february 2018 Russian Prosperity Fund Euro

Investment Objectives and Methodology NAV EUR (A) 116.81, (K) 106.38 Prosperity utilises a long-only, bottom-up, fundamental-value, active investment approach that seeks to benefit from the significant value generated PERFORMANCE % INCEPTION FEB YTD 1 YR 3 YR 5 YR 10 YR from Russia and the Former Soviet Union’s (FSU) on-going corporate The Fund* 1068.1 3.1 9.0 14.8 80.0 21.9 31.2 consolidation and restructuring processes whilst mitigating the principal risk of investing in the region – namely corporate governance. In general, MSCI Russia (Euro) 130.1 2.6 11.8 6.0 27.5 -9.2 -38.4 Prosperity’s investment philosophy can be described as a bottom-up search for companies that are adding value through internal modernisation and RTS (Euro) 409.1 1.9 9.6 1.6 31.5 -10.2 -22.6 consolidation. Russian Prosperity Fund Euro is a UCITS compliant, Finland-domiciled *A Shares, in EUR terms, net of all PCM fees. Index data, provided for reference only, is not of the total vehicle advised by Alexey Krivoshapko. On 1 February 2014, RPFE became a return variants - which are not available to the Fund’s inception. feeder fund, investing its assets in the master fund, Russian Prosperity Fund Luxembourg – a UCITS compliant Sicav. Performance Fund Comment €120 The Russian market took a pause after the January rally and was up 2.6% in The Fund February with the fund showing a similar performance. Our oil and gas exposure €100 was 4% higher for the period. was 2% higher on the rulings of various MSCI Russia court cases against the company’s European customers, implying a move from €80 oil-linked contract pricing to spot-based arrangements. We sold our entire KazMunaiGas position (3% of the fund) at a small discount to the VTO price RTS proposed by the company and put the proceeds into Gazprom, €60 common shares and Gazpromneft. Bashneft preferred shares rose by 16% in anticipation of receiving RUB 100bn proceeds from the settlement with . Our financials were 6% higher. Sberbank may reach a 50% pay-out faster than €40 we anticipated as it plans to sell its bank in Turkey, which will release its RAS capital. Tinkoff Bank was 7% higher for the period and Halyk Bank rose by 9%. €20 We met with Halyk Bank’s management in Almaty and it seems that the bank, which by now is a dominant Kazakh deposit-funded universal bank, may resume its dividend policy this year. €0 Our materials were 7% higher in February. MMK was 6% higher on decent Mar 00 Mar 02 Mar 04 Mar 06 Mar 08 Mar 10 Mar 12 Mar 14 Mar 16 financials and an increasing dividend pay-out. Evraz rose by 15%, being highly sensitive to coal prices. We took profits in NLMK and added to weak Highland Gold, positively valuing our meeting with the new CEO. Retail stocks were 5% down in February. In a highly surprising move, ’s founder and CEO, Sectors Top Exposures’ Drivers Sergei Galitskiy, sold 29.3% of the 32% he had in the company to VTB at a discount to an already discounted share price. We are actively engaged with other minority shareholders to make sure the new board of Magnit, which will be formed at the April 18 EGM, will give the majority of seats to independent board members. We added to Magnit and X5 on weakness and we continued to add Lenta to our portfolio as finally its valuation started to make sense to us. We nominated INEDs to Obuv Rossii’s board. Our power stocks were 2% higher for the month across the board. We continued to add to FSK on valuation grounds. Our property exposure, which is predominantly LSR was 3% higher for the period as the Q4 trade update showed Oil & Gas 23.6% Value 58.3% some improvement in sales momentum and more importantly showed first signs Financials 18.7% Growth 28.7% of price increases. We met with the CEO of LSR and had his reassurance on the Retail 14.3% Metals & Mining 14.0% Corporate Governance 5.5% dividend policy, disciplined approach to capital and potential sale of non-core Power 9.1% Restructuring 4.9% European operations, which we would support to focus on core Russian Agriculture 6.1% Consolidation 2.6% business. We are enthusiastically looking forward on the back of increased M&A Real Estate 3.6% and IPO activity. Overall the fund trades at 5.6x 2018 P/E with 5.9% DY. Other sectors 6.4% Top Ten Exposures Cash 4.2% SECURITY EXPOSURE, % SECTOR PERFORMANCE, % PE18 PE19 DRIVER COMMENT Sberbank 9.6 Financials 4.7 7.9 7.0 Value Dominant bank, rising consumer leverage, corporate transformation Gazprom 9.3 Oil & Gas 2.4 3.3 2.8 Value Low valuation, efficiency turnaround potential, strong cash gen. MHP 6.1 Agriculture 3.3 4.2 3.8 Value Vert. integr. poultry prod, dominant Ukr. m. share, growing exports X5 5.3 Retail -5.7 10.9 7.5 Growth Leading food retailer in Russia Tinkoff Bank 5.3 Financials 6.7 10.3 8.8 Growth Leading data-driven credit card lender, strong management Surgutneftegas 4.7 Oil & Gas -0.9 4.1 3.9 Corp. Gov. Low valuation, cash pile exceeds market capitalisation 4.5 Oil & Gas 3.8 6.5 5.5 Value Low valuation, attractive dividend yield MMK 4.2 Metals & Mining 6.3 7.7 10.1 Restructuring Flat steel maker, non-integr. to raw materials, high dividend potential Magnit 4.0 Retail -6.6 10.9 6.4 Growth Leading food retailer, undergoing restructuring Halyk Bank 3.8 Financials 8.5 5.6 5.0 Value Dominant bank, underinvested balance sheet, low valuation Total 56.8 Company exposure may comprise several individual equity positions - in ordinary shares, preferred shares or depository receipts. Where this is the case, the performance and price earnings ratios of the largest equity position are noted. february 2018 russian prosperity fund euro | prosperity capital management

