East Capital Eastern European Fund

Eight years of successful investments in Eastern Europe
Olle Olsson, Senior Sales Manager
March 2006
East Capital

A leading investment house specialised in
Russia, the Baltic States and Eastern
Europe.

Company founded in 1997 by former
executives at Enskilda Securities, the
investment bank of the leading Scandinavian
universal bank SEB.

Offices in Stockholm, Paris and Moscow,
soon in Tallinn

International staff of 90 employees with
Eastern European nationals at all levels of
the firm.

Currently over 2.8 billion EUR (~27 billion
SEK) in AUM.
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East Capital’s three fund families
UCITS funds
Russia & CIS
Baltic States
Balkans
Central Europe
Russian Fund
Baltic Fund
Balkan Fund
Eastern European
Fund
Offshore funds
Bering Russia Fund
Bering Ukraine Fund
Special fund products
Amber Fund
Explorer Property
Fund-Baltic States
Explorer
Financial Institutions
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Four open-ended public equity funds, soon five
East Capital
Russian Fund
Launch: 05/98
928m euro
East Capital
Baltic Fund
Launch: 06/98
367m euro
East Capital
Balkan Fund
Launch: 10/04
306m euro
East Capital
Turkish Fund
Launch: 03/06
East Capital Eastern European Fund
Launch: 03/02
587m euro
Status: UCITS III. Notification of cross-border activity in Austria
estimated to be approved on March 27, 2006
Trading and pricing: Daily with no notice period
Identical fee structure in all four funds:
- Subscription fee: 2.5%
- Management fee: 2.5%
- No performance fees, no lock-up or exit fees and no other hidden fees
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Our Bering funds – two offshore funds for
qualified investors
East Capital Bering Russia Fund (launched June 2004)
East Capital Bering Ukraine Fund (launch in July 2005)
Investment focus

2nd and 3rd tier Russian and CIS companies (Bering
Russia) – ranked best equity fund in the world by Nelson
Marketplace 4 quarters ending June 30, 2005 (89.4%)

Ukraine across all asset classes, including private equity
and debt (Bering Ukraine)
Fund structure
Vitus Bering – the explorer
of far-away lands in Russia

Cayman-domiciled, semi-closed with quarterly liquidity

Exit fees – payable to the fund – for those investors who
choose to redeem before 4 years have passed

Capped at 50 MUSD (Russia) and 100 MUSD (Ukraine)
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Our private equity products

East Capital Amber Fund
- 12 MEUR private equity fund dedicated to Russian and Baltic consumer
goods sector, started in November 2002 and now fully invested
- Main investments include a Russian clothing retailer and a Baltic fashion
and styling group

Explorer Property Fund – Baltic States
- A 53 MEUR real estate fund targeting the Baltic states, started in June 2005,
jointly managed by East Capital and Arco Real Estate, the leading real estate
company in the Baltics
- Primary targets are properties in suburban areas or in other major regions
of the three countries (A-/B+ locations)

Explorer Financial Institutions Fund
- A 327 MEUR private equity fund that will invest in the banking and financial sector
in Eastern Europe, focused mainly on Russia and the former Soviet states
- The fund was launched at the end of November 2005 and is now closed for
further investments
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A large, diverse and stable client base
- More than 250,000 private and institutional clients from around the world
Institutional
~30%
3rd party distribution
~50%
Direct private clients
~20%
Around 50 major institutional
investors
Around 200.000 indirect
clients through agreements
with around 50-60 partners
Almost 20.000 direct clients
serviced directly by East
Capital’s client service team
Examples of institutions:
Examples of 3rd parties:
Examples of private clients:
A $1.5 billion US philanthropy,
the pension scheme of a
major European country’s
Postal Service, four of the
largest life insurance
companies in Finland
SEB, Dexia-BIL, Nordea,
Swedbank, Banque de
Luxembourg, Skandia, ETrade, The Swedish
Premium Pension Authority,
SNS Fundcoach
Everyone from the smallest
private investor ($30 minimum)
to some of Europe’s most
wealthy persons
The wide range of clients ensures the stability of the funds, something which is
particularly important in volatile equity markets such as those of Eastern Europe
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Investment philosophy and process
Investment philosophy

