Tailoring SRI Research to Emerging Europe Investment Veronika JuchnewitschLimestone Investment Management

TBLI Conference Europe 2008, Amsterdam

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Limestone believes, that

• Socially responsible investing means making an impact and getting better investment ideas – not company ratings

• Today, where the transparency and data availability are low, active bottom up stock selection coupled with engagement

• Is the key to maximising financial outperformance and improving sustainable business practises

• To have a maximum impact, engagement should be a collaborative rather than competitive initative

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Limestone Investment Management

Limestone Investment Management - Emerging Europe specialist equity

investment manager located in Tallinn

• Founded August 2007• Fully management owned and entrepreneurial• Strong investment team with a public track record in Emerging Europe• Signatory to the UN PRI

• Investment Philosophy is based on active management with no style bias

Large tracking error and high information ratio High conviction stock-picking Proximity to target markets Strong investment team extensive local contact network

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INVESTMENT UNIVERSE – NEW EUROPE

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Dedicated to New EuropeCEE Region compared to “old EU”

Estonia

Latvia

Lithuania

Poland

Macedonia

Montenegro

Albania

Serbia

Bosnia and Herzegovina

Bulgaria

RomaniaCroatia

Austria

Hungary

Czhech Republic

Slovakia

Slovenia

Kosovo

CEE 11

Population million 108

GDP growth 5.8%

GDP per capita, $ 13,631CPI 5.1%

EU 15

385

2.2%

32,862

2.3%

Export growth 10% 4%

FDI (% of GDP) 2004 4.8% 0.7%

Gov. Debt (% of GDP) 31% 63%

Fiscal bal. (% of GDP) -2.3% -2.7%

Unemployment rate 9.8% 7.9%

Source: EC, Eurostat, IMF

As of 2007

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Growth Engine’s Two Pillars: FDI and EU Transfers

Source: Eurostat, UniCredit , IMF, European Commission

Foreign direct investments as %GDP, average

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Strong foreign direct investments alleviate the current account imbalances while EU transfers boost underdeveloped infrastructure and agriculture together these open up great opportunities for investors

EU transfers to new members as %GDP

INVESTMENT PROCESS

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Limestone’s Investment Philosophy

• The objective is to provide exposure to the new EU member state equity markets through a disciplined identification of undervalued stocks with focus on ESG issues and engagement

Active management with no style bias Large tracking error (and high

information ratio) High conviction stock-picking based on

solid proprietary research Proximity to target markets Strong investment team, extensive local

contact network

• Dedicated team of 5 sector analysts / portfolio managers

• Disciplined risk management and transparent GIPS compliant reporting

Alvar Roosimaa, CIO, fund manager12 years of experience

Veronika Juchnewitsch fund manager, head of SRI research3 years of experience

Limestone’s Investment Process

1,000 companies

40 companies

320 companies

400 companies

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Main concerns in New Europe – transparency and data availability

• SRI Research and Engagement partnership with GES Investment Services

• 320 companies out of 1000 companies selected based on:

• Quantitative and;• Qualitative criteria + negative screens

• GES Risk Rating research identified data availability to be the main challenge

• 148 companies did not disclose any environmental information• 180 companies did not disclose any information about human rights

• Companies not publishing ESG data obtained the lowest rating

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Limestone Research: Quantitative idea generationHighly dynamic proprietary database

• 320 company coverage with DCF models and price targets• Data sources include 100 company meetings p.a. and local broker contacts

• We believe Limestone is the only local asset manager having built its investment process around extensive fundamental research

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Engagement in companies

• Investing responsibly and not constraining the investment universe

• Rather than rewarding the best in class, concentrating on those that benefit the most from engagement

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Research company specific ESG issues

Company meetings and recommendations

Follow up and actions by company

Utilise shareholder options

Progress in company behavioour

Selling the holding

NO NO

YES YES

Standard SRI approach

• Sector based negative screening• Rating by SRI Research Agency• Investment in best in class

companies

Limestone SRI approach

• Sector based negative screening – eliminates only 12 companies

• Active research, using management meetings and engagement with companies ..

- Provides access to proprietary info- Increases the level of ESG reporting

- Creates better investment ideas

Due to lack of standardized or publicly available data is not applicable in New Europe

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Limestone has developed an effective fundamental research and engagement based SRI investment process, which enables us to increase earnings visibility and to recognize investment risks

Tailored Approach For New Europe

Closing the Information Gap Through Extensive Research Capabilities

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Extra-Financial sources of information

- SRI Research from GES- Public information

Limestone Investment Team

Triple bottom line research

Companies

Management meetings

- Financial information- Management quality- CSR information

Gain access to information omitted due to lower standards of publicly available data.Influence companies to be more transparent and publish information

LIMESTONE NEW EUROPE SRI FUND

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Value Proposition: Portfolio Characteristics (as of 4 Nov ‘08)

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At current price levels, a carefully constructed and actively managed high conviction portfolio offers superior long term returns.

25.1%

15.7%

15.6%

17.4%

6.2%

20.0%

Austria

Other

Poland

Czech Rep.

