Announcement about Fund merger

Dear Client,

Thank you for choosing investment funds managed by IPAS „INVL Asset Management“.

IPAS „INVL Asset Management“, the manager of Open-ended investment fund “FINASTA SABALANSÇTAIS FONDS“, ISIN LV0000400265 (hereinafter – Finasta Sabalansçtais fonds) and of Open-ended investment fund “FINASTA OBLIGÂCIJU FONDS“, ISIN LV0000400257 (hereinafter – Finasta Obligâciju fonds), sends you this notification to inform about the upcoming fund merger and hereby invites you to take a close notice of this letter.

MERGING FUNDS

IPAS „INVL Asset Management“ (hereinafter – the Fund Manager) has reviewed all of its managed investment funds, their investment strategies and financial reports. As a result, by seeking to act in its clients best interests as well as in best interests of its managed investment funds, the Fund Manager is optimizing its management activities and together with Lithuania-registered management company UAB „INVL Asset Management“, has approved a cross-border merger of three investment funds, where:

  • Latvia-registered Open-ended investment fund Finasta Obligâciju fonds and Open-ended investment fund Finasta Sabalansçtais fonds will be incorporated into Lithuania-registered Harmonized Open-ended Umbrella Investment Fund - Finasta Emerging Europe Bond Subfund (ISIN: LTIF00000468).

(hereinafter – Fund merger).

The decision has been approved by the Boards of IPAS „INVL Asset Management“ and UAB „INVL Asset Management“. Both fund management companies belong to the same financial group AB „Invalda INVL“:

  • IPAS INVL Asset Management (the manager of Finasta Obligâciju fonds and Finasta Sabalansçtais fonds);
  • UAB INVL Asset Management (the manager of Finasta Emerging Europe Bond Subfund).

The decision for Fund merger has been driven with the effort to form the basis of potentially strong, active and profitable INVL group investment funds as well as to boost the inflows of the above mentioned funds. The Fund merger is expected to benefit the participants of merging funds as a result of maximum possible return on their investments and investment growth in the continuing fund.

The Fund merger will take effect on January 19, 2016.
After the Fund merger:

  • the continuing (receiving) fund will be – Finasta Emerging Europe Bond Subfund (ISIN: LTIF00000468);
  • the terminating fund – Finasta Obligâciju fonds (ISIN LV0000400257);
  • the terminating fund – Finasta Sabalansçtais fonds (ISIN LV0000400265).

On January 19, 2016 the participant of Finasta Obligâciju fonds and Finasta Sabalansçtais fonds will become a participant (investment fund unit holder) of Finasta Emerging Europe Bond Subfund.

FINASTA EMERGING EUROPE BOND SUBFUND

Finasta Emerging Europe Bond Subfund – is a MORNINGSTAR and Lipper Leaders rated fund with five years of attractive investment history. It is one of four subfunds of Finasta Umbrella fund, registered in Lithuania and managed by the management company UAB “INVL Asset Management” . UAB „INVL Asset Management” (hereinafter – INVL Lithuania) has been successfully managing Finasta Umbrella fund, which has been established on October 29, 2010 and currently consists of four subfunds:

Finasta Umbrella fonds

On January 1st, 2012 three other investment funds have been incorporated into Finasta Umbrella Fund, therefore forming a strong and potentially attractive umbrella investment fund for confident investment seekers. With clearly set investment geographical regions and cost efficient investment strategies, all subfunds of Finasta Umbrella Fund are popular amongst investors and have reached the total net asset value of 29mln EUR.

Three of subfunds (Finasta Emerging Europe Bond Subfund, Finasta New Europe TOP20 Subfund and Finasta Russia TOP20 Subfund) are listed on NASDAQ OMX Baltic exchange (www.nasdaqbaltic.omx) and also notified for distribution in other countries abroad: Latvia, Finland, Sweden, Norway, Denmark, and Germany. Subfunds are actively distributed in Sweden by several official distributors. Therefore, wide distribution area forms a strong potential in fund assets’ growth.

