2 3 Why CEE? Tomasz Grajewski Global Head GSS Unicredit Agenda - - PowerPoint PPT Presentation

Welcome to the

9th CEE Summit

18 and 19 April 2013 Prague, Czech Republic

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Why CEE?

Tomasz Grajewski Global Head GSS Unicredit

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Agenda

n The scale of the CEE region n The attractions of the CEE region n The special features of the CEE region n The custodian perspective of the CEE n A vision for the future

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The Scale of the CEE Region – GDP comparison

100 200 300 400

GDP (EUR b)

10 20 30 40

GDP per capita (EUR k)

Source: UniCredit CEE Quarterly

The potential for growth is material; these are largely emerging and frontier markets

7 500 1000 1500 2000 2500 3000

GDP (EUR b)

10 20 30 40

GDP per capita (EUR k)

Source: UniCredit CEE Quarterly and UniCredit Economics Research

The Scale of the CEE Region – GDP in further context

The gap in GDP per capita is a good indicator of the potential of even the regional “tigers”

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The Scale of the CEE Region – Stock Market Size

100 200 300 400 500 600 700 800

Stock market size (EUR billion) versus market capitalization of major global corporates

Source: WFSE and FT

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The Scale of CEE Markets – Market Cap to GDP

20 40 60 80 100 120 140 160 180

Domestic market cap as % of GDP

Source: WFSE and Unicredit Economics Research

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The Scale of the CEE Markets

20 40 60 80 100 120 140 160

Cap (EUR billions)

600

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The Scale of CEE Markets (Feb turnover EUR)

20 40 60 80 100 120 140 160

Smaller markets - EUR millions

600

5 10 15 20

Larger markets- EUR billions

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The Attractions of the CEE Markets

n Best regional economic growth rates n Exporting economies n CEE adhesion and impact n IPO’s in the future? n Growing local investor bases n Infrastructure evolutionary trends

But Very Dependent

• n EU economies

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The Attractions of the CEE Region

• Economic Growth Rates

n Poor 2012 performance but GDP growth forecast generally ahead of EU average

• 3
• 2
• 1

1 2 3 4 5 Austria Czech Hungary Poland Russia Croatia 2011 2012 2013

Source: UniCredit CEE Quarterly and Unicredit Economic Research

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The Attractions of the CEE Region – Exporting Economies

n EU is the target of much of exports; region still tied to EU economic performance n Exports are on average 65% of GDP in CEE or CEE aspirant emerging and frontier markets countries

20 40 60 80 100

Exports:GDP

Source: UniCredit CEE Quarterly

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The Attractions of the CEE Region – CEE adhesion and its impact

n EU is a market of 500 mio people – 10 CEE countries who are EU members/aspirants have a population of 110 mio n EU development and other funds are key drivers for growth n Euro participation is an emerging issue with currently AT, SK and SI being in countries but others plan to join “in the future” n And in the securities world harmonisation, infrastructure convergence and common regulation are prevailing trends n The MSI all country index includes AT (developed), RU, PL, CZ and HU (emerging) from the CEE with most others still classified as “frontier”

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And the T2S development is attracting both Euro and non Euro markets and is a major enterprise

Austria Slovakia Slovenia Hungary Romania Rebuilding platform; project plan being implemented; details shared with users; currently scheduled for phase 3 release T2S on top of infrastructure; total redesign of IT architecture; will retain many local unique features; currently scheduled for phase 2 release T2S on top of current architecture upgraded two years ago; middleware decision to be made 2Q2013; currently scheduled for phase 3 release T2S on top of current infrastructure; RFP out to allow tender for major market IT re-engineering; T2S to cover EUR settlement

• nly (not Florint); currently scheduled for phase 3 release

T2S on top of current infrastructure; some enhancements to be adopted; T2S to cover EUR settlement only (not Leu); currently scheduled for phase 1 release.

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The Attractions of the CEE Region

• IPO’s?

n The region is moving from state managed to market economies n We expect a greater number of new IPOs – on average markets could increase market cap by 100% to reach world “norms” n Some of the IPO’s could be substantial (On the WSE in 2011, there were 16 foreign issuers listed, of which 12 on the main list) n Align this with above average GDP growth and a more friendly global environment and market capitalisations could well rise dramatically n The region is still complex, change is country centric and local knowledge and involvement is key to managing the process

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The Attractions of the CEE Region – Growing Local Investor Base

n A recent CEESEG study showed that just 13.8% of the domestic stocks held by institutional investors in their four markets are held by domestic institutions; the balance by foreign investors with the US (33.6%), UK (18.8%) and France (5.3%) being the major investors

10 20 30 40 USA UK Austria France Germany Other

Foreign Investment in CEE %

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The Attraction of the CEE Region

• Infrastructure is changing

n The dominant players in the region are CEESEG and the Warsaw Stock Exchange

20 40 60 80 Securities Euro (b) MiFID liquid Int Members CEESEG WSE

Source: CEESEG

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But The market Infrastructure Is Bound To Change

n MTF’s are syphoning off some of the more liquid stock activity to the detriment of the traditional Exchanges n Many regional markets are small; many markets have low liquidity n A regional grouping makes sense and the major impediment will be political

• Can it be structured around a CEE regional grouping: an expanded

CEESEG, a hub from Moscow or the sometimes debated Polish/Austrian alliance?

