Circular No. 21/2004/TT-BTC guides the auction of government bonds, government-guaranteed bonds, and local government bonds through the centralized securities trading market.

CIRCULAR

Guidelines for tendering government bonds, government-guaranteed bonds, and local government bonds through the centralized securities trading market

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Pursuant to Decree No. 141/2003/NĐ-CP dated November 20, 2003 of the Government on the issuance of government bonds, government-guaranteed bonds, and local government bonds, the Ministry of Finance provides guidelines for tendering government bonds, government-guaranteed bonds, and local government bonds (collectively referred to as bonds) through the centralized securities trading market as follows:

This technical regulation sets out technical requirements, testing methods, sampling procedures; management requirements; responsibilities of organizations and individuals producing, trading, and importing cigarettes.

1. The subjects regulated by this Circular include issuing organizations, including: State Treasury (issuing treasury bonds, central construction bonds, local government bonds under the authority of provincial People's Committees), Development Fund (issuing investment bonds), enterprises (issuing government-guaranteed bonds), financial and credit institutions (issuing local government bonds under the authority of provincial People's Committees); Securities Trading Center (Stock Exchange) and other related organizations and individuals.

2. Bonds issued through the centralized securities trading market shall be listed and traded at the Securities Trading Center (Stock Exchange).

Government bonds and local government bonds may be bought and sold in the money market or discounted, rediscounted, or pledged at the State Bank in accordance with the law.

3. Based on the annual capital-raising plan of the state budget (central budget, local budget) and the progress of capital utilization, the issuing organization shall develop a monthly, quarterly detailed tendering plan according to the type of term and notify investors to prepare for participation in the market.

4. The Securities Trading Center (Stock Exchange) acts as an agent for the issuing organization in reviewing members participating in the tender, receiving tender applications, evaluating tenders, and announcing the tender results.

5. Definitions:

In this Circular, the following terms are understood as follows:

5.1. Competitive interest rate tendering refers to the process where participants in the tender offer their bid interest rates, which the Securities Trading Center (Stock Exchange) selects from.

5.2. Non-competitive interest rate tendering refers to the process where participating organizations do not offer bid interest rates but register to purchase bonds at the winning bid interest rate determined by the competitive interest rate tendering result.

5.3. Ceiling interest rate is the maximum interest rate of the issued bond announced by the Minister of Finance during each period.

5.4. Selling bonds through discount means that the issuing organization sells bonds below their face value and pays the face value when due.

5.5. Selling bonds at par value means that the issuing organization sells bonds at their face value. Interest on the bond is paid periodically or together with the principal when due.

5.6. Selling bonds above or below par value means that the issuing organization sets a fixed periodic interest payment rate in advance and determines the bond selling price above or below par value based on the tendering result.

II. SPECIFIC PROVISIONS

1. Currency of issuance and payment

Bonds tendered through the centralized securities trading market are issued and settled in Vietnamese Dong.

2. Form and denomination of bonds

2.1. Form of Bonds

Bonds tendered through the centralized securities trading market are issued in the form of certificates or book-entry records; they may be registered or unregistered.

a) For certificate form: The Ministry of Finance stipulates the content for the issuing organization to print and distribute to successful bidders.

b) For book-entry record form: The Securities Trading Center (Stock Exchange) and depositary organizations record and manage the books.

When issued, bonds are executed in the form of book-entry records and centrally deposited at the Securities Trading Center (Stock Exchange). In case the bondholder requests a certificate, the depositary organization where the bondholder has an account shall request the Securities Trading Center (Stock Exchange) to notify the issuing organization to issue a certificate. Based on the certificate transferred by the issuing organization, the Securities Trading Center (Stock Exchange) shall reduce the number of book-entry bonds and transfer the certificate to the bondholder through depositary members.

2.2. Face Value of Bonds

Issued bonds have a minimum face value of VND 100,000 (one hundred thousand dong). Other face values are multiples of VND 100,000.

3. Interest Rate of Bonds

3.1. The Minister of Finance announces the ceiling interest rate for each period. The Chairman of the Provincial People's Committee (referred to as the Chairman of the Provincial People's Committee), General Director (Director) of the issuing organization decides the specific interest rate for each tender session within the permitted ceiling interest rate.

Depending on specific conditions, the Minister of Finance may not set a ceiling interest rate for the tender.

