FEM Q2 2021 Manager Letter

In our last letter, we made a case for investors to think differently about how they approach emerging markets. We argued that many of the largest constituent countries of emerging market indices have reached levels of economic development, regulatory cycle, and market efficiency that makes them comparable to developed markets. We continue to advocate that the true emerging market opportunity today lies in the next generation of emerging markets like Egypt, Indonesia, Kenya, Pakistan, and Vietnam. Today, those market offer up a unique combination of a large, young and rapidly urbanizing consumer base that is increasingly connected but still not served in the same way their counterparts in more developed countries are. Our job is to find public companies that are able to fill that gap by offering services directly to those customers (B2C) or by enabling other businesses to offer those services to customers (B2B2C). That gap represents a substantial economic and social profit opportunity for well run businesses in which the strategy is generously invested.

Vergent Asset Management LLP

DISCLOSURES

1. Unless otherwise stated, all data is at June 30, 2021 and stated in US dollars (US$). Source: Connor, Clark & Lunn Financial Group, Thomson Reuters Datastream.

2. Performance history for the Vergent Emerging Opportunities Strategy is that of the Vergent Emerging Opportunities Composite. The Composite has an inception and creation date of August 2018.

3. Net performance figures are stated after management fees, estimated performance fees, trading expenses and before operating expenses. Operating expenses include items such as custodial fees for pooled vehicles and would also include charges for valuation, audit, tax and legal expenses. Such additional operating expenses would reduce the actual returns experienced by investors. Past performance of the strategy is no guarantee of future performance; Future returns are not guaranteed and a loss of capital may occur. For illustrative purposes, performance fee of 20% on added value over the hurdle rate of 6% plus the management fee of 1.25% have been assumed. Actual management fees charged to a particular account may vary.

4. There is no benchmark for the Vergent Emerging Opportunities Strategy because it has an absolute return objective

5. Standard Deviation measures the dispersion of monthly returns since the inception of the strategy.

Benchmarks and financial indices are shown for illustrative purposes only, are not available for direct investment, are unmanaged, assume reinvestment of income, do not reflect the impact of any management or incentive fees and have limitations when used for comparison or other purposes because they may have different volatility or other material characteristics (such as number and types of instruments) than the Strategy. The Strategy’s investments are not restricted to the instruments comprising any one index and do not in all cases correspond to the investments reflected in such indices.

These materials (“Presentation”) are furnished by Vergent Asset Management (“Vergent”) on a confidential basis for informational and illustration purposes only. This Presentation is intended for the use of the recipient only and may not be reproduced or distributed to any other person, in whole or in part, without the prior written consent of Vergent. Certain information contained in this Presentation is based on information obtained from third-party sources that Vergent considers to be reliable. However, Vergent makes no representation as to, and accepts no responsibility for, the accuracy, fairness or completeness of the information contained herein. The information is as of the date indicated and reflects present intention only. This information may be subject to change at any time, and Vergent is under no obligation to provide you with any updates or amendments to this Presentation. This Presentation is not an offer to buy or sell, nor a solicitation of an offer to buy or sell any security or other financial instrument advised by Vergent. This Presentation does not contain certain material information about the strategy, including important risk disclosures. An investment in the strategy is not suitable for all investors, and before making an investment in the strategy, you should consult with your professional advisor(s) to determine whether an investment in the strategy is suitable for you in light of your investment objectives and financial situation. Vergent does not purport to be an advisor as to legal, taxation, accounting, financial or regulatory matters in any jurisdiction, and the recipient should independently evaluate and judge the matters referred to in this Presentation. Vergent Asset Management LLP is registered in England and Wales with its registered office address at 8th Floor, 1 Knightsbridge Green, London SW1X 7QA, United Kingdom (Companies House number OC418829) and is authorized and is an Exempt Reporting Adviser in the USA. It is regulated by the Financial Conduct Authority (FRN: 791909).

