CONFIDENTIAL
AFC Asia Frontier Fund
July 2013
TABLE OF CONTENTS
2
1. Executive Summary 3
2. Why Asian Frontier Markets 4
3. Asia Frontier Capital 18
4. Investment Objec...
EXECUTIVE SUMMARY
Objectives
• Achieve long-term capital appreciation by investing in listed equities of companies that ha...
4
WHY ASIAN FRONTIER MARKETS?
AFC Asia Frontier Fund CONFIDENTIAL
5AFC Asia Frontier Fund CONFIDENTIAL
WHY ASIAN FRONTIER MARKETS
AFC Asia Frontier
Universe
Bangladesh
Cambodia
Iraq
Laos
M...
6 CONFIDENTIAL
Excellent upside
potential due to
high GDP growth
Low correlation
and diversification
Increasing
Consumptio...
7
Low Correlation to Global Markets
Asian Frontier Markets offer greater diversification benefits
AFC Asia Frontier Fund C...
-0.2
-0.1
0
0.1
0.2
0.3
0.4
0.5
0.6
ISXGI Index (Iraq)
DSE General Index (Bangladesh)
CSX Index (Cambodia)
MSE Top 20 Inde...
9
High Growth + Diversification
High GDP growth of 6.9% in 2012 and 7.2% expected in 2013 for the AFC Frontier universe
AF...
10
The AFC Frontier Universe offers attractive investment opportunities as
their combined GDP is comparable in size to eme...
27%
24%
16%
14%
7%
6%
2% 2% 1% 1%
Pakistan
Iraq
Vietnam
Bangladesh
Sri Lanka
Myanmar
Papua New Guinea
Cambodia
Mongolia
La...
12AFC Asia Frontier Fund CONFIDENTIAL
0
200
400
600
800
1,000
1,200
1,400
1,600
China India Europe
(2011)
AFC
Frontier
Uni...
13
AFC Frontier Universe Combined Population: 569 million (as of 2012)
AFC Asia Frontier Fund CONFIDENTIAL
WHY ASIAN FRONT...
14AFC Asia Frontier Fund CONFIDENTIAL
Increasing urbanisation will support growth in
the Consumer, Infrastructure and Fina...
15AFC Asia Frontier Fund CONFIDENTIAL
0
5
10
15
20
25
30
35
40
45
Personal remittances, received
(US$ Billion)
Bangladesh
...
16 CONFIDENTIAL
Attractive Valuations
Most Asian Frontier markets offer attractive dividend
yields and low Price to Earnin...
17 CONFIDENTIAL
Governments Are Attempting To Increase FDI
• Increasing productivity through transfer of skills, technolog...
18
INTRODUCING
ASIA FRONTIER CAPITAL
AFC Asia Frontier Fund CONFIDENTIAL
19 CONFIDENTIAL
Proven Expertise In Frontier Markets
• The founder and CEO, Thomas Hugger, has more than 20 years experien...
Our Team
Thomas Hugger, CEO and Fund Manager, has spent 27 years in private banking where he
specialized in managing portf...
21
INVESTMENT
OBJECTIVE & STRATEGY
AFC Asia Frontier Fund CONFIDENTIAL
• Achieve long-term capital appreciation by investing in listed equities of
companies that have their principal business a...
23
Top-down
Approach
Value /
Growth
Risk
Mitigation
Cash
AFC Asia Frontier Fund CONFIDENTIAL
INVESTMENT STRATEGY
• Invest in target countries large cap and liquid stocks (core portfolio) with
stock positions ranging from 2% to 5%, and ...
Vinasun (Vietnam Sun Corp), Bloomberg Code: VNS VN
• Vinasun is the largest taxi operator in Vietnam with a market share o...
United Motors Lanka PLC, Bloomberg Code: UML SL
• The leading auto industry distributor in Sri Lanka with a strategic netw...
27 CONFIDENTIAL
Country/Sector Approach
In addition to AFC Frontier Fund’s core investment themes (Consumption,
Infrastruc...
28 CONFIDENTIALAFC Asia Frontier Fund
ASIAN FRONTIER THEME – CONSUMER STOCKS
AFC Asia Frontier Fund’s key sector allocatio...
29 CONFIDENTIALAFC Asia Frontier Fund
ASIAN FRONTIER THEME – CONSUMER STOCKS
Frontier Consumer Stocks have the potential t...
30 CONFIDENTIAL
Risk Mitigation
 Focus on earnings growth, free cash flow and value as the key driver for
high returns
 ...
31
FUND INFORMATION
AFC Asia Frontier Fund CONFIDENTIAL
32 CONFIDENTIAL
NAV as of June 30th 2013
USD-A EUR-A CHF-A USD-B EUR-B CHF-B
NAV USD $1,107.2 n/a CHF $1,125.32 USD $1,112...
33 CONFIDENTIAL
NAV as of June 30th 2013
USD-A EUR-A CHF-A USD-B EUR-B CHF-B
NAV USD $1,107.08 n/a CHF 1125.32 USD $1,112....
34 CONFIDENTIALAFC Asia Frontier Fund
FUND STATISTICS
850
900
950
1,000
1,050
1,100
1,150
1,200
Mar
12
Apr
12
May
12
Jun
1...
35 CONFIDENTIAL
Amongst the top 5% of Funds at the end
of June 2013
AFC Asia Frontier Fund’s 3 month, year to
date and 1 y...
36 CONFIDENTIALAFC Asia Frontier Fund
Growth in Fund Size and Number of Clients
0
2
4
6
8
10
12
14
16
-
500
1,000
1,500
2,...
