Fund Manager's Update Q2 2017

Terra Capital Plc

Fund Manager's Update Regarding Q2 2017

Terra Capital Plc. ('TCA' or the 'Fund'), the AIM quoted investment trust focused on investing in value opportunities globally, primarily in frontier markets is pleased to report that it has received the latest report from Terra Partners Asset Management Limited ('TPAM' or the 'Fund Manager'), covering its activities in Q2 2017.

The Fund Manager's update covering Q2 2017 is reproduced below.

Terra Partners Asset Management Limited

Portomaso Tower, 8/5A

Portomaso Avenue

St Julian's STJ 4011 MALTA

Telephone +356 2371 7000

Regulated by the Malta Financial Services Authority, Reg. No. C 56353

Registered Investment Adviser with the US Securities & Exchange Commission

August 30, 2017

Terra Partners Asset Management Limited ('TPAM' or the 'Fund Manager') presents its Second Quarter 2017 Update to shareholders regarding the activities of Terra Capital Plc. ('TCA' or the 'Fund'), an AIM quoted investment trust investing globally in value opportunities, primarily in frontier markets. The opinions expressed in this document represent the views of TPAM, the Fund Manager of TCA, at the time of its preparation. This document has been prepared from publicly available information, internally developed data and other sources believed to be reliable, and all reasonable precautions have been taken to ensure its accuracy; however, no representation or warranty about the accuracy of the information contained in, or of any omissions from, this document or any supplementary information made available to any interested party or its advisers is implied, and any liability in respect of such information or omissions is hereby expressly disclaimed.

Note that the information herein is not all of the information TPAM had available, or which it relied upon, when making its initial and continuing investment decisions. TPAM reserves the right to amend the information provided herein, and its opinions, at any time, and undertakes no obligation (express or implied) to provide any recipient with any further information or to correct any inaccuracies or omissions which may subsequently become apparent. Readers are advised that a fund managed by TPAM, and some officers and employees of TPAM currently own positions in TCA. This document is for information purposes only and it is not intended as an offer or solicitation regarding the purchase or sale of any security or investment vehicle.

Investments in Emerging and Frontier markets usually suffer from liquidity problems, and are often affected by governmental interference in the free market, local politics and vagaries in commodity and currency prices; therefore, their prices can be very volatile. This means that it can be difficult to acquire and subsequently sell the shares "noted" in TCA's portfolio. All current and prospective investors should be aware that PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

All solicitations or offers regarding TCA are made and transacted on the public market of the AIM Section of the London Stock Exchange and occur by reference to TCA's Offering Memorandum and the document titled "Tender Offer to Purchase Ordinary Shares at the Tender Price and Restructuring and Amendment to the Directors' Incentive Plan and Change of name to Terra Capital PLC and Notice of Extraordinary General Meeting" of the April 30, 2012 (the "Circular") as amended by subsequent resolutions, primarily the one passed at the January 26, 2015 EGM. Documents are accessible on TCA's website www.terracapitalplc.com in the "Investor Centre" tab under the Documents and Announcements section of the file "AIM Rule 26". This website contains important information which may supplement, modify or differ from the information contained herein and no prospective investment decision should be considered before careful reading of documentation found on TCA's website.  

By accepting this document, you agree to be bound by the foregoing limitations.

TCA's 2nd Quarter 2017 Return & Portfolio

The Fund's NAV increased to $1.085 at June 30, 2017 from $1.076 at March 31, 2017, a net total return of 1.4% for the quarter.

The Fund's investment level (equity, fixed income and hedging) decreased from 98.5% at March 31 (including commitment to Terra Argentine Fund, L.P.) to 85.9% at June 30. The large decrease in invested level is the result of sales in the portfolio as well as the removal of the Terra Argentine Fund, L.P. commitment following this fund's letter of August 2, 2017 explaining that the Uncalled Capital Commitments shall be cancelled upon final distribution of the investment.

Specific Areas of Investment

Europe

The Fund's exposure to Europe increased from 21.7% to 22.8% and is the largest regional allocation. The Fund increased its positions KCELL (Kazakhstan) and Speedy (Bulgaria). It decreased its positions in Crnogorski Telekom (Montenegro)0 and X5 Retail Group (Russia).

Americas

The allocation to the Americas decreased from 30.9% to 20.8% and is the Fund's second largest regional allocation. The Fund increased its position in Refineria La Pampilla (Peru) and decreased its positions in Copa Holdings (Panama), IRSA (Argentina), Terra Argentine Fund (Argentina), and National Commercial Bank (Jamaica). It liquidated its position in Scotia Group (Jamaica).

