Iran The Next Frontier. November PDF Free Download

Iran The Next Frontier November 2015

Middle Income Country Iran is a middle-income country with GDP of $417 billion and per capita PPP of $16,918 GDP has grown 330% and per capita GDP has more than doubled since the 1979 Revolution Poverty has been virtually eradicated, with only 1% of the population living on less than $1 per day $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 Per Capita GDP (PPP, 2015) $25,350 $20,299 $18,714 $16,918 $15,519 $13,993 $13,078 $11,444 $10,759 $6,176 Russia Turkey Mexico Iran Brazil China South Africa Egypt Indonesia India 3 Source: IMF World Economic Outlook

Modern Infrastructure Iran has a fairly modern infrastructure, including ports, domestic airports, roads and communications However, infrastructure built with Western help in the 1960s and 1970s is aging and in need of capital investment 90% 80% 70% 60% 50% 40% 30% 89% 74% 64% Paved Roads (as a percentage of total roads) 57% 54% 38% 90% 80% 70% 60% 50% 40% 30% 85% 79% 74% 72% 72% Urban Population (as a percentage of total population) 64% 53% 52% 43% 32% 20% 14% 20% 10% 10% 0% 0% Turkey Iran China Indonesia India Mexico Brazil Brazil Mexico Russia Iran Turkey South Africa China Indonesia Egypt India 4 Source: The World Bank

Higher Education Iran has an age-old tradition of innovation in physics, chemistry, irrigation, mathematics, energy and medicine Literacy is 85% nationwide and 98% in the 14-to-24 year age group Iran has world-class universities and technical colleges Iran currently has 4 million university students of which more than 50% are women Educational patterns in Iran are similar to high-income countries Almost half of Iranian college students are studying science, engineering, manufacturing or construction the highest rate of scientific education in the world 5 Source: UNESCO, The World Bank

Higher Education Higher Education Rates Scientific and Technical Education Rates High income countries 75.1% Iran Korea 31% 47% Iran 55.2% Finland Germ 28% 27% Mexico 27% Upper middle income countries 33.9% U.A.E. 26% Ireland 24% Middle income countries 28.1% Turkey 21% Japan 20% Lower middle income countries 22.8% U.S.A. 16% Low income countries 9.2% 0% 50% 100% Brazil 12% 0% 10% 20% 30% 40% 50% Percentage of College Students Studying Science, Engineering, Manufacturing and Construction 6 Source: UNESCO

Hydrocarbon Reserves Largest in the World 157 billion barrels of proven oil reserves 34 trillion cubic meters of proven natural gas reserves, although the huge South Pars field needs substantial investment Crude extraction costs are among the lowest in the world at $10-15 per barrel Only country with access to both Persian Gulf and the Caspian Sea hydrocarbons basins Proved Crude Oil and Natural Gas Reserves (2013) 400,000 350,000 300,000 Crude Oil (Million Barrels) Natural Gas (Million Barrels of Oil Equivalent) 250,000 200,000 150,000 100,000 50,000-7 Iran Venezuela Source: BP Statistical Review of World Energy 2013 Saudi Arabia Russia Qatar Canada Iraq UAE Kuwait USA Nigeria Libya Kazakhstan

The Iranian Economy at a Glance Statistics 2013 2014 2014 2015 (E) Population 78 million 79 million GDP USD403 billion USD 417 billion GDP Growth 1.50% 2.20% Per Capita GDP (PPP) USD 16,463 USD 16,918 Gross Government Debt (as a percentage of GDP) 11.20% 11.10% Net Government Debt 3.40% 4.20% (as a percentage of GDP) Gross National Savings 47.00% 44.00% (as a percentage of GDP) Inflation (end of period) 20.00% 20.00% Inflation (actual, September, 2014 y-o-y) 14.60% Unemployment 11.60% 12.20% 8 Source: Central Bank of Iran, Statistical Centre of Iran and Turquoise Partners