37 CONFIDENTIALAFC Asia Frontier Fund
COUNTRY ALLOCATION
18.6%
13.9% 13.5%
12.4%
9.5%
7.4% 7.1% 6.5%
2.3%
1.2%
7.8%
0%
5%
...
38 CONFIDENTIALAFC Asia Frontier Fund
SECTOR ALLOCATION
26.4%
16.6%
12.6%
11.4%
7.3% 6.4%
4.5%
3.2%
1.3% 1.2% 1.1% 0.4%
7....
39
Asia Frontier Capital
Universe
Snapshots
CONFIDENTIALAFC Asia Frontier Fund
COUNTRY SNAPSHOTS
40 CONFIDENTIAL
Population 151.8 m
5 Year Average GDP Growth 6.2%
Population of working age 90m
• Growing middle-class wit...
41 CONFIDENTIAL
CAMBODIA
• Abundant natural resources
• Strategic location in dynamic region
• Favourable demographics
• S...
42 CONFIDENTIAL
Population 33.7m
5 Year Average GDP Growth 7.1%
Value of Oil Exports (USD bn) 92.69
• Continuous improveme...
43 CONFIDENTIAL
Population 6.4m
5 Year Average GDP Growth 8.0%
Agriculture as % of GDP 33%
• New-found mineral wealth is t...
44 CONFIDENTIAL
MONGOLIA
Population 2.8m
5 Year Average GDP Growth 8.8%
Least dense country in the
world
1.8
persons/
km2
...
45 CONFIDENTIAL
MYANMAR
Population 63.7m
5 Year Average GDP Growth 5.2%
Rich of natural resources
87% of export
earnings
•...
46 CONFIDENTIAL
PAKISTAN
• Recent elections could lead to economic
reform.
• Stable relations with India
• Apparel and tex...
47 CONFIDENTIAL
Population 6.8m
5 Year Average GDP Growth 8.1%
Rich of natural resources
73% of
export
earnings
• Port Mor...
48 CONFIDENTIAL
SRI LANKA
Population 20.7m
5 Year Average GDP Growth 6.4%
Literacy Rate 91%
• South Asia’s most open econo...
49 CONFIDENTIAL
VIETNAM
Population 90.4m
5 Year Average GDP Growth 5.9%
Literacy Rate 93%
• A major exporter of agricultur...
AFC Asia Frontier Fund CONFIDENTIAL50
Investment Manager: Asia Frontier Capital Ltd., Cayman Islands
Investment Advisor: A...
CONFIDENTIAL51
Subsequent Minimum Subscription: USD 10,000 for USD shares
Initial Subscription Price: EUR 10,000 for EUR s...
52 CONFIDENTIAL
ASIA FRONTIER CAPITAL LTD.
Thomas Hugger, CEO and Fund Manager, Hong Kong
Email: th@asiafrontiercapital.co...
53 CONFIDENTIAL
This Presentation is presented solely for purposes of discussion to assist prospective investors in determ...
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AFC Asia Frontier Fund: presentation

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AFC Asia Frontier Fund invests in fast growing Asian frontier countries like Bangladesh, Cambodia, Iraq, Laos, Mongolia, Myanmar (Burma), Papua New Guinea, Pakistan, Sri Lanka and Vietnam. Due to the emerging middle class and opportunities for developing infrastructure in these countries, the fund’s main investment focus is the consumer and infrastructure sector. The AFC Asia Frontier Fund is positioned to take advantage of the continuing economic shifts in these countries.

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AFC Asia Frontier Fund: presentation

  1. 1. CONFIDENTIAL AFC Asia Frontier Fund July 2013
  2. 2. TABLE OF CONTENTS 2 1. Executive Summary 3 2. Why Asian Frontier Markets 4 3. Asia Frontier Capital 18 4. Investment Objective & Strategy 21 5. Fund Information 31 6. Country Snapshots 39 7. Fund Terms and Conditions 50 8. Contact Information 52 9. Disclaimer 53 AFC Asia Frontier Fund CONFIDENTIAL
  3. 3. EXECUTIVE SUMMARY Objectives • Achieve long-term capital appreciation by investing in listed equities of companies that have their principal business activities in the high-growth frontier markets of Asia Fund Overview • Fund Universe consists of listed equities from Bangladesh, Cambodia, Iraq, Laos, Mongolia, Myanmar, Pakistan, Papua New Guinea, Sri Lanka and Vietnam • Focus on earnings growth and undervalued stocks as key drivers for returns • Sector focus: Consumer related stocks (Consumer Staples and Consumer Discretionary), Financials and Infrastructure related stocks. Additionally country specific sectors/stocks such as Tourism in Sri Lanka and Mining in Mongolia and Papua New Guinea • Invest in target countries’ large cap and liquid stocks (core portfolio) with stock position size ranging from 2% to 5%, and mid to small caps (satellite portfolio) with position size ranging from 1% to 3% Firm Overview • Asia Frontier Capital, created through a Management Buy Out with Leopard Capital, is headquartered in Hong Kong and is focused on managing the AFC Asia Frontier Fund • The CEO, Thomas Hugger has more than 20 years of investment experience in emerging and frontier markets 3AFC Asia Frontier Fund CONFIDENTIAL
