Dear Customer,

We would like to inform you about the following in connection with the impact of the current war situation on the capital markets and the suspension of sale of the Aegon Russia Stock Investment Fund (Fund).

The Russian invasion launched against Ukraine on 24 February 2022 and the Western economic sanctions announced as a result have serious effects on the regional stock and bond markets even in the short term. The disconnection of a significant portion of Russian banks from the international SWIFT system, the ban of Russian planes from the airspace of the EU Member States and other states, and the freezing of the assets of certain Russian nationals is expected to cause severe damage to the local economy. The situation may change dramatically day by day, which results in volatility on the global stock, goods and forex markets that is significantly higher than normally. The EU’s sanctions completely banned the trade of many Russian securities, and at the same time Russia introduced a prohibition of disposal of Russian securities for foreigners. In addition to the foregoing, the EU has also implemented several other economic sanctions, for example in connection with oil refining, air traffic, the space industry, and maritime shipping. It banned the maritime trade of oil and disconnected several Russian banks from the SWIFT system. In the meantime, the EU also adopted newer sanctions, via which it implemented further sanctions against Russia. Russia adopted sanctions against the EU too, according to which, it prohibited – among other things – the acquisition and sale of shares held in strategic enterprises and joint stock companies. These sanctions make entering and trading on the Russian market completely impossible at present.

The Fund Manager completed the conversion of certificates of deposit in the Fund into local market shares, so the ratio of GDRs in the Fund has decreased significantly. The Fund Manager completed the conversion through the depositary in every possible case, and after the conversions, 4 shares remain, which are not recorded on the Russian local market: Magnit, Phosagro, X5, and Yandex. This latter is not a certificate of deposit, but a share introduced to the Nasdaq exchange.

As an important development, the Fund’s depositary opened the S accounts for the Fund.  CBR, the Russian central bank, introduced several types of S accounts – securities, money –, and based on the regulations prescribed by the CBR, proceeds from securities held in the NSD for foreign investors resident in countries that have imposed sanctions through a local Russian sub-depositary or Eurclear and Cleartstream are kept on record on the S-type accounts opened by Russian sub-depositaries and the NSD. The scope of use of amounts credited to S-type cash accounts is limited, and they cannot be used for payment freely or repatriated (converted to another foreign currency); they represent conditional claims usable subject to the conditions prescribed by the Russian state at any given time. In addition to the shares introduced abroad and the liquid non-Ruble assets, the assets of the Fund are also kept on record on the S-accounts.

In the past month, several Russian companies paid dividends (Gazprom, Lukoil), which were also channelled to the aforementioned S-accounts. The properly received dividend payments recorded on these accounts can be considered to be favourable news, but it is important to note that the Fund remains unable to access these, and in the absence of a stock exchange, we cannot dispose over them either.

It was important news that the Russian exchange has been opened for the investors of “friendly” countries. Based on the first impressions, no significant selling pressure arose on the market, and what is more, there was not even significant change in the volume traded.

The list of strategic enterprises is not final at present. According to the presidential decree, only the investors of “friendly” countries and foreign companies having majority ownership may trade in these enterprises, while for the investors of “non-friendly” countries – including Hungarian investors –, this is expected to be prohibited both this year and the next.

Therefore, in accordance with the foregoing, the investors of “non-friendly” countries will not be able to sell even after the market opening, which poses a further restriction for the Fund.

Both the Russian and the EU sanctions continue to remain effective, and the net asset value of the series of the Aegon Russia Stock Investment Fund cannot be determined either. VIG Befektetési Alapkezelő Magyarország Zrt.(the Fund Manager) still has no access to the Russian stock markets, and therefore the sale and redemption of investment units is still not possible due to reasons within the scope of operation of the Fund Manager.

Therefore, due to the foregoing, the conditions for recommencing continuous sale are unfortunately still not fulfilled for the Aegon Russia Stock Investment Fund.

Our Customers can find our communications relating to the Aegon Russia Stock Investment Fund on our website, via the following link:

https://www.vigam.hu/jelentesek-kozlemenyek/kozlemenyek/

We would also like to inform our Customers that the suspension of the Aegon Russia Stock Investment Fund will not cause any change in the operation or solvency of the Fund Manager.

2 December 2022

VIG Befektetési Alapkezelő Magyarország Zrt.

Disclaimer:

The data contained in the communication are only for informational purposes, and do not qualify as investment recommendation, offer, investment advice, or call to proposal. The conditions related to the foregoing may change. Past returns do not guarantee future returns. VIG Befektetési Alapkezelő Magyarország Zrt. will not be liable for investment decisions made based on the present communication or any consequences thereof.