INVESTMENT OPPORTUNITIES. naslovnica

Transcription

1 INVESTMENT OPPORTUNITIES naslovnica 1

2 INVESTMENT OPPORTUNITIES Several factors that make Slovenia interesting ź ź ź Current account surplus Slovenia is an export-oriented economy (EU accounts for 69.1% of Slovenian exports) The Slovenian banking sector is relatively small in size and with regard to its GDP. ź Public debt-to-gdp was at 54.1% of GDP at the end of ź Labour and pension reforms were passed in the Parliament in ź ź ź The Parliament confirmed the introduction of the Golden Fiscal Rule into the Constitution in Good position of Slovenian companies and their brands in the Western Balkans region. Slovenian companies are among the largest investors in individual countries of the Western Balkans. Privatization process of 15 companies (7 of which are listed companies) Companies from different sectors to be privatized: telecommunication, transportation, transportation infrastructure, banking, chemicals, electrical equipment, industrials, food & beverage, health care, etc. Adria Airways d. d. O Aero Celje d. d. O Elan d. o. o O Fotona d. d. r Letrika, d. d. (the sales process has already begun) Adria Airways tehnika d. d. Aerodrom Ljubljana d. d. Cinkarna Celje d. d. Terme Olimia Bazeni Gospodarsko razstavišče d. o. o. r NKBM d. d. r Paloma d. d. Telekom Slovenije d. d. Terme Olimia Bazeni d. d. r Unior d. d. r Žito d. d. 3/58

3 4 SOD-privatization indd 4 8/21/ :56:02 PM

4 INVESTMENT OPPORTUNITIES INDEX INDEX 1 SLOVENIA BRIEF COUNTRY DATA MACROECONOMIC PICTURE CREDIT RATING COUNTRY COMPARISON STRENGTHS CAPITAL MARKETS PRIVATIZATION PROCESS DESCRIPTION OF THE PRIVATIZATION PROCESS PRESENTATION OF SOD PRESENTATION OF OTHER MEMBERS OF THE CONSORTIUM BRIEF COMPANY DETAILS ADRIA AIRWAYS d.d ADRIA AIRWAYS TEHNIKA d.d AERO CELJE d.d AERODROM LJUBLJANA d.d CINKARNA CELJE d.d ELAN d.o.o FOTONA d.d GOSPODARSKO RAZSTAVIŠČE d.o.o LETRIKA d.d NKBM d.d PALOMA d.d TELEKOM SLOVENIJE d.d TERME OLIMIA BAZENI d.d UNIOR d.d ŽITO d.d DISCLOSURE CONTACTS

5 SLOVENIA PRIVATIZATION IN SLOVENIA 1 SLOVENIA 1.1 BRIEF COUNTRY DATA Area: 20,273km2 Capital: Ljubljana Border countries: Italy (West; 199km), Austria (North; 330km), Croatia (South; 455km), Hungary (East; 102km) Coastline: 46.6km Population: 2,060,460 Biggest ethnic groups: Slovene (83.1%), Serb, Croat, Bosniak etc. Average age: 43.1 Life expectancy: 77.7 (74.0 male, 81.5 female) Total fertility rate: 1.32 Currency: EUR Average salary: EUR 1, (gross); EUR (net) GDP: EUR 35,466m (2012 data) GDP per capita: EUR (2012 data) Public debt to GDP: 59.5% (2013 estimate) Credit ratings: Moody Standard & Poor Fitch Ba1 A- BBB+ Negative Stable Negative Political System: Parliamentary Democracy Voting System: Proportional Last parliamentary election: 2011 (next 2015), government change in February 2013 Last presidential election: 2012 (next 2017) Last local election: 2010 (next 2014) Number of municipalities: 212 Key membership: NATO (7 April 2004), European Union (1 May 2004), Eurozone (1 January 2007), OECD (27 May 2010) 6

6 INVESTMENT OPPORTUNITIES SLOVENIA 1.2 MACROECONOMIC PICTURE Data 2012A 2013F 2014F GDP, real growth (in %) GDP, current prices (in EURm) 35,466 35,027 35,455 GDP per capita (in EUR) 17,244 16,982 17,157 Registered unemployment rate (in %) ILO unemployment rate (in %) Gross wage per employee, real growth (in %) Labour productivity, real growth (in %) Participation rate (15 64) Participation rate (65 years and over) Exports of goods and services, real growth (in %) Imports of goods and services, real growth (in %) Current account balance (% of GDP) External balance of goods and services (% of GDP) Total General Government revenues (in EURm) 14,995 Total General Government expenditure (in EURm) 16,118 General Government Deficit (as a % of GDP) Domestic consumption, real growth (in %) As a % of GDP Private consumption, real growth (in %) As a % of GDP Government consumption, real growth (in %) As a % of GDP Gross fixed capital formation, real growth (in %) As a % of GDP Change in inventories, contribution to GDP (in p.p.) Inflation Dec/Dec (in %) Inflation Annual average (in %) Source: Summer Forecast of Economic Trends 2013, Institute of Macroeconomic Analysis and Development (IMAD), Ministry of Finance Slovenian GDP is continuing its downward trend in 2013, as in 1Q13, GDP decreased by 4.8% YoY. This also means a 0.7% QoQ contraction of GDP. One of the reasons for the weak macroeconomic dynamic in the last few years is Slovenia s export-oriented economy, which makes it vulnerable in the event of its main export partners experiencing severe economic strain. The main export partners are Germany (20%), Italy (12%), Austria (8%), Croatia (6%), France (5%) and Russia (5%). The European Union accounts for 69.1% of Slovenian exports. Additionally, as the main export industries are mostly cyclical in nature (manufactured goods, machinery and transport equipment, automobile industry, chemicals etc.), with few exceptions (pharmaceuticals), any economic downturn or weakness is only accentuated. 7

7 SLOVENIA PRIVATIZATION IN SLOVENIA Here we note 2013 Eurozone data numbers are still pointing to a recessionary environment, as 1Q13 data shows a 0.2% decrease in GDP in Eurozone (seasonally adjusted) or 1.1% YoY. 4,3 4,5 5,8 7,0 3,4 GDP Growth in % Slovenia Eurozone 1,2 0,6-0,2-2,3-2,4-7,8 Source: Institute of Macroeconomic Analysis and Development, International Monetary Fund (April World Economic Outlook Database) On the other hand, Slovenia s export exposure can be beneficial in times of recovery, which is clearly seen in economic recovery during 2010 and 2011 of 1.2% and 0.6% respectively, which was mostly based on export strength (annual growth of 10.1% and 7.0%). The OECD and other foreign institutions are also forecasting a gradual rally by late 2013 and in Also, the economies of some non-eu countries are picking up, which are becoming increasingly important to Slovenia (former Soviet Union states, northern Africa and Asia). In addition, it is important to note that despite poor figures, exports continue to be a positive factor in Slovenia s economic activity. Even more so, IMAD revised its expectations upwards for exports in 2013 to 1.8% growth YoY. YoY growth rates (%) 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 Real GDP Private consumption Government exp Gross investments Export Import Source: Institute of Macroeconomic Analysis and Development The second reason for a decline in economic activity was a credit contraction linked to banking system problems. Namely non-performing loans have surged significantly in the last few years, especially in the three biggest Slovenian banks (surpassing 20% and increased by EUR 1.2 bln in 2012), while capital injections were slow and failed to reach targets. Therefore the Slovenian banks balance sheet contracted by 4.5% YoY from the end of January 2012 to the end of January 2013 (after a 2.3% contraction in 2011), 2.4% for households and 8.0% for corporate clients. The contraction continues in This affected investment activity and also negatively contributed to the financial difficulties of companies, already significantly elevated by a high leveraged position, especially in the construction sector and the financial holdings sector. This affected companies ability to invest and recruit. On the other hand, since construction sector activity had already drastically contracted (by more than 80% since 2008), the situation 8

8 INVESTMENT OPPORTUNITIES SLOVENIA here is abating. Here we note that gross fixed capital formation fell less in 1Q13 than in previous quarters, despite a further decline in construction activity. This was a result of increased purchases of equipment abroad related to energy infrastructure. This also supported import data and in turn lowered net exports. Changes in inventories and valuables will again contribute to the decline in GDP according to IMAD, mostly due to very low realization in 1Q13. The third reason for the decrease in GDP, which is the most prevailing during 2013, is a further substantial decline in private household consumption, which is forecast to bottom during 2013 with a 4.2% YoY drop. Here we note private consumption will additionally be hit with a VAT tax rate increase (by 2 p.p. from 20% to 22%; lower tax rate by 1 p.p. from 8.5% to 9.5%), which is in effect from 1 July IMAD states that due to the current adverse economic environment and the accounting experiences of some other countries that have previously increased VAT tax rates, only a limited pass-through into prices has been assumed when predicting household spending. Private consumption is falling due to the ongoing recession, which is affecting purchasing power through lower real wages and sentiment (affecting consumer behaviour). The unemployment rate is also increasing, as the registered unemployment rate stood at 12.0% at the end of 2012 versus 6.7% in Here we must note that Slovenia had a registered unemployment rate of 10.3% in 2004 (followed by quite low unemployment rates) and that this is still relatively low unemployment compared with some other Eurozone countries. On the other hand, despite reforms, labour legislation remains quite rigid, therefore unemployment will most likely persist at these high levels in the next few years. IMAD expects unemployment to rise to 13.6% by Consumption dynamic in % 12,400 10,600 12,500 6,300 2,300 1,300,900,100-2,500-2,900-4, Consumer sentiment sentimate -50 Business climate Source: Institute of Macroeconomic Analysis and Development, SURS Consumer sentiment and the business climate are persisting at low levels and have been in a downward trend over the last three years. However, at the end of 2012 a positive turnover was observed in the business climate. Government fiscal tightening and consolidation is the last puzzle for a slump in GDP. While from 2008 to 2010 government spending replaced some of the demand to support the economy (which made deficit stay around 6%), spiralling debt levels and pressure from capital markets and international institutions forced the Slovenian government to tighten its belt. For 2013, IMAD expects government expenditure will further decrease by 1.7% YoY 9

9 SLOVENIA PRIVATIZATION IN SLOVENIA based on the Stability Programme and Guidelines for Drafting the Revised Budget for Namely spending on public employees should decline by 5.4% in nominal terms, as wages were cut and workforces reduced. Nevertheless in 2013 the budget will be substantially affected by the bank recapitalization scheme, as in 1Q13 the budget deficit was at 10.4% of GDP due to 3.9% conversion of hybrid debt into equity for NLB. On the other hand, even without the bank issue, the budget deficit would be at a high 6.5% of GDP according to the Bank of Slovenia, most likely due to the recessionary environment impacting revenues (-6.0% YoY in January-April period). However, in 2012 and additionally in 2013, several public cost-cutting measures were agreed and implemented. The government budget deficit goal stands at 4.4% of GDP, or at EUR 1,547m, with EUR 1,200m envisioned for the bank recapitalization scheme , ,805-1,043-1,230-1,270-1,447-1,300-1,311 -, , ,553-5,278-6, Government Deficit/Surplus in % of GDP -8 Current account balance in % of GDP Source: Institute of Macroeconomic Analysis and Development, International Monetary Fund (April World Economic Outlook Database) For 2014, IMAD expects to see a continued decline in GDP level, although less pronounced. Additionally, fixed capital formation should again positively contribute to GDP growth (but only assuming the banking sector stabilizes during 2013 through the BAMC scheme), although not enough to compensate poor consumer figures. Consumer spending will be impacted by the high tax burden implemented by the government in order to improve the fiscal situation. Overall improvement in economic activity is also tied to improvement in the regional economic environment (trading partners) currently envisioned by most analysts. Inflation rates increased in recent years from 0.9% in 2009 to 2.6% in Core inflation was and will be subdued as a result of weak economic activity and also by low pressure on commodity prices. On the other hand, there will be some pressure on prices due to the higher VAT tax rate and introduction of some new taxes (tax on sugary drinks, higher environmental taxes and a higher radio-television subscription fee). On a positive note, Slovenia had a current account surplus in 2012, which should persist in the coming years. This is mainly a consequence of corporate deleveraging and limited access to financing due to adverse banking conditions. In particular this is affecting the surplus of gross savings over gross investment. IMAD expects the current account surplus to widen in 2013 and 2014 due to the faster growth rate of exports compared to the growth of imports. 10