  4. 4. 4 WHY ASIAN FRONTIER MARKETS? AFC Asia Frontier Fund CONFIDENTIAL
  5. 5. 5AFC Asia Frontier Fund CONFIDENTIAL WHY ASIAN FRONTIER MARKETS AFC Asia Frontier Universe Bangladesh Cambodia Iraq Laos Mongolia Myanmar Pakistan Papua New Guinea Sri Lanka Vietnam
  6. 6. 6 CONFIDENTIAL Excellent upside potential due to high GDP growth Low correlation and diversification Increasing ConsumptionFavourable Demographics AFC Asia Frontier Fund WHY ASIAN FRONTIER MARKETS
  7. 7. 7 Low Correlation to Global Markets Asian Frontier Markets offer greater diversification benefits AFC Asia Frontier Fund CONFIDENTIAL WHY ASIAN FRONTIER MARKETS 0.34 0.81 0.87 0.91 0 0.2 0.4 0.6 0.8 1 MSCI Asia Frontier Index MSCI Frontier Index MSCI BRIC Index MSCI EM Index Correlation with MSCI World Index Source: Bloomberg. *Based on 5 years data where available
  8. 8. -0.2 -0.1 0 0.1 0.2 0.3 0.4 0.5 0.6 ISXGI Index (Iraq) DSE General Index (Bangladesh) CSX Index (Cambodia) MSE Top 20 Index (Mongolia) KSE All Share Index (Pakistan) LSXC Index (Laos) Colombo All Share Index (Sri Lanka) VH Index (Vietnam - Hanoi) VN Index (Vietnam - Ho Chi Minh) 8 Low Correlation to Global Markets Asian Frontier markets are under researched and have the potential to provide returns with low correlations to global markets AFC Asia Frontier Fund CONFIDENTIAL WHY ASIAN FRONTIER MARKETS Source: Bloomberg. *Based on 5 years data where available
  9. 9. 9 High Growth + Diversification High GDP growth of 6.9% in 2012 and 7.2% expected in 2013 for the AFC Frontier universe AFC Asia Frontier Fund CONFIDENTIAL WHY ASIAN FRONTIER MARKETS 0 2 4 6 8 10 12 14 16 AFC Frontier Universe Growth Rates (%) Source: IMF
  10. 10. 10 The AFC Frontier Universe offers attractive investment opportunities as their combined GDP is comparable in size to emerging and developed countries AFC Asia Frontier Fund CONFIDENTIAL WHY ASIAN FRONTIER MARKETS 0 200 400 600 800 1,000 1,200 1,400 Korea Indonesia AFC Frontier Universe Turkey Saudi Arabia Switzerland Sweden GDP (US$ billion) Source: IMF GDP of AFC Universe Economies: US$ 867 billion (as of 2012)
  11. 11. 27% 24% 16% 14% 7% 6% 2% 2% 1% 1% Pakistan Iraq Vietnam Bangladesh Sri Lanka Myanmar Papua New Guinea Cambodia Mongolia Lao P.D.R. 11 GDP of AFC Universe Economies: US$ 867 billion (as of 2012) AFC Asia Frontier Fund CONFIDENTIAL WHY ASIAN FRONTIER MARKETS Source: IMF
  12. 12. 12AFC Asia Frontier Fund CONFIDENTIAL 0 200 400 600 800 1,000 1,200 1,400 1,600 China India Europe (2011) AFC Frontier Universe United States Indonesia Brazil Population (Millions) WHY ASIAN FRONTIER MARKETS AFC Frontier Universe has a sizeable population which continues to grow which can support future GDP growth AFC Frontier Universe Combined Population: 569 million (as of 2012) Source: IMF
  13. 13. 13 AFC Frontier Universe Combined Population: 569 million (as of 2012) AFC Asia Frontier Fund CONFIDENTIAL WHY ASIAN FRONTIER MARKETS 31% 26% 16% 11% 6% 4% 3% 1% 1% 1% Pakistan Bangladesh Vietnam Myanmar Iraq Sri Lanka Cambodia Papua New Guinea Lao P.D.R. Mongolia Source: IMF
  14. 14. 14AFC Asia Frontier Fund CONFIDENTIAL Increasing urbanisation will support growth in the Consumer, Infrastructure and Financial sectors. WHY ASIAN FRONTIER MARKETS AFC Frontier Universe is Urbanizing from a Low Base Rural 20% Urban 80% OECD members Rural 65% Urban 35% AFC Asia Frontier Universe Source: IMF
  15. 15. 15AFC Asia Frontier Fund CONFIDENTIAL 0 5 10 15 20 25 30 35 40 45 Personal remittances, received (US$ Billion) Bangladesh Cambodia Iraq Lao PDR Mongolia Myanmar Pakistan WHY ASIAN FRONTIER MARKETS Remittance inflows continue to grow and this can support domestic consumption and investment Remittance Inflows supports GDP Growth Source: IMF
  16. 16. 16 CONFIDENTIAL Attractive Valuations Most Asian Frontier markets offer attractive dividend yields and low Price to Earnings and Price to Book ratios. Asian Frontier markets are valued attractively relative to some of the emerging Asian countries. The MSCI Frontier Markets Index also reflects the relative attraction of Frontier Markets. AFC Asia Frontier Fund WHY ASIAN FRONTIER MARKETS Source: Bloomberg. P/E is Trailing 12 Month and P/B is latest Financial Year Emerging Asia Index Valuations Country Index P/E (x) P/B (x) Dividend Yield (%) Thailand SET Index 16.5 2.3 3.0 Philippines PCOMP Index 18.9 2.8 2.2 Indonesia JCI Index 17.9 2.8 2.1 Malaysia FBMKLCI Index 17.0 2.3 3.3 Select Asian Frontier Index Valuations Country Index P/E (x) P/B (x) Dividend Yield (%) Laos LSXC Index 8.8 1.3 7.4 Pakistan KSE100 Index 9.9 1.8 5.3 Sri Lanka CSEALL Index 12.1 1.7 2.6 Vietnam VNINDEX Index 13.5 1.7 3.6 Peer Index Valuations Index P/E (x) P/B (x) Dividend Yield (%) MSCI World Index 16.8 1.9 2.6 MSCI Frontier Markets Index 11.9 1.5 4.1 MSCI Emerging Markets Index 11.1 1.4 2.9
