the gap between Public Offered Price and NAV

Load

=

POP-NAV POP

x 100%

Offering price of fund certificate

• Offering price of fund certificate is

calculated as follow:

POP = NAV/(100% - offering for sale cost )

06/08/2011 B02003 - Securities Investment

6.3.2 Investment activities

• Fee and cost of investment fund

• Investment process

Fee and cost of investment fund

• Fees which investors pay when

participating and when drawing money

from the fund

• Direct fees on the fund

06/08/2011 B02003 - Securities Investment

Fees which investors pay when

participating and when drawing money from the fund

• Issuing fee

• Repayment fee

Direct expense on the fund

• Annual management cost

• Awards and incentives

• Costs of the Board of representative of the fund

• Supervision and deposit costs

• Service costs for investors

• Auditing cost

• Pricing cost

• Loan fee

• Other fees (establishment fee, legal fee,

brokerage fee, etc…)

• Tax

06/08/2011 B02003 - Securities Investment

Investment process

• Identify targets and strategies of

investment

• Establish the structure of investment

portfolio in accordance with targets and strategies

• Inspect and research markets

• Adjust investment portfolio