Avoided Resources Dependence 40% of Iranian exports are non-oil and gas Over the past ten years, the share of oil in GDP has declined from 22% to 10% as manufacturing and service industries have grown The IMF expects the share of oil revenues in total government revenues to decline from 45% today to 31% by 2016 Services 58.7% Agriculture 6.4% Composition of GDP (2013/2014*) Oil and Gas 9.8% Mining 1.1% Manufacturing 15.5% Power, Gas and Water 1.6% Construction 6.8% 9 Source: The Central Bank of Iran

Diverse Economy Iran is the largest car producer in the Middle East, producing 1.6 million cars in 2011 the year before Iranian auto sector was placed under sanctions Iran has one of the largest construction industries in the region and is also a major producer of cement, steel and petrochemicals Iran last year exported $2.3 billion of technical and engineering services and these exports rose 40% y-o-y in Q1 of this year Photo: Production at Iran Khodro, the largest car producer, rose 133% in April-August, year on year, due mainly to an easing of trade sanctions 10 Source: Turquoise Partners, News CN

Virtually Debt-Free Iran s gross government debt is 11.2% of GDP and net debt is 3.4% of GDP Central Bank reserves are over $75 billion Gross national savings is 47%, behind only Kuwait, China, Singapore and Saudi Arabia General Government Gross Debt Gross National Savings Rate Percentage of GDP 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 93% 66% 64% 50% 48% 36% 26% 19% 13% 11% Percentage of GDP 60% 50% 40% 30% 20% 10% 50% 39% 32% 31% 26% 20% 15% 15% 14% 10% 0% Egypt Brazil India South Africa Mexico Turkey Indonesia China Russia Iran 0% China Iran India Indonesia Russia Mexico Turkey Brazil South Africa Egypt 11 Source: IMF World Economic Outlook

Ambitious Reforms Underway Structural Reforms Timeline 2008 2009 2010 2011 2012 2013 2014 2015 2016 Privatisation Tax Reform Elimination of Subsidies Monetary Discipline Exchange Rate Unification The reform program is intended to lower inflation, expand employment and increase trade Policies include deregulation, tax reform, monetary discipline and privatization The IMF endorsed the reform agenda after a February 2014 visit to Iran 12 Source: Turquoise Partners

Privatization Iran has been privatizing state-owned assets since 1988.* A total of $119 billion in state assets have been privatized since 2006, including 15 of Iran s 30 largest companies. Iran s ten-year target is to reduce state ownership from 75% to 20% of the economy by 2017. Insider privatization under former President Ahmadinejad transferred substantial assets to state entities such as the Social Security Fund and to well-connected foundations (bonyads). These shares are now flowing to the market. President Rouhani has ordered quasi-state organizations and bonyads to limit themselves to activities that do not compete with the private sector (such as charity and development work). The Privatisation Program is often referred to as The Article 44 Program referring to Article 44 of the Constitution which permits multiple forms of ownership 13 Source: Turquoise Partners

Fundamental Ratio Comparison Country P/E P/B Dividend Yield (%) Iran 5.8 1.57 11 Egypt 11.1 29.0 2.2 1.8 Turkey 10.5 1.4 3.2 Frontier Markets** 10.9 1.5 3.9 Saudi Arabia 17.6 2.0 3.4 Emerging Markets*** 13.6 1.5 2.7 **Frontier Market countries include: Argentina, Bahrain, Bangladesh, Bulgaria, Croatia, Estonia, Jordon, Kenya, Kuwait, Lebanon, Lithuania, Kazakhstan, Mauritius, Morocco, Nigeria, Oman, Pakistan, Romania, Serbia, Sri Lanka, Tunisia, Ukraine and Vietnam. *** Emerging Market countries include: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Russia, Qatar, South Africa, Taiwan, Thailand, Turkey and UAE. 14 Source: MSCI, Turquoise Partners

Composition of the Market By Sector Sector Composition Sector Composition Chemicals & By Products 23% Motor Vehicles and Auto Parts 4% Monetary Intermediation 14% Transportation & Storage 3% Basic Metals 9% Pharmaceuticals 3% Diversified Industrial (Holdings) 7% Technical and Engineering Services 3% Post & Telecommunication 7% Investment Companies 3% Refined Petroleum Products & Nuclear Fuel 7% Cement, Lime & Plaster 2% Metal Ores Mining 5% Computer & Related Activities 2% Utilities Supplying 2% As at 31 Jul 2015 15 As at 31 Jul 2015 Source: Turquoise Partners

