Turquoise Variable Capital Investment Fund
Alternative Investment Fund Investing in Iranian Securities
Commentary
The Turquoise Variable Capital Investment Fund - Sub Fund B/C seeks to
achieve capital growth by investing in a
diversified portfolio of Iranian securities.
Key Characteristics



10 ~ 25 Holdings
Invests across all market capitalizations
Stockpicking focus
Fund Facts
Structure
Domicile
Registrations
Launch Date
Income
Dealing
Dealing Cut-off
Alternative
Investment Fund
Cyprus
Applying
30 November 2015
Accumulated
Monthly - last
business day
2 business days
before end of the
month
No. of Holdings 15
Cash Weight
3%
Fund Size
EUR 8.7 million
Fund Size
EUR 53.9 million
(incl. sub fund A)
Fund Manager
Fortified Capital
Limited
Portfolio
Turquoise Partners
Advisors**
Investment Advisors
Limited
Charlemagne Capital
(IOM) Limited
Investment
Ramin Rabii
Committee
Shervin Shahriari
Stefan Böttcher
Dominic BokorIngram
Demetris
Katsambekis
Administrator
ATG Fund Services
Legal Advisors
Harneys
NAV Data
Open Share Classes
B Shares
C Shares
1
The NAV of the Fund increased by 0.45% in May versus a fall in the Iranian market of 2.5% in Euro
terms bringing the Fund’s YTD returns to +21.8%. The single most important reason we believe for
the slightly negative performance of the equity market in the last couple of months has been the
impediments to foreign capital flows being able to find their way into the capital markets and into the
economy generally. One significant hurdle is the presence of the dual exchange rate structure.
Despite the SWIFT system being notionally available to all Iranian and International banks to transact
through, the fact that transactions must be done at the official exchange rate of 30,500 Rials to the
USD versus a parallel market rate of 34,500, has effectively precluded SWIFT as a way of
transacting in the Rial. However the CBI governor has recently reaffirmed his commitment to unifying
the exchange rates by the end of year, thereby facilitating the issue of money transfer by the banks.
This will not only impact the capital markets but also allow foreign capital to flow more easily into the
Iranian economy. Despite these technical difficulties we have recently seen the first major
transaction through the SWIFT system to impact the capital markets where a German company has
purchased a Euro 51m stake in an Iranian listed detergent manufacturer. The overall situation with
international banks and their willingness to transact with Iran shows signs of improvement every day,
with as we expected the early adopters being mainly smaller European Banks. We believe it will take
a significantly longer time for the global banks with large US operations to become comfortable
transacting. We have also heard from many European government trade agencies, including the UK
and Italy, that trade finance support is actively being provided to European companies trading with
Iran. The biggest overall positive for Iran in May was the return to pre-sanctions levels of oil exports
of around 2.5mbpd. Many analysts had predicted that achieving these export levels would take at
least a year, if it were to happen at all. Achieving the target within three months gives a very positive
insight into the state of the Iranian oil infrastructure. Following this positive oil theme, India has made
the first euro payments to Iran in four years to clear part of its $6.4-billion oil debt ahead of Prime
Minister Narendra Modi's visit to Tehran. We believe the initial payments to amount to over $1bn.
There have been a number of suggestions in Iran in the past couple of weeks of the possibility of
further declines in interest rates in the near future. At the moment the interest rate on annual term
deposits stands at 18%, which we believe provides scope for up to a 3% cut to take place
immediately as the current 12% gap between interest earned on deposits and the YoY inflation
figure which stands at 7.3% is still one of the highest in the world. With the equity market trading on
a dividend yield of 13%, we see potential reductions in deposit rates as probably the biggest driver
of equity market performance over the next year. In terms of the portfolio of the fund, we have
increased the number of positions to 15 as we have seen some of our initial target companies come
back to levels that meet our valuation criteria. Our very detailed bottom-up analysis in a market that
is significantly under researched will continue to bias us towards a concentrated portfolio.
