2. Karoll Financial Group
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
3. Karoll Financial Group
Karoll Brokerage
Karoll Capital
Management
Advance Terrafund
Advance Equity
Karoll Investment
Leader by number of transactions on BSE for 15 years in a row
30% market share of of all transactions
Pioneered the first mutual fund in the country (2004)
Strategic partner of Schroders for the local markets
Largest farm land REIT in the country
IFC (World Bank) - key stakeholder
First Private Equity fund in Bulgaria
Executed the first IPO in Bulgaria (2004)
25 EXCITING YEARS OF SUCCESS | TEAM OF 200 EXPERTS
4. Karoll Financial Group
Product Offering
Bulgarian Capital
Market
International Capital
Markets
Brokerage
Wealth Management
• Advance Invest
• Advance Eastern
Europe
• Advance Emerging
Europe Opportunities
• Advance Global Trends
• Advance Conservative
Fund
• Discretionary accounts
Institutional Mandates
• Eastern Europe
• Central Europe
• Balkan
• Thematic equity
• Mixed
Asset
Management
IPO & SPO
Activities
M&A
Restructuring
Investment
Banking
Real Estate
ADVANCE
TerraFund
REIT
Private Equity
ADVANCE
Equity Holding
5. Karoll Capital Management Overview
Unique heritage in Emerging Europe
Founded in Sofia in 2003, our roots are truly in Emerging Europe
Independent and skilled Eastern Europe-based team with long tenure
Part of Karoll Financial Group with support of 200 professionals + 70 local offices
Steady business growth on solid reputation
AUM around USD 250 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
Partnership with top international names
Local representative of Schroder Investment Management, UK
Partners with IFC (World Bank), European institutions and global players
Cheverny Capital – our Canadian representative
6. Our Unique Value Proposition
“Emerging Europe offers a unique asset class with
strong upside potential and low correlation to the
developed world. It is a truly overlooked opportunity.
We pick out high-growth sectors in a high-growth
region.
We generate alpha in the region while helping global
investors overcome local barriers.”
Daniel Ganev
Managing Director,
Karoll Capital Management
Independent
Flexible
Entrepreneurial
Deep
understanding
of local markets
7. Karoll Capital’s Investment Committee
Seasoned investment team with long tenure and unique combination of skills:
Daniel Ganev, MBA, Managing Director
15+ yrs of experience in in fund management, financial products development and marketing,
business development in emerging markets
Nadia Nedelcheva, CFA, Head of Portfolio Management
15+ yrs of experience in portfolio management, research, valuations and modeling in Central &
Eastern Europe (CEE)
Alexander Nikolov, Portfolio Manager
18+ yrs of experience in portfolio management, financial analysis, technical analysis on the US,
European and CEE market
Katerina Atanassova, Portfolio Manager
15+ yrs of experience in portfolio management, technical analysis and trading on the global developed
and emerging markets
Georgi Georgiev, Portfolio Manager
13+ yrs of experience in research, fundamental analysis, valuations, portfolio management and
trading in the global emerging markets and USA
8. Karoll Capital’s Analytical Support
Our Sofia-based analysts have easy access to regional companies in search of
investment opportunities:
Dimitrios Latitaris, Investment Analyst
4+ yrs of experience in research, investment banking,
fundamental analysis, valuations in Central & Eastern
Europe
Georgi Raykov, Investment Analyst
3+ yrs of experience in research, fundamental analysis,
valuations in Central & Eastern Europe
9. Karoll Capital’s 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 Central and Eastern Europe. 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 returns
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 our analyst team, examines the selected
investment proposals in view of portfolio construction. In the case of managed accounts / mandates the
decision is collective. Convening each month, the committee 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.
