Best fund manager Openend funds on 1 year

Best fund manager Open-end funds on 1 year Sustainable and social responsible investments The KBC AM approach Geert Heuninck – Head of SRI department geert. heuninck@kbc. be +32 2 429 33 92 Januar 2007 Innovative Bausteine Portfolio

Agenda 1. 2. 3. 4. 5. 6. 7. Introduction SRI Market KBC approach Sustainability research Our products Transparency Conclusions

KBC AM overview An independent asset manager More than 50 year experience in asset managing The largest operator in Belgium - occupying a prominent position in Western Europe - a dominant force in Central Europe A leader in capital protected products (click funds, etc. ) Offices in Brussels, Dublin, Luxemburg, Prague, Budapest and Warsaw Representative office in New York & Shanghai 153 bln EUR assets under management (31 -12 -2006)

KBC Asset Management profile Market leader in capital protected funds Market share in Belgium: 60, 94% (30 -06 -2006) Top 3 player in pension funds in Belgium, Ireland Czechia Amongst the first European asset managers to have launched sector & theme funds Europartners Multi Investment Fund (EMIF): a European partnership for management and distribution Pioneer in SRI since 1992

Definitions: Corporate Social Responsibility SUSTAINABILITY: attention and care for the coming generations: “Our common future”: Brundtland Commission report 1987: "Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs" SOCIAL RESPONSIBILITY: attention and care for existing or potential inequalities within current generations, both in and outside one’s own environment (solidarity)

Key elements Continuous improvement Voluntary Triple bottom-line Communication and transparency

2. From CSR to SRI? Socially Responsible Investment combines traditional financial values with social, ethical, governance and environmental criteria by including them in investment management (saving and investing) in a - Structural, - Voluntary and - Transparent Process. Consultation with the stakeholders is an important part of this process.

2. SRI growing interest

KBC SRI funds AUM in mln euro (12/06) Open equity: (12/05) 1 y gr KBC Eco World 36 49 -26% KBC Eco Water 161 20 720% KBC Eco Alt. Energy 123 29 324% KBC Eco Sust. Euroland 11 11 0% KBC IF Ethical Euro Eq. 45 24 88% KBC Ethical Euro Bds. 736 685 7% 146 21% 43 33 30% 3, 034 997 204% KBC Eco Climate Change Bonds: KBC Renta (7) 1, 000 KBC Obli Euro 285 Mixed: KBC Global Ethic. Def. 167 Structured: KBC Sustainables (6) 427 KBC Eco Water Tailor made* Total:

3. KBC AM approach SRI funds since 1992: KBC Eco Fund World (1992) is the oldest sustainable investment fund in Belgium Since 2002: First financial institution in Belgium to carry out research via own sustainable and socially responsible investment department to screen the relative sustainable and socially responsible character of companies and countries for inclusion in sustainable investment funds. to assist its clients in their choice of sustainable investments

3. KBC AM approach sustainable investments from ‘ethical’ to ‘sustainable’ investments ethical investments sustainable investments • boycotts, ethical motivation • exclusion of certain sectors • focus on tight selection of social and environmental criteria • get even with the past • creation of shareholder value • best-in-class approach • integration of economic, social and environmental criteria • forward-looking (rather negative approach) (rather positive approach)

3. KBC AM approach Concept 1. Screening: Multicriteria referring to People Planet Profit Negative scoring on involvement with questionable practices Independency by • data provider EIRi. S (independent research institute) • methodology approved and guaranteed by External advisory board • based on mathematic scoring model 2. Composition sustainable universe: Best-in-class per sector No exclusions (except aerospace & defense and tobacco) In house screening expertise 3. Stock picking: Independent from sustainability scores 4. Fund management: no difference with classical funds 5. Control / audit: Compliance server Regular checks by VED (KBC Bank) Yearly audit by Deloitte

3. KBC AM approach External advisory board 1. External Advisory Board Independent body of experts, all academics from various Belgian and Dutch universities. Each member is a specialist in his/her particular discipline. Independent • Quality assurance of the methodology and research • Objective assessment of company and country profiles • Credibility 2. Environmental Advisory Committee (EAC) (since early ‘ 90 s) Belgian environmental experts (four academics, one research director and one consultant), Screening of companies for the KBC Eco Fund family Expertise on composition of the criterion ‘environment’

