Karoll Capital Management Gateway to Emerging Europe

Karoll Financial Group | Key Facts

Established in 1993

among the pioneers in Emerging Europe

financial group offering the full spectrum of investment products and services

Steady business growth based on excellent reputation

over 200 experienced professionals

headquarters in Sofia + 70 offices across the country

Focus on Emerging Europe

Investments mainly in CEE

Access to big regional players as well as under-researched opportunities

Partnership with top international firms

Local representative of Schroder Investment Management

Partners from the USA, UK, Luxembourg, Germany, Switzerland, etc.

20 Exciting Years of Success

Karoll Corporate University program launched (2013)

Karoll ranks as #1 local brokerage firm for 12 consecutive years (2013)

Karoll starts its own library with the best finance & business-related titles (2009)

Karoll launches first Bulgarian private equity fund – Advance Equity Holding (2006)

Advance Terrafund REIT – first local fund to invest in farm land – successfully

launched (2005)

Karoll Capital Management launches first Bulgarian stock fund - Advance Invest

Mutual Fund (2004)

Karoll Capital Management becomes first local asset manager to invest abroad

(2004)

Karoll Broker lead-manages first Bulgarian IPO – Investor.BG (2004)

Karoll executes first online trade on the BSE (2003)

Karoll Broker receives FSC permit to operate on the international capital markets

(2000)

Karoll obtains investment intermediary license (1997)

Karoll Financial House founded with focus on FX services (1993)

Karoll Financial Group Structure

Bulgarian Capital Market

International Capital Markets

Brokerage

Wealth Management

Institutional Asset Management

Asset Management

IPO & SPO Activities

M&A Restructuring

Investment Banking

Real Estate Investment

Trusts

ADVANCE TerraFund

Mutual Funds

ADVANCE Invest

ADVANCE Eastern Europe

ADVANCE IPO

Fund

ADVANCE Global Trends

ADVANCE Conservative

Fund

Private Equity

ADVANCE Equity

Holding

Solid Office Network

Sales reps reaching out to more than 30,000 clients via the offices of our Insurance Broker - Karoll Standard

Operates 60 client servicing points across Bulgaria

Partnership between Karoll and Schroders

Wide range of UCITS: 100+ mutual funds offered in the local market

Over EUR 60 million raised in one year

Fostering investment awareness and providing solutions to local households & institutions

Objectives

“Over the years we have built a solid reputation of a reliable partner. Our relationships with clients are based on mutual trust and alignment of interests.

Our goal is to help various international institutions and individuals tap into the potential of Emerging Europe where hidden gems lurk.”

Stanimir Karolev

Founder and Chairman,

Karoll Financial Group

Karoll Capital Management | Key Facts

Established in 2003

Pioneers in the regional asset management industry

Manages 5 UCITS funds and multiple segregated accounts

Steady business growth based on solid reputation

AUM exceeding EUR 200 mln.

35% of assets in various mutual funds, 50% in real estate, 15% in private wealth mgmt

Crisp focus on Emerging Europe

Helping various international institutions harness the potential of emerging Europe

Access to leading regional players as well as to under-researched opportunities

Dedicated PM and 4-member investment committee with solid markets expertise

Partnership with top international names

Local representative of Schroder Investment Management, UK

Regular international road-shows and conferences

Karoll Capital Management

Pioneers in the regional

asset management

industry

The 5 Investment Pillars

Crisp focus on Eastern Europe

We believe new Europe offers excellent investment opportunities as the regional economies are set to grow faster that the Eurozone and given local stock exchanges’ embrionic stage of development. The positive market outlook combined with diminishing risk levels are once again starting to attract foreign investors to the region. While other Eastern European funds tend to invest in companies based elsewhere that only generate some of their revenues here, we focus solely on stocks of companies operating in the region.

Solid expertise and passion for emerging markets

Our in-depth local knowledge and on-the-ground presence give us an edge in analysing the economies and markets of Eastern Europe. All investment products are managed by seasoned investment specialists with solid capital markets expertise and a passion for Emerging Europe. Thanks to our location and excellent analytical capabilities we can access information quickly and easily as we visit companies on a regular basis. Karoll Capital’s portfolio managers are dedicated to constructing investment portfolios positioned to outperform regional benchmarks and peers.

Long-term horizon for success

At Karoll Capital Management we believe in taking a long-term view when making investment decisions. We expect Eastern Europe to continue to outperform the Eurozone in the long run due to the convergence processes related to income levels, household living standards, interest rates, etc. This conviction is reflected in our asset allocation and stock selection process, where the horizon of portfolio investment decisions is usually beyond three years. Likewise, our clients are aware of emerging market investments’ volatile nature in the short run, so normally have a long-term investment perspective (at least 3 years).

