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Central Europe 2012

Uncovering thecore. 500 companies 18 countries 5 industries

This is thefirst time that Ihave had thepleasure of welcoming you to theDeloitte Central Europe Top 500 ranking and report. This is thesixth year that we are publishing our essential annual publication that provides insight into thekey factors affecting thecorporate business community across the18 countries of theCentral European region. This year is proving to be achallenging one for businesses all over Europe; in thecurrent climate, theonly certainty we have is uncertainty. Even though countries in our region are, in general, faring better than many elsewhere, this does not mean that we are in any way immune to theimpact of thealmost daily turbulence that continues to shake our interconnected economies. In this challenging environment, there is one consistent driver that influences thedecisions that businesses must make every day on how they respond to such issues: leadership. This is why throughout this years report we are focusing on thecritical importance of leadership at all levels in achieving organisational and market success. As you read theperspectives of Deloitte partners and executives from some of theregions largest companies, Iam confident you will see how thequalities of good leadership can and dopermeate every organisation. Inside this report, one of our interviewees says: When acompany is facing atime of turbulent change, they will find themselves in trouble unless they have agenuine leader. This statement was never more relevant than it is today. By focusing on thelargest 500 companies in Central Europe, we are identifying some of thecommon leadership themes that have helped them find success while others continue to struggle in theongoing effects of thefinancial crisis. Personally, Ibelieve that themost important attribute of atrue leader is theability first to create acompelling vision for anorganisation and then to align its people through outstanding teamwork and communication to ensure that strategic goals are achieved. Within that context, Ibelieve that this report has areal story to tell in underlining how Central Europes business leaders are managing to steer their companies through some turbulent economic waters. Ihope you find it as interesting and meaningful as Ido.

Alastair Teare Chief Executive Officer Deloitte Central Europe

Contents

Foreword 3 Ranking overview Major leadership concerns Index of success Industry insights 6 19 28 34

Ranking overview

For thesecond consecutive year, theDeloitte CE Top 500 ranking is overshadowed by speculation over thefuture of theeurozone and economic uncertainty across Central Europe. That said, thebusiness performance of theregions leading companies throughout 2011 was surprisingly good, with median revenues growing by 9.8%. This is acontinuation of thepositive trend from 2010, which saw median revenues grow by 11.4%. Thetotal revenue of all thecompanies we surveyed reached EUR 706 billion, returning to thelevel of 2008 before theregion felt theimpact of theglobal crisis. It is interesting to note, however, that theaverage net profitability thecompanies delivered dropped by 3.5% in 2011. Performance data for thefirst three months of 2012 show acontinuing increase in average revenue levels, but only at half therate achieved throughout 2011. This may indicate theapproach of another economic slowdown.

Tomasz Ochrymowicz Partner, Financial Advisory Deloitte Central Europe

Central Europe TOP 5002012

Little movement in thetop 10

Polish state-owned petrochemical business Lotos has joined thetop ten companies in Central Europe, moving up from eleventh to seventh place following a44% increase in revenues resulting from further implementation of the10+ investment programme (completed in March 2012) and rising oil prices. Indeed, petrochemical and power companies continue to dominate theregions business landscape, taking seven places in thetop ten. Theonly exceptions are retailer Jeronimo Martins and manufacturing companies Skoda Auto and Metinvest. Metinvest, in fact, has risen by two places to take fourth position following its acquisition of theZaprozhstal steel company. State-owned Polish gas business PGNiG is theonly company to leave thetop ten this year, having generated insufficient growth (4.8%) to maintain its place in theleading group. Theconsolidation of Vatenfall Heat Poland, acquired in 2011, will potentially help PGNiG to achieve ahigher position in next years ranking. Interestingly, Czech state-owned power company EZ has seen another fall in theranking (from fifth to sixth place) despite its continuing position as theregions leading company by market capitalisation. Jeronimo Martins completes thetop ten, having maintained theposition it first claimed last year. Thebiggest jumpers State-owned Polish manufacturing company Azoty Tarnw stands out as thebiggest mover of theranking, having risen from 416th to 144th place. Its operations have grown by over 170% following theacquisitions of Zakady Azotowe Kdzierzyn and Zakady Azotowe Police. Skoda is not theonly outstanding performer in theCzech automotive marketplace: significant investments in increased production capacity have seen Hyundai Motor Manufacturing Czech rise from 149th to 51st place in theranking.

Estonian fuel marketing and distribution company Baltic International Trading has seen a106% increase in its revenues, propelling it from 326th to 136th place. And Kernel, aUkrainian food producer quoted on theWarsaw Stock Exchange, has risen from 256th to 131st place thanks to significant revenue growth mainly resulting from increased exports to theRussian market. Thetrends at play in 2012 Last year saw acontinuation of 2010s economic growth across theregion. This was especially strong in Poland (4.3%), Slovakia (3.3%) and theBaltic States. However, along with theweakening of thekey European drivers of growth, most particularly theGerman and French economies, we can already detect early signs of economic slowdown in company results from thefirst quarter of 2012. After this period, Polands GDP growth had fallen to 3.8% while theGDPs of theCzech Republic and Hungary fared even worse, decreasing by -1% and -1.5% respectively. Similar conclusions can be drawn from Deloittes most recent CFO Survey, which presents theopinions of financial directors on thefactors most impacting their business. According to the2012 survey, themajority of respondents expect very low economic growth of only 0% up to 1.5%, with theexception of Poland where theGDP growth between 1.5% up to 3% is expected. As in 2010, growing exports were thekey driver of economic growth in Central Europe in 2011. In theCzech Republic, Hungary, Slovakia and Poland exports grew by 11%, 8.4%, 10.8% and 7.6% respectively. Germany continues to be thekey trading partner of these economies, and all countries across our region have benefited from an11% growth in exports to Germany alone.

Companies performing well globally and locally Thepotential for anupcoming economic slowdown is anticipated in quarterly revenue data which show median quarter-on-quarter growth of 4% in 2012 (less than half of thetotal 2011 growth). With its companies showing anmedian revenue growth of 22%, Latvia appears to be thestrongest country in this category.

Graph 1: Median% revenue change - Q1 2012 vs. Q1 2011

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Graph 2: Top 500 broken down by country by number of companies - 2011, 2010

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Thenumber of Polish companies in theTop 500 has continued to decrease due to theconsolidation of thepower sector among other factors. Nevertheless, Poland remains theleader in terms of thenumber of companies in theranking, with 167 now on thelist. Each year we see agrowing number of Romanian and Ukrainian companies who benefitted in 2011 from dynamic revenue growth of 17% and 24% respectively. Themanufacturing industry recorded high growth in thenumber of companies in theranking, rising by 9 to 129 (more than 25% of thelist). Theincrease follows very good company results across thesector, with median growth of 17%. This was mainly aresult of thegood shape of theprocessing industry (including chemical and metal companies), taking advantage of apositive overall economic situation. Median revenue growth across thewhole processing industry subsector was 22%.

Interestingly, no growth was recorded in thenumber of construction companies on thelist, even though construction achieved thehighest increase in revenue of any industry (with amedian increase of 21%). Thegroup of 11 industry representatives is made up of seven Polish and four Czech companies, and revenue growth was mainly driven by Polish companies whose many projects included preparation of theinfrastructure for Euro 2012.

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Graph 5: Median revenue change - annual, 2011 vs. 2010


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Real Estate and Construction Manufacturing Energy and Resources TOP 500 Consumer Business and Transportation Life Sciences and Health Care Public Sector Technology, Media and Telecommunications

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Value by capitalisation As has been thecase in all theprevious editions of this report, EZ remains thecompany with thehighest market capitalisation. It maintains a50% lead over thesecond-placed company, thePolish bank PKO BP. Please note that the2011 year-end valuations of almost all thefeatured companies were lower than in 2010. At theend of July 2012, PZU rose up theranking following a23% growth in value compared with theend of 2011.

Table 1: Top companies by market capitalisation # Company Country Market capitalisation (in EUR million) Asof 31.12.2011 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 EZ PKO BP Pekao PGE PZU MOL KGHM PGNiG Komern banka INA TPSA ING Telefnica Czech Republic PETROM BZ WBK PKN Orlen OTP Bank BRE JSW Richter Gedeon Handlowy T-HT Group Tauron Synthos ZABA Czech Republic Poland Poland Poland Poland Hungary Poland Poland Czech Republic Croatia Poland Poland Czech Republic Romania Poland Poland Hungary Poland Poland Hungary Poland Croatia Poland Poland Croatia 16,390 9,090 8,388 8,763 6,041 5,828 5,008 5,450 4,906 5,053 5,210 4,823 4,783 3,803 3,739 3,283 2,896 2,345 2,270 2,049 2,009 2,631 2,123 1,318 1,727 Asof 31.07.2012 14,744 9,853 8,897 8,435 7,414 6,168 6,146 5,795 5,261 5,147 5,102 5,001 4,955 4,798 4,068 3,714 3,522 2,912 2,663 2,581 2,567 2,219 1,955 1,701 1,676 -10% 8% 6% -4% 23% 6% 23% 6% 7% 2% -2% 4% 4% 26% 9% 13% 22% 24% 17% 26% 28% -16% -8% 29% -3% Change

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Company ownership We have not noticed any major changes in theshare of foreign investors in theregions companies. Thenumber of state-owned companies has decreased, however, due to ahigher number of shares going into thehands of investors from Central Europe (Poland in particular). Theconsumer and transportation industry saw thehighest growth in this regard, with thenumber of shareholders from theregion increasing from 43 to 56. Theproportion of shareholders from outside theregion grew most in themanufacturing industry, at theexpense of theTechnology, Media and Telecommunications (TMT), Life Sciences and Health Care and Energy & Resources industries.

Table 2: Breakdown of ownership by industry Status 2011 Consumer Business and Transportation Energy and Resources Life Sciences and Health Care Manufacturing Public Sector Real Estate and Construction Technology, Media and Telecommunications Total Non CE private sector 82 56 12 97 9 25 281 CE private sector 56 39 8 23 2 7 135 State owned 14 53 9 6 2 84 Total 152 148 20 129 6 11 34 500

Table 3: Largest foreign groups in CE - 2011, 2010 No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Company Volkswagen E.ON Metro RWE OMV Samsung Electronics Lukoil Tesco Deutsche Telekom Arcelor Mittal Foxconn Nokia France Telecom Renault Fiat REWE Kaufland BP British American Tobacco Philips Eni Shell U.S. Steel Carrefour Lidl Revenues 2010 (mln EUR) 20,768 10,905 8,571 7,766 8,306 8,143 7,305 7,410 7,280 8,331 5,785 5,752 5,687 4,606 5,041 4,443 4,565 4,270 2,829 3,772 2,854 3,414 3,239 3,209 3,089 Revenues 2011 (mln EUR) 25,059 11,308 7,799 8,280 9,857 7,721 8,703 8,078 6,941 9,496 5,197 3,707 5,291 5,170 5,161 4,660 5,056 4,597 3,372 3,129 2,890 3,315 3,156 3,123 3,320 Change (%) 20.7% 3.7% -9.0% 6.6% 18.7% -5.2% 19.1% 9.0% -4.6% 14.0% -10.2% -35.6% -7.0% 12.2% 2.4% 4.9% 10.7% 7.7% 19.2% -17.1% 1.2% -2.9% -2.5% -2.7% 7.5%

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Graph 6: Thepercentage of companies with revenue increase vs. decrease - 2011 vs. 2010 by country

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Graph 8: Thepercentage of companies with revenue increase vs. decrease

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Thebigger picture To sum up, 2011 saw continued growth among thebiggest companies from all theregions countries and industries (except TMT), while average net profitability declined (-3.5%). To asignificant extent, this was theresult of rising prices of theraw materials used in theproduction of theexported goods and growing exports. While theregions companies continued to grow in thefirst quarter of 2012, this was at only half therate of 2011. In addition, data from thefirst quarter of 2012 show further decrease of theaverage net income by 5.6%. Likewise, countries have seen adecline in their GDP growth following thefirst three months of 2012, which may suggest that aneconomic slowdown is on its way.

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Leadership is theability to manage thehearts and minds of individuals and teams alike to manage by setting anexample. It is theability to make theright decisions in critical circumstances, anatural process of translating team motivation into individual determination. It entails establishment of clear standards of action, planning and team performance. Modern leadership entails responsibility; it is anobligation to be honest and aprivilege to give support to others. It requires of you to push beyond thelimits.
Dariusz Mioduski, CEO, Kulczyk Investments, Poland

In crisis Ibelieve you can create acompetitive advantage by looking at crisis as opportunities and being clear about your strategy by focusing on leadership under pressure, performance under pressure, clear communication, visibility in theorganisation and really having excellent execution. Engagement in thecompany is really key and this is theway that you can create thewinning mindsets and win compared to your competitors in themarketplace.
Christopher Laska, CEO, Telenor, Hungary

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Major leadership concerns


Theconcept that theworld operates in astate of unchanged predictability has been strongly challenged, and even thenotion of leadership itself is changing. With theincreased integration and cooperation of companies, resources and talent, it is now possible that asingle seemingly local and minor crisis may impact thewhole business world. Interdependence, correlation, cooperation and interconnection these are thewords that repeatedly remind us of theunprecedented complexity of thecurrent business environment.
Magdalena Joczak, Director, Consulting, Deloitte Poland

Examining thefactors that drive true leadership According to arecent Deloitte global research project1, themarket perception of its leaders can affect acompanys share price by as much as athird. Based on asurvey of leading market analysts, thereport finds that thequality of senior leadership including core capabilities as well as personal qualities such as honesty and integrity has adirect and measurable impact on analysts assessment of whether companies have been successful and will be successful in thefuture. This may sound like abold assumption, particularly given that leadership has long been perceived as anintangible, magical power that you are either born with or not. It is widely believed, in fact, you cannot name thespecific skills and traits that asuccessful leader should possess in order to get things done. Too often, though, leadership is mistaken for adescription of acharismatic persons actions, rather than theaction of leading. However, this is now changing. Today we know that leaders can be developed and made, shaped by education or environment and guided by great mentors and teachers. There is no doubt that today we can observe agreater focus on leadership than ever before. Increased globalisation and revolutionary changes in technology are posing new challenges as well as new opportunities for businesses.

Jzef Wancer, along-time banking leader and architect of many thriving careers in thePolish banking sector, and now aDeloitte adviser, has written2 that thereal tasks of aleader lie in not so much optimising management methods but in fostering proper relations with their team. These relations form abilateral contract that ensures company goals are met in exchange for theemployees development. Asimple model, but still agreat one for those who aspire to inspire thecrowds. Thetrends that affect leadership Leaders now need to accept that there are strong trends affecting in many ways their operational environment and thepeople they work with. They must look for new ways to lead more effectively in such anuncertain environment. They must learn constantly and stay abreast of emerging trends and threats, as these may soon evolve into opportunities. Now, more than ever before, they need to build thecommitment of their people and their teams to help cope with thefast-changing environment and powerful trends that will continue to dominate our reality for years to come. Theprogress of new technologies is continuing to open up many new opportunities and threats alike. Thedigital revolution is fundamentally changing theways in which companies interact with their stakeholders. Networks such as Facebook and Twitter are powerful tools that can ruin astrong brand or company valuation within seconds.

1 Theleadership premium: How companies win theconfidence of investors, Deloitte March 2012. 2 Article in ThinkTank magazine Lekcje zosigania celw przez wolno (Lessons in achieving goals through freedom).

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In theworld where theonly constant is sudden change, fundamental values are becoming more important than ever before. To successfully manage anorganization one should always remember that stressing efficiency at all cost leads to spectacular failure. Every soldier has theright to acompetent commander, and similarly, every employee has theright to work with acompetent and wise leader, who will not play God, who knows his or her constraints, learns from thewiser and takes appropriate decisions focused on thebest interest of thecompany. Top position in acompany does not entail power and privileges. What it really means is responsibility.
Andrzej Klesyk, CEO, PZU, Poland

First days at university, alecture in philosophy and revelation: in this discipline, questions are what matters most. In fact, questions often carry more weight than answers. Ibelieve this also applies to everyday business practise: leadership is mostly about asking questions. Questions that inspire, questions that help break theroutine, questions that show adifferent perspective, questions that give courage in thinking and acting, questions that matter. Let theanswers come from people it will motivate employees, unite theteam and in long term bring better results than leading with recipes.
Piotr Szeliga, CEO, Boryszew, Poland

My view of leadership has two principal components. One has to excel in areas you want your people to excel otherwise, you might want to dotheright thing but you lack credibility. And theother component is that you have to sell your vision to your people so that they want to follow you rather than being forced to doso.
Josef Kotrba, Office Managing Partner, Deloitte Czech Republic

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With technology continuing to blur thelines between professional and private lives while giving rise to expectations of theinstant and sometimes ill-considered response, leaders need to work on theproductivity and integrity of their employees as well as thesecurity and reputation of their companies. Other challenges meanwhile, such as theincreased risk of technological failure, cyber security threats and theadaptation of different social groups to technological change also call for strong commitment. Such advances in technology give consumers easy access to better information and awider array of alternatives to choose from, leading to rising demand for innovative, customised products and animproved customer experience. For this reason, customers and consumers are becoming less loyal than ever before, easily comparing options and potentially switching vendors or products. Moreover, consumers will no longer just be passive recipients of information instead theyll be creating and updating marketing content, blogging, commenting and creating communities around products and brands. As aresult, they will increasingly expect to have significant input into what is being sold to them. This changing balance of power will affect all industries. In addition, these and other challenges can interact with each other, blurring theline between cause and effect. For example, customer expectations may drive demand for innovative products, but innovative products may be theresult of accelerating technological development3. Having theright people is thekey to meeting all thechallenges of todays world. This is by far themost important element that leaders need to embrace. Shrinking numbers of people in thelabour force and changing demographic structures mean that people from different generations and cultures are more regularly meeting in theworkplace. People are continuing to work until later in life and as attitudes to career are changing, leaders need to reshape their approach to long-term career and succession planning. Thedeclining population in our region is also resulting in astrong need both to find and to retain talents.