• Will it be driven by an acquirer from Western Europe such as

Deutsche Boerse or Euronext?

• Is there enough value to attract a new entrant, a buyer from another

region?

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The Special Features of the Region

n Political and economic factors drive markets (e.g. electoral change, public policy on savings) n Cost advantage over much of EU; exporters (dependent on EU economic performance, expanding markets outside EU) n Markets are adopting EU harmonization (better governance, improved transparency but still “exciting” developing markets) BUT: n Substantial diversity remains across markets ( the region will move forward at different speeds and will take a decade + long process) AND: n Unicredit GSS presence countries are 14 states of the CEE accounting for around 450 of the Deloitte CEE top 500 companies

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The Custodian Perspective In A Changing Environment n Infrastructure consolidation likely to be Exchange led with CCPs and CSDs as slow followers n EU legislation being adopted in EU markets and becoming template for best practise elsewhere n Harmonisation (e.g. T+2) with an eye to Western Europe n Risk and cost dynamics militate for the regional custody providers with a strong regional asset gathering role n Although we can think of a “single market” for the next generation, local presence key in markets with many unique characteristics

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My Vision For the Future Decade

• Exciting Space with Challenges

Macroeconomic perspective

n Faster economic growth than world or European average

Capital markets perspective

n Stock Exchanges increase in scale but also align to major Groupings within or

• utside region

n Rapid development of domestic institutional markets

Regional Investments perspective

n Russia, Poland, Czech Republic and possibly Hungary will move from emerging to developed in MSI

Infrastructure perspective

n CCP development and interoperability with major groupings n CSDs use common infrastructures but retain local presences (notary functions) with CEESEG, Warsaw and Moscow retaining independence n Alignment of infrastructures and adoption of EU laws across much

• f the region

Why CEE?

Tomasz Grajewski

Global Head GSS

Unicredit

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The impact of EU legislation on the post-trading industry

Rafael Plata Head of Derivatives and Post-trading Federation of European Securities Exchanges (FESE) 9th CEE Summit Prague – 19th April 2013

FESE represents in total 46 Securities Exchanges (in equities, bonds, and derivatives) through 21 Full Members from all EU Member States and Iceland, Norway and Switzerland as well as 4 Observer Members from European emerging markets.

46 Securities Exchanges through 20 Full Members from 30 countries 4 Observer Members from 4 countries

The Federation of European Securities Exchanges (FESE)

Why a trading person in a post-trading panel?

TRADING POST-TRADING

Question

How many EU legislations regulated CCPs and CSDs prior to EMIR/CSD Legislation? 1. None 2. 2 3. 3 4. 5

G20 implementation in the EU for OTC derivatives

OTC Derivatives Clearing obligation Trading obligation

Capital Requirements Contracts subject to CCP clearing obligation Contracts subject to trading

• bligation RMs/MTFs/OTFs

G20 CRD IV EMIR* MiFID

• Average frequency of trades
• Average size of trades
• Number and type of active market participants

ESMA OK based on

• Standardisation of the contract
• Reduction of systemic risk in the financial system

(inc. lack of transparency on positions)

• Liquidity of contracts
• Availability of pricing information

ESMA OK based on

* EMIR also includes a requirement for derivatives to be reported to Trade Repositories

• CCP clearing obligation
• Liquidity based on:

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Arrangements for naked CDS trading

Scope

MiFID EMIR CRD IV

Post-trading Trading

Market Abuse

• Eq. FI

Ds Ds OTC Ds Eq.

• Eq. FI

Ds

Scope

• Sounder CCPs
• Trade repositories
• Gral. review + G20

commitments on derivatives

Short Selling /CDS

• Eq. FI

Ds

+ Use of CCPs Extension of MAD regime to OTC Derivatives

CSD Reg.

