Private Equity Business outlook in the time of change in the CEE Region

Private Equity Business outlook in the time of change in the CEE Region Prepared for Private Equity Forum & Awards Gala

2 Macroeconomic overview Poland and the CEE Region

3 Region of Central and Eastern Europe Core CEE Countries: Poland Czech Republic Slovakia Hungary Romania Other countrires: Slovenia Croatia Albania Bosnia-Herzegovina Kosovo Macedonia Montenegro Serbia Bulgaria Moldova Lithuania Latvia Estonia

4 Economic growth The year 2014 was characterized by economic growth in the majority of countries from Central and Eastern Europe. 15,00 10,00 GDP y/y quarterly 2004-2014 Lehman Brothers buncruptcy begining of the world crisis Relatively small drop in economic growth in Poland Period of stable growth in CEE countries The economic growth in Poland in 2014 reached the level of 3.4%. GDP. The growth for 2015 is forecasted at the level of 3.5%. 5,00 0,00 In other CEE regions GDP growth rate in 2014 stood at: Hungary 3.3%; After the recession in 2012, in the next 2 consecutive years have entered the path of steady growth and consequently became one of the fastest growing economies in Europe. Czech Republic 1.5%; Romania 2.8%. -5,00-10,00 European Union (28 countries) Poland Czech Republic Hungary Romania Source: GUS, Hungarian Central Statistical Office, Romanian National Institute of Statistics, Czech Statistical Office, Eurostat. Data as of 13.05.2015.

2010M01 2010M03 2010M05 2010M07 2010M09 2010M11 2011M01 2011M03 2011M05 2011M07 2011M09 2011M11 2012M01 2012M03 2012M05 2012M07 2012M09 2012M11 2013M01 2013M03 2013M05 2013M07 2013M09 2013M11 2014M01 2014M03 2014M05 2014M07 2014M09 2014M11 2015M01 2015M03 Private Equity business outlook 5 Inflation The growth of GDP dynamics in 2014 was accompanied by further drop in inflation, which was caused primarily by supply factors (decrease in energy prices (mainly fuels) and unprocessed food) and relatively low demand pressure. As a result, core inflation in the CEE region remained at historically low levels. In Bulgaria and Poland, and temporary also in Croatia, Estonia, Slovenia, Slovakia and Hungary, inflation dropped below zero. In Poland, inflation rate as of April 2015 stood at -0.9% compared with December of the previous year. In other CEE regions, inflation rate also remains at low or negative levels (as of the end of April 2015, y/y): Hungary: 0%. Czech Republic: 0.1%. Romania: 0.6%. After the period of historically low inflation levels in the second half of 2014, it is supposed to grow in the second half of 2015. Predictions show that in 2015-2016 the HICP inflation will remain low, however the slight increase should be caused by expected growth in consumer demand and the increase in core inflation. 10,0 5,0 Harmonized Consumer Price Index y/y 0,0-5,0 European Union (28 countries) Source: NBP Sytuacja gospodarcza w krajach Europy Środkowej i Wschodniej 01/2015, GUS, Hungarian Central Statistical Office, Romanian National Institute of Statistics, Czech Statistical Office, Eurostat. Data as of 13.05.2015.

2005Q1 2005Q2 2005Q3 2005Q4 2006Q1 2006Q2 2006Q3 2006Q4 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 Private Equity business outlook Public debt 6 80,0 70,0 Lehman Brothers buncruptcy begining of the world crisis 60,0 50,0 Pension Fund Reform in Poland 40,0 30,0 20,0 10,0 0,0 Czech Republic Hungary Poland Romania As of the end of 2014, the public debt in Poland reached the level of 39.50% of GDP. In Romania it was over 10 b.p. lower 27.70%. In Czech Republic it stood at 38.10% of GDP. The highest level in analyzed CEE countries was reported in Hungary, where the public debt stood at 65.90% of GDP. Source: NBP, The Central Bank of Hungary, The Czech National Bank, National Bank of Romania, Eurostat. Data as of 13.15.2015

Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Private Equity business outlook 7 Basic interest rates 18 16 14 12 10 8 6 4 2 0 Extended period of low interest rates Poland Hungary Czech Republic Romania In march, the Polish Monetary Policy Council has decided to lower the interest rate by 0.50 b.p. The reference rates stands now at 1.50% Hungary is in a period of very rapid reductions. MNB, which has been lowering the interest regularly since the August of 2012, has decided in April 2015 to lower interest rates from 1.95% to 1.80%. In Czech Republic, the interest rate has remained at the same level since the end of 2012. In Romania, for two years, the interest rate has been systematically lowered. BNR has lowered the interest rate seven times by 25 b.p. - in May to 1.75%. Źródło: NBP, The Central Bank of Hungary, The Czech National Bank, National Bank of Romania. Data as of 13.05.2015

9 Capital Market Selected key stock indices 160% 140% 120% 100% 80% 60% WIG20 (Warsaw) PX (Prague) BET (Bucharest) BUX (Budapest) ATX (Vienna) Source: Stooq. Data as of 24.05.2015.

2010M01 2010M07 2011M01 2011M07 2012M01 2012M07 2013M01 2013M07 2014M01 2014M07 2015M01 2010M01 2010M05 2010M09 2011M01 2011M05 2011M09 2012M01 2012M05 2012M09 2013M01 2013M05 2013M09 2014M01 2014M05 2014M09 2015M01 2010M01 2010M07 2011M01 2011M07 2012M01 2012M07 2013M01 2013M07 2014M01 2014M07 2015M01 2010M01 2010M07 2011M01 2011M07 2012M01 2012M07 2013M01 2013M07 2014M01 2014M07 2015M01 2010M 2010M 2011M 2011M 2012M 2012M 2013M 2013M 2014M 2014M 2015M Private Equity business outlook 10 Exchange rates (EUR/national currencies) 4,60 4,40 4,20 4,00 3,80 1,5000 1,4000 1,3000 1,2000 1,1000 1,0000 PLN USD 4,60 4,40 4,20 4,00 320,00 300,00 280,00 260,00 30,00 28,00 26,00 24,00 RON HUF CZK Situation on the foreign exchange markets in the CEE region has been relatively stable in the second half of 2014. Fluctuations of the exchange rates, caused by the Ukraine-Russia conflict, led to the depreciation of the regional currencies, especially Polish zloty and Hungarian forint. Situation on foreign exchange markets has significantly ameliorated in the first quarter of 2015. Polish and Hungarian currencies have strengthened significantly vs. EUR (by 5% and 4%). There was also a slight appreciation of Czech koruna and Romanian leu (1%). Source: Eurostat, data as of 25.02.2015

11 Basic data for selected Central European Countries Country GDP (USD billion)* Inflation rate (y/y) Industrial output (annual change, February 2015) Central Bank Rates (march 2015) EUR/currency Unemployment rate (February 2015) Poland 518-0.9% 5.2% 1.50% 4.02 7.8% Czech Republic 198 0.5% 4.5% 0.05% 27.44 5.8% Hungary 133 0.0% 6.0% 1.80% 299.43 7.4% Romania 190 0.6% 3.7% 1.75% 4.42 6.4% Estonia 24.48 0.4% 4.9% 0.05% Eurozone 5.9% Bulgaria 53.01-0.9% 2.5% 0.01% 1.96 10.2% Croatia 57.54-0.1% 1.8% 5.00% 7.59 18.4% Serbia 42.52 1.8% -3.9%** 6.50% 120.17 17.6%** Sweden 558 0.5% -3.8% -0.25% 9.33 7.9% Austria 416 0.9% (p) 1.6% (p) 0.05% Eurozone 5.4% Source: Eurostat, Statistical Office of the Republic of Serbia, National Bank of Serbia. Data for 04.2015 if not stated otherwise. *-Data for the end of 2013, (p) = provisional, ** - For Serbia data as of the end of 2014

12 Private Equity business outlook in Poland and the CEE Region

13 Sources of corporate financing in Poland The main source of corporate financing in Poland is still own capital of entrepreneurs. National credits and loans remain the second most important source of capital in Poland Sources of corporate financing in Poland in 2013 10,36% 3,82% 5,47% 3,68% 6,44% 70,23% Source: GUS own capital national credits and loans other sources budget funds direct foreign funds non-financed investments