10. 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
11. Investment Capabilities & Results
4 main strategies offered to institutional investors:
Eastern Europe, Central Europe, Balkan, and Thematic, 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 designed to take advantage of the L.T. trends
as well as hot opportunities in the market
We have identified a compelling theme as an excellent opportunity for our institutional clients:
Emerging Europe High-Growth Exporters, comprising companies from the industrial, outsourcing
and ICT sectors with strong competitive edge and excellent upside potential
Strategies results vs. benchmarks,
as of 31.12.2016 2016
3 years,
annualized
5 years,
annualized Volatility Alpha
MSCI EFM Europe +CIS 24.40% -3.91% -1.52% 23.04%
MSCI EFM Europe +CIS ex RU -1.29% -7.72% -2.60% 19.39%
Balkan strategy 10.56% 1.83% 3.41% 10.44% 5.72%
Eastern Europe strategy 11.87% 1.54% 2.92% 13.51% 2.16%
Central Europe strategy 7.76% -4.18% 1.22% 12.80% 0.80%
Emerging Europe High-Growth
(thematic strategy) 22.06% 22.15% n.a 12.21% 18.92%
12. Emerging Europe High-Growth Exporters
Karoll Capital’s highest alpha generating strategy
Investment theme: to invest in high-growth industrial, outsourcing and ICT companies
benefiting from low labor costs, highly skilled workforce and lowest taxes in a fast-growing
region with strategic location
Investment style: growth, benchmark agnostic, bottom-up
Market cap: small and mid cap.
Concentrated portfolio: 20-30 positions
Low portfolio turnover (<20%) and limited volatility
Offering format: Managed Account
Minimum size of investment: EUR 0.25 mln.
Fees: up to 1.5% on assets p.a. +15% performance fee, high-watermark
Highly-experienced team with long tenure and excellent understanding of local markets
Launch: April, 2013
13. Solid outperformance of Thematic Strategy
vs. benchmark
Strategy vs. Benchmark,
performance,
as of 31.12.2016 1 month YTD 1 year Since inception
Annualized (since
inception) Volatility Beta Alpha
MSCI EFM Europe +CIS 9.33% 24.58% 24.58% -17.90% -5.15% 23.04%
Thematic strategy (Emerging Europe
High-Growth Exporters) 4.61% 22.06% 22.06% 100.35% 20.01% 12.21% 0.26 17.31%
0
50
100
150
200
250
4/5/2013 4/5/2014 4/5/2015 4/5/2016
MSCI EFM Europe +CIS Strategy
14. Emerging Europe High-Growth Exporters
Geographic breakdown (31.12.2016) Sector breakdown
Top 5 positions % of portfolio Country Sector
CD Projekt 8.26% Poland IT Services & Consulting
Uniwheels AG 6.75% Poland Automotive supplies
GMK Noril'skiy nikel' PAO 6.19% Russia Metals and mining
Novolipetsk Steel PAO 5.73% Russia Metals and mining
Fabryki Mebli Forte SA 5.01% Poland Furniture
Poland
43.12%
Russia
23.03%
Turkey
14.61%
Romania
7.37%
Hungary
4.15%
Bulgaria
3.41%
Czech
2.40%
Ukraine
1.91%
IT services and
consulting
24.41%
Basic materials
19.83%
Chemical
9.24%
Household appliances
8.90%
Machinery
8.66%
Wood products
Furniture
8.63%
Pharmaceutical
6.95%
Automotive supplies
6.75%
Auto&Multi Utility
Vehicles
4.72%
Agriculture
1.91%
15. 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
16. Karoll Capital’s UCITS Funds
Advance Mutual Funds Family
Stock selection in Bulgaria & Romania
Stock selection in Eastern Europe
Stock selection in Central Europe
Local deposits, fixed income, repo-agreements
Flexible global multi-asset fund
18. While Central & Eastern Europe is a diverse region, it offers appreciable scale:
350+ mln combined
population
USD 4+ trln GDP (1/3
of euro-zone total)
3,000+ listed companies
USD 1+ trln total
market cap
Emerging Europe