Collective leadership Leaders cannot act alone. Addressing market complexities should be atruly collective endeavour4. This is why it is now more important than ever for theconcept of leadership to embrace both leaders and followers. People are essential for success may be aclich, but today it is crucial to learn from your team and to apply that knowledge for everybodys benefit. Collective leadership is what happens when alarge group of people come together and commit to making big things happen. As One. If in your organisation leadership means getting things done through other people, then it is vital to get those people on board. Working as one towards acommon goal collective leadership is important because we are rapidly moving closer to aworld where technological advancements will continually redefine how we doour jobs and how we interact with each other. This means it is no longer possible to assume that you have thefull commitment or loyalty of your team. And today, more than ever, leaders need this full commitment and loyalty if they are to succeed in anintensely competitive world. Aleaders vision can only come alive if he or she inspires followers to voluntarily commit to it. Todays difficult economic environment has caused many leaders to change their strategic direction and restructure their organisations. Many have had to reduce their workforce and make substantial cost reductions, including those in salaries. Some have merged with former competitors, resulting in achallenging change in identity for their corporate cultures. In theface of crisis, theconcept of collective leadership provides leaders with theunderstanding, data and tools necessary to regain trust, re-inspire purpose and reactivate engagement. It can help leaders who have lost thehearts and minds of their people. Research has shown that there are multiple ways of leading and no single one that is right above all others. Collective leadership builds on afoundation of understanding how employees feel about their organisations and provides new insights on how to inspire people into effective action.

3 Coping with complexity: Leadership in financial services, Deloitte. 4 Theleadership premium: How companies win theconfidence of investors, Deloitte March 2012.

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In my view, atrue leader respects theopinions of others, no matter who they are. Second, leaders keep their word if they say they are going to dosomething, they should doit; that is how people will have faith in them. And third, they should be capable of having empathetic, human relationships; they should never forget that their people have families, for example, and that they may have to deal with issues in their personal lives that should not be disregarded because of work priorities.
Ivo Kocin, IT Director, D Cargo, Czech Republic

Leadership brings vision, clarity and purpose to anorganization. We are living in adynamic environment due to economy situations, technological changes and developing competitive landscapes. In addition to theknown leadership attributes such as vision and strategic thinking thecurrent leadership needs to be able to deal with mindset change implemented through either achange in strategy or change in actions that help in executing theexisting strategy. Itherefore believe that entrepreneurial agility that fosters innovation and develops talent that is adaptable and ready to deal with thechange should be high on theagenda of todays leaders.
Ahmed Hassan, Office Managing Partner, Deloitte Romania

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With collective leadership, thefocus of theorganisation shifts away from traditional thinking about employee engagement and retention to focus on asingle question: What does it take to increase thelikelihood that theworkforce is properly engaged in delivering thebusiness strategy? Adapting to anew world order Thepast couple of years have been tough. Therecent economic turmoil in Europe leaves no doubt that we are now dealing with theso-called new normal. Themajor trends driving business today revolutionary technologies, cost-consciousness, talent shortages and unrelenting change will most probably stay with us for good. Those leaders who understand that these conditions will continue to accelerate, and seek to leverage them for thebenefit of their companies, will succeed. And those who learn how to lead in partnership with their committed teams will thrive. In this new context, leadership must enable organisations to collectively make sense of thecomplexities they face. Thepriorities are to deliver change, to ensure consistent communication, to strengthen thecorporate culture and to unite people to meet common goals. Leading organisations and their talented leaders are able to turn challenges into opportunities by rethinking and improving how they execute their business strategies. Jzef Wancer has stressed theimportance of thefreedom to concept in leading people to achieve common goals. Freedom to think independently. Freedom to make decisions. Freedom to take responsibility. Todays leaders more than ever depend on thequality of their relationship with thepeople they work with. Wise bosses, managers, supervisors and mentors give their people freedom to act, to create and to grow through their experiences. Such leaders in this create theright environment for their people to develop and become acrucial component of anorganisations success.

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There is abig demand for charisma and inner strength because these provide safety. Leaders have ahard time but Doing thesame thing over and over again and expecting different results (definition of Insanity by Albert Einstein) is not theanswer for thecurrent economic situation.
Octavian Dascalescu, CEO, British American Tobacco Central Europe

Leading companies dont just make money from themarket in which they operate; they are also interested in developing it. MTS regularly takes part in discussing new directions and initiatives that affect themarket as awhole, as well as developing its CSR practices.
Iryna Yevets, CFO, MTS, Ukraine

Ibelieve leadership is based upon aclear vision which is clearly articulated in astrategy and effectively communicated to others. Aneffective leader takes theinitiative, inspires theorganization for thevision and drives implementation of strategy. Without initiative, leader is just aworker in aleadership position.
Marin Hudk, Office Managing Partner, Deloitte Slovakia

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To be aleader in todays Ukraine, you must be capable of successfully rising to challenges. NIBULON has along history of hard but interesting work, facing up to testing examinations and delivering great achievements. Our team knows that success in business does not come from alack of obstacles or aneasy ride; rather, it is theresult of anability to successfully overcome challenges through constant hard work and acreative approach to solving unusual problems.
Oleksiy Vadaturskyy, General Director, NIBULON, Ukraine

Asuccessful leader should be anexample for others in innovations, continuous development and anability to achieve things that are necessary for thehealthy operation and growth of thecompany.
Pavel Kysilka, Chairman of theBoard of Directors and CEO of esk spoitelna, Czech Republic

SAPs management places aspecial emphasis on people issues, looking beyond mere numerical results to appreciate theeffort that employees make. Thecrisis has also made our people more receptive to new or modified corporate goals.
Balzs Ablonczy, Managing Director, SAP Hungary

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For us, it is most important that leadership is not driven by one person, but that all managers and coordinators are able directly to motivate their people and to teach them how to perform to thehighest possible levels of quality and efficiency.
Eek-Hee Lee, President and CEO, Kia Motors Slovakia

One needs vision to be amarket leader, alongside anoutside-the-box approach and thecourage to learn from mistakes and successes alike. In this respect, innovation goes hand-in-hand with proactivity and ability; in this context, Mediplus is unchallenged in its market.
Sorin Mirica, Business Unit Director, Mediplus - A&D Pharma, Romania

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Index of Success

Rewarding business excellence in theDeloitte and Rzeczpospolita newspaper Index of Success It is now six years since Deloitte first launched theCE Top 500 programme, theessential league table that lists and analyses thelargest and most dynamic companies across the18 countries of Central Europe. During that time, theTop 500 ranking has become anestablished element of theregions business landscape, with companies keen to see their performance in comparison with competitors and their own position in previous years. As part of theprogramme, Deloitte is also running theIndex of Success scheme, in conjunction with theRzeczpospolita newspaper, which features 30 companies selected from theprevious years Top 500 listing. Theselection criteria include theneed for organisations to have their operational headquarters in Central Europe, to have apublicly-known ownership structure and financial statements, and further operations in at least three other countries worldwide. From this selection, Deloitte and ajury of high-profile business, academic and political figures from Poland choose three particularly strong performers to receive thespecial Company of theYear 2011 title. This jury included Polands former Prime Minister Jan Krzysztof Bielecki, who is also aformer CEO of Bank Pekao SA and now Head of theEconomic Council in thePrime Ministers office.

Alongside him was Henryka Bochniarz, President of Boeing International Central Eastern Europe and President of thePolish Confederation of Private Employers, former President of theEuropean Parliament Jerzy Buzek, Professor Micha Kleiber, who is Chairman of thePolish Academy of Sciences, Tomasz Wrblewski, Editor in Chief of Rzeczpospolita and Alastair Teare, CEO of Deloitte Central Europe. After much deliberation and discussion, thepanel successfully made their final selection of three companies in two key categories Exceptional Achievements (which focuses this year on asignificant M&A transaction) and Growth and Financial Stability. To doso, they looked closely at arange of financial measurements, including growth, profitability, liquidity and capital strength as well as further criteria including CSR, innovation, investment activity and, of course, any significant acquisitions. Thefinal three winners, who received their prizes on day one of theXXII Economic Forum in Krynica, are without doubt outstanding examples of everything that is good in theCentral European business community. Estonian cruise, passenger-transport and cargo shipping operator Tallink Group, for example, saw its revenues rise year-on-year throughout theperiod of financial crisis, from EUR 786.8M in 2008 to reach EUR 1.153B by 2011. During thesame time its return on equity (ROE) rose from 2.9% to 7.5%. Outstanding operational achievements include thefact that it carried 11.8M passengers in 2010-11, and saw sales through its restaurants and shops reach 54% of its total revenues.

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Tallink is based squarely on thevision of its leaders to deliver service excellence to all its customer groups. Thecompany has already achieved thestatus of being theworlds leading ferry company by beds and thethird by revenues, and it continues to concentrate on constant improvement in areas like customer satisfaction, increased volumes and new service introductions. This is how thecompany plans to boost shareholder value even further, showing that there is no room for complacency in true leadership. Thevast electrolytic copper and silver producer KGHM Polska Miedz, meanwhile, saw its revenues rise from EUR 3.6B in 2008 to EUR 5.37B in 2011and its ROE grow from 27.2% to 58.3%. As well as greater production levels, such impressive revenue growth was due to price increases that in turn supported agreatly improved EBITDA margin (from 30.6% in 2008 to 63.3% in 2011), enhanced labour efficiency and better Quick Ratio (theability to use cash and other assets to pay off its liabilities). Landmarks passed by thecompany during 2011 include thehighest production level in thehistory of Polish copper and KGHM becoming theworlds largest producer of silver. In terms of theExceptional Achievement award, thecompanys acquisition of Canadian mining group Quadra FNX was of particular interest to thejury because it underlines KGHMs ability to expand on aglobal scale. This deal, in fact, was thelargest foreign investment ever made by aPolish company, which its leaders see as akey step in building theposition of Polish businesses as producers of strategic resources on aglobal scale.

Theacquisition is also set to increase thecompanys copper production from 2011s record level of 571,000 tonnes, to 635,000 tonnes and upwards to over 700,000 tonnes each year to create acompelling vision that KGHMs leadership is making reality. TheAsseco Group companies are listed on theWarsaw Stock Exchange, Tel-Aviv Stock Exchange, as well as on theNASDAQ Global Market. And as theseventh biggest software vendor in Europe, Asseco is one of very few Polish technology companies to build atruly international market for its products and services. Its growth has been impressive over thelast four years, with revenues increasing from EUR 792.4M in 2008 to EUR 1.2B by 2011. And with anetwork of companies operating in 30 countries worldwide, it is competing with increasing success in ahighly combative global market place. Thecompany has been highly successful in leveraging vertical markets. Following theacquisition of IDIT Technologies and FIS Software by its Israeli subsidiary Sapiens International, Asseco is now one of thetop three providers of IT solutions for theglobal insurance and banking industries. Thejury was particularly impressed by thecommitment of its leaders both to building competitive advantage through proprietary products and services and to further expansion through its ongoing acquisition strategy. As Alastair Teare, CEO of Deloitte Central Europe, comments, Thesheer quality and range of achievement shared by our three award winners is extremely impressive, and Ihope that others are inspired by their success.

Comments of Assecos Management Board on theaward received in theIndex of Success

Aleader is on theone hand avisionary and on theother aman who can delegate responsibility. Only aneffective combination of thetwo dimensions makes all objectives attainable. TheIT sector is dominated by big American companies and Europe needs to move towards consolidation to achieve true competitive advantage. TheAsseco Group and our strategy may serve as anexample of such project.

Since 2004 theAsseco Group has been pursuing astrategy towards creation of aglobal IT company specialising in theproduction of software and sales of related services. According to our estimates in 2011 we will rank 5 in Europe in terms of sales of own IT solutions. In thenext five years we want to be thesecond software producer in Europe after SAP. To dothis we need to strengthen our position in Western Europe and expand our Group to include Russia and South America.
Adam Gral, President of theManagement Board, Asseco, Poland

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Comments of thePresident of KGHMs Management Board on theaward received in theIndex of Success - M&A category.
Sierra Gorda, theseventh largest copper deposit in theworld owned by QUADRA FNX of Canada at thetime was that kind of aproject. QUADRA FNX looked for apartner to exploit theore, but theoffer made by Japanese Sumitomo was better than ours today Sumitomo has 45% rights to thecopper deposit. That prompted us to start working towards avery ambitious goal since we did not manage to acquire therights to thedeposits, we decided to try to acquire thecompany. Negotiations and our research to check thefirms potential lasted over ayear. Thecompany developed dynamically, it was engaged in interesting projects and possessed great deposits. Theproblem was that no Polish enterprise before us attempted afriendly take-over of afirm that was publicly quoted abroad, with aview to remove it from thepublic market, afirm it must be mentioned - possessing assets not only in Canada but also in theUS, Chile and Greenland. We have succeeded in what we set out to accomplish. On theother side of theglobe there is acompany bearing afamiliar name of KGHM International. Now we concentrate on integration of KGHM International, on increasing its goodwill and on execution of theprojects that are in progress. We are on thehigh road to fulfil our strategic plans. We are also very pleased that our success has been recognised in theIndex of Success ranking. Herbert Wirth, President of theManagement Board, KGHM Polska Mied, Poland

For thepast fifty years of its operations, KGHM focused on exploitation of copper deposits. Over theyears, it required knowledge, determination and persistence to cope with thecomplex geological and technological conditions. We had theoption to continue down that path, even though we were aware that it was bound to become increasingly harder to maintain our annual output at thelevel of half amillion tons of copper. That would mean adecline and loss of our position. Therefore, we decided on adifferent strategy according to which by 2018 KGHM would produce 700 rather than 500 thousand tons of copper per year. It would entail extending our operations beyond Poland and Europe. We established criteria to be met by our projects both companies and undertakings at various stages of development.

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Comments of Tallinks Management Board on theaward received in theIndex of Success


Leadership is about seeing thebig picture, making good decisions, taking responsibility and having belief in what you do. All those points are also represented in therecipe of building thecompany`s goodwill. Those two are certainly in strong coherence with each other and that is how it is applied also in Tallink. Long-term planning is necessary in shipping business. We believe that thebusiness sustainability lies within thecapability to foresee and analyze thefuture trends as well as be able to operationally react to those. We have been and are eager to set new trends ourselves as we have proven with therevolutionary Tallink Shuttle service. Thesuccess story is to never rest on laurels, have skilled people on board who are able to come up with new ideas, are not afraid of thecompetitive edge and be able to make decisions. Fast, if necessary. On thestrategic plan, there should be also place for adream-like vision. Think big, as without ambitions it is hard to succeed big. In 20 years Tallink has increased its passenger volumes from 160 thousand to 9 million. Thefleet has grown from one chartered vessel to 19 owned vessels crowned with thefleet renewal program of over one billion Euros. This all assures us to think even bigger.
Andres Hunt, Vice-chairman of theManagement Board, Tallink, Estonia

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CEE region becomes global not only through foreign investments. Its largest businesses operate globally and invest abroad. KGHM has recently closed thelargest acquisition transaction, thus becoming atruly cross-border corporation. Tallink and Asseco have been demonstrating stable growth for years.
Henryka Bochniarz, President of Boeing International Central Eastern Europe and President of thePolish Confederation of Private Employers

During thework on theIndex of Success award, we have long thought about how to choose thecompanies which truly deserve therecognition. In other words, we wondered which criteria would be most appropriate to perform areliable evaluation of companies in thechanging environment. Thecriterion which shows that thecompanys position in themarket is strong and unchallenged and which can be measured and assessed has been named thestable growth criterion. Thesecond criterion is anextraordinary, positive event in thelife of thecompany which shows how determined, consistent and persistent thecompany is in theimplementation of thelong-term development strategy. Both factors show astable position of thecompany and its latest successes. It is such companies that we want to and recognize in special way. We hope that every year there will be more of such businesses. Thepoint is to boost theconfidence of Polish companies so that they go beyond local interests and become part of theglobal economy.
Professor Michal Kleiber, Chairman of thePolish Academy of Sciences

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Industry insights

Financial Services Technology, Media and Telecommunications Energy and Resources

39 54 62

Manufacturing 72 Real Estate and Construction 81

Thenew reality is one in which true leaders will be defined by their actions.

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This section of the2012 CE Top 500 report focuses on five of our regions most significant industries, featuring detailed analysis from Deloitte partners of themain trends, opportunities and headwinds that are having thegreatest commercial and economic influence as companies seek to maximise their performance in this challenging environment. Each section contains insight from our industry experts examining theissues at play at both aregional level and from acountry-by-country perspective. Thepicture that emerges is one of aregion-wide business community that continues to take aproactive approach to thechallenges it is up against. Whether that approach includes seeking new markets, new customers, new processes or even anew business model, it is characteristic of Central Europes leading companies that their leaders are not content to be passively shaped by events. Rather, they are striving to take control of thepotentially chaotic environment in which they have to operate, in thefull understanding that any rapid return to thenorm prior to 2008 is becoming increasingly remote. Thenew reality is therefore one in which true leaders will be defined by their actions which have asignificant impact on theperformance of their organisations. Ibelieve that thereflections by senior executives on thenature of effective leadership that you will find throughout this section are of particular value and interest today. These are thevery people whose energy, determination and action are proving that in even thetoughest market conditions there are always opportunities for those organisations that have theright leaders in place.