10 INVESTMENT OPPORTUNITIES SLOVENIA 1.3 CREDIT RATING Moody s S&P Fitch Aaa AAA AAA Prime Aa1 AA+ AA+ Aa2 (before 2009) AA (before 2009) AA (before 2009) High Grade Aa3 (23 September 2011) AA- (19 October2011) AA- (28 September 2011) A1 (12 December 2011) A+ (13 January 2012) A+ Upper A2 (13 February 2012) A (3 August 2012) A (27 January 2012) Medium A- (12 February 2013) A3 A- (8 August 2012) Grade A- (26 July 2013) Baa1 BBB+ BBB+ (17 May 2013) Lower Baa2 (2 August 2012) BBB BBB Medium Baa3 BBB- BBB- Grade Ba1 (30 April 2013) BB+ BB+ Non-investment Ba2 BB BB grade Ba3 BB- BB- speculative B1 B+ B+ Highly B2 B B speculative B3 B- B- Caa1 CCC+ Caa2 CCC Substantial risks Caa3 CCC- CCC CC Extremely Ca C speculative DDD C D DD In default D Source: Bloomberg (26 July 2013) S&P downgraded Slovenia in August 2012 from A+ to A, while Moody followed with a downgrade from A2 to Baa2 and Fitch by a downgrade from A to A-. The downgrades mostly reflect weak economic activity (internal and external) and banking sector problems. During 2013, S&P further downgraded Slovenia to A- due to the likelihood of an increased debt burden (to around 60%) in order to recapitalize the banking sector and due to uncertain growth prospects. On 26 July 2013, S&P confirmed Slovenia s long-term credit rating at A- and said that the outlook remains stable due to expectations that the government will continue fiscal consolidation and restructuring of the banking system. Fitch Ratings noted in March 2013 that although the formation of the new government reduced short-term risk, the new administration will face several tough challenges, linked in particular to the recapitalization of banks and fiscal consolidation. Here Fitch noted that failure to implement the bank recapitalization and BAMC scheme in a timely manner will result in a fresh wave of downgrades and prevent Slovenia from taping the bond market on reasonable terms. On the other hand, in spring 2013 Fitch was still of the opinion that international financing assistance could be avoided (and is therefore not their base case scenario). 11

11 SLOVENIA PRIVATIZATION IN SLOVENIA 1.4 COUNTRY COMPARISON 2012 data: GDP growth Source: IMF (April World Economic Outlook Database) Inflation CA Balance /GDP Unemployment Budget deficit /GDP Austria 0.8% 2.6% 2.0% 4.4% -2.5% 73.7% Belgium -0.2% 2.6% -0.5% 7.3% -4.0% 99.6% Cyprus -2.4% n.a. -4.9% 12.1% -5.6% 86.2% Estonia 3.2% 4.2% -1.2% 9.8% -0.2% 8.5% Finland -0.2% 3.2% -1.7% 7.7% -1.7% 53.3% France 0.0% 2.0% -2.4% 10.2% -4.6% 90.3% Germany 0.9% 2.1% 7.0% 5.5% 0.2% 82.0% Greece -6.4% 1.0% -2.9% 24.2% -6.4% 158.5% Ireland 0.9% 1.9% 4.9% 14.7% -7.7% 117.1% Italy -2.4% 3.3% -0.5% 10.6% -3.0% 127.0% Luxembourg 0.1% 2.9% 6.0% 6.0% -1.9% 21.1% Malta 0.8% 3.2% 0.3% 6.3% -3.0% 72.5% Netherlands -0.9% 2.8% 8.3% 5.3% -4.1% 71.7% Portugal -3.2% 2.8% -1.5% 15.7% -4.9% 123.0% Slovak Republic 2.0% 3.7% 2.3% 14.0% -4.9% 52.3% Slovenia -2.3% 2.6% 2.3% 9.0% -3.2% 52.6% Spain -1.4% 2.4% -1.1% 25.0% -10.3% 84.1% Debt /GDP 2013 data: GDP growth Inflation Source: IMF (April World Economic Outlook Database) Source: IMF (April World Economic Outlook Database) CA Balance /GDP Unemployment Budget deficit /GDP Austria 0.8% 2.2% 2.2% 4.6% -2.2% 74.2% Belgium 0.2% 1.7% -0.1% 8.0% -2.6% 100.3% Cyprus n.a. n.a. n.a. n.a. n.a. n.a. Estonia 3.0% 3.2% 0.0% 7.8% 0.4% 9.7% Finland 0.5% 2.9% -1.7% 8.1% -2.0% 56.9% France -0.1% 1.6% -1.3% 11.2% -3.7% 92.7% Germany 0.6% 1.6% 6.1% 5.7% -0.3% 80.4% Greece -4.2% -0.8% -0.3% 27.0% -4.6% 179.5% Ireland 1.1% 1.3% 3.4% 14.2% -7.5% 122.0% Italy -1.5% 2.0% 0.3% 12.0% -2.6% 130.6% Luxembourg 0.1% 1.9% 6.6% 6.3% -1.0% 23.3% Malta 1.3% 2.4% 0.5% 6.4% -2.9% 73.3% Netherlands -0.5% 2.8% 8.7% 6.3% -3.4% 74.5% Portugal -2.3% 0.7% 0.1% 18.3% -5.5% 122.3% Slovak Republic 1.4% 1.9% 2.2% 14.3% -3.2% 55.3% Slovenia -2.0% 1.8% 2.7% 9.8% -6.9% 68.8% Spain -1.6% 1.9% 1.1% 27.0% -6.6% 91.8% Debt /GDP 12

12 INVESTMENT OPPORTUNITIES SLOVENIA 2012 Budget Deficit in % 9,00 8,00 7,00 6,00 5,00 4,00 3,00 2,00 1,00,00 Estonia Luxembourg Slovenia Slovakia Finland Spain Netherlands Austria Malta Cyprus Germany France Belgium Ireland Portugal Italy Greece Debt to GDP in % Source: Eurostat ( While the data and IMF forecasts clearly show that the main weaknesses in Slovenian macro data lie in the belowaverage GDP dynamic that is persisting in 2013 (and even 2014), the main strengths (especially toward problematic Eurozone countries) are current account surplus, still solid GDP to debt levels and even relatively acceptable unemployment rates. In particular, the unemployment rate is substantially higher than in core healthy economies like Austria and Germany, but on the other hand significantly lower than in Spain or even Ireland. We note that budget deficit is another source of weakness in 2013, but tied to the banking recapitalization process. The government is also endeavouring to enforce fiscal consolidation in ,00 Estonia 2012 GDP growth 2,00,00-2,00-4,00 Slovak Republic Germany Austria Malta Ireland Belgium France Luxembourg Netherlands Finland ItalyCyprus Portugal Slovenia Spain -6,00 Greece -8,00,00 5,00 10,00 15,00 20,00 25,00 30, Unemployment rate Source: IMF (April World Economic Outlook Database) 13

13 SLOVENIA PRIVATIZATION IN SLOVENIA 1.5 STRENGTHS There are several factors that make Slovenia interesting: Current account surplus and other characteristics of the export sector (regression between industry export orientation and industry NPLs) clearly show that the Slovenian export sector is the healthiest sector of the economy and continues to be competitive. This means there are no current account imbalances to additionally complicate the situation and solutions. Current account balance in 2012 (% GDP) 4,9 6,0 7,0 8,3 0,3 2,0 2,3 2,3-4,9-2,9-2,4-1,7-1,5-1,2-1,1-0,5-0,5 Source: IMF (April World Economic Outlook Database) Slovenia is an export-oriented economy, with the main export partners being Germany (20%), Italy (12%), Austria (8%), Croatia (6%), France (5%) and Russia (5%). The European Union accounts for 69.1% of Slovenian exports. Currently, international institutions are experiencing a pickup of economic activity in Eurozone for 2014 and 2015, which should benefit the Slovenian economy in its recovery as well. The Slovenian banking sector is relatively small in size (due to the size of the country) and relative to its GDP. Total assets to GDP at the end of 2012 were at 130% of GDP (EUR 46 bln / EUR 35 bln). By way of comparison, the same ratio for Spain was 350% and for Cyprus 700%. Deposits to GDP are at 0.7. All of this implies that the scale of the problem with the banking system is quite low compared to other Eurozone problems. Here we note that the BAMC scheme is continuing during 2013, so we can hope that the brunt of the banking problem should be resolved in one year s time. Debt to GDP was at 54.1% of GDP at the end of This is still a quite low number relative to other Eurozone countries. Even if we were to add an additional 15% of GDP to this number (based on EUR 1.2 bln government budget specified for bank recapitalization and EUR 4.0 bln of toxic assets transferred to BAMC in exchange for publicly guaranteed bonds of BAMC), 6.5% of the budget deficit for 2013 (extraction of 1Q13 number by IMAD) and a 2.4% drop in GDP (IMAD forecast), Slovenia s debt to GDP would stand at 76%. We note that although this (level and especially dynamic) is a cause for concern, it s still a lower ratio than Germany s. This means Slovenia has the reassurance of redressing the banking system without overleveraging itself, and therefore a chance to get back on the right track. 14

14 INVESTMENT OPPORTUNITIES Graf na str. 15 8,5 21,1 SLOVENIA General government gross debt for 2012 (% GDP) 158,5 52,3 52,6 53,3 71,7 72,5 73,7 82,0 84,1 86,2 90,3 99,6 117,1 123,0 127,0 Source: IMF (April World Economic Outlook Database) Some very constructive changes were passed in parliament in the last year. Labour and pension reforms were passed in 2012 and are steps in the right direction. Even more importantly, parliament confirmed the introduction of a golden fiscal law into constitution in 2013, as well as changing referendum legislature. With this, referendums will become rarer and harder to use to block necessary (but sometimes painful) reforms. Slovenia was, before 1991, a part of Yugoslavia. The regional proximity of Ex-Yugoslavian countries, geographic location of Slovenia, better knowledge of the region, language and its economy, better market position and perception of some Slovenian brands make Slovenia (and its companies) an ideal first stepping stone into the West Balkan region. Here it is important to emphasize that most Ex-Yugoslavian countries are going through conversion processes in terms of the European Union and economic development, therefore the long-term growth potential is substantial. Slovenia s location is also an advantage, as it links West & East and North & South. Privatization process. The Slovenian government has direct or indirect stakes in several large and mediumsized companies. On 31 December 2012, AUKN reported that the government holds EUR 9,200m of assets based on book valuation on the same date. Industry Book value on 31 December 2012 Energy 3,316,726,433 Transport & Infrastructure 2,808,832,172 Special purpose companies 1,426,390,114 Telecommunications & Post service 754,780,012 Finance 732,986,046 Portfolio investments 123,980,839 Other 35,960,148 The scale of government assets means that it can reduce the burden of bank recapitalization through divestments and lower the debt to GDP ratio, and with it its interest burden. The current government has already created a list of 15 companies to be on a priority list for privatization. The list was passed through parliament on 21 June

