Emerging EuropeEmerging EuropeSydneySydney

25 August 2009

East Capital in briefEast Capital in briefLeading asset manager dedicated to Eastern Europe founded in 1997Eastern Europe, founded in 1997

USD3.4 billion in public and private equity

37 investment professionals 160 employees37 investment professionals, 160 employees

Offices in Stockholm, Paris, Moscow, Hong Kong, Tallinn, Oslo, and Vienna

Diversified client base across segment and geography

11 year track record first fund launched in 199811 year track record, first fund launched in 1998 and awarded best Russia Fund in the world by Morningstar in 2008

I d d tl d d dIndependently owned and managed

Founders and main owners still active at senior management level

25 August 2009 28

AgendaAgenda

Region

CrisisCrisis

Economies & Markets

Outlook

25 August 2009 29

The sheer size and variety of East Capital universe

25 August 2009 3030

25 August 2009 31

Eastern Europe the size of China and JapanEastern Europe the size of China and Japan

EE GDP Breakdown in 2008 Largest economies in 2008

Bulgaria; 1,2% Serbia; 1,1% Lithuania; 1,1% Azerbaijan; 1,0%

Slovenia; 1,2%14 265

(USDbn)

Belarus; 1,3%

Slovakia; 2,1%

Croatia; 1,5%Russia; 37,3%

Kazakh 2,9%

Hungary; 3,5%

Ukraine; 4,0%

4 924 4 490 4 4023 668

Turkey; 16,2%

Romania; 4,4%

Czech ; 4,8%

Poland; 11,7%USA Japan EE China Germanyp y

Nominal GDP tripled over the past five years in Eastern Europe

25 August 2009 32

Source: IMF

AgendaAgenda

Region

CrisisCrisis

Economies & Markets

Outlook

25 August 2009 33

Dire PrognosesDire Prognoses

Forecast FactForecast

1. Russian Rouble to repeat ’98 performance

Fact

1. 30% managed depreciation. Currency now stableperformance.

2. Western banks to cease ti th i b idi i

Currency now stable.

2. Not one bank has ithdsupporting their subsidiaries

in Eastern Europe.

3 Wid d i l t

withdrawn.

3. Widespread social unrest.

4. Eastern Europe debt crisis to i l W t fi i l

3. None.

4 C i i i dcripple Western financial system.

4. Crisis contained.

25 August 2009 34

Crisis ContainedCrisis Contained

Global Fiscal StimulusGlobal Fiscal StimulusSubstantial Russian package

Strong policy response at G20IMF 2 0IMF 2.0

EU, Vienna initiative, IFI Action Plan

Bond markets re-opened

25 August 2009 35

Leverage : Prudence pays offLeverage : Prudence pays off

Small and vulnerable:– 13 small economies in the region on IMF support.

– Only large country exception : Hungary

Big and beautiful: – the largest the least leveragedthe largest the least leveraged

– 4 largest economies in the region – Russia, Turkey, Poland and the Czech Republic – >70% of the region’s GDP p g

25 August 2009 36

AgendaAgenda

Region

CrisisCrisis

Economies & Markets

Outlook

25 August 2009 37

Currencies & commodity prices (July 2008=100)

110

Currencies strengthening Commodity prices recovering120

100

110

90

100

110

80

90

60

70

80

60

70

40

50

60

50Jul/08 Sep/08 Nov/08 Jan/09 Mar/09 May/09 Jul/09

CZK HUF RON RSD TRY PLN

20

30

Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09

Oil Copper Aluminum Gold Nickel HRC Steel

Most EE currencies are approaching recovery after the initial sell-off in autumn ’08. Commodities are a bit more mixed, but in general increased in

CZK HUF RON RSD TRY PLN Oil Copper Aluminum Gold Nickel HRC Steel

25 August 2009 38

Q2Source: Bloomberg, as of 31 July 2009

Inflation & interest rate development last 5

16

18Russia Czech Rep Poland Turkey Hungary

25Russia Czech Rep Poland Turkey Hungary

years

12

1420

8

10

Infla

tion

rate

s %

10

15

Inte

rest

rate

s %

4

6

5

10

0

2

Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-090Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09

Inflation and interest rates are falling again in EE. Turkey has recorded all-time low inflation and interest rates at 5.6% and 8.25% respectively

25 August 2009 39

Source: Bloomberg (end of period)

Growth still falling rapidly in EE butGrowth still falling rapidly in EE, but . . .

