meritkapital fixed income fund

T A B L E O F C O N T E N T S

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I. MeritKapital Overview

II. MeritKapital Fixed Income Fund

a. Roles

b. Fund Specifics

c. Strategy

d. Top Holdings

e. Emerging Markets

f. Benchmark

g. Fees

III. A Word About Risk

IV. Biographies

V. Contacts

This material is for general information purposes only. There can be no assurance that the objectives and/or trends will come to pass or be maintained. This

material may include estimates, projections and other “forward-looking” statements. Actual events may differ substantially from those presented. MeritKapital

assumes no duty to update any such statements. Projections are based on current asset prices and are subject to change. The processes described herein are

illustrative only and subject to adaptation in any particular context. This material reflects the current opinions of the author but not necessarily those of

MeritKapital and such opinions are subject to change without notice. MeritKapital, its officers, directors, employees or clients may have positions in securities or

investments mentioned in this publication, which positions may change at any time, without notice. Fixed income investments entail interest rate risk, the risk of

issuer default, issuer credit risk, and price volatility risk. Funds investing in bonds can lose their value as interest rates rise and an investor can lose principal.

Fund share prices and returns will fluctuate with market conditions, currencies, and the economic and political climates where investments are made. Emerging

markets securities carry special risks, such as less developed or less efficient trading markets, a lack of company information, and differing auditing and legal

standards. The securities markets of emerging markets countries can be extremely volatile. The Fund’s investments denominated in foreign currencies will

decline in value if the foreign currency declines in value relative to the U.S. dollar. You should consider the investment objectives, risks, charges and expenses

of a mutual fund carefully before investing. A Fund’s Prospectus contain this and other information about the Fund. To receive a Prospectus, please call +357

2585 7700 or write to [email protected]. Please read it carefully. Past performance is no guarantee of future results.


I. MeritKapital Overview

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F I R M O V E R V I E W

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MK | CHRONOLOGIC DEVELOPMENTS AND ACHIEVEMENTS

‘06

’10

‘13

’14

’15

’15

Investment Advice

& Portfolio

Management

(LICENSE)

Custody & Brokerage

(LICENSE

EXTENSION)

Dealing on Own

(LICENSE

EXTENSION)

Successfully dealt

tens of millions of

distressed debt of

Bank of Cyprus; on

own book and via

intermediation

Becomes member

Firm of the CSE

Acted as a Eurobond

underwriter for an indirect

subsidiary of the Kazakh

sovereign wealth fund

’16

▪ Progressive investment firm with expertise in emerging market (EM) eurobond space

▪ Offices in London, Cyprus, Latvia (MiFID compliant, regulated by the CySEC & FCA)

▪ MeritKapital deals on own book, renders asset management and custodial services and also executes

on behalf of the clients

▪ MeritKapital total assets under management stand at approximately $150 million

▪ Settlement and custody are performed through internationally renowned custodians including Raiffeisen

Bank International, Vienna

▪ LOCAL NETWORK: MeritKapital, the fund’s broker, is networked with local EM banks and asset managers

via a proprietary brokerage platform for its extensive network of liquidity providers among western capital

markets. Their insight into underlying issuer specific and macro economic specific dynamics provide an

edge towards the optimal selection of investment opportunities.

▪ CAPITALIZING ON PLATFORM: MeritKapital is well known within the Russian and CIS space for its

emerging markets expertise. This reputation is built on a combination of local and international relationships

generating optimal liquidity and pricing, as well as heightened awareness of daily market developments.

These intrinsic parameters propel the fund’s performance.

▪ FUND’S TEAM: The team of the fund and of MeritKapital is comprised of talented individuals sourced from

Russia, CIS and MENA, adding their own networks of contacts and industry specific expertise.

▪ EXISTING PERFORMANCE: The fund is relatively recent however the platform and expertise are brought

forward from MeritKapital’s asset management unit with over a decade of performance. MeritKapital

successfully achieved capital preservation returns through the subprime crisis and later prospered within the

emerging market space thanks to its edge in this niche and optimal monetary easing environment. The

latter has allowed the fixed income space in general to perform and in a high yield hunting environment has

made the emerging market space popular.

▪ SMALLER FUND: It is empirically proven that smaller sized funds out-perform bigger sized ones

(500mn$+) on the back of a more attentive investment strategy and adherence to clients’ best interests.