  17. 17. 17 CONFIDENTIAL Governments Are Attempting To Increase FDI • Increasing productivity through transfer of skills, technology, and job opportunities Expected Increase In Foreign Investors’ Participation • Myanmar has attracted foreign inflows from well reputed companies such as Coca-Cola, Dell, Carlsberg, Mitsubishi, etc. • Banks such as Standard Chartered and HSBC are also in the process of setting up operations in Myanmar • Labor intensive businesses are moving to Bangladesh from China due to the cheaper availability of a young skilled labor • Exxon Mobil has set up a US$ 20 bn LNG project in Papua New Guinea which is expected to double PNG’s GDP • Tourism is growing rapidly in countries such as Sri Lanka and Cambodia AFC Asia Frontier Fund WHY ASIAN FRONTIER MARKETS
  18. 18. 18 INTRODUCING ASIA FRONTIER CAPITAL AFC Asia Frontier Fund CONFIDENTIAL
  19. 19. 19 CONFIDENTIAL Proven Expertise In Frontier Markets • The founder and CEO, Thomas Hugger, has more than 20 years experience in investing in Frontier Markets • Licensed by SFC Hong Kong for Type 4 (investment advisory) and Type 9 (asset management) • Asia Frontier Capital Limited was created in June 2013 through a Management Buy Out with Leopard Capital Ongoing Cooperation with Leopard Capital • Leopard Capital has experience managing funds in frontier markets since 2008 • Conducts research through local offices in Bangladesh, Cambodia, Laos and Thailand Attractive Equities Identified in Structured Investment Policy • Asia Frontier Capital has identified equities with great upside potential • The Fund has access to numerous primary and secondary research sources • A Structured Investment and Research process is being followed AFC Asia Frontier Fund INTRODUCING ASIA FRONTIER CAPITAL
  20. 20. Our Team Thomas Hugger, CEO and Fund Manager, has spent 27 years in private banking where he specialized in managing portfolios of listed and unlisted equities. He has been investing in Asian and African Frontier Markets since 1993. He is the former Managing Partner, CFO & COO of Leopard Capital; and was previously a Managing Director and Head of Portfolio Management at LGT Bank in Hong Kong. He also held senior investment positions at Bank Julius Baer in Zurich and Hong Kong. Mr. Hugger was the founding shareholder of one of the largest brokerage companies in Bangladesh. He is also a Certified Financial Investment Analyst (CFIA) and Investment Adviser (Switzerland) and a Certified European Federation of Financial Analysts Societies (EFFAS) Financial Analyst. Ruchir Desai, Senior Investment Analyst, is an MBA graduate in Finance from CUHK Business School at The Chinese University of Hong Kong and is also an alumnus of The Fuqua School of Business at Duke University. Prior to being based in Hong Kong, Ruchir was based in Mumbai where he spent two years as a Senior Analyst at HandsOn Ventures LLC, a mid-market private equity group focused on investments in the Business Services industry. Prior to this role, he spent three years as a Research Analyst covering the Software Services industry at Pioneer Investcorp Ltd, an institutional brokerage based in Mumbai. Ruchir is familiar with our investment approach having joined us from The Leopard Asia Frontier Fund where he was a Summer Associate in 2012. Stephen Friel, Marketing Director, holds a Master of Development Economics with Distinction from University of Queensland, Australia’s highest ranked economic research institution and is also an alumnus of CUHK Business School at The Chinese University of Hong Kong. Prior to joining Asia Frontier Capital, Stephen supported the launch of a Hong Kong based hedge fund where he conducted research on Japanese equities. He is also a former International Business/Strategy Lecturer at The Queensland University of Technology Business School. His background in Development Economics has seen him spend an extensive amount of time on the ground in emerging and frontier markets such as Vietnam, Thailand, Laos, Cambodia, Papua New Guinea, The Philippines and Vanuatu.
