EU

Ukraine

Moldova

Russia

Horizon Capital An Investor’s Perspective March 2016

Horizon Capital - 20 years of mid-cap PE investing in Ukraine & Region

2

Operating in Ukraine since

1995

Managing over $600m in

3 funds

39 Ukrainian investee

companies

> $365m invested in

Ukraine

Leading institutional investors backing us

The Church Pension Fund

A ground-floor investment opportunity at the EU’s frontier

“…Next door to Russia there is a complicated place, but also more attractive – it has a much better Finance Minister than anyone you can find in that part of the world… Ukraine is an extremely attractive place to invest and I would look at that place as a place if you want to take some risk and you are investing in dollars, but there aren’t that many people investing in Ukraine, so you’re probably going to buy some things that are going to be relatively inexpensive” - David M. Rubenstein, Carlyle Group

"I stand ready. There are concrete investment ideas, for example in agriculture and infrastructure projects. I would put in $1 billion” - George Soros, Soros Fund Management

"I am extremely encouraged by the progress that has been achieved in the past few months. In a difficult environment, macroeconomic stabilization is taking hold and the economy shows signs of turning the corner. This achievement is a tribute to the courageous work of the Ukrainian authorities.” - Christine Lagarde, International Monetary Fund

3

Reforms: Proven to turn laggards into leaders

Pre-reform govt Post-reform govt Starting point Outcomes

8%

17%

-6%

14%

-1%

9%

6%

13%

1990-2000 2000-2014

1990-2004

2004-2014

1990-2001

2001-2014

1990-2004 2004-2014

Per capita GDP growth per annum during period*

• Black sheep of Europe • Missing EU accession

opportunity • Limited growth

• Zero to highest automotive output per capita in a few years

• Exports drove growth, from $19bn in 2000 to $66bn in 2013

• Fastest growing economy in Europe through 2008

• Endemic corruption • Crippling energy blackouts • Economy in shambles

• From #98 to #8 in Ease of Doing Business by 2014

• One of the fastest growing economies in the world

• Ruinous Asian crisis • Sluggish economy • President impeached • Separatist war in the South

• Sound national security • Real GDP CAGR of 5.4% during

2002-2014 • BPO crucial catalyst, built on

young, cost-competitive English-speaking generation

• Failed state • Recession • Weak institutions • War vs. guerillas

• National security key priority • GDP CAGR 4-5% thru 2014 • FDI <$2bn to >$16bn in 2013 • Exports up 4.3x to $67bn

Slovakia

Georgia

Philippines

Colombia

Sources: 1)World Bank 2)The Economist * Note: Based on growth of nominal GDP per capita in USD 4

Ukraine = grains too

5

Ukraine = grains too

6

b

Top math and science education, starting with primary school

7

US 1

China 2

Ukraine 11

Romania 13

France 14

Germany 27

India 37

Netherlands 43

Czech Republic 45

Belgium 56

Source: International Mathematical Olympiad, Eurostat, OECD, Ukrstat 2014

Results at the International Math Olympiad, global rank

Share of math, science and computing graduates, %

8%

6%

2%

10%

0%

4%

4.9% 4.4%

Latvia

3.9%

9.8%

Lithuania

5.1%

Ukraine Bulgaria

6.3%

Hungary

6.8%

9.9%

Romania Poland Netherlands

Strong technical education ensures high quality of students…

8

United Kingdom 1

Hungary 9

Germany 11

France 12

Ukraine 13

Netherlands 18

United States 26

Poland 32

Romania 48

Philippines 115

Source: goodcountry.org, Universitas 21

Good Country Index: Science and Technology parameters reported to GDP, rank

US 1

Netherlands 7

Germany 14

France 17

Hungary 30

Poland 32

Ukraine 41

Romania 42

Turkey 49

India 50

Universitas 21, university research quality, rank

…and feeds abundant technical talent into the market

9

Engineering graduates per annum in European countries, thousand students

13

4856

667175

93

105

130

0

20

40

60

80

100

120

140

Netherlands Italy Spain Poland UK Turkey Germany France Ukraine

Source: World Economic Forum, Forbes, 2014, IVC, www.business-standard.com

Programmer salaries among the most competitive in the world

10

Average salary among developers with +5 years experience, thousand USD per annum

Source: Stackoverflow Developer Survey 2016

33

545555

70747677

80

106

0

20

40

60

80

100

120

Ukraine Germany

-69%

Israel Australia United States

UK Netherlands China Ireland Canada

Largest IT outsourcing force in CEE & among top ones globally

11

Kharkov 6.7%

Kyiv 6.6%

Lviv 3.4%

Zaporizhya 3.1%

Omsk 3.1%

Moscow 2.8%

Minsk 2.7%

Novosibirsk 2.6%

Bucharest 2.5%

Belgrade 2.3%

Source: dou.ua, Elance

3% Macedonia

3%

Croatia 2%

Moldova 7%

Other

7% Poland

4% Belarus

4% Bulgaria

Serbia 8%

21%

33% Ukraine

Russia

9%

Romania

Top CEE countries by IT freelance outsourcing, % Top CEE cities by IT freelance outsourcing, %

