Debt Instruments Investment Compartment

Investment of €2M into Cyprus Special Investment Compartment of the Fund entitles to Cyprus citizenship provided

Debt Instruments Investment Compartment shall consist of different classes of Participating Shares which could be created or liquidated by the decision of CIO approved by the Board of Directors. For the time being there shall be one Class of Participating Shares:

Class “DI1” Participating Shares

Government, Corporate and Personal Debt

Investment product for investors who prefer higher level of liquidity with significant level of protection and steady revenue stream of interest and dividend payments. We intend to establish portfolio, which mostly consists of different classes of debt instruments, directly or indirectly collaterized by real estate and other tangible assets.

The Company shall be entitled to enter into the following transactions:

Government, regional and municipal bonds,
Corporate bonds,
Corporate promissory notes and invoices (factoring),
Corporate loans,
Personal promissory notes and loans,
Other types of debt instruments as deemed appropriate by the CIO

INVESTMENT STRATEGY

The investment strategy used for this compartment is a combination of “bottom-up” approach, fundamental analysis and dividend investing. We strongly believe that potential counterparties/debt instruments should be cherry-picked within the generally well-performing asset type. At the same time our goal is to identify an asset which will be delivering good ROI while in the portfolio through interest payments.

TECHNIQUES EMPLOYED

When evaluating potential target for acquisition, Chief Investment Officer takes decision based the following criteria:

Fundamental analysis of the counterparty’s financial statements confirms proper financial standing and room for growth and improvement,
Combined revenues derived from interest payments and price appreciation significantly outperform the revenue target

MANAGEMENT METHODS

Diversification: as a rule, any investment should not exceed 25% of the total assets in the portfolio;

Benchmarking: accrued gross revenues should be as good or better than similar assets on the market,

VaR calculated as directed by Risc Metrics approach

RISKS

Credit (default) risk

Risk of not getting the promised money as per the agreed schedule; either there is a delay or the money does not come back at all. This risk is mitigated by:

Investigating quality of the borrower at the time of acquisition of debt instrument and subsequent periodical reviews (credit rating, financial analysis)’
Using collateral.

Interest rate risk

Adverse change of interest rates can lower the prices of debt instruments in possession which can result in losses if those are sold before maturity date. The risk could be mitigated by purchase of derivatives like forward contract on interest rate. Most efficient way though is to balance the portfolio in a way that maturity of debt instruments corresponds with expected maturity of Participating Shares.

Risk of liquidity

From time to time there could be no market for the debt instruments in possession which will force the Company to hold those until maturity and repayment.

Inflation Risk

If the rate inflation exceeds the interest rate of the debt instrument, the real return on investment becomes negative.

Currency Risk

If the investment in the debt instrument is in the other currency than the Company’s base currency (EUR), adverse change of interest rate can cause losses. The risk could be mitigated by buying a derivative instrument such as futures’ contract or currency swap.

USE OF LEVERAGE

Up to 50%