  21. 21. 21 INVESTMENT OBJECTIVE & STRATEGY AFC Asia Frontier Fund CONFIDENTIAL
  22. 22. • Achieve long-term capital appreciation by investing in listed equities of companies that have their principal business activities in high-growth Asian frontier markets. • The fund focuses primarily on investments in consumer related stocks, financials and infrastructure. • Countries included in the AFC Asia Frontier Fund Universe include  Bangladesh  Cambodia  Iraq  Laos  Mongolia  Myanmar  Pakistan  Papua New Guinea  Sri Lanka  Vietnam 22 CONFIDENTIALAFC Asia Frontier Fund INVESTMENT OBJECTIVE
  23. 23. 23 Top-down Approach Value / Growth Risk Mitigation Cash AFC Asia Frontier Fund CONFIDENTIAL INVESTMENT STRATEGY
  24. 24. • Invest in target countries large cap and liquid stocks (core portfolio) with stock positions ranging from 2% to 5%, and mid- to small caps (satellite portfolio) with positions ranging from 1% to 3% • Focus on free cash flow, growth potential and undervalued stocks as key drivers for returns • Top – Down Approach  Strategic country and currency allocation • Combination of Value and Growth  Gain exposure to domestic and structural growth by investing in companies with sound business performance and management, coupled with good expansion strategies  Company visits and research (primary and secondary) either by the fund manager or team members 24 CONFIDENTIALAFC Asia Frontier Fund INVESTMENT STRATEGY
  25. 25. Vinasun (Vietnam Sun Corp), Bloomberg Code: VNS VN • Vinasun is the largest taxi operator in Vietnam with a market share of 42% in Ho Chi Minh City and a fleet size of ~4,000 taxis. • Recently, the company has entered into new cities such as Dong Nai and Binh Duong where it is the market leader. VNS is further expanding into new cities such as Nha Trang and Can Tho and could also be looking at smaller acquisitions to gain market share. • Vinasun’s competitive advantage is the ease of access to its taxis through a 24 hour call centre as well as online and on the ground presence at airports, hotels and commercial centres which reduces waiting time relative to competition. • Increasing urbanisation is a demand driver for taxi services with urban population at 32% of total population in 2012 as compared to 26% in 2002 • Revenue and net income have grown at a CAGR of 26.8% and 22.1% respectively between 2008 and 2012 • 2012 Return on Equity at 18.4%, operating margin of 10.9% and not heavily levered with net debt of 0.6x and EBITDA/Interest expense of 5.2x • Currently valued at a 2013 Forward P/E of 9.4x and a P/B of 1.6x. Similar peer, Indonesia based Express Transindo (TAXI IJ) trades at 2013 Forward P/E of 23.2x and a P/B of 4.2x • With further growth in fleet size and profits we expect Vinasun to achieve comparable valuations to its regional peers which leaves room for further upside 25 CONFIDENTIALAFC Asia Frontier Fund INVESTMENT STRATEGY – GROWTH PICK
  26. 26. United Motors Lanka PLC, Bloomberg Code: UML SL • The leading auto industry distributor in Sri Lanka with a strategic network across the country • UML is the sole distributor in Sri Lanka for • Mitsubishi passenger vehicles from Japan • Fuso commercial vehicles from Japan • TVS Motors two and three wheelers from India • Perodua compact cars from Malaysia • JMC commercial vehicles from China • Zotye compact SUV’s from China • Yokohama Tyres from Japan • Valvoline Lubricants from USA • Revenues and net income for the company have grown at a CAGR of 16.2% and 30.7% respectively between FY2008 and FY2013 • 2013 Return on Equity at 30.5%, operating margin of 14.7% and unlevered balance sheet with minimal debt • Currently valued very attractively at 4.0x Trailing 12 Months P/E and at a P/B of 1.1x • The fund entered this stock when valuations were even more compelling with a P/E of 1.97x and P/B of 0.77x • The stock has appreciated by 68% since purchase but we believe it is still attractively valued given the growth prospects for the Sri Lankan economy and it also offers a dividend yield of 8.7%. 26 CONFIDENTIALAFC Asia Frontier Fund INVESTMENT STRATEGY – VALUE PICK
  27. 27. 27 CONFIDENTIAL Country/Sector Approach In addition to AFC Frontier Fund’s core investment themes (Consumption, Infrastructure, and Financials), the fund is also targeting country-specific sectors that are poised for rapid growth  Agriculture in Cambodia, Laos, Myanmar and Vietnam  Textiles in Bangladesh and Pakistan  Travel & Tourism in Cambodia and Sri Lanka  Power generation in Laos  Energy in Iraq and Papua New Guinea  Mining in Mongolia and Papua New Guinea AFC Asia Frontier Fund INVESTMENT STRATEGY
  28. 28. 28 CONFIDENTIALAFC Asia Frontier Fund ASIAN FRONTIER THEME – CONSUMER STOCKS AFC Asia Frontier Fund’s key sector allocation – Consumer Stocks Why we like Consumer Stocks: • Demographics of Frontier Markets – Young Population • Increasing disposable income will shift demand for consumer goods • Attractive valuations, free cash flow generation, consistent earnings growth and dividend payout • Is not subject to political interference or heavy government regulation unlike other industries such as Utilities or Infrastructure • Professional Management as these firms compete with Multi National Companies • Not as significantly impacted by political and social issues • Asian Consumer companies could be attractive acquisition/investment targets; Heineken acquired Asia Pacific Breweries at a P/E ratio of 38.0x, KKR invested US$ 359 million into Vietnam based Masan Group at 44.0x earnings
