Launching of Thailand's First Inflation Linked Bond

Project Funding For Infrastructure Development in Bangkok

Launching of Thailand’s First Inflation Linked Bond 20th – 25th June 2011 Thailand first’s ILB London – UK, SG, HK

1

Disclaimer Public Debt Management Office, Ministry of Finance - Thailand

The information contained in this presentation is for informational purposes only and does not constitute an offer or invitation to sell or the solicitation of an offer or invitation to purchase or subscribe for THB inflation linked bonds (the “ Bonds”) issued by the Ministry of Finance of the Kingdom of Thailand in the United States, Thailand or any other jurisdiction nor should it or any part of it form the basis of, or be relied upon in any connection with, any contract or commitment whatsoever.

This presentation is confidential and is intended only for the exclusive use of the recipients thereof and may not be reproduced (in whole or in part), retransmitted, summarized or distributed by them to any other persons.

None of The Hongkong and Shanghai Banking Corporation Limited, Bangkok Branch Krung Thai Bank Public Company Limited, The Siam Commercial Bank Public Company Limited and Kasikornbank Public Company Limited (together, the “the Joint Lead Managers”) or the Issuer nor any of their holding companies, subsidiaries, affiliates, associated undertakings or controlling persons, nor any of their respective directors, officers, partners, employees, agents, representatives, advisers or legal advisers makes any representation or warranty, express or implied, as to the accuracy or completeness of the information contained in this document or otherwise made available nor as to the reasonableness of any assumption contained herein or therein, and any liability therefore (including in respect of direct, indirect or consequential loss or damage) is expressly disclaimed. Nothing contained herein or therein is, or shall be relied upon as, a promise or representation, whether as to the past or the future and no reliance, in whole or in part, should be placed on, the fairness, accuracy, completeness or correctness of the information contained herein. None of the Joint Lead Managers, the Issuer or their subsidiaries or affiliates has independently verified, approved or endorsed the material herein, or undertakes to update or revise any information subsequent to the date hereof, whether as a result of new information, future events or otherwise.

This presentation may contain forward-looking statements that may be identified by their use of words like “plans”, “expects”, “will”, “anticipates”, “believes”, “intends”, “depends”, “projects”, “estimates” or other words of similar meaning and that involve risks and uncertainties. Forward-looking statements are based on certain assumptions and expectations of future events. None of the Joint Lead Managers or the Issuer can guarantee that these assumptions and expectations are accurate or will be realized. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements as a result of a number of risks, uncertainties and assumptions. You are cautioned not to place undue reliance on these forward looking statements. None of the Joint Lead Managers or the Issuer assumes any responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent developments, information or events, or otherwise.

These materials may not be taken or transmitted or distributed, directly or indirectly, to a U.S. person (as defined in Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”)) or to any officer, employee or affiliate of a U.S. person located in the United States or any of its territories. It may be unlawful to distribute these materials in certain jurisdictions.

2

Thailand’s stimulus package in 2009 led to a strong rebound in economic growth Public Debt Management Office, Ministry of Finance - Thailand

15%

% change (Y-O-Y)

Real GDP (year on year percentage change)

China India

10%

7.8%

Thailand

5%

4.0% 0%

-2.3% -5% 2008 China

Hong Kong SAR

2009 India

Indonesia

2010 Korea

Malaysia

2011F Philippines

Vietnam

Thailand

Source : IMF, World Economic Outlook Database, April 2011

3

Biggest Stimulus Package in the Region

TKK* 2012 : US Dollar 43 Billion

(TKK* 2012 plan)

(By Sector) Public Debt Management Office, Ministry of Finance - Thailand

Economy

Stimulus Package as share of 2009 GDP (%)

China, People's Rep. of

1.2

Hong Kong

1.4

India

1.6

Indonesia

1.3

Korea, Rep. of

2.5

Malaysia

2.6

Philippines

4.1

Singapore

5.9

Taipei, China

2.1

Thailand

6.4

Units: Billion US Dollars

Others 5.0 12%

Logistic 12.3 28%

Public Health 3.6 8% Community Investment 4.7 11%

Education 4.7 11%

Energy 5.2 12%

Agriculture 7.5 18%

Source : Oxford Economics, 2009 “Asian Emerging Fiscal Policy. A limit Boost, but China could yet do more”, Emerging Market Weekly, 16 March * Thai Khem Khaeng (TKK) scheme is a stimulus package initiated to support economic recovery and to help strengthen the country’s medium-term economic competitiveness.