Fund Performance — Net Returns in Euro (%)**
May 31, 2016
Net Performance
Jan
2016
Feb
2016
Mar
2016
April
2016
May
2016
Since Inception
(Dec15 – May16)
Class B
12.0%
7.6%
-2.3%
3.0%
0.5%
21.8%
Comparative Track Record (Net Euro) *
300
Iran Equity Investment
Please note the performance fees which had
been accrued but not charged were charged
as of March 31st and hence the difference in
net performance between the B& C share class.
Historic Fund* Annual Performance
250
2015
-15.9%
200
2014
-5.6%
150
2013
-24.4%
2012
27.6%
2011
11.8%
2010
25.6%
100
EUR
121.801
127.07
May 2016
50
0
Rebased to 31 May 2006 = 100
2009
17.8%
2008
-10.9%
2007
13.1%
2006
27.2%
Past performance is not a reliable indicator of future results, prices of Fund shares and the income that may be derived from them
may fall as well as rise and investors may not get back the whole amount originally invested by them.
Source: Forticap, Turquoise Partners, Charlemagne Capital, Tehran Stock Exchange. *The comparative track record is provided for information purposes only. It is based on the performance of the BVI domiciled
Turquoise Equity Investment Fund launched on 31 May 2006 and whose strategy has been replicated and continued with Turquoise Partners in the present AIF structure. **Forticap has approved Turquoise Partners &
Charlemagne Capital as advisors of the fund.
Turquoise Variable Capital Investment Fund
Top Five Companies*
Top Five Sectors**
Company Name
Country
Sector
Housing Investment Co.
Iran
Real Estate
Fajr Petrochemical Co.
Iran
Utilities
Iran Mobile Telecommunication Co.
Iran
Telecommunication
Iran Industrial Development Investment Co. (IDIC)
Iran
Financial Institutions
Tamin Pharmaceutical Investment Co. (TPICO)
Iran
Pharmaceutical
Percentage Share
Sector Name
13.6% Utilities
12.7%
12.1%
Telecommunication
8.7%
The fund is jointly advised by Turquoise Partners and
emerging market specialist Charlemagne Capital with
Forticap as the AIFM. Forticap is a multi-asset AIFM and
UCITS Manager regulated by the Cyprus Securities and
Exchange Commission. Turquoise is an investment
banking and asset management group based in Iran which
provides financial products and services to clients and
investors who are interested in benefiting from exposure to
Iranian markets. Charlemagne Capital is an independent
specialist emerging markets investment manager that
seeks to use the inefficiencies that exist in emerging
markets to generate excess returns through a disciplined
and research-driven bottom-up stockpicking process
within an intelligent risk framework. Charlemagne Capital
(UK) Limited is authorized and regulated by the Financial
Conduct Authority. Turquoise Partners Group is authorized
by Organization for Investment Economic and Technical
Assistance of Iran, Ministry of Economic Affairs and
Finance.
Forticap Ltd
Tel:
+357 22495707 / +357 99 220190
Email: [email protected]
Website: www.forticap.eu
Turquoise Partners Group
Tel:
+44 (0)20 7493 0412
+98 21 887 26 681
Email:
[email protected]
Website: www.turquoisepartners.com
Charlemagne Capital (UK) Limited
39 St James’s Street
London SW1A 1JD
Tel:
+ 44 (0)20 7518 2100
Email:
marketing @charlemagnecapital.com
Website: www.charlemagnecapital.com
ATG Fund Services Ltd
Elia House, 77 Limassol Avenue
2121 Nicosia, Cyprus
Tel:
+357 22418811
Email:
[email protected]
Website: www.atgfunds.com
*Combined weight of top 5 holdings: 45%. Class B & C only.
**Excluding cash and fixed income investments, Class B & C only.
Minimum Subscription
Additional Subscriptions
Annual Management Fee
Performance Fee
Hurdle Rate
Status
ISIN Code
Valor
Bloomberg Code
Financial Institutions
Pharmaceutical
10.2%
Subscription Info.