Along with this letter we provide you with the latest copy of Finasta Emerging Europe Bond Subfund’s Key Investor Information Document (Appendix no. 1). Please take a close attention and get familiar with main objectives and investment policy of this subfund, its investment risks, and other important information for you as an investor and future participant of Finasta Emerging Europe Bond Subfund. Please note that after the Fund merger, the depository bank for your investments will change and will be held at SEB bank’s depository (company code 112021238, registered address: Gedimino pr. 12, Vilnius, Lithuania).

All other to Fund merger related changes are listed below and more information about Finasta Emerging Europe Bond Subfund (key investor information document, Rules, Prospectus, past performance results) can be obtained at our website www.invl.com or by contacting our offices in Lithuania or Latvia.

CHANGES RELATED TO FUND MERGER

After the effected Fund merger, the fund units of terminating funds Finasta Obligâciju fonds and Finasta Sabalansçtais fonds will be replaced to its participants free of charge with the fund units of continuing fund Finasta Emerging Europe Bond Subfund. Thus, the participants of Finasta Obligâciju fonds and Finasta Sabalansçtais fonds will become participants of Finasta Emerging Europe Bond Subfund and they will invest according to rules and procedures described in the documents of Finasta Emerging Europe Bond Subfund. Therefore they will experience several positive changes.

Comparison of investment strategies, fees, charges, and other, applied to merging funds:

  Before merger (Finasta Obligâciju fonds) Before merger (Finasta Sabalansçtais fonds) After merger (Finasta Emerging Europe Bond Subfund)
Investment Strategy Up to 100 per cent of the fund assets are invested in the debt securities with focus mainly on Central and Eastern Europe and CIS. Up to 50 per cent of the fund assets are invested in the debt securities and an up to 50 per cent are invested in equities. Focus mainly on Central and Eastern Europe and CIS2. Up to 100 per cent of the Subfund assets are invested in debt securities of developing European governments and companies, indicated by the credit analysis as the most promising.
Fund’s base currency Euro Euro Euro
Investment region Worldwide Worldwide Limited: up to 100 per cent are invested into Central and Eastern Europe and CIS2.
Investment risk category 3 category* 3 category* 3 category*
Benchmark Index None None 0,5 * JP Morgan Euro Emerging Markets Bond Index Diversified Europe (JP Morgan Euro EMBI Diversified Europe*) + 0,4 * JP Morgan Corporate Emerging Markets Bond Index Broad Europe (CEMBI Broad Europe*) + 0,1 * Euro Cash Indices Libor Total Return 1 Month Index (ECC0TR01 Index*)
Conditions of Investment Units Conversion - - Possibility to switch Subfund units to other subfunds under Finasta Umbrella Fund.
Listing on the exchange - - Subfund is listed on NASDAQ OMX Vilnius Exchange.
Depository Swedbank, AS** Swedbank, AS** AB SEB Bank
Investment Units in investors accounts with six decimal places with six decimal places with four decimal places
Net assets of the Funds with seven decimal places with seven decimal places with four decimal places
Net asset value of the Funds with four decimal places with four decimal places with four decimal places
Fees:
Management 1,50% 1,75% 1%
Distribution currently applied 0,5% (max 3% according to fund’s documents) currently applied 1%, (max 3% according to fund’s documents) currently applied 1% (max 2% according to fund’s documents)
Subfund switch fee N/A N/A 0,25%
Redemption 0% 0% 0%
Depository fees 0.3 % + 142.29 EUR (a monthly payment) 0.3 % + 142.29 EUR (a monthly payment) max 0,5%
Audit fee max 0,2% max 0,2% max 1% (of the average annual NAV of the Subfund)
Fees to other financial institutions max 1,5% max 1,5%
Transaction fees max 1% (of the value of concluded transactions)
Legal costs max 1% (of the average annual NAV of the Subfund)
- bank charges;
- other operating expenses
max 1% (of the average annual NAV of the Subfund)
- NASDAQ OMX Vilnius exchange fees; N/A N/A
- market maker fees; N/A N/A
Max of total expenses covered by the fund: 3,70% of the average annual NAV of the fund 3,95% of the average annual NAV of the fund 2% of the average annual NAV of the Subfund
Ongoing charges as of year 2014*** 2,05% 2,29% 1,33%
MORNINGSTAR**** - - 4 stars
Lipper Leaders***** - - 5 points and 4 points