buoyant region converging with the rest of Europe
an incubator for thriving companies
increasingly participating in European and global supply chains - vast number of companies shifting
production here
19. Emerging Europe
among the fastest growing regions
Source: IMF October 2016 outlook
2014 20152016e 2017f 2018f 2019f 2020f 2021f
World 3.4% 3.2% 3.1% 3.4% 3.6% 3.7% 3.7% 3.8%
Advanced economies 1.9% 2.1% 1.6% 1.8% 1.8% 1.8% 1.7% 1.7%
Euro area 1.1% 2.0% 1.7% 1.5% 1.6% 1.5% 1.5% 1.5%
European Union 1.6% 2.3% 1.9% 1.7% 1.8% 1.8% 1.8% 1.7%
Emerging market and developing economies 4.6% 4.0% 4.2% 4.6% 4.8% 5.0% 5.1% 5.1%
Commonwealth of Independent States 1.1% -2.8% -0.3% 1.4% 1.7% 2.1% 2.2% 2.4%
Emerging and developing Asia 6.8% 6.6% 6.5% 6.3% 6.3% 6.4% 6.4% 6.4%
Emerging and developing Europe 2.8% 3.6% 3.3% 3.1% 3.2% 3.1% 3.2% 3.2%
Latin America and the Caribbean 1.0% 0.0% -0.6% 1.6% 2.1% 2.6% 2.7% 2.7%
Middle East and North Africa 2.6% 2.1% 3.2% 3.2% 3.4% 3.6% 3.7% 3.6%
Sub-Saharan Africa 5.1% 3.4% 1.4% 2.9% 3.6% 4.2% 4.3% 4.2%
20. Emerging Europe
now a major production & services hub
CEE countries have become major automotive
producers 26% of motor vehicles in Europe
are produced here
Local suppliers steadily moving up the value
chain
CEE is Europe’s Silicon Valley IT sector
rapidly increasing its share of GDP with fast
growing number of employees
Booming outsourcing sector CEE countries in
top 20 ranking for Business Process Outsourcing
21. Emerging Europe
growing much faster than developed Europe
GDP growth (%)
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
Euro area
Emerging and
developing Europe
Source: IMF April 2016 outlook
Emerging Europe
growing at a much faster
pace vs. developed
Europe: +3.5% on avg
b/n 2005 and 2015 vs.
+0.8% for euro-area
Trend expected to persist
in the following years
GDP growth (%)
22. Solid performance of regional economies
continued in 2016
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
-0.6%
0.5%
0.8%
1.3%
1.6% 1.8% 2.0% 2.0% 2.1%
2.6%
3.0% 3.1% 3.1%
5.9%
GDP growth Q2'16 y-o-y
Most regional economies are
growing at a faster pace compared
to the euro-zone average thanks to
robust domestic consumption
growth
Romania posted the highest GDP
growth rate in the EU in Q2 2016
Recession in Russia is easing as it
experienced the slowest contraction
in Q2 2016 since it started to
contract at the beginning of 2015
Ukraine bottomed out and returned
to modest positive growth in Q1
with GDP figures accelerating in Q2
Source: Eurostat, National statistics institutes
23. Low levels of GDP p.c. = solid catch-up potential
GDP per capita (EUR), 2015
Source: Eurostat, IMF
Rising but still very
low levels of GDP
per capita –b/n 6
and 51% of euro-
zone average
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000
Euro area
Czech Republic
Estonia
Lithuania
Latvia
Hungary
Poland
Croatia
Turkey
Russia
Romania
Bulgaria
Serbia
Ukraine
24. Compelling opportunities in Emerging Europe
Strategic location of the region ideally situated for building trade links between Western
Europe, Middle East and Asia. Infrastructure has significantly improved in the past years with
major investments planned in the mid term
region now deeply integrated with pan-European transport corridors
Most countries are current or future members of EU, OECD and NATO major changes in
their economies and business environment. Some have already adopted the Euro. Legal,
regulatory and business conditions have marked solid improvement; regulatory framework
synchronized following EU accession.