Ukraine is the #1 IT outsourcing country in CEE, by a wide margin; #3 by freelance outsourcing in the world after US, India

As result, IT outsourcing grew at 30% annually for over 10 years

12

Total size of the IT outsourcing market in Ukraine, USD million

Source: Ukrainian Hi-Tech Initiative, Symphony-solutions, Kyivpost

2,379

2,000

1,400

1,100

874697

530544390

250165110

2,500

0

500

1,000

1,500

2,000

2,500

2003 2004 2010

+30%

2005 2014 2009 2007 2013 2012 2011 2006 2008 2015

Beats growth in global IT outsourcing by a wide margin

13

437

368

257

202

161128

97

144141123121112107

111

0

100

200

300

400

500

2007 2008 2009 2010 2011 2012 2013 2014

Growth in Ukrainian IT outsourcing sales vs. the global market, indexed (2007=100)

Source: Ukrainian Hi-Tech Initiative, Symphony-solutions, Gartner

Global IT outsourcing

Ukrainian IT outsourcing

Ciklum – leading IT outsourcer [exited to Soros Fund]

14

2,5002,379

2,000

1,400

1,100

874

697

530544390

250165110

0

500

1,000

1,500

2,000

2,500

2015 2005 2009 2007 2011 2013 2003

IT outsourcing market, $m

Top 5 player in CIS

Up from 1800 to 2700 people

Revenue up 2x in 3 years

40% CAGR 2007-2014

Over 200 global clients

Gartner Cool Vendor

Ciklum performance

30%

Source: Ukrainian Hi-Tech Initiative, Symphony-solutions, Kyivpost

15

Average salary of IT specialists, $k per year

Jooble – top-5 global jobs search engine

33

545555

7476

106

0

20

40

60

80

100

120

Germany US China

-69%

Ukraine Netherlands Israel UK

Top-5 global job search engine

Unique R&D technology

Serving 64 markets from UA

Selling in 24 languages

Low costs = high margins

Revenue up 9x in 5 years

Jooble performance

Source: Stackoverflow Developer Survey 2016

16

Rozetka – the “Amazon” of Ukraine

• Company’s monthly internet reach in Ukraine comparable to Wikipedia, Facebook

• Undisputed market leader of Ukrainian ecommerce, 8x site visits vs. #2 player;

• Huge user base: 5m registered users, 660k YouTube subscribers, 20m monthly emails

• Ukrainian e-commerce market has grown nearly 6x in 7 years in USD terms

• Internet penetration is still only ~37%, 2-2.5x lower vs. EU countries

• Only ~20% of Ukrainian internet users shop online, with share up 2x in 2 years

Source: retailresearch.org, postnord.com

20%

40%

60%

80%

100%

0% 20% 40% 60% 80% 100%

Netherlands

Sweden

Germany

UK

Ukraine

Italy

Poland

Spain

France

% of internet users shopping online

% o

f in

tern

et u

sers

in t

ota

l po

pu

lati

on

Undisputable #1 in a high growth market

Ukraine has among the lowest living expenses in the world

17

India 122

Pakistan 120

Ukraine 117

Philippines 105

Romania 103

Poland 90

Hungary 80

China 61

Germany 29

Netherlands 23

Bermuda 1

Source: numbeo.com, 2016

Cost of living, including rent, global ranking (lower = cheaper)

One bedroom rent (centre), month 294

Intercity train Kyiv-Lviv (500km) 16

Two courses in fancy restaurant 15

Dry-clean suit 10

Theater ticket 5

Haircut 5

Taxi trip 3

A bowl of borscht 2

Tomatoes, 1kg 1

Milk, 1L 0.6

Prices of selected items in Kyiv, USD

The beer and burgers are the cheapest in the world too :)

18 Source: Wall Street Journal, The Economist Big Mac Index – January 2016

0,0

1,0

2,0

4,0

3,0

5,0

7,0

6,0

1,7

Berlin Kyiv Dehli

1,8

4,5

New York

2,6

Ams terdam

5,2

Hong Kong

London

3,6

6,2

Geneva

6,3 7,0

1,0

2,0

5,0

6,0

3,0

4,0

0,0 France

6,4

3,9

4,4

4,9

US Switzer. Ukraine Nether lands

3,7

Ger many

1,9

India

1,5

Average price of a 330ml beer, USD Price of a Big Mac, USD

And all this in a progressive, cosmopolitan, European country

19

Vasile Tofan

Partner

Horizon Capital

Tel +380 44 490 5580 Mob +380 98 382 7989

vtofan@horizoncapital.com.ua

20

Contacts For More Information

www.horizoncapital.com.ua/groundfloor-opportunity

80+ slides on Ukraine: Ground-floor Opportunity

EU

Ukraine

Moldova

Belarus

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Horizon CapitalGround floor opportunity

July 2015