  29. 29. 29 CONFIDENTIALAFC Asia Frontier Fund ASIAN FRONTIER THEME – CONSUMER STOCKS Frontier Consumer Stocks have the potential to catch up with Emerging Market Valuations Asian Frontier Consumer Picks Regional Comparisons Source: Bloomberg. P/E based on Trailing 12 Month Earnings, P/B based on most recent Financial Year Country Company P/E (x) P/B (x) Dividend Yield (%) Bangladesh Shoe Retailer 11.6 4.2 4.8 Mongolia Consumer Food Products 8.9 0.7 0.8 Pakistan Consumer Beverage Products 9.3 1.1 1.5 Sri Lanka Consumer Beverage Products 8.5 1.8 2.3 Vietnam Consumer Food Products 7.0 1.6 11.0 Country Company P/E (x) P/B (x) Dividend Yield (%) India Bata India 33.2 8.2 0.7 China Tsingtao Brewery 30.7 4.3 0.7 Thailand President Bakery 24.4 5.7 2.0 Indonesia Indofood Sukses Makmur 19.4 2.8 2.5 Philippines Universal Robina Corp 29.4 5.2 2.0
  30. 30. 30 CONFIDENTIAL Risk Mitigation  Focus on earnings growth, free cash flow and value as the key driver for high returns  In-depth due diligence of investment opportunities  Diversify across sectors and countries to reduce non systematic risk  Avoid investing in countries / currencies / sectors of which we strategically disapprove  No leverage Cash  Not fully invested in uncertain times and/or excessive valuations  Holding cash will allow the fund to take advantage of opportunistic investments when they arise (momentum / news driven) AFC Asia Frontier Fund INVESTMENT STRATEGY
  31. 31. 31 FUND INFORMATION AFC Asia Frontier Fund CONFIDENTIAL
  32. 32. 32 CONFIDENTIAL NAV as of June 30th 2013 USD-A EUR-A CHF-A USD-B EUR-B CHF-B NAV USD $1,107.2 n/a CHF $1,125.32 USD $1,112.77 n/a n/a Monthly Performance AFC Frontier Fund (Class A) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD 2012 USD +0.91% -7.56% -0.27% -0.26% +0.85% +3.64% -0.96% +0.62% +3.62% +0.15% CHF -0.29% -1.18% -2.62% +1.62% -1.40% +1.92% -1.82% +0.24% +2.26% -1.39% 2013 USD +5.99% -1.75% -0.70% +1.12% +8.25% -2.33% +10.56% CHF +5.65% +0.84% +0.61% -0.96% +11.36% -3.46% +14.12% Monthly Performance AFC Frontier Fund (Class B) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD 2012 USD +0.94% -7.55% -0.24% -0.23% +0.88% +3.67% -0.94% +0.64% +3.65% +0.37% 2013 USD +6.09% -1.77% -0.70% +1.17% +8.45% -2.36% +10.87% AFC Asia Frontier Fund FUND STATISTICS
  33. 33. 33 CONFIDENTIAL NAV as of June 30th 2013 USD-A EUR-A CHF-A USD-B EUR-B CHF-B NAV USD $1,107.08 n/a CHF 1125.32 USD $1,112.65 n/a n/a AFC Asia Frontier Fund FUND STATISTICS Monthly Performance AFC Frontier Fund (Non-US Class A) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD 2012 USD +0.91% -7.56% -0.27% -0.26% +0.85% +3.64% -0.96% +0.62% +3.62% +0.15% CHF -0.29% -1.18% -2.62% +1.62% -1.40% +1.92% -1.82% +0.24% +2.26% -1.39% 2013 USD +5.99% -1.75% -0.70% +1.12% +8.25% -2.33% +10.56% CHF +5.65% +0.84% +0.61% -0.96% +11.36% -3.46% +14.12% Monthly Performance AFC Frontier Fund (Non-US Class B) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD 2012 USD +0.94% -7.55% -0.24% -0.23% +0.88% +3.67% -0.94% +0.64% +3.65% +0.37% 2013 USD +6.09% -1.77% -0.70% +1.17% +8.45% -2.36% +10.87%
  34. 34. 34 CONFIDENTIALAFC Asia Frontier Fund FUND STATISTICS 850 900 950 1,000 1,050 1,100 1,150 1,200 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 IndexedReturn Performance of the Fund and Relevant Indexes AFC Asia Frontier Fund USD Class A MSCI World MSCI Frontier Markets MSCI Frontier Markets Asia
  35. 35. 35 CONFIDENTIAL Amongst the top 5% of Funds at the end of June 2013 AFC Asia Frontier Fund’s 3 month, year to date and 1 year performances are amongst the top 1%, 4% and 5% of peer equity funds globally out of a total of 2,254 funds (net of all fees/expenses) Source: Bloomberg AFC Asia Frontier Fund FUND STATISTICS
  36. 36. 36 CONFIDENTIALAFC Asia Frontier Fund Growth in Fund Size and Number of Clients 0 2 4 6 8 10 12 14 16 - 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 Private Clients (RHS) Institutional Clients (RHS) Fund size (US$'000) (LHS) FUND STATISTICS
  37. 37. 37 CONFIDENTIALAFC Asia Frontier Fund COUNTRY ALLOCATION 18.6% 13.9% 13.5% 12.4% 9.5% 7.4% 7.1% 6.5% 2.3% 1.2% 7.8% 0% 5% 10% 15% 20% Country Allocation - June 2013
  38. 38. 38 CONFIDENTIALAFC Asia Frontier Fund SECTOR ALLOCATION 26.4% 16.6% 12.6% 11.4% 7.3% 6.4% 4.5% 3.2% 1.3% 1.2% 1.1% 0.4% 7.8% 0% 7% 14% 21% 28% Sector Allocation - June 2013
  39. 39. 39 Asia Frontier Capital Universe Snapshots CONFIDENTIALAFC Asia Frontier Fund COUNTRY SNAPSHOTS
  40. 40. 40 CONFIDENTIAL Population 151.8 m 5 Year Average GDP Growth 6.2% Population of working age 90m • Growing middle-class with a young demographics • Increasing urbanization • The SFC has withdrawn 10% capital gain tax for foreign institutional investors • Strategically located between India and China. • Growing pharmaceutical, software and garment industries AFC Asia Frontier Fund COUNTRY SNAPSHOTS
  41. 41. 41 CONFIDENTIAL CAMBODIA • Abundant natural resources • Strategic location in dynamic region • Favourable demographics • Stable government with favourable investment policies • Stock market established 2011 • First IPO completed in April 2012 Population 14.7 m 5 Year Average GDP Growth 5.4% Main industries Garments, Tourism, Agriculture AFC Asia Frontier Fund COUNTRY SNAPSHOTS
  42. 42. 42 CONFIDENTIAL Population 33.7m 5 Year Average GDP Growth 7.1% Value of Oil Exports (USD bn) 92.69 • Continuous improvement in stability and security • Strategic position, availability of labor and competitive cost base allow Iraq to export to the Middle Eastern Region and to the world. • Growing middle class • Low corporate tax rates of 15% • Abundant proven oil reserves (in excess of 115 billion barrels) IRAQ AFC Asia Frontier Fund COUNTRY SNAPSHOTS