15 SLOVENIA PRIVATIZATION IN SLOVENIA 1.6 CAPITAL MARKETS The regulated capital market is Ljubljana Stock Exchange ( with the following market structure for shares: Prime Market, Standard Market, and Entry Market. Through the Ljubljana Stock Exchange (member of CEE Stock Exchange Group) investors can also trade other securities, such as bonds, open and close end funds, structured products etc. Market Turnover in Market Cap. in Number of issues EUR 000 EUR 000 Equity 21,795 4,804, Bonds 4,952 12,254, Investment coupons 91 15,776 1 Treasuries 0-11 Commercial paper Total 26,940 17,075, Source: LJSE ( ) In the last decade, the equity market dynamic was quite extreme, with a significant surge in prices of most equity names from 2006 to 2007 (main domestic equity index SBI TOP returns in these years were 56.6% and 71.0% respectively) and a significant downtrend from 2008 onwards. In 2008, SBI TOP lost 66.1% and despite recovering in mid 2009, the negative trend persisted in the following years. There were several reasons for the divergence from global capital markets in 2009 to 2012: Very high valuation of SBI TOP index and most members before the market crash. Poor macroeconomic data and deterioration of macroeconomic forecasts in the period. Weak EPS dynamic of most Slovenian blue chip companies. Low market liquidity, as financial liquidity drained and especially leveraged positions were hard to refinance. In late 2012 and 2013 we saw a bottoming of SBI TOP, mostly due to low valuations caused by a stock price slumps in previous years and due to privatization process speculations. These emerged in autumn 2012 and again in spring 2013, when a new government promised and delivered a list of 15 names on a priority privatization list SBI TOP MSCI World mar/09 sep/09 mar/10 sep/10 mar/11 sep/11 mar/12 sep/12 mar/13 Source: Bloomberg (23 July 2013) 16

16 INVESTMENT OPPORTUNITIES SLOVENIA Current trailing P/E for SBI TOP is still negative, but this is due to NKBM and Mercator high loss. On the other side of the spectrum, several blue chip companies trade below or around P/E 10 and can be considered relatively cheap. The P/B ratio for SBI TOP is at 0.79, while market capitalization to GDP for Slovenia stands at only 13.8%, considerably below all Western and Central European stock exchanges and most East and South stock exchanges. Primary market operations are scarce and mostly involve capital injections into distressed companies or banks (NKBM). However, in 2013 there was a heavily over-subscribed EUR 55m capital increase into Sava RE to acquire the stake in Zavarovalnica Maribor, where local and international investors targeted by Alta subscribed to EUR 93m of new shares of Sava RE. Company Industry P/E EV/EBITDA P/B Gorenje Appliances neg Intereuropa Logistics neg Krka Pharmaceuticals Luka Koper Port services Mercator Retail neg NKBM Banks neg. n.m Petrol Oil&Gas Sava RE Insurance 8.0 n.m Telekom Slovenije Telecommunication Zavarovalnica Triglav Insurance 5.6 n.m Source: ALTA Invest calculations (23 July 2013, trailing data) The Fixed Income market for corporate has become more active, which is a direct consequence of the banking sector struggling to meet corporate demand for refinancing/financing. Company Ticker Maturity Maturity Date Yield to Maturity Petrol d.d. PEK03 6 months 23 September % Gorenje GRV01 8 months 20 December % Mercator d.d. MEL07 5 months 20 December % Gen-I d.d. GEN01 1 year 10 February % Petrol d.d. PET1 5 years 29 June % Petrol d.d. PET2 5 years 20 December % Telekom Slovenije d.d. TLSG 5 years 21 December % Petrol d.d. PET3 5 years 7 December % Source: ALTA Invest calculations (24 July 2013) As for Slovenian Government bonds, they have been under pressure in the last few years due to credit rating downgrades and the Eurozone peripheral debt crisis. In the last few years, the spread between Spanish 10YR bond has widened severely Slovenia 10YR Spain 10YR % sep/09 mar/10 sep/10 mar/11 sep/11 mar/12 sep/12 mar/13 Source: Bloomberg (23 July 2013) 17

17 PRIVATIZATION PROCESS PRIVATIZATION IN SLOVENIA 2 PRIVATIZATION PROCESS 2.1 DESCRIPTION OF THE PRIVATIZATION PROCESS On its 9th regular meeting on 9 May 2013, the Slovenian Government adopted the National Reform Programme , the Stability Programme Update 2013 and the wording of the decision of the National Assembly s consent for the disposal of investments of the Republic of Slovenija, Kapitalska družba pokojninskega in invalidskega zavarovanja, d. d., Slovenska odškodninska družba, d. d., Modra zavarovalnica, d. d., DSU, družba za svetovanje in upravljanje, d. o. o., and Posebna družbe za podjetniško svetovanje, d. d. The wording included the list of companies where the abovementioned entities could proceed with divestment processes. The companies were grouped into two clusters. The first cluster includes companies for which the divestment process has already begun: Adria Airways d. d., Aero Celje d. d., Elan d. o. o., Fotona d. d. and Helios d. d. The second cluster consists of companies where the divestment procedure has not yet begun: Adria Airways tehnika d. d., Aerodrom Ljubljana d. d., Cinkarna Celje d. d., Gospodarsko razstavišče d. o. o., NKBM d. d., Paloma d. d., Telekom Slovenije d. d., Terme Olimie Bazeni d. d, Unior d.d. and Žito d. d. The consent to privatize the abovementioned companies by the abovementioned state entities was given by the National Assembly on 21 June 2013 on the basis of the tenth and twelfth paragraphs of Article 38 of the Slovenian National Holding Company (Official Gazette of RS, no. 105/12 and 39/13) and on the basis of Article 112 of the Rules of the National Assembly (Official Gazette of RS, no. 92/07 official consolidated text and 105/10). For the purpose of this document, Helios d. d. company will not be included in chapter 3 (brief company details), as it is in the late stages of the sale process. Instead, Letrika d. d. was added to the document, as state entities have a significant ownership in the company. ADDITIONAL KEY FACTS: The time period for privatization is not currently set or specified. According to Slovenian takeover legislature, the threshold for mandatory takeover announcements and bids is 33%. The lead contact entity and the lead seller in the consortium is the state entity that holds the biggest stake in the company. There is a possibility that other companies and/or funds will be joining the state privatization (sale) process, especially in case of state involvement in ownership of that company/state. In some instances, agreements for joint sale are already in effect. In some instances, companies are seeking a capital increase and the privatization process is likely to go hand in hand with the capital injection process. In some instances, the sale processes already started. 18

18 INVESTMENT OPPORTUNITIES PRIVATIZATION PROCESS 2.2 PRESENTATION OF SOD Name: Slovenska odškodninska družba, d. d. Address: Mala ulica 5, 1000 Ljubljana, Slovenia Registration number: VAT registration number: SI Legal status: public limited company Telephone number: General address: Web page: Slovenska odškodninska družba d.d. (SOD) is a public limited company entirely owned by the Republic of Slovenia and was established pursuant to the Slovene Compensation Fund Act. It is a financial organization for settling obligations to beneficiaries according to the Denationalization Act and other regulations regulating the denationalization of assets. It subsequently extended its activities to the settlement of obligations according to the Act Regulating the Issuing of Bonds in Compensation for Confiscated Property pursuant to the Abrogation of the Penalty of Confiscation of Property, the Payment of Compensation to the Victims of War and Postwar Aggression Act, and the Return of Investments in the Public Telecommunications Network Act. On the basis of the Slovenia Sovereign Holding Act (SSH), SOD took over the management of Republic of Slovenia capital investments on 28 December 2012 that had been carried out by this Agency up to the abolition of the Capital Assets Management Agency of the Republic of Slovenia. The company s management is represented by: Tomaž Kuntarič MSc, President of the Management Board Matej Runjak, Member of the Management Board Matej Pirc, Member of the Management Board 2.3 PRESENTATION OF OTHER MEMBERS OF THE CONSORTIUM Name: Kapitalska družba pokojninskega in invalidskega zavarovanja, d. d. Address: Dunajska cesta 119, 1000 Ljubljana, Slovenia Registration number: VAT registration number: SI Legal status: public limited company Telephone number: General address: info.kad@kapitalska-druzba.si Web page: Kapitalska družba pokojninskega in invalidskega zavarovanja, d.d., is a public limited company wholly owned by the Republic of Slovenia and established in The main activity of Kapitalska družba, d. d. is the provision of additional funds for pension and disability insurance by management of its own assets and management of Sklad obveznega dodatnega pokojninskega zavarovanja (The compulsory supplementary pension insurance fund). It will also continue to manage and maximize the assets in order to provide additional funds to the ZPIZ (Pension and Disability Insurance Institute of Slovenia). 19

19 PRIVATIZATION PROCESS PRIVATIZATION IN SLOVENIA Name: Modra Zavarovalnica, d. d. Address: Dunajska cesta 119, 1000 Ljubljana, Slovenia Registration number: VAT registration number: SI Legal status: public limited company Telephone number: General address: info@modra-zavarovalnica.si Web page: Modra Zavarovalnica d. d. is organized as a limited company whose founder and sole shareholder is Kapitalska družba pokojninskega in invalidskega zavarovanja, d.d. At the time it was established in October 2011, the insurance company took over the management of the closed-end mutual pension fund for civil servants (ZVPSJU) Capital Mutual Pension Fund (KVPS), First Pension Fund RS (PPS) and PPS Guarantee Fund (KS PPS). It has EUR 152.2m of share capital to ensure a stable guarantee for its long-term pension obligations. In addition to managing mutual funds, Modra Zavarovalnica d.d. offers a wide range of competitive supplementary pensions (annuities). Name: DSU, družba za svetovanje in upravljanje, d.o.o. Address: Dunajska cesta 160, 1000 Ljubljana, Slovenia Registration number: VAT registration number: SI Legal status: limited company Telephone number: General address: info@dsu.si Web page: DSU, družbe za svetovanje in upravljanje, d.o.o., is a limited company wholly owned by the Republic of Slovenia and founded in DSU is now primarily engaged in the acquisition and management of property and assets where the process of denationalization is still unresolved, and in managing liquidation activities. The assets it owns are largely insolvent and usually connected with large-scale litigation process. By law, all proceeds from sold assets must be paid into the state budget. Name: PDP, Special Company for Corporate Advisory, Inc. Address: Dunajska cesta 160, 1000 Ljubljana, Slovenia Registration number: VAT registration number: SI Legal status: public limited company Telephone number: General address: info@pdp.si Web page: PDP, Special Company for Corporate Advisory, Inc. is a financial holding established in May 2009 by three stateowned funds (Kapitalska družba, d. d., Slovenska odškodninska družba, d. d. and DSU, d. o. o.). In December 2009, these funds increased the capital of PDP with the shares and stakes of 10 Slovenian companies (EUR 66.8m) which were previously held in their portfolios. PDP actively manages its portfolio through corporate governance processes. It also offers and performs services in the field of corporate law and corporate valuation. 20

20 INVESTMENT OPPORTUNITIES BRIEF COMPANY DETAILS 3 BRIEF COMPANY DETAILS 3.1 ADRIA AIRWAYS d.d. BRIEF COMPANY DESCRIPTION Address: Zgornji Brnik 130 h, 4210 Brnik Aerodrom Web address: Management Board: Mark Anžur (President & CEO) Adria Airways was established in 1961 and has more than fifty years of experience in air transportation of passengers and cargo. Adria Airways is an airline registered in the Republic of Slovenia and offering charter and scheduled flight services. The carrier connects Slovenia to numerous European cities, and offers good connections especially between Southeast Europe and Central and West Europe through Ljubljana Airport hub. Adria Airways is also a Star Alliance member and as such provides access to a global network of flights to 193 countries. The company has its registered office at Ljubljana Jože Pučnik Airport, representation offices in Brussels, Frankfurt, Moscow and Zurich, and sales agencies in almost all European countries. The sales structure is as follows: Chartered flight 14% Other 16% Passengers - other; 20% Cargo - regular; 1% Other; 5% KEY DATA (in EUR 000) Scheduled flight 70% Passengers - regular; 74% Sales revenues 149, , ,094.6 EBITDA -47, , EBITDA margin -31.8% -4.8% -0.3% EBIT -59, , ,101.0 EBIT margin -39.9% -10.2% -5.5% Net income/loss -63, , ,800.9 Net margin -42.1% -8.0% -7.3% Total Assets 101, , ,164.0 Total Equity -37, , ,488.0 Financial debt 89, , ,526.0 Net financial debt 88, , ,818.0 Assets Turnover Return on Assets -62.4% -12.6% -13.5% Equity multiplier Return on Equity n/a -53.8% -86.5% Number of employees No. of passengers 1,170,235 1,163, ,279 Number of flights 25,124 24,480 20,863 More information: 21