Marek Metrycki Office Managing Partner, Deloitte Poland

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Financial Services

While Poland survived thecrisis with asubstantial growth in GDP (averaging 3.3% between 2009 and 2011) other countries faced either asignificant decline in their growth rate (Slovakia recorded 0.9% over thesame period) or even recession (such as in Bulgaria, Croatia, theCzech Republic, Hungary, Romania and Serbia). This contrast may be reflected in banks future revenues.
Figure 1. Change in real GDP (2011,%)

Zbigniew Szczerbetka, Partner, Financial Services Industry Leader in Poland and Central Europe

Poland 4.3%

In no other industry during thelast year has theword leadership been as important as in Financial Services, in terms both of theinstitutions as awhole and their human resources. TheFinancial Services Industry has been aparticularly difficult place to work as aresult of thelast four years ongoing financial turmoil. Awidespread lack of confidence in thebanking sector, together with regulatory, cultural and market change, has forced banking leaders to adapt urgently to thenew conditions in order either to generate profits or at least minimise losses. Deloitte has analysed eight banking markets for this report: thebiggest economies in theregion Poland, theCzech Republic, Slovakia and Hungary thelargest Balkan countries Bulgaria, Croatia, Romania and Serbia TheBaltic states and other Balkan countries were not included due to their relatively small banking sectors. Slow economic growth is affecting financial institutions results Thedifferences between theregions individual banks have increased since 2008, although theoverall trends they face are expected to be similar for all. Yet there are major differences in both themagnitude and timing of events, which are easily visible when comparing thedevelopment of local economies.

Czech Republic 1.7%

Slovakia 3.3% Hungary 1.6%

Romania 2.5%

Croatia 0.0% Serbia 1.6% Bulgaria 1.7%

Below 2%

2 - 3%

3 - 4%

4 - 5%

above 5%

Thebanking sector is growing but its profitability is suffering Theposition of Central Europes financial institutions is relatively good. Since theeconomic meltdown, theassets of thefinancial sector have risen each year by anaverage of 4.5% to reach around EUR 833.2B. Interestingly, thevalue of these aggregated assets of Central Europes financial institutions is comparable with that of Luxemburg (at EUR 817.0B), and is smaller than in most western countries. Thegrowth rate in theregion amounted to 6.4% in 2011 and was largely accounted for by thelargest economies in theregion Poland and theCzech Republic.

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Figure 2. Return on equity in analyzed CE countries (2011,%)

Poland 12.1%

Czech Republic 14.7%

Slovakia 15.0% Hungary -2.5% Romania 2.4%

However, their profitability is ~30% lower than in 2008. Thereason for such asignificant decline is explained by very high level of impairment costs (thegap between anassets value on thebalance sheet and its recoverable amount). In 2011 thevolume of write-offs and other impairment costs equalled 24.4% of therevenues generated by thebanking industry, as compared to 18.0% in 2008. Had impairment costs remained at the2008 level, banks ROE would now stand at 12.1% which is 34.7% higher than today. High cost of risk decreasing banks appetite for new loans Thelevel of non-performing loans (NPL) has grown dramatically since 2008, but is now expected to stabilise. While thesituation in thecountries like Poland, theCzech Republic and Slovakia is relatively good with NPL levels below 7.3% and decreasing, it is agrowing issue in therest of theregion, at its highest in Serbia at 19.0%. Whats more, many banks in Central Europe have modified their loan policies and are not willing to increase their loan commitments as fast as before thecrisis. Thevolume of loans in 2011 compared to 2010 has grown by 7.5%, but this has been inflated by the16.2% growth in theregions largest market Poland. High growth has also taken place in Slovakia (8.7%) and theregions second largest economy, theCzech Republic (6.2%). Growth in other CE countries, however, was either negative or consumed by inflation. Theliquidity issue Another problem that thebanks are facing is alack of liquidity. Before 2008, theinterbank market was very active and banks were lending money with great confidence. Thesituation has changed since then, and many smaller banks have serious problems in finding sources of liquidity other than deposits.

Croatia 7.6% Serbia 0.2% Bulgaria 5.6%

Below 0%

0 - 4%

4 - 8%

8 - 12%

above 12%

Theoverall business activity of theregions financial institutions is still increasing. While thebanks have reacted to theworsening economic situation with amore risk-aware approach, through cost optimisation and (when possible) by deleveraging assets, their revenues have continued to rise.

Figure 3: Impact of loan-to-deposit ratios on market development (2011, 2010)


12 10 8 Assets growth (%) 6 4 2 0 -2 -4 -6 -8 80 85 90 95 EE SK CZ RS HR RO LV LT BG HU GR SI PL

100 105 110 115 120 125 130 135 140 145 150 155 160 165 170 Loan-to-deposit (%)

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Capital requirements In most European countries, banks are facing serious problems in meeting their capital requirements. Pressure from theEuropean banking system and theparent companies of theregions banks is making funding both increasingly expensive and limited. As aresult, banks are being forced to seek capital on theopen market. TheCapital Adequacy Ratio (CAR) is particularly high among Central Europes banks, most notably in Croatia and Serbia where it has reached over 19.0%. Theregions lowest CAR level (13.1%) is in Poland. Nonetheless, many banks in theregion were unable to meet therequirements of Basel III by theend of 2011. Forthcoming regulation may require thebanks to take action in order to increase their Capital Adequacy levels. Higher minimum capital requirements are scheduled to begin being phased in at thebeginning of 2013 and to be fully implemented by 2015. Further market consolidation is expected

Poland has proved to be particularly attractive market thanks to its relatively strong economic performance and large internal market. Some two thirds of thebanking assets in thecountry belong to foreign-owned banking groups, which have needed financial aid following thecrisis and have been forced to dispose of foreign assets including well-performing Polish banks. Add to this thefact that Poland was already considered as aninvestment opportunity before thefall of Lehman Brothers, further consolidation is expected. During 2011/2012, two significant M&A transactions took place. After acquiring BZ WBK (Polands fifth largest bank by assets), Santander Group has also purchased Kredyt Bank and is currently merging these two institutions. Thesecond deal is thepurchase of Polbank from EFG by Raiffeisen Bank. These transactions are proving theneed for scale in thePolish domestic market, and following themergers, both banks will strengthen their position in thecountrys top ten.

Figure 4. Concentration of theassets of thetop 10 banks Taking all theabove into account, theoverall market Figure 4. Concentration of the assets of the top 10 banks situation is difficult. This is reflected in themarket capitalisation of numerous banks, which is lower than their book value; this means that their expected return Avg: 76% on equity is lower than theexpected rate of return. From aninvestors point of view, of course, such % asituation is might look as temptation, but despite 60% this theregions M&A activity is not particularly strong, suggesting that thelevel of uncertainty is too high.

94

70
%

Central Europe TOP 5002012

77%

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Several M&A transaction have taken place over thelast year. Excluding mergers on theinternational stage that had animpact on operations in Central European countries, such as theacquisition of theinternational operations of Volksbank (Austria) by Sberbank (Russia) and themerger between EFG Group (Greece) and Alpha Bank (Greece).

ry ga

Bulgaria

Cze c

Most of theCE banking markets are relatively concentrated. Particularly in Croatia, Slovakia and theCzech Republic, where theasset share of top the10 banks stands at 94%, 85% and 78% respectively, competition between thelargest players is making it difficult for other banks to compete with those that can leverage their scale.

Poland
Cr o

a ati

Ro m
ia an

Slovakia

85%

71%

Serbia

ep. hR

Hu n

74
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Figure 5. Merger and acquisition transactions in Central Europe (2011, 2010, EUR mln)
4290 Target Buyer Country % acq. WestLB Hungary Wallis Zrt. Hungary 100% Target Helikon Bank Buyer Hungarian Enterpreneurs Country Hungary % acq. 100% Target Buyer Country % acq. WestLB Bank Polska IMDSA/Abris Capital Poland 100% Target Buyer Country % acq. Target Buyer Country % acq. Target Buyer Country % acq. Target Buyer Country % acq. Polbank EFG Raiffeisen Intern. Beteil. Poland 70% Target Buyer Country % acq. BZ WBK Banco Santander Poland 100% Romexterra Bank Pinebridge, Riverstyxx Capital Romania 92% Volksbank Internat. Sberbank CEE 100%

Figure 5. MVE (EUR m)

Dexia Banka Penta Investments Slovakia 89% Allianz Bank Geting Holding Poland 100% Target Buyer Country % acq.

Target Buyer Country % acq.

Target Buyer Country % acq. NLB Banka Soa TBIF FS Bulgaria 100%

Milton Bank Magyar Toketarsaag Hungary 100% Target Buyer Country % acq. GMAC Poland Geting Holding Poland 100%

700

Target Bulgarian Am. Credit Bank Buyer Clever Synergies Inv. Fund Country Bulgaria % acq. N/A Target Buyer Country % acq. 45 May 2011 Jun Banka Brod Suzer Group Croatia 100%

505

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31 Jun

14 Jul Aug Sep Oct

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Target Allianz Bank Buyer FHB Nyrt Country Hungary % acq. 100%

35 Dec Jan Feb Mar

15 Apr

10 Jul Aug

Jan

Feb

Mar

Apr

May

Nov

Sep

2010

While in other Central-European countries due to lack of any large scale foreign interest, thebanking transactions were characterised by divesting or winding up smaller subsidiaries by larger WesternEuropean banking groups. Yet it is expected that M&A activity will increase in years to come. Firstly, international players will continue to leave due to their strategically refocus and due limited opportunities to gain thescale they require to fulfil potential. Secondly in most of thecountries there are still far too many universal banks. This will result in further sector consolidation as theleading players strengthen their positions.. Thirdly we expect aheavy wave of asset deleveraging by thelarger players involving NPL and non-core loan portfolios, which can be either happen as direct sale, but rather involving complex structure.

Business model optimisation Recession on thefinancial markets has forced banks to seek savings in all areas of their operations. As aresult, banks are increasingly recognising thelower costs involved in leveraging existing customers rather than attracting new ones, largely through increasing their satisfaction with products and services. As aresult, customer loyalty levels are increasing. At thesame time banks, are investing in new technologies, upgrading existing core systems and hiring teams of young professionals to create products to attract ayounger, more sophisticated customer group that understands and uses mobile technology, even though they are not generating high revenues. This makes thecurrent situation even more interesting while thebanks are cutting costs, they are also simultaneously reaching for two very different groups of customers.

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CONFIDENTIAL (pending)

Competition through innovation In recent years, some fascinating product innovations have been introduced and popularised. Interestingly, at atime when innovation may dictate whether or not banks will survive, only afew of these were actually introduced by financial institutions. This is because not just non-banking but even non-financial companies are becoming increasingly active within thefinancial services market, forcing incumbents to revise their business models to become more flexible, either by increasing thelevel of innovation within theorganisation or by cooperating with third parties in virtually every area. Since thebanking ratio (theproportion of thepopulation using banking services) in some of theregions countries still shows scope for improvement, this is creating anopportunity for financial institutions both to attract new customers and to improve customer satisfaction. Regardless of industry, innovation requires atop-down approach. Company leaders need to provide aroadmap for employees and encourage out-ofthe-box thinking that drives ideas in terms both of new products and areas for improvement within theorganisations business processes. Not only does this approach improve efficiency, it also motivates teams and has adirect positive impact on thequality of services. Even in thehighly regulated banking sector, it is possible to work with companies from numerous other industries to address various areas of thebusiness. Global concepts and ideas such as Groupon Now, Foursquare, Square, Cardlytics and MoneyAisle show thekinds of opportunity that are still available. Moreover, innovation should include banks core systems. Many of these are still not meeting theneeds of achanging market and are restricting thepotential development of new opportunities. Investments in this area will generate long-term benefits, including anenhanced ability to assess customer needs and expectations so enabling banks to tailor products more precisely.

Customer-centricity In order to win new customers and retain existing ones, banks need to understand and address thechanging needs and expectations of their customers. Awider range of products, high-quality innovative services and transparency together provide astrong basis for competitive advantage, afoundation stone of customer satisfaction and, in thelong term, apowerful driver of loyalty. Arecent report, Setting anew course: Thecustomer experience challenge facing Central Europes retail banks, which was published by Deloitte based on asurvey carried out by TNS Global in Poland, theCzech Republic, Slovakia, Hungary and Romania, helps to pin-point this key issue. It represents asignificant move away from thebusiness model of thepast, in which revenues were derived through transaction fees and banks were largely content to see customers churn from one provider to thenext. Today, therefore, banks are making investments in quality to improve customer loyalty at thesame time as reducing risk through more robust approaches to credit-process design and operational excellence. In this process, theexperience of other European banks can prove to be particularly beneficial. Regional financial institutions understand and benchmark thebusiness cases of other institutions and can avoid theproblems encountered by pioneers.

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What next? Thebanking market is becoming more and more challenging, and banks must take aseries of key actions to build sustainable competitive advantage. Thetraditional sources of income for banks are becoming much more restricted than before thecrisis: Theavailability of mortgages is limited due to problems with long-term financing Consumer finance and SME lending are weak, due to thehigh risks involved that result from slow economic growth and growing unemployment Revenues from deposits have significantly decreased as aresult of thehigh cost of liquidity and intense competition for deposits in those markets with high loan-to-deposit ratios Transactional fees are gradually decreasing as customers make theshift towards electronic banking, where services are much less costly As aresult, banks are seeking other sources of income and trying to increase their cross-sell ratios as ameans of improving thefalling revenues they make from each individual customer. In most countries in theregion, thepenetration of banking services is very high, leaving limited room for further organic growth. Thebanks therefore have to concentrate on improving service quality in order to secure theloyalty of existing customers. Thebest way to dothis is to understand customer needs and, most important, thepossible future changes that will take place. Deep understanding of customer needs and addressing them in theright way makes customers willing to pay more for their banking services, because they appreciate thevalue they deliver. It is expected that thenext generations of customers will be tech-savvy; thebanks will have to meet their needs in order to build thecustomer base of thefuture, while retaining those traditional customers who still generate asignificant share of their profits. Growing competition from non-financial companies is another issue. If they take no action, thebanks may become mere cash and liquidity providers while other areas will be served by external companies.

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Figure 6. ROE driver's tree for CE region Figure 6: ROE drivers tree for CE region Net Revenues / Assets (%) 3.9 3.6 CZ 4.5 4.1 5.0 5.6 6.2 3.9

SK

PL

CR

BG

RO

SR

HU

Cost to Income (%) 48.8 45.0 50.9 47.7 50.6 52.2 61.8 62.2

Return on equity (%) 15.0 14.7 12.1 7.6 5.6 2.4 0.2 -2.5 HU

SK

CZ

PL

CR

BG

RO

SR

HU

f
1.0 SK 0.9 CZ

Cost of risk / Loans (%) 1.7 BG 2.9 4.3 2.0 SR HU

SK

CZ

PL

CR

BG

RO

SR

1.3 PL

1.2 CR

RO

Equity / Assets (%) 7.6 SK 8.1 CZ 10.0 PL 14.0 13.6 20.6 10.1 RO SR 8.6 HU

CR

BG

Country insights Bulgaria TheBulgarian market has performed poorly in terms of economic growth in recent years. However, some development of thebanking sector has been underway, with particularly strong growth in thedeposit base between 2009 and 2011, thecompound annual growth rate averaged 10.5%. Since theloan-to-deposit ratio in 2009 exceeded 130%,while financing from parent companies has remained restricted and raising capital from themarket continues to be expensive, this significant increase in deposit volumes alongside reduced lending aims to balance themarket and optimise costs. In 2011, theloan-to-deposit ratio decreased by approximately 20% as aresult. Yet banking revenues continued to decline between 2009 and 2011, falling by 1.0% annually. Despite falling operating costs, net profits reduced by over 13% annually, largely due to thesecond highest level of non-performing loans (NPLs) ever recorded (18.6%). Croatia TheCroatian market is in decline. Thecountrys GDP has been decreasing for some years, which has adirect impact on thelevel of NPLs; these reached 14.0% in 2011, causing profitability issues for thebanks. In 2009 there was asignificant fall in profits (by nearly 30.0%). There has been some improvement since this low point with profits growing annually by 14.0%, to reach EUR 0.57B in 2011. As aresult, ROE stands at 7.6%.

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However, themarkets Capital Adequacy Ratio of 19.5%, which aims is to ensure that thebanks can absorb potential losses, is thehighest in theregion. This might be theresult of thelow profitability of theCroatian banking sector and thecountrys poor economic performance. It is expected that theCroatian financial services industry will remain largely stable despite thelimited growth prospects that arise from high levels of indebtedness at all levels of society Czech Republic TheCzech Republic is thesecond largest market in Central Europe with banking assets of EUR 173.6B. At 75%, thecountry has thehighest banking ratio among citizens aged 18+ of all thecountries we surveyed. In theyears since 2009s peak in thenet profitability of theCzech banking sector, at EUR 2.4B, aslight decline has been apparent. Net profit decreased in 2010 by 6.8% year-on-year (to EUR 2.3B) and afurther 4.4% decrease took place in 2011. These decreases donot match thestability achieved in loans and deposits, which grew on average between 2009 and 2011 by 4.9% and 3.3% respectively each year. Growth in lending activities was not curtailed by anincreasing share of NPLs, which grew significantly from 2.8% in 2008 to apeak of 5.4% in 2010. Hungary TheHungarian banking sector experienced strong growth and delivered good profits in theyears before theglobal financial crisis. These peaked in 2006, reaching close to EUR 1.3B with a20% return on equity (ROE). However, by 2006 thecountry had already experienced aserious budget deficit and was witnessing aslow-down in theeconomy. Theglobal turmoil after 2008 combined with government actions led to serious losses, both in terms of thecountrys economy as shown by very low GDP growth, which decreased by 6.8% in 2009 and its banking sector.