JP Morgan Euro EMBI Diversified Europe – total return index which tracks performance of bonds issued by Emerging European countries’ governments;
CEMBI Broad Europe - total return index which tracks performance of bonds issued by companies from Emerging Europe;
ECC0TR01 Index – total return index which tracks changes of 1 month LIBOR.
* This indicator demonstrates risk and reward ratio of the fund. In the scale from 1 to 7, higher number means more risks have to be taken to achieve higher return. 1 category investment is not necessarily risk-free. Risk category is calculated using historical data, thus does not guarantee future returns of the fund. Fund’s risk category is indicated in Key Investor Information Document of every fund (KIID).
** Before merger depository of Finasta Obligâciju fonds and Finasta Sabalansçtais fonds is Swedbank, AS (Reg. Nr. 40003074764, Balasta dambis 15 , LV-1048, Riga, Latvia); after merger depository will be the same as remaining Subfund’s – AB SEB bank (Reg. Nr. 112021238, Gedimino pr. 12, Vilnius, Lithuania).
*** Ongoing charges fee shown in the table is based on the last year’s expenses ending December 2014. This figure can be different every year. This fee does not include performance fee and expenses on the conclusion of the transactions with the assets of each fund, with the exception of the cases when the distribution and (or) redemption fees are covered from the assets of the fund when buying or selling the investment units or shares of another collective investment undertaking on behalf of the fund.
**** MORNINGSTAR – independent international fund ranging agency – evaluates and ranks investment funds with at least 3 years of history based on risk and reward ratio (as of October 30, 2015). http://www.morningstar.lt/lt/funds/snapshot/snapshot.aspx?id=F00000LYK4.
***** Lipper Leaders - global leader in supplying mutual fund information, analytical tools, and commentary – has assigned the highest (5 points) Lipper Leaders Rating in Preservation and Expense category and 4 points Lipper Leaders Rating in Total Return category (as of October 27, 2015). http://www.lipperleaders.com.

THE EXPECTED IMPACT ON YOUR INVESTMENTS (according to changes related to Fund Merger)

Finasta Emerging Europe Bond Subfund has assigned benchmark index so its investors can easily evaluate Subfund’s past performance.

Finasta Emerging Europe Bond Subfund has lower management fee (1 %) comparing to Latvian funds: Finasta Obligâciju fonds (1,50%) and Finasta Sabalansçtais fonds (1,75%).

Finasta Emerging Europe Bond Subfund currently has half percentage higher distribution fee comparing to Finasta Obligâciju fonds (but it is the same as Finasta Sabalansçtais fonds). However, the maximum distribution fee that can be applied according to Subfund’s Rules is lower and reaches only 2,00%, while both other merging funds that will be terminated has the maximum distribution fee of 3,00%. Distribution fees applied as of today are published at www.invl.com and can be increased or decreased within the maximum limits set in Subfund’s Rules and Prospectus by the decision of the Subfund’s Management Company’s Board.

It should be noted that difference in distribution fees of merging funds will not affect the current fund participants of the terminating funds as they already have acquired fund units according to Rules of Finasta Obligâciju fonds and/or Finasta Sabalansçtais fonds. Therefore, current participants of Finasta Obligâciju fonds and/or Finasta Sabalansçtais fonds will not be effected by the change in distribution fees.

Depository fees set in Finasta Emerging Europe Bond Subfund have relatively lower limit and no compulsory monthly fees comparing to depository fees of Finasta Obligâciju fonds and Finasta Sabalansçtais fonds.