4 Source : Public Debt Management Office, Ministry of Finance

4

Effective Fiscal and Debt Management Lead to LOWER Public Debt to GDP in the Long Run Public Debt Management Office, Ministry of Finance - Thailand

70

(%) Pre-TKK Stimulus Package 61.7

60.3 46.9 46.0

41.9

35

42.7

37.3

Post-TKK Stimulus Package

14.6

2018F

2017F

2016F

2015F

2014F

2013F

2012F

2011F

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

0 1996

Public Debt / GDP (%)

52.5

5

Macroeconomics Indicators Public Debt Management Office, Ministry of Finance - Thailand

GDP: back on growth trend Positive signs in Q1/2011 World economic recovery + expanding domestic demand resulted in - higher export - expansion in tourism - increasing private investment - higher farm income - lower unemployment rate

Source : NESDB May 23, 2011

Economic management for 2011 (1) Maintaining stability and increasing level of income (2) Monitoring prices of commodities (3) Enhancing competitiveness of Thai economy (4) Accelerating a regional cooperation in trade and transportation

6

Macroeconomics Indicators Public Debt Management Office, Ministry of Finance - Thailand

Low Unemployment Rate

Strong External Balance and Export y-o-y

USD mil 4,000 3,500 3,000 2,500 2,000 1,500

60% %

50%

12

40%

10

30% 8

20%

1,000 500 0 -500 -1,000 -1,500 -2,000

10%

6

0%

4

-10%

2

-20%

EU

UK

Dec-10

Apr-10

Aug-10

Dec-09

Apr-09

Aug-09

Dec-08

Apr-08

Aug-08

Dec-07

Apr-07

Aug-07

Dec-06

Apr-06

Aug-06

Dec-05

Apr-05

Aug-05

Thailand

Source: Bloomberg, April 2011

US

Source: Bloomberg, June 2011

Historical Policy Rates

YoY Inflation Historical Trend %

%

7

10

6

8

5

6

4

4

3

2

2

0

1

-2

2000

0 2000

Dec-04

2011

Apr-04

2010

Export growth (right axis)

Aug-04

2009

Dec-03

2008

Apr-03

2007

Aug-03

2006

Dec-02

2005

Apr-02

2004

Aug-02

2003

Trade Balance (left axis)

Dec-01

2002

Apr-01

2001

Aug-01

0

-30%

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

-4

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011 -6

Thailand

Source: Bloomberg, June 2011

EU

UK

US

Thailand

Source: Bloomberg, June 2011

EU

UK

US

7

Consensus: Thailand’s fundamentals remain sound and improving Public Debt Management Office, Ministry of Finance - Thailand

S&P’s Thailand Analysis**

Moody’s Thailand Analysis*

Fitch’s Thailand Analysis***

Thailand’s Baa1 LT Local currency rating reflects medium economic and institutional strength

LT Local currency affirmed at ‘A-’ with stable rating outlook

Revised LT Local currency IDR up from negative outlook to stable and affirmed rating at ‘A-’

• International reserves build up • Steady repayment of external debt • External debt reduction • Export competitiveness • Track record of fiscal restraint • Stronger external indicators than the median values of Baa peers and many A-rated countries

• Thailand is a significant net external creditor • Prudent fiscal management • Foreign-exchange reserves are likely to exceed USD 170 billion • Government indebtedness is modest (less than 23% of GDP at end of 2010) • Interest burden is kept at only 5.3% of government revenue

• External finances ‘exceptionally strong’ compared to BBB Median • Capability for external debt repayment and servicing exceeds BBB group • Quicker than expected fiscal stablisation from stimulus programmes

Remarks:

* Moody’s Thailand Credit Opinion, March 2011 ** S&P’s Thailand Report, January 2011 *** Fitch’s Thailand Report, May 2011

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Thai Bond Market

9

Thailand’s Bond Market has Grown Strongly for More Than a Decade Public Debt Management Office, Ministry of Finance - Thailand

140%

128%

120%

105% 100%

86%

80%

78%

72% 60%

63%

52% 40%

39% 20%

7%

Bank Loan / GDP

Equity Market / GDP

2011 (Q1)