Profits of Hungarian banks have deteriorated from EUR 0.9B in 2009 to EUR -0.3B in 2011. This decline was due to: Abank tax, introduced in 2010, which placed on banks anew obligation to pay EUR 0.7B in each year from 2010 to 2012, exceeding thetotal profit of thesector in 2009 Anincrease in loan loss provision (LLP), from 0.7% in 2008 to 3.0% in 2011, in line with theNPL level that reached 12.3% last year AnF/X retail mortgage loan repayment scheme, which enables customers to finance their debt at favourable rates, that has caused bank losses of EUR 0.7B. High loan-to-deposit ratios, aweakening capital position and drying up F/X funding have caused new loan volumes to drop significantly. Banks have focused on boosting deposits through theacquisition of affluent customers, which has driven anaverage 4.8% annual growth in overall deposits grew since 2009. 75% of theHungarian population aged 18 and above use banking products, which is arelatively high proportion compared to other countries in theregion. Poland Poland is thelargest Central European financial industry market, with bank assets of EUR 290.5B. Despite thefinancial turmoil and global crisis in public finances that have now been underway for almost four years, this key sector of thePolish economy is still achieving aform of continuous improvement. In 2011, in fact, thebanks operating in Poland generated anall-time national record of nearly EUR 3.8B in net profits. Adding this to thefacts that ROE is above 12%, theCapital Adequacy Ratio exceeds 13% and theGDP in 2011grew by 4.3% makes these results even more impressive.

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Polands banking services penetration is low compared to other European countries, with just 67% of people aged 18 and above holding acurrent account. At thesame time, only some 12% of bank customers in Poland have ever switched banks, and most continue to use theservices of their very first bank. This is thelowest ratio of switchers in comparison to other CE countries. Based on market forecasts thesituation in theyears to come is expected to worsen as themarket is moving towards stagnation. Still, GDP growth is not expected to fall below 2%. Romania Romania was one of many countries in theregion that experienced negative GDP growth as aresult of global economic slowdown. Thebanking sectors profits have decreased significantly from EUR 0,4B in 2009 to EUR 0.2B in 2011, mainly caused by non-performing loans (NPLs). Theasset base of Romanian banks has levelled out at around EUR 82.2B, but theindustry has not reduced thetotal supply of credit supply. After two years of contraction, 2011 finally showed thefirst signs of improvement for theRomanian economy with GPD growth of 2.5%. Romania still remains one of theleast banked nations in theEuropean Union roughly 60% of adults dont use banking services and 90% of those who doso use one of thecountrys seven biggest banks. Serbia With banking assets of EUR 25.4B, theSerbian market is thesmallest of thecountries we have analysed. Despite therecession that started in 2009, and thecountrys slow economic recovery ever since, Serbias banking assets showed double-digit growth following thecollapse of Lehman Brothers up to 2010. In 2011, banking assets grew by 4.6%. Banks profitability is falling sharply, however. In 2011 theindustrys net profit fell by 95% year-on-year. This may have been caused by thegrowing share of non-performing loans, which reached 19.0% thehighest level in theregion. Costs associated with these loans accounted for 37.4% of thetotal revenue generated by Serbias banks.

High loan-to-deposit ratios and aweakening capital position have also caused new loan volumes to fall significantly. These fell by 2.4% in 2011, contrasting with thestrong growth of earlier years (2008 2010 CAGR reached 23.5%). Despite such growth, banks have not managed to acquire additional funds from their customers in 2011, in fact, thedeposit base shrank by 2.7% year-on-year. Similarly to Croatia, theSerbian banking sector is characterised by avery high capital adequacy ratio (19.1%), while at just 0.2% ROE is thesecond lowest in theregion. Slovakia With apopulation of just 5.4m and banking assets of EUR 59.0B, Slovakia is thefifth-largest market in theregion. However, it generated Central Europes third highest net profits in 2011, reaching its all-time national record of approx. 0.7B. Thecountry has been affected by thecrisis, falling into recession in 2009 when it delivered negative GDP growth of -4.9%. It recovered quickly, however, and is developing fast. There was asignificant increase in lending activities between 2009 and 2011, with average annual growth of 7.2%. However, this was not balanced by any similar growth in deposits, which fell by 0.4% annually over thesame period. Yet, considering thefact that thecountrys 2011 loan-to-deposit ratio was 91%, this should be considered more as animprovement than as athreat. Thepenetration of banking services in Slovakia is relatively low compared to other countries in theregion, reaching 66% of thepopulation aged 18 or over. Thebanking market is also highly concentrated among afew players, with thetop five banks sharing over 80% of themarket.

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Banks need constantly to adapt in order to achieve strategic objectives such as increasing market share, ensuring faster growth, retaining customers and winning new ones. Nowadays they face many challenges, chief among which is growing competition, even from thecompanies outside of thesector at atime when theexisting approach to thecustomer-bank relationship is changing. This will require reorientation of theexisting banking business models. Financial institutions must demonstrate their ability to deliver quality products and services beyond what is offered by therapidly growing competition. New players are using new technologies both focused on internet and mobile environment and develop new business models like community banking, peer to peer lending or payment services. Institutions that manage to adapt to this new environment will gain asignificant and sustainable competitive advantage. It is extremely important at thetime when decreasing availability of capital and its much higher cost paralleled with increasing regulatory pressure is making banking business much harder and challenging in terms of profitability. Sustainable growth strategy will require not only scale and lean operating model but will depend significantly on ability to adapt new technology, innovative channel strategies and new business models in pursuit of supreme quality and volume of customers.
Zbigniew Szczerbetka, Partner, Financial Service Industry Leader in Poland and Central Europe

In ahighly volatile market it is impossible to develop adetailed plan for thedevelopment of thebanking sector in thenext few years. There are too many uncertainties, such as: theeconomic development in theEuropean Union, stability of theeuro zone, plans for theestablishment of theEuropean banking union, implementation of Basel III and maybe most important theGDP growth in Poland. Therefore, as it usually happens in difficult times, we should focus even more on thebasics, i.e.: liquidity and equity. Theformer is ensured by access to theretail deposit base. It is themost important source of financing in thecurrent crisis situation. Thelatter should be created by retained earnings accumulated during theprosperity of banks in 20112012. Expected deterioration of theeconomic condition will translate into higher costs of credit risk and deterioration of banks financial performance. We dont know how serious theslump will be. Undoubtedly, themain task will be to focus on theexisting customers, without aggressive customer acquisition. Theproblems of themother companies of banks in Poland, resulting from therecession in their home countries, deterioration of theeconomic climate locally and lower profitability of banks will favour further concentration of thebanking sector in Poland. We should expect several more acquisitions some of them spectacular. We are living in interesting times. We should maintain our prudence, but at thesame time show boldness.
Zbigniew Jagieo, CEO, PKO Bank Polski, Poland

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Security, stability and predictability are themost important factors for investors. Thats why we would welcome certain decisions that would help in perceiving Europe as amore stable place for investments in thefuture. On theother hand, its necessary to say that we in Central and Eastern Europe are still thepart of Europe that enjoys thetrust of investors. Thereason behind it is that theres amoderate or even above-average economic growth compared with other countries. Thebanking systems here are healthy and Ihope it will stay that way. And of course, if you look at how investors perceive lets say thebanking sector, then thegroups which are strong in countries like theCzech Republic, Slovakia and Poland are recognized as themost positive ones. Theability of fast recovery is much better in this region. People have learned to live with thecrises and failures. Its not theend of theworld. Extraordinary situations taught them how to be flexible and search for solutions. They may not necessarily always be thebest ones, but people are simply searching for other solutions.
Jozef Skela, CEO, Slovensk sporitea, Slovakia

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Polands PKO BP has further strengthened its position as Central Europes largest, achieving significant growth in both its net income and assets.

Theyears most prominent decline was recorded by Hungarys OTP bank, sliding from second in 2010 (where it is replaced by theCzech Republics CSOB) to fifth place in 2011.

Table 4: Top 50 banks in Central Europe 2011 - Based on 2011 total assets

Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Company name PKO BP SOB esk spoitelna Pekao OTP Bank Komern banka BRE BCR NLB Group ZABA ING Privatbank BZ WBK Getin Noble BRD Millennium Bank Slovensk sporitea UniCredit Bank CR VB Erste Bank Hungary PBZ Handlowy Kredyt Bank MKB K&H

Country Poland Czech Republic Czech Republic Poland Hungary Czech Republic Poland Romania Slovenia Croatia Poland Ukraine Poland Poland Romania Poland Slovakia Czech Republic Slovakia Hungary Croatia Poland Poland Hungary Hungary

LY Rank 1 3 4 5 2 6 7 9 8 11 10 14 12 19 15 13 17 22 20 21 24 25 18 23 16

Rank 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50

Company name Tatra banka BGK BPH Erste Croatia CIB Raiffeisenbank CR Nordea Bank SEB bankas BG Raiffeisen Bank Polska Raiffeisen Bank Hungary Ukreximbank Oschadbank Hypoten banka eskomoravsk stav. spo. Unicredit Bulbank Banca Transilvania NKBM Group CEC SOB Slovakia Raiffeisen Bank Swedbank Lithuania HYPO Croatia RBA GE Money Bank

Country Slovakia Poland Poland Croatia Hungary Czech Republic Poland Lithuania Poland Poland Hungary Ukraine Ukraine Czech Republic Czech Republic Bulgaria Romania Slovenia Romania Slovakia Romania Lithuania Croatia Croatia Czech Republic

LY Rank 30 28 26 34 29 32 40 38 33 35 31 36 49 39 37 44 NEW 42 NEW 45 NEW 46 NEW 43 47

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There has been little change since last year at thetop of theCE insurance league table, with Polish and Czech companies retaining their grip on thetop four places including PZUs dominant position at number one. Slightly further down, however, themost notable performance is by Polands Ergo Hestia whose

incorporation of MTU drove it up thetable from eighth to fifth place. In general, theregions insurance companies are performing well, with positive net income and stable gross written premium levels.

Table 5: Top 50 insurance companies in Central Europe 2011 - Based on 2011 gross written premium

Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Company name PZU esk pojiovna Kooperativa pojiovna Warta Ergo Hestia Zavarovalnica Triglav Allianz Polska Allianz - Slovensk poisova Aviva Polska Allianz Hungaria SOB Pojiovna ING Polska Kooperativa Slovakia Generali Polska Allianz pojiovna Croatia osiguranje Pojiovna esk spoitelny Generali Providencia Nordea Polska Amplico Life HDI Polska Compensa TU Uniqa Polska Generali Pojiovna Groupama Garancia Biztost

Country Poland Czech Republic Czech Republic Poland Poland Slovenia Poland Slovakia Poland Hungary Czech Republic Poland Slovakia Poland Czech Republic Croatia Czech Republic Hungary Poland Poland Poland Poland Poland Czech Republic Hungary

LY Rank 1 2 3 4 8 5 6 10 9 7 19 11 14 17 18 16 20 13 12 24 34 39 15 22 23

Rank 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50

Company name AEGON Magyarorszg Komern pojiovna esk podnik. pojiovna Adriatic Slovenica Zavarovalna Druba ING Biztost Zavarovalnica Maribor InterRisk Vzajemna Astra Asigurari Europa AXA ycie UNIQA pojiovna ING ivotn pojiovna BENEFIA Allianz-Tiriac Generali Slovensko UNIQA Biztost Aegon Polska Omniasig AXA ivotn pojiovna Groupama KOMUNLNA poisova Asirom Dunav osiguranje Allianz Zagreb

Country Hungary Czech Republic Czech Republic Slovenia Hungary Slovenia Poland Slovenia Romania Poland Poland Czech Republic Czech Republic Poland Romania Slovakia Hungary Poland Romania Czech Republic Romania Slovakia Romania Croatia Croatia

LY Rank 25 21 31 28 26 29 27 35 30 46 32 41 38 NEW 33 42 40 43 37 NEW 44 45 NEW 49 48

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Leadership perspectives
Let us not overestimate leadership. This is not anart in itself. To alarge extent, it is afunction of ones personality. In large organizations, with multi-level competency assignment, leadership grows in importance. Themanagement style is decisive for motivation of people in agiven organization, its efficiency, flexibility and ability to fast respond to changes, often forced by arapidly changing market. Leadership quality decides on organizational ability to grow, look forward and predict market development. Without astrong, inspiring, change-embracing and innovative leadership, anorganization becomes inert, interested only in maintaining of its position and soon fails to be competitive. It loses to those who are well motivated and strong enough to follow theleaders.
Cezary Stypukowski, CEO, BRE Bank, Poland

Our philosophy is based on theleadership skills and aspirations of each individual, regardless of whether they are in amanagerial position or not. We lead people to theidea that each person can impact theactivities in our business. Our programmes are based on three principal pillars know yourself, know your environment/team and know your customer and sense of our business. Subsequently, we have elaborated these pillars for various levels of management and everyone has access to these programmes. Our decision to invest important funds and efforts in thedevelopment is beneficial for us in thelong-term.
Pavel Kysilka, Chairman of theBoard of Directors and CEO of esk spoitelna, Czech Republic

Organisations have always been looking for leaders who would be able to turn dreams, visions and plans true. Thesame can be said about todays business organisations, including banks. Iam confident that thegroup of managers Ihave gathered at PKO Bank Polski has theability to lead. For over two years we have been consistently changing thebank, and building shareholder, customer and employee value.
Zbigniew Jagieo, CEO, PKO Bank Polski, Poland

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In my experience, effective leaders are those executives who have vision, are able to articulate it effectively and through there management actions inspire theorganisation to be focused and deliver on its chosen strategy.
Peter Wright, Partner, Tax, Financial Services Industry Leader in theCzech Republic, Deloitte

First of all, high-quality leadership skills is amust. We look for people who are proactive creators and who are proud of theresults they produce. These people should enter theoffice with asparkle in their eyes, have insight into their fields of expertise, know how to achieve success, be able to explain thebenefit of thesuccesses they achieve and use such successes to sell themselves. We apply this principle when we search for experts in themarket. Retail banking experts are employed if they have already achieved success in this field for another bank and really have aninsight into it.
Sergii Podrezov, Chairman of theManagement Board, Oschadbank, Ukraine

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Technology, Media and Telecommunications


In addition, many programmers and software engineers working in Central Europe are also seeking access to theglobal technology market by either working remotely for major international players or by creating original products for theglobal market place. Thanks to acombination of good education and highly competitive reward expectations, such individuals are becoming anincreasingly attractive workforce, which is leading many software production centres to move into Central Europe from high-wage Western economies. Media
Dariusz Nachya, Partner, Consulting, Deloitte Poland

TheTechnology, Media and Telecommunications (TMT) sector includes three discrete segments that have much in common with one another but also have equally distinct areas of differentiation. In line with global trends, technology markets across Central Europe are undergoing significant change, driven by theshift to cloud computing. Theregions media markets, meanwhile, are being affected by thecontinuing development of online and mobile media and theassociated changes in consumer behaviour. By way of contrast, thetelecommunications industry continues to consolidate, leading to acommitted search for thenext big thing. Technology Cloud computing and thenew business models it is driving are thegame changers in todays technology sector. According to theDeloitte Fast 50 programme, which identifies thefastest-growing technology companies in Central Europe, internet and software business are merging as most new software products are only available in thecloud. This is also aboom period for data centers, working both to meet internal corporate needs and increasingly those of external clients. Following just alittle way behind theglobal pattern, smartphone and tablet sales are growing rapidly at theexpense of desktop computers and laptops. This in turn is driving theneed for new applications to be distributed by digital retailers, which are often created within theregion to address local needs.

Central Europes media businesses are undergoing rapid change as people in thecountries across theregion gain greater access to broadband, increasing awareness of thebenefits of high-speed internet and nowhere is this more true than among those companies directly competing for consumers, readers and viewers. Theinternet culture of free downloads is seriously affecting hard-copy media and CD sales, with no compensating income being generated by sales of electronic media and music downloads. In addition advertising models are changing fast as every year brings new developments in consumer behaviour. Social media continue to proliferate, meanwhile, with Facebook and others challenging local incumbents in most CE markets. Despite thesteady invasion of theinternet into almost every aspect of life, television remains theleading entertainment medium in Central Europe. Events like theEuro 2012 tournament confirm that there is no better way for most to watch live sporting events than in ones own home in front of large TV screen. Some might even say it is abetter experience than actually being at thematch! With theincreasing coverage and popularity of digital terrestrial television (DTT), thebattle for viewers continues to heat up. In many countries, in fact, DTT has impacted on theperformance of cable and satellite companies, direct-to-home operators and even telecom companies providing TV services over their broadband networks. Just one thing is for certain while it is impossible to predict theeventual winner, consumers will be better off whatever happens.