CEE boasts well-educated and relatively inexpensive workforce
labor force with tertiary education steadily increasing. Wages on the rise, but still far below EU
average.
Favorable tax regimes significantly lower tax rates (e.g. 10% corporate income tax in
Bulgaria)
25. Stable economies with low level of government debt
Government debt/GDP, 2015
Source: Eurostat, IMF
Government debt in
CEE at low levels:
below 50% of GDP on
average for the region
vs. 91 % for euro-zone
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Euro area
Croatia
Ukraine
Serbia
Hungary
Poland
Lithuania
Czech Republic
Romania
Latvia
Turkey
Bulgaria
Russia
Estonia
91%
87%
80%
77%
75%
51%
43%
41%
38%
36%
33%
27%
18%
10%
26. Emerging Europe
boasts favorable tax regimes
Corporate tax rates
55%
35%
34%
30%
30%
30%
25%
25%
22%
20%
20%
20%
20%
19%
19%
19%
18%
16%
15%
15%
15%
10%
0% 10% 20% 30% 40% 50% 60%
France
USA
Brazil
Mexico
India
Germany
China
Indonesia
Slovak Republic
Croatia
Russia
Turkey
Estonia
Hungary
Poland
Czech Republic
Ukraine
Romania
Serbia
Latvia
Lithuania
Bulgaria
Corporate and other taxes
much lower in Central &
Eastern Europe vs. developed
world and major manufacturing
hubs
Most regional states provide tax
incentives and additional
stimulus to attract foreign
investors
27. Emerging Europe
boasts highly educated & qualified workforce
17.1
24.1
35.3
15.1
9.2
15.1
11.7
9.5
7.5
26.5
33.1 32.7
27.8
24.3 23.9
20.9
19.7
18.6
14.7
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
European
Union
Estonia Lithuania Latvia Poland Bulgaria Hungary Czech
Republic
Slovakia Romania
2000
2015
People with tertiary education (% of population)
Share of people with tertiary education in CEE steadily on the rise
Source: Eurostat
28. Labor costs significantly below
those in the developed world
Labor costs per hour (EUR), 2015
While convergence has
been driving wages in
CEE higher, they are still
far below European
averages
Min wages range b/n
EUR 194 in Bulgaria and
EUR 425 in Turkey,
compared to EUR 1,473
in Germany and EUR
1,500 in UK
Source: Eurostat
51.2
41.3
39.1
37.4
36.2
35.1
34.1
33.0
32.4
32.2
30.0
29.7
28.1
25.7
21.2
15.8
15.6
13.2
13.0
10.3
10.0
9.9
9.6
8.6
7.5
7.1
6.8
5.0
4.1
0.0 10.0 20.0 30.0 40.0 50.0 60.0
Norway
Denmark
Belgium
Sweden
Luxembourg
France
Netherlands
Finland
Austria
Germany
Ireland
Euro zone average
Italy
United Kingdom
Spain
Slovenia
Cyprus
Portugal
Malta
Estonia
Slovakia
Czech Republic
Croatia
Poland
Hungary
Latvia
Lithuania
Romania
Bulgaria
29. High growth of employment in science & tech
Human resources in science and technology (% of active population)
Science and tech play
an increasing role with
R&D expenditures rising
fast
The Czech Republic,
Estonia, Hungary,
Lithuania now spending
over 1% of GDP on
R&D
While this figure is still
low compared to EU
average of 2%, it is
rapidly rising
Source: Eurostat
0%
5%
10%
15%
20%
25%
30%
35%
27%
25%
24%
22% 21%
30%
24%
21% 21%
25%
17%
32%
30% 30%
28% 29%
31%
28%
24%
26%
24%
19%
2005
2015
30. Emerging Europe
enjoys solid FDI flows
Services were the main recipient of FDI flows in the transition period driven by extensive privatization
processes + market seeking and supply cost optimization
Banking systems and telecom operators now mostly in the hands of foreign investors, primarily from EU
FDI in manufacturing have been concentrated in: automotive sector, transport equipment, electrical
equipment, food, chemicals & metals
Source: UNCTAD
31. Emerging Europe
abundant resources provided by EU
Since these countries became EU members, EU co-financing has become an essential factor
for their development EU Structural and Cohesion Funds accounted for 11.3 - 25% of
annual GDP in 2007-2013, fostering regional cohesion
Large part of EU SCF financed major infrastructure projects, but also environment projects,