Disciplined investment process and flexible allocations

Each of our investment products is managed by a separate Portfolio Manager. In making asset allocation decisions, the PM is supported by a four-member Investment Committee. The team debates and decides on the asset classes comprising the portfolio, as well as the geographic and sector splits. The stock selection is performed by the fund’s PM with the help of a seasoned analyst team. Unlike most other assets managers investing in the region, we have the freedom to deviate from local indices based on our views. This gives us great flexibility in our investment choice, regularly leading to superior results and outperformance of benchmarks and peers. Meanwhile, ongoing risk management is essential to ensure excessive risk is avoided - our funds' risk measures are consistently lower than those of benchmarks.

In-house valuations to ensure top picks

Because of market inefficiencies we believe Emerging Europe is abundant with mispriced assets.

Our analysts possess solid experience in screening the broad investment universe and identifying “hidden gems” through proprietary research. In estimating the true value of an asset we study the firm’s ability to realize an IRR greater than the cost of capital, its shareholder structure and management capabilities, sector dynamics and overall market position. On-site company visits are a key part of research as well. In addition to employing valuation methods, we always consider investor psychology, liquidity and order flows.

Karoll Capital Management - Research Coverage

Our analytical and asset management capabilities currently

cover 11 countries in CEE, namely:

Bulgaria, Romania, Serbia, Croatia, Russia, Ukraine, Kazakhstan, Turkey, Poland,

Czech Republic, Hungary

Why Eastern Europe

Eastern Europe’s GDP per capita =

32% of EU average

convergence forces to boost regional

economies in the long run

rising income levels and living

standards, falling interest rates

EU’s economic recovery is coming

from the East

in 2014 CEE expected to grow by

2.7% vs. 0.8% for Euro-area

regional growth to accelerate to 2.9%

in 2015 (1.35% for the Euro-area)

growing Western demand favors CEE

exporters

Population, mln.

GDP, USD bln.,

2013

GDP per capita (USD)

GDP growth

2013 2014f 2015f

Bulgaria 7.4 53.7 7 624 0.9% 1.4% 2.0%

Croatia 4.3 58.6 13 920 -1.0% -0.8% 0.5%

Serbia 7.12 43.7 6 217 2.5% -0.5% 1.0%

Romania 20 184 8 943 3.5% 2.4% 2.5%

Russia 143.3 2 118 14 973 1.3% 0.2% 0.5%

Turkey 76 822 10 745 4.0% 3.0% 3.0%

Ukraine 45.5 176 3 862 0.0% -6.5% 1.0%

Poland 38.5 518 13 435 1.6% 3.2% 3.3%

Czech Republic 10.5 198 18 871 -0.9% 2.5% 2.5%

Hungary 9.9 132 13 388 1.1% 2.8% 2.3%

Kazakhstan 17.4 232 13 509 6.0% 4.6% 4.7%

Why Eastern Europe

Prudent fiscal policy

debt levels much lower

than EU average

improving C/A balances

Highly competitive

economies to attract FDIs

educated and skilled labor

force

major outsourcing

destination due to lowest

business expenses and

taxes

abundance of natural

resources

Current account/GDP

Inflation 2014f

Unemployment 2014f

FDI/ GDP

Gov. debt/ GDP 2013 2014f 2015f

Bulgaria 1.9% -0.2% -2.3% 0.0% 12.5% 3.1% 19.0%

Croatia 0.9% 2.2% 2.2% -0.1% 16.8% 1.2% 65.3%

Serbia -6.5% -6.1% -5.1% 3.3% 21.6% 2.3% 65.0%

Romania -1.1% -1.2% -1.8% 2.5% 7.2% 1.7% 39.0%

Russia 1.6% 2.7% 3.1% 8.3% 5.6% 2.5% 14.1%

Turkey -7.9% -5.8% -6.0% 9.0% 9.5% 23.3% 35.0%

Ukraine -9.2% -2.5% -2.5% 19.0% 10.0% 4.0% 48.1%

Poland -1.4% -1.5% -2.1% 0.0% 9.5% 2.3% 49.4%

Czech Republic -1.4% -0.2% -0.3% 1.4% 6.4% 2.5% 44.4%

Hungary 3.0% 2.5% 2.0% 1.8% 8.2% 10.6% 79.1%

Kazakhstan -0.1% 0.3% -0.7% 8.4% 5.2% 4.4% 13.7%

Why Eastern Europe

Compelling valuations | P/E ratios lower vs. historical averages and developed markers; Attractive dividend yields (current CEE

div. yield of 3.6% vs. 2.4% for developed markets)

Low market penetration solid catch-up potential of mkt cap/GDP compared to developed markets (>100 %)

Improving market liquidity

Large investment universe and low correlation with developed markets

Major index performance (%) (as of

31.10.2014)

Market cap.