3.2. The interest rate of issued bonds is determined based on the results of each tender session.

3.3. The interest rate of bonds can be fixed throughout the entire term of the bond or floating annually based on fluctuations in interest rates in the financial and monetary markets. In the case of floating interest rates, based on the agreement of the Ministry of Finance, the Chairman of the Provincial People's Committee, the General Director (Director) of the issuing organization shall announce the reference interest rate before the tender. The official interest rate will be announced periodically or at interest payment dates based on the reference interest rate at the time of announcement.

4. Tendering Principles

4.1. Maintain confidentiality of all information of participating organizations and information related to the tender interest rate.

4.2. Conduct public tenders ensuring equal rights and obligations among participating organizations.

4.3. Successful bidders are responsible for purchasing bonds according to the volume and winning bid interest rate announced.

5. Tendering Forms

The issuance of bonds through tendering shall be conducted in one of two forms: Competitive interest rate tendering, or a combination of competitive interest rate tendering with non-competitive interest rate tendering.

The issuer decides on the specific form of tender for each tender session. In cases where the combined form of tendering between competitive interest rate tendering and non-competitive interest rate tendering is applied, the quantity of bonds tendered under non-competitive interest rate tendering shall not exceed 30% of the total quantity of bonds announced for issuance in that tender round.

6. Participants and Conditions for Participation in Tendering

6.1. Participants in Tendering

Participants in bond tendering through the centralized securities market include:

a) Credit institutions operating under the Law on Credit Institutions;

b) Insurance companies, insurance funds, investment funds legally operating in Vietnam; foreign investment fund branches in Vietnam;

c) Securities companies;

d) Enterprises and economic organizations of all types of ownership.

Budgetary units benefiting from state budget funds may not use such funds to purchase bonds.

6.2. Conditions for Participation in Tendering

a) Having legal entity status, established or operating legally according to current Vietnamese laws;

b) Having a minimum statutory capital of 22 billion Vietnamese dong;

c) Having a Vietnamese dong account opened at a bank;

d) Being issued a certificate of membership to participate in bond tendering.

Annually, the Securities Trading Center (Stock Exchange) reviews the conditions of participants to issue new or revoke certificates of membership to participate in bond tendering.

7. Forms of Bond Issuance

Bonds tendered through the centralized securities trading market are sold in the following forms:

7.1. Discount sale form;

7.2. Par value sale form;

7.3. Sale form above or below par value.

8. Organization of Bond Tendering

8.1. Time of Tendering Organization

Bond tendering is organized weekly, monthly, or quarterly based on the state budget's capital-raising plan, the issuing organization's capital needs, and the financial and monetary market situation.

8.2. Tender Announcement

Four working days before organizing the tender, based on the issuance proposal of the issuing organization, the Securities Trading Center (Stock Exchange) sends the bond issuance announcement to participating tender members and publishes it in mass media. The announcement includes: quantity of bonds to be issued; tender date; tender form; issuance date, maturity payment date; bond form; bond sale form; principal and interest repayment method.

8.3. Tender Registration and Opening

a) Procedures for tender registration, sequence of opening bidding sheets, checking the validity and legality of bidding sheets, as well as the tendering procedures and formalities are stipulated by the Securities Trading Center (Stock Exchange).

b) Organizations and individuals who are not tender members can place bids through tender members.

c) The minimum bid quantity for participating tender members is 100,000,000 Vietnamese dong (one hundred million Vietnamese dong).

8.4. Determination of Winning Bid Quantity and Interest Rate

8.4.1. Basis for Determination

The basis for determining winning bid quantity and interest rate includes:

a) Bid quantity and interest rate of participating organizations.

b) Anticipated bond issuance quantity and ceiling interest rate (if applicable).

8.4.2. Principles for Determination

a) Competitive interest rate tendering form

- In case there is no ceiling interest rate: The winning bid quantity is selected in ascending order from the lowest interest rate until the issuance quantity is reached.

If multiple bid sheets have the same interest rate and the winning bid quantity exceeds the issuance quantity at that interest rate, the remaining winning bid quantity (after subtracting the winning bid quantity at lower interest rates) will be allocated proportionally to each bid sheet based on the bid quantity of each sheet.

- In case there is a ceiling interest rate: The winning bid quantity is selected in ascending order within the ceiling interest rate range. At the highest interest rate within the ceiling range where the bid quantity exceeds the issuance quantity, the remaining winning bid quantity (after subtracting the winning bid quantity at lower interest rates) will be allocated proportionally to each bid sheet based on the bid quantity at that interest rate.

