Your Gateway to SEE Markets

CITYWIRE VIENNA

FORUM 2013,

12 March 2013

KD Asset Management

Leading South East European Asset Manager

* Please see disclosures on back page

Since 1994, the KD Group has developed into one

of the largest privately owned insurance groups

in SEE

KD Group PLC

The leading asset management company in SEE

13 investment professionals located across the SEE region (Slovenia, Croatia, Bosnia, Montenegro, Romania and Macedonia) responsible for managing approx. EUR 500m

The first Slovenian specialist life insurance company

Developed the unit-linked market in Slovenia still considered the most innovative company in the life segment

The fastest-growing Croatian unit-linked life company

The 3rd largest insurance company in Slovenia

Unique position in health insurance

Presence in Slovenia and Serbia

KD

Asset Managemen

t

KD Funds, Slovenia

SAI KD Investments, Romania

KD Investments

, Croatia

KD Fondovi,

Macedonia

KD Asset management has 18 years of investing

experience and has been extensively investing in the SEE

region for more than 10 years

Local analysts speak the local language and understand

the market dynamics

Local knowledge - analysts are located throughout the

region where:

the markets are extremely inefficient,

what is required are specialised skills, which are

similar to those in private equity investing, and

there is a diversity of languages.

KD analysts have an extensive information network

which is imperative when dealing in these relationship-

based markets

KD analysts can access tightly held/concentrated

shareholdings

In addition to managing mutual funds in Slovenia, Croatia,

Romania and Macedonia, KD also manages two

privatisation funds in Bosnia and an investment company

in Montenegro. Further, it manages two additional

mandates (a Russian fund and a CEE fund) for a

Slovakian asset management company

14 mutual funds

6 institutional mandates

9 investment

professionals

1 mutual funds

1 investment professional

5 mutual funds

1 investment professional

3 mutual funds

1 investment professional

Unique combination of experience, local

presence and global allocation capabilities

Initial screening

Investible universe

Idea generation

Approved stock list

Investment Process

Macro-economics & strategy

Risk matrix Cycle & earnings potential

Relative money flow

Global allocation guidelines

5

Analytics Portfolio construction Portfolio revision

TOP-DOWN: Country/sector allocation

BOTTOM-UP: Stock selection

South East European region

SEE: South East Europe

Slovenia: EU Member 2004, pop. 2m

Romania: EU Member 2007, pop. 21m

Bulgaria: EU Member 2007, pop. 8m

Croatia: EU Member exp. July 2013, pop. 4m

Macedonia: EU Candidate 2004, pop. 2m

Serbia: EU Candidate 2012, pop. 8m

Bosnia & Herzegovina: pop. 4m

CEE: Central & East Europe

Poland: EU Member 2004, pop. 38m

Czech Rep.: EU Member 2004, pop. 10m

Hungary: EU Member 2004, pop. 10m

Core Region Narrow Strategic

Region

Broad Strategic

Region

We are an SEE asset manager with a focus on the

emerging European Union

Long-term drivers

Increasing political stability

Low correlation with other equity markets

Countries are either EU members or in the EU

accession process

Healthy economic growth prospects

Inexpensive but highly educated workforce

Increasingly positive investment climate

Capital markets are being liberalised

Adoption of the euro typically acts as a stimulus for

M&A activity

Short-term drivers

Privatisation process ongoing

The cycle is turning for the majority of East

European markets

We see a new bull market forming over the course of

the next 5 years

Top-down macro factors will loosen their grip but still

remain important

Stock-specific bottom-up factors will be more in the

spotlight

Risk aversion will fade and risky assets will

outperform

So it’s time for more aggressive positioning

Reasons to invest in the SEE & CEE region

Correlation + Convergence = Alpha

8

The uniqueness of the EU convergence process in the region combined

with a relatively low correlation provide attractive opportunities for

investors

0

0.1

0.2

0.3

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0.8

0.9

1

Stoxx Balkan ex TR & GR vs MSCI AC World

Stoxx Balkan ex TR & GR vs MSCI Emerging Markets

MSCI Emerging Markets vs MSCI AC World

Data: Bloomberg;

Annual correlations calculated

based on weekly data in EUR 9

Correlation

Great diversification opportunities both against developed and

emerging markets

Convergence

There is evidence that CEE and particularly SEE markets are not yet integrated into global portfolios since their expected returns reflect higher stand-alone risk excluding their lower covariances with global portfolios

Convergence towards the EU will attract foreign capital flows into the region as markets become more liberalised and countries complete the privatisation process. This will have a positive impact on the cost of capital, increasing economic activity and potentially further increasing the trend growth rates of the economy

Moving towards integration with the EU will force SEE countries to speed up the structural reforms needed to satisfy EU requirements which would further reduce the cost of capital and contribute positively to economic growth

Opportunity:

Investors willing to participate in the early stages of this process are more likely to reap the benefits of equity prices not reflecting the risk contribution to global portfolios but instead the higher stand-alone risk, resulting in a higher than expected return on equity.