(USD bln.) Market

cap./GDP

Avg. daily equity

turnover (USD mln.),

2013 No. of listed companies P/E, ttm P/E at peak P/B, mrq 2013 YTD

Change from pre-crisis

peak

Bulgaria 6.9 12.8% 3.23 382 10.2 23 0.8 42.3% 5.9% -73.4%

Croatia 21.7 37.0% 2.75 181 11.0 29.1 1.34 3.1% 2.5% -65.9%

Serbia 9.2 21.1% 1.5 407 6.6 45.04 0.82 6.5% 25.9% -78.9%

Romania 33.0 18.0% 11.2 83 12.0 17.5 1 26.1% 8.3% -34.9%

Russia 642.4 30.3% 1 135.0 277 5.0 15.56 0.53 -5.8% -24.3% -55.2%

Turkey 209.9 25.5% 1 716.4 403 10.5 13.94 1.33 -13.3% 18.8% 38.8%

Ukraine 17.9 10.2% 1.0 310 n.a 25 0.5 -8.6% 45.5% -63.8%

Poland 269.7 52.1% 1 260.0 466 28.7 15.7 1.09 -7.1% 2.6% -37.0%

Czech Republic 47.5 23.9% 35.0 26 12.0 25.5 1.49 -4.8% -0.8% -49.0%

Hungary 15.8 12.0% 22.7 50 11.6 n.a 0.8 2.2% -6.7% -41.9%

Kazakhstan 26.0 11.2% 3.1 77 12.0 n.a. 1 -5.3% 14.2% -62.7%

Take advantage of Emerging Europe’s growth potential

Advance Mutual Funds (UCITS)

Stocks in Bulgaria & Romania

Stocks in 6 selected Emerging European countries

IPOs & newly listed companies in CEE

Local deposits, fixed income, repo-agreements

Flexible global multi-asset fund

Advance Eastern Europe | The Essentials

Easy access to Emerging Europe

Launched in 2006

Investment focus: equities in 3 different types

of countries in Eastern Europe: Bulgaria & Romania,

Russia & Ukraine, Serbia & Croatia

Experienced locally based team Dedicated Portfolio Manager & 4-member

Investment Committee Fundamental and technical analyst support

Active investment approach 1-st layer top-down allocation Black-Litterman Asset Allocation Model 2-nd layer Stock selection within each market

Alexander Nikolov, Portfolio Manager

Advance Invest | The Essentials

First Bulgarian stock fund Launched in 2004 Investment focus: Bulgaria & Romania

Experienced locally based team Dedicated Portfolio Manager & 4-member

Investment Committee Thorough in-house valuations and on-site

company visits

Active investment approach Bottom-up stock picking in Bulgaria & Romania L.T. strategy based on fundamental selection across all sectors

Georgi Georgiev, Portfolio Manager

Advance IPO Fund | The Essentials

Unique investment theme Launched in 2007 IPOs & newly listed companies across entire CEE region

Experienced local based team

Dedicated Portfolio Manager & 4-member investment Committee

Thorough in-house deal evaluation and management interviews

Aggressive investment approach Selected IPOs & newly listed companies Short-term holding period to capture initial market reaction

Nadia Nedelcheva, CFA Portfolio Manager

Advance Conservative Fund | The Essentials

Easy access to local high-interest rate environment

Launched in 2012 Portfolio comprising bank deposits, short-term

debt securities, bonds and repo’s

Seasoned locally based team Dedicated Portfolio Manager Thorough in-house risk assessment

Conservative investment approach Active management of diversified portfolio of low-risk and highly liquid instruments Aims to outperform average local bank deposit rates

Kamelia Dimitrova, Portfolio Manager

Advance TerraFund | The Essentials

First and largest fund investing in agricultural land

Top Bulgarian REIT with market cap of BGN 210 million

Biggest farm land owner in Bulgaria after the government

Member of all domestic indices

Component of major regional indices (DJ FEAS Composite)

Biggest free float in the market (~55%)

Diverse shareholder base

IFC (the World Bank) is major stakeholder in the fund

Highest dividend distribution on BSE 3 years-in-a-row (>15% Div Yld)

Radoslav Manolov, Managing Director

Contacts

Daniel Ganev Managing Director Karoll Capital Management ganevd@karoll.bg

Headquarters Sofia

1 Zlatovrah Str., Sofia 1164, Bulgaria | (+359 2) / 4008 300 | kcm@karoll.bg