Carnegie Rysslandsfond Carnegie Rysslandsfond Manager Investment policy FREDRIK COLLIANDER The fund is a mutual fund that invests in Russian equities without MSc in Business Administration. He has worked any restrictions in terms of industries or companies. The fund can in the financial sector since 1990 and has also invest in equity markets in Estonia, Latvia and Lithuania and in been employed at the firm since 2000. Årets interest-bearing securities. Stjärnförvaltare [Fund Manager of the Year] in 2001, 2005, 2006 and 2009. Rated A by Citywire. KARIN FRIES BA in Economics. She has worked in the financial sector since 2004 and has been employed at the firm since 2004. [email protected] [email protected] Fund facts Total return, % Risk measure Start date 27/10/1997 acc. from start 509.4 Total risk, fund, % 12.6 Category Mutual fund, Russia average from start 9.4 Management fee, % 2.5 10 acc. -10.0 Fees and costs 31/12/2017 Risk class 6 10 average -1.0 Annual fee, % 2.53 Portfolio managers F. Colliander & K. Fries 5 acc. 19.6 Management fee, % 2.50 Fund company Carnegie Fonder AB 5 average 3.6 Management fee for 10,000 SEK 1) 238.69 Price listing Every day 3 acc. 61.0 Management fee for 100 SEK/month,1) 15.71 Country of registration Sweden 3 average 17.2 Management fee/average fund assets, % 2.50 Dividends No 2 acc. 38.8 1) Calculated on lump-sum deposits at the start of the year and on monthly deposits Bankgiro 5206-4656 2 average 17.8 on the first day of each month. PPM fund number 249 995 1 year -4.8 Performance During the period, the fund has not traded that Veon was valued more attractively. We have The Rysslandsfond fell by approximately 4.54 per in derivatives or carried out any stock loans. increased Surgutneftegaz preference shares on cent in 2017. The main reason for this was the The existing security requirement at the end of several occasions during the year. The share is strengthening of the Swedish krona against the December was 0 kronor. The Commitment Method a long-term dividend case and is also a hedge dollar and the ruble. After a few years of negative has been used as a risk assessment method in order against any weakening of the ruble. The position in growth, the Russian economy stabilised during to calculate total exposures in the fund. the power company Unipro was taken since we the year and is now showing signs of growth. The fund has had a few investments that have saw that the situation at the company was being Furthermore, the oil price rose at the end of provided positive returns in Swedish kronor improved and that we can expect good dividends the year, which provided support for the market. during the period. The best of these were in both from now on. Polymetal was increased since The fact that inflation continued to fall was also the IT companies Yandex and Mail. Yandex rose we found the company cheap and also wish to positive and meant that the Central Bank was by 46 per cent and Mail rose by 42 per cent increase our exposure to gold. able to lower interest rates. Despite the lowering Of the larger holdings, Sberbank rose the most We have continually sold equities in Sberbank of interest rates, real interest rates nevertheless (24 per cent). Furthermore, it is worth pointing during the year. The equity has accounted for continue to be extremely high. Market speculation out that Novolipetsk rose by 24 per cent and almost 10 per cent of the fund throughout the year. that relations between the USA and Russia would Gazpromneft rose by 10 per cent. Since the equity has risen considerably, we have improve after Trump's election victory came to The companies with the worst returns were been forced to sell under the restriction rules. The nothing. Relations instead deteriorated, which Magnit, Gazprom, LSR and Rushydro. Magnit fell by diamond company Alrosa was sold in its entirety drove up the risk premium during the year. 44 per cent, Gazprom fell by 21 per cent, LSR fell since the diamond market has deteriorated and The fund's managed capital decreased in 2017 by 28 per cent and Rushydro fell by 25 per cent. the company also suffered an accident that had a from 4,235 billion kronor to 3,567 billion kronor. considerable effect on production. We also carried The fund had a net outflow of 484 million kronor. Management out relatively large sales in Severstal and X5. These The remainder of the reduction was due to a During the year, we carried our relatively large sales consisted of repatriations of profits. reduction in rates. net purchases in Veon, Surgutneftegaz preference In most cases the fund's holdings are listed in shares, Unipro and Polymetal. The mobile phone Holdings of securities dollars or rubles. The ruble fell by 3.9 per cent company Veon was purchased at the same time as At the end of December, the fund was 95.6 per against the krona during the year. The dollar rate we sold Megafon. After