Real Estate
B Shares
C Shares
EUR 125,000
EUR 5 Million
EUR 10,000
EUR 10,000
2%
3%
20%
-
8%
-
Open
Open
CYF000000382
31362367
TURVCIB CY
CYF000000390
30002378
TURVCIC CY
This document is issued by Fortified Capital Limited which is licensed by the Cyprus Securities and Exchange Commission
(CySEC) as an Alternative Investment Fund Manager. Fortified Capital Limited has been appointed as the investment manager of
Turquoise Variable Capital Investment Fund PLC (the Fund). The Fund is authorised by CySEC as an open-ended Alternative
Investment Fund (AIF) comprising multiple investment compartments. Each investment compartment (termed as a Sub-Fund in the
Fund’s Information Memorandum) is considered an AIF in its own right. The issuance of non-voting redeemable participating
shares of the Fund is restricted exclusively to persons qualifying as either (1) professional investors, meaning persons who are
“professional clients” either by default or by assessment under Law 144(I) of 2007 on Investment Services and Activities and
Regulated Markets (CIF Law), which implements Directive 2004/39/EC on Markets in Financial Instruments in Cyprus; or (2) wellinformed investors, within the meaning of section 2 of Law 131(I)/2014 regulating the Alternative Investment Funds (AIF Law) which
refers to an investor who does not qualify as a professional investor, as defined above, but meets the two following conditions in (a)
and (b): (a) the investor confirms in writing that they adhere to the status of well-informed investor, and (b) either (i) or (ii) following
applies to them:(i) they invest a minimum of EUR 125.000 (One Hundred and Twenty-Five Thousand euros) in the Fund, or (ii) they
are assessed by a credit institution within the meaning of the Banking Law 66(I) of 1997 as amended or Directive 2013/36/EU, by
an investment firm within the meaning of the CIF Law or by a management company within the meaning of Law 78(I) of 2012 on
Open-Ended Undertakings for Collective Investment (UCI Law) or EU Directive 2009/65/EC certifying their expertise, experience
and knowledge in adequately apprising an investment in the Fund. Shares in the Fund should be purchased only by such persons
and on the basis that they have experience of participating in AIFs such as the Fund and any other person who receives this
document should not rely upon it. This is neither an offer to sell nor a solicitation of an offer to buy shares in the Fund, which may
only be made on the basis of and by the Fund's Information Memorandum and accompanying Supplement. This document and
shares in the Fund shall not be distributed, offered or sold in any jurisdiction in which such distribution, offer or sale would be
unlawful and until the requirements of such jurisdiction have been satisfied. The purchase of shares in the Fund constitutes a high
risk investment and investors may lose a substantial portion or even all of the money they invest in the fund. Investors in the Fund
should note that past performance should not be seen as an indication of future performance. Fortified Capital Limited does not
guarantee the accuracy, adequacy or completeness of any information contained herein and is not responsible for any omissions
or for the results obtained from such information. The information is indicative only and is for background purposes and is subject
to material updating, revision, amendment and verification. All quoted returns are illustrative. No representation or warranty,
expressed or implied, is made as to the matters stated in this document and no liability whatsoever is accepted by Fortified Capital
Limited or any other person in relation thereto. FOR EEA INVESTORS: Notwithstanding the foregoing, under the passport framework
established by Directive 2011/61/EU on Alternative Investment Fund Managers (AIFMD), which has been implemented by Law
56(I) of 2013 on Alternative Investment Fund Managers (AIFM Law), Fortified Capital Limited and its representatives on behalf of
the Fund may market and solicit shares of the Fund to potential investors that qualify as “professional investors” from across the
member states of the European Union, European Economic Area and certain third countries associated with the European Union
that have implemented the AIFMD. However Fortified Capital Limited will not, solely on the basis of rights and authorisations
established under the AIFMD framework, market and solicit on behalf of the Fund, shares to potential investors that qualify as “wellinformed investors” but not “professional investors”. Despite the opportunities offered by the passport framework outlined above, in
case Fortified Capital Limited may not benefit from such opportunities at launch of the Fund (or a relevant Sub-Fund) where the
necessary regulatory processes as contemplated by the AIFMD have not been completed. In such event Fortified Capital Limited
may market and solicit the shares in the Fund only where such marketing and solicitation is at all times permitted under applicable
law in the relevant EEA member state, including all private placement rules relevant to AIFs such as the Fund.