Audit fee set in Finasta Emerging Europe Bond Subfund has relatively higher limit (max 1%), but merging funds have comparatively different grouping of costs (i.e. Finasta Emerging Europe Bond Subfund separately identifies fees to financial intermediaries while Finasta Obligâciju fonds and Finasta Sabalansçtais fonds incorporate these costs to other expenses). As Finasta Emerging Europe Bond Subfund is registered in Central Securities Depository of Lithuania and listed on NASDAQ OMX Vilnius Exchange, it has additional expenses and fees, but the maximum limit for covering mentioned costs from the assets of the Subfund is lower – max 1,00% (in Finasta Obligâciju fonds and Finasta Sabalansçtais fonds it is – max 1,5%).

The maximum percent of total expenses covered by the fund in Finasta Emerging Europe Bond Subfund is almost twice lower – only 2% of the average annual NAV of the Subfund. While in Finasta Obligâciju fonds it is 3,70% of the average annual NAV of the fund and in Finasta Sabalansçtais fonds - 3,95% of the average annual NAV of the fund.

Additionally when comparing the ongoing charges for all merging funds as of year 2014, ratio for Finasta Emerging Europe Bond Subfund is the lowest amongst all three. The Subfund’s net assets are highest, therefore some of fixed costs (that are relevant to all three funds) get relatively smaller (i.e. fee to audit company), because fees applied to Subfund directly (i.e. expenses for banking services) are distributed amongst larger number of participants.

Possibility to switch between subfunds. The participants of Finasta Obligâciju fonds and Finasta Sabalansçtais fonds after they become participants of Finasta Emerging Europe Bond Subfund will have the right to switch between subfunds of Finasta Umbrella Fund by transferring an investment from one Finasta Umbrella fund’s subfund to another. It is a convenient option while maintaining one’s investments, as switch transactions between subfunds are switched with the price of the same day when the switch order has been received and with the max one-off charge of 0,25%. For more information about the possibility to switch between subfunds, please refer to the prospectus of the subfund.

Terms for buying and redeeming investment units. The participants of terminating funds Finasta Obligâciju fonds and Finasta Sabalansçtais fonds after they become participants of Finasta Emerging Europe Bond Subfund, will be able to trade their investment units at NASDAQ OMX Vilnius Stock Exchange, Baltic regulated market by placing an order to any intermediary of public trading during business days and business hours of NASDAQ OMX Vilnius stock exchange, under the procedure established by the regulations of NASDAQ OMX Vilnius stock exchange.

After the Fund merger, when Finasta Obligâciju fonds and Finasta Sabalansçtais fonds will both be incorporated into Finasta Emerging Europe Bond Subfund, the management company INVL Lithuania will use the depository of Finasta Emerging Europe Bond Subfund..

Depositories of funds before Fund merger:

  1. Depository of Finasta Obligâciju fonds - Swedbank, AS, company code: 40003074764, head office: Balasta dambis street 15, LV-1048 Riga, Latvia (hereinafter – Swedbank depository);
  2. Depository of Finasta Sabalansçtais fonds - Swedbank, AS, company code: 40003074764, head office: Balasta dambis street 15, LV-1048 Riga, Latvia (hereinafter – Swedbank depository);
  3. Depository of Finasta Emerging Europe Bond Subfund – AB SEB bank, company code: 112021238, head office: Gedimino ave. 12, LT-01103 Vilnius, Lithuania (hereinafter – SEB depository).

Chosen Depository after Fund merger:

  1. AB SEB bank – company code: 112021238, head office: Gedimino ave. 12, LT-01103 Vilnius, Lithuania (hereinafter – SEB depository).

On the date of Fund merger all financial assets and liabilities of Finasta Obligâciju fonds and Finasta Sabalansçtais fonds will be transferred from the funds’ accounts in Swedbank depository to receiving subfund’s (Finasta Emerging Europe Bond Subfund’s) accounts in SEB depository.

INVL Lithuania uses SEB bank’s depository services for all other its managed funds. SEB bank is well known in its market and the change in depositories, as well as other related amendments will not result in any unfavourable outcome for participants of Finasta Obligâciju fonds and/or Finasta Sabalansçtais fonds.

PROCEDURE FOR MERGER

The Fund merger will take effect on January 19, 2016.