Telia's exit from Megafon, cent invested in equities. The remaining 4.4 per fell by a full 10.0 per cent. the risk in the company rose and we also found cent was made up of cash in hand. Full-year Report 2017 42 Carnegie Rysslandsfond The holding is concentrated in 27 holdings. in terms of the dollar. This was despite the fact that also fallen considerably and this means that the The largest holdings include Sberbank, Novatek, the oil price rose towards the end of the year. A Central Bank will also continue to lower interest Gazprom and Surgutneftegaz preference shares. valuation gap has therefore opened up. Russian rates this year. All this is positive for the equities equities can now be regarded as relatively cheap. market. Future prospects After a few years of recession, the Russian Any new American sanctions pose a threat to The Russian equities market fell behind the other economy has now bottomed out and is once the Russian economy and equities market. On growth markets in 2017. Most growth markets rose again beginning to grow. We estimate growth of the other hand, reduced sanctions would have a considerably, whereas Russia was largely unchanged approximately 2 per cent in 2018. Inflation has decisive positive effect. PERFORMANCE PER YEAR, % PERFORMANCE, % GEOGRAPHICAL DISTRIBUTION, % 160 20 120 0 Russia 92.9 80 Liquid assets 4.4 20 40 Ukraine 1.4 Georgia 1.3 0 0 0 0 0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 01/01/2008 31/12/2017 Average/10 years - 1.0% PERFORMANCE 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Unit value, SEK 22.62 50.97 56.52 45.60 49.60 51.54 36.85 42.62 62.31 59.31 Number of units 83,200,509 117,287,634 93,224,379 84,780,764 85,992,966 78,116,205 67,392,479 65,349,676 68,294,801 60,130,267 Fund assets, MSEK 1,882 5,978 5,269 3,866 4,266 4,026 2,483 2,793 4,252 3,566 Dividend, SEK/unit – 0.14 0.20 0.01 0.28 – – – – – Total return, % -66.2 126.6 11.3 -19.2 9.2 3.9 -28.5 15.7 45.8 -4.8 THE 10 LARGEST HOLDINGS 31/12/2017 DISTRIBUTION OF INDUSTRIES 31/12/2017 OTHER KEY RATIOS 31/12/2017 Holding Percentage Industry Percentage Novatek GDR 9.4 Energy 37.9 Brokerage fees/turnover, % 0.06 Sberbank 9.4 Finance and property 17.6 Average fund assets, MSEK 3,717 Gazprom ADR 9.2 Information technology 12.0 Turnover rate, times/year 0.17 Surgutneftegaz PREF 8.8 Consumer staples 7.9 Transaction costs, KSEK 933 Lukoil ADR 4.4 Materials 7.2 Analysis cost, KSEK 1,050 Moscow Exhange Micex 3.9 Telecoms operators 6.8 Transaction costs/average fund assets, % 0.03 Polymetal International PLC 3.9 Power supply 5.1 X5 Retail Group Industrial goods Analysis costs/average fund assets, % 3.8 1.0 0.03 Mobile Telesystem ADR 3.8 Proportion of the fund's securities Mail Group 3.6 transactions in which a closely-related institution has acted as a counterparty in commission, held outright or through trade in own inventories. – Full-year Report 2017 43 Carnegie Rysslandsfond INCOME STATEMENT FINANCIAL INSTRUMENTS 31/12/2017 Market value, Market value, KSEK 2016 2017 Securities KSEK Fund weight, %1) Securities KSEK Fund weight, %1) Income and change in value 2) Change in value of transferable Transferable Securities Power supply 5.1 securities 1,228,115 -221,894 Consumer staples 7.9 Inter Rao 98,658 2.8 Interest revenue 49 869 Magnit GDR 75,607 2.1 Rushydro 47,277 1.3 Dividends 123,686 130,455 Magnit PJSC 18,036 0.5 Unipro PJSC 37,412 1.0 Exchange gains and losses, net 6,338 -14,806 MHP 51,072 1.4 Other financial income – – X5 Retail group 135,395 3.8 Materials 7.2 Other revenues – – Novolipetsk Steel GDR 55,057 1.5 Total revenues and Energy 37.9 Polymetal International PLC 137,522 3.9 change in value 1,358,188 -105,376 Gazprom ADR 327,386 9.2 Severstal GDR 64,721 1.8 Gazprom Neft PJSC 10,416 0.3 Expenses Gazprom Neft ADR 113,817 3.2 Telecoms operators 6.8 Payment to the company that Lukoil ADR 157,004 4.4 Mobile Telesystem ADR 136,249 3.8 carries on the fund business -79,803 -92,938 Novatek GDR 334,550 9.4 Veon 107,728 3.0 Interest expenses – -146 Surgutneftegaz PREF 314,663 8.8 Other financial expenses – – Transneft PREF 93,912 2.6 Total securities 3,407,847 95.6 Other expenses -6,602 -7,243 Total expenses -86,405 -100,327 Other assets Profit/loss for the year 1,271,783 -205,703 Finance and Property 17.6 and liabilities (net) 158,495 4.4 Bank of Georgia GDR 43,726 1.2 Total fund assets 3,566,342 100.0 LSR Group GDR 85,520 2.4 Moscow Exhange Micex 140,429 3.9 BALANCE SHEET Sberbank 334,419 9.4 KSEK 31/12/2016 31/12/2017 Vostok Emerging Finance 24,190 0.7 Assets Industrial goods 1.0 Transferable securities 4,022,854 3,407,847 Total financial instruments with Hydraulic Mechines And Systems 36,102 1.0 positive market value 4,022,854 3,407,847 Investment in accounts at Information technology 12.0 credit institutions – – Luxoft 98,235 2.8 Total investments with 1) The figures are rounded off to the nearest tenth of a per cent.