  43. 43. 43 CONFIDENTIAL Population 6.4m 5 Year Average GDP Growth 8.0% Agriculture as % of GDP 33% • New-found mineral wealth is transforming the traditionally agricultural economy • Increased global commodity prices are driving growth • Young population – 48% under the age of 14 • Further reforms to the banking system are expected • Government is promoting investment in SMEs LAOS AFC Asia Frontier Fund COUNTRY SNAPSHOTS
  44. 44. 44 CONFIDENTIAL MONGOLIA Population 2.8m 5 Year Average GDP Growth 8.8% Least dense country in the world 1.8 persons/ km2 • The National Development and Innovation Committee (NDIC) projects GDP growth to top 20.6% in 2014 • Aggressive expansion due to foreign investment in large mining projects • Banks anticipated to double assets to keep up with loan growth AFC Asia Frontier Fund COUNTRY SNAPSHOTS
  45. 45. 45 CONFIDENTIAL MYANMAR Population 63.7m 5 Year Average GDP Growth 5.2% Rich of natural resources 87% of export earnings • Strategically located between India and China • Resource rich • Far reaching political & economic reforms • Sanctions to be lifted • International support • Local stock exchange with 2 listed stocks only for domestic investors • Exposure possible though stocks listed in Singapore AFC Asia Frontier Fund COUNTRY SNAPSHOTS
  46. 46. 46 CONFIDENTIAL PAKISTAN • Recent elections could lead to economic reform. • Stable relations with India • Apparel and textiles accounted for nearly 60% of exports • Transport infrastructure has been given significant focus in the last two decades for improvement and modernization Population 178.9m High rates of inward remittances Over US$1 bn/month in 2011 Population of working age 60 million AFC Asia Frontier Fund COUNTRY SNAPSHOTS
  47. 47. 47 CONFIDENTIAL Population 6.8m 5 Year Average GDP Growth 8.1% Rich of natural resources 73% of export earnings • Port Moresby Stock Exchange with 22 stocks listed • Companies also listed overseas in Australia, Hong Kong and London • Resource rich: natural gas, oil, copper, gold, silver • Cash crops: coffee, copra, tea, rubber, sugar • Fishery • Tourism underdeveloped PAPUA NEW GUINEA AFC Asia Frontier Fund COUNTRY SNAPSHOTS
  48. 48. 48 CONFIDENTIAL SRI LANKA Population 20.7m 5 Year Average GDP Growth 6.4% Literacy Rate 91% • South Asia’s most open economy (since 1977); Private sector driven (85% of GDP) and non-monopolistic • Stable economy after end of civil conflict in 2009 • Spectacular tourism destination • Specialty agricultural exporter (tea, rubber, spices etc.) • Future growth will be spurred by reconstruction projects and real-estate development AFC Asia Frontier Fund COUNTRY SNAPSHOTS
  49. 49. 49 CONFIDENTIAL VIETNAM Population 90.4m 5 Year Average GDP Growth 5.9% Literacy Rate 93% • A major exporter of agricultural products such as black pepper, rice and coffee • Bordered by China to the north, Laos to the northwest, Cambodia to the southwest, and the South China Sea to the east • Pivoting towards a manufacturing oriented economy • Potential for consumer companies due to increasing disposable income AFC Asia Frontier Fund COUNTRY SNAPSHOTS
  50. 50. AFC Asia Frontier Fund CONFIDENTIAL50 Investment Manager: Asia Frontier Capital Ltd., Cayman Islands Investment Advisor: Asia Frontier Investments Ltd., Hong Kong Fund Base Currencies: USD, EUR, CHF Subscription Frequency: Monthly, 5 business days before end of month Redemption: Monthly: - 90 days prior notice for class A shares - 180 days prior notice for class B shares Management Fee: 1.8% p.a. of NAV for class A shares 1.5% p.a. of NAV for class B shares Performance Fee: 10% NAV appreciation above 3 month USD-LIBOR +2% and high water mark for class A shares 8% NAV appreciation above 3 month USD-LIBOR +2% and high water mark for class B shares Initial Minimum Investment: USD 100,000 for USD shares EUR 80,000 for EUR shares CHF 100,000 for CHF shares FUND TERMS & CONDITIONS
  51. 51. CONFIDENTIAL51 Subsequent Minimum Subscription: USD 10,000 for USD shares Initial Subscription Price: EUR 10,000 for EUR shares CHF 10,000 for CHF shares Initial Subscription Price: USD 1,000 for USD shares EUR 1,000 for EUR shares CHF 1,000 for CHF shares Subsequent Subscription Price: NAV Country/Region Focus: Asia Frontier Markets Initial Launch Date: 30 March 2012 Valuation Day: Last day of each calendar month Main Custodian Bank: Deutsche Bank, Singapore Auditor: KPMG, Cayman Islands Administrator: Amicorp Fund Services Asia Pte Ltd., Singapore Legal Advisor: Cayman Islands: Ogier, Hong Kong US: Bingham McCutchen LLP, Boston AFC Asia Frontier Fund FUND TERMS & CONDITIONS
  52. 52. 52 CONFIDENTIAL ASIA FRONTIER CAPITAL LTD. Thomas Hugger, CEO and Fund Manager, Hong Kong Email: th@asiafrontiercapital.com Tel: +852 3904 1015, Fax+852 3904 1017 Website: www.asiafrontiercapital.com AFC Asia Frontier Fund CONTACT INFORMATION Asia Frontier Investments Limited is licensed by SFC Hong Kong for Type 4 (investment advisory) and Type 9 (asset management)
  53. 53. 53 CONFIDENTIAL This Presentation is presented solely for purposes of discussion to assist prospective investors in determining whether they have a preliminary interest in the investment opportunity described herein. Under no circumstances is it to be used or considered as an offer to sell, or a solicitation of an offer to buy, any security or other interest in AFC Asia Frontier Fund, AFC Umbrella Fund or any other fund related thereto (the “Fund”). Offers and sales of interests in the Fund will not be registered under the laws of any jurisdiction and will be made solely to qualified investors under all applicable laws. Potential investors must read the entire Offering Memorandum delivered by the Fund and the disclosure in this Subscription Agreement. Nothing contained herein shall be deemed to be binding against, or to create any obligations or commitment on the part of, any potential investor or the Asia