14 Sources of corporate financing as GDP percentage in Poland 45,00% 40,00% 35,00% 30,00% 25,00% 20,00% 15,00% 10,00% 5,00% 0,20% 0,18% 0,16% 0,14% 0,12% 0,10% 0,08% 0,06% 0,04% 0,02% Capitalisation of national companies Corporate loans Private Equity Investments (right axis) 0,00% 2009 2010 2011 2012 2013 0,00% Source: http://www.gpw.pl/

Warsaw Stock Exchange in comparison with other CEE markets 15 500 450 400 Companies on WSE 700 000,00 600 000,00 Comparison of WSE Market Capitalization with selected European Countries (in mln EUR) 350 500 000,00 Warsaw 300 250 200 400 000,00 300 000,00 Prague 150 100 50 200 000,00 100 000,00 Bucharest 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 0,00 Mediolan Number of Companies Market capitalisation of national companies (mln PLN) - right axis 0,00 100 000,00 200 000,00 300 000,00 400 000,00 500 000,00 2011 2012 2013 2014 Source: http://www.gpw.pl/

16 Initial Public Offerings on European markets 90 80 70 60 50 40 30 20 10 0 819 295 126 380 80,50 14,00 7,10 26,30 27,10 11,30 26,50 49,50 Source: http://www.pwc.pl/ - IPO Watch Europe *Excludes IPOs on Borsa Istanbul and Bucharest Yearly European IPO activity 459 288 279 375 2007 2008 2009 2010 2011 2012 2013 2014 Total value of IPOs (in bln EUR) Volume of IPOs 900 800 700 600 500 400 300 200 100 0 In 2014, activity on European IPO market has been the highest since the beginning of the global financial crisis it has been the most successful year since 2007. The number of IPOs has doubled in comparison with 2013, and their total value has increased by 34%. 68% of proceeds were raised in the first half of 2014. The second half of the year saw a cooling of the market, especially in London, Europe s most active market, where only 18% of total proceeds for the year were raised in the second half Overall activity in 2014 has therefore become more geographically balanced with exchanges in continental Europe strongly improving versus prior year, with two of the top 5 IPOs listing on Euronext Amsterdam.

17 Initial Public Offerings on Warsaw Stock Exchange in 2005 2014 Number of IPOs in Poland 100 80 60 40 20 0 20,00 15,00 10,00 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total value of IPOs in Poland (in bln PLN) Warsaw Stock Exchange has dropped in the ranking of European stock exchanges. The activity on IPO market during the last 3 years has been significantly lower than in the majority of Europe. Total value of IPOs on WSE has dropped by 72% and stood at 313 mln EUR. 2014 has been the worst year in terms of public offerings since 2002. 5,00 0,00 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source Own analysis based on http://www.pwc.pl/, http://biznes.pl/, http://www.gpw.pl/

18 Investments of Polish Pension Funds on foreign stock exchanges 9 000,00 8 500,00 8 000,00 7 500,00 7 000,00 6 500,00 6 000,00 5 500,00 5 000,00 4 500,00 4 000,00 Stocks of companies listed on foreign regulated markets (mln PLN) 6,00% 5,50% 5,00% 4,50% 4,00% 3,50% 3,00% 2,50% 2,00% Stocks of companies listed on foreign regulated markets - share of total investment portfolio Source: Own analysis based on KNF

Value of Private Equity/Venture Capital investments in Poland 800 000,00 600 000,00 400 000,00 200 000,00 Private Equity investments in Poland 100 80 60 40 20 19 0,00 2007 2008 2009 2010 2011 2012 2013 2014 Total investments (in thousands EUR) Number of companies in which PE funds invested (right axis) Private Equity investments in 2014 by sectors 0 140 000 120 000 100 000 80 000 60 000 40 000 20 000 0 20 15 10 5 0 Total investments (in thousands EUR) Number of companies in which PE funds invested (right axis) Source: http://www.evca.eu/

Private Equity investments as percentage of GDP in CEE Region 20 1,00% 0,90% 0,80% 0,70% 0,60% 0,50% 0,40% 0,30% 0,20% 0,10% 0,00% Private equity investment as % of GDP 2007 2008 2009 2010 2011 2012 2013 2014 Bulgaria Czech Republic Hungary Romania Poland Europe The value of private equity investments in relations to GDP is still significantly lower in the CEE region than in the Western Europe. However, it is expected that, together with further GDP per capita growth, the value of PE investments should also grow, especially in Poland.