3. KBC AM approach External advisory board Composition of the External Advisory Board • president : Jaak Stokx, honorary director of Kredietbank, president of Hefboom, fellow-worker of of the Centre of Economisc and Ethics at the University of Leuven • Prof. Dr. Eva Brems, teaches Human Rights at the University of Gent • Prof. Dr. Hans Bruyninckx, teaches durable development at the University of Leuven • Prof. Dr. Luc Hens, director of the department Human Ecology at the University of Brussels and member of the federal council of durable development • Prof. Dr. Stefan Marysse, teaches International Relations in the Third World at the University of Antwerp • Prof. Dr. ir. Eric Tollens, teaches Agricultural Economy at the University of Leuven • Prof. Dr. emeritus Henk van Luijk, business ethics at the University of Nijenrode • Prof. Dr. Mieke Van Haegendoren, teaches employee relations at the University of Hasselt and is Vice-rector of the University Hasselt • Prof. Dr. Xavier Baeten, manager at Vlerick Leuven Ghent Management School • Prof. Dr. Kurt Devooght, teaches at Ehsal and is a worker at the Centre of Economics and Ethics at the University of Louvain.

4. Sustainability research in the investment process Global universe Sustainable companies and countries Investable stocks and bonds Sustainable universe regulations Strategical allocation Fund manager composes SRI fund

4. Sustainability research screening of countries: criteria economic performance, structure and policy • technological development (WEF) • public + company efficiency (IMD) • macro-economic performance (OECD) • good governance (World Bank) • corruption perception (Transp. Intl. ) Equal weighted criteria wellfare and security of the population • Human Development Index (3 items) (UN) • health care (WHO) • criminal record (UN) • labor security (ILO) Independent data equality and freedom of the population • Gini index: equality of income (UN) • Gender Empowerment Index (UN) • intergenerational solidarity (OECD) • political rights and civil liberties (FH) Yearly update environment • ESI index (50% weight ) (WEF) • ratification, international environmental treaties (UN) • ecological footprint (WWF) 50% best – in -class international relations • commitment to development (Center for Global Developm. ) • relative policy priorities (UN) • ratification, international HR & labour treaties (UN)

4. Sustainability research screening of countries: results Turkey Mexico Romania Korea S Greece United States Bulgaria Poland Croatia Italy Lithuania Czech Rep. Latvia Slovakia Estonia Hungary Portugal Spain Japan France Belgium Slovenia UK Australia New Zeeland Germany Canada Ireland Austria Luxembourg Netherlands Switzerland Denmark Finland Sweden Norway Iceland

4. Sustainability research screening of companies: criteria + + + - Economic performance Customers/supplier relations Community involvement Code of ethics Problems with legal framework Corporate Composition of the board governance Deontology Stakeholder engagement Policy Management Environment Reporting Biodiversity Performance Equal opportunities Trade unions and employee participation Internal Social Job Creation Training policy Wage structure Health & safety Global HR responsibility concerning own staff Human Rights Supply Chain responsibility Bribery & corruption Alcohol Tobacco Gambling Controversial Animal testing practices Genetic Engeneering Military Industry Nuclear power Specific weighting subcriteria Economic policy Equal weighted criteria Independent data Yearly update Continuous monitoring

4. Sustainability research screening of companies: selection Exclusion of: Research universe Global SRI universe All tobacco- and defense companies “worst-in-class”-companies, • Score on corporate governance, environment, internal social policy OR human rights within 10% worse in the whole universe OR Score controversial practices < -14, 5% Admitted companies: “best-in-class”-approach, • 40 % best scoring per sector • Oil & gas and mining: 20 % best The External Advisory Board can decide to exclude companies (temporarily) because of involvement in scandals or serious violations of one of the screening criteria.