Middle East

The Fund's exposure to the Middle East decreased on the quarter from 17.4% to 16.6%. The Fund increased its positions in Blom Bank (Lebanon), Bank Muscat (Oman), Gulf Warehousing (Qatar), BBK (Bahrain), Gulf Hotels Group (Bahrain), Ooredoo (Oman), Amanat Holdings (UAE), and Oman Cement (Oman). It decreased its position in Al Meera (Qatar) and liquidated its position in Air Arabia (UAE).

Africa

The Fund's exposure to Africa decreased from 14.0% to 12.9%. The Fund increased its positions in Emaar Misr (Egypt), Holdsport (South Africa), African Oxygen (South Africa), and Onatel (Burkina Faso). It decreased its position in Coop Bank (Kenya) and liquidated its position in Onelogix (South Africa).

Asia

The allocation to Asia decreased from 14.5% to 12.8%. The Fund increased its positions in Travellers Hotels (Philippines), Belle Corporation (Philippines), and Qingling Motors (China). It decreased its position in Great Wall Motor Company (China) and liquidated its position in Bank of Georgia (Georgia).

Fund Details

The following page details the Fund's holdings, changes from the prior quarter, and the total return of each company's shares over the quarter in both U.S. dollars and local currency. The numbers provided are based on TPAM's internal calculations:

* These figures were prepared by the Fund Manager based on its internal records and calculations.

Summary of TPAM's Policy and Procedures regarding Allocation of Investment Opportunities among Investment Advisory Clients

The policy ("Policy") of TPAM is that no fund account for which TPAM has investment decision responsibility (each portfolio or account TPAM manages shall in this Policy be referred to individually as a "Fund" and collectively as "Funds") shall receive preferential treatment over any other Fund other than as described in this Policy. In allocating investment opportunities, each Fund shall receive equivalent treatment.

Prior to engaging in any trading activity TPAM shall evaluate each Fund's investment objectives and strategies as set forth in the Fund's governing documents in order to determine whether an investment in the particular security is appropriate for each Fund.

TPAM shall take into consideration, among other factors in the governing documents, the trading liquidity of a security when assessing its appropriateness for a Fund. Specifically for TCA, in regard to securities listed and quoted on a recognized securities market, TPAM will use its best efforts to invest in securities trading with moderate liquidity unless it is a targeted activist position, for which liquidity will not be a factor. "Moderate Liquidity" of a listed security shall be calculated at the time of the initial purchase and shall mean:

· fifty-two (52) week average daily value of trades of minimum of one hundred and fifty thousand US dollars (US$ 150,000);

· opportunity to purchase a significant block of securities of minimum three million US dollars (US$ 3 million) for all applicable Clients' portfolios; or

· an activist targeted position.

If a listed ADR or GDR for a particular security trades on a market other than the market on which the underlying security trades, then without regard to the liquidity of the ADR/GDR on that market, if the underlying security meets the liquidity provisions on its home market and such securities can be used to create additional ADRs/GDRs, such ADR/GDR shall be considered to meet the liquidity requirements on the other market.

TPAM acts for Funds that have overlapping investing policies and therefore it will be likely that investment opportunities sourced by TPAM will be suitable for more than one of its Funds. In these circumstances, TPAM will allocate a Fund's exposure to such opportunity on a pro rata allocation principle based primarily on the size of the Fund's portfolio. In allocating a security among its Funds, TPAM may deviate from this pro rata allocation principle by taking into account some, or all, of the following:

· the investment objectives and restrictions applicable to the Fund;

· the investment phase of the Fund (e.g. a Fund in a ramp-up phase may be allocated a higher percentage of a trade);

· the Fund's total assets and its cash resources available for investing;

· the Fund's liquidity needs or preferences;

· the liquidity of the security being purchased;

· the geographic distribution of the Fund's portfolio at the time of investment;

· the sector concentration of the Fund's portfolio; and

· the currency exposure of the Fund's portfolio.

The nature of trading listed securities in markets indicated in the Governing Documents of each Fund often makes it difficult to acquire those securities in adequate quantities in one block or during the course of the day (or any other relevant time period) so that TPAM may subsequently allocate it to each Fund. The nature of these markets often makes aggregation of trades, and the use of average prices for allocation of trades, among TPAM's Funds impossible. Furthermore, TPAM may invest a part of the Fund's portfolio in securities displaying various types of trading liquidity constraints ("other less liquid securities"). Frequently, TPAM can only acquire a Funds' targeted security and other less liquid securities over a period of time and in small quantities. It is not uncommon for the price and liquidity of a security to change during the time period in which TPAM is attempting to acquire such security. Such market changes can create significant swings in the price of the security - or even make it impossible to acquire any amount, or as much of the security as TPAM might want to purchase, for each Fund.

