VTB Capital IM Russian Market Fund – UCITS V Art of Investments Month in Review NAVPS As of 31.01.17: USD 88.14(A)

ForFor Professional Professional Investors Investors Only Only January 2017

VTB Capital IM Russian Market Fund – UCITS V Art of Investments Month in Review NAVPS as of 31.01.17: USD 88.14(A)

In January, the Fund gained 2.54% versus a 1.38% gain for the benchmark MSCI Russia 10/40 index. During the month, we sold our position in Unipro because of expected Berezovskaya TPP-related penalties and potential repair work delays. Our 4% position in Magnit was reduced to 2% due to weak December trading update. We increased our position in Sistema and added M Video to our portfolio at a 13% discount to the buyout price ($7); its current weight is at 2%. We are no longer underweight in Gazprom but still see value in it due to decent operating results for 2016 and expected dividend yield above sector average. After the Finance Ministry announced its plans for foreign currency purchases, we increased our position in preferred shares of Surgutneftegaz because they are a natural hedge against ruble depreciation. It is pleasing to see an IPO on the Russian market. Detsky Mir will place a significant minority block on the market with a listing on MICEX. The company is attractive, it is growing at 30% on the top line while many retailers are suffering. Detsky Mir will pay out an attractive 50% of IFRS net income in dividends. Sistema and the Russia-China Investment Fund will remain as significant shareholders in the company while free float will be up to 35%. Last month, the Russian government’s most significant actions included a new FX intervention policy. The policy and FX intervention mechanism can be briefly described as a transparent tool to limit excess ruble volatility, through FX purchases in amounts equal to excess budget revenue from oil prices exceeding $40/bbl (i.e., the oil price level embedded into the 2017 Federal Budget). Since oil prices are expected to average $55/bb in 2017, many analysts have concluded that $20-30bn in FX intervention may occur in 2017, which they believe may cause the ruble to depreciate 5-7%. Other government discussions concerning the law to increase dividend payout ratios of SOEs from 25% to 50% were not so favorable. Many investors had already begun to price in the higher level of pay-outs. It is likely that some of the large SOEs have lobbied hard to remain at 25% and the government has succumbed to the pressure.

Historical Returns %

Year Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec YTD

2017 2.54 2.54

2016 -0.17 4.92 13.78 5.98 -3.25 3.44 5.84 3.57 4.94 -0.45 2.23 11.05 64.33

2015 -4.95 17.89 -0.89 16.41 -5.96 -5.81 -3.86 -6.70 -3.92 9.83 1.70 -10.64 -1.51

2014 -9.70 -0.82 -10.04 -2.33 14.67 4.28 -7.32 -3.61 -9.94 -5.85 -10.52 -22.15 -50.36 2013 5.01 -3.26 -7.83 -1.51 -0.28 -5.21 2.87 0.27 6.86 2.67 -2.42 3.08 -0.76 2012 16.88 10.73 -3.60 -3.28 -18.30 6.75 4.05 1.95 6.01 -0.88 -2.03 5.56 21.30

3 Months 6 Months YTD 2016 5 Years Since inception Annualized Return Max Month Loss Max Month Return Volatility*

Fund (Class A) 16.40 25.95 2.54 64.33 -15.14 818.13 11.33 -22.15 17.89 26.30 Benchmark 18.62 26.66 1.38 54.07 -8.45 638.94 10.17 -22.66 23.09 29.87 *Annualized standard deviation of daily returns for the past 1.5 years . Illustrative Top Five Holdings Issuer Sector Share % Rationale Lukoil Energy 9.3 Stable DPS growth, recovery in production and compelling multiples vs. peers

Gazprom Energy 8.8 Decent operating results for 2016 and expected dividend yield above sector average

Surgutneftegaz pref Energy 5.4 Natural hedge against ruble depreciation

Sberbank pref Financials 5.0 Inexpensive valuation on 2017E multiples: P/B 1.2x, P/E 6.1x

MTS Telecom 4.8 High dividend yield (9.5%)

Historical NAV performance Sector Breakdown

MCRUSFI LX Equity* MXRU40PD Index** MCRUSFI LX Equity* 1900% Energy 44,7% Financials 18,8% 1400% Materials 11,8% 900% Telecom 9,8%