THIRD-PARTY DATA PROVIDERS

This report may contain information obtained from third parties including: Merrill Lynch, Pierce, Fenner & Smith Incorporated (BofAML), S&P Global Ratings, and MSCI. Source: Merrill Lynch, Pierce, Fenner & Smith Incorporated (BofAML), used with permission. BofAML permits use of the BofAML indices related data on an “As Is” basis, makes no warranties regarding same, does not guarantee the suitability, quality, accuracy, timeliness, and/or completeness of the BofAML indices or any data included in, related to, or derived therefrom, assumes no liability in connection with the use of the foregoing, and does not sponsor, endorse, or recommend CC&L Canada, or any of its products. This may contain information obtained from third parties, including ratings from credit ratings agencies such as S&P Global Ratings. Reproduction and distribution of third party content in any form is prohibited except with the prior written permission of the related third party. Third party content providers do not guarantee the accuracy, completeness, timeliness or availability of any information, including ratings, and are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of such content. THIRD PARTY CONTENT PROVIDERS GIVE NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. THIRD PARTY CONTENT PROVIDERS SHALL NOT BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, EXEMPLARY, COMPENSATORY, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES, COSTS, EXPENSES, LEGAL FEES, OR LOSSES (INCLUDING LOST INCOME OR PROFITS AND OPPORTUNITY COSTS OR LOSSES CAUSED BY NEGLIGENCE) IN CONNECTION WITH ANY USE OF THEIR CONTENT, INCLUDING RATINGS. Credit ratings are statements of opinions and are not statements of fact or recommendations to purchase, hold or sell securities. They do not address the suitability of securities or the suitability of securities for investment purposes, and should not be relied on as investment advice.

Source: MSCI. The MSCI information may only be used for your internal use, may not be reproduced or re-disseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. MSCI makes no express or implied warranties or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data obtained herein. This report is not approved, reviewed or produced by MSCI.

This strategy and any associated investments are only available to professional investors and eligible counterparties, as defined in the rules of the UK Financial Conduct Authority. This communication is not being made to, and should not be relied upon by, persons who are retail clients for FCA regulatory purposes. Vergent Asset Management LLP is not authorised by the FCA to deal with retail clients.

The strategy continues to be rewarded for the thesis we’ve built around technology, payments, and financial inclusion in our markets. The starting point for us in that process was the mobile money opportunity in East Africa which continues to be best exemplified by Kenya’s Safaricom’s M-Pesa. Over time, we built a deeper understanding of the payments value chain which helped us identify infrastructure players like Morocco’s Hightech Payment Systems which was an early investment in the life of the strategy. We also broadened the geographical scope of the thesis by expanding our core mobile money thesis towards West Africa into Ghana with MTN’s exciting Momo business which is now starting to get the attention it deserves from the market. We also benefited from the deepening opportunity set in the sector with transformational companies like Kazakhstan’s Kaspi.Kz coming to market last year. Our financial inclusion theme extended to microfinance companies like Bank BTPN Syariah in Indonesia which provides micro loans to nearly four million women entrepreneurs in rural Indonesia. BTPN Syariah has a fantastic opportunity to go from an offline centric credit disbursement and collection model into an Omni-channel offering that will help scale the business whilst improving the level of service they provide customers. Our initial thesis has evolved and strengthened since we started investing in the sector; financial inclusion and digital transformation has become a regulatory priority and the pandemic has only helped accelerate adoption and usage among consumers. Moreover, the companies we’ve invested in are constantly evolving with Kaspi.Kz continuing to add new services to its super app that counts over half of Kazakhstan’s population as active users and M-Pesa accelerating its transformation from a peer-to-peer USSD based service into a full-fledged lifestyle and financial services platform servicing ~25 million Kenyan consumers and ~300k merchants. Another factor that we must acknowledge has changed over the last two years is the valuations have re-rated for the broader sector both in the public and private markets. What reassures us on that front are four key points:

1. The aforementioned companies and others we own in the sector are all profitable
2. Their balance sheets are unlevered and in most cases net cash
3. They trade at reasonable multiples relative to the sector in developed markets (albeit at a premium to the rest of the portfolio) and private markets. In fact, no one company we’ve invested in currently trades on a P/E ratio that is in excess of 30x 2022 earnings. Note our emphasis on price to earnings ratio means all of our companies are bottom line profitable
4. The growth profile and optionality embedded in these business models means that the multiples we see on near term earnings will burn off fairly quickly in the next five years