renewable energy, SMEs, education & health, information society, increasing the adaptability of
workers and enterprises, strengthening of institutional capacity
Poland
Czech
Republic Hungary Romania Slovakia Lithuania Bulgaria Latvia Slovenia Estonia Croatia
EU funds, 2007-2013 (EUR,
bln.) 67.19 26.3 24.92 19.18 11.65 6.77 6.67 4.54 4.1 3.4 1
EU funds/GDP (%) 17.2% 17.6% 25.4% 13.4% 16.2% 19.6% 16.7% 19.4% 11.6% 18.5% 2.3%
Total: EUR 175.7 bln = 16.2% of GDP on average
32. EU cohesion policy 2014-2020 to provide further
boost to regional competitiveness
0
10
20
30
40
50
60
70
80
77.6
32.8
28.6
23 22 21.9 21.5
19.2
15.9 15.5 14 11.8
8.6
7.6 6.8 4.5 3.6 3.1 2.3 2.1 1.5 1.4 1.2 1.2 0.7 0.7 0.6 0.1
EU cohesion policy 2014-2020, allocation by country (EUR bln)
CEE to receive over 50% of EU 2014-2020 Cohesion Policy = more than EUR 190 bln
EU 2014-2020 Cohesion Policy targets: R&D, ICT sector, sustainable transport, SMEs, renewable energy
& energy efficiency, environment, employment and education
33. Competitiveness of local economies
steadily on the rise
Country
Rank,
2006
Rank,
2016 Change of
position
Estonia 18 16 2
Lithuania 22 20 2
Poland 56 25 31
Slovenia 42 29 13
Slovakia 32 29 3
Czech Republic 59 36 23
Romania 62 37 25
Mexico 58 38 20
Bulgaria 48 38 10
Hungary 46 42 4
Thailand 23 49 -26
Russia 95 51 44
Turkey 60 55 5
Croatia 115 65 50
Vietnam 75 78 -3
China 89 90 -1
Serbia 78 91 -13
Indonesia 114 114 0
India 116 130 -14
Competitiveness of local
economies has registered rapid
advance as measured by the
Ease of Doing Business Ranking
by the World Bank
Most CEE countries are in top
50
5 countries hold a position in top
30
34. Rising role in European value chains
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
56.7
114.0
54.0
41.6
36.2
15.8
5.7 6.2 8.7
4.8
1.2 4.5 3.2
141.6
135.7
119.1
72.4
61.6
40.2
14.9 14.1 12.8
8.7
7.9 7.7 7.5
2005
2015
Export of Emerging Europe countries to EU (EUR bln)
Export of CEE countries to EU have jumped by
more than 80% b/n 2005 - 2015
Share in total EU imports now above 37%
(2005: 29.8%) and significantly lower before
that
Most countries export over 50% of production to
EU
2015
Czech Republic 83.4%
Hungary 81.4%
Poland 79.2%
Estonia 75.2%
Romania 73.7%
Latvia 69.5%
Croatia 65.9%
Bulgaria 64.2%
Serbia 63.7%
Lithuania 61.3%
Turkey 44.5%
Russia 44.4%
Ukraine 24.2%
Share of export to the EU in total export
(2015)
Source: Eurostat, KCM calculations
35. Eastern Europe
becoming a major manufacturing hub for multinationals
For 15 years the regions has seen massive inflows
of foreign investors
Following the GFC there is a clear trend of
Emerging Europe establishing itself as a major
manufacturing hub
Much lower production costs – labor, office rentals,
electricity, taxes and other incentives many
multinationals shifting production to Eastern
Europe
Location becoming more important – proximity,
both in geographical and cultural terms, favors
Eastern Europe over Asia and Latin America
EU membership and accession make trading
much easier
NEARSHORING
gaining popularity
36. Emerging Europe vs. Asia
Eastern Europe increasingly recognizing the importance of quality as a differentiator to low-cost Asian producers
Wages have been growing robustly in Asia in the past years with wage gap b/n Eastern Europe and Asia narrowing;
wages in China have more than tripled in the past decade
Realizing the trend of nearshoring, even Asian companies are investing in the region
Emerging Europe now moving up the value chain from low-cost manufacturing centers, regional economies now
facing the challenge to become innovative knowledge-based economies
Rather than viewing the CEE region as a cheap production base, multinationals increasingly consider it to be a
source of expertise.