Liberalisation + Privatisation + Structural Reforms = Lower Cost of Capital & Higher GDP

10

Pattern of past recoveries and the current

situation

0

50

100

150

200

250

07 08 09 10 11 12 13 14 15 16

I

n

d

e

x

e

d

V

a

l

u

e

E

U

R

Synchronized date (years)

Local high before crisis = 100

Crisis composite index

MSCI World AC

MSCI Emerging Markets

Lower band - historical volatility (2std. Dev.)

Upper band - historical volatility (2std. Dev.)

STOXX Balkan ex-Greece & Turkey

MSCI Frontier Markets

0%

20%

40%

60%

80%

100%

120%

140%

2004 2005 2006 2007 2008 2009 2010

EXTREMELY OVERVALUED

EXTREMELY UNDERVALUED

Attractive valuation in SEE SEE blue chip basket compared to cycle normalised EPS

0

5

10

15

20

25

30

35

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Top cycle valuations hit 30x normalized

EPS. Some markets like Slovenia experience even loftier valuations reflecting the tendency of SEE markets

toward extreme overshooting.

1999 – 2013 average P/nE: 11,9

Investment policy:

The fund's investment objective is long-term capital growth,

which will be pursued through the active management of

investments in equities in the Balkans. At least 85% of the

fund's assets is placed in shares, and at least 80% is

allocated to shares in the region comprising Slovenia,

Croatia, Bosnia and Herzegovina, Serbia, Montenegro,

Macedonia, Romania, Bulgaria, Greece and Turkey. Less

than 10% of the fund's assets is allocated to units of other

funds.

13

KD Balkans The easiest way to get an exposure to the SEE region

Management company KD Funds, LLC

Fund’s incorporation date 24.02.2006

NAV (€'000) on date: 31.01.2013 22.320

Fund type

Equity Southeast

Europe

Subscription fee 3.00%

Management fee 2.49%

Ongoing charges (Jan. 2012 - Dec. 2012) 2.86%

PTR (Jan. 2012 - Dec. 2012) 35.99%

Geographical focus Southeast European

countries

Benchmark

STOXX® Balkan TMI ex Greece & Turkey Index 100%

Past returns

1-year 5.58%

3-year (cumulative) -28.53%

5-year (cumulative) -71.19%

Average weekly return 0.17%

Standard deviation of weekly return 1.45%

1.5

1.7

1.9

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2.3

2.5

2.7

2.9

31

/01

/201

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30

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31

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31

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31

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30

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31

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KD Balkans - Changes in unit value (in EUR)

14

KD Balkans Top 10 Holdings & Geographical Breakdown

Romania and Serbia are the fund’s largest overweights.

We like Romania’s economic prospects, reform and

privatisation agenda and relatively low political risk in

the near future. In Serbia, we expect 2013 GDP growth

in the 2% range and further fiscal consolidation with a

potential IMF precautionary deal boosting credibility.

The overweight in Serbia results from conviction calls on

companies like NIS and AIK bank.

Croatia is the largest underweight. We see a budget

planned on unrealistic forecasts and expect a revision in

the next couple of months. GDP could well be in the

negative territory in 2013, with tourism as one of the

best performing sectors.

Slovenia is a tactical underweight due to political

uncertainties which are currently at elevated levels.

Announced privatisation plans could be a boost to the

stock market but their realisation depends on political

will.

Bulgaria and Macedonia are equal weights.

Romania32%

Slovenia31%

Serbia15%

Croatia10%

Bosnia and Herzegovina

4%

Macedonia3%

Bulgaria4%

Other1%

Top 10 holdings as at: 31.01.2013

OMV PETROM SA 9.29%

NAFTNA INDUSTRIJA SRBIJE 6.7%

BRD-GROUPE SOCIETE GENERALE 6.10%

KRKA 5.70%

BANCA TRANSILVANIA 5.26%

FONDUL PROPRIETATEA SA/FUND 4.31%

AIK BANKA AD 3.03%

PETROL D.D. 2.77%

KOMERCIALNA BANKA BEOGRAD 2.52%

SOJAPROTEIN 2.41%