4. Sustainability research Example Economic policy Corporate governance and business ethics Environment Internal social policy Questionable practices and technologies Total score whithout controversial practises 40% Human rights Total score Stora Enso 79% 88% 75% 71% 70% Bayer 74% 80% 92% 94% 92% 61% -10% Nippon Steel Corp. 56% 58% 71% 65% 70% 67% 17% -2% Du Pont de Nemours 50% 64% 80% 74% 42% 56% -15% Dyson Group 16% 20% 17% 25% 9% 8% 38% -3% Company 60%

4. Sustainability research Global SRI Universe Sector EUR JAP NAM PAC Ro. EUR ROW Total Energy 3 2 7 3 8 2 25 Materials 16 17 16 9 22 2 82 Industrials 27 34 21 8 65 1 156 Cons. Discr. 30 27 44 7 63 171 Cons. Staples 16 14 8 4 19 61 Health Care 7 12 22 2 21 64 Financials 53 20 48 27 65 4 217 Inform. Techn. 13 33 38 2 19 1 106 Telecom 9 3 4 2 6 2 26 Utilities 15 8 5 1 13 Total 189 170 213 65 301 42 12 950

Transparency Example

5. Our SRI products overview Bond or mixed funds: KBC IF Ethical Euro Bonds KBC Obli Euro – KBC Renta KBC IF Global Ethical Defensive 1 (80/20) Open Equity: KBC Eco Fund: • World • Alternative Energy • Water • Sustainable Euroland KBC IF Ethical Euro Equities Closed-end: KBC Equisafe Sustainables (institutional) KBC Equisafe Sustainables World (retail) Tailor-made sustainability or ethical screening

5. Our SRI products bond or mixed funds KBC IF Ethical Euro Bonds (733 mio €) KBC Obli Euro (236 mio €) KBC IF Global Ethical Defensive 1 (80/20) (173 mio €) SRI-strategy: Gov. Bonds: Country selection Corporate bonds: Global SRI universe Equities: Global SRI universe Supranationals: automatically allowed Management strategy: Identical to ‘classic’ funds top-down approach 2006 2005 2004 2003 Return Ethical Def Ethical Bonds 2. 70% 0. 12% 8. 56% 4. 12% 6. 35% 7. 46% 5. 84% 4. 41%

5. Our SRI products equity funds: KBC Eco Fund World Global SRI-strategy: Eco World Best-in-class on total SRI score Best-in-class on “environment”: • 40% best companies on environment ” • minimum “environmental score” of 60% no negative appreciation by Environmental Advisory Board Sustainable universe of 477 companies (since 2006) Management strategy: Benchmark MSCI World Top-down approach: • Regional allocation • Sectoral allocation 2006 • Stock picking 2005 2004 2003 Return Sharpe MSCI Eco World 5% 7% 0. 51 0. 78 24% 13% 2. 44 1. 40 5% 0% 0. 41 0. 02 5% 15% 0. 30 0. 79

5. Our SRI products equity funds: KBC Eco Fund Water SRI-strategy: Global SRI Eco Water Screening by Environmental Advisory Board Substantial part of corporate activity in “water” Not affected by controversial practices concerning SRI No bottling companies Water universe: 89 companies Management strategy: Top-down approach Long term assessments quarterly Investing in IPO’s Stock picking: • Investment Requirements • Regulatory Environment • New Legislation • Emerging Technology • Valuation

5. Our SRI products equity funds: KBC Eco Fund Water

5. Our SRI products equity funds: KBC Eco Fund Alternative Energy Global Eco Alt. Ene. SRI-strategy: Screening by Environmental Advisory Board Substantial part of corporate activity in “alternative energy” Not affected by controversial practices concerning SRI Alt. en. universe: 106 companies Management strategy: Top-down approach Long term assessments quarterly Investing in IPO’s Stock picking: • Current Trends • Government Subsidies • New Legislation • Emerging Technology • Valuation Current Allocation of Fund 50. 0% % 40. 0% 30. 0% 20. 0% 10. 0% Utilities Wind Energy Solar Current Portfolio 29. 2% 17. 8% 15. 1% 19. 7% 3. 8% 14. 3% Longterm Targets 40% 20% 15% 10% 5% Sector Fuel Cells Microturbines Other

5. Our SRI products equity funds: KBC Eco Fund Alternative Energy 30% Performance to benchmark 25% 20% 10% 8% 8% 1% 0% -10% -20% -18% -11% -30% 2001 2002 2003 2004 2005 KBC Eco Fund Alternative Energy 2006

5. Our SRI products SRI-strategy: Global SRI universe Management strategy: benchmark MSCI EMU Top-down approach Identical investment strategy to KBC IF Euro Equities (since 2006) Global SRI EMU

5. Our SRI products equity funds: KBC IF Ethical Euro Equities Period 2001 -2004 Return St. deviation Sharpe Since 2005 2001 -2004 Ethical Euro 2005 - nu Ethical Euro -6. 59% 24. 04% -0. 40 27. 04% 12. 39% 2. 18 -3. 92% 23. 55% -0. 25 27. 10% 12. 05% 2. 25