In both cases, the highest winning bid interest rate is the common issuance interest rate applied to all winning bidders.

b) Combined form of competitive interest rate tendering and non-competitive interest rate tendering

- Determination of competitive and non-competitive interest rate tender quantities:

+ In case the non-competitive interest rate tender quantity is less than or equal to 30% of the announced issuance quantity, the non-competitive interest rate tender quantity equals the bid quantity. The competitive interest rate tender quantity equals the announced issuance quantity minus the non-competitive interest rate tender quantity.

+ In case the non-competitive interest rate tender quantity exceeds 30% of the announced issuance quantity, the non-competitive interest rate tender quantity equals 30%, and the competitive interest rate tender quantity equals 70% of the announced issuance quantity.

- Determination of winning bid quantity and interest rate:

+ For participants in competitive interest rate tendering: The winning bid quantity and interest rate of competitive interest rate tendering members are determined as specified in paragraph a of this section.

For participants in non-competitive bidding who do not compete on interest rates: Participants in non-competitive bidding may purchase bonds at the issue interest rate applicable to competitive bidding participants. If the amount of non-competitive bids exceeds 30% of the announced bond issuance volume, the issuance volume for these participants shall be allocated proportionally based on the bid volume of each participant.

8.5. Determining the Bond Sale Price and Amount to be Paid Upon Maturity

a) Selling Bonds at a Discount

- The bond sale price is determined using the following formula:

Where:

G: Bond sale price

MG: Face value of the bond

Ls: Bid-winning interest rate (% per annum)

n: Term of the bond (years)

- Upon maturity, payment will be made at the face value of the bond.

b) Selling Bonds at Par Value

- For bonds that pay principal and interest once upon maturity:

+ The bond sale price equals 100% of the face value

+ The amount to be paid upon maturity is calculated using the following formula:

Where:

T: Total amount payable (principal and interest)

MG: Face value of the bond

Ls: Bid-winning interest rate (% per annum)

n: Term of the bond (years)

- For bonds that pay interest periodically:

+ The bond sale price equals 100% of the face value

+ Periodic interest payments are calculated using the following formula:

Where:

L: Periodic interest payment amount

MG: Face value of the bond

Ls: Bid-winning interest rate (% per annum)

k: Number of interest payments per year

+ Upon maturity, the bondholder will be paid the principal at the face value of the bond and the final interest payment.

c) Selling Bonds Above or Below Par Value

- The issuer sets the periodic interest rate (as a percentage per annum) and determines the issue interest rate and bond sale price through bidding.

- The bond sale price is determined using the following formula:

Ls

Where: r =

k

G: Bond sale price

L: Periodic interest payment amount

MG: Face value of the bond

Ls: Bid-winning interest rate (% per annum)

k: Number of interest payments per year

t: Number of interest payment periods over the term of the bond

- Periodic interest payments are calculated using the following formula:

Where:

L: Periodic interest payment amount

MG: Face value of the bond

Lt: Periodic interest rate (% per annum)

k: Number of interest payments per year

- Upon maturity, the bondholder will be paid the principal at the face value of the bond and the final interest payment.

(Appendix 01: Specific Examples of Selling Bonds Above or Below Par Value).

8.6. Announcing the Results of the Auction

After determining the winning interest rate and volume, the Securities Trading Center (Stock Exchange) deposits the Summary of Auction Results with the issuer, the Ministry of Finance (Department of Banking and Financial Institutions, State Securities Commission), the People's Committee of the province or city (if it is a local government bond), and simultaneously sends the results to participating entities and publishes them through mass media.

9. Payment for Purchasing Bonds

9.1. The bond issuance date is set for the second working day after the auction. Within two working days following the auction, successful bidders must transfer the full purchase price of the bonds according to the price determined in the winning bid notification into the issuer’s account.

The account opening unit of the issuer reports the receipt of proceeds from selling bonds to the successful bidders to the issuer, and simultaneously informs the Securities Trading Center (Stock Exchange) to process the bond registration for the successful bidders.

9.2. In case successful bidders delay the payment procedures beyond the specified date, the issuer notifies the Securities Trading Center (Stock Exchange) of the name of the successful bidder and the delayed payment period, so that the Securities Trading Center (Stock Exchange) can request the bank where the successful bidder has an account to deduct funds from the deposit account and transfer them to the issuer. Late paying entities will be subject to late payment penalties. The penalty amount will be deducted from the deposit account of the successful bidder and transferred to the central budget (for Treasury bonds and central government project bonds), the local budget (for local government bonds), or reimbursed to the issuer (for investment bonds and government-guaranteed bonds). The late payment penalty amount is calculated using the following formula:

Where:

- P: Amount of late payment penalty

- St: Amount of late payment

- Ls: Bid-winning interest rate (% per annum)

- n: Number of days late

If more than five working days have passed since the payment deadline and the balance in the deposit account of the successful bidder is still insufficient to make the payment, the unfulfilled portion of the winning bid will be canceled, and the entity will be penalized 5% of the canceled amount to be transferred to the central budget (for Treasury bonds and central government project bonds), the local budget (for local government bonds), or the issuer (for investment bonds and government-guaranteed bonds).