N I C H E

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II. MeritKapital Fixed Income Fund

DIRECTORS: Hannes Boeck, Evangelia Georgiou

MANAGER: MeritKapital Limited, Cyprus

ADMINISTRATOR: Meritservus Secretaries Ltd

CUSTODIAN: Raiffeisen Bank International AG, Vienna

AUDITOR: Deloitte, Cyprus

LEGAL COUNSEL: Antis Triantafyllides & Sons LLC


R O L E S

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Fund Type: Open-end fund

Asset Class: Fixed Income

Morningstar Category: Global Emerging Markets, New Issues, Distressed Debt

Inception: 06/01/2015

Fund Base Currency: USD

Share Class Currency: USD

Benchmark: JP Morgan Emerging Markets Bond Index

Domicile: Cyprus

ISIN: CYF000000200

Bloomberg Ticker: MERFXPT CY

Settlement platform: CLEARSTREAM


F U N D S P E C I F I C S

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▪ SYNOPSIS: to achieve consistent year on year Net returns that beat the respective benchmark by

selecting solid issuers within the EM space. Due to the volatility inherent to the EM periphery the

Portfolio Manager aims to contain risk by utilizing the following means:

▪ Solid issuers: Careful selection of underlying names filtered by utilizing Relative Value and

Financial Statement analysis tools. Dialogues with the fund’s local network including local

banks’ research or sales analysts that cover the Eurobonds and the investor relations’ unit of

the issuer directly

▪ Duration: Overall fund duration is kept in check to cap volatility associated with interest rate

dynamics, especially amidst a recently tightening monetary policy environment of the main

central banks (FED, ECB, BOJ, BOE)

▪ Diversification: Proportionate weightings across the fund are kept in check across regional

focus within the EM subset and across underlying industries in question

▪ Primary issue space: Should yield metrics of newly issued Eurobonds seem attractive

relative to the existing issuers’ and comps’ curves, then relative investment is undertaken to

reap respective returns

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S T R A T E G Y


F U N D C O M P O S I T I O N

41%

11%8%

16%

11%

5%

3% 3% 2%

Government

Basic Materials

Financial

Energy

Consumer, Non-cyclical

Utilities

Industrial

Consumer, Cyclical

Communications

Credit Rating BBModified Duration 6.6Yield to Worst 5.2Cash 9.9

16.4%

10.4%7.9% 7.2%

4.9% 4.9% 4.7% 4.3% 3.5% 3.2%

32.6%

▪ CURRENT VALUATIONS: The Trump administration, the ensuing political environment between Russia

and the West, the unstable political environment that is inherent to the emerging markets in general has

added volatility to the markets that enables investors to better time entry points.

▪ ATTRACTIVE YIELDS: Recent market dynamics and US, France and Germany election results have

favored equity over the bond markets. Fixed income valuations have decreased across both IG and HY/EM

space and particularly on the long end of the curve. However, yields within the EM space remain

significantly more attractive than those of developed markets.

▪ COMMODITY SECTOR UNDERVALUED: A large portion of emerging market countries are commodity

exporters. As global economy growth gaining pace, the commodity industry is one of the beneficiaries of the

recovery. Thus, a considerable potential for upside remains unlocked in the sector. That said we understand

the related volatility and adjust our fund positioning to mitigate excessive risks.

▪ OPTIMAL GROWTH vs. DEVELOPED MARKETS: Easing Monetary policies of the ECB, BOJ and BOE

over the past decade have attempted to boost economic growth and reach inflation targets while the

respective growth in the developed economies remains slow. Emerging markets, particularly China, the Far

East and Africa, drive global economic growth from fundamental economic dynamics vs. central bank tools.


E M E R G I N G M A R K E T S

Performance Fee* 15% per annum

Hurdle 3% per annum

Management Fee 0.75% per annum

Admin Fee US$ 10,000 flat

Director Fee US$ 2,500 flat

*Performance Fee: On each Valuation Day in a Performance Period, a Performance Fee is accrued for the account of the Manager in

an amount equal to 15% of the increase in the Net Asset Value per Share determined as at such Valuation Day (before deduction of

any accrued Performance Fees for such period) in excess of an annual Hurdle Rate of 3% compounded annually.

The Manager is entitled to an annual payment of Performance Fees, calculated as of the end of Performance period or at other times

upon the redemption of Shares or dissolution of the Fund. Performance Fees paid to the Manager are calculated on the basis of

unaudited data, are not refundable to the Fund, but may be subject to audit adjustments.

