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

Investment capabilities in the region of CEE

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

Partnership with top international firms

Local representative of Schroder Investment Management, UK

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

22 Exciting Years of Success

Karoll ranks as #1 local brokerage firm for 13 consecutive years (2014)

Karoll Corporate University program launched (2013)

Karoll Capital Management enters into strategic partnership with Schroders, UK

(2012)

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 stock fund in the country - 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

ADVANCE TerraFund

REIT

Mutual Funds

ADVANCE Invest

ADVANCE Eastern Europe

ADVANCE Emerging

Europe Opportunities

ADVANCE Global Trends

ADVANCE Conservative

Fund

Private Equity

ADVANCE Equity

Holding

Karoll Capital Management | Key Facts

Unique heritage

Founded in Sofia in 1993, our roots are truly in Emerging Europe

Unique and independent Eastern Europe-based team

Steady business growth based on solid reputation

AUM exceeding EUR 200 mln.

Assets split in various mutual funds, real estate investment trusts, wealth mgt &

mandates

Manages 5 UCITS funds and multiple private accounts

Crisp focus on Emerging Europe

Helping clients harness the potential of emerging Europe

Deep understanding of the cultures and dynamics of our markets

On-the-ground research coverage of strategically important holdings

Partnerships with top international names

Local representative of Schroder Investment Management, UK

International road-shows and conferences

Our Mission

“Our goal is to create top-notch vehicles, tools and processes in helping international investors harness the exciting potential of Emerging Europe.”

Stanimir Karolev

Founder and Chairman,

Karoll Financial Group

Partnership between Karoll and Schroders

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

over EUR 70 mln raised to date

Fostering investment awareness and presenting global solutions to local households

Karoll Capital Management Pioneers in the regional asset management industry

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 than the Eurozone and given local stock exchanges’ embrionic stage of development. The positive economic outlook combined with diminishing risk levels are once again starting to attract foreign investors toward the region. While other CEE 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 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 are able to visit companies. 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 3-5 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 PM with the help of a seasoned analyst team. Unlike most other asset 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 products' 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.

Investment Process – the 4 S’s

Screen

The process starts with our on-the-ground analyst team screening the landscape in search of investment opportunities in Emerging Europe. We apply filters in terms of liquidity (time needed to enter/exit investment), market cap, transparency, corporate governance, etc. As a result, our investment universe comprises around 500 stocks out of some 3 000 listed companies in CEE. Our major advantage is the freedom to deviate from local indices based on our views. This gives us flexibility in our investment choice, regularly leading to superior results and outperformance of benchmarks and peers. Using proprietary analytical tools and exchange with local contacts, we seek to pinpoint stocks that are trading at a discount or that are in a position to undergo some fundamental change. Examples of such events are turnaround situations, management changes, financial results surprises, etc.

Study

The generation of investment ideas leads to the next step -- a thorough in-depth analysis conducted in house. Because of market inefficiencies we believe Emerging Europe is abundant with mispriced assets. In estimating the true value of a stock we study the firm’s business model and its ability to realize return greater than the cost of capital, the shareholder structure and management capabilities, sector dynamics and overall market position. We strive to find companies with improving profitability margins and low debt levels that are traded at a discount to peers. On-site visits and regular contact with company representatives are a key part of research as well. In addition to employing valuation methods, we also consider investor psychology, liquidity and order flows. The outcome of the investment assessment is the analyst proposal to the investment committee, which summarizes the case, the rationale behind it, potential upside and associated triggers, as well as the risks involved.

Shape

Karoll Capital’s 4-member investment committee, supported by the analyst team, examines the selected investment proposals in view of portfolio construction. At the asset allocation level (asset class and geographic splits), we normally apply the Black Litterman model, which takes into account the market size, volatility, correlations and our convictions. The committee then debates whether a stock deserves to be included in the portfolio, when and what weight to be assigned to it. In the case of Karoll’s mutual funds the Portfolio Manager has the final say with regard to stock selection, while in the case of managed accounts / mandates the decision is collective. Likewise, the committee / PM decides on position weight changes and/or liquidations. At each stage, compliance with regulatory guidelines and client-tailored requirements are factored in.

Scrutinize

Finally, the investment portfolio is monitored with all different positions being systematically scrutinized. The investment team applies in-house processes and practices enabling it to adequately react to the different triggers causing distortions to the investment case. As part of the process our analysts and portfolio managers follow up with the companies’ management, screen the sector competitors and general business/political environment. Conducting attribution and risk management analysis on the portfolio holdings is essential. Any resulting concerns related to the investment case prompt reviews of the rationale behind the decision to add / hold/ reduce the stock as a portfolio component.

