Union Investment Group and Bank Gospodarki Zywnosciowej Announce Co-operation in Fund Management Business.

Business Editors

LONDON--(BUSINESS WIRE)--June 29, 2000

Union Investment Group of Germany and Bank Gospodarki Zywnosciowej have agreed to co-operate in their fund management operations in Poland.

In the first such transaction in the Polish market, BGZ's fund management company Korona will merge with Union Investment's Polish subsidiary Union Investment TFI S.A., with Union Investment Group holding 70 percent of the merged company's shares, and BGZ 30 percent. The new fund management company, to be called Union Investment TFI S.A., will be headquartered in Warsaw and distribute products through brokers, the BGZ network, and other partners. The decision was ratified at the General Shareholder Meetings of both fund management companies on 26 June, and, conditional on SEC approval, the merger will be completed by January 2001.

BGZ is the leading cooperative bank in Poland, with 319 branches and over 8,500 employees. Its Korona fund management subsidiary controls 4% of the Polish investment fund market, with a total of 180 million Zloty (45 Millionen Euro) under management.

The merged company aims to be among the top three fund managers on the Polish market. Korona's existing product range and services will be expanded, combining investment in European and Global growth stocks (the core competence of Union Investment) with domestic Polish products. Launch of the first international fund by Union Investment TFI is already planned for September 2000. Clients will therefore benefit from a broad choice of competitive and innovative products, combined with tried-and-tested expertise in fund management at an international level, and optimised efficiency of service, distribution and costs.

Both companies expect the merger to create value and synergies because of their shared mutual vision for the merged company, its strategy, positioning, and products. "Bank Gospodarki Zywnosciowej S.A. sees Union Investment as a partner with great expertise in asset management. Union Investment's experience in dealing with co-operative banks is also very important," stressed Robert Pydzik, Vice President of BGZ. Pydzik also pointed to a widening of Korona's product palette with the introduction of innovative products into the Polish market.

Union Investment, meanwhile, sees the co-operation with Korona as a strategic step into a growth market. "We are looking toward Poland because here we see one of the most promising fund markets for the future," explained Dr. Wolfgang Mansfeld, Managing Director of Union Investment. In Mansfeld's view, the Polish market is well regulated and offers a stable political environment with promising economic development. Union Investment is convinced that the relatively small size of the Polish fund market (less than 1 billion Euros) gives a lot of upward scope, as the general recognition of private investment is growing, per capita income is rising and the need for private pension saving is becoming clear.

"We therefore expect Poland to jump several stages in the development cycle and to develop quickly into a highly developed investment market," Mansfeld explained. "For instance, in the field of private pensions, Poland is even leading Germany, where there is no clearly defined third-pillar of the pension system, which already exists in Poland. The entry of Poland into the European Monetary Union should further support the financial markets and increase public awareness of private investments, as was the case for the current member states."

Mansfeld further noted that the co-operation with Korona is an integrated part of Union Investment's wider international network of partnerships.