10

15Russia Turkey Poland Czech

5

10

oY

-5

0

P gr

owth

% Y

o

-10

GD

P

-20

-15

2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2

Sharp contraction across Eastern Europe. Poland is a positive exception

2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2

25 August 2009 40

Source: Haver, National Statistics

Industrial production picking up

20

25Russia Turkey Romania* Czech Rep Hungary Poland

Industrial production picking up

5

10

15

on %

YoY

-10

-5

0

ial p

rodu

ctio

25

-20

-15

10

Indu

stri

-30

-25

Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09

*Romanian national statistics agency changed methodology starting January 2009

Very sharp contraction on the back of falling demand and inventory destocking. Signs of improvement last couple of months

*Romanian national statistics agency changed methodology starting January 2009

25 August 2009 41

Source: CBR, Turkstat, INSSE, OECD (Data as of 30 June for RU,TU,RO, 31 May for CZ,HU,PL)

Leading indicators suggest EE is beyond 115

Russia Turkey Poland Czech

trough

105

110

100

90

95

85

90

Jun (05) Jun (06) Jun (07) Jun (08) Jul Aug Sep Oct Nov Dec Jan (09) Feb Mar Apr May Jun

OECD composite indicators (indices of industrial production) indicate EE has entered the recovery phase

25 August 2009 42

Source: OECD

Purchasing Managers’ Index improving60

Poland Russia Czech Rep Germany USA China Turkey

Purchasing Managers Index improving

50

55

40

45 50 = Manufacturing is expanding50 = Manufacturing is contracting

35

40

30Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09

While macro numbers remain weak, leading PMI numbers for nearly all countries have been strengthening recently

25 August 2009 43

Source: Various press releases

Performance YTD & 2Q2009* (USD)

% 8% 0% 8%

86.6

%

88.8

%

89.7

%

91.9

%

80%

100%

Performance YTD & 2Q2009 (USD)

%

47.5

%

49.9

%

50.2

%

56.1

%

61.2

%

61.4

%

66.8

68. 8

69.0

70.

60%

80%

19.9

%

23.8

%

31.0

20%

40%

-20%

0%

0 0 d a M a M a p il d n a y a e y

Bal

tic 3

S&

P50

MS

CI W

orl

Rus

si

MS

CI E

M

Chi

n

MS

CI E

ME

urop

e

Ser

bi

Cze

ch R

e

Bra

z

Pol

an

Kaz

akhs

ta

Indi

Turk

e

Rom

ani

Ukr

ain

Hun

gar y

2Q2009 Year to Date

Solid performance around the world in Q2. EE markets among top performers

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performersSource: East Capital, Bloomberg (As of 31July 2009)*2Q2009 = 31March – 31July 2009

Performance since respective peak & bottom (USD)Performance since respective peak & bottom (USD)

128 8%130.6%132.6%139.5%142.6%143.1%

140%

160%

-10%

0%

81 7%90.5%

104.2%107.2%115.6%117.6%

128.8%

100%

120%

-34 4%

-30%

-20%

46.0%

69.6%

81.7%

60%

80%

34.4%-36.9% -38.7%-40.6%-41.2%

-44.4%-45.3%

-52.9%-55.8%

-59.1%-60%

-50%

-40%

0%

20%

40%-65.6%

-72.3%-77.5%

90%

-80%

-70%

0%

S&P500

Croatia

Serbia

MSCI EM Europ

eRus

sia India

Poland

Czech

Rep

Ukraine

Brazil

Turkey

Roman

iaHun

gary

China H

Shares

-90%

Brazil

S&P500

India

China H

-Sha

resTurk

eyCze

ch R

epHun

gary

Poland

MSCI EM Europ

eRus

siaCroa

tiaRom

ania

Ukraine

% Performance since bottom (USD) % Performance since peak (USD)

BRICs and EE markets have performed well since their respective bottoms. But despite strong gains in Q2, EE markets are still some 40 –

25 August 2009 45

80% off their peaksSource: Bloomberg (As of 31 July 2009)