Focus on absolute return without benchmarking, long term view

Bottom-up stock-picking – with both value and growth in mind

Overweight in high-potential small-caps, with maintained daily
liquidity in the funds

High portfolio diversification in order to lower company-specific risk
Investment Process

Macroeconomic and political overview, leading to a selection of
“themes”
– Long-term investment theme: exposure to domestic growth

Bottom-up selection of stocks, in accordance with the “themes”

Hands-on contact with the portfolio companies and their
management – frequent company visits
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Investment process
Right
region
Macroeconomics
Politics
Right
sector
Reforms
Growth
Consolidation
Right
company
Valuation
Growth
Management
Corporate
Governance
Right
instrument
Direct /
indirect
Common /
Preferred
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East Capital Asset Management’s Investment
Committee
Örjan Berner,
Bengt Dennis,
Carl Bildt,
former Ambassador of
Sweden to Russia, leading
expert of Russian and
Eastern European
macroeconomic and
political issues.
former Governor of The
Central Bank of Sweden,
Senior Adviser to SEB,
leading expert of the Baltic
States.
former Prime Minister of
Sweden, former High
Commissioner in Bosnia
and the United Nation’s
special envoy to the
Balkans. Leading expert
on southeastern Europe.
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Major indices are not reflecting economic reality
Breakdown of the MSCI EM Eastern European Index vs. the countries’ GDP (2004) vs. EC EE Fund
100%
CZECH
REPUBLIC
14 OTHER
EE COUNTRIES
11 OTHER
EE COUNTRIES
CROATIA
UKRAINE
ROMANIA
CROATIA
UKRAINE
ROMANIA
TURKEY
TURKEY
CZECH REPUBLIC
50%
CZECH
REPUBLIC
HUNGARY
40%
POLAND
90%
80%
HUNGARY
70%
60%
POLAND
HUNGARY
POLAND
30%
20%
RUSSIA
RUSSIA
RUSSIA
GDP Breakdown 2004
East Capital Eastern
European Fund
10%
0%
MSCI Eastern European
Index
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Industry diversification
100%
SERVICES
90%
SERVICES
INDUSTRY
80%
SERVICES
70%
60%
INDUSTRY
50%
40%
OIL & GAS
INDUSTRY
30%
OIL & GAS
20%
10%
OIL & GAS
0%
Russian stockmarket
GDP Russia (est.)
East Capital Russian
Fund
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Company diversification
Russian Energy According to the RTS Index
Ufaneftekhim; 1,15%
YUKOS; 1,22%
Rosneft-Purneftegaz;
Bashneft; 1,49%
Russian Energy According to Us
Valkyries petroleum;
0,83%
Tatneft pref; 1,10%
Ritek; 1,01%
Bashneft pref; 0,93%
Sibneft; 6,89%
Ukrnafta adr; 2,07%
Yaroslav nos; Ufimsky
0,17% npz pr; 0,39%
Ufimsky npz; 4,17%
Ufaneftekhim pr; 1,91%
Ufaneftekhim; 1,62%
Tatneft; 8,00%
LUKOIL 34,90%
Transneft pr; 13,77%
Transneft pref 9,63%
Tatneft pr; 2,42%
Tatneft co; 0,30%
Tatneft adr; 1,96%
Yukos adr; 1,02%
Yaroslav nos pr; 1,02%
Novy neft; 4,77%Rengaz holdings; 10,17%
Rengaz holdings 2; 0,74%
Onako; 0,04%
Ryazannefteproduct;
Orenburg ng;
0,40%
0,01%
Saratov
ng; 0,05%
Neftemaslozavod;
0,88%
Saratov ng pr; 0,09%
Orenburgnefteproduct;
Tnk; 2,60%
0,01%
Udmurtneft; 0,03%
Varyogan ng; 0,02%
Udmurtneft pr; 0,72%
Bashneft pr; 2,49%
Varyogan
Bmb munai;
0,59%ng pr; 0,37%
Orenburg
Caspian energy;
0,42%ng pr; 1,77%
Evraz gdr; 0,98%
Lukoil; 2,48%
Surgut ng pr adr; 5,82%
Surgutneftegaz pref;
10,54%
Surgut ng pr; 1,03%
Surgutneftegaz;
21,85%
Lukoil adr; 18,81%
Surgut ng adr; 7,06%
Ritek; 1,68%
Nelson resources; 1,84%
Petrokazakhstan adr;Nelson resources new;
0,85%
Sibneft adr; 0,84%
Novoil pr; 0,62%
Novatek; 0,20%
