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PROSPERITY CAPITAL MANAGEMENT SICAV Société D'investissement À Capital Variable (A Luxembourg Domiciled Open-Ended Investment Company)

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PROSPERITY CAPITAL MANAGEMENT SICAV Société D'investissement À Capital Variable (A Luxembourg Domiciled Open-Ended Investment Company) PROSPERITY CAPITAL MANAGEMENT SICAV Société d'investissement à capital variable (a Luxembourg domiciled open-ended investment company) Annual report, including audited financial statements, as at December 31, 2016 R.C.S. Luxembourg B174912 PROSPERITY CAPITAL MANAGEMENT SICAV Société d'investissement à capital variable (a Luxembourg domiciled open-ended investment company) Annual report, including audited financial statements, as at December 31, 2016 1 PROSPERITY CAPITAL MANAGEMENT SICAV Annual report, including audited financial statements, as at December 31, 2016 No subscription can be received on the basis of this report. Subscriptions are only valid if made on the basis of the current prospectus accompanied by the Key Investor Information Document ("KIID"), the latest annual report, including audited financial statements, and the most recent semi-annual report, if published thereafter. 2 PROSPERITY CAPITAL MANAGEMENT SICAV Table of contents Organisation of the SICAV 4 General information 6 Distribution abroad 7 Management report 8 Report of the Réviseur d’Entreprises agréé 16 Financial statements Statement of net assets 18 Statement of operations and changes in net assets 19 Number of shares outstanding and net asset value per share 20 Sub-fund : PROSPERITY CAPITAL MANAGEMENT SICAV - RUSSIAN PROSPERITY FUND (LUXEMBOURG) - Statement of investments and other net assets 21 - Geographical and industrial classification of investments 23 Notes to the financial statements 24 Total Expense Ratio ("TER") (unaudited appendix) 31 Performance (unaudited appendix) 32 Other information to Shareholders (unaudited appendix) 33 3 PROSPERITY CAPITAL MANAGEMENT SICAV Organisation of the SICAV REGISTERED 15, avenue J.F. Kennedy, L-1855 Luxembourg, Grand Duchy of Luxembourg OFFICE BOARD OF DIRECTORS OF THE SICAV CHAIRMAN Mr Joseph KEANE, Director, Prosperity Capital Management (UK) Ltd, 2nd Floor, Cavendish Square, London W1G OPD, United Kingdom MEMBERS Mr John ALLDIS, Director, Carne Global Financial Services S.à r.l. 6B, route de Trèves, L-2633 Senningerberg, Grand Duchy of Luxembourg Ms Veronica BUFFONI, Director, Carne Global Financial Services S.à r.l. 6B, route de Trèves, L-2633 Senningerberg, Grand Duchy of Luxembourg Mr Cédric BIART, Independant Board Member, 15, avenue J.F. Kennedy, L-1855 Luxembourg, Grand Duchy of Luxembourg CENTRAL FundPartner Solutions (Europe) S.A., 15, avenue J.F. Kennedy, L-1855 Luxembourg, Grand ADMINISTRATION Duchy of Luxembourg AND MANAGEMENT COMPANY BOARD OF DIRECTORS OF THE MANAGEMENT COMPANY CHAIRMEN Mr Marc BRIOL, Executive Vice President, Banque Pictet & Cie SA, 60, route des Acacias, CH- 1211 Geneva 73, Switzerland (until December 1, 2016) Mr Christian SCHRÖDER, Group Corporate Secretary and Head of Organisation, Banque Pictet & Cie SA, 60, route des Acacias, CH-1211 Geneva 73, Switzerland (since December 1, 2016) MEMBERS Mr Pierre ETIENNE, Managing Director, Pictet & Cie (Europe) S.A., 15A, avenue J.F. Kennedy, L-1855 Luxembourg, Grand Duchy of Luxembourg (until December 1, 2016) Mrs Michèle BERGER, CEO and Managing Director, FundPartner Solutions (Europe) S.A., 15, avenue J.F. Kennedy, L-1855 Luxembourg, Grand Duchy of Luxembourg Me. Claude KREMER, Partner, Arendt & Medernach - Avocats, 14, rue Erasme, L-2082 Luxembourg, Grand Duchy of Luxembourg Mr Geoffroy LINARD DE GUERTECHIN, Independant Director, 2, rue Jean-Pierre Beicht, L 1226 Luxembourg, Grand Duchy of Luxembourg (since March 14, 2016) 4 PROSPERITY CAPITAL MANAGEMENT SICAV Organisation of the SICAV (continued) MEMBERS OF THE Mrs Michèle BERGER, CEO and Managing Director, FundPartner Solutions (Europe) S.A., 15, MANAGEMENT Avenue J.F. Kennedy, L-1855 Luxembourg, Grand Duchy of Luxembourg COMMITTEE Mr Pascal CHAUVAUX, Head of Central Administration, FundPartner Solutions (Europe) S.A., 15, Avenue J.F. Kennedy, L-1855 Luxembourg, Grand Duchy of Luxembourg Mr Cédric HAENNI, Head of Risk & Compliance, FundPartner Solutions (Suisse) SA, 60, route des Acacias, CH 1211 Geneva 73, Switzerland Mr Dorian JACOB, Head of Investment Management Oversight, FundPartner Solutions (Europe) S.A., 15, avenue J.F. Kennedy, L-1855 Luxembourg, Grand Duchy of Luxembourg INVESTMENT Prosperity Capital Management (UK) Ltd, 2nd Floor, 6 Cavendish Square London W1G 0PD, MANAGER AND United Kingdom GLOBAL DISTRIBUTOR DEPOSITARY BANK Pictet & Cie (Europe) S.A., 15A, avenue J.F. Kennedy, L-1855 Luxembourg, Grand Duchy of Luxembourg REVISEUR KPMG Luxembourg, Société coopérative, 39, avenue J.F. Kennedy, L-1855 Luxembourg, D’ENTREPRISES Grand Duchy of Luxembourg AGRÉÉ LEGAL ADVISOR AS Elvinger Hoss Prussen, 2, place Winston Churchill BP 425, L-2014 Luxembourg, Grand Duchy TO LUXEMBOURG of Luxembourg LAW LEGAL ADVISOR AS CMS International B.V. Presnenskaya Nab., 10, 123317, Moscow, Russian Federation TO RUSSIAN LAW INFORMATION Zeidler Legal Services, 48 Bettinastraße, D-60325 Frankfurt am Main, Germany AGENT IN GERMANY LEGAL BNP Paribas Securities