Our Investment Universe

3,000+ listed companies in CEE

Investment Universe – 1,500

750

500

250

Survivors

150

Selection Filters:

Sector Outlook & Company Competitiveness

Mkt cap & Liquidity

Corp Governance & Transparency

Financial Strength

In-house Valuation

Mandates model portfolio vs. benchmarks as of 30.09.2015 YTD 3 M 6 M 1 yr

3 yrs, annualized

5 yrs, annualized Volatility Beta Alpha

Sharpe ratio

MSCI EFM Europe +CIS -5.74% -16.78% -17.47% -21.81% -12.31% -8.22% 16.69% neg.

MSCI EFM Europe +CIS ex RU -19.46% -16.37% -19.95% -22.35% -9.21% -8.51% 14.40% neg.

Balkan strategy -4.83% -1.68% -5.31% -9.46% 6.20% -2.92% 10.77% 0.38 15.4% 0.36

Eastern Europe strategy 0.17% -4.67% -2.63% -9.07% 1.10% -0.76% 8.90% 0.29 13.4% 0.03

Central Europe strategy -6.54% -5.75% -11.02% -14.31% -6.29% -4.65% 10.42% 0.29 6.0% neg.

Investment Capabilities & Results

3 main strategies offered to institutional investors: Eastern Europe, Central Europe

and Balkan, as well as mixed strategies based on specific mandate

Karoll Capital’s Investment Committee aims to construct for our institutional clients

Managed Accounts / Mandates portfolios positioned to outperform regional

benchmarks and peers

Against the background of the latest market developments, we believe that current

price levels provide good entry opportunities for our clients

Our Unique Value Proposition

“Emerging Europe offers a unique asset class with strong upside potential and low correlation to the developed markets.

We generate alpha in the region while helping international clients overcome local barriers.

We provide a direct personal approach and full transparency.”

Daniel Ganev

Managing Director,

Karoll Capital Management

Independent

Flexible

Entrepreneurial Deep

understanding of local markets

Accessing investment opportunities in Emerging Europe is often obstructed by various

challenges related to language barriers, cultural differences and transparency issues.

To help our institutional clients make the most of what the region has to offer we provide a

number of analytical tools:

quarterly strategy report & flash reports

individual sector and stock reports upon request

monthly performance statements, attribution analyses

conference calls and discussions with investment committee members

on-site client visits upon request

Analytical Support for Institutional Clients

Emerging Europe:

The Leveraged Play

on Western Europe

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 2015 CEE expected to grow by 3 %

vs. 1.5 % for Euro-area

Higher regional growth to continue

into 2016

Growing Western demand favors CEE

exporters

Population, mln.

GDP, USD bln., 2014

GDP per capita (USD)

GDP growth

2014 2015f 2016f Bulgaria 7.4 56 7 753 1.7% 1.7% 1.9% Croatia 4.3 57 13 494 -0.4% 0.8% 1.0% Serbia 7.16 43.866 6 123 -1.8% 0.5% 1.5%

Romania 20 200 10 035 2.8% 3.4% 3.9% Russia 143.3 1 857 12 926 0.6% -3.8% -0.6% Turkey 76 806 10 482 2.9% 3.0% 2.9% Ukraine 45.5 131 3 055 -6.8% -9.0% 2.0%