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1996

1995

1994

1993

1992

1997

12%

0%

Bond Market / GDP

10

The Thai Bond Market has Developed Rapidly and Efficiently Public Debt Management Office, Ministry of Finance - Thailand

Billion US Dollars

350

100%

Next Step 2011: (Market Deepening Oriented)

Post Crisis – 2000:

2007 – 2010 :

300

Volume Oriented

Development Oriented

250

Bond Market Capitalisation tripled Government Bonds Outstanding grew by 50 times Government Bond Market Share jumped from 3% in 1997 to 44% in 2000

Regular Benchmark Issuance New Product Development Pro-active Bond Market Management (BoT and PDs)

40%

% of GDP

- Illiquid Bond Market - Absence of Benchmark Bond - Dominated by SoE’s Bonds - Retail Market

20%

10%

50

65% 57%

Pre-Crisis

100

80%

60%

200

150

Upgrade PD system Regional Linkage ILB and 50-yr Bond

2012F

2011 (Q1)

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

0% 1995

0

11 11

Deep and liquid domestic bond market allows government to meet funding requirements (tripled as a result of stimulus measures) Public Debt Management Office, Ministry of Finance - Thailand

Billion US Dollars

32

Consistent benchmark issuance Benchmark yield curve Saving bonds Expand investor base (Retail) Low cost bank loan TKK Investment

Strategy FY2011-12 ILB

Rising inflation rate trend Long-term P/N Demand from insurance LB 50-yr bond Lengthen portfolio

24

Bank Loan 1.0

T-Bill 4.5

16

P/N 1.7

Tripled

TKK 5.0

Bank Loan 7.9

P/N 3.5

SB 2.7

SB 2.7

New Instruments 2.5 Bank Loan 2.0

P/N 1.8

FIDF 11.3

SB 0.1

P/N 1.0

8

-

P/N 1.0

SB 0.6

SB 0.6

LB 6.4

LB 7.4

LB 12.8

LB 14.7 T-Bill -4.2

LB 13.7

Budget Deficit 11.7

T-Bill -2.5 Refinance Bank Loan

-2.5 Refinance Bank Loan

-2.7

-8 Fiscal Year

2007

2008

Annual Fund raising USD 8.0 bn Note:

USD 9.0 bn

2009 USD 22.7 bn

2010 USD 24.6 bn

2011 USD 17.6 bn

2012

USD 28.5 bn

SB – Saving bond for retail investors LB – Loan bond (Thai government bond) ILB – Inflation-linked bond P/N – Promissory note TKK – Thai Khem Khaeng scheme FIDF – Financial Institutions Development Fund

12

2007 – 2011

Innovation of Gov’t Debt Securities Public Debt Management Office, Ministry of Finance - Thailand

2007-10 30-yr Loan Bond

• Lengthen average-time-to-maturity − New Issuing Debt 6 yrs to 10 yrs − Government Debt Portfolio 5.7 yrs to 6.3 yrs

Floating Rate Bond

• Increase floating debt ratio (5% to 13%) • Promote BIBOR

Step-up Saving Bond

• Increase investor base – Retail investors • Low interest burden at the initial periods of bond

Fixed Promissory Note

• Increase investor base – Insurance / Long-term investors • Non-Benchmark maturity

2011 50-yr Loan Bond

• Combat low interest rate + Lengthen average time-to-maturity • 4th country in the world (1st : UK 2nd : France 3rd : China)

Inflation Linked Bond (ILB)

• • • • •

Saving Bond - ATM

Strong anti-inflationary signal Deepen the Development of the Bond market 1st country in Emerging Asian Economies Enhance liquidity of saving bond To be launched : Sep 2011

13

Keep Our Word to get Investor Confidence for the Plan

Firm Committed Supply of Benchmark Bond Regardless of Budget uncertainty

FY2009 400,000

Higher government funding due to the Stimulus Package I and II ~ +270,000

300,000

MB

200,000

Plan +3% 209,530

281,000

+151% 163,000

203,000

Total Funding increase from: 424,691 MB to 696,252 MB (+64%)

Actual

+91%

+160% +33% 80,000

100,000 65,000

109,722

147,000

60,000

42,191

-

Benchmark Bond

Non Benchmark Bond

Saving Bond

T-Bill

Others

(Outstanding)