On the 19th of January, 2016 Finasta Obligâciju fonds and Finasta Sabalansçtais fonds shall be terminated and all of its assets and liabilities will be transferred to Finasta Emerging Europe Bond Subfund.

After the effected Fund merger, the fund units of terminating funds Finasta Obligâciju fonds and Finasta Sabalansçtais fonds will be replaced to its participants free of charge with the fund units of continuing fund Finasta Emerging Europe Bond Subfund. Thus, the participants of Finasta Obligâciju fonds and Finasta Sabalansçtais fonds will become participants of Finasta Emerging Europe Bond Subfund.

NOTE: all investment units for participants of terminating funds will be rounded upward in favour of participants:

Currently, Finasta Emerging Europe Bond Subfund’s investment units are calculated leaving four decimal places (i.e. 1,1234), while investment units of Finasta Obligâciju fonds and Finasta Sabalansçtais fonds are calculated leaving six decimal places (i.e. 1,123456). Therefore, in order to act in the best interests of investors of terminating funds, INVL Lithuania has decided to exchange fund units using exchange ratio set and the resulting number of units received round upward leaving four decimal places, i.e.:

If investor has 10,123456 investment units of Finasta Obligâciju fonds and exchange ratio set on the Fund merger day is i.e. 1,12234633, the investor will receive the result in investment units of Finasta Emerging Europe Bond Subfund as follows:

10,123456 x 1,12234633 = 11,362023688522
[round upward]
Result: 11,3621 units of Finasta Emerging Europe Bond Subfund.

After the effected Fund merger, the unit value of Finasta Emerging Europe Bond Subfund will be set according to rules and procedure described in subfund’s Rules and Prospectus, where unit value is set by dividing the subfund’s NAV by the number of all the subfund’s units in circulation. The total value of all units of the subfund is always equal to the NAV of the Subfund. The subfund’s unit value is calculated leaving four decimal places and is rounded according to mathematical rounding up rules.

Please be advised that the Fund manager, in order to successfully effect the Fund merger, has defined a period of time, during which no investment units of terminating funds Finasta Obligâciju fonds and Finasta Sabalansçtais fonds will be issued, redeemed or converted:

11th January, 2016 – 19th January, 2016

All information about suspending trade, issue, redemption, and conversion operations of terminating funds as well as details about completing Fund merger will be published at www.invl.com.

On the date of completing Fund merger, after converting the investment units of terminating funds to investment units of continuing (receiving) fund, all corresponding entries shall be recorded to investment accounts of all participants of Finasta Obligâciju fonds and Finasta Sabalansçtais fonds by the relevant data of date January 18, 2016. All participants of Finasta Obligâciju fonds and Finasta Sabalansçtais fonds that will not exercise their right to redeem their investment units, on January 19, 2015 will become the participants of Finasta Emerging Europe Bond Subfund.

As net asset values of investment funds are calculated on the T+1 basis and published not later that till noon 12.00 pm (CET+1), technically the fund merger will be executed on the 19th of January, 2016, although the records in fund participant’s investment account shall be entered as of date January 18, 2016. On the 19th of January, 2016 both funds – Finasta Obligâciju fonds and Finasta Sabalansçtais fonds – will be incorporated into Finasta Emerging Europe Bond Subfund and will cease to exist.

PROCEDURES FOR REBALANCING THE PORTFOLIOS OF THE TERMINATING FUNDS

Considering current investment strategies of the funds participating in Fund merger, it has been decided to rebalance portfolios of both terminating funds Finasta Obligâciju fonds and Finasta Sabalansçtais fonds, as investment strategies and financial assets of Finasta Obligâciju fonds and Finasta Sabalansçtais fonds do not fully meet the investment strategy of Finasta Emerging Europe Bond Subfund, that is provided in its Rules and Prospectus.