Annual Performance Risk Characteristics (Three Years)

Year Fund Returns % MSCI RU % RTS(Euro)% Alpha(%): 10.85 Since Inception 1068 130 409 Beta: 0.75 2000 -34 -32 -26 0.64 2001 114 63 90 R-Square: 2002 18 -4 18 Sharpe: 1.02 2003 60 42 32 Treynor(%): 28.18 2004 8 -4 0 Tracking(%): 13.71 2005 135 94 110 2006 46 38 53 Ann. Std Deviation(%): 20.75

2007 4 10 7 Source: FolioMetrics 2008 -76 -73 -71 2009 176 95 123 2010 48 26 13 Key Information 2011 -23 -18 -7 Investment Manager for Seligson & Co Fund Management Plc RPFE (Feeder Fund) 2012 20 8 8 Investment Manager for Prosperity Capital Management (UK) Ltd* 2013 0 -7 -9 RPFL (Master Fund) 2014 -42 -38 -38 Home Page www.prosperitycapital.com

2015 15 5 7 Status Open-ended (UCITS) 2016 66 53 57 Domicile Finland 2017 6 -12 -12 ISIN Code FI0008808183 (K Shares) FI0008802004 2018 9 12 10 (A Shares - open to Swedish/Finnish investors) CAGR 15 5 9 Trading Daily Past performance is not an indication or guarantee of future returns. Listing No Advisor Profile Date Of Inception 08-Mar-00 PCM is one of the leading Russia-focused asset managers in the world, with around USD 4.3bn of assets under management. Total Fund Assets EUR 47 million Founded in 1996, PCM has consistently topped performance charts Fees K Shares: 2.7% mgmt fee, A Shares: 1.2% mgmt fee, for emerging market funds. The firm has built a reputation for its performance fee of 15% over RTS Euro. thorough research and “active” investment approach. PCM is now a major shareholder in some of the leading companies in Russia, Minimum Investment Euro 25k Ukraine and Central Asia. Our international client base includes international pension funds, Placing/Exit fees Up to 2.5%/0.5% (within 6 months) insurers, endowments, family offices and private banks, as well as Redemption Daily, on dealing day sovereign wealth funds. PCM has a strong presence in - with 16 staff based in NAV/Price Release Bloomberg (SELPRUS), Morningstar offices close to Red Square. The majority of the staff are Russian. PCM Administrator also has offices in London and the Cayman Islands. Seligson & Co (Helsinki) +358 9 6817 8200 The company’s philosophy is “long-only/active” using no leverage. Investments are made on a fundamental value basis, using a bottom- up approach. Portfolios tend to be concentrated.

Investment Manager for RPFE (Feeder Fund) Investment Manager for RPFL (Master Fund) Client Services (Finnish investors) Client Services (Other investors) Seligson & Co Fund Management Plc Prosperity Capital Management (UK) Ltd* Seligson & Co Fund Management Plc Prosperity Capital Management (UK) Ltd* Erottajankatu 1-3 2nd Floor, 6 Cavendish Square Erottajankatu 1-3 2nd Floor, 6 Cavendish Square FI -00130, Helsinki, Finland London, W1G 0PD FI -00130, Helsinki, Finland London, W1G 0PD Tel +358 9 68178200 Fax +358 9 68178222 Tel +44 20 7299 6950 Fax +44 20 7299 6951 Tel +358 9 68178200 Fax +358 9 68178222 Tel +44 20 7299 6950 Fax +44 20 7299 6951 [email protected] [email protected] [email protected] [email protected] *Authorised and regulated by the UK Financial Conduct Authority. Registered in England and Wales. Company No. 04959887. Registered Office: 5 Old Bailey, London EC4M 7BA february 2018 russian prosperity fund euro | prosperity capital management

Disclaimer

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