21 BRIEF COMPANY DETAILS PRIVATIZATION IN SLOVENIA As is the case for a lot of other European carriers, Adria Airways results have been under pressure due to unfavourable FX effects, high fuel prices and the poor macroeconomic climate. In 2011, the company embarked on a restructuring process and although results remained negative and turnaround was not as fast as planned, the bottom line result in 2012 improved significantly with net loss narrowing. STRATEGY & PLANS The company will continue to pursue restructuring activities, which include mainly reducing costs and increasing passenger numbers. In addition to aircraft utilization and load factor improvement, which will be achieved also through the future introduction of new flight destinations, Adria will also focus on marketing and pricing and strive to remain competitive. The management is expecting that projected macroeconomic conditions and operational changes should lead to positive operational results and net income breakeven point. KEY FACTS Adria Airways is a well-established carrier, and a Star Alliance member with a strong brand and a wellestablished passenger base. The carrier has key slots on the main European airports: Frankfurt, Zurich, Munich, Vienna, Brussels, Paris and Amsterdam. The small but flexible fleet includes one Airbus A320, two Airbus A319 aircraft, four Bombardier CRJ900 aircraft and five Bombardier CRJ200 aircraft. Results are indicating that the restructuring programme has been successful and will lead to positive results in the near future. Also past results, peer comparison and the restructuring programme show that there are opportunities for cost and revenue optimization in order to improve future results. TOP 10 SHAREHOLDER STRUCTURE (23 July 2013) Shareholder name Number of shares Stake Republika Slovenija 2,475, % NLB d.d. 695, % Abanka d.d. 167, % PDP, d.d. 73, % Hypo Bank D.D. 64, % Unicredit Banka Slovenije d.d. 62, % Palma, d.o.o., Celje 1, % Kompas d.d. 1, % Infond d.o.o., PE Infond Global % Marn Peter % Additionally Modra Zavarovalnica d.d. PPS has 163 shares in Adria Airways. The company has 3,542,445 shares with ticker AARG. It s not listed on LJSE. 22

22 INVESTMENT OPPORTUNITIES BRIEF COMPANY DETAILS 3.2 ADRIA AIRWAYS TEHNIKA d.d. BRIEF COMPANY DESCRIPTION Address: Zgornji Brnik 130H, 4210 Brnik Web address: Management Board: Maksimiljan Pele (CEO), Branka Jerše (Executive Office) Adria Airways Tehnika is maintenance, repair and overhaul (MRO) company with a 50-year history. It was a division of Adria Airways until June 2010, when the company was spun off into an independent daughter company. The company is not only the base maintenance provider for Adria Airways, but also to SAS, Wizzair, Air Méditerranée, Afriqiyah Airways, Spanair, Germanwings and many others. Among its customers are SAS, Lufthansa, Britair, Air One, Belair, Eurowings, Bombardier, Air India-Alliance Air, Austrian, UTAir, SCAT The company is the maintenance facility for Bombardier CRJ100/200/700/900 and works in partnership with Air France Industries on A&C checks on the A320 family. Sales structure: Domestic (Adria Airways) 53% Foreign 47% Workshop and outsourcing 6% Line maintenance 18% Engineering 9% Other 2% Base maintenance 65% KEY DATA (in EUR 000) Sales revenues * 10, , ,022.0 EBITDA EBITDA margin -3.7% -3.5% -0.9% EBIT -5, , EBIT margin -52.9% -18.5% -5.1% Net income/loss -5, , ,106.0 Net margin -50.4% -19.1% -6.9% Total Assets 12, , ,874.0 Total Equity 9, , ,058.0 Financial debt 0.0 4, ,748.3 Net debt 0.0 4, ,628.2 Assets Turnover Return on Assets -40.6% -26.2% -6.6% Equity multiplier Return on Equity -53.0% -85.7% -27.3% Number of employees Revenues from Adria Airways 5, , ,556.9 Number of projects *Revenue from June December 2010 (7 months) 23

23 BRIEF COMPANY DETAILS PRIVATIZATION IN SLOVENIA After strong revenue growth in 2011, 2012 sales results were again under pressure. In 2010, Adria Airways Tehnika ramped up their marketing activities and as a result signed a contract with Spanair. Since the Spanish carrier became the second largest customer in 2011 (35% of revenues), Spainair s bankruptcy in 2012 was the main reason for the slump in revenues. Although Adria Airways Tehnika has embarked on a restructuring process and tried to lower costs, it was impossible to offset extraordinary events which led to 18% lower sales than forecast. STRATEGY & PLANS For 2013, the company is expecting to increase sales by 14% to EUR 18.5m. Adria Airways Tehnika will continue to pursue strong marketing activities and replace lost business by signing contracts with SAS, Air Berlin, Wizz Air, Belair and others. Additionally, Adria Airways Tehnika will further adjust to a difficult environment by tightening costs, which are expected to increase only by 5% YoY. Accordingly, the management is envisaging positive EBITDA and a considerable improvement in net income. It is expected that positive trends will continue also in the period and that Adria Airways Tehnika will return to profitability. KEY FACTS Adria Airways Tehnika is positioned as Europe s leading third-party maintenance provider in CRJ100/200/700/900, which are produced by Canadian company Bombardier. Since 2005, Adria Airways Tehnika has provided maintenance work for the very popular Airbus A320 family. Adria Airways Tehnika is focusing on diversifying its customer base, which was already in 2012 (with the exception of its biggest client, Adria Airways) considerably more fragmented and hence more resilient to extraordinary events and client fluctuations. The company holds all the necessary approvals for the maintenance of planes from higher growth regions Bermuda DCA approval for maintenance of Bermuda-registered aircraft (mainly for Russia and CIS countries), Indian CAA approval for CRJ base maintenance, Ukrainian CAA approval and Jordanian Government approval. The company is continuing with its restructuring plan and is closely cooperating also with the trade union (has a 308,000 man/hours capacity). Daily connections to major European operators within a 2-hour flight range. TOP 10 SHAREHOLDER STRUCTURE (23 July 2013) Shareholder name regular shares Number of shares Stake PDP, d.d. 1,250, % Aerodrom Ljubljana, d.d. 605, % Shareholder name preferred shares Number of shares Stake Aerodrom Ljubljana, d.d. 1,142, % PDP, d.d. 669, % The company has 1,855,818 regular shares with ticker AATR and 1,811,806 preferred shares with ticker AATP. They are not listed on LJSE. 24

24 INVESTMENT OPPORTUNITIES BRIEF COMPANY DETAILS 3.3 AERO CELJE d.d. BRIEF COMPANY DESCRIPTION Address: Ipavčeva ulica 32, 3000 Celje Web address: Management Board: Žepič Zvonko (President) Aero was founded in 1929 as a subsidiary of the Czech company Brauns, but started to operate independently in It is a producer of self-adhesive products and materials (repositionable products, labels, ribbons), promotional products, paint, paper strips, glues, microcapsules, wet fingering moisteners and repositionable products. Sales structure: Domestic 21% Other 5%, KEY DATA (in EUR 000) Foreign 79% Adhesive products 95% Sales revenues 34, , ,222.0 EBITDA 2, ,490.3 n.a. EBITDA margin 7.4% 4.4% n.a. EBIT ,137.0 EBIT margin 0.0% -2.7% -7.1% Net income/loss -1, , ,430.0 Net margin -2.9% -5.7% -14.7% Total Assets 38, , ,374.0 Total Equity 10, , ,974.0 Financial debt 18, , ,639.0 Net debt 17, ,191.6 n.a. Assets Turnover Return on Assets -2.6% -5.1% -16.8% Equity multiplier Return on Equity -9.7% -22.9% % Number of employees Sales on domestic market 6,807 6,886 n.a. Sales on foreign markets 27,995 27,146 n.a. Aero Celje is again operating at a loss. This is due to the economic and financial crisis as well as due to high financial gearing. The 2011 net debt to EBITDA ratio stands at an alarming 12.9x. Therefore financial problems are affecting normal business processes. In October 2012, Aero sold its subsidiary Aero Papiroti to partially mitigate the liquidity pressure. Aero Papiroti generated around 26% of Group revenues in the past; therefore this will strongly impact on results for 2012 and

25 BRIEF COMPANY DETAILS PRIVATIZATION IN SLOVENIA STRATEGY & PLANS No strategic plan is publicly available. The company is going through financial and operational restructuring that involves partial reorganization of the sales department, a reduced headcount and possibly also selling or closing certain programmes in order to alleviate the financial strain on the company (such as Aero Papiroti). KEY FACTS The company exports most of its products. Geographic diversification is extensive, with the most important markets being Poland, Czech Republic, Lithuania, Hungary, Romania, Netherlands, Germany, Italy and Spain. In total the parent company exports 75% to EU countries, 18% to other European countries (Croatia, Serbia being the biggest) and 7% to other countries (Turkey, Saudi Arabia, UAE). Wide range of adhesive products under its own brand name. Cost and revenue optimization process could improve future results. TOP 10 SHAREHOLDER STRUCTURE (23 July 2013) Shareholder name regular shares Stake PDP, d.d. 45, % Probanka, d.d. 30, % Intereuropa d.d. 14, % Goričane, d.d. Medvode 5, % Merkur, d.d. 4, % SAVA, d.d. 4, % AERO, d.d. 3, % NFD 1, mešani fleksibilni podsklad JV Evropa 3, % Ilirika d.d. Ljubljana 2, % Kolpa, d.d. Metlika 2, % The company has 138,169 shares with ticker AECG. It s not listed on LJSE. 26

26 INVESTMENT OPPORTUNITIES BRIEF COMPANY DETAILS 3.4 AERODROM LJUBLJANA d.d. BRIEF COMPANY DESCRIPTION Address: Zgornji Brnik 130a, SI-4210 Brnik-Aerodrom Web address: Management Board: Zmago Skobir (President), Bernarda Trebušak, Iztok Podbregar Aerodrom Ljubljana is the operator of the biggest Slovenian airport that in 2012 handled 1.2m passengers (terminal measures 13,000m2) and 17 tonnes of cargo. The first aircraft landed at Brnik in December Geographic and product revenue split is: Foreign 30% Other 3% Comm. services 28% Domestic 70% Airport services 50% Ground handling services 19% KEY DATA (in EUR 000) Q13 TTM Sales revenues 33, , , ,841.6 EBITDA 12, , , ,744.1 EBITDA margin 36.8% 42.0% 34.2% 34.8% EBIT 5, , , ,738.3 EBIT margin 17.3% 22.3% 16.9% 18.6% Net income/loss 4, , , ,704.2 Net margin 12.6% 15.5% 16.8% 18.5% Total Assets 128, , , ,620.4 Total Equity 121, , , ,313.5 Financial debt Net debt -15, , , ,678.3 Assets Turnover Return on Assets 3.3% 4.1% 4.0% 4.4% Equity multiplier Return on Equity 3.6% 4.4% 4.2% 4.6% Number of employees No. of passengers 1,388,651 1,369,485 1,198, ,911 Cargo throughput (in tonnes) 17,310 19,659 17,031 4,374 More information: Operating margins contracted during 2012, while sales revenues fell by 7.7% YoY. Nevertheless, net income stagnated during In 2013, Aerodrom Ljubljana is back on track with positive growth, so 1Q13 TTM numbers are showing improvement compared with In 5M13, passenger traffic is up 6% YoY, revenues up 2% YoY and net income up 40% YoY. 27