• Eq. FI
• Sounder CSDs
• Settlement Cycles
• Eq. = Equity; FI = Fixed Income; Ds = Derivatives

The EU regulatory landscape

EMIR

Equity Fixed Income Derivatives

` Trading Clearing Trade repositories Trading Clearing Settlement Trading Clearing Derivatives Equity Fixed Income Settlement

EMIR - Provisions

1.- CCP clearing obligation 2.- CCPs rules and relationship with members 3.- Reporting to trade repositories

• bligation

Question

What percentage of the global OTC interest rate swaps market was cleared at the end of 2009? 1. 35%

• 2. 52%
• 3. 70%
• 4. 98%

Main impacts of EMIR

Safety Efficiency Transparency Margins/ Collateral Paper-work New infrastructures

Trade Repositories for EU derivatives

DTCC CDS DTCC IRS DTCC London CDS*

* Copy of the US original

Luxembourg REGIST-TR ALL FX Commodity DTCC Equity London Access to data by EU supervisors EU US DTCC Others DTCC

CSD Legislation – In progress

Market discipline Settlement cycles Electronic records CSD rules Passport User choice Access More than settlement Settlement Safety Efficiency Safety Efficiency Transparency

Question

The need of collateral will increase after the implementation of EU

• Legislation. What are the estimated annual costs of the internal

fragmentation of the global collateral management market?

• 1. 1.7 million EUR
• 2. 83 million EUR
• 3. 1 billion EUR
• 4. 4 billion EUR

So what is there for the future?

So what is there for the future?

Review EMIR CSD Legislation New issues

Communication protocols CCP services to buy-side Intraday settlement, operating hours/deadlines Pre-settlement harmonisation Registration procedures Withholding tax procedures Transaction tax procedures Exchange Traded Funds (ETFs) Cross border shareholder transparency

Děkuji!

Contact Rafael Plata Head of Derivatives and Post-trading Federation of European Securities Exchanges (FESE) plata@fese.eu +3225510189

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Panel discussion

Latest Trends in Eastern Funds Distribution

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F ide lity Worldwide Inve stme nt

April 2013

Adam Lessing Head of Austria and Eastern Europe

§ Founded in 1969, serving institutional clients for over 40 years § Investment Management is our only business § Fundamental research is the foundation of our investments § The company is privately held, majority owned by the managers who run it, and

• ur chairman Ned Johnson, and his family have been the single largest

shareholders since inception § We have built our business slowly and steadily through organic growth so our culture has remained strong and our business franchise stable

F ide lity Wor ldwide Inve stme nt is a Pr ivate Company: Its only Busine ss is Asse t Manage me nt

Our interests and our clients’ interests are well aligned

Source: Fidelity Worldwide Investment (FIL Limited) 45

Singapore Sydney Hong Kong Taipei Shanghai Tokyo Seoul Mumbai Delhi Dalian

F ide lity Wor ldwide Inve stme nt

Glo b a l re se a rc h re so urc e s

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71 Portfolio Managers 68 Equity Research 37 Fixed Income Research** 11 Other Research***

Pan Europe and Americas

10 Portfolio Managers 25 Equity Research

Japan

24 Portfolio Managers 42 Equity Research 11 Fixed Income Research**

Asia Pacific (ex Japan)

Emerging Markets 375 Total Investment Professionals 105 Portfolio Managers 194 Research Professionals* 26 Traders (ex Fixed Income) 28 Divisional Management 22 Equity Research Support Global Europe United Kingdom United States Sector and Country

London Frankfurt Milan Paris Sao Paulo *Research Professional numbers include fixed income analysts and equity (including technical and shorting) analysts. **Fixed Income Research includes quantitative and credit analysts and traders. ***Other Research includes real estate, multi-manager, quantitative and derivatives experts. Portfolio Managers include equity, fixed income, real estate and multi-manager teams. Source: FIL Limited. 31 December 2012. Data is unaudited.

F ide lity Wor ldwide Inve stme nt

E a ste rn E uro pe Pre se nc e

§Warsaw §Vienna §Prague §Budapest §Bratislava

§Sales and marketing

• ffice Vienna

§Sales office Warsaw §Funds registered in Czech Republic, Slovak Republic and Hungary §Fund Platform FFB in Germany §Fund Platform FFB

• pening in Austria (Q3,

2013)

§Kronberg §

Source: Fidelity Worldwide Investment (FIL Limited) as at 31.3.2013

F ide lity Offe r s a Wide Range of Inve stme nt F unds Ac r

• ss

all Asse t Classe s

8 Global Eq.Fds. 18 Eur. Eq.Fds. 4 America Fds. 2 Asian Bd Fds. 6 Target Fds 2 Property Fds. 2 EM Bd Fds. 11 Bal. Fds 3 € Bd Fds. 4 High Yld Fds 3 Japan Fds. 19 Asia Fds. 6 Int‘l Fds. 7 Cash Funds

E quitie s E quitie s E quitie s E quitie s

F ixe d Inc ome and Cash

FF Global Real Assets FF Euro Blue Chip FF China Consumer FF US High Yield

Source: FIL 30.6.2012

FF European Growth

Balanc e d

L

• c al We b and Mar

ke ting Suppor t ar e Ke y

Source: Fidelity Worldwide Investment (FIL Limited)