Turquoise Partners Financial services group with over a decade's experience in Iran Established operations with over 100 employees in Tehran and a representative office in London Extensive international client network Recognized international brand Is a partnership between the management team and foreign investors Combines local expertise with Western-educated, experienced management 16 Source: Turquoise Partners

Charlemagne Capital Emerging market equity specialist Where we invest Established in 2000 Publicly listed, our people own approximately 40% USD 2 billion 1 under management Strong balance sheet, no debt 17 1 Including assets excluded from the GIPS-compliant definition of the firm As at 30 Sep 2015 This information is presented as supplemental to the GIPS compliant presentation included at the end of this document

Charlemagne Capital Track Record New Frontiers Strategy - Performance Overview 200 Period to 30 Sep 2015 Fund Index Relative 180 1 Month 0.0% -1.6% 1.6% 160 140 3 Months -8.0% -10.7% 2.7% From 31 Dec 2014 1.3% -6.1% 7.4% 1 Year -8.9% -14.2% 5.3% Annualized data: 120 100 3 Years 14.6% 11.4% 3.2% Since inception (30 Jun 2010) 9.6% 6.5% 3.0% 80 Jun 2010 Nov 2010 Apr 2011 Sep 2011 Feb 2012 Jul 2012 Dec 2012 May 2013 Oct 2013 Mar 2014 Aug 2014 Jan 2015 Jun 2015 Gross EUR Chart rebased to 30 Jun 2010 = 100 Frontier Markets Composite EUR MSCI Frontier Markets Index EUR Fund returns are based on a composite of all share classes The Index is the MSCI Frontier Markets Index Charlemagne Capital s Frontier Markets Composite consists of fee-paying discretionary portfolios with a remit to invest solely in frontier markets. Composite performance figures are shown gross, ie before fees, in EUR. The Index is the MSCI Frontier Markets Index. Performance figures are annualized for periods in excess of one year. Charlemagne Capital claims compliance with the Global Investment Performance Standards (GIPS ), as verified for the period 1 Jun 2000 through 31 Dec 2014 by Ashland Partners. A copy of the verification report is available upon request. 18 Source: Charlemagne Capital This information is presented as supplemental to the GIPS compliant presentation included at the end of this document

Charlemagne Capital Track Record Magna MENA Fund - Performance Overview 400 350 300 250 200 150 Period to 30 Sep 2015 Fund Index Relative 1 Month 3.2% -0.8% 4.0% 3 Months -6.5% -12.6% 6.2% From 31 Dec 2014 19.3% -0.9% 20.2% 1 Year 9.5% -16.2% 25.7% Annualized data: 3 Years 35.1% 10.2% 24.9% Since inception (28 Feb 2011) 27.7% 10.0% 17.6% 100 50 Feb 2011 Jun 2011 Oct 2011 Feb 2012 Jun 2012 Oct 2012 Magna MENA Composite EUR Feb 2013 S&P Pan Arab Composite Index EUR Jun 2013 Oct 2013 Feb 2014 Jun 2014 Oct 2014 Feb 2015 Jun 2015 Gross EUR Chart rebased to 28 Feb 2011 = 100 Fund returns are based on a composite of all share classes The Index is the S&P Pan Arab Composite Index The Magna MENA Composite is based on all share classes of the Magna MENA Fund. Charlemagne Capital claims compliance with the Global Investment Performance Standards (GIPS ), as verified for the period 1 Jun 2000 through 31 Dec 2014 by Ashland Partners. A copy of the verification report and is available upon request. 19 Source: Charlemagne Capital, S&P This information is presented as supplemental to the GIPS compliant presentation included at the end of this document