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Telecommunications Over recent years, thetelecommunications industry in just about every country in Central Europe has been under growing pricing pressure as aresult of theincreasing saturation of thefixed and mobile markets. Those countries that were still growing strongly just acouple of years ago are now stagnant at best and in some cases actually decreasing. Theusage of telecom services is continuing to increase, however it is price reductions that are making life miserable for telecom company executives across Central Europe. Telecom companies are responding to this trend in two main ways: in anenergetic hunt for new revenue streams; and through consolidation, achieving operational efficiencies and synergies through M&A. Besides these approaches, theobvious businessas-usual strategy is to prevent customers from leaving and to attract new ones by providing superior customer service and innovative product packages. Theonly significant revenue stream that continues to grow is broadband access. Every year, more consumers find they need broadband, and every year they need higher speeds. But even here there are difficulties for theoperators: double thespeed does not translate into double theprice rather theopposite, in fact. So every year customers expect areduced tariff despite benefitting from higher speeds. This naturally makes companies uncertain about thereturns they can gain from network investments and cautious about investing in new technologies (such as 4G or FTTH). Paradoxically, themost risky investments are often those made by incumbents with thegreatest investment capabilities. This is because telecom regulations, such as theenforced sharing of their new networks with smaller competitors, can render their investments unattractive.

Throughout theregion, there is anon-going debate over thebest way to allocate thenew frequencies to be dedicated to 4G technology. Two opposing views dominate theargument: thefirst supports thecase of those new entrants who could potentially bring new levels of innovation and competition to themarket place; theother favours those large players that have thefinancial strength to actually deliver new services to thepublic. There are several areas besides broadband access in which telecom companies are seeking new revenue opportunities, including mobile payments, sales of media such as TV, films and music, and even financial services like insurance. None of these would appear to compensate for theshrinking revenues coming from thetraditional voice business, however. If, despite every effort, revenues continue to fall, then thecorrect strategy must be to drive improved efficiency and cost cutting. Themost radical efficiency gains are to be achieved through consolidation: themerger with or acquisition of players in thesame markets and with similar business models can deliver hugely valuable synergies once operations are combined. Many operators in theregion recognise thewisdom of gradually increasing their scale for improved results. However, thelarger theplayer, themore difficult is to obtain theapproval of therelevant anti-monopoly authorities to enable further market consolidation. It would appear that such authorities believe their responsibilities lie in encouraging competition between many companies, even though this approach might weaken thefinancial power of all players and, eventually, reduce consumers choice and service quality. Arecent statement by theEUs most senior technology regulator may reverse this approach, however. Neelie Kroes expressed her clear support for consolidation when she said: Having afew pan-European operators that are strong in thecrossborder market would not necessarily be bad for competition. She added that protecting consumers is about more than simply ensuring that each country has agiven number of operators.

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Country insights Bulgaria Thetelecommunications market declined 6% in terms of revenue to just over 1.5 billion, with major telecommunications operators reporting stable internet sales but declining telephony (-11%) and cable/satellite subscriptions (-24.6%). Package services double, triple or quadruple play saw arise of over 150%. 2011 saw thestart of two new operators: bob (affiliated to market leader MTel) and Call-ya (affiliated to Vivacom). Mobile termination fees were cut significantly in line with EU recommendations for thesector, which is expected to lead to declining rates for mobile users. Anumber of 4G licenses issued in thepreceding year were revoked due to non-payment of fees. While theTV landscape remained unchanged, with bTV and Nova grabbing thelions share of ad revenues, theprint media market was shaken by thetransfer of WAZ-held Trud and 24 Chassa newspapers, No.1 and 2 on themarket, to local entrepreneurs Ognyan Donev and Lubomir Pavlov. Czech Republic Broadband internet penetration reached 22.1%. In May 2011, theVDSL technology was introduced by major operator Telefnica. 3G coverage slowly reached 70% of population (30% of thearea of theCzech Republic) and the3G network sharing agreement between two major operators (Telefnica and T-Mobile) promises to further accelerate therate of expansion. However theprices of internet and voice services remain above theEU average in general. In 2012 it is expected that there will be anauction of available frequencies in theranges of 800, 1800 and 2600 MHz. Thefrequencies of 800 and 2600 MHz are meant to be used for theimplementation of the4G network (LTE). Theauction raises consumers hopes that it could facilitate theentry onto themarket of afourth mobile operator and increase competition. Theauction conditions and future obligations (mainly related to network coverage) provoked excited discussions among market players as they are one of themost demanding in Europe.
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Hungary At theend of 2011 theNational Media and Infocommunications Authority of Hungary (NMHH) announced anauction for free blocks of the26 GHz frequency band. Five companies entered thetender (Telenor, Vodafone, Magyar Telekom [aDeutsche Telekom subsidiary], MVM [Hungarian Power Companies Ltd.] and GTS) for the262x28 MHz frequency bandbase blocks which thewinners would be entitled to use for thefollowing 15 years. All 5 companies who entered thetender won base blocks according to thefollowing distribution: Telenor 4; Vodafone 6; Magyar Telekom - 4 (Magyar Telekom already held two blocks from anauction that took place in 2008); MVM 6; and GTS - 2. The26 GHz frequency band will allow thewinning firms to develop high speed wireless connection systems such as wireless point-to-point and point-tomultipoint systems. Anauction of the900 MHz frequency was concluded with aconsortium of theHungarian Post, MFB Invest and MVM securing aposition during thebid that can enable theconsortium to start thefourth mobile network operator that is to be named MPVI Mobil. Theother three operators raised objections about theresult of theauction. Asecond degree judicial verdict was reached with thecourt ruling in favor of MPVI Mobil. However due to anongoing appeal process by other operators, thefourth operator will not be able to begin developing its network until thecourts give their verdict. Two new MVNOs (mobile virtual network operators) entered theHungarian market in thebeginning of 2012. Thefirst entrant was Blue Mobile adiscount mobile service provider introduced by thediscount German supermarket chain Lidl. This new market entrant started operation in February using thenetwork of Magyar Telekom. Thesecond MVNO who set up shop in Hungary was Tesco Mobile in March. Tesco Mobile is owned by Tesco and Vodafone (each company holds a50% stake) and uses thenetwork of Vodafone to operate its services.

Poland At theend of March 2012, P4 (Polands fourth mobile operator) launched aflat fee unlimited voice service. Although such amove was long expected and soon followed by other mobile operators, it significantly changed thedynamics of themobile market. Over therecent year or so there were more transactions on thetelecom market than over many preceding years put together. These included, among others, Mr Zygmunt Solorzs having approved his acquisition of Polkomtel; UPCs acquisition of Aster; and Netias acquisition of Dialog and Crowley. Further potential transactions (pending approval at thetime of print) are themerger of two DTH operators (Cyfra+ and Neovision) and theacquisition of Onet by Ringier Axel Springer Media. Abattle for the4G (2.6 GHz) band is brewing thetender will be announced within thenext few to several months. Theprobability that it will be combined with thetender for the790-862 MHz band, which is currently used for military purposes, increases with time. As of theend of May 2012, over 90% of Polands population can watch 15 TV programmes broadcast free to air over DTT technology. Romania This year theRomania telecommunications market faced significant pressure due to theexpiration of 15-year 2G licenses for thetwo major players. Thenew licenses, expected to be announced before October, might bring changes to thetelecom market structure as theregulator (ANCOM) hopes to attract new market entrants as well. According to thetelecoms regulator, thetotal number of active mobile phone users in Romania decreased by 4.0% to 23.4 million at theend of 2011. Mobile voice traffic increased by 11% and totaled 58 billion minutes. TheRomanian telecom market continues to be attractive for potential new entrants as consumers are open to innovation and new technologies, atrend noted by theincreasing consumption of data by users.

Themedia industry was heavily hit by thecrisis, especially theprint segment. Unsustainable costs forced several publications to shut down or transfer online. Television is still themost popular media channel, while theInternet is growing fast, leveraging on social media and new online and mobile advertising technologies. While thecentral media landscape is still reshaping itself, new local media trusts are being established in themost important economic centers of Romania (for example, arecently launched one in Cluj, theWestern economic hub of thecountry). Romanias competitive mobile market is served by mobile network operators utilizing amixture of 2G and 3G technologies while investment is continuing to upgrade networks with LTE and HSPA+. Thetender for four LTE licenses in thesecond half of 2012 will be acrucial step to enabling Romanias mobile network operators to develop mobile broadband. Theconcessions for theuse of these frequencies will provide some diversity for operators to extend networks in both rural and urban environments. Ukraine Ukrainian mobile phone operators and broadband Internet providers are faced with rapidly increasing network traffic, forcing them to impose some limitations on theamount of data subscribers can send or receive. In theUkrainian media segment, television continues to hold avery strong position in comparison with more developed markets, but at thesame time online advertising continues to grow at accelerating rates. In addition, special attention within thehigh-tech sector is being paid to thedevelopment of cloud computing. Ukraines IT industry is one of themost dynamically developing market sectors in theworld, with acurrent annual market output of UAH 10 billion (EUR 991 million), of which 95% is mostly attributed to customised products (although theUkrainian origin of such products is rarely acknowledged). Tax relief for theIT industry, scheduled to come into force in 2013, should stimulate further development.

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Polands TMT market has one of themost competitive landscapes in theregion, with high dynamics and increasing consolidation and convergence trends. We will observe further consolidation developments within thegreatly fragmented cable sector. Thesector has to unite to achieve necessary scale to continue competition with much bigger players; and to benefit from multimillion investments in cable infrastructure and innovative digital services that bring Poland closer to achieving goals of theEuropean Digital Agenda. Going forward anincreased level of infrastructure competition should be expected, as aneffective way to cater to future needs of consumers. Cable operators with its state-of-the-art networks are well prepared for thenext phase of digital evolution.
Simon Boyd, CEO, UPC Poland

Themost important factors to ensure are thecontinuous high quality and availability of theproducts and services abusiness offers, as well as high service standards, all of which combine to ensure customer loyalty. When these factors are already in place, then themost important thing is theability to adapt quickly to changes in themarket. Trends appear and change rapidly in our business, so asuccessful company can never afford to overlook theemergence of anew service, technology or even fashion trend.
Iryna Yevets, CFO, MTS, Ukraine

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Thenumber of technology, media and telecoms (TMT) companies in theTop 500 ranking has decreased again for theconsecutive year. This is also theonly sector in which we have witnessed adecline in revenues from 2010, which is largely theresult of thehigh levels of market saturation affecting theperformance of fixed and mobile telecom operators. Aprominent exception is software business Asseco Poland, which saw its revenues rise by close to 50% over theprevious year.

Table 6: Top 10 in theTMT within Central Europe (All revenue and net income figures are in EUR million) Rank Top 500 Rank Top 500 Rank LY Company name Country Revenue from sales 2011 1 2 3 4 5 6 7 8 9 10 25 31 65 70 71 88 95 100 109 156 16 22 26 57 56 69 70 73 135 230 FOXCONN CZ TPSA Nokia Komrom Magyar Telekom Telefnica Czech Republic Centertel Polkomtel PTC Siemens Asseco Czech Republic Poland Hungary Hungary Czech Republic Poland Poland Poland Czech Republic Poland 4,154.7 3,622.0 2,257.5 2,131.1 2,129.8 1,870.5 1,774.8 1,737.2 1,629.2 1,203.9 Revenue change (%) 2011- 2010 -4.7% -7.9% -38.1% -3.2% -3.0% -3.1% -7.6% -5.5% 11.4% 48.5% 62.3 147.4 252.9 Net income 2011 -1.0 465.6 59.5 11.3 353.0 Net income change (%) 2011- 2010 -106.4% N/A -46.5% -95.9% -27.3% N/A -12.7% N/A -6.3% 18.6% 300.8 415.5 412.6 500.3 831.6 Revenue from sales Q1 2012 Revenue change (%) Q1 2012 Q1 2011 N/A -12.0% N/A -5.0% N/A N/A -6.9% -6.2% N/A -0.8%

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Leadership perspectives
For acompany operating in astrong matrix structure as Oracle does, both thesupervisory leadership and theinfluence leadership style needs to be implemented at thesame time.
Csaba Remnyi, CEO, Oracle, Hungary

Amarket leader does not necessarily have atrue leader; achieving such aposition may depend on simply fulfilling aniche demand or having anoutstanding product. And thats anoperational marketing issue; but when acompany is facing atime of turbulent change, they will find themselves in trouble unless they dohave agenuine leader.
Kamil ermk, CEO of EZ ICT Services and President of theCzech Institute of Directors, Czech Republic

Agood leader attaches great significance delegating tasks which is one of themost effective methods of motivation. Motivation requires plenty of communication by themanagement and selecting theright communication channel is acritical issue.
Csaba Bthe, CEO, IT Services, Hungary

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For me, thecorporate leadership means theability to define aclear companys vision and strategy at thesame time as implementing them successfully on themarket. Thekey implementation challenge in todays mobile market is how to deliver high quality services that customers require and take for granted. Ibelieve that we are experiencing anew era of thetelecoms industry, which is based on fast development of new technologies and services. There are new start-up and small companies developing new services in very short time but only small percentage of these services is successful on themarket. T-Mobile as anestablished business takes another approach to compete by using incubator strategies for new products and thus enabling development of new services in isolation from complexity of large company. From managerial point of view, Ibelieve again that theability to define aclear companys vision and strategy is vital. It is essential that managers communicate and share them with all employees with appropriate levels of passion and enthusiasm.
Otakar Krl, CFO, T-Mobile, Czech Republic

In my experience, since theglobal crisis, themost important features of agood leader have been to remain focused and theability to ensure that theorganization continuously adapts to changes, which also has aneffect on redefining strategic goals.
Pter Szp, Partner, Business Advisory Services, Deloitte Hungary

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Energy and Resources

In alonger-term horizon, after 2023, nuclear energy is expected to start affecting theenergy mix. Aquestion to ask in thePolish context should not be if but rather how and with whom to carry out thenuclear investments in thecountry. Theissue of funding arises right away. It is commonly believed that Government guarantees or another mechanism of ensuring theappropriate stability of electricity prices for thenext 60 years will be necessary. In theCzech Republic, nuclear energy will be thecore factor shaping thenational energy mix. Construction of Temelin 3 and 4 shall enhance theposition of nuclear energy in thepower landscape of thecountry.
Wojciech Hann, Partner, Financial Advisory, Energy & Resources Regional Team Leader

Introduction - challenges Theneed to invest in new power generation capacities and to refurbish theexisting ones is among themost important medium to long term challenges that theenergy sector of Central and Eastern Europe must face up to. Thechallenge concerns as well investments in thetransmission sector, both in thearea of electrical power engineering as well as gas transmission and production. Thescope of therelated projects planned in Poland can be wel understood analysing thestrategies of PSE Operator or Gaz-System.

New energy mix Certain significant changes regarding theenergy mix in selected countries of Central Europe or in broader terms of specific markets can be observed on theregional scale. Over thenext 10 years theenergy mix in Poland will most likely evolve towards renewables and gas. Thejury is still out regarding long term profitability of gas-related investment projects considering thecurrent pricing conditions, i.e. high costs of gas and relatively low prices of electricity. Coal-related investments certainly seem to be profitable, at least in theshort to medium term. Gas co-generation is certain to attract anincreasing number and volume of investments. In general, we are bound to witness many more alliances of gas companies with electrical power enterprises.

Studies and more advanced efforts regarding nuclear projects have been commenced or are continued in Romania, Bulgaria, Lithuania and Hungary. Additionally, Romania continues to be working on construction of large hydropower capacity projects. Theenergy mix in Central and Eastern Europe will further change impacted by non-hydro renewable energy sources. These differ in different countries. In theCzech Republic, photovoltaic boom seen two years ago has been brought to ahalt following achange in theregulatory system. In Poland, rapid development of wind power sources has been observed: in 2012 theinstalled capacity increase ranged from 400 to 600 MW. Asimilar growth is seen in Romania, and to alower extent, in Croatia and Bulgaria. Theprocess is dominated by such players as Spanish Iberdrola, Portuguese EdP, Gamesa, Danish DONG or German RWE, which has invested in Poland. Another usual suspect , EZ remains anactive market player. Recently it has purchased astake in ECO Wind Construction, adeveloper of wind power stations. On theother hand, large Polish state-controlled electricity players may face anumber of administrative and operating challenges, as well as those related to gaining social support for such investments. Provided that theregulatory system shall remain stable, ensuring subsidies to renewable power sources, further growth of wind power projects and other renewable sources should be expected accross theregion.

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M&A in energy sector In 2011, key regional players were active in M&A as well. We have observed aseries of significant transactions, related to Vattenfall exiting Poland via selling nearly all of its Polish assets. These were purchased by Tauron (Vattenfall Distribution Poland) and PGNiG (Vattenfall Heat Poland) respectively. Outside observers have little doubts regarding thetransactions being extremely favorable for theseller in terms of selling price. Thesale of SPEC by thecapital city of Warsaw was another large transaction. Thecompany was purchased by Dalkia. Romanian market is also active in terms of M&A, where many investments in wind power projects took place, similarly to Poland. Both European and non-European (including Chinese) investors are active in that market. EZ has maintained theposition of awell-positioned and active market player. Even facing alarge investment in Temelin 3 and 4 (relative to thescale of thecompany) it has not resigned from M&A transactions in selected projects ensuring fast cash on cash return. Gas sector investments When observing development of certain projects, including RWE attempting to sell 100% of shares in NET4GAS, aCzech operator of gas transit and transmission network, construction of Nord Stream, and thewell-advanced construction of theLNG terminal in winoujcie, we can say thegas transmission and consumption in Central Europe has been undergoing asubstantial structural change, thechange towards more distributed, more diversified and multi-polar ownership landscape. Thechange was under theradar screen of many observers for anumber of years, but now it is clear that measures undertaken some time ago bring results. Of course, this change requires further substantial investments. In terms of infrastructural investments, multilateral institutions, such as European Investment Bank, offering long-term loans on favorable terms, continues to remain anexcellent funding source. Unfortunately, investing in power production will not be so easy. In this case, funding will have to be sought in large part from commercial banks, who donot offer comparably competitive conditions.