By seeking to ensure the requirements for Finasta Emerging Europe Bond Subfund’s portfolio diversification and keep with the investment strategy described in the Rules and Prospectus of the subfund, the management company of terminating funds during the Fund merger period shall re-balance some financial instruments in the portfolios of Finasta Obligâciju fonds and Finasta Sabalansçtais fonds in order to comply with Finasta Emerging Europe Bond Subfund’s investment strategy. During the Fund merger period and on the date of completing Fund merger, both portfolios of the terminated funds – Finasta Obligâciju fonds and Finasta Sabalansçtais fonds – will or might consist of cash (in EUR and / or USD currencies), derivatives (for purpose of currency risk hedging), term deposits, debt securities (enterprise and government bonds) or CIUs that invest in enterprise and government bonds. Herein mentioned assets will be transferred into receiving fund Finasta Emerging Europe Bond Subfund’s bank account in SEB depository on the date of effecting Fund merger.

INVESTORS RIGHTS RELATED TO FUND MERGER

During all period till 11th of January, 2016 all participants of Finasta Obligâciju fonds and Finasta Sabalansçtais fonds have the right to sell their fund units with no fees applied. All units of Finasta Obligâciju fonds and Finasta Sabalansçtais fonds will be redeemed and settled by the terms and conditions indicated in the prospectus of the respective fund.

If till the 11th of January, 2016 the participant of Finasta Obligâciju fonds will not exercise his above mentioned rights, after the effected Fund merger he will become the participant of Finasta Emerging Europe Bond Subfund.

If till the 11th of January, 2016 the participant of Finasta Sabalansçtais fonds will not exercise his above mentioned rights, after the effected Fund merger he will become the participant of Finasta Emerging Europe Bond Subfund.

Before making a decision to invest, the participant of the fund should individually or with the help of investment consultants personally assess the selected fund’s investment strategy, applicable fees and all investment-related risks. One should also carefully read the respective fund’s Rules, Prospectus and Key Investor Information Document. All important information about investment funds managed by INVL Asset Management can be obtained at www.invl.com.

FURTHER INFORMATION

During all period since the receipt of this announcement till the actual Fund merger date, the participants can obtain the copy of terminating funds depository’s confirmation. For that, one should contact INVL Asset Management following contact details shown below.

Any additional information that might be interested and relating to herein mentioned Funds merger will be available and provided under request:

  • At any client representative offices in Vilnius and Riga;
  • On-line www.invl.com (in Lithuanian, English and Latvian);
  • By phone +370 700 55 959 or email info@invl.com in Lithuania;
  • By phone + 371 67092988 or email LV@invl.com in Latvia;

Information about effected Fund merger, investment fund exchange ratio will be published on-line www.invl.com on the date of completing Fund merger.

The investment units of the Finasta Umbrella Fund and its compartments (Finasta Emerging Europe Bond Subfund, Finasta New Europe TOP20 Subfund and Finasta Russia TOP20 Subfund) are marketed in Latvia by INVL Lithuania (UAB “INVL Asset Management”, Company code 126263073, Gyneju str. 14, LT-01109 Vilnius, Lithuania; telephone number +370 700 55959, email: info@invl.com).

However, the company from whom investors in Latvia may obtain all Fund merger relevant information, distribution details and documents of the Finasta Umbrella fund, including Finasta Emerging Europe Bond Subfund is INVL Latvia (IPAS “INVL Asset Management”, Company code 40003605043, Smilðu iela 7-1, LV-1050 Riga, Latvia; telephone number + 371 67092988, email: LV@invl.com).

Subscription and redemption orders will also be available to submit on NASDAQ OMX Baltic in Baltic Fund centre.

The latest electronic copies of the Finasta Emerging Europe Bond Subfund documents are published on-line:

All above mentioned documents can also be obtained via email info@invl.com or LV@invl.com.

When becoming participants of Finasta Emerging Europe Bond Subfund, investors in Latvia shall have the right to submit a complaint about the services of UAB “INVL Asset Management” in the Lithuanian, English or Latvian language whichever is their priority language and by those procedures set out in the Complaint Handling Order Requirements in UAB “INVL Asset Management”, which is available in INVL Lithuania’s website www.invl.com.

2 CIS - The Commonwealth of Independent States.