FY2010 400,000

360,000

Plan

+6%

Lower Borrowing from Economic Recovery ~ 105,000 MB

300,000

340,000

-45% 281,000

306,171

261,171

-52%

200,000

Total Funding decrease from: 801,171 MB to 696,171 MB (-13%)

Actual +17%

154,000

+150 %

100,000

75,000

170,000 82,000

30,000 -

Benchmark Bond

Non Benchmark Bond

Saving Bond

T-Bill (Outstanding)

Others

13

Equilibrium of Thailand Bond Market

• Issuers • Credit Rating • Investors Public Debt Management Office, Ministry of Finance - Thailand

Issuers

• 82 percent of Thailand’s debt securities were issued by Government, Central bank and State-owned Enterprises

Credit Rating

• 98 percent of Thailand’s debt securities are classified as Investment Grade by local rating agencies

Investors

• Thailand’s government debt securities are held by a wide group of investor types

Thailand Bond Market (Classified by Issuers)

Thailand Bond Market (Classified by Credit Rating*) Other

BBB

2% 2%

A

7%

AA

Private Sector

Government

7%

39% Central Bank

Source: Thai Bond Market Association

TSD (Subbook of Broker/Custodian)

4%

SOEs

36%

3%

AAA

18%

Government Debt Securities (Classified by Types of Investors)

SOEs

29%

Government

7

39%

%

%

* This is local rating agencies – TRIS / Fitch (Thailand)

25%

Non-resident

1% Household and Non-profit

Central Bank

36

Insurance and Other Corporation

Government and Central bank

Depository Corporation

26%

17% 2%

Source: Bank of Thailand

15

Bond Market Liquidity in Secondary Market

Selected ASEAN+3 Government Bond Turnover Ratio Public Debt Management Office, Ministry of Finance - Thailand

Japan

USD 10,425 bn

China

USD 2,369 bn

Korea

USD 524 bn

Thailand

USD 180 bn

Malaysia

USD 155 bn

Singapore

USD 105 bn

0.96 1.16

0.61 0.81

USD 63 bn

0

S & P*

Aa2

AA-

Aa3

AA-

A1

A

49.6

Baa1 BBB+

0.87

0.27 USD 103 bn

Indonesia Philippines

1.15

Moody’s*

1.3 1

* Source: Sovereign foreign currency ratings, Bloomberg (as of 16 Jun 2011) ** Trading volumes in secondary market and bond turnover ratios are from Asian Bonds Online

A3

A-

Aaa

AAA

Ba1

BB+

2011

Ba2

BB

2010

2 16 16

1. Trading Volume 3. Demand Concentration

Key Success Indicators

2. Turnover Ratio 4. Auction Price

Public Debt Management Office, Ministry of Finance - Thailand

5 yr Benchmark Bond : Highest Secondary Trading Volume (accounted for ¼ of total trading volume)

27%

5

FY08

FY09

3.9

27%

20%

3.1

2.4

1.7

7% FY07

5 yr Benchmark Bond : Higher Turnover Ratio

FY10

Top 10 Gov’t Bond Series – Accounted for 84% of all Gov’t Bond trading in Secondary Trading Volume

FY07

FY08

FY09

FY10

Well developed Benchmark Bond pays off : Even with greater size of issuance, the cost of funding is still at market rate

-0.6 bps +1.4 bps

84% 76%

78%

80%

70% FY07

FY08

FY09

FY10

FY11 H1

+1.2 bps USD 7.5 bn FY08

USD 12.8 bn

FY09

USD 14.5 bn

FY10

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ILB Features

18

Structure of Thai ILB Public Debt Management Office, Ministry of Finance - Thailand

Indicative Terms & Conditions Format

Capital Indexed Bond (similar to Canadian model) with floor

Currency

Thai Baht

Tenor

10 years

Programme Size

Up to THB 40 billion (USD 1.3 billion equiv.)

