BG Asset Management Before & After

19 May 2011

Vienna

BG Capital Market - Brief History

The first stock exchange is founded on May 1st, 1914 and exist till WWII

1991 the capital market is “revived” and the “First Bulgarian Stock Exchange” (BSE) is

officially registered; number of regional exchanges within next years

1995 the Securities, Stock Exchanges and Investment Companies Act is adopted; a

Securities and Exchange Commission is set up and the regional stock exchanges merge into

“The Bulgarian Stock Exchange” JSC

1996 – the Central Depository starts operating

2000 – the Public Offering of Securities Act replaces the previous law

2003 – the new Financial Supervision Commission takes up its duties

2007 – 85 licensed brokers (34% banks)

2008 – BSE successfully launched the Deutsche Boërse electronic trading system XETRA

2011 – 62 licensed brokers including banks – consolidation to continue

till the end of 2011 – forthcoming privatisation of 51% of BSE, remaining shares belongs

to banks and brokers

Legal framework fully complying with EU Directives and international

standards

Supervision through a single regulatory body - the Financial Supervision

Commission(FSC)

Well functioning co-ordination between the key institutions&:

− Bulgarian Stock Exchange

− Financial Supervision Commission

− Central Depository

− brokers/dealers associations

Modern and efficient infrastructure, fully electronic remote trading, settlement

cycle-T+2

Strict information disclosure rules for the public companies

Legal framework and institutions

Traded instruments

− Equities

− Bonds /Government, municipal, mortgage & corporate/

− Rights

− Compensatory instruments

− Warrants

Trading platform – Xetra /strategic partnership with Deutsche Boerse/

− as of June 16th 2008

− A major step towards creating an international securities market

integrated with leading capital markets

− BSE visibility improvement

Trading on BSE

Capital Market Performance

• Turnover downward trend of the recent years remained unchanged in 2010. • The major reason for the last years’ decrease is the lack of foreign investors, who were a driving force in 2007.

•Market Capitalization is low compared to Western and Eastern Europe. • Structural problems such as the low purchasing power, the small scale companies and the relatively low free float impede possible growth.

Capital Market Performance

ASSET MANAGEMENT Market Overview

Young, inmature and fragmented market Low awarenes

Low penetration

High potential

Local AM AuM as of 31/04/11 – EUR 243mln

About 100 funds in 4 main investment strategies, according to risk exposure

37 licensed asset managers

3 Asset Managers hold more than 50% of the market in 18 mutual funds

Foreign investment funds – distribution Total AuM accumulated in the country – EUR 247 mln as of 31/03/11/

Distributed mainly via the group’s local bank branches

Biggest player – Pioneer Investments through Unicredit Bulbank branches

Other participants – asset management arms of OTP, Raiffeisen, Societe Generale, Piraeus Bank, Eurobank EFG etc.

Assets under management according to fund types (in millions EUR)

Type of Funds

Dec 2007 Dec 2008 Dec 2009 Dec 2010 March 2011

Number

of Funds

Assets under

Management

Number of

Funds

Assets under

Management

Number of

Funds

Assets under

Management

Number of

Funds

Assets under

Management

Number of

Funds

Assets under

Management

Total Investment Funds 176 612 171 233 290 329 342 449.3 375 455

Foreign Investment Funds 108 153.5 87 86.7 197 167.5 244 253.8 276 247.3

Local Investment funds 68 458.9 84 146.3 93 161.6 98 195.6 99 207.4

Source: BNB

Penetration

Bulgaria – the lowest penetration

AuM/GDP per capita (PPP) Sources: IMF, EFAMA

GD

P P

er C

ap

ita (

PP

P) i

n U

SD

Bulgarian Mutual Funds 2005 - 2011

Source: BNB , FSC

Bulgarian Mutual Fund Market 31/04/2011

Source: Data from the Bulgarian Association of Asset Managers and the Bulgarian Stock Exchange

Lack of wide variety of differentt product types (ELANA manages the biggest

product portfolio with 7 funds and individual portfolio management)

Product segmentation attributes

Risk profile – most important

Currency

Geographic coverage – relatively new for the market (mainly BG market;

other emerging markets; only couple with global exposure

Sector funds

The Product Mix – BG asset managers

The Product Mix

Source: Baud, EFM; EFAMA

AuM by product type

Source: Baud, EFM

Equity

Recent Trends in BG AuM (BGN mln) Recent Trends in EU AuM (EUR billions)

Money Market

Bond/ low risk

Balanced

Source: EFAMA

The Client

Source: BNB

*Other financial intermediaries includes PE funds; factoring and lease companies; investment intermediaries; asset managers; etc

No clear cut Private

Banking or Wealth

Management service

No clear understanding

about service coverage

No special products

Low minimum

investment amount that

could not allow service

upscale

Lack of IT solutions

that could support

upscale

Private Banking - Asset Managers

50,000 BGN minimum

investment amount

Personal consultant/ PM direct contact

Individual portfolio

management

Investment advisory

Research and analysis free access

No clear cut Private

Banking or Wealth

Management service

Better understanding of

the scope

There is only one bank

offering specialy designed

products and services for

that segment; premium

service and personal

aproach

Private Banking – the Banks

- 50,000 BGN – 150,000 BGN

minimum investments

- Net income 2,000 BGN +

- Regular monthly inflow

Personal consultant

Privacy

Out of the branch service

Special rates and

conditions

Information about

promotions and new products

Benefit the sinergy of the group

- 20 years of expertise in the areas of asset management; trading on financial

markets; investment banking; business consultancy; real estate investments etc.

- Wide product variety

- Access to all markets

Client centric model

Retail focus

- Well established distribution network with nationwide coverage

- Sustainability and better resistence to market dynamics

Successful partnerships

- Auerbach Grayson

- SAXO Bank

- KBC Asset Management

- MAN

- Local banks and other third party distributors

ELANA Model

Great potential for asset management industry in Bulgaria

Room for know-how import

Need for market consolidation

Main Conclusions

THANK YOU!