400% Consumer… 6,5%

-100% Consumer Discr. 4,5% Utilities 0,0%

*VTBC IM became the Investment Manager and took full control of the Fund as of 01/10/2015. The Fund changed its name from Valartis Russian Market Fund to VTB Capital IM Russian Market Fund after 11/11/2015. Fund performance is net of fees and all expenses. www.vtbcapital-im.com **In January 2011 the benchmark was changed from the ROS Index to MSCI Russia 10/40. ForFor Professional Professional Investors Investors Only Only JanuaryVTB Capital 2017 Russia & CIS Equity Fund VTB Capital IM Russian Market Fund – UCITS V Art of Investments Investment Objective and Strategy

The Fund’s investment objectives are to achieve long term capital appreciation through investments in equity securities of companies operating in or having significant exposure to Russia and CIS with higher than average value. The investment rationale is that Russia has one of the cheapest markets among the emerging market countries. Whether looking at earnings multiples, asset multiples or DCF derived fair value, Russia stocks are tremendously under-valued. Russia is the largest country in the world, is the largest oil producer and has the largest natural gas reserves. Despite these fundamental strengths, Russia remains highly discounted due to perceptions of geopolitical, corporate governance and other types of risks. We believe that many of these risks, whether real or perceived, can change, and that current market levels offer an attractive entry point for investors. The investment strategy involves a bottom-up portfolio construction, with liquidity and corporate governance screening and scoring to identify an investible universe of about 100 stocks. In-house fundamental analysis with DCF modeling and external research are used to select a high conviction portfolio of 30 to 50 liquid and listed stocks. Liquidity risk is optimized against value to ensure a liquid portfolio.

Firm Overview Fund Structure and Terms

VTB Capital Investment Management is a key division of VTB Capital, Inception Date June 1996 VTB Group’s investment arm. VTB Group, the second largest financial Investment Manager VTBC Asset Management International Ltd group in Russia, is 60% owned by the Russian Federation. VTB Capital Investment Management offers professional investors world Auditor E&Y class investment solutions through its experienced and award winning Management Company Kredietrust Luxembourg Portfolio Management business. Total AUM is USD 6.3bn, with USD Administrator European Fund Administration 995m in the equity strategy1. Custodian KBL European Private Bankers SA Swiss Representative LB Swiss VTB Capital Investment Management has extensive experience and knowledge of the specifics of asset management in Russia. Our Currency USD integrated team of analysts and managers are in the midst of current Structure UCITS V/open-ended events and know firsthand the business realities that take place in Domicile Luxembourg Russia. Meticulous research along with our ability to exploit Russian NAV/Dealing Frequency Daily market inefficiencies have allowed us to exceed market returns and Leverage None deliver superior results to our clients. Many of our funds have received Minimum Investment A: $250,000 / D: $1m numerous awards and top ratings. Management Fees, p.a. A: 1.25% / D: 1% 1 Strategy size as of 30 December 2016 Bloomberg / ISIN Ticker: MCRUSFI LX A: LU0066480616 / D: LU0376698907 The Synthetic Risk and Reward Indicator ( SRRI ) is based on the historic volatility of the UCITS. The volatility is calculated based on the weekly returns of the UCITS. If that is not Higher risk – typically higher income possible, the volatility may be calculated based on the UCITS’ monthly returns. Volatility SRRI calculation is based on the returns of the past 5 years. Historic dividend payments must be opportunity/risk of loss considered in the calculation. The risk-reward profile is based on the historic data and cannot serve as reliable forecast for the future risk-reward profile. A SRRI of 1 does not imply s risk free investment. Based on the historic price changes, the UCITS was awarded a SRRI of 7. This value may however change in time. 1 2 3 4 5 6 7

Key Personnel

Tim McCarthy, Co-CIO and Head of International Investment Management Tim McCarthy has 26 years of experience in financial markets. His portfolio management track records in a range of long-only and long/short equity and fixed-income funds and strategies span more than 19 years. Tim came to VTBC IM from Valartis Asset Management in Geneva, Switzerland, where he was the Head of Asset Management and the portfolio manager of three Russia & CIS Funds and two GEM funds. Tim has an MBA in Finance and a BS in economics from the State University of New York. Andrey Kilin, Lead Equity Portfolio Advisor Andrey joined the Firm in 2014. He has over 19 years of experience with leading Russian financial institutions and was ranked best Russian portfolio manager in 2007 and 2010 by RBC. Prior to joining VTBC IM, Andrey was the Chief Investment Advisor at Spectrum AM. Andrey has a degree in economics from Novosibirsk State University. He is FFMS 1.0, 5.0 certified. Stepan Andreev, CFA, Portfolio Manager Stepan is a Portfolio Manager at VTBC Asset Management International Limited. He holds a CFA designation and is a member of the CFA Institute and CFA Society United Kingdom. Stepan graduated with a degree in applied mathematics from Lomonosov’s Moscow State University.