Poland 38.5 547 14 379 3.4% 3.5% 3.5%

Czech Republic 10.5 206 19 563 2.0% 3.9% 2.6%

Hungary 9.9 137 13 881 3.6% 3.0% 2.5% Estonia 1.3 26 19 671 2.0% 2.9% 3.4%

Lithuania 2.9 48 16 386 2.9% 1.8% 2.6% Latvia 2.033 32 15 729 2.4% 2.2% 3.3%

Forecasts: IMF, World Economic Outlook, July, 2015

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 2015f

Unemployment 2015f

Gov. debt/ GDP 2014 2015f 2016f

Bulgaria 0% 1% 0.2% 0.3% 10.3% 28.6%

Croatia 0.7% 1.7% 1.5% -0.4% 16.6% 89.3%

Serbia -6.0% -4.0% -3.9% 2.5% 20.6% 76.7%

Romania -0.4% -0.7% -1.5% - 0.5% 6.9% 40.9%

Russia 3.2% 5.0% 5.4% 13.5% 6.0% 20.4%

Turkey -5.8% -4.5% -4.7% 8.0% 10.8% 32.1%

Ukraine -4.7% -1.7% -1.7% 45.8% 11.5% 94.4%

Poland -1.3% -0.5% -1.0% 0.1% 7.5% 51.1%

Czech Republic 0.6% 1.7% 1.2% 0.5% 5.2% 40.6%

Hungary 4.2% 4.8% 4.1% 2.0% 7.6% 75.5%

Estonia 0.1% 0.6% 0.3% 0.4% 6.8% 10.8%

Lithuania -0.2% 0.2% 1.5% 0.2% 10.6% 38.8%

Latvia -3.1% -1.7% -2.7% 1.9% 10.4% 37.8%

Forecasts: IMF, World Economic Outlook, October, 2015

Why Eastern Europe

Attractive valuations

P/E ratios lower vs. historical averages and developed markers

attractive dividend yields

Low market penetration

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

indices are way below their pre-crisis peaks

Improving market liquidity

Large investment universe and low correlation with developed markets

Major index performance (%) (as of

30.09.2015)

Mkt cap. (USD bln)

Mkt cap/ GDP

Avrg equity daily turnover (USD mln), 2014

No. of listed companies

P/E, ttm

P/B, mrq 2014 YTD

Change from pre-crisis peak

Bulgaria 4.6 8.6% 1.46 372 14.1 0.55 6.2% -15.3% -77.3%

Croatia 19.4 33.2% 1.99 181 26.3 1.24 -2.7% -3.4% -68.7%

Serbia 6.6 15.1% 0.84 407 8.5 0.72 19.5% -5.8% -81.2%

Romania 36.5 19.9% 14.09 83 12.3 0.90 9.1% -1.4% -35.4%

Russia 467.6 25.2% 727.0 277 7.1 0.45 -45.2% -0.6% -67.7%

Turkey 170.2 21.1% 1 480.0 403 9.4 1.23 26.4% -13.4% 27.8%

Ukraine 8.8 6.7% 1.6 310 47.5 0.59 28.7% -22.2% -75.1%

Poland 317.6 58.1% 269.0 476 16.2 1.18 -3.5% -10.8% -47.2%

Czech Republic 47.4 23.0% 28.0 24 17.4 0.76 -4.3% 2.6% -49.6%

Hungary 16.6 12.1% 29.5 46 19.5 0.99 -10.4% 25.6% -29.9%

Estonia 2.1 7.9% 0.6 16 10.7 1.17 -7.7% 14.3% -17.3%

Lithuania 3.9 8.1% 0.4 33 14.2 1.23 7.3% 6.1% -18.4%

Latvia 1.0 3.1% 0.1 28 20.7 0.62 -11.3% 40.0% -25.2%

Take advantage of Emerging Europe’s growth potential

Advance Mutual Funds (UCITS)

Stocks in Bulgaria & Romania

Stocks in Eastern Europe

Stocks in Central Europe

Local deposits, fixed income, repo-agreements

Flexible global multi-asset fund

Advance Eastern Europe | The Essentials

Easy access to Eastern 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 L.T. strategy based on fundamental selection across all sectors

Georgi Georgiev, Portfolio Manager

Advance Emerging Europe Opportunities| The Essentials

Convenient access to Central Europe Launched in 2007 Listed companies across the entire Central European

region

Experienced local-based team Dedicated Portfolio Manager & 4-member investment

committee thorough in-house deal evaluation and management interviews

Aggressive investment approach Bottom-up stock picking L.T. strategy based on fundamental selection across all sectors

Nadia Nedelcheva, CFA Portfolio Manager

Advance Conservative Fund | The Essentials

Easy access to high-interest rate local 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 regional REIT with market cap of BGN 210 mill

Biggest farm land owner in Bulgaria after the state

Member of various market indices

Component of major regional indices (DJ FEAS Composite,

SOFIX, BGREIT, BGTR30, BGBX40)

Biggest free float in the market (~55%)

Diverse shareholder base

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

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

Radoslav Manolov, Managing Director

Contacts

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

Nadia Nedelcheva, CFA

Head of Portfolio Management Karoll Capital Management nnedelcheva@karoll.bg

Headquarters Sofia

1 Zlatovrah Str., Sofia 1164, Bulgaria | (+359 2) / 4008 382 | kcm@karoll.bg

The historical results of investment products do not guarantee future results. The value of the investment and the income from it can increase as well as decrease. Profits are not guaranteed and there is a risk that investors may not receive the full amount of the invested funds. Investments in the mutual funds and other investment products are not guaranteed by a state guarantee fund or any other institution. This material has been prepared by Karoll Capital Management, a licensed asset management company, a member of the Bulgarian Association of Asset Management Companies (BAAMC). It has been approved by the Compliance department at Karoll Capital Management. The prospectuses, KIIDs and Rules of the funds are publicly available at all offices of Karoll Capital Management as well as at www.karollcapital.bg.

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