In this context, Gaz System may have achance to strengthen its strategic position. It is to build themissing parts of thePolish gas transit system connecting theLNG terminal in winoujcie and therest of thePolish system. Thecompletion of theLNG terminal is planned for 2014, and thenetwork system to connect it with therest of thecountry must be ready by then. Theinvestments are underway. Importantly, LNG supplies shall depend only on commercial terms and competitiveness of gas, not on decisions made at adiscretion of amonopolist. Other Central European countries may also use LNG. Aterminal is being considered at Krk Island in Croatia, somewhat similar to that in winoujcie, which may provide Southern Europe with gas in thefuture. This will not be avolume comparable to thepresent supply of Russian gas, but gradually it may grow in importance as alternative supply. Direct access of thePolish market to non-Russian pipeline gas sources, e.g. from Norway, is apending issue. Power market Poland is still facing theissue of individual power consumer market becoming free. Theobligation to trade energy on thecommodity markets introduced two years ago is astep in theright direction. ThePolish power market is among themost liquid in theregion. Nevertheless, increasing thenumber of market players, so that theenergy trading may be diversified and not limited to afew large players, is of more importance than enhancing themarket liquidity with administrative measures. At present, theminimum liquidity level (15 to 20 percent) has been reached. Further administrative increasing of thecommodity market trading obligation (to 70%) will grow thevalue of thecommodity market. In thecontext of diversifying thegroup of traders and market players, theamount of power traded on thecommodity market is of less importance, whether it is 15 or 70 percent. In terms of quality, thechallenge involves establishing anefficient gas market and trading gas as commodity: if, when and how. This would be amilestone in development of thepower market, since trading of gas and electricity will be increasingly interrelated as seen for years in Northern and Western Europe.

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Infrastructural investments, cross-border transmission capacity Gaz-System shall play akey role in development of cross-border gas trading and transmission market, in addition to whoever will finally assume control of theCzech Net4Gas from thecurrent owners RWE. Interconnectors, e.g. that with theCzech Republic, or planned interconnectors with Slovakia, Lithuania or Germany, are therelated investments, and so is PSE Operator. In future, Poland should be much closer linked to neighboring markets and EU, thus being safer, meaning that asudden power station shutdown or another Gazprom gas supply hiccup will have lesser impact on its stability in terms of gas and / or power supply. Alternative easily accessible sources will mitigate possible supply shocks. This is thedirection of theEU policy, which forces additional solutions. Also, Polish energy sector will hopefully retain its cost advantage over, for example theGerman energy sector, and thus may become anet power exporter.

Renewable power If in thecoming years thecost reducing trend continues e.g. in relation to photovoltaic, this energy source may become competitive to other sources, and in thelong run may be even able to compete with conventional power suppliers. Then, energy mix modification will become easier. Thechange will be of bottom-up nature, much more than at present. We will gradually face distributed energy sources, possible to be installed individually in each household. We will cease to exist as mere consumers, transforming ourselves into prosumers of energy, i.e. either buying or selling, depending on whether there is asurplus or shortage in our domestic sources, and obviously, on pricing terms. This image however, albeit attractive, belongs currently to alonger term future.

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Country insights Czech Republic Thekey tasks of theCzech Republic in theenergy sector involve updating theCzech state energy concept, developing nuclear power stations, strengthening thecross-border capacity of thetransmission system and strengthening mutual cooperation in theCEE region, along with theissue of limits for coal mining and its effective use and thefuture development of theheating plant sector. Theobjective of theupdated energy concept of theCzech Republic is to increase energy safety and thediversification of energy sources and transportation routes. Energy safety and self-reliance should be increased through thedevelopment of nuclear power stations in Dukovany and Temeln. Repeated oil supply outages via theDruba pipeline confirmed thecorrectness of thestrategic decision to build analternative route theIKL oil pipeline. As IKL is connected to theTAL oil pipeline from Trieste, theCzech Republic is seeking to acquire anequity stake in TAL. Given therapid development of renewable sources (primarily photovoltaic power stations) in 2009 and 2010, theCzech government undertook anumber of measures to reduce their impacts on theprices of electricity for end customers. For thefuture, conditions are developed in theCzech Republic for further rational development of renewable sources, primarily combustion of biomass and biogas, and further support of small decentralised sources. Anticipated Future Development of theEnergy Mix of theCzech Republic Theanticipated development is impacted by thestability or instability of thepolitical, legislative and economic environment in theCzech Republic. Thedevelopment of theenergy mix of theCzech Republic will most probably continue in nuclear energy, with asimultaneous reduction (and partial refurbishment) of coal-based energy sources emitting high volume of green house gases, development of wind energy as well as biomass, biogas, and natural gas sources, provided it proves to be economical.

Rational investors will not be willing to invest in new sources with anunclear or highly uncertain economic return. At present, prices of electricity and emission allowances are highly volatile. Thebasic limiting factors of coal energy include thelack of local brown coal and stricter emission limits resulting from Directive 2010/75/EU on Industrial Emissions, which will put certain older pieces of equipment out of operation starting from 2016, 2020 and 2023, respectively. However, thelimiting factor for all types of conventional power stations is aprohibitively low return on investments assuming current prices of electricity continue their trend. In thecrude oil processing sector, we expect thecurrent long-term trend of low refinery margins to continue, due to theexcess refinery capacities in theCentral European region. Thetrend has already led, for example, to thebankruptcy of PETROPULOS and therelated shutdown of therefinery. In this context, it wouldnt be surprising to see thePARAMO refinery in Pardubice to be shut down as well. Another characteristic feature of thesector in thefuture will be thestrategy of thestep-by-step departure from thefinal refining and distribution of oil products and theinvesting of available funds in oil and/or natural gas E&P development. This has been astrategy announced afew years ago, for example, by OMV, which is believed to be seeking to sell its network of petrol stations in theCzech Republic, to reduce investments in refineries and to strengthen its position in thegas industry. Lithuania Lithuanian government initiated significant reforms in energy sector to make theenergy sector more competitive and efficient. These changes are one of thebiggest economic reforms since Lithuania became independent. Lithuanian government is very excited about that and believes it will provide additional stimulus to Lithuanian economy and investment climate. Notably, thejoint investment in thenew Visaginas Nuclear Power Plant with GE - Hitachi who has been selected as thetechnology and equity partner for theLithuanian project as well as potentially with theEstonian, Latvian and Polish partners, will set adominant accent over thecountrys energy sector for theyears to come.

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Romania After elections this coming autumn, Romania will decide whether to allow exploration of shale gas which may change theprimary energy mix of thecountry, which may directly impact theimportexport balance for thefuture as well as decisions regarding involvement in strategic hydrocarbon infrastructure projects in theregion. Amajor challenge for theRomanian power system at themoment turns out to be hosting thehuge number of renewable energy projects, concentrated mainly in theSouth-East of thecountry. Thegenerous support scheme that has been cleared with theEuropean Commission and reinforced by means of legislative acts has attracted aconsiderable inflow of investments (and investors) as well as development of installed capacities way above thelevel of thecountrys political commitments under the20/20/20 EU initiative. Thehigh voltage power transmission network is subject to threats of major network congestions and innovative financing solutions backed by appropriate legislative and regulatory environment (not to mention EU support) should be sought in order to allow investment in swift network reinforcement. Thetransposition of theThird EU Liberalization Package generates serious challenges for theRomanian institutions, that will need serious reinforcement in terms of resources, authorities, attributions to cope with new challenges such as liberalization of end-user tariffs for electricity and gas. Thenew legislation imposing trading of electricity only on centralized markets is likely to affect seriously thebankability of any power generation development project in theabsence of bankable long term power purchase agreements.

Slovakia In late May, theGovernment approved adraft Act on Energy and on Regulation in Network Industries, which was subsequently passed by theParliament on thefirst reading. Thefinal adoption of theAct is expected this September. However, thedeadline for thetransposition of two directives from theThird Energy Package into national legislation expired on 3 March 2011. Asubstantial difference compared to theprevious proposals is thebase model for thefuture operation of thegas transmission network. Theoriginal proposal involved amodel for establishing anindependent transmission operator (ITO); however, theapproved draft Act introduces full separation of theownership of transmission activities, so-called ownership unbundling (OU), as thebase model for meeting therequirements of theThird Energy Package. Thedraft Act also stipulates that, until October 2012, theGovernment may decide not to use OU, hence implementing theITO model. Slovensk plynrensk priemysel (SPP) has systematically prepared for theITO model since 2010, and thelast step was to be thetransfer of thetransmission network assets from theparent company (SPP) to Eustream. SPP is concerned that thepotential implementation of theOU model may weaken thecompanys position as animportant energy player in Central Europe, as well as theoverall position of Slovakia on theEuropean energy map. According to its own statements, SPP also started to prepare for thepotential OU implementation and for thepotential sale of its subsidiary, Eustream, and hence thesale of thewhole natural gas transmission network. E.ON Ruhrgas and GdF Suez have announced that they have entered negotiations with Energetick prmyslov holding (EPH) regarding apotential change in theownership structure of Slovak Gas Holding (SGH), through which they own 49% of SPPs shares. Theproposed transaction would involve therefinancing of theacquisition and thesubsequent transfer of thewhole 100% share in SGH to EPH. TheMinistry of Economy, having started negotiations with EPH regarding thepotential change in theownership structure of SGH, is to decide on further actions during thethird quarter of this year. Slovakias exercise of its pre-emptive right is also in play.

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Theoperator of theSlovak gas transmission network, Eustream, and its Hungarian partner, Magyar gaz Tranzit (MGT), signed anagreement on cooperation regarding theconstruction of aconnection between Slovakia and Hungary. Thenew connection should be launched commercially from January 2015. Thevalue of theproject is estimated at EUR 160 million, and theproject has been supported by theEuropean Energy Programme for Recovery (EEPR) in theamount of EUR 30 million. Theproject will significantly contribute to theenergy safety and diversification of transmission routes. It will also help improve theliquidity of thegas market in this region. Theprojects strategic importance for Slovakia also lies in securing Slovakias access to theplanned south gas corridors or to theLNG terminal in Croatia. Hungary will gain access to gas networks in Western Europe. There was also progress in theproject of agas pipeline connection between Slovakia and Poland. Eustream and its Polish partner, Gaz-System S.A., selected asupplier to prepare afeasibility study regarding theconstruction of anew cross-border connection of gas pipelines that will connect Slovakias and Polands transit networks. Theconnection is apart of theplanned North-South corridor and it diversifies gas pipeline routes. Thecompanies expect that theproject will be co-financed by theEuropean Unions Trans-European Energy Network programme (TEN-E). Thecompetition on theelectricity and gas market keeps growing as aresult of new alternative suppliers entering themarket, as well as thetraditional suppliers adapting to new conditions and expanding their existing portfolio of gas supply services with electricity or vice versa. By theend of this year, virtually all traditional suppliers will offer acombination of electricity and gas supplies (dual offer) not only for small and medium-sized businesses, but also for households.

However, despite thewide range of offers, thetraditional suppliers were still dominant in terms of thesupplied volume of electricity and gas as at theend of thelast year, especially in thehousehold segment. SPP maintained its overall share of approximately 70% in thegas market. Theelectric transmission network is experiencing anincreasing number of problems with theoverloading of transmission corridors. Thetransmission capacities from theNorth of Europe to theSouth appear to be particularly congested, and it is generally assumed that theunplanned overloads of electricity are caused mainly by production from renewable energy sources in North Germany. Theexcess electricity then overloads thesurrounding countries, including Slovakia. Theproblem could be partially resolved by strengthening thecross-border interconnectors, especially between Slovakia and Hungary. Slovenia and Croatia Slovenia and Croatia are both significant importers of electricity due to thelack of sufficient domestic generation capacity. Since both countries are relying on hydro-power for asignificant part of its generation, dry hydrological years like 2011 can further exacerbate theproblem of import dependency. After theNovember 2011elections, thenew Croatian Government has identified construction of new domestic electric generation capacity as one of its top priorities. New gas, coal, hydro and wind projects are in thepipeline, and private investors are welcome to join theincumbent players for theinvestment wave. It is hoped that within 5-6 years enough generating capacity will be built to greatly reduce or eliminate net electricity imports.

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Investments and M&A are some of thekey factors of DTEKs having grown and reached leading market positions. In many ways, thepresent structure of DTEK is attributed to anumber of acquisition deals made over thepast seven years. On theother hand, investment means bringing theacquired companies to order, as when they were acquired they lacked proper management and sufficient funding. Therefore, we place high value on aweighted, well-balanced and proper understanding of how to approach investment, in order to enable such assets to become as efficient as possible.
Vsevolod Starukhin, Chief Financial Officer of DTEK, Ukraine

We traditionally provide core distribution, supply and energy services, alongside additional advisory, design, maintenance and rehabilitation services. Despite this range, we are constantly seeking to add new activities and have become anenergy trader as well as developing renewable energy capabilities including wind, solar, hydro and biomass generation. Much more is in thepipeline.
Ioan Rosca, CEO, Electrica, Romania

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Energy and resources (E&R) businesses represent asignificant proportion of theTop 500 companies, with atotal of 148 entries. Oil and gas giants PKN Orlen (Poland) and MOL (Hungary) once again occupy thetop two places in our ranking, although thegap between thetwo companies revenues has increased during thelast year. Polands Lotos is theonly company to enter thetop ten this year (moving from eleventh place up to number seven in theranking).

Table 7: Top 10 in theEnergy and Resources within Central Europe (All revenue and net income figures are in EUR million) Rank Top 500 Rank Top 500 Rank LY Company name Country Revenue from sales 2011 1 2 3 4 5 6 7 8 9 10 1 2 5 6 7 8 9 11 12 14 1 2 4 5 11 9 7 15 8 13 PKN Orlen MOL Naftogaz of Ukraine EZ Lotos PGE Energorynok ORLEN Lietuva PGNiG RWE Transgas Poland Hungary Ukraine Czech Republic Poland Poland Ukraine Lithuania Poland Czech Republic 25,965.6 19,053.7 9,703.6 8,290.1 7,102.2 6,823.5 6,553.9 5,872.0 5,583.7 5,528.3 Revenue change (%) 2011- 2010 24.1% 22.7% 10.5% 8.4% 44.3% 33.1% 22.6% 34.4% 4.8% 18.2% Net income 2011 489.1 659.8 821.5 1,656.8 157.6 1,207.0 85.6 -4.0 394.7 380.2 Net income change (%) 2011- 2010 -20.4% 68.0% 140.8% -10.7% -7.6% 34.0% N/A 83.0% -35.8% N/A 1,472.7 2,113.0 1,849.8 1,867.7 Revenue from sales Q1 2012 6,907.5 4,600.0 3,667.8 Revenue change (%) Q1 2012 Q1 2011 20.3% 5.7% 6.5% N/A 12.1% 1.4% N/A 14.6% 18.4% N/A

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Leadership perspectives
Aleader has something that other people lack. First of all, aleader has avision, anidea which often is strikingly different from everything else and goes against thestream. Aleader knows what he or she wants, can inspire others and fire them with enthusiasm. Leaders are consistent in pursuit of their goals, they dont easily lose heart but at thesame time, they are open, they listen to others and know how to make use of other peoples ideas when working towards thegeneral goal. They can rise above theinterests of thegroup they originate form or identify with, they take risk. Success pleases them and serves as thedriving force to accomplish more.
Herbert Wirth, President of theManagement Board, KGHM Polska Mied, Poland

In one of his books, Julio Cortazar wrote, You cannot capture afortress while fleeing from enemies. Leadership involves: a. understanding therule; b. applying it; c. building ateam that understands it as well as you do; d. be able to correctly identify anenemy. From theperspective of nearly 20 years of managerial effort Ican tell you that thelast thing is thetoughest, since your opponents change along with times. Responses required from you in tough times differ from those sufficient in times of well-being, characterized by complacence. Therefore, leadership needs flexibility. And this accounts for point e. on my How to be aleader list.
Jacek Krawiec, CEO, PKN ORLEN, Poland

Professionalism and credibility, both in and outside thefirm, are thekey attributes of aleader. Therefore, you must weigh your words carefully, not waste them, and instill thesame in your employees. Atrue leader has strong co-workers, supports their development, motivates and gives them freedom to act since they are theones who build thecompany value. To dothis, trust is necessary. Further, aleader must be prudent. If you take responsibility for alarge capital, you cannot betray thetrust you have been given. Tauron is apublic company, which means it is open and transparent. This provides perfect motivation for prudent decision making.
Dariusz Lubera, CEO, TAURON Polska Energia, Poland

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Creating aregional electricity market in South East Europe over thelast decade has taken clear vision and acapacity to execute astrategy two fundamental components of leadership which EFT displays. But new markets give rise to new risks, and afurther quality of leadership is theability to analyse and discover ways to mitigate against them. EFT led theway, recruiting from theworlds of finance and engineering to create aninternational team and asuccessful and profitable business that is admired throughout theSouth East European market.
Milo Hamovi, Vice President of EFT Group, Serbia

When Ilook at DTEK, Isee aunique, young management team, focused on analysing thebest practices and incorporating them into thecompany. They are very open-minded and flexible in thedecision-making process, ready to acknowledge any mistakes and deploy dynamic movement in theopposite direction if, for example, theexternal environment changes. These, Ithink, are thereal strengths of theDTEK leadership.
Vsevolod Starukhin, Chief Financial Officer of DTEK, Ukraine

Leadership is theart of linking agood vision, strategy and personnel policy while doing all this with asufficient degree of humility. In acompany such as EZ, it is important to assess, on anongoing basis, aseries of long-term market opportunities that often carry ahigh level of risk. However, these opportunities can and often dogenerate significant income. Thebasis for our success is therefore always our employees, since without them, without agood team, no leader could exist. But therule also is that, in view of thelong-term character of our operations, we must behave very responsibly towards clients, shareholders and, in our case, all thecitizens of theCzech Republic because all of them expect that we will lead theCzech power sector forward in theright direction.
Pavel Cyrani, Chief Strategy Officer, EZ, Czech Republic

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Manufacturing

declining demand in certain European countries is reflected in theoverall condition of economies. Theglobal situation is unclear as well in 2012. Theunclear situation on commodity markets, growth of input prices and fuel, theVAT increase and other impacts that result in anincrease in final product prices also donot contribute to thestability of theCentral European market. Concurrently, it should be noted that theeconomies of thecompanies operating in Central Europe are significantly impacted and driven by consumers demand in Western European countries, primarily thedemand of theGerman market and its export. These are primarily companies operating in theCzech Republic whose economy is substantially export-driven within theEuropean and global markets often indirectly, for example, through theexport of German corporations. Theexperience from thepast several years demonstrated that both, positive and negative trends, or even themere expectations of our western neighbours, are increasingly manifesting themselves in theCentral European countries. In thedrivers seat Theprincipal and concurrently traditional driver of theeconomy in Central European countries is theautomotive industry, both in terms of sales and innovations. Atotal of 45 companies in CE TOP 500 fall within theautomotive industry; these include car manufacturers primarily well-known brands owned by significant multinational groups and sub-suppliers manufacturing components in thesupply chain in theautomotive industry. Theautomotive industry with its approaches (Design to Cost, etc.) and emphasis on quality and consistency determines therequirements for its products that are subsequently transferred to other sectors. Thepositive development of theautomotive industry since 2009 has become thekey stabilising factor of therecovered economy of theCzech Republic although, as we can see now, it is not able to offset thenegative development in other economic fields.