Contact Information

Trident Fund Services Limited 4th Floor, West Wing, Trafalgar Court, Admiral Park, Tim McCarthy John Papesh Dr. Louis Poon St. Peter Port, Guernsey GY1 3RL Co-CIO and Head of Int’l IM Head of Int’l Distribution Asian Distribution Channel Islands (Geneva): +41 22 310 1440 (Dubai): +971 (4) 377 0792 (Hong Kong): +852 9028 5909 Tel: +44 1481 727571 [email protected] [email protected] [email protected] Fax: +44 1481 723162 Email: [email protected] www.vtbcapital-im.com ForFor Professional Professional Investors Investors Only Only JanuaryVTB Capital 2017 Russia & CIS Equity Fund VTB Capital IM Russian Market Fund – UCITS V Art of Investments Disclaimer

This document (hereinafter referred to as the “Document”) is issued by VTBC Asset Management International Limited (hereinafter referred to as “VTBCAMIL”) for informational purposes only and for professional investors only. It is not intended to constitute all or any of the information necessary to adequately evaluate the consequences of investing in VTB Capital IM Russian Market Fund – UCITS IV (hereinafter referred to as the “Fund”). The Fund is not available for sale in any state or jurisdiction in which such sale would be prohibited. The Fund has not been registered under the US Securities Act of 1933, as amended (the “Securities Act”), and is not registered under the US Investment Company Act of 1940, as amended (the “Company Act”). Accordingly, unless an exemption is available, the fund may not be offered, sold or distributed in the United States or to US persons. Not an offer: This document does not constitute an underwriting commitment, an offer of financing, an offer to sell, or the solicitation of an offer to buy or sell any securities described herein, which shall be subject to VTBCAMIL internal approvals. Not advice: VTBCAMIL is acting solely as principal and not as advisor or fiduciary. You must independently determine, with your own professional advisors, the appropriateness of any contemplated transaction or investment. No part of this material constitutes tax, legal, accounting, financial or investment advice and should not be construed as such. VTBCAMIL accepts no liability whatsoever for any consequential losses arising from the use of this document or reliance on the information contained herein. Accuracy: Whilst every care has been taken in preparing this material, VTBCAMIL does not guarantee the accuracy or completeness of information which is contained in this document and which may have been obtained from or is based upon data from third party sources. All information contained herein is subject to change without any notice. VTBCAMIL assumes no duty to update any of the content. Opinions: Information and opinions contained herein have been compiled or arrived at by VTBCAMIL from publicly available information and sources that VTBCAMIL believes to be reliable. Any views expressed represent the personal assessment of the author(s) only and do not necessarily reflect the views of VTBCAMIL. All opinions and estimates are given as of the date hereof and are subject to change. Past performance: The value of any investment may fluctuate as a result of market changes. Past performance is not indicative of future performance. The information in this document is not intended to predict actual results and no assurances are given with respect thereto. Risks: Certain transactions, including futures, options and other derivatives, involve significant risk, and may not be suitable for all investors. Many persons, physical and legal, may be restricted from dealing in the securities markets. Investors should perform their own due diligence before investing. Importantly, securities and financial instruments denominated in foreign currencies and other investments are subject to exchange rate fluctuations that may adversely affect the value of the investment. The value of investments may fall as well as rise and investors may not get back the amount invested. The terms and conditions of the investment will be set out in full in a confidential private placement memorandum and the subscription and related bind transaction document(s) described therein, which will be provided to potential investors, and the above-indicated descriptions are indicative only. VTBCAMIL is not soliciting any action based upon this information. VTBCAMIL is acting solely as principal and not as advisor or fiduciary. VTBCAMIL makes no representation and gives no advice in respect of any tax, legal or accounting matters in any applicable jurisdiction. Disclaimer for Switzerland: The State of the origin of the Fund is Luxembourg. In Switzerland, the Representative is ACOLIN Fund Services AG, Stadelhoferstrasse 18, CH– 8001 Zurich, whilst the Paying agent is NPB Neue Privat Bank AG, Limmatquai 1/am Bellevue, CH-8022 Zurich. The Basic documents of the Fund such as the prospectus, the key investor information document (KIID), the Fund’s constituent documents the articles of association as well as the semi-annual and annual reports may be obtained free of charge at the office of the Swiss Representative. The performance shown does not take account of any commissions and costs charged when subscribing to and redeeming shares. Past performance may not be reliable guide to future performance. The current document is intended for information purposes only and shall not to be used as an offer to buy and/or sell shares.