Since TPAM acts for several Funds, each with a separate account, to ensure that no Fund receives an unfair advantage, or suffers any disadvantage with respect to the timing of execution of a trade, when aggregation and use of average pricing is not possible TPAM may attempt to purchase sufficient amounts of that security sequentially for all of its Funds in order to manage the conflicts and issues of fairness to each Fund. In addition, or alternatively, TPAM may purchase the security in rotation so that each Fund will have an equal opportunity to be the first entity trading in such security and to achieve fairness on an overall basis, and over time, with respect to the timing of executing trades; however, regardless of these efforts, market prices and liquidity change frequently and may shift significantly up or down before TPAM can purchase the full extent of the initially desired securities for each of its Funds. Depending on the type of trade, market conditions, and time constraints, TPAM may be forced to deviate from its normal rotation policy and therefore TPAM cannot guarantee that each Fund will be able to purchase the same security at the same time, at the same price, or at all.

Where the allocation of a trade would result in a de minimis amount (e.g. an amount such that it would not be economically beneficial to a Fund when taking into account the cost of the transaction and other relevant factors) being allocated to one or more Funds, TPAM may determine not to have such Fund(s) participate in such trade.

The Chief Compliance Officer is responsible for monitoring TPAM's compliance with this Policy.

The above constitutes a summary of TPAM's Policy. For the full version or any relevant extract therefrom, kindly request a copy from TPAM.

Summary of the Remuneration Policy (this "Policy") of Terra Partners Asset Management Limited ("TPAM").

The aim of this Policy is to ensure that TPAM's policies and practices are consistent with, and promote, sound and effective risk management, and do not encourage excessive risk-taking. This Policy applies to certain categories of TPAM's staff who receive variable remuneration (the "Identified Staff"), principally those whose professional activities have a material impact on TPAM's risk profile in respect of its management of the funds. This Policy takes due regard to proportionality in view of TPAM's size, internal organisation and the nature, scope and complexity of its activities.

The Board has prepared and implemented this Policy in consultation with the officers in charge of risk management and compliance (the "Control Functions"), in line with the risk-profiles, long-term business strategy, objectives, values and interests of both TPAM and the funds. Variable remuneration shall be paid to Identified Staff following a performance assessment based on quantitative as well as qualitative (non-financial) criteria. In conducting its performance assessments, the Board shall seek the appropriate input of the Control Functions. The Board will periodically (at least annually), and in consultation with the Control Functions, review the general principles of this Policy.

The above constitutes a summary of TPAM's Policy. For the full version or any relevant extract therefrom, kindly request a copy from TPAM.

Disclosure of Portfolio Data of Terra Partners Asset Management Limited ("TPAM")

TPAM has a fiduciary duty to protect the confidential portfolio information related to its clients. In the event that TPAM discloses confidential portfolio information to any person (including investors or third party service providers), TPAM will take reasonable measures to protect the confidentiality of such information, which may include entering into a confidentiality agreement with the recipient or ensuring that the recipient may only disclose such confidential portfolio information to the extent such additional recipients agree to maintain the confidentiality of such portfolio information.

Investors may request portfolio data from time to time. TPAM shall ensure that when it makes such disclosures, it shall do so under the following conditions: a. Disclosure of individual portfolio holdings shall occur following the investor's request, but the data provided shall contain information that is at least one (1) month earlier than the date of its provision; however, disclosure of other portfolio data may be current; and b. All investors have an equal right to receive the same information and while TPAM need only communicate portfolio data to the requesting investor TPAM shall address the same requests for information in the same manner.

RESPECTFULLY SUBMITTED BY:

Terra Partners Asset Management Limited

Portomaso Tower, 8/5A, Portomaso Avenue,

St. Julian's ž STJ 4011 ž MALTA

Regulated by the Malta Financial Services Authority, Reg. No. C 56353

Registered Investment Adviser with the US Securities & Exchange Commission

Contact: Galileo Fund Services Limited (Administrator)

Ian Dungate or Suzanne Jones

+44 1624 692600

Panmure Gordon (Nominated adviser and corporate broker)

Paul Fincham or Jonathan Becher

+44 20 7886 2500

NOTES:

Terra Capital Plc is an AIM quoted investment trust focussed on generating high absolute returns while ensuring volatility is kept to a minimum. The fund predominantly invests in under-researched and under-valued companies. The Fund Manager targets companies that are trading at less than their intrinsic worth and so, aside from any potential growth prospects, provide scope for capital appreciation as a result of a reversion towards underlying value. Investments are also made in companies which are viewed as fair value but offer opportunities for growth at a reasonable price. Due to inherent market inefficiencies, the Fund Manager believes many such 'value' opportunities can be found in Frontier Markets and utilises in-house teams of analysts on the ground in areas of interest to investigate suitable opportunities rather than rely on third party research.