The trend will continue and a deep supplier base will emerge here as local companies become integrated into global
supply chains.
Production gains in CEE have come from better management rather than from growing population and capital
investment (the Asian case).
37. Automotive sector in CEE
Assessing the potential of the region, Western European and Asian companies invested in local automakers and
established new companies. Fiat acquired Poland’s FSM in 1992; Volkswagen took over Škoda in the Czech Republic
in 1991; and Renault bought Dacia in Romania in 1998. Audi, Opel, and Suzuki all opened plants in Hungary;
Peugeot, Toyota, and Hyundai established operations in the Czech Republic; and Peugeot Citroën invested in
Slovakia. Renault, Toyota, Hyundai, Honda, Ford and Fiat all have production facilities in Turkey. Russia is the top
producer in the whole CEE region with sizable production by Hyundai, Renault, Volkswagen, Nissan, General
Motors and others.
Along with the automakers came automotive parts suppliers, creating automotive clusters across the region. The
factory of Audi in Hungary is now the biggest car engines producer in the world.
Nearly 2/3 of automotive exports go to EU-15 markets, and 60% of sales are concentrated in Germany, the UK, and
France
38. Booming car production in CEE
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
Russia Turkey Czech
Republic
Slovak
Republic
Poland Hungary Romania Serbia
1,354,504
879,452
602,237
218,349
613,200
152,015
194,802
14,179
1,384,399
1,358,796
1,303,603
1,000,001
660,603
495,370
387,177
83,630
2005
2015
Motor vehicles production in CEE (units)
Car production rose
nearly 70% from 2005
to 2015, with Slovakia,
Czech Republic and
Hungary more than
doubling production
Renault now with over
35% of total production
in CEE
Source: International Organization of Motor Vehicle Manufacturers
39. Eastern Europe
the new Silicon Valley
The human assets of the region make it a major player in technological innovation
Forbes consistently ranks CEE at the top of the world in educational
achievement in math, science & technology.
In 2013, 16 out of the 24 finalists of Google's annual Code Jam programming
competition were from Central and Eastern Europe
Solid growth of number of employees in ICT sector (Estonia: +128% in the past 10
years, Romania: +120%, Bulgaria: +84%).
Many significant tech businesses have started in CEE:
- Skype founded by Estonians, acquired by Microsoft for $8.5 bln
- Whatsapp founded by Ukrainian, acquired by Facebook for $19 bln
- Prezi launched in Hungary as online tool for creating presentations
- Major cyber security companies - AVG Technologies, Avast and ESET, in the Czech
Republic and Slovakia
Abundant EU funding supports start-ups from the tech sector
40. 40
Emerging Europe
stock markets lagging behind
0.000
50.000
100.000
150.000
200.000
250.000
300.000
ACWI
EFM EUROPE + CIS
EM ASIA
EM LATIN AMERICA
EUROPE
NORTH AMERICA
Performance of MSCI EFM
Europe+CIS, EUR as of
31.12.2016
3M 15.46%
YTD 24.4%
1Y 24.40%
3Y, annualized -3.91%
5Y, annualized -1.52%
10Y, annualized -5.43%
since 2007
peak
-49.7%
43. Emerging Europe
Compelling reasons to invest
-CEE turning into major manufacturing hub -> rising role in global value chains (over 50% of exports to EU)
-Major global companies shift production here -> solid FDIs in automotive sector, transport equipment, electrical equipment, food,
chemicals & metals
-CEE turning into the new Silicon Valley due to highly qualified IT specialists
-Booming outsourcing sector -> CEE countries in top 20 for Business Process Outsourcing.