27 BRIEF COMPANY DETAILS PRIVATIZATION IN SLOVENIA STRATEGY & PLANS The company s main strategic goals for the period up to 2017 are to increase the number of passengers to 1.5 million, the number of aircraft movements to 36,000 and the volume of transported cargo to 18.8 thousand tonnes. To achieve these goals the airport has implemented an extensive CAPEX programme worth in total EUR 77m. KEY FACTS The biggest airport operator in Slovenia. Also since most of Slovenian territory is only 90 minutes away, and parts of north-east Italy, southern Austria and northern Croatia are only 120 minutes away, there is the potential to attract new passengers. Untapped tourism potential could also boost passenger growth. The balance sheet is currently debt-free, with a significant cash & investment position. The size of the existing runway and available space around the airport is enabling and supporting the future development of Aerodrom Ljubljana. Here we note that the current management has an ambitious growth plan to overhaul airport facilities and construct a new passenger terminal (31,200m2). TOP 10 SHAREHOLDER STRUCTURE (23 July 2013) Shareholder name ordinary Number of shares Stake no-par value shares Kapitalska družba, d.d. 279, % Slovenska odškodninska družba, d.d. 258, % Zavarovalnica Triglav, d.d. 151, % Publikum Trezor d.o.o. 103, % Republika Slovenija 63, % Salink limited 54, % KD Rastko, delniški 54, % Abanka, d.d. 49, % NFD 1, mešani fleksibilni podsklad 40, % NLB skladi Slovenija delniški 27, % Shareholder name preference Number of shares Stake participating no-par value shares Republika Slovenija 1,860, % SHARE PRICE DATA (23 July 2013) Stock data Market price (EUR) 18.3 Number of shares* 3,796,527 Market Cap. in EUR (k)** 35, week range (EUR) Avg. daily trade vol., EUR(k) 5.14 EV/Sales 1.2 EV/EBITDA 3.4 EV/EBIT 6.5 P/E 12.0 P/B Jul 12 Oct 12 Jan 13 Apr 13 Jul 13 AELG SBI TOP * 1,936,229 ordinary and 1,860,298 preference participating no-par value shares with limited voting rights ** only ordinary no-par value shares traded on Ljubljana Stock Exchange 28

28 INVESTMENT OPPORTUNITIES BRIEF COMPANY DETAILS 3.5 CINKARNA CELJE d.d. BRIEF COMPANY DESCRIPTION Address: Kidričeva 26, 3001 Celje Web address: Management Board: Tomaž Benčina (President), Nikolaja Podgoršek Selič, Jurij Vengust, MSc, Marko Cvetko Cinkarna Celje has a 140-year production history, and although until 1968 the company s primary activity was metallurgy, after 1970 the company moved into the chemical processing sector, starting production of titanium dioxide pigment in Other 21% Slovenia 14% Paints and varnishes 6% Other 9% Ex-Yu countries 5% Zink products 13% EUR 60% Titanium dioxide 72% KEY DATA (in EUR 000) Q13 TTM Sales revenues 153, , , ,064.3 EBITDA 26, , , ,679.9 EBITDA margin 17.0% 25.0% 21.7% 16.6% EBIT 13, , , ,275.3 EBIT margin 9.0% 17.8% 13.9% 8.5% Net income/loss 8, , , ,793.6 Net margin 5.8% 13.9% 10.6% 6.5% Total Assets 188, , , ,679.1 Total Equity 106, , , ,380.6 Financial debt 47, , , ,296.7 Net debt 40, , , ,191.7 Assets Turnover Return on Assets 4.7% 12.9% 9.3% 5.5% Equity multiplier Return on Equity 8.3% 20.0% 13.7% 8.1% Number of employees 1,053 1,063 1,005 n.a. BS Provisions 16,907 29,017 28,377 28,416 BS Inventories 21,084 31,042 35,717 30,768 More information: While revenues and profitability surged in 2011, market conditions have since deteriorated. Therefore operating margins have contracted. Significant cash flow in recent years has been used for dividend payments and to reduce the financial debt (in 2011). Therefore the balance sheet is healthy, additionally since Cinkarna Celje has EUR 2.7m of long-term investments. 29

29 BRIEF COMPANY DETAILS PRIVATIZATION IN SLOVENIA STRATEGY & PLANS As the titanium dioxide industry is in a downtrend due to market imbalances, management is expecting 2013 to be a difficult year. They expect a 3% reduction in sales revenues versus 2012 and a loss of EUR 12.3m despite affirmative business policy measures; however, Q1 results imply that the difficulties might have been overestimated, hence better results can be envisaged. As for CAPEX, they expect to invest EUR 5.1m, or 37% less YoY. According to the strategy, the company will focus its R&D and CAPEX on segments that are achieving the highest level of profitability, notably a 10% increase in titanium dioxide production capacity being the most important investment. KEY FACTS Has an international and therefore diversified sales structure. Export markets represent more than 85% of all sales revenues, with Germany being the biggest market (36% of exports; 14kt of titanium dioxide and 6.6kt of titanium zinc sheets & coils in 2012). Italy has a 13% share in export revenues, and Turkey 11%, while France, Netherlands and Ex-Yu each have a 5% share of exports. Also exports to USA, North Africa and the Middle East. In the past (due to an industry cyclical uptrend) the company was able to generate substantial cash flow from which investors reaped hefty dividend yields. The balance sheet is healthy, with a low financial debt to EBITDA ratio of 0.2. It works in a specific cyclical industry with up and downtrends. Management proved its profitability commitment as the construction segment remained profitable in very harsh regional conditions. TOP 10 SHAREHOLDER STRUCTURE (23 July 2013) Shareholder name regular shares Number of shares Stake Modra zavarovalnica, d.d. 162, % Zvon Ena Holding, d.d.- in bankruptcy* 128, % NFD 1, mešani fleksibilni podsklad JV Evropa 107, % Slovenska odškodninska družba, d.d. 92, % Banka Koper d.d. 33, % NKBM d.d. 31, % KD Galileo, fleksibilna struktura naložb 25, % KD Rastko, delniški 19, % Kritni sklad prvega pokojninskega sklada 16, % KD Dividendni, delniški 15, % * Shares of Zvon Ena Holding are posted as collateral to NLB and Banka Celje. These two banks (together with direct stakes) have therefore an 11.1% and 3.4% stake respectively. 30

30 INVESTMENT OPPORTUNITIES BRIEF COMPANY DETAILS SHARE PRICE DATA (23 July 2013) Stock data Market price (EUR) 70.0 Number of shares 814,626 Market Cap. in EUR (k) 57, week range (EUR) Avg. daily trade vol., EUR(k) EV/Sales 0.4 EV/EBITDA 2.6 EV/EBIT 5.1 P/E 5.3 P/B Jul 12 Oct 12 Jan 13 Apr 13 Jul 13 CICG SBI TOP 31

31 BRIEF COMPANY DETAILS PRIVATIZATION IN SLOVENIA 3.6 ELAN d.o.o. BRIEF COMPANY DESCRIPTION Address: Begunje na Gorenjskem 1, 4275 Begunje na Gorenjskem Web address: Management Board: Andreja Košir (President), Leon Korošec ELAN has more than 60 years experience in manufacturing and marketing of sport products under its own R&D and brand name. Business divisions are: Winter sports division (skis of all types, snowboards), Nautic division (sailboats ranging from 20 to 50 feet), Energy division (production of key components for wind turbines) and Sporting equipment division (sports equipment, protective netting, equipment for stadia, etc.). The sales structure is as follows: Domestic 9% New Energy 6% Sporting equipment 8% Nautical 15% Foreign 91% Winter 71% KEY DATA (in EUR 000) Sales revenues 83, , ,656.0 EBITDA 5, , EBITDA margin 6.2% 5.8% 1.2% EBIT ,145.0 EBIT margin -1.2% 0.3% -5.3% Net income/loss -1, , ,858.0 Net margin -1.7% -1.5% -8.8% Total Assets 113, , ,744.0 Total Equity 50, , ,098.0 Financial debt 35, , ,797.0 Net debt 26,859.0 Assets Turnover Return on Assets -1.2% -1.1% -6.4% Equity multiplier Return on Equity -2.8% -2.8% -17.1% Number of employees Market share (skis) 7.7% 8.3% 8.4% The Winter segment suffered in 2012 due to the mild 2011/2012 winter season (therefore not a specific but an overall industry problem). On a positive note, market share improved from The Nautical segment fared even worse, again due to tough industry conditions, especially since Elan has a smaller market share in this division. 32

32 INVESTMENT OPPORTUNITIES BRIEF COMPANY DETAILS STRATEGY & PLANS In the Winter division, management plans to rank among the top 3 in one of the key markets. For 2013, the Elan Group is planning recovery in terms of profitability in all divisions, despite a troubled global environment. Especially in the New Energy division further revenue growth is envisioned. But management are also expecting to positive growth in 2013 for the Nautical, Winter and Sport equipment divisions. Overall, the Elan Group should have a positive operating result as constant cost-reduction should impact on profitability. KEY FACTS In 2012 and 2013 it received a Plus X Award for most innovative brand in winter sports equipment. ELAN is one of the leading brands in innovation and design of sporting equipment, with a very strong R&D department and track record. The new AmphibioTM technology introduced in the Winter division for skis set a new milestone in ski innovation. The technology is very popular among customers. Has a large 8.4% market share in skis (7th place) with a leading market position in eastern Europe and good market position in Germany, Canada and Japan. In US it ranks in 6th place. In 2012, it also entered the Italian Ski Pool in order to improve its marketing potential in Italy though sporting competition. Weaker markets are France, Austria and Switzerland, where there is a strong domestic competitor. In 2012, lower volume sales of skis (by 26%) was compensated by a 13% increase in ASP. This proves that Elan is successful in moving into higher end sales. Is one of the major manufacturers of yachts in Europe (key markets are Adriatic, Scandinavia and Turkey) with overall global market share of 3.3%. Capacity utilization improved through 2 OEM partnership productions. According to a survey by Yacht Magazine it is the 3rd most innovative brand and 13th most recognized brand out of 31 manufacturers of yachts. Has an extensive distribution network. The wind power industry has a high growth potential, and with it the New Energy division. Wind power represents 21.4% of all new power capacity and 71.3% of all renewable energy sources. Revenues from this segment more than doubled in 2012 versus The company is a subcontractor for Siemens. In 2012 it sold 382,817 pairs of skis and 138 sailboats under EB, in addition to products for OEM partners. There are additional capacities available. TOP 10 SHAREHOLDER STRUCTURE (23 July 2013) Shareholder name regular shares Stake PDP, d.d. 66.4% Triglav Naložbe, finančna družba, d.d. 25.0% Modra Zavarovalnica, d.d. 8.6% ELAN d.o.o. is a limited company. The sale process has already begun. In autumn 2012, the European Commission issued a decision that a EUR 10m capital injection given by government entities in 2008 was unlawful government aid. EUR 10m must therefore be returned to investors that paid in capital. In order to finance this, ELAN needs a capital injection. 33