Turquoise Partners Track Record Turquoise Iran Equities Investment Fund - Performance Overview Turquoise s foreign fund is the only foreign-focused equity fund in Iran, with over 90% of foreign portfolio investment on the Tehran Stock Exchange The Fund reports in Euros, although the underlying assets are in rials Turquoise s Firouzeh domestic fund was the top performer in 2014 out of 100 domestic funds in Iran The domestic Fund has outperformed its peers in both bull and bear markets 20 As at 31 Aug 2015 Source: Turquoise Partners

Turquoise Iran Equities Investment Fund Portfolio Characteristics Company Name Country Industry Portfolio Weight Mobile Communications of Iran Iran Telecommunications 12.1% Tamin Pharmaceutical Co. Iran Pharmaceuticals 10.4% Housing Investment Iran Real Estate and Construction 10.4% Khuzestan Steel Iran Metals and Mining 8.9% Pasargad Bank Iran Banks 8.1% As at 30 Jun 2015 Data is based on the current Turquiose Iran Equities Investment Fund Top 5 portfolio holdings 21 Source: Turquoise Partners

Turquoise Iran Equities Investment Fund Portfolio Characteristics Turquoise Iran Equities Investment Fund Portfolio Portfolio Tehran Stock Exchange* Average P/E 4.0 5.8 (as at 31 Jul 2015) Average P/B 1.7 1.5 (as at 14 Sep 2015) Average ROE (portfolio) 38% Average Dividend Yield 13% 11%** Number of holdings 15 283 (as at 22 July 2015) Equities 88% Bonds (with average yield of 24.3% annually) 12% Average market cap (USD billion) 1.2 As at 30 Jun 2015 *Tehran Stock Exchange Figures as at dates specified ** Estimation as of realised profit in 1393(2014) /market cap 1392 (2013) 22 Source: Tehran Stock Exchange, Turquoise Partners

Sanctions lifting timeline December 15 th 2015- Possible Implementation day - The International Atomic Energy Agency scheduled to provide final assessment of Iran s nuclear program. If the IAEA verifies Iran has met its obligations, then: 1. UN terminates nuclear-related sanctions 2. EU terminates or suspends a range of Iran nuclear related sanctions, including financial and energy sector sanctions 3. US ceases to enforce sanctions related to the financial and energy sector, removes a number of individuals/entities on SDN list, terminates Executive Orders related to Iran, licenses aviation-related trade Immediately: $30-100bn of cash and oil locked up in offshore accounts gets released An extra 300,000 barrels of oil per day is exported- $15m per day at todays prices 30-60 days later- Swift system is turned back on. Once this happens: Stock market investment from abroad can start Foreign companies can invest in Iran Iranian companies can raise capital from abroad 23

Sanction Compliance Policy Extensive sanctions compliant document based on external legal advice. Complies with EU and UN sanctions regimes. Controlled and defined sanctions compliant process: 1. Due diligence from publically available information for TSE listed companies 2. Due diligence on the company, company management, Directors and any associated companies or businesses 3. Ensure that investing in the company would not breach any of the sectoral sanctions set out in the Nuclear Proliferation and Human Rights regimes 4. Examine sanctions that might be applicable to non-eu(except US) investors 5. Sanctions compliance officer will provide a copy of each Investment checklist form to the Cyprus based depository 24 Source: Excerpt taken from the Sanction Compliance Policy 2015, Cyprus

Money Flow from the Fund into Iranian stocks Cyprus Fund Turquoise Variable Capital Investment Fund PLC Incorporated in Cyprus and to be licensed by CySEC. Board of Directors: Mr. RouzbehPirouz (UK) and Mr. Vivishan Pillay (Cyprus) Back office support provided by Global Resource Brokerage LLC (UAE) and First Accounting Services Tortola Limited (BVI) Bank of Georgia Banker to the Fund Cyprus Subsidiary Turquoise Trading Limited Incorporated in Cyprus, wholly owned subsidiary of Fund Dubai Exchange Bureaus Tehran Broker Iranian TSE (Tehran Stock Exchange) Broker Credit institution incorporated and license in Iran. Not designed under sanctions. Handles orders for Fund s subsidiary on TSE. Tehran Stock Exchange Investment in listed blue-chip TSE companies that are sanctions compliant Central Securities Depository of Iran TSE designated depository holds for Turquoise Trading Limited as owner of TSE securities 25 Source: Sanctions Compliance Policy Underwritten by WHO TRADES, Cyprus, CCL