Impor tant Infor mation

This material is intended for investment professionals and must not be relied upon by private investors. This communication is not directed at, and must not be acted upon by persons inside the United States and is otherwise only directed at persons residing in jurisdictions where the relevant funds are authorised for distribution or where no such authorisation is required. These figures reflect the resources of FIL Limited and its subsidiaries, and FMR LLC and its subsidiaries. FIL Limited and FMR LLC are separate companies with some shareholders in common. Source: FIL and FMR LLC. April 2013. Data is unaudited. Research professionals include associates, analysts, country and sector managers who retain research responsibility and technical & quantitative analysts who are part of the research groups. Assets and resources as of 31/12/2012 are those of FIL Limited. Data is unaudited. Issued by FIL (Luxembourg) S.A., 2a rue Albert Borschette, 1021 Luxembourg, Luxembourg. Fidelity Worldwide Investment only gives information on its products and does not provide investment advice based

• n individual circumstances. Any service, security, investment, fund or product outlined may not be available to or suitable for you and may not be available in your
• jurisdiction. It is your responsibility to ensure that any service, security, investment, fund or product outlined is available in your jurisdiction before any approach is

made regarding that service, security, investment, fund or product. The document may not be reproduced or circulated without prior permission and must not be passed to private investors. All views expressed are those of Fidelity Worldwide Investment. Fidelity, Fidelity Worldwide Investment and the Fidelity Worldwide Investment logo and currency F symbol are trademarks of FIL Limited. Fidelity/Fidelity International means FIL Limited (FIL) and its subsidiary companies. Investments should be made only on the basis of the current Key Investor Information Document (KIID), current prospectus, the annual report and – if published later – the last semi-annual report. They are available along with the current annual and semi-annual reports free of charge from our distributors, from our European Service Centre in Luxembourg, FIL (Luxembourg) S.A., 2a rue Borschette, 1021 Luxembourg your financial advisor, or, for Slovakia from our representative, UniCredit Bank Slovakia, a.s., with its registered office at Sancova 1/a, 813 33 Bratislava, for Czech Republic from our representative Unicredit Bank Czech Republic, a.s., Zeletavska 1525/1, 140 92 Prag 4 – Michle, or for Hungary from our distributor Raiffeisen Bank Zrt., Akademia u. 6, 1054 Budapest. Except for the KIID these documents are in English. Documents include the fund rules and further information regarding the incorporation of the UCITs. Further information regarding the nature of the risk for this fund would be available at the following web pages: For Czech Republic: www.fidelity.cz , for Hungary: www.fidelity.co.hu, for Slovakia: www.fidelity.sk. MKAT1749

Investiční společnost České spořitelny, a.s.

Member of Erste Asset Management GmbH

ISČS Company Presentation 26.04.2013 - Page 52

EAM - leading asset manager in CEE region

§ Core competence: mutual fund’s and individual mandates asset management § EAM’s oldest subsidiary ERSTE-SPARINVEST KAG was founded in Austria in 1965 § Erste Asset Management Group (EAM) has EUR 47 bn. AuM § EAM has 290 employees, thereof 85 investment professionals § Number 1 in Austria, Romania § Number 2 in Czech Republic, Croatia, Serbia § Number 3 in Hungary, Slovakia § ERSTE-SPARINVEST KAG is GIPS certified since 2003 § Strong partner Erste Bank (market leader in AUT, CZ, RO, SK, serves 17 million clients, employs around 50,000 people and operates 3,100 branches in 8 countries)

<Erste Asset Management GmbH> 26.04.2013 - page 53

Organizational chart of Erste Asset Management

Erste Asset Management GmbH is owned 100% by Erste Group Bank AG

portfolio unit

International provider with local anchoring

From a personal point of view, would you invest into mutual funds?

• 1. Yes, I have already invested into mutual funds.
• 2. No, but why not in the future.
• 3. Yes, but I won’t do it again.
• 4. No and I’ll never invest in those products.

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Should you invest into mutual funds, what would you primarily look at?

• 1. The brand / reputation of the Investment Manager.
• 2. The fund’s strategy / Theme.
• 3. The risks related to investment policy.
• 4. The costs.

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Investors and products in the area

• f mutual funds

Martin Rezac, CFA Erste Asset Management

Funds / GDP

Source: IMF, EFAMA, local associations of fund management companies

Funds / Capita (in EUR)

Source: IMF, EFAMA, local associations of fund management companies

Asset Class Mix of Fund Markets

Source: local associations of fund management companies

Banking Development in Transformation Economies

Source: Erste Group

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THANK YOU

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