33 BRIEF COMPANY DETAILS PRIVATIZATION IN SLOVENIA 3.7 FOTONA d.d. BRIEF COMPANY DESCRIPTION Address: Stegne 7, 1000 Ljubljana Web address: Management Board: Dr. Matjaž Lukač (President), Miloš Resnik Fotona is one of the most experienced developers of high-technology laser systems, as it was founded in They design and manufacture advanced solid-state laser systems for medicine (aesthetics, surgery, gynecology), dentistry and industry & defence. In the past, the military programme was more important for Fotona, whereas in it accounted for 9% of total sales. Now, healthcare programmes dominate. Sales structure: Other; 3% Domestic; 3% Defence; 2% Other; 3% Asia; 26% Europe; 42% Healthcare - dental; 29% America; 26% Healthcare - medicine; 66% KEY DATA (in EUR 000) Sales revenues 19, , ,420.0 EBITDA 1, , ,608.0 EBITDA margin 6.2% 7.0% 8.7% EBIT EBIT margin 2.7% 3.1% 4.5% Net income/loss , Net margin 2.3% 9.3% 3.9% Total Assets 19, , ,498.0 Total Equity 14, , ,382.0 Financial debt 1, Net debt , ,517.0 Assets Turnover Return on Assets 2.3% 9.5% 3.6% Equity multiplier Return on Equity 3.2% 11.7% 4.3% Number of employees COGS 12,399 12,592 10,451 Inventories 5,524 6,317 4,586 The company has reduced its debt and is accumulating financial assets. Negative revenue CAGR for the period is 3.2%, but the improved EBITDA margin is offsetting lower revenues. 34

34 INVESTMENT OPPORTUNITIES BRIEF COMPANY DETAILS STRATEGY & PLANS Fotona s business philosophy is satisfying its customers needs perfectly, and the shortest possible time-to-market. It will continue to emphasize its own R&D capabilities and brand name. KEY FACTS As the company manufactures and tests all components for laser systems, it offers better quality control. It also has its own brand and own R&D activities. The R&D division employs 32 people. The majority of the electronics hardware and software assemblies for Fotona s laser systems are also developed internally, according to stringent manufacturing and control processes. This ensures the highest attainable levels of precision and reliability. In 2012 they developed FotonaSmooth for use in gynecology. For 2H13, they plan to develop a new generation of lasers for use in dermatology and esthetical surgery. Wide distribution network spanning 60 countries. Negative net debt and quite stable cash flow generation. High growth of profit due to cost rationalization measures. Namely EBITDA CAGR in 2010 to 2012 period is at 15.3%, while net income CAGR is at 24.7%. Dun & Bradstreet (D&B) and i, d.o.o. credit rating company, have listed Fotona d.d. among Slovenia s Top 50 Companies for Has a wide range of certification, including ISO 9001:2000, ISO 13485:1996, ISO 13485:2003, EN 46001, MDD 93/42 Annex II.3 standards, and the United States GMP standards. TOP 10 SHAREHOLDER STRUCTURE (23 July 2013) Shareholder name regular shares Stake PDP, d.d. 463, % G.I. Dakota investments limited 77, % Iskra, d.d. 68, % Infond d.o.o., PE Infond PBGS, mešani sklad 19, % Celestina Igor 1, % MP Naložbe d.d % Rožaj Brvar Alenčica % Cimerman Alojzij % Vukas Božo % Eržen Borut % The company has 657,751 shares with ticker IEOR. It s not listed on LJSE. The sales process has already begun. 35

35 BRIEF COMPANY DETAILS PRIVATIZATION IN SLOVENIA 3.8 GOSPODARSKO RAZSTAVIŠČE d.o.o. BRIEF COMPANY DESCRIPTION Address: Dunajska cesta 18, 1000 Ljubljana Web address: Management Board: Iztok Bricl, MSc (President) Gospodarsko Razstavišče is an event centre consisting of 24 multifunctional halls offering a total surface area of 35,471 square metres, comprising 25,277m2 indoor space and 10,194m2 of outdoor space, all located in the Slovenian capital, Ljubljana. It has several facilities boasting modern and functional architectural design. It was established in 1954, but underwent a major renovation in Sales structure: Other markets 3% Other 10% Other 27% KEY DATA (in EUR 000) Domestic 87% Exibitions organized by others 5% Exhibitions organised by GR 68% Sales revenues 4, , ,115.0 EBITDA -4, ,080.0 EBITDA margin -86.4% 20.0% 21.1% EBIT -4, EBIT margin -98.4% 6.4% 8.8% Net income/loss -5, Net margin % 0.4% 0.6% Total Assets 32, , ,867.0 Total Equity 22, , ,462.0 Financial debt 8, , ,434.0 Net debt 8, , ,246.0 Assets Turnover Return on Assets -16.5% 0.1% 0.1% Equity multiplier Return on Equity -23.6% 0.1% 0.1% Number of employees BS Land and buildings n.a. 17,843 18,524 BS Real estate investments 8,524 8,516 8,224 Sales revenues stagnated at around EUR 5.0m, while EBITDA margins in the last two years are around 20% to 21%. Margins actually improved in 2012 versus 2011 despite the harsh domestic economic climate. Net debt to EBITDA ratio is high at 7.6, but this is due to the fact that Gospodarsko Razstavišče has not been able to sell real estate that it received in 2000 as a capital injection in the form of an in-kind contribution by the Municipality of Ljubljana. 36

36 INVESTMENT OPPORTUNITIES BRIEF COMPANY DETAILS STRATEGY & PLANS Company plans are not publicly available. KEY FACTS It s located near the main railway and bus station in Ljubljana, Slovenia s capital city. Therefore it offers the best location for exhibits in Slovenia. Inside the exhibition centre or nearby there is a good support infrastructure (catering, parking, hotels, etc.). It has 20 multifunction halls with a total surface area of 13,139 square metres, plus an additional 8,844m2 of outdoor exhibition space. Function rooms are versatile and can be arranged to accommodate from 15 to 4,000 delegates. Hall name m2 W/L/H (m) Theatre Classroom U-shape Reception Banquet Kocka 2, /56.6/8.9 2,200 1, ,100 1,200 Kupola 1, /41.5/8-12 1, , Kupola Hall Foyer L /23.9/ Kupola Hall Foyer R /9.8/ Gallery /71.5/ Steklena 1, /87.4/ , Marmorna 1, /51.2/ , , Marmorna /25.5/ Marmorna /25.5/ Marmorna foyer /49/ Stebrna 1, /47.7/ , Forum /11.4/ Urška /56.6/ Urška /10.5/ Urška /7.7/ Urška /17.7/ Urška /20.7/ Povodni mož /46.8/ Povodni mož /14.72/ Povodni mož /12.15/ Povodni mož /12.15/ Povodni mož /14.72/ Jurček 498 Ø 12.8 Ø 2.1/ Oda 3,692 52/71/ ,000 1,400 Sonet 1,636 27/60.6/ , Gazela 2,211 33/67/ ,800 1,000 Meduza 4, /52.5/ The premises are fitted with modern and state-of-the-art technical equipment. Year-round events and exhibitions. The latest calendar can be found on TOP 10 SHAREHOLDER STRUCTURE (23 July 2013) Shareholder name regular shares Stake Mestna občina Ljubljana (Municipality of Ljubljana) 69.0% Kapitalska družba d.d. 29.5% DSU, družba za svetovanje in upravljanje d.o.o. 1.2% Other 0.3% Gospodarsko Razstavišče, d.o.o. is a limited company. 37

37 BRIEF COMPANY DETAILS PRIVATIZATION IN SLOVENIA 3.9 LETRIKA d.d. BRIEF COMPANY DESCRIPTION Address: Polje 15, 5290 Šempeter pri Gorici Web address: Management Board: Edvin Sever (President), Bojan Konič Letrika was established in 1960 (as Iskra Avtoelektrika) as a provider of electrical parts to the automotive industry. Today it masters completely and independently all stages of the business process, including R&D, production and sales. Letrika is therefore a Group trademark that markets high-quality, innovative and cutting-edge products for starters, alternators, electric drive and mechatronic systems. Sales structure: Other; 44,100% Germany; 26,200% Mechatronic systems 13% Other 7% Starters 34% USA; 13,100% Electric drive 23% France; 7,400% Italy; 9,200% Alternators 23% KEY DATA (in EUR 000) Q13 TTM Sales revenues 218, , , ,530.0 EBITDA 18, , , ,937.0 EBITDA margin 8.6% 8.2% 5.6% 6.3% EBIT 10, , , ,689.0 EBIT margin 4.8% 4.9% 2.5% 3.3% Net income/loss 4, , , ,034.0 Net margin 2.2% 2.3% 0.6% 1.7% Total Assets 165, , , ,824.9 Total Equity 38, , , ,183.9 Financial debt 66, , , ,030.3 Net debt 57, , , ,223.7 Assets Turnover Return on Assets 2.9% 3.2% 1.0% 2.4% Equity multiplier Return on Equity 12.5% 13.3% 3.6% 8.7% Number of employees 2,380 2,630 2,485 2,345 R&D expenses 7,954 8,408 8,933 8,584 Inventories 49,577 58,952 46,897 47,355 More information: Sales revenues are under pressure due to global turmoil and tough industry conditions, but TTM results are already showing signs of improvements despite the revenue decline. Net debt has lowered in 2012 and 1Q13. 38

38 INVESTMENT OPPORTUNITIES BRIEF COMPANY DETAILS STRATEGY & PLANS For 2013, Letrika Group management envisage revenues of EUR 246.5m, EBITDA of 18.7m, EBIT of EUR 11.4m and net income of EUR 5.7m. In early 2012, management also prepared their long-term strategic plan based on their long-term arrangements with main customers, new projects and possible expansion onto the new emerging markets. Strategic goals are that in 2015 Letrika Group generates EUR 324m of revenues with EBITDA margin of 9.1%, net margin of 3.8% and ROE of 16.4%. At the same time they hope to raise the R&D investment to sales revenues ratio to above 4%. KEY FACTS Its sales revenues structure (geographical and product) is highly diversified. Its production facilities are located not only in Slovenia, but in Bosnia & Herzegovina, Belorussia, Brazil and China. This has lowered production costs and enabled better local market attendance. It offers innovative and quality products, with the group investing around 3.5% of its revenues in R&D. Management intends to increase this ratio to above 5% by Innovation is also orientated towards green technologies, which is the predominant trend for the future. TOP 10 SHAREHOLDER STRUCTURE (23 July 2013) Shareholder name regular shares Number of shares Stake Kolektor Group d.o.o. 273, % Modra zavarovalnica, d.d. 228, % NLB d.d. 196, % CBH d.o.o. 160, % Slovenska odškodninska družba, d.d. 113, % Zvon Ena Holding, d.d.- in bankruptcy 91, % Abanka Skladi Evropa, delniški podsklad 60, % NFD 1, mešani fleksibilni podsklad JV Evropa 59, % Triglav vzajemni skladi delniški triglav steber 46, % Zavarovalnica Triglav, d.d. 44, % The sale process has already begun. SHARE PRICE DATA (23 July 2013) Stock data Market price (EUR) 17.5 Number of shares 1,608,313 Market Cap. in EUR (k) 28, week range (EUR) Avg. daily trade vol., EUR(k) EV/Sales 0.3 EV/EBITDA 5.5 EV/EBIT 10.7 P/E 7.0 P/B Jul 12 Oct 12 Jan 13 Apr 13 Jul 13 IALG SBI TOP 39

39 BRIEF COMPANY DETAILS PRIVATIZATION IN SLOVENIA 3.10 NKBM d.d. BRIEF COMPANY DESCRIPTION Address: Ulica Vita Kraigherja 4 Web address: Management Board: Aleš Hauc (President), Igor Žibrik Nova Kreditna Banka Maribor Group (NKBM) is one of the leading Slovenian financial institutions. The predecessor of Nova KBM d.d. was Mestna Hranilnica Maribor, established in Along with their associated companies, they provide comprehensive and broadly accessible banking and financial services, not only in the field of traditional banking, but also in mutual funds and the stock brokerage business. Very important parts of the NKBM Group are also partly-owned Adria bank AG, Poštna banka Slovenije and also the Serbian bank Credy banka. Other 14% Large corporate 26% Other 13% Debt securities 1% Equity 4% Retail 24% Sole traders 3% SME 33% Loans & rec. to banks 16% Loans & rec. to non-bank customers 66% KEY DATA (in EUR 000) Q13TTM Total revenues (net interest income + net fee and commission income) 229, , , ,631 Net interest income 147, , ,844 95,206 Net interest margin 2.5% 2.3% 1.9% 1.7% Pre-provision profit 101,223 72,826 91,279 78,365 Provisions -83, , , ,456 Net profit/loss for the financial year 11,413-81, , ,610 Cost to income ratio 56.0% 63.2% 56.9% 76.6% Total Assets 5,866,657 5,813,071 5,321,810 5,387,779 Total Equity 438, , , ,724 Non-bank loans 4,034,927 3,844,085 3,397,900 3,321,727 Non-bank deposits 3,712,652 3,760,639 3,618,678 3,618,457 Loans to deposit 109% 102% 94% 92% Return on Assets (before tax) 0.3% -1.8% -3.9% -0.9% Equity multiplier Return on Equity (before tax) 4.1% -21.5% -55.0% -17.1% Number of employees 3,025 2,991 2,027 2,039 Capital adequacy ratio (total equity) 10.9% 11.5% 9.2% 9.2% Core Tier I Ratio (EBA) 7.4% 8.1% 7.6% 7.5% NPL Ratio 12.1% 15.1% 22.2% 25.7% More information: 40