10. Transfer of Issuance Proceeds

Based on the credit report received from the account opening unit, the issuer processes:

10.1. For the National Treasury: Record the central government revenue from issuing Treasury bonds and central government project bonds; record local government revenue for local government bonds if authorized by the provincial People's Committee.

10.2. For the Development Support Fund and designated financial institutions and credit organizations issuing investment bonds: Record the revenue from issuing investment bonds.

10.3. For designated financial institutions and credit organizations issuing local government bonds: Record local government revenue from issuing local government bonds.

10.4. For enterprises issuing government-guaranteed bonds: Record the revenue from issuing bonds. The enterprise is responsible for maintaining separate records and accounting for the bond issuance proceeds and their use for designated investment projects.

11. Payment of Bonds Upon Maturity

11.1. For Non-Book-Entry Bonds

The principal and interest payments on bonds shall be made at the issuing organization or at agents appointed by the issuing organization to make such payments. One working day before the due date for principal and interest payments, financial agencies (central and local); Development Support Fund, financial and credit organizations issuing investment bonds, enterprises issuing government-guaranteed bonds shall process the transfer of funds to the State Treasury (for bonds issued by the State Treasury) or to payment agents to pay directly to bondholders.

11.2. For registered bonds

Principal and interest payments on bonds shall be made at bond registration organizations. One working day before the due date for principal and interest payments, financial agencies (central and local); Development Support Fund, financial and credit organizations, enterprises issuing bonds shall process the transfer of capital to the Securities Trading Center (Stock Exchange) to transfer to bond registration organizations to pay directly to bondholders. The Securities Trading Center (Stock Exchange) and bond registration organizations shall be entitled to a fee on the amount of principal and interest actually paid.

11.3. Early redemption of bonds

In case of necessity, issuing organizations may carry out early redemption of bonds. Early redemption of bonds must be approved in writing by the Ministry of Finance.

12. Issuance and payment expenses for bonds:

12.1. Sources of issuance and payment expenses for bonds are the central budget (for treasury bonds and central public works bonds), local budgets (for local government bonds); Development Support Fund, financial and credit organizations (for investment bonds); enterprises (for government-guaranteed bonds) which ensure and pay to organizations responsible for issuing and paying bonds, specifically as follows:

a) Expenses for printing bond certificates shall be paid directly to the printing agency according to the contract.

b) Expenses for organizing bond auctions shall be paid to the Securities Trading Center (Stock Exchange) at 0.15% of the total value of winning bonds. The Securities Trading Center (Stock Exchange) shall distribute 0.05% of the value of winning bonds of non-member organizations and individuals to member organizations that execute bidding orders for non-member organizations and individuals.

c) Expenses for paying bonds shall be paid to payment agent units at 0.1% of the actual principal and interest paid.

The Securities Trading Center (Stock Exchange), bond registration organizations, State Treasury, and bond payment agents have the responsibility to use bond issuance and payment expenses in accordance with the prescribed financial regulations for their units.

12.2. Transfer fees for transferring principal and interest of bonds into accounts at the request of bondholders shall be borne by the bondholders at the bank transaction fee rate.

13. Responsibilities of related units

13.1. The State Securities Commission has the responsibility:

a) To inspect and supervise the organization of bond auctions through the centralized securities trading market;

b) To resolve disputes, complaints, and accusations arising from the organization of bond auctions;

c) To monitor auction market trends and recommend measures to manage market activities.

13.2. The Securities Trading Center (Stock Exchange) has the responsibility:

a) To provide specific procedures for bond auctions through the centralized securities market;

b) To check the conditions of participating organizations in the auction;

c) To organize the opening of bids, determine the winning interest rates, winning quantities, and issue prices of bonds;

d) To monitor and oversee the payment of bond purchase money by winning organizations.

III. IMPLEMENTATION

1. This Circular shall take effect fifteen days after its publication in the Official Gazette.

2. Ministers, Heads of ministerial-level agencies, heads of agencies under the Government, Chairpersons of People's Committees of provinces and centrally-administered cities, Chairman of the State Securities Commission, General Directors (Directors) of issuing organizations, and Heads of related units are responsible for implementing this Circular strictly in accordance with its guidance.