Interest Payment

Every 6 months

Index

Headline CPI

Indexation Lag

3 months

Index Ratio

CPI t / CPI 0 (TBMA's calculation)

Expected Real Yield

[ ]

Repayment Method

Bullet

Expected Timing

Following Thai election in early July 2011

19

Calculation Public Debt Management Office, Ministry of Finance - Thailand

Interest Paid (semi-annually) Inflation-adjusted component on Principal (at Maturity)

where

=

Actual

× C × Index Ratio × Principal

365

= (Index Ratio − 1) xPrincipal

Index ratio =

CPIRef CPIIssue

 D −1  CPI Issue , CPI Ref = CPI M -3 +  × (CPI M -2 − CPI M -3 )  TD 

C CPIRef CPIIssue CPIM-2 CPIM-3 D TD

= = = = = = =

Date Interpolation Factor

Coupon Rate (which is equal to Real Rate for ILB) Each Referred Headline CPI has a Referred Headline CPI @ Interest Payment Date 3-month lag time (International ILB Referred Headline CPI @ Bond Issuance Date Standard Compliance Purpose) Headline CPI @ 2 months prior to the relevant Interest Payment Date Headline CPI @ 3 months prior to the relevant Interest Payment Date Date of Interest Payment Number of Days in the Interest Payment Month

Example Thailand*s ILB issued on January 1, 2011 (CPI @ October 2010 = 100 and CPI @ April 2011 = 103) Calculate Index Ratio on the first interest payment date, July 1, 2011: when CPIIssue = 100 (calculated from CPI @ Octorber 2010) CPIRef on July 1, 2011 = 103 (calculated from CPI @ April 2011) from the formula Index Ratio = CPIRef CPIIssue

Hence, Index Ratio on July 1, 2011 = 1.03

20 20

Comparison of Global ILB Bond Structures Public Debt Management Office, Ministry of Finance - Thailand

• Thailand’s Inaugural ILB issued by MOF will conform with international ILB standards and conventions. This allows investors to compare valuations more easily (UK recently shifted the majority of supply into 3mth lag index-linked gilts).

• Inflation floors offer advantage for investors in times of deflation. Thai ILB approach to inflation floor conforms with international standards.

Thailand MOF ILB

CANi

UK InflationLinked Gilts

U.S. TIPS)

OATi

OAT€i

Reference Index

Thai Headline CPI (monthly)

Canada CPI (monthly)

RPI (monthly)

CPI-U (monthly)

INSEE ex-tobacco (monthly)

EMU HICP ex-tobacco (monthly)

Coupon Frequency and Fixing Method

Semi-annual (postdetermined)

Semi-annual (postdetermined)

Semi-annual (postdetermined)

Semi-annual (postdetermined)

Annual (Postdetermined)

Annual (Postdetermined)

Principal Indexation

Daily with a 3 month lag

Daily with a 3 month lag

RPI with a 3 month lag*

Daily with a 3 month lag

Daily with a 3 month lag

Daily with a 3 month lag

Principal Repayment

Minimum at par

Minimum at par

No minimum

Minimum at par

Minimum at par

Minimum at par

* Since 2008

21

Reference Index

Reflects the changes in local consumer purchasing patterns Public Debt Management Office, Ministry of Finance - Thailand

Thailand

USA

European Union

US CPI Urban

EU Harmonised index of Consumer Price (ex-tobacco)

Headline CPI Food 15% Education 5%

Other 33%

Food 33%

Medical 6% Energy 10%

Transportati on 23%

Housing 23%

Apparel 4%

Food 20% Services 41%

Manaufacur ing 31%

Housing 42%

Services 36%

Energy 9%

UK

Mexico

Retail Price Index

Nacional de Precious al Consumidor

Other 10%

Food 15% Other 17%

Food 22%

Apparel 6% Housing 12%

Remarks : Monthly Announcement by Ministry of Commerce (at the

1st

working day of the following month)

Bloomberg ticker : THCPI Index <GO>

Services 51%

Apparel 6%

Services 20% Housing 35%

22

Next Step: Enhance ILB liquidity Public Debt Management Office, Ministry of Finance - Thailand

Develop regular Annual Auction plan (auction every quarter or 6 times a year) Top-up the existing tenor to enhance more liquidity Issue other Benchmark tenors (3-, 5- and 7-year ILBs) Develop Benchmark Real Rate Yield Curve Maintain portion of successful bid in ILB primary market Maintain portion of ILB trading in secondary market Provide firm bid/ask spreads in secondary market

Encourage SOEs and private sector to issue ILBs Cooperate with mutual funds to issue the ILB-related funds Allow dealers to develop inflation-related products (e.g. Inflation Derivative) 23