40 INVESTMENT OPPORTUNITIES BRIEF COMPANY DETAILS Due to the difficult macroeconomic environment, NKBM is going through the process of restructuring and loan portfolio cleaning. High provisioning costs have led to substantial losses. While pre-provision profit is very close to pre-crisis levels, it is under pressure of a falling net interest margin. Although trends seem negative, the situation should improve with the transfer of NPLs to BAMC and further stabilization of the deposit market. STRATEGY & PLANS The Group is planning to end 2013 with total assets of EUR 5,345.7m. Net interest income is projected to be around EUR 113.7m, and net interest margin to be around 2.11%. Net fees are expected to remain stable and should amount to EUR 58.3m. Administration costs are projected to decrease by 3% to EUR 116.9m. Due to forecasts of a continuing economic crisis, provisioning costs will remain at relatively high levels, but are projected to be 44.7% below the figure reported for Considering this, the Group plans to report a loss from continuing operations in The transfer of NPLs to BAMC is planned in 2H13. KEY FACTS NKBM is the second largest banking group in Slovenia and has around 11% market share in terms of total banking sector s assets, around 11% market share in commercial loans and 15% market share in deposits. It has the largest branch network, with more than 600 offices and outlets. It is focused on core banking activities, with a strong market share of the deposit market, which is the main source of the Group s income. The bank will participate in transferring NPLs to BAMC. After the transfer, clarity with regard to the bank s future will improve significantly. TOP 10 SHAREHOLDER STRUCTURE (23 July 2013) Shareholder name Number of shares Stake Republika Slovenija 294,803, % KDPW fiduciary account 2,941, % Pošta Slovenije d.o.o. 2,599, % GEN d.o.o. 2,500, % Kapitalska družba, D.D. 1,875, % Slovenska odškodninska družba, d.d. 1,250, % ELES, d.o.o., Ljubljana 937, % East Capital Balkan Fund 923, % NFD 1, mešani fleksibilni podsklad JV Evropa 917, % Eaton Vance Emerging Markets Fund 637, % SHARE PRICE DATA (23 July 2013) Stock data Market price (EUR) 0.40 Number of shares 323,103,520 Market Cap. in EUR (k) 129, week range (EUR) Avg. daily trade vol., EUR(k) P/E neg. P/B Jul 12 Oct 12 Jan 13 Apr 13 Jul 13 KBMR SBI TOP 41

41 BRIEF COMPANY DETAILS PRIVATIZATION IN SLOVENIA 3.11 PALOMA d.d. BRIEF COMPANY DESCRIPTION Address: Sladki Vrh 1, 2214 Sladki Vrh Web address: Management Board: Tadej Gosak (President), Stanko Kranjc The strategic orientation of Paloma d.d. is the competitive cost-efficient provision of a wide range of quality hygienic paper products (toilet paper, kitchen rolls, napkins, tissues, universal towels, industrial towels, medical towels, folded toilet paper and maxi-roll toilet paper) under own and other (private-label) brand names. It has a 140-year history and supplies products for end consumers at home and Away-From-Home institutional consumers. The geographical sales structure and structure of operating costs is as follows: West Europe 55% Domestic 14% South Europe 18% Labour costs 21% D&A Other 6% 1% East Europe 13% COGS 72% KEY DATA (in EUR 000) Sales revenues 86, , ,039.1 EBITDA 1, , ,161.6 EBITDA margin 2.1% 5.9% 4.9% EBIT -3, EBIT margin -3.9% 0.6% -0.4% Net income/loss -4, ,160.2 Net margin -5.2% -0.6% -1.4% Total Assets 59, , ,759.9 Total Equity 8, , ,229.4 Financial debt 23, , ,738.0 Net debt 21, , ,077.0 Assets Turnover Return on Assets -7.5% -1.0% -2.3% Equity multiplier Return on Equity -49.6% -6.3% -16.0% Number of employees Production in tonnes 66,596 64,643 64,923 Tonnes per employee More information: 42

42 INVESTMENT OPPORTUNITIES BRIEF COMPANY DETAILS Paloma Group has managed to maintain revenues at EUR 85m to 86m despite the harsh environment that is shifting consumers towards white-label products. At the same time, competition is intensifying. Nevertheless, the EBITDA margin has improved compared with 2010 and stands at 4.9% as labour productivity is increasing. However, results remain under the influence of operating losses (D&A costs are eradicating all EBITDA) and high financial gearing. Net debt has, however, lowered in the period. STRATEGY & PLANS For 2013, management forecasts revenues in the amount of EUR 90.4m with net income at EUR 2.3m. Production volume is expected to increase by 3.3% versus In addition, management envisages CAPEX at EUR 2.2m. Its long-term strategy is to lower the cost per product while strengthening its own brand name. KEY FACTS Diversified sales structure in terms of products and geography. In 2012, financial and business restructuring activities commenced, which should produce positive effects in For example, a new gas distribution agreement should annually save the company over EUR 1m in costs. Its annual capacity amounts to 70,000 tonnes of hygienic paper that can be transformed into a variety of end products. It has a strong brand presence on the domestic Slovenian market and in the region (Ex-Yu markets). It s also persisting as the market leader in the region, with the Paloma brand remaining among the Top 25 regional consumer goods brands (specifically in 13th place). The biggest export market in western Europe is Germany, followed by Austria, Holland, UK, France and Switzerland. In eastern Europe, the biggest export markets are Hungary and the Czech Republic. High-quality standards (ISO 9001, ISO 14001, OHSAS 18001, IFS (HPC), PEFC, FSC, ECO LABEL) Strong brand awareness in the regional markets (over 90%). One of the biggest recent investments was in the reconstruction of steam production, which will lower energy costs. TOP 10 SHAREHOLDER STRUCTURE (23 July 2013) Shareholder name regular shares Stake PDP, d.d. 2,410, % Factor Banka d.d. 291, % Avtotehna d.d. 139, % INFOND d.o.o., PE Infond PBGS, mešani sklad 83, % Murales d.d. Ljutomer 64, % Bavčar Igor 63, % Zlata Moneta II d.d. 51, % Janus, d.d. in liquidation 37, % Probanka, d.d. 32, % Gorenje Surovina d.o.o. 15, % Additionally DSU d.o.o. has 1,237 shares of PSTG. The company has 3,395,834 shares with ticker PSTG. It s not listed on LJSE. 43

43 BRIEF COMPANY DETAILS PRIVATIZATION IN SLOVENIA 3.12 TELEKOM SLOVENIJE d.d. BRIEF COMPANY DESCRIPTION Address: Cigaletova ulica 15, 1000 Ljubljana Web address: Management Board: Rudolf Skobe, MSc (President), Zoran Vehovar, MSc (Vice President), Mateja Božič, MSc, Zoran Janko, Darja Senica The company is Slovenia s leading provider of telecommunications services in fixed and mobile telephony, VoIP, IPTV and broadband internet services. The Group also offers telecommunication network construction and maintenance services through its subsidiary GVO, and IT and TV services through Avtenta and TSmedia subsidiaries. It also operates in Kosovo through Ipko, in Macedonia through One, and in Bosnia and Herzegovina through Aneks. It also has a 50% stake in Gibtelecom Limited. Sales structure: Kosovo 7% Macedonia 7% Other 1% Intercon. 16% Other 12% Mobile 40% Slovenia 85% Broadband 19% Fixed line 13% KEY DATA (in EUR 000) Q13 TTM Sales revenues 839, , , ,330.0 EBITDA 247, , , ,563.0 EBITDA margin 29.4% 31.0% 30.5% 31.0% EBIT -178, , , ,071.0 EBIT margin -21.3% 7.8% 8.0% 7.7% Net income/loss -210, , , ,836.0 Net margin -25.1% 4.2% 5.6% 5.5% Total Assets 1,658, ,575, ,554, ,500,462.0 Total Equity 807, , , ,079.0 Financial debt 585, , , ,667.0 Net financial debt 520, , , ,127.0 Assets Turnover Return on Assets -12.7% 2.2% 2.8% 2.9% Equity multiplier Return on Equity -26.0% 4.2% 5.4% 5.3% Number of employees 4,841 4,760 4,724 4,701 Number of connections 3,082,358 3,029,194 3,114,623 3,101,419 EBITDA CAPEX 133, , , ,955 More information: Despite revenue decreases, which are expected due to the maturity of the domestic market, profitability is improving thanks to cost optimization processes. However, Telekom Slovenije is still lagging behind its peer group in profitability. Debt to EBITDA ratio is healthy. 44

44 INVESTMENT OPPORTUNITIES BRIEF COMPANY DETAILS STRATEGY & PLANS For 2013, Management are forecasting up to EUR 245m of EBITDA and EUR 50m of net income. In their strategy, Management set goals for ROE to exceed 10% at the end of the period, and for net income to surge to EUR 100m. This objective remains intact and is mostly based on cost optimization processes, some of which have already been implemented. On the other hand, the goals are set to be achieved also through stabilizing revenues by offering additional services. KEY FACTS Has a dominant position on the domestic market, with a 67.2% market share in fixed line telephony, 56.5% market share in IP TV, 50.3% market share in mobile telephony, 50.0% market share in prepaid mobile, 38.5% market share in broadband access, 36.8% market share in FTTH and 25.1% market share in IP fixed. While the domestic market is mature and slowly growing, there is still room for an increase in penetration in Kosovo and Macedonia. In broadband access, Kosovo has a penetration rate of 8.2%, versus 14.7% in Macedonia and 24.8% in Slovenia. Growth can also be achieved through infrastructure construction and IT services. Compared with its peer group, the EBITDA margin is depressed, while labour costs per revenue are elevated. This implies room for further cost optimization to help the bottom line. Solid annual cash flow as generated EBITDA stands at around EUR 240m to 250m. Healthy balance sheet with net debt to EBITDA at 1.6x. TOP 10 SHAREHOLDER STRUCTURE (23 July 2013) Shareholder name regular shares Number of shares Stake Republic of Slovenia 4,087, % Kapitalska družba, d.d. 365, % Slovenska odškodninska družba, d.d. 277, % Modra zavarovalnica d.d. PPS 93, % Intersvet d.o.o. 68, % Perspektiva FT d.o.o. 49, % NLB d.d. 36, % Triglav vzajemni skladi delniški Triglav steber 35, % DBS d.d. 34, % NFD 1, mešani fleksibilni podsklad JV Evropa 33, % SHARE PRICE DATA (23 July 2013) Stock data Market price (EUR) Number of shares 6,535,478 Market Cap. in EUR (k) 699, week range (EUR) Avg. daily trade vol., EUR(k) EV/Sales 1.4 EV/EBITDA 4.5 EV/EBIT 17.9 P/E 16.3 P/B Jul 12 Oct 12 Jan 13 Apr 13 Jul 13 TLSG SBI TOP 45