Manager, Investment and Sub-advisors Turquoise Variable Capital Investment Fund PLC Incorporated in Cyprus and to be licensed by CySEC. Board of Directors: Mr. RouzbehPirouz (UK) and Mr. Vivishan Pillay (Cyprus) Back office support provided by Global Resource Brokerage LLC (UAE) and First Accounting Services Tortola Limited (BVI) Fortified Capital Limited (AIFM) Investment Manager Incorporated in Cyprus and licensed by CySEC Sub-advisor Charlemagne Capital (IOM) Limited (Advisor) Incorporated in the Isle of Man and licensed by IOM FSC Investment Committee 1 Fortified Capital member 2 Charlemagne Capital members 2 Turquoise Partners members TP Investment Advisors Limited (Advisor) Incorporated in the Cayman Islands registered with the Cayman Islands Monetary Authority Sub-advisor 26 Source: Sanctions Compliance Policy Underwritten by WHO TRADES, Cyprus

Fund Structure Turquoise Variable Capital Investment Fund Authorised by: Investment Manager: Investment Advisors: Depository: Administrator: Auditor: Cyprus Securities and Exchange Commission Fortified Capital Limited (Forticap) TP Investment Advisors Limited and Charlemagne Capital (IOM) Limited Who Trades Limited ATG Fund Services Limited Deloitte Cyprus Subscriptions/redemptions: Monthly Fees: Minimum Investment: EUR 125,000 <EUR 5m subscription: 2% management fee plus 20% (performance fee) over 8% hurdle >EUR 5m: 3% management fee 27 Source: Sanction Compliance Policy, Cyprus

Disclaimer This document has been issued by Charlemagne Capital (UK) Limited for information purposes only and is not to be construed as a solicitation or an offer to purchase or sell any security or other financial instrument or to any particular category of investors in jurisdictions in which such an offer or solicitation to the public or to any particular category of investors is illegal. Although the material in this report is based on information that Charlemagne Capital (UK) Limited considers reliable, Charlemagne Capital (UK) Limited does not make any warranty or representation (express or implied) in relation to the accuracy, completeness or reliability of the information contained herein. Any opinions expressed herein reflect a judgment at the date of publication and are subject to change. Charlemagne Capital (UK) Limited accepts no liability whatsoever for any direct, indirect or consequential loss or damage of any kind arising out of the use of all or any of this material. Where Charlemagne Capital (UK) Limited provides information in the document, it is provided exclusively for information purposes. The information does not constitute any form of recommendation related to the personal circumstances of investors or otherwise, nor does it constitute any specific or general recommendation to buy, hold, or sell financial instruments and does not thus create any relationship between Charlemagne Capital (UK) Limited and any investor. The document may not include all the up-to-date information required to make investment decisions. Other more accurate and relevant sources of information may exist. Investors should thus diligently inform themselves about the chances and risks of the investments prior to taking investment decisions. In addition to the financial aspects, this should include, in particular, the legal and tax aspects of the investments. It is strongly recommended that any potential investor should contact a financial adviser and, where required, a lawyer or tax adviser. Furthermore, it should also be considered that the future performance of financial instruments and their return cannot be inferred from their past performance. The value of investments may go down as well as up and investors in financial instruments should be capable of bearing a total loss of investment. Neither Charlemagne Capital (UK) Limited nor any third party content provider shall be liable for any errors, inaccuracy, delay or updating of the published content of the provided document. Charlemagne Capital (UK) Limited expressly disclaims all warranties as to the accuracy of the content provided, or as to the use of the information for any purpose, as far as legally possible. This material is for the use of intended recipients only and neither the whole nor any part of this material may be duplicated in any form or by any means. Neither should any of this material be redistributed or disclosed to anyone without the prior consent of Charlemagne Capital (UK) Limited. Issued by Charlemagne Capital (UK) Limited authorised and regulated by the FCA. Charlemagne Capital (UK) Limited 39 St James s Street London SW1A 1JD United Kingdom Tel: + 44 (0)20 7518 2100 Fax: + 44 (0)20 7518 2199 Website: www.charlemagnecapital.com Email: marketing@charlemagnecapital.com NB: Charlemagne Capital is the source of all information unless stated otherwise. 28