21 Characteristics of the Polish Private Equity market 800 000 700 000 600 000 500 000 400 000 300 000 200 000 Private Equity investment in Poland (in thousands EUR) In recent years, institutional frames that support private equity activity have developed in Poland. In that, Poland is becoming more similar to countries from Western Europe, hence offering to investors the growth potential. 100 000 0 2007 2008 2009 2010 2011 2012 2013 2014 Investments by local private equity firms (-) Foreign investments by local private equity firms (+) Local investments by foreign private equity firms Total nvestment in Poland Source: EVCA, KPMG Total investment = investments by local private equity firms foreign investments by local private equity firms + local investments by foreign private equity firms

22 The value of IPOs in comparison with Private Equity/Venture Capital investments in Poland 6,00 5,00 5,13 4,00 4,09 3,00 2,00 2,91 1,80 2,23 1,00 0,00 0,43 0,64 1,16 0,82 0,65 0,68 0,47 0,27 0,38 0,32 0,25 2007 2008 2009 2010 2011 2012 2013 2014 Total value of IPOs (in bln EUR) Tolal PE investment in Poland (in bln EUR) Source: http://www.evca.eu/, GPW

Annual investments of Private Equity business in the CEE region* Private equity investment in the CEE region totalled 783m in 2013, a 22% fall on the 2012 level. However, the number of companies receiving investments increased by 7% to 241. Poland Czech Hungary Slovakia Bulgaria Ukraine 23 Poland is considered to be the most important and the most attractive private equity market among the CEE countries. Croatia Romania Estonia Lithuania Slovenia Latvia Serbia 0 200 400 600 800 1000 1200 1400 2013 2012 2011 2010 2009 2008 Source: EVCA Central and Eastern Europe Statistics 2013, KPMG W POLSCE Rynek Private Equity w Polsce: fakty a opinie *no bank leverage included (in million EUR)

Mar-03 Oct-03 May-04 Dec-04 Jul-05 Feb-06 Sep-06 Apr-07 Nov-07 Jun-08 Jan-09 Aug-09 Mar-10 Oct-10 May-11 Dec-11 Jul-12 Feb-13 Sep-13 Apr-14 190 Private Equity business outlook 140 100 90 40 Assessment of Private Equity/Venture Capital sector in Europe Central Europe PE Confidence Index* 156 148 139 154 149 155 153 159 118 102 48 78 140 138 153 117 70 101 71 127 144 101 Confidence continues to rise, with 18 months of unbroken improvement seeing the index at its highest level since 2011. The index is nearing its 2007 peak, with respondents optimistic about the economy, market activity and leverage availability. Portfolio management is giving way to new investments as deal doers increased confidence gives them courage to originate again. Poland has the highest VC/PE attractiveness rank within CEE countries. The 2013 VC/PE Country Attractiveness Index Ranking** Rank Country Score 1. United States 100.0 2. Canada 97.8 3. United Kingdom 95.4 28. Poland 70.3 33. Turkey 67.4 35. Czech Republic 66.4 42. Hungary 59.9 44. Lithuania 59.9 45. Slovakia 59.1 46. Slovenia 58.6 53. Bulgaria 53.4 60. Latvia 51.1 62. Romania 50.9 65. Croatia 48.8 24 Source: Delloite - Hitting the right notes Central Europe Private Equity confidence survey, The Venture Capital and Private Equity Country Attractiveness Index 2013 Annual - Alexander Groh, Heinrich Liechtenstein and Karsten Lieser *The PE Confidence Index is based upon answers received from PE professionals focused on Central Europe. It is composed from answers to the first seven questions of the survey. For each period the average of positive answer ratios over the sum of positive and negative answers is computed. This average is compared to the base period, which in our case is spring 2003. ** Ranking based on the following factors : 1. Economic Activity, 2. Depth of Capital Market, 3. Taxation, 4. Investor Protection & Corporate Governance, 5. Human & Social Environment, and 6. Entrepreneurial Culture & Deal Opportunities

25 Prepared by DFCM Research and Analysis Unit Jarosław Dąbrowski CEO Tel.: +48 693 333 555 E-mail: j.dabrowski@dfcm.eu DF Capital & Management Sp. z o.o. Aleje Jerozolimskie 134, X floor 02-305 Warsaw Tel. +48 22 128 59 71