45 BRIEF COMPANY DETAILS PRIVATIZATION IN SLOVENIA 3.13 TERME OLIMIA BAZENI d.d. BRIEF COMPANY DESCRIPTION Address: Zdraviliška cesta 24, 3254 Podčetrtek Web address: / Management Board: Zdravko Počivalšek (President) The company was established by Terme Olimia d.d. with a subsequent capital injection provided by Kapitalska družba d. d. and Zvon Ena Holding d. d. With this injection, they became majority owners of the company. Terme Olimia Bazeni d.d. owns the thermal water well and outdoor pool complex Aqualuna, which is operated by Terme Olimia d. d. (ownership structure not connected, although some owners are present in both companies). Therefore the main products of the company are rents and pool cleaning services for Terme Olimia d.d. As a result, the future of the company is strongly linked to Terme Olimia d.d., which has several outdoor and indoor thermal facilities aside from Aqualuna. The following pie charts depict product segmentation of revenues and distribution of operating costs: Other; 8% Aqualuna rents; 26% D&A 20% Other 2% COGS 9% Cleaning; 66% Labour costs 69% KEY DATA (in EUR 000) Sales revenues 1, , ,280.9 EBITDA EBITDA margin 30.0% 30.6% 27.1% EBIT EBIT margin 12.6% 10.7% 9.2% Net income/loss Net margin 10.3% 11.3% 11.2% Total Assets 5, , ,649.6 Total Equity 5, , ,505.1 Financial debt Net debt Assets Turnover Return on Assets 2.1% 2.1% 2.5% Equity multiplier Return on Equity 2.1% 2.2% 2.6% Number of employees 58 Sales revenue growth CAGR in 2012 to 2010 period is 7.2%. Despite EBIT margin contraction, the net margin remained stable at 11.2%. The company operates without financial debt. 46

46 INVESTMENT OPPORTUNITIES BRIEF COMPANY DETAILS STRATEGY & PLANS No strategy is disclosed, but the company s future depends on Terme Olimia d.d., which also enjoys solid profitability. In 2012, Terme Olimia had an EBITDA of 23.9%, ROE of 3.6% and net income of EUR 899,000. KEY FACTS Terme Olimia Bazeni d.d. and its business partner Terme Olimia d.d. have been profitable for the last three years. Therefore they are one of the better thermal facilities in Slovenia in terms of profitability. Aqualuna offers 3000m2 of facilities, with an emphasis on water attractions such as the 550m2 of Aquajungle 2 and several waterslides. The company operates without financial debt. On the other hand, it has EUR 964,000 of cash and short-term investments & loans. TOP 10 SHAREHOLDER STRUCTURE (23 July 2013) Shareholder name regular shares Stake Kapitalska družba, d.d. 251, % Zvon Ena Holding, d.d.- in bankruptcy 127, % NKBM d.d. 126, % Bioto turizem, d.o.o. 1, % The company has 506,100 shares with ticker TOBR. It s not listed on LJSE. 47

47 BRIEF COMPANY DETAILS PRIVATIZATION IN SLOVENIA 3.14 UNIOR d.d. BRIEF COMPANY DESCRIPTION Address: Kovaška cesta 10, 3214 Zreče Web address: Management Board: Darko Hrastnik (President), Branko Bračko The beginnings of Unior date back to 1919, but it became a public limited company in Its activities focus on 4 segments: forging parts (generally intended for the automotive industry), hand tools (5,500 different products, own trademark and original manufacture solutions), special machines (producing specific CNC machines for serial processing) and tourism (several health, thermal and ski resorts). It has 20 subsidiaries and 9 associated companies. Sales structure is as follows: Domestic; 38,800 19,2 Tourism; 20, Foreign; 163,058 80,8 Industrial; 181, KEY DATA (in EUR 000) Q13 TTM Sales revenues 239, , , ,572.1 EBITDA 21, , , ,023.5 EBITDA margin 9.2% 9.6% 6.9% 7,3% EBIT 4, , , ,115.5 EBIT margin 2.0% 3.5% 0.6% 1.0% Net income/loss -1, , ,546.0 Net margin -0.7% 0.1% -4.5% -3.7% Total Assets 431, , , ,524.6 Total Equity 162, , , ,237.8 Financial debt 199, , , ,222.0 Net debt 194, , , ,235.1 Assets Turnover Return on Assets -0.4% 0.1% -2.5% -2.5% Equity multiplier Return on Equity -1.0% 0.2% -6.5% -6.8% Number of employees 3,956 4,085 3,917 Sales Tourism segment 21,259 20,010 20,117 Sales Industrial segment 218, , ,741 EBIT Tourism segment ,160 EBIT Industrial segment 4,607 8,377 2,387 More information: 48

48 INVESTMENT OPPORTUNITIES BRIEF COMPANY DETAILS In last two years revenues decreased due to the sale of some subsidiaries, excluded this, the revenues increased, particularly in industrial segment. This segment generates 90% of its revenues on foreign markets and has a positive EBIT. Group again posted net loss in 2012 mainly due to the impairment of assets. STRATEGY & PLANS For its forged parts segment, Unior plans to diversify out of the automotive industry (currently 80%). The tourism segment should generate EUR 25m of annual turnover and 230,000 overnight stays per year in On the other hand, management will seek a strategic partner for this segment. Group revenues should amount to EUR 440m with ROE of 7.3% by The main activity, however, is overall financial restructuring. KEY FACTS The company is collaborating with several prominent business manufacturers: Volkswagen, Audi, BMW, Renault, Dacia, Peugeot, ZF Lemförder & ZF Lenksysteme, Volvo, Bosch Siemens Group, Daimler, Jtekt, GKN, Arvin Meritor, General Motors and Cimos. It is certified to the following standards: ISO 9001, ISO 14001, ISO/TS and VDA 6.4. It has a diversified Industrial segment. Unior d.d. generates 57% of segment revenues from forging parts, 6% from sintering, 22% from hand tools, 11% from special machines and 4% from other products. It therefore has a wide range of products and expertise. It has signed an agreement with banks regarding financial restructuring. It will deleverage itself from EUR 142m to EUR 71m by 2019 by divesting non-core assets. SHARE PRICE DATA (23 July 2013) TOP 10 SHAREHOLDER STRUCTURE (23 July 2013) Shareholder name regular shares Stake PDP, d.d. 1,053, % NLB d.d. 245, % Kapitalska družba, d.d. 157, % Rhydcon d.o.o. Šmarje pri Jelšah 141, % Štore Steel d.o.o. 100, % Zavarovalnica Triglav, d.d. 100, % Slovenska odškodninska družba, d.d. 65, % KD dividendni, delniški 57, % Ofentavšek Anton 56, % Železar Štore D.P. d.d. 43, % As the company Unior d.d. is overleveraged it needs a capital injection. Stock data Market price (EUR) 3.05 Number of shares 2,838,414 Market Cap. in EUR (k) 8, week range (EUR) Avg. daily trade vol., EUR(k) 1.49 EV/Sales 0.9 EV/EBITDA 10.5 EV/EBIT 74.6 P/E neg. P/B Jul 12 Oct 12 Jan 13 Apr 13 Jul 13 UKIG SBI TOP 49

49 BRIEF COMPANY DETAILS PRIVATIZATION IN SLOVENIA 3.15 ŽITO d.d. BRIEF COMPANY DESCRIPTION Address: Šmartinska 154, 1529 Ljubljana Web address: Management Board: Janez Bojc, MSc (President). Erik Žunič, Peter Rajačič, Sandi Svoljšak Žito Group is engaged in the food industry in Slovenia as well as abroad. Activities are based on the bakery, milling and pastries industry as well as on the production of pasta, frozen food, confectionery, rice, tea and spices. The Group dates back to 1947, when it was established by the government. In 1998, Žito was transformed into a public company, while in the last few years it has managed to broaden its scope of business. Sales structure: Foreign 16% Milling 13% Confection Confectionery ery 22% 22% Bread 40% Domestic 84% KEY DATA (in EUR 000) Contempoary Contempor ary Kitchen Kitchen 25% Q13 TTM Sales revenues 111, , , ,357.5 EBITDA 11, , , ,319.2 EBITDA margin 10.4% 7.8% 9.9% 10.2% EBIT 5, , , ,811.2 EBIT margin 4.7% 2.6% 4.9% 5.2% Net income/loss 2, , Net margin 2.3% 1.3% 0.4% 0.7% Total Assets 115, , , ,703.7 Total Equity 69, , , ,546.5 Financial debt 22, , , ,625.0 Net debt 21, , , ,476.6 Assets Turnover Return on Assets 2.2% 1.2% 0.3% 0.6% Equity multiplier Return on Equity 3.7% 2.2% 0.6% 1.1% Number of employees 1,305 1,248 1,163 1,150 Revaluation revenues 0 0 3, ,380.0 Long-term investments 7,462 9,747 9,787 9,758 More information: Revenues are stagnating in the period, while margins are under pressure from the tough climate results are incomparable due to the one-off revaluation. In 1Q13, Žito managed to improve its business performance with a 22.3% YoY increase in EBITDA. 50

50 INVESTMENT OPPORTUNITIES BRIEF COMPANY DETAILS STRATEGY & PLANS Žito expects to achieve EUR 113m in revenues in 2013, EBITDA of EUR 9.0m (+18% to adjusted 2012 figure) and net income of EUR 1.9m. By 2015, Žito Group forecasts revenues of EUR 115.2m with EBITDA of EUR 11.3m. The key cornerstones of a new strategy are: rationalization of assets, cost optimization and market consolidation with growth. In addition, while Žito Group wishes to grow its core business also by acquisitions, it will at the same time find suitable business solutions for its non-core assets. KEY FACTS Žito Group is one of the largest Slovenian food producers and is also the leading local producer of flour, bread, pasta, sweets, rice, spices and tea. On the other hand, through Žito investors also have some exposure to SEE markets. 100,000m2 of its production premises are situated in Ljubljana close to the biggest shopping centre, BTC. Moving this production facility could generate significant one-off cash flow for Žito. There is room for cost rationalization, as Management plan to improve EBITDA margin from 6.8% to 10.0% by The Group has a 17.32% stake in local competitor Mlinotest. It could further consolidate this stake and with it its market position in Slovenia. Recent changes in the ownership structure (FinVita) are not taken into consideration. TOP 10 SHAREHOLDER STRUCTURE (23 July 2013) Shareholder name regular shares Number of shares Stake Modra zavarovalnica, d.d. 53, % Slovenska odškodninska družba, d.d. 43, % KD Kapital d.o.o. 31, % FIN VITA d.o.o. 23, % KD dividendni, delniški 20, % KD Galileo, fleksibilna struktura naložb 18, % ML Inženiring d.o.o. 17, % KD Rastko, delniški 11, % Towra s.a. spf 5, % Zveza bank reg.z.zo.j.bank und revisions 5, % SHARE PRICE DATA (23 July 2013) Stock data Market price (EUR) 62.0 Number of shares 355,792 Market Cap. in EUR (k) 22, week range (EUR) Avg. daily trade vol., EUR(k) 5.98 EV/Sales 0.4 EV/EBITDA 3.8 EV/EBIT 7.5 P/E 29.1 P/B Jul 12 Oct 12 Jan 13 Apr 13 Jul 13 UKIG ZTOG SBI TOP 51

51 DATA INFO PRIVATIZATION IN SLOVENIA DATA INFO: All company data, including future plans and strategy, is based on their respective annual and interim reports, company web pages and other public announcements or documents. In addition, data was taken from the following web pages: Short explanation of methodology: Net debt = Financial debt reduced by cash and cash equivalents and short-term investments. Equity and net profit = Total equity and net income, not just for majority shareholders. This implies also to all calculations based on equity or net income. EBIT = Operating profit. EBITDA = Operating profit plus depreciation and amortization costs. TTM = trailing twelve months. All data consolidated and as reported in annual or interim reports unless otherwise specified. 52