-Buoyant region with appreciable scale converging with the West
-Growing much faster than developed Europe
-Among lowest taxes in the world
-Low labor costs –> 27% of euro-zone average
-Well-educated & highly qualified workforce
-Abundant EU funding boosts competitiveness
-Geographic & cultural proximity to the West
-Greater focus on quality vs. low cost Asian producers
44. Why invest in Emerging Europe now
Solid catch-up potential based on lagging performance in recent years
Improving sentiment towards emerging markets as a whole has sparked
uptrend
Attractive valuation ratios with multiples lower than peers and historic
averages
Low market penetration = solid catch-up potential
Improving liquidity
Take advantage of the Emerging Europe opportunities with Karoll Capital’s
thematic strategy:
Emerging Europe High-Growth Exporters
high alpha-generating strategy, investing in small & mid cap exporting
companies with strong competitive edge!
45. Contact us at:
Daniel Ganev
Managing Director,
Karoll Capital Management
E-mail: ganevd@karoll.bg
Tel: +359 2 400 8 382
Nadia Nedelcheva, CFA
Head of Portfolio Management,
Karoll Capital Management
E-mail: nnedelcheva@karoll.bg
Tel: +359 2 400 8 386
Headquarters Sofia
1 Zlatovrah Str., Sofia 1164, Bulgaria | (+359 2) / 4008 382 | kcm@karoll.bg www.karollcapital.bg
46. Disclaimer
This presentation is for information purposes only and does not represent a proposal for buying of selling securities. While reasonable care has
been taken to ensure that the information contained herein is not untrue or misleading at the time of publication, Karoll Capital Management
makes no representation that it is accurate or complete. The information contained herein is subject to change without notice. Karoll makes no
representations or warranties whatsoever as to the data and information provided in any third party referenced website and shall have no liability
or responsibility arising out of or in connection with any such referenced website. Karoll does not maintain a predetermined schedule for
publication of research and will not necessarily update this presentation.
Karoll Capital Management and any of its officers, employees, related and discretionary accounts may, to the extent not disclosed above and to
the extent permitted by law, have long or short positions or may be otherwise interested in the investments or securities referred to in this
document, or in options on such investments or securities, or in related investments (including other securities of the same issuer). Karoll, or its
clients or customers, may trade as market maker in the investments or securities that are the subject of this document, or in related investments,
and may have acted upon, bought for their own account or used the information contained in this document, before its publication. In addition,
Karoll Financial Group may provide banking, insurance or asset management services for, or solicit such business from, any company referred to
in this presentation.
Any investments referred to herein may involve significant risk, may be illiquid and may not be suitable for all investors. Investors should note that
income from such investments or other securities, if any, may fluctuate and that price or value of such securities and investments may rise or fall.
Accordingly, investors may receive back less than originally invested. Past performance is not indicative of future results. Foreign currency rates
of exchange may adversely affect the value, price or income of any security or related investment mentioned in this presentation. This
presentation should not be regarded by recipients as a substitute for the exercise of their own judgment. Investors should make their own
investigations and investment decisions without relying on this presentation. Only investors with sufficient knowledge and experience in financial
matters to evaluate the merits and risks should consider an investment in any issuer or market discussed herein and other persons should not
take any action on the basis of this presentation. Before entering into any transaction, investors should consult their advisors and understand the
risks involved in these transactions. Investors should make themselves aware of any local laws governing such securities or investments.