Bronislav Panek, Partner, Consulting, Deloitte Czech Republic

Manufacturing companies in Central European countries significantly contribute to overall economic results, their total share in thegross domestic product exceeds theaverage of EU and Eurozone countries. With theonset of theeconomic crisis, certain countries reported agradual decrease in theshare of themanufacturing sector in thetotal economic results in 2006-2009. Indeed, experience resulting from theeconomic crisis will be further evaluated in thefuture. However, one of thehypotheses may be that thepotential of thesector of services or modern technologies, for example, was overvalued before thecrisis so as to ensure astable development of economies. On theother hand, theview of thetraditional industries, such as theprocessing industry, indicates, that their contribution to theperformance and stability of theeconomy was perhaps understated. Uncertainty and crisis In connection with thearrival of therecovery of European economies, manufacturing companies recorded animprovement of thesituation in 2010 which continued in many cases in 2011 when companies witnessed growing sales. This corresponded with theexport-driven recovery in most of Central European countries. Unfortunately, thecurrent economic results of manufacturing companies in Central Europe for 2012 donot show that thesignificant improvement of thesituation in themanufacturing sector should continue this year as well. Thegreat uncertainty associated with thecontinuing of thedebt crisis accompanied by

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Athreat from theEast Theever-present characteristic element of not only recent years is thegrowing competition from Eastern countries with their competitive advantage comprising mainly low production costs. Some of Central European manufacturers have been transferring parts of their manufacturing capacities to China and India. These primarily include successful producers operating in theautomotive industry, following multinational car producers in their expansion to key Asian markets. Thepressure of Asian manufacturers and unclear perspectives of European demand, thetraditional market of Central European manufacturing companies, forces theCentral European manufacturing companies to consider diversifying their market focus. Anumber of producers are searching for ways of returning to theRussian market which reports agrowing tendency and represents afuture potential and/or seek ways to directly operate on American markets. Transferring part of production to other regions allows themanufacturers to decrease production costs and use thecompetitive advantages to their benefit while reducing costs of distribution towards end consumers. Theresult of thecompetitive struggle among producers is asignificant pressure on theprofit margin which has recently been lower in many cases than thecompanies anticipated and projected. In this respect, it is necessary to realise that companies undertook significant efforts to reduce their costs in theperiod between 2008 2010, with primary focus on increasing work productivity, decreasing staffing levels and reducing costs incurred in thepurchase of raw materials, material and services. Despite theabove initiatives which were implemented across-the-board, it can be said that asignificant part of companies continue to have thepotential of increasing theeffectiveness and operational performance, primarily involving their own development and innovations, investments in developed production technologies and production techniques.

Thedevelopment of thetechnological production base in thelast years has suffered from thedecrease in capital costs owing to concerns about theanticipated economic development. Anumber of manufacturing companies realise thenecessity of their own product and service development, investing in thedevelopment and innovative potential. They have theability to benefit from significant support taking theform of EU funding which is akey initiator of investments in many cases. However, there are rather strong indications of strengthening investments at least at thelevel of certain sectors or enterprises. There are also indications of increased demand for investment loans. Atight situation on labour markets, including high unemployment, is likely to turn theattention of thegovernments of many countries towards placing agreater emphasis on supporting investment through arrangements such as investment incentives. Push for increased effectiveness However, there is no doubt that thepressure for theeffectiveness of production will continue at least to theextent as in theprevious years. This is connected also with theweak purchase power of economies weakened by thecrisis, and also thepressure on low prices of products and services. Opportunities for savings in manufacturing companies continue to largely involve applying lean production techniques, achieving savings in thepurchase of energy, decreasing energy consumption of own production and achieving savings of working capital in synchronising and boosting thequality of supply chains. For example, in thesupply chains, part of thepotential that consisted in decreasing purchase prices was already used up at thelevel of demand of individual companies or groups of companies; however, another significant potential lies in thecooperation and combination of procurement needs and requirements among individual companies in supply chains and joint planning synchronisation of theconsumption of material and raw material for theproduction of final products.

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Thedecrease in working capital necessary for themanufacturing of thefinal product, i.e. total working capital required in theentire supply chain of thespecific product, will be asignificant factor considerably impacting thecosts of manufacturing companies and may bring necessary savings that are markedly used up in anumber of other processes. In this respect, it can be anticipated that anumber of Central European companies will invest in developing anIT solution in advanced planning and closer connection of information systems as part of thesupply chain. Another example of achieving savings is thejoint purchase of electricity which represents asignificant production input given theenergy requirements of manufacturing companies, and merging thedemand in order to strengthen thepurchase power appears to serve auseful purpose. Searching for savings Thematters referred to above indicate that further savings measures are less likely to involve headcount reductions in certain countries, for example in Poland, increased demand for manpower can be expected to occur. Personnel capacities and human resources show another significant trend highly qualified, technically focused employees are of apre-retirement or retirement age and companies need to revisit their approach to ensuring thesharing of knowledge that will both strengthen their replaceability without putting at risk thefunctioning of thecompany while also allowing to make safe changes in technologies and innovations designed to strengthen thecompetitiveness of companies. They will search for talent that will necessitate further training and development.

Anincreasing number of companies are also considering revising their supply models and distribution and sales channels. They search for ways to communicate with end customers and develop their own customer base. Anumber of companies see thepotential in decreasing costs in sales and marketing; however, in this area, thereduction needs to be approached in awell-controlled and coordinated way and following detailed consideration of all possible impacts on acompanys operations. Challenges ahead Manufacturing companies continue to see theprospective developments for 2013 and onwards with acertain degree of restraint. Theoutlook reflects theclash of arather good financial and economic situation of companies and avery unclear perspective of demand or generally economic conditions. Thegiven statement applies not only to Europe but de facto to thewhole world as documented by thedevelopment in many parts of theworld including quickly growing Asian economies. Since thecompetitive struggle is expected to continue primarily at thelevel of margins, successful companies will be those that succeed in maintaining thequality of products while incurring satisfactory cost levels, being sufficiently innovative and therefore attractive for customers, as well as will be generally capable of flexibly and effectively responding to challenges which are likely to result from thefurther development of theeconomy.

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Country insights Czech Republic Thedevelopment of theCzech Republics industrial production is predominantly influenced by themanufacturing industry. In thecontext of theEU, thestatus of theCzech Republic as anindustrial country is enhanced by aproportion of employment in themanufacturing industry that is above theEU average (theproportion in theCzech Republic exceeds 26%, whereas it is below 16% for theEU as awhole). Automotive production, including final products as well as parts, plays akey role within themanufacturing industry. Asteep downturn in 2009 (at thebeginning of theyear, there was ayear-onyear decrease of almost 25% in respect of industry and 40% in theautomotive sector) was replaced by astrong year-on-year increase in themanufacturing industry of almost 20% at thebeginning of 2011, or of almost 50% in thecase of automotive at thebeginning of 2010. Since mid-2011, themanufacturing industry has only been reporting aminor increase, or even adecrease in May 2012. Given thehighly-complicated situation of EU countries, which represent themajor export market for Czech firms (thelargest export market being Germany with ashare of almost 32%; theonly non-EU country among theten largest Czech export partners in 2010 was Russia, which ranked 9th with its 2.7% share), theoutlook of theCzech manufacturing industry for 2012 is not good. Arather positive factor in thecoming crisis of theEuropean automotive industry is thepresence of car producers that are not affected by thesales decreases (VW and Hyundai); nevertheless, thefurther development of theEuropean debt crisis will significantly affect thedevelopment of theCzech economy. Hungary Theeconomic downturn, declining demand, and unfavourable carry-over effects from other industries (real estate, automotive, household goods, etc.) caused asignificant recession in themanufacturing industries of Hungary in previous years. These trends were worsened by poor availability of financing from thebanking sector. In thefirst half of 2011 themanufacturing sectors started to climb up from thebottom with production output growing, albeit marginally. However, theencouraging prospects turned and in thesecond half of 2011 thesectors slight recovery stopped and started to slowly slide back to recession. In 2012 it appears that themanufacturing sector is still on theprecipice, looking for demand to recover theprevious levels of production and to find financial sources and resources. There were two segments that produced visible growth, both thanks to growing demand for exports (automotive manufacturing and thefood industry), while other segments stagnated or slowly declined. In 2013 thenew Opel and Audi car assembly and engine factories are expected to launch production in Hungary, which will provide aboost to production output, though theunderlying trend still seems to be pessimistic.

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Poland Poland is anattractive market for themanufacturing industry especially theautomotive sector. Theprimary reasons are agood platform for cooperation with groups of sub-suppliers on different levels of thesupply chain; thehigh quality of Polands workforce and adequate level of education among managers; and achance for cross-border cooperation with other countries in theregion. However thelabour market is not as flexible and adaptable as companies would prefer, as theindustry is sensitive to changes in theoverall economic situation. There is also apotential to cooperate more widely with R&D institutions and university experts. Additionally, theautomatic sector expects local communities and government representatives to become business partners in order to achieve amutually beneficial outcome for all parties (business and municipal entities). Despite thefact that it was thethird year in arow during which car factories in Poland had to reduce production, two out of four (Volkswagen and Opel) ended 2011 with positive growth, while thelargest manufacturer (Fiat Auto Poland) reported adecline in vehicles produced. Ukraine Ukraines manufacturing industry is generally dependent on two sources: primary raw materials (due to theraw materials-intensive character of theindustry) and technologies which were traditionally provided by thescientific and development entities which are dependent on theeducation level of staff. Ukraine has enough reserves of iron ore, themain resource for steel production, and ranks among theworlds top countries by iron ore reserves. It also has awell-developed steel production industry, themajority of whose output is exported. Thesecond important input for thedevelopment of manufacturing is technology. There are asignificant number of domestic scientific institutes and organizations, as well as local universities, all working to develop new technologies and prepare highly skilled staff.

Ukraines chemical industry as awhole remains heavily exposed to economic cycles and nearly all of theindustrys underperformance of theprevious few years can be ascribed to economic turmoil. Theglobal economic meltdown led to weak industrial demand for chemicals, which in turn created significant regional and global production overcapacities. This resulted in adramatic decline in operating profits across theworld. While theglobal economic recovery appears to be underway, therecent turmoil in Europe and its impact on global growth remain sources of near-term uncertainty. Thecompetition in thechemical industry of Ukraine is not high as chemical production is very diversified and companies specialize in creating different types of products. Moreover, Ukrainian chemical enterprises that produce similar goods are situated in different regions of thecountry, helping them avoid direct competition against each other but at thesame time makes each of them anatural monopolist in its own region. In addition, in recent years four major chemical producers of ammonia and fertilizers were integrated into one group called OstChem Holding AG (apart of Group DF) which eliminated thecompetition between these companies. However, Ukrainian chemical companies are strongly competitive on theworld chemical industry market.

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We are currently facing amore challenging economic situation than ever before, and theautomotive car industry is invariably among thefirst to be affected during such turbulent times. In past years, Kia has implemented anumber measures designed to maintain employment levels. These have included increasing production capacity and even hiring more employees to launch athird shift. In fact, during aperiod when other car producers are closing operations, losing market share and laying off employees, we are successfully maintaining growth thanks to new model introductions and theapplication of innovative technologies.
Eek-Hee Lee, President and CEO, Kia Motors Slovakia

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Manufacturing companies record astrong presence in this years Top 500 ranking, including Skoda at number three and Metinvest at number four. Manufacturers across theboard recorded robust growth during theyear, driven by theparticularly strong performance of theprimary metals, chemicals and automotive sectors.

Volkswagen Group, thelargest foreign group operating in CE, showed asignificant surge in its revenues during theyear, typifying thesectors upward trajectory, although aless stellar performance by Fiat saw it slip from number 20 to 27 in theranking.

Table 8: Top 10 in theManufacturing within Central Europe (All revenue and net income figures are in EUR million) Rank Top 500 Rank Top 500 Rank LY Company name Country Revenue from sales 2011 1 2 3 4 3 4 13 17 3 6 12 21 KODA Metinvest AUDI Hungaria Volkswagen Slovakia GE Infrastructure Central & Eastern Europe Holding Korltolt Felelssg Trsasg GE Hungary Fiat ArcelorMittal Poland Kia Motors Slovakia Samsung Electronics Slovakia Czech Republic Ukraine Hungary Slovakia 10,267.6 10,152.6 5,582.5 5,192.9 Revenue change (%) 2011- 2010 18.3% 44.3% 17.3% 28.5% Net income 2011 653.5 1,326.6 759.2 135.1 Net income change (%) 2011- 2010 87.0% N/A 28.3% 79.7% 2,421.9 Revenue from sales Q1 2012 Revenue change (%) Q1 2012 Q1 2011 N/A 4.0% N/A N/A

22

NEW

Hungary

4,445.6

16.0%

809.1

N/A

N/A

6 7 8 9 10

23 27 30 36 39

25 20 64 36 33

Hungary Poland Poland Slovakia Slovakia

4,211.2 4,008.4 3,679.6 3,328.4 3,152.8

80.9% -2.4% 9.5% 15.2% -2.9%

1,020.2 20.4 156.7 68.6 164.9

107.4% 199.3% 192.9% 60.0% 39.7% 987.0

N/A -12.1% N/A N/A N/A

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Leadership perspectives
Leadership means management by example, providing guidance to employees in both determining and achieving their goals, and thereby laying thefoundations of thecompanys long-term success. Theperformance review is one of thecornerstones of this process, as it both allows managers to give employees feedback on their work and enables leaders to measure how successful they have been in terms of communication and motivation.
Zsolt Peth, CEO, TVK Nyrt., Hungary

Theability to take acomprehensive view and actively shape theenvironment, in particular during times of crisis, are two critical characteristics of atrue leader ,and are absolutely necessary to lead acompany into thefuture.
Ryszard Jania, CEO, Pilkington Automotive Poland Sp. zo.o., Poland

Leadership in building thecompany value gives employees certainty that their regular activities are important. Therole of theleader is to set objectives, explain why they are important and what thecompany will be like, if they are achieved. But most of all, therole of theleader is to make employees realise that their every-day efforts contribute to thesuccess of theentire organisation and are meaningful.
Tomasz Kalwat, CEO, Synthos, Poland

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First of all, theleaders of thefuture will have to be strong personalities. Using feedback and evaluations from several internal company education programmes, we give theopportunity to develop theknowledge and skills of those young people whom we have identified as themost talented. That is their first step to become one of our potential future leaders.
Eek-Hee Lee, President and CEO, Kia Motors Slovakia

As theresult of thecrisis thestyle of theleadership and its focus areas needed to be reconsidered, thespeed of decision-making has got higher importance. Executives at Schneider are getting more deeply involved in talent management and succession planning is getting more importance.
Jzsef Spilk, Country President, Schneider Electric Hungria Villamossgi Zrt., Hungary

In Central Europe, employees expectations for aleader primarily involve clearly formulating visions and goals, and ensuring their achievement. Thecurrent state of theeconomy, coupled with theuncertainty regarding future developments, results in challenging conditions where achieving goals is more demanding than ever and necessitates motivated teams and talent for whom asuccessful leader must create conditions for personal growth and development.
Bronislav Panek, Partner, Consulting, Deloitte Czech Republic

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Real Estate and Construction

Diana Rdl Rogerov, Partner, Audit, Real Estate Leader, Central Europe

Is theworst over for Central Europes real estate markets? Theleaders of theregions real estate industry have yet to successfully grasp thetwin issues of distressed assets and former government properties that threaten market saturation. Therapid growth of Central Europes economies in theyears following 1990 drove asignificant expansion in theregions real estate markets. Over thelast 10 to 15 years, in fact, development activities have completely redrawn thelayout of numerous cities, with new junctions being formed and entirely new property formats coming on to themarket. In many cases, theprosperity of countries across theregion after 2000 also led to anincrease in development levels and property values that were not matched by thegrowth of thereal economy, actual purchasing power and employment levels. Theshare of theoverall market represented by speculative development activities (involving theconstruction of business or logistical centres with no purchasers or tenants being identified in advance) also began to grow substantially, supported by theexpansionist approach of thebanks. Giant real estate projects emerged, often disrupting thefragile balance between quality and price. In many segments, including theresidential market, apurchasing panic set in, when buyers came to believe that growth would never end, so triggering spiralling property prices.