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F E E S

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IV. Biographies

CHIEF INVESTMENT ADVISOR

GOLIB ZOHIDOV spent the last three years of his career with ICBC Standard Bank, London

where he traded Emerging Markets’ credit ranging from Russian, Latin American corporate

and sovereign Eurobonds. At Standard Bank, he established a footprint in Russian

corporate and financial credit by actively market making bonds which the bank was not

active in previously. Moreover, he extended the bank’s client pool that was comprised of real

money, hedge funds and Swiss based Private Banks and thus benefitted other focus areas

of the bank, especially the Sub Sahara Africa desk. Previously, worthy positions to note

include his four-year post as a Credit Research Analyst of the Emerging Markets’ Corporate

Credit Research team of Barclays, London and his two-year assignment as a Credit Risk

Management analyst of Deutsche Bank, London. Mr. Golib Zohidov holds a BSс in

International Investment and Banking from the University of Reading, UK, is a holder of CISI

Level 3 Certificate in Investments and is UK FCA registered.

INVESTMENT ADVISOR

LADI OLUWO began his career as a commodities trader with institutions both in London,

most recently with Commodities Spectrum Ltd, and in Nigeria, at Knights Capital Ltd, where

he built a local buy side network. In 2014, he joined Renaissance Capital Limited in London to

set up the Sub-Sahara Africa (SSA) Trading operation of the Fixed Income Desk. He was

responsible for identifying fixed income trading opportunities from the regions and advising

institutional clients accordingly. Subsequently, he joined MeritKapital Ltd to develop a similar

effort. He holds a degree in Mathematics and Statistics with Finance from Queen Mary

University of London and the Investment Management Certificate (IMC).

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T E A M

TRADER

ALLA KHOLODKOVA has more than 7-years experience in the capital markets industry. She

spent 6 years of her career on the Sales & Trading desk of Credit Suisse, Moscow where she

covered Russian and CIS clients for fixed income, swaps and repo products. Throughout her

career at Credit Suisse, she dealt with both local and hard currency bonds and gained a

thorough understanding of the underlying issuers as well as of the local market dynamics.

She has since transitioned to MeritKapital, Cyprus where she heads the Russian and CIS

Sales & Trading desk. Alla's relationships with Russian and CIS buy side firms are an

imperative variable to locking in optimal pricing for underlying bonds. She has two Master

degrees in Economics and Linguistics respectively from Nizhegorodzky State University,

Russia where both diplomas were obtained simultaneously.

INVESTMENT ADVISOR

PERSELLA IOANNIDES has an MBA and an MS in Financial Engineering from Columbia

University and a BS in Mathematics and Statistics from Bristol University. She spent three years

as a risk manager for Morgan Stanley’s institutional equity derivatives desk in New York. In 2007,

Persella set up Meritkapital, an FCA and CySEC licensed investment firm with an initial focus on

asset management and investment advice. Since, she has progressively grown the firm’s product

offerings to include proprietary trading, brokerage, custody and the underwriting business and has

worked towards building the firm’s global presence. Persella has developed the firm’s niche in the

Eurobond fixed income space, particularly in emerging markets including Russia and the CIS. Her

strong relationships with large buy side funds are testament to the positioning of Meritkapital in its

field of expertise.


T E A M

INVESTOR RELATIONS:

TATIANA KOZLOVA joined MeritKapital in 2014. Prior, she spent two years as a salesperson

for Anixter, a Fortune 500 company focused on telecom & security. Tatiana has been

instrumental in building the firm’s sales desk, particularly in Russia and the CIS. In 2015, she

led MeritKapital’s involvement as co-underwriter on a Kazakh Eurobond issue of a subsidiary

of “KazTransGas.”; the deal was well publicized as it was the first issue to be denominated in

Kazakh tenge and be settle-able in Euroclear. Tatiana has an undergraduate degree in

Financial Management from Belgorod University of Cooperation, Economics and Law in

Russia and holds the CySEC MOF exams, where she ranked in the top 10th percentile.