P/E (forward looking 2009e)P/E (forward looking, 2009e)

25.730

14 215.4

16.518.4 18.620

25

5 6 6.68.6 9.2

10.9 11.1

14.0 14.2

10

15

5.6

0

5

ia ia ia tia ey ry ep.

zil

nd 00 x dia P) na

Serb

Lith

uan

Rus

s

Cro

a t

Turk

e

Hun

gar

Cze

ch R

e

Braz

Pola

n

S&P

50In

dex

Ind

MSC

IAs

ia(x

JAP

Chi

n

Despite strong performance in Q2, Russia and EE are still among the lowest valued markets

25 August 2009 46

Source: Bloomberg (As of 31July 2009)

P/BV – Eastern Europe cheapest among BRICs

3.43.84

1 9 2.1

3.4

2.5

3

3.5

0 70.9 1.0 1.1 1.2

1.4 1.5 1.5 1.51.7

1.9 1.9 2.1

1

1.5

2

0.5 0.60.7

0

0.5

1

nia

bia

atia sia

en ria ary

ep.

nd key pe

UK

azil

AP) 00 x dia na

Lith

uan

Serb

Cro

a

Rus

s

Swed

e

Aust

r

Hun

ga

Cze

ch R

e

Pola

Turk

MSC

I Eur

o U

Bra

MSC

IAs

ia(x

J A

S&P

5In

dex

Ind

Chi

Russia has a P/BV ratio which is 3-4 times lower than India and China. Most of Eastern Europe can still be bought for approx 1x book

25 August 2009 47

Source: Bloomberg (As of 31 July 2009)

Russia vs GEM peers 2009ERussia vs. GEM peers, 2009E

90%

100%

60%

70%

80%

40%

50%

60%

10%

20%

30%

0%P/E EV/EBITDA EV/S P/BV Net debt/Equity

Russia Discount to GEM peers

Using any indicator, Russia is substantially undervalued compared to Global Emerging Markets peers

25 August 2009 48

Source: Troika (August 2009)

Summary : better picture emergingSummary : better picture emerging

Markets rallied while the macro picture deteriorated in Q2

Higher commodity prices and stronger currencies

Record high correlation between Russian stock marketRecord high correlation between Russian stock market and oil price

IMF programsIMF programs

Improved political climate

Macro numbers in general are still rather poor but the overall situation has stabilised and we see the first signs of economic recovery

25 August 2009 49

AgendaAgenda

Region

CrisisCrisis

Economies & Markets

Outlook

25 August 2009 50

Drivers / AssumptionsDrivers / Assumptions

Durability of early indicatorsDurability of early indicators

Datapoints give an impulse

Macro environment improving

Consumer spending to stabiliseConsumer spending to stabilise

Bank lending to gradually return

Unemployment

We believe that we have seen the worst in terms of macro figures in Q2. Bank lending and unemployment are the largest uncertainties going forward

25 August 2009 51

forward

EE will follow & not leadEE will follow & not lead

In the short term, Russia and EE will continue to take direction from global market sentiment

In the short to medium term, plenty of upside

Market consolidation ?

We think Q3 will be more of a consolidating quarter but with positive underlying momentum

25 August 2009 52

y g

Current PositioningCurrent Positioning

Large markets should outperform

Poland – unlikely laggard

Mid-cap stocks at astounding value

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The sheer size and variety of East Capital universe

25 August 2009 5454

Disclaimer

These notes should not be used as a basis for investment. Information and advice in this publication is based on sources that East Capital deem reliable, but East Capital can under no circumstances be answerable for the totality or correctness of the information, or for direct or indirect loss that can occur as a result of mistakes or discrepancies therein. Investment in funds is always associated with risks. Historic yields are no guarantee of future yields. Fund units can go up or down in value and there is no guarantee that investors will get back all capital invested As East Capital invests in foreignvalue, and there is no guarantee that investors will get back all capital invested. As East Capital invests in foreign markets, currency fluctuations can affect the funds’ values. Fund information brochures can be obtained from East Capital.

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Hong Kong Office

30/F Bank of China Tower1 G d R d C t l1 Garden Road, Central

Phone: +852 2251 8205-6

25 August 2009 56