Away from payments and technology, the strategy also experienced strong returns in the period from our retail portfolio in Morocco and the Philippines. In Morocco, the vaccination rollout program has been very successful with over 18m doses administered as of the date of writing (Morocco’s total population is ~36 million of which 27% is under the age of 15). This has bolstered the outlook for sales at Label Vie, the operator of the largest supermarket chain in the country under license from France’s Carrefour. Label Vie also operates the largest cash & carry format stores in the country under the Atacadao brand, a Brazilian concept brand also owned by Carrefour which caters to professional buyers and households. The reason for our optimism on the company’s short term prospects comes from the potential return of the hospitality channel as Morocco reopens to European tourism. Prior to the pandemic, a quarter of Atacadao’s sales came from the hospitality channel and we expect that some of that will start to show in sales over the next few quarters. Longer term, our bullish thesis on Label Vie is underpinned by the broader modern retail sector’s development and management team’s aggressive expansion strategy which is focused on scaling several formats including supermarkets (~700sqm), minimarkets (~200sqm), and Atacadao. It is worth nothing that Label Vie’s management is also investing in building an online presence in Morocco through “Bringo”, a Romanian online grocery concept that is also owned by Carrefour. Morocco is a very nascent market for online (~1% of retail sales) and according to our channel checks has not experienced the same step change in online shopping habits that other markets have experienced since the onset of the pandemic. This gives Label Vie an opportunity to build out its online channel thoughtfully by adapting its offerings and fulfillment strategy to local tastes and dynamics. We were encouraged by management’s receptiveness to our recommendations in this area and expect to continue to engage with them as they build out their online model. In the Philippines, we are seeing early signs of a recovery as vaccinations begin to pick up pace. Encouraged by that progress, we made an investment in a leading home improvement retailer that we believe will benefit tremendously from the return in construction spending and home renovation activity. It is worth nothing that unlike in other markets in the world, construction activity has been largely suppressed in the Philippines since the pandemic started in March of last year as a result of strict social distancing measures at the local and federal level.

In our last letter, we made a case for investors to think differently about how they approach emerging markets. We argued that many of the largest constituent countries of emerging market indices have reached levels of economic development, regulatory cycle, and market efficiency that makes them comparable to developed markets. We continue to advocate that the true emerging market opportunity today lies in the next generation of emerging markets like Egypt, Indonesia, Kenya, Pakistan, and Vietnam. Today, those market offer up a unique combination of a large, young and rapidly urbanizing consumer base that is increasingly connected but still not served in the same way their counterparts in more developed countries are. Our job is to find public companies that are able to fill that gap by offering services directly to those customers (B2C) or by enabling other businesses to offer those services to customers (B2B2C). That gap represents a substantial economic and social profit opportunity for well run businesses in which the strategy is generously invested.

Vergent Asset Management LLP

DISCLOSURES

1. Unless otherwise stated, all data is at June 30, 2021 and stated in US dollars (US$). Source: Connor, Clark & Lunn Financial Group, Thomson Reuters Datastream.

2. Performance history for the Vergent Emerging Opportunities Strategy is that of the Vergent Emerging Opportunities Composite. The Composite has an inception and creation date of August 2018.

3. Net performance figures are stated after management fees, estimated performance fees, trading expenses and before operating expenses. Operating expenses include items such as custodial fees for pooled vehicles and would also include charges for valuation, audit, tax and legal expenses. Such additional operating expenses would reduce the actual returns experienced by investors. Past performance of the strategy is no guarantee of future performance; Future returns are not guaranteed and a loss of capital may occur. For illustrative purposes, performance fee of 20% on added value over the hurdle rate of 6% plus the management fee of 1.25% have been assumed. Actual management fees charged to a particular account may vary.