Frontier Capital (the “Fund Sponsors”). The Fund Sponsors reserve the right, in their sole and absolute discretion with or without notice, to alter the terms or conditions of this Presentation and the Fund and/or to alter or terminate the potential investment opportunity described herein. Potential investors are not to construe this Presentation as investment, legal or tax advice. Prior to making any potential investment, potential investors should consult with their own legal, investment, accounting, regulatory, tax and other advisors to determine the consequences of the potential investment opportunity described herein and to arrive at an independent evaluation of such potential investment opportunity. By accepting this Presentation, the recipient agrees not to copy, distribute, discuss or otherwise disclose this Presentation or the contents hereof (including the potential investment opportunity described) or any other related information provided by the Fund Sponsors or by its agents to any person other than employees of recipient evaluating this potential investment opportunity on recipient’s behalf without the prior written consent of the Fund Sponsors. While the information contained herein has been obtained from various sources which the Fund Sponsors believe, but does not guarantee, to be reliable, the Fund Sponsors do not represent that it is accurate or complete and it should not be relied upon as such. No person has been authorized to give any information or make any representation or warranty regarding the subject matter hereof, either express or implied, and, if given or made in this Presentation, in other materials or verbally, such information, representation or warranty cannot and should not be relied upon nor is any representation or warranty made as to the accuracy, content, suitability or completeness of the information, analysis or conclusions or any information furnished in connection herewith contained in this Presentation and it is not to be relied upon as a substitute for independent review of the underlying documents, available due diligence information and such other information as prospective investors may deem appropriate or prudent to review. The Fund Sponsors, their agents, their respective affiliates, and each of their respective shareholders, members, officers, directors, managers, employees, counsel, advisors, consultants and agents (“Representatives”), expressly disclaim any and all liability for express or implied representations or warranties that may be contained in, or for omissions from or inaccuracies in, this Presentation or any other oral or written communication transmitted or made available to a prospective investor or its Representatives. Without limiting the generality of the foregoing, nothing contained herein is or shall be relied upon as a promise or representation as to any matter, including, without limitation, the future performance of the potential investment opportunity described herein. None of the Fund Sponsors, their agents, or their respective Representatives is under any obligation to correct any inaccuracies or omissions in this Presentation. Each prospective investor will have the sole responsibility for verifying the accuracy of all information furnished in this Presentation and in any other due diligence information furnished to a prospective investor, and each prospective investor shall have the sole responsibility for determining the value of the potential investment based on assumptions said prospective investor believes to be reasonable. There shall be no recourse against the Fund Sponsors or any of their Representatives in the event of any errors or omissions in the information furnished, the methodology used, the calculations of values or conclusions. Without limiting the generality of the foregoing, any historical information or information based on past performance included herein is for informational purposes only, has inherent limitations and is not intended to be a representation, warranty or guarantee of future performance. All of the information presented herein is subject to change without notice. Actual returns to potential investors may be lower than the figures shown herein. Projected performance data shown constitutes “forward-looking information” which is based on numerous assumptions and is speculative in nature. Actual results may vary significantly from the values and rates of return projected herein. There can no assurance that the Fund will realize its rate of return objectives or return of investors’ capital. Potential investors should have the financial ability and willingness to accept the risks (including without limitation the risk of loss and lack of liquidity) characteristic of investments in entities such as the Fund. AN INVESTMENT IN THE FUND WILL NOT BE APPROPRIATE FOR ALL INVESTORS. INTERESTS IN THE FUND WILL INVOLVE A HIGH DEGREE OF RISK AND ARE INTENDED FOR SALE ONLY TO SOPHISTICATED INVESTORS WHO ARE CAPABLE OF UNDERSTANDING AND ASSUMING THE RISKS INVOLVED. INVESTORS MAY LOSE ALL OR SUBSTANTIALLY ALL OF THEIR INVESTMENT. THE INTERESTS IN THE FUND HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE APPLICABLE SECURITIES LAWS OF ANY US. STATE OR ANY NON-U.S. JURISDICTION, AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY SUCH APPLICABLE LAWS. INTERESTS IN THE FUND HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE US. SECURITIES AND EXCHANGE COMMISSION OR BY THE SECURITIES REGULATORY AUTHORITY OF ANY STATE OR ANY OTHER RELEVANT JURISDICTION, NOR HAS ANY OTHER AUTHORITY OR COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. AFC Asia Frontier Fund DISCLAIMER

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