Hungary

cash

31%

9%9%

5%

14%

6%4%Financials

Energy

Utilities

Materials

Industrials

Real Estate CoTelecom

Portfolio Characteristics (median)

P/E ('08e) 4.33

P/B ('08e) 0.72

Performance YTD -59%

Performance 12m -62%

PEG '08 - '10 0.46

Upside to TP's 162%

0246810

Immoeast AGOrco Property GroupErste Bank der Oester SparkKoncar DistributivniTelefonica O2 Czech RepublicSwedbank ABAutomotive Components EuropeRaiffeisen Intl Bank HoldingKGHM Polska Miedz SAPKO Bank Polski SACeramika Nowa Gala SAOTP Bank NyrtSIF 1 Banat-CrisanaOMV AGCEZ AS

P/E 2008E

Position WeightCEZ AS 9.2%OMV AG 8.8%OTP Bank Nyrt 6.1%SIF 1 Banat-Crisana 6.0%Ceramika Nowa Gala SA 5.7%KGHM Polska Miedz SA 5.2%PKO Bank Polski SA 4.9%Telefonica O2 Czech Republic 4.6%Automotive Components Europe 4.6%Koncar Distributivni 4.2%

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New Europe At Discount: LS Universe vs Euro STOXX 600

Median P/E ’08E Median P/B Median PEG ’08-’10E Average YTD return

# P/E '8e # P/E '8e # P/B # P/B # PEG # PEG # YTD # YTDAll Sectors 579 9.16 324 8.41 585 1.3 302 0.82 543 0.82 211 0.71 585 -23% 330 -55% Basic Materials 47 7.26 22 6.30 47 1.15 20 1.03 41 0.81 9 0.44 47 -33% 24 -63% Consumer Goods 62 10.47 38 15.32 62 1.51 35 0.79 60 1.08 22 0.81 61 1% 42 -57% Consumer Services 72 9.96 57 8.91 73 1.42 53 0.83 71 0.94 47 0.70 73 -28% 57 -61% Financials 139 7.3 78 7.14 140 0.81 78 0.57 128 0.79 42 0.53 142 -36% 78 -65% Health Care 30 14.38 19 10.87 32 3.29 16 0.82 29 0.9 12 1.01 32 -3% 19 -46% Industrials 120 8.38 70 7.90 121 1.47 61 0.98 116 0.64 54 0.51 120 -37% 70 -58% Oil & Gas 33 7.38 11 5.39 34 1.4 11 0.56 30 0.54 5 0.52 34 -19% 11 -61% Technology 23 11.48 16 7.79 23 2.58 15 0.81 22 0.99 11 0.71 23 -31% 16 -51% Telecommunications 19 9.47 10 9.03 19 1.99 10 1.07 16 1.07 6 1.42 19 -26% 10 -41% Utilities 34 12.46 3 9.95 34 2.27 3 2.33 30 0.91 3 0.76 34 -24% 3 -44%

STOXX 601 LS UniverseSTOXX 600 LS Universe STOXX 600 LS Universe STOXX 600 LS Universe

Sources: Bloomberg, LimeStone Research

Engagement: SIF1 Banat Crisana, Romania

18Source: GES Investment Services, SIF1 Banat Crisana Engagement Report for Limestone

The recommendations were accepted and SIF1 is currently working on improving its Corporate Governance procedures and implementing a CSR policy

The company also stated, that it will start publishing ESG reports starting from 2009

Time to get exposed to New EuropeMarket downturn has created a unique opportunity

• Complement your portfolios with an allocation to New Europe: Vicious circle of retail panic, sell side downgrades, and rating agencies

trailing the market has brought values to imply near fatal collapse Equities in Eastern Europe have reached fundamentally attractive levels Convergence process still heading forward, though further potential varies

across different markets and segments No real signs of economies landing too hard can be detected

• Careful fundamental research complemented with ESG component and engagement helps to better understand the underlying risks and opportunities

• Most extensively researched portfolio ideas in the region• Better information leads to informed investment decisions

• New Europe SRI fund – waiting investment partners• Luxembourg registered UCITS• EUR dominated share class

• For further information contact: Paavo Põld, Head of Business Development, paavo.pold@limestonefunds.eu

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CONTACT:Paavo PõldLimestone Investment ManagementVäike-Karja 12 Tallinn 10140 EstoniaVeronika.juchnewitsch@limestonefunds.euPhone +372 511 9201Fax +372 628 2370www.limestonefunds.eu

Disclaimer: This summary is for information purposes only and does not constitute an offer to sell or a solicitation to buy. Citizens or residents of the United States may not invest in this Fund. Opinions and estimates constitute the manager’s judgment and are subject to change without notice. Past performance is not indicative of future results. Investments in emerging markets should be considered high risk where a portion or total loss of capital is conceivable. No assurance can be given that the investment objective will be achieved or that an investor will receive a return of all or part of his/her initial capital, and investment results can fluctuate substantially over any given time period. Please refer to the Fund’s prospectus which contains brief descriptions of certain risks associated with investing in the fund. Questions should be directed to your local representative or financial advisor. This document may not be reproduced, distributed, or published for any purpose without the prior written consent of the manager.

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