4. There is no benchmark for the Vergent Emerging Opportunities Strategy because it has an absolute return objective

5. Standard Deviation measures the dispersion of monthly returns since the inception of the strategy.

Benchmarks and financial indices are shown for illustrative purposes only, are not available for direct investment, are unmanaged, assume reinvestment of income, do not reflect the impact of any management or incentive fees and have limitations when used for comparison or other purposes because they may have different volatility or other material characteristics (such as number and types of instruments) than the Strategy. The Strategy’s investments are not restricted to the instruments comprising any one index and do not in all cases correspond to the investments reflected in such indices.

These materials (“Presentation”) are furnished by Vergent Asset Management (“Vergent”) on a confidential basis for informational and illustration purposes only. This Presentation is intended for the use of the recipient only and may not be reproduced or distributed to any other person, in whole or in part, without the prior written consent of Vergent. Certain information contained in this Presentation is based on information obtained from third-party sources that Vergent considers to be reliable. However, Vergent makes no representation as to, and accepts no responsibility for, the accuracy, fairness or completeness of the information contained herein. The information is as of the date indicated and reflects present intention only. This information may be subject to change at any time, and Vergent is under no obligation to provide you with any updates or amendments to this Presentation. This Presentation is not an offer to buy or sell, nor a solicitation of an offer to buy or sell any security or other financial instrument advised by Vergent. This Presentation does not contain certain material information about the strategy, including important risk disclosures. An investment in the strategy is not suitable for all investors, and before making an investment in the strategy, you should consult with your professional advisor(s) to determine whether an investment in the strategy is suitable for you in light of your investment objectives and financial situation. Vergent does not purport to be an advisor as to legal, taxation, accounting, financial or regulatory matters in any jurisdiction, and the recipient should independently evaluate and judge the matters referred to in this Presentation. Vergent Asset Management LLP is registered in England and Wales with its registered office address at 8th Floor, 1 Knightsbridge Green, London SW1X 7QA, United Kingdom (Companies House number OC418829) and is authorized and is an Exempt Reporting Adviser in the USA. It is regulated by the Financial Conduct Authority (FRN: 791909).

THIRD-PARTY DATA PROVIDERS

This report may contain information obtained from third parties including: Merrill Lynch, Pierce, Fenner & Smith Incorporated (BofAML), S&P Global Ratings, and MSCI. Source: Merrill Lynch, Pierce, Fenner & Smith Incorporated (BofAML), used with permission. BofAML permits use of the BofAML indices related data on an “As Is” basis, makes no warranties regarding same, does not guarantee the suitability, quality, accuracy, timeliness, and/or completeness of the BofAML indices or any data included in, related to, or derived therefrom, assumes no liability in connection with the use of the foregoing, and does not sponsor, endorse, or recommend CC&L Canada, or any of its products. This may contain information obtained from third parties, including ratings from credit ratings agencies such as S&P Global Ratings. Reproduction and distribution of third party content in any form is prohibited except with the prior written permission of the related third party. Third party content providers do not guarantee the accuracy, completeness, timeliness or availability of any information, including ratings, and are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of such content. THIRD PARTY CONTENT PROVIDERS GIVE NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. THIRD PARTY CONTENT PROVIDERS SHALL NOT BE LIABLE FOR ANY DIRECT, INDIRECT, INCIDENTAL, EXEMPLARY, COMPENSATORY, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES, COSTS, EXPENSES, LEGAL FEES, OR LOSSES (INCLUDING LOST INCOME OR PROFITS AND OPPORTUNITY COSTS OR LOSSES CAUSED BY NEGLIGENCE) IN CONNECTION WITH ANY USE OF THEIR CONTENT, INCLUDING RATINGS. Credit ratings are statements of opinions and are not statements of fact or recommendations to purchase, hold or sell securities. They do not address the suitability of securities or the suitability of securities for investment purposes, and should not be relied on as investment advice.

Source: MSCI. The MSCI information may only be used for your internal use, may not be reproduced or re-disseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. MSCI makes no express or implied warranties or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data obtained herein. This report is not approved, reviewed or produced by MSCI.