29 November 2015 Iran

Proposed Cash Flow Investor Euros (cash) Fund Bank Account Turquoise Variable Capital Fund 100% owned subsidiary Trading Subsidiary Bank Account Turquoise Trading Limited Cyprus Dubai Exchange Bureau Turquoise Trading Limited Cyprus TEHRAN Exchange Bureau - Rials Turquoise Trading Limited Cyprus Iranian Broker Account Turquoise Trading Limited Cyprus 30 Exchange listed equities held in central depository Turquoise Trading Limited Cyprus

Proposed Fund Structure Extract from the Sanctions Compliance Policy ATG Fund Services Limited (Administrator) Incorporated in Cyprus and supervised by ICPAC (Advisor) TP Investment Advisors Limited (Advisor) Incorporated in the Cayman Islands registered with the Cayman Islands Monetary Authority Turquoise Fund Management (Advisor) 31 Source: Sanctions Compliance Policy Underwritten by WHO TRADES, Cyprus

Iran The Next Frontier September 2015

Turquoise Partners Track Record Turquoise Iran Equities Investment Fund - Performance Overview Rebased to 30 May 2006 =100 300 250 200 150 100 50 May 2006 May 2007 May 2008 May 2009 May 2010 May 2011 May 2012 May 2013 May 2014 May 2015 Turquoise Iran Equities Investment Fund EUR Turquoise s foreign fund is the only foreignfocused equity fund in Iran, with over 90% of foreign portfolio investment on the Tehran Stock Exchange The Fund reports in Euros, although the underlying assets are in rials Turquoise s Firouzeh domestic fund was the top performer in 2014 out of 100 domestic funds in Iran The domestic Fund has outperformed its peers in both bull and bear markets 33 As at 31 Aug 2015 Source: Turquoise Partners

Sanctions Q&A Q: When were the nuclear related sanctions introduced and why? A: The USA, UN, and EU have levied multiple sanctions on Iran for its nuclear program since the International Atomic Energy Association (IAEA), the UN's nuclear watchdog, was unable to verify the peaceful nature of Iran s nuclear program Q: What has been restricted up until now? A: Sanctions target only specific sectors, individuals and entities. Q: Am I allowed to invest in Iran today? A: For non-us investors, it has never been illegal to invest in Iran providing that the underlying investment does not contravene sanctions. Many international companies are currently operating there. However, since Iran was excluded from the international banking system (SWIFT) in 2012, it has been costly to transfer money in and out, and there is a wide disparity between official and free market FX rates. Q: What if I am a US person? A: Substantial restrictions would remain at least initially, permitting some trade and market participation in selected sectors (food, pharma etc..), unless the company has a US OFAC license permitting them to deal with Iran. Q: What is happening now? A: The majority of US and EU sanctions continue unchanged pending the IAEA verification process. Some temporary sanctions relief which was implemented during the negotiating period by the US and EU, will continue to be available. Q: What is the timetable for removing sanctions? A: Aug 15 Response to IAEA; Sep 15 US Congress vote; Oct 15 Adoption day (preparations begin to remove sanctions after IAEA verification); Dec 15 Implementation Day: Upon IAEA verification, the agreement lifting the sanctions will take effect. 34 Source: Turquoise Partners

Iran- the biggest opportunity in 20 years? 80 million population with GDP/capita higher than Brazil, China South Africa Largest oil and gas reserves in the world but only 10% of GDP is oil and gas Stock market trades on a p/e of 5.8x with a dividend yield of 13% Lifting of sanctions could see the e double in 3 years as economic growth picks up to 6-8% Frontier markets trade on a p/e of 11 times. Earnings growth times multiple re-rating could see 400% stock market return in 3 years This fund provides a fully EU and UN sanctions compliant way to invest before sanctions are lifted through an EU regulated fund. 35

Iran The Next Frontier. November 2015