5. Our SRI products tailor made products Client defines own CSR criteria/ethical screens: Exclusion list (weapons, tobacco, engineering, human rights violations, breaches of conventions, …) Tailor made sustainable universe: • Additional screening criteria • Different selection criteria (best-in-class 20%) • Best-in-class (regional and small vs large cap neutral) Closed-end funds with capital protection: • Individualised baskets of companies • Selection criteria to be defined by customer

5. Our SRI products simulation 1: Green universe Criteria: Basic SRI conditions plus: + BIC environment + no/low involvement ozone depleting chemicals + use of alternative energy + No unaddressed environmental allegations SIMULATION 1 Basic conditions BIC Environment No ozone depletion Alternative energy No Env. breaches Total 950 -227 -6 -595 0 EUR 183 -35 -3 -113 0 ROE 318 -71 -2 -200 0 NAM 219 -88 -1 -107 0 JAP 166 -15 0 -139 0 PAC 64 -18 0 -36 0 Green Fund 122 32 45 23 12 10

5. Our SRI products Simulation 2: Business ethics universe Criteria: Basic SRI conditions plus: + BIC business ethics & corp governance + no gambling + no anticonception/abortus related activities/products: + Pornography: no ‘adult entertainment’ services SIMULATION 2 BIC Corp Gov Gambling Anticonception Pornography Total 950 -54 -7 -6 -15 EUR 183 -15 0 -2 -6 ROE 318 -15 -3 -2 -3 NAM 219 -2 -2 -2 -1 JAP 166 -20 0 0 -5 PAC 64 -2 -2 0 0 Ethical Fund 868 160 295 212 141 60 Basic conditions

6. Transparency Eurosif Transparency Guidelines web application: www. kbc. be/duurzaambeleggen Sector ranking with the possibility to sort on the different partial scores Company fact sheet • sustainability scores • sustainability graph Studies: sector specific studies or studies on specific CSR-issues NGO - breakfast Biannual publication of ‘Monitor Duurzaam Beleggen’

Conclusions SRI works: Growing demand for SRI funds SRI does not result in underperformance Tailor made products are possible KBC is pioneer in SRI and has a splendid track record

Ansprechpartner für Deutschland KBC Bank Deutschland AG Fondsvertrieb/Asset Management Zentrale Bremen Wachtstr. 16 28195 Bremen Tel: + 49 (0) 421 - 36 84 - 363 Fax: + 49 (0) 421 - 36 84 - 489 Internet www. kbcfonds. de Niederlassung Frankfurt Voltastr. 81 60486 Frankfurt / Main Zentrale Bremen Rainer Ottemann Tel: + 49 (0) 421 - 36 84 - 320 e. Mail: rainer. ottemann@kbc. be Thomas Meyer Tel: + 49 (0) 421 - 36 84 - 331 e. Mail: thomas. meyer@kbc. be Niederlassung Frankfurt Arend van Itterbeek Tel. : + 49 (0) 69 - 75 61 93 - 10 e. Mail: arend. vanitterbeek@kbc. be Axel Ullmann Tel. : + 49 (0) 69 - 75 61 93 - 28 e. Mail: axel. ullmann@kbc. be Peter Kruyniers Tel: +49 (0) 69 - 75 61 93 - 35 e. Mail: peter. kruyniers@kbc. be

Ansprechpartner für Österreich KBC Bank Deutschland AG Fondsvertrieb/Asset Management Zentrale Bremen Wachtstr. 16 28195 Bremen Tel: + 49 (0) 421 - 36 84 - 363 Fax: + 49 (0) 421 - 36 84 - 489 Internet www. kbcfonds. at Niederlassung Frankfurt Voltastr. 81 60486 Frankfurt / Main Niederlassung Frankfurt Wilfried Marco Thoerner Tel. : + 49 (0) 69 - 75 61 93 - 46 e. Mail: wilfried. thoerner@kbc. be Zentrale Bremen Rainer Ottemann Tel: + 49 (0) 421 - 36 84 - 320 e. Mail: rainer. ottemann@kbc. be Sandra Eichler Tel: + 49 (0) 421 - 36 84 - 266 e. Mail: sandra. eichler@kbc. be

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