Services, Paris, succursale de Zurich, 16 Selnaustrasse, CH-8002 REPRESENTATIVE Zurich, Switzerland AND PAYING AGENT IN SWITZERLAND 5 PROSPERITY CAPITAL MANAGEMENT SICAV General information PROSPERITY CAPITAL MANAGEMENT SICAV (the "SICAV") publishes an annual report, including audited financial statements, within four months after the end of the business year and an unaudited semi-annual report within two months after the end of the period to which it refers. Annual reports, including audited financial statements, and semi-annual reports provide information on each sub-fund and, on a consolidated basis, the SICAV as a whole. The following documents are also available, free of charge, and copy thereof may be obtained at the registered office of the SICAV: (i) the Articles of Incorporation; (ii) the annual report, including audited financial statements, and semi-annual reports of the SICAV; (iii) the Prospectus; (iv) the KIIDs; and (v) a copy of the changes in the investment portfolio for the year ended December 31, 2016 Additional information is made available by the Management Company at its registered office, upon request, in accordance with the provisions of Luxembourg laws and regulations. This additional information includes the procedures relating to complaints handling, the strategy followed for the exercise of voting rights of the SICAV, the policy for placing orders to deal on behalf of the SICAV with other entities, the best execution policy as well as the arrangements relating to the fee, commission or non-monetary benefit in relation to the investment management and administration of the SICAV. 6 PROSPERITY CAPITAL MANAGEMENT SICAV Distribution abroad Distribution in Switzerland The SICAV has been authorised in Switzerland as a foreign investment fund. Representative and The representative and paying agent in Switzerland is BNP Paribas Securities Services, Paris, Paying Agent succursale de Zurich (the "Representative"), with its registered office in 16 Selnaustrasse, CH 8002 Zurich, Switzerland. Place of distribution of The prospectus, the Key Investor Information Documents of the sub-fund distributed in reference documents Switzerland, the Articles of Incorporation and the annual and semi-annual reports are available free of charge from the Representative in Switzerland. The list of purchases and sales that have taken place during the financial year under review is available free of charge on request to the Representative in Switzerland. 7 PROSPERITY CAPITAL MANAGEMENT SICAV Management report Russian equities experienced high volatility in January, along with other markets, commodities and the ruble. The month ended with a 1.8% drop of the index. The sub-fund was 4.6% lower in the month. Our oil and gas holdings were flat in the period. The main news of the month were the government’s attempts to increase budget revenues by both increasing the pay-out for state-owned companies from 25% to 50% and increasing taxes for oil companies to the magnitude of 15% to 20% of 2016 profit. Our metals and mining companies were 6% lower on lower steel prices. Trade updates from our steel companies came in line with expectations. We added to Evraz and Norilsk Nickel from Lukoil on valuation grounds. Our retail stocks were 5% lower in the month. Dixy lost 11% on weaker than expected December sales. We expect further management changes. Magnit was flat on strong Q4 margins, while X5 was 3% lower despite decent Q4 sales. Our agro holdings were 6% lower in the month. Cherkizovo was 3% higher on an in line trade update for Q4, while MHP lost 14% despite a decent trade update for Q4. Ukraine is going through further deterioration on governance following the resignation of the liberal and trustworthy economy minister and a lack of clarity with respect to further reforms and the IMF package. We see no serious risks to MHP, which earns close to 50% of EBITDA forecast for 2016 from export operations, while risks of further political vulnerability increased. Financials lost 7%, in line with the ruble more or less, despite strong December figures from Sberbank. We met with the chairman of Tinkoff Bank and feel comfortable about the bank’s ability to earn money and we welcome the improved corporate governance as the bank will stop the expensive cycling team sponsorship from 2017. Kcell was weak in the month on poor Q4 financials, which overshadowed the high pending dividend. MTS rallied in the month for what seems to be a relief that it will not buy an Indian operator, which used to be owned by Sistema. Our power stocks were 5% lower in the month on no particular news flow. LSR (-9%) published a decent trade update for Q4 and won another large land plot auction in Moscow and we added on this weakness. Russian equities rebounded in February. The sub-fund was 4.3% higher in the month, above the 2.6% rise of the index. Our oil and gas holdings were 7% higher in the month. Bashneft common shares performed strongly on news that the Russian State plans to privatise a controlling stake in the company in 2016. Other oil companies performed in line with the market. Gazprom was supported by the news that the Russian state may increase dividend payout to 50% from IFRS profits to cover budget deficit, which is estimated at 3% to 4% of GDP in 2016.
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