Data from September 27th 2005
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Spreading of investments between several companies
allows exposure to sectors with sometimes low liquidity
and also lower the overall portfolio risk
East Capital Russia Fund steel portfolio
Viktor Rashnikov
Magnitogorsk MK
Izhstal
Vyksa
Alexey Mordashov
Chelyabinsk Trubny
The East Capital
steel portfolio
Mechel
Severstal
Novolipetsk MK
Nizhny Tagilsky MK
Source: East Capital, end of 2004
Vladimir Lisin
Alexandr Abramov
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Annualized performance since inception:
East Capital vs. index
80%
69.4%
Performance in EUR
70%
60.9%
60%
50%
40%
40.8%
35.2%
30%
24.5%
27.2%
26.6%
19.4%
20%
10%
0%
Russian
Fund
RTS
Russian
Fund
Baltic Fund
Baltic 30
Baltic Fund
Easter
MSCI
Eastern
European
European
Fund
Fund
Balkan Fund
Balkan
Fund
MSCI
Note: As of 31 January, 2006
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Performance since inception (May 1998)
SEK
East Capital Russian Fund
RTS-Index
Russian Fund
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Performance since inception (June 1998)
East Capital Baltic Fund
Baltic 30-Index
Baltic Fund
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Performance since inception (March 2002)
East Capital Eastern
European Fund
MSCI EM Eastern
Europe Index
Eastern European Fund
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Performance since inception (October 2004)
SEK
East Capital Balkan Fund
MSCI EM Eastern
Europe Index
Balkan Fund
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East Capital Eastern European Fund
Risk/Reward analysis first three years
Return
Risk
Sharpe
East Capital Eastern European Fund
123,40%
13,111
1,846
Thames River TR Eastern European USD
85,71%
19,476
0,98
ABN AMRO Eastern Europe
71,46%
17,828
0,904
Baring Eastern Europe Fund
69,02%
20,322
0,793
Griffin Eastern European Value Fd
65,25%
22,436
0,704
Robur Eastern European Fund
64,00%
19,647
0,762
Nordea Eastern European Fund
57,49%
20,674
0,669
SEB Eastern European Fund
55,42%
21,24
0,636
Handelsbanken Eastern European Fund
48,31%
19,504
0,595
Source: Moneymate (18 March 2002 – 18 March 2005)
All figures in SEK
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Awards
LIPPER 2006
Netherlands
”Best Emerging
Europe Fund over
Three Years”
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What East Capital offers – in summary

Superior performance since 1998

High diversification

A larger investment universe, covering more Eastern
European countries

Full transparency in the funds and the asset
management company

Broad and solid investor base

Wide range of funds enabling a tailor-made exposure

Innovative approach to client service (three large
investor trips every year etc)
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East Capital in Austria

Notification of cross-border activity in Austria estimated
to be approved on March 27, 2006

Initial partners are Raiffeisen Zentralbank, Erste Bank
and Capital Bank, but we welcome more and
negotiations with several other partners is under way

We are looking to hire a local, German-speaking sales
representative for Austria
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Contacting East Capital
East Capital Asset Management AB
Kungsgatan 30, Norra Kungstornet
SE-111 93 Stockholm, SWEDEN
www.eastcapital.com
Olle Olsson
Senior Sales Manager
Telephone: +46 8 505 88 512
[email protected]
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