RISK MANAGER:

DEMETRIS CONSTANTINOU began his career at the Risk desk of Easyforex, Cyprus, a

significant player in the global FX CFD’s industry. There, he was responsible for hedging large

FX exposures, monitoring feeds from liquidity providers, identifying risks and arbitrage trading

patterns caused by the system defectiveness. Demetris joined Meritkapital Ltd in 2015 and

runs the firm’s Risk. He has a BSc in Mathematics with First Class Honors and an MSc in

Actuarial Science from the University of Surrey. Demetris is a holder of the CySEC MOF

exams.


T E A M

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DIRECTOR:

EVANGELIA GEORGIOU is an Associate Director of DI Ross. During her 15 years in the

accounting profession she has amassed a great deal of exposure to all aspects of complex

accounting matters as well as an up-to-date knowledge of the IFRS and their application.

Evangelia specializes in dealing with large international conglomerates and primarily deals

with complex consolidation and merger engagements that require conversion of local GAAP

into IFRS, multi-currency reporting and translations, the purchase and sale of Treasury

Shares and changes to Group structures. She joined our group in 2006 having been in the

audit and accounting profession since 2001. She is a Fellow Chartered Certified Accountant.

DIRECTOR:

HANNES BOECK began his career at Cleary, Gottlieb, Steen & Hamilton, New York, where

he worked on the structuring of products and global activities of financial institutions and the

tax and accounting treatment of derivatives. In ‘96 he joined Credit Suisse, London where he

rose up the ranks to reach MD level and to lead the global Product Development unit which

structured and marketed tax, regulatory and accounting motivated transactions covering all

asset classes and clients. In 2004, he left Credit Suisse to co-set up and lead Kupperstein,

Vienna, an advisory business on balance sheet restructurings of financials institutions and

other sizeable entities. Hannes holds graduate degrees in Economics and Computer Science

and also in Law from the University of Vienna. He also holds an LLM in Taxation from NYU

School of Law, New York which he attended as a Fullbright scholar.


D I S C L A I M E R

▪ Merit Fixed Income Fund Limited (the "Fund"), is reserved for

professional and well-informed investors as defined by the

Alternative Investment Funds Law n.131(I) of 2014 (the "Law")

who, on the basis of the Offering Memorandum (the "Offering

Memorandum") and the subscription agreement, should make

their own assessment of the conditions of their participation in

the Fund. It is the responsibility of participating investors, to

determine whether the fund described in the Offering

Memorandum is suitable to their expectations of performance

and risk.

▪ The Fund operates as an Alternative Investment Fund with

Limited Number of Persons according to the Law, regulated by

the Cyprus Securities and Exchange Commission, license

#LPAIF05/2014, in the legal form of a variable capital investment

company. Prospective investors are not to construe the contents

of the Offering Memorandum or any communication relating to

this offering as investment, legal or tax advice. Each investor

should, however, consult his own legal counsel, accountant and

other professional adviser as to legal, tax and related matters

concerning an investment in the Fund.

▪ The Offering Memorandum, the Memorandum & Articles of

Association as well as the latest monthly report are available

from the registered office of the Manager and from the Fund’s

administrator. An investment in the Fund involves financial risk

and prospective investors are advised to read the Offering

Memorandum carefully in its entirety.

▪ With respect to any quotation of expected returns throughout

this Presentation or the Offering Memorandum, it must be

noted that these are generated from part research and cannot

be guaranteed. The value of an investment in the Fund may

fluctuate. Forward looking statements by nature comprise

risks and uncertainty since they are related to events and

circumstances that may or may not occur or materialise in the

future. Due to various risks and uncertainties, actual events or

results, the actual performance of the Fund may differ

materially from those reflected or contemplated in such

forward looking statements.

▪ There can be no assurance that the Fund; investment

objectives will be achieved and investment results may be

achieved over time. Investment in the Fund is not intended on

a complete investment program for any investor. Prospective

investors should carefully consider if an investment in shares

in the Fund is suitable for them in light of their circumstances

and their resources.

▪ No application has been made to list the shares of the Fund on

any stock exchange.

▪ Important: shares in the fund are offered solely on the basis of

the information and representations contained in the Offering

Memorandum and the documents specified therein, which are

available for inspection at the Fund’s registered office and no

other information or representation relating thereto is

authorised.

C O N T A C T S

| CONFIDENTIAL |

ADDRESS

MAIL TO: Eftapaton Court, 256 Makarios Avenue

P.O.Box 53180, Limassol CY-3301 Cyprus

EMAIL: [email protected]

TEL: +357 2585 7700

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