Theonset of themortgage crisis had asignificant impact on theCentral European real estate market. While thevarious markets in countries across theregion had behaved almost identically in terms of growth and positive sentiment until 2008, that year saw asplit emerge between Poland and therest of Central Europe. While foreign investors started withdrawing from theCzech Republic, Slovakia and Hungary, they flocked into Poland. By mid-2010, in fact, more than 70% of all property investments in theCzech Republic were made by local investors. Theslow-down of theregional real estate markets also demonstrated that it is not necessarily appropriate to apply aWestern European perspective to Central European real estate markets. In many of theregions countries, there is agreater difference than in theWest between how thereal estate market functions in capitals and regions. Central European markets also differ from those in Western Europe in terms of buying behaviours and thework and post-work practices of consumers. Thecrisis also left behind it anumber of unsuccessful or incomplete development projects. However, theextent of this problem has not yet fully materialised it remains within thedomain of theregions banks, which have not as yet started thesales of distressed property assets that investors are eagerly awaiting.

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There is therefore acertain level of tension on themarket; potential investors awaiting these sales have greatly more speculative expectations than sellers, leading to awide gap between theexpectations of thesellers, buyers and, indeed, reality. As aresult, themarket has been operating in akind of stand-by mode. However, thedata for 2011 indicate that aclear market revival was set in motion during theyear vacancy rates peaked and started to fall, and nominal rents remained more or less unchanged (even though actual rents charged remained under pressure, mainly outside large cities). New projects were being launched and completed, meanwhile, as companies showed how they have learned to operate in this new economic reality. In addition, theinvestment activities of foreign funds, particularly from Germany, theUK and theUS, picked up notably in 2011. One thing is clear, however. Central European real estate markets are set to be very different from how they were prior to 2008; today, thepursuit of stability and prudence has made its return. Residential market There has been immense development in theresidential property markets of all Central European countries since 1990. State-owned and municipal apartments alike have been substantially privatised. And in theyears following 2000, when mortgage funding became widely available, thewhole region experienced amassive round of new residential development. Whats more, acombination of mortgage-availability with thegrowing purchasing power of thepopulation and their positive expectations drove rapid increases in both demand and prices.

Theslow-down following 2008 had amajor impact on theregions residential housing markets. Theconditions deteriorated for financing development projects, and many people were disappointed by thefailure of their properties to achieve thegrowth in value they had anticipated. As aresult, asubstantial proportion of thepopulation revised its housing strategies, particularly as people became more concerned about their ability to maintain future earnings. To make matters worse, certain countries (such as Hungary) also experienced asimilar problem to that of Iceland, where people took out foreign currency mortgages that were difficult to repay when thelocal currency depreciated. Today, thecontinuing significant volume of forfeited mortgage collateral may prove in time to be asignificant impediment in theway of full market recovery. Just as important, it is also aserious social issue that is having anotable political impact. Today, across theregion, developers are looking for new residential market formats, such as housing for older people and accommodation for students. In one example of this trend, theCzech Republic is seeing arevival of cooperative housing schemes.

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Office real estate market Ananalysis of data from 2011 reveals some significant differences in thehealth of thecommercial property markets for office accommodation between theregions capitals. For example, while thevacancy rate in Budapest stood at over 25% in 2011, it only amounted to around 7% in Warsaw. Anumber of risks have thepotential to impact on theregions office accommodation market, including what we call ahidden capacity reserve. This is caused by alarge number of tenants who significantly changed their business strategy after 2008, from afocus on growth to amore defensive position. As aresult, they no longer need to keep empty premises in reserve to house future expansion. They are therefore either seeking to sublet their vacant offices, or are waiting for their leases to end in order to renegotiate terms or move to more suitable premises. Thesecond risk affects theowners of pre-used buildings lower building costs than in thepast have enabled newly built developments to provide asuperior spec, leaving thelandlords of older centres with apotential White Elephant. Third, theimplementation of new workspace strategies, possibly including flexible and home-working options, may result in afurther decrease in demand and prices. Finally, theuncoordinated vacating of government offices is asignificant risk to themarket as awhole. In some countries, thestates share of thetotal office accommodation market can easily exceed 50%. Thelack of aclear government vision for managing this portfolio is likely to have amajor impact on thewider marketplace.

Retail real estate market Theretail RE market across theregion is under pressure from consumer concerns that are leading to areduced appetite for spending and hence decreasing sales. This trend is reflected in theperformance of several retail formats. Moreover, themarket is being influenced by anumber of further factors that specifically affect thecentral European region. These include arelatively narrow choice of brands, which does not motivate buyers to try different shopping centres, agap between thesophistication of consumers in big cities and theregions, and aless developed transport infrastructure than is standard in Western Europe. Similar to other property sectors, Poland is theclear leader in retail because themarket continues to benefit from uninterrupted economic growth. Industrial real estate market Economies throughout Central Europe are strongly dependent on exports, and theinflux of foreign direct investment (FDI) into theregions industries has also been akey driver of economic success in thelast 15 years. Theindustrial real estate market was thefirst segment to be affected by theslowdown after 2008, and it has also been thefirst to recover from thedownturn. Nevertheless, therate of change across theregions countries is not identical; while thevacancy rate in Hungary is close to 20%, for example, it stands at only around 7% in Slovakia.

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Opportunities for theCentral European real estate market: Market entry by foreign investors from new regions, such as theMiddle East, India, China and Scandinavia; Agreater influx of investments from pension funds, particularly those from within theregion, whose current property exposure is minimal; Theestablishment of new formats, such as commercial rental housing, student housing and retirement homes; Differentiation of retail RE; and TheEurope 2020 strategy and its implications for property markets, including theexpansion of theGreen Building concept, energy-efficient buildings etc. Risks for theCentral European real estate market: Hidden reserves in administrative and residential buildings; Greater implementation of alternative workplace management practices, resulting in adecrease in theoverall demand for office space; Persisting negative business sentiment; and Vast government-owned property portfolios, which in anumber of cases have undergone unplanned growth placing significant numbers of empty buildings on themarket may have along-term paralysing effect. Recognising theimportance of maintaining stability in theregions real estate market, leaders need to address risk with prudence while leveraging merging market opportunities.

How theCentral European construction industry is having to adapt to new realities One of thekey leadership challenges facing theconstruction industry is theneed to restore and maintain thequality of build and design in amarket that is still far from healthy. In transitional economies, particularly those in Central and Eastern Europe, there is astrong positive correlation between therate of economic growth and that at which infrastructure is restored to improve its accessibility and quality. TheCentral European region showed significant growth early in themillennium; for example, between 2003 and 2008, theSlovak construction industry recorded acompound annual growth rate of 16.4%. And as theregional economies boomed, therapid increases in demand for construction work were driven by arange of factors including missing or under-invested infrastructure, alack of high-quality office, storage and residential property, aninflow of funds from theEU and through foreign direct investment (FDI), and thegrowing purchasing power of thepopulation as awhole. Construction companies made investments in their capacity that were necessary to accommodate this growing demand. But all too often, thequality of work suffered in theface of thesheer quantity involved. In addition, theconstruction industrys workforce was insufficiently skilled and qualified, and thecosts of labour materials grew during this boom period. Inevitably, theglobal financial crisis that followed thecredit crunch of 2008 triggered asevere slowdown of theindustrys expansion as foreign investors re-thought their plans, business sentiment dived sharply, and banks markedly revised their terms for financing construction projects.

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Thefragility of thetransitional economies in Central Europe became obvious, particularly in terms of theregions unpredictable and unstable political environment. Governments replaced expansionist strategies with restrictive policies and counter-cyclical measures with programmes that further fuelled economic deterioration. As aresult, investment in public construction programmes declined, often even more sharply than in theprivate sector. Since that time, construction companies have been struggling to cope with thesubstantial over-capacity they built up in theyears up to 2008, driving afierce price war across theregion. Large construction companies, that in more prosperous times had rejected small construction contracts, re-entered thesegment to place small and medium-sized companies under even more pressure. Many construction companies saw their turnover crash by more than 50%, and several firms exhausted their historic cash reserves due to alack of profitable projects. Theregions construction companies have begun to adapt to these new conditions by taking anumber of measures including cost cutting, reducing their production capacity and launching more strategic alliances and M&A programmes. Examples of this include thepurchase of Slovakias SkyBau by Skanska in December 2010, and theacquisition of several mid-sized companies across theregion by Czech start-up, Hinton. Companies are also entering new markets, such as Russia and theMiddle East, as well as new segments like thepower industry, and are seeking new technologies, including green building and energy efficiency solutions. Poland is theonly country in theregion to have maintained growth in both its economy and its construction industry during theglobal economic downturn. Polish construction has benefitted from theneed to address significant historic short-falls in thecountrys infrastructure. Additional positive factors include thecontinuing inflow of support from EU funds and preparatory work on the2012 European Football Championship, which necessitated thecompletion of alarge number of infrastructural projects. There has also been asubstantial change in thefocus of property investors, who are moving away from Central Europes declining markets to invest in prosperous Poland.

Due to theeconomic situation in Europe, theEconomist Intelligence Unit (EIU) has estimated Polands GDP growth in 2012 at 1.5%. Theforecast also indicates thepotential for arelatively rapid improvement in thecountrys economic growth after 2012, although its prediction for long-term GDP growth of around 3.5% per annum is lower than Poland achieved from 2006 to 2008. Across theregion, theimplementation of infrastructural public/private partnership (PPP) projects has yet to receive broad-based political support, although change could be in theair. However, PPP plans in theregion appear to be based more on akind of supplier loan arrangement than on real political conviction. This is because governments are able to borrow money more cheaply than theprivate sector; in thecurrent European public spending crisis, governments are beginning to understand theincreasing need for companies to obtain afinancing alternative to debt securities, driving something of acomeback in PPP projects. For example, in Poland thepublic sector is considering thepotential implementation of around 120 PPP projects. These are at different stages of development, and tendering has yet to begin in most cases. Theprojects relate primarily to sport and recreation, municipal and transport infrastructure, including parking resources. By comparison with Western Europe, however, at thetime of writing there are still relatively few projects in theareas of education, healthcare and theenvironment. Following its election in March 2012, thenew Slovak government also intends to relaunch its PPP programme. According to theNational Highway Company, which oversees infrastructural construction work, aseries of new projects is expected to launch in 2012 under conventional public procurement procedures.

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Opportunities for theCentral European construction industry: New PPP projects are expected to bring significant growth in construction volumes in thenext few years; Theforthcoming new programming period for EU funding (2014 2020) is expected to further stimulate theconstruction market through thegreater involvement of private investment in national and local government projects; Significant plans exist for road, rail and energy infrastructure projects, including rail track renovation and feasibility work on new nuclear power plants in thecoming year; High levels of market fragmentation will allow relatively easy market consolidation; There is continuing potential for acquiring locally owned construction companies, which have historically dominated theregional industry. Most foreign companies that have entered themarket have done so by acquisition, which due to current levels of market saturation continues to be anadvisable entry strategy; There are positive implications from theEurope 2020 Strategy, which calls for anindustry-wide 20% reduction in greenhouse gas emissions and energy consumption, alongside anincrease to 20% in theproportion of total energy consumption from renewable resources. This creates opportunities for nearly zero-energy buildings, theimplementation of Green Public Procurement and theconstruction of renewable energy resources.

Risks facing theCentral European construction industry: Theexistence of excess capacity and theassociated potential for consolidation, alongside extreme price competition and pressurised operating margins; Theunpredictable future development of theregional construction market, driven by pressurised public budgets; Theuncertain future of theEUs financial markets, influencing wider economic conditions and impacting any recovery in consumer spending; Poor transparency of public procurement; and Low stability of state concepts for infrastructure and construction development. As theregions construction leaders continue to respond to market fragility, they are shaping anew reality where matching capacity to demand has never been more important.

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Country Insights Czech Republic TheCzech Republic in recent years could not avoid theimpacts of theglobal economic recession. Please note, for example, that thegeneral year-on-year decline in theconstruction industry by nearly 7% in 2010 was mitigated by themassive construction of solar power plants (due to attractive tariffs). In 2011, construction production dropped by 3.1% vs. 2010. Compared to 2008, when thevolume of theconstruction industry achieved its historic maximum, construction production was down by 10.8%. Total production was driven down in 2011 vs. 2010 by heavy construction, which decreased by 8.7%. Production of building construction reported ayear-on-year decline of only 0.3%. It is expected that in 2012, thesituation will not substantially change for thefollowing reasons: Restricted public investment significant and ad-hoc restriction of public investments in infrastructure due to fiscal consolidation High competition and price war several firms have exhausted historic cash reserves due to lack of profitable projects. There is anexcess of construction capacity on themarket and we expect consolidation in themid-term. TheCzech construction sector is fragmented to agreat extent. In thelong-term, Czech construction companies suffer from under-investment in thearea of IS/ICT solutions and theimplementation of new and progressive management methods that would significantly improve their productivity. Long-term trends include thedevelopment of green and energy-efficient buildings; however, many Czech companies still lack sufficient experience in this respect.

Hungary Weak macroeconomic environment, falling investment demand and poor household finances led to theHungarian construction sector being in recession since 2006. 2012 will probably be avery depressive year for theconstruction sector, but from 2013 theimproving macroeconomic condition and higher public investment are likely to reverse this negative trend. Real estate market players adopted await-and-see attitude until thecountrys negotiations with theIMF/ EU conclude. There are acouple of significant investment deals negotiated already and expected to be done in thesecond half of theyear. Securing financing remained difficult in 2012; banks were only willing to lend to buyers with high quality and built to suit developments. Agrowing number of distressed commercial and residential property assets have fallen into thepossession of banks. Thebanks started developing their real estate and asset sale strategies. This creates opportunities for buyers and it is expected to drive investment volumes in Hungary.

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Poland Construction: Although public funds for investment projects will reach record high in 2012, theoutlook for theconstruction industry is not very optimistic. Many construction companies (both general contractors and subcontractors) already struggle with liquidity problems. Thepayment gridlock in investor-general contractor relations adversely affects thecondition of subcontractors, who are facing aneven greater risk of loosing liquidity and bankruptcy resulting from their scale of operations. According to theprojections and opinions of market participants, in thecoming years many companies will have to struggle to survive. It is anticipated that residential/commercial building projects and energy contracts will not compensate for thedecrease in thenumber of infrastructure projects. Investment: Stable economic situation and opportunities arising from being theco-host of 2012 UEFA Championship in Poland were indicators attracting foreign investors attention. In 2011 transaction volume on Polish market was highest since 2007, what influenced real estate market. Majority of investment transactions took place in retail sector, followed by office and logistic and around 65% of them in Warsaw. Core yields seem to stabilize. It needs to be underlined that thesingle transaction volume decreased significantly in all real estate subsectors and such trend should maintain. Industrial: In 2011 supply on thereal estate market increased by 40%, comparing to 2010 (mostly on theUpper Silesia market), while demand was steady for almost whole year. At thesame time thevacancy rate dropped and it seems to be further reduced in thecoming year. Most signed agreements were continuance of tenants activity, majority of them was pre-leases. Rents for warehouse space were stable. Around 60% of themarket is dominated by only afew biggest foreign developers. Offices: New supply decreased in 2011 on theoffice market, dominated by new deals, followed by renegotiations/renewals agreements. As aresult, vacancy rate dropped and mostly, besides prime locations, rents were stable. In thecoming year theoffice stock supply will increase significantly, mainly in Warsaw and Upper Silesia.

Retail: In 2011 there has been asignificantly increasing supply on thePolish retail market. Currently over 60% of available retail space is located in 8 biggest agglomerations; however themajority of retail space which is currently under construction will be located in small and medium sized cities. Despite increasing demand, retail vacancy rate has decreased marginally. At thesame time rents were and should remain stable. Romania Thelocal real estate market remains sensitive, considering themacroeconomic situation and thescarcity of thefinancing sources. However, some segments seem to recover more rapidly than others. While industrial and retail show clear signs of improvement, theoffice market remains stable, slightly surpassing 1.84 million sqm at theend of 2011. As for theresidential market, theforecasts are cautious, as theWait and see approach is still on for both buyers and sellers. However, theexistent supply in Bucharest continues to be excessive in terms of volume and prices. Thegap between developers expectations and end users actual purchasing power continues to be wide, despite significant drops in prices. Therefore, in order to encourage thelocal real estate segment, theRomanian Government reduced VAT to 5% for properties under RON 380,000 and developed in 2009 aspecial scheme for First Time Buyers (Prima Casa). Theconstruction sector is expected to remain in arecovery mode this year. Infrastructure, and road construction in particular, is considered thesegment with thehighest growth potential, especially in themedium and long run, given thecurrent poor state of thenational road network. In 2011, constructions weighted for 10% of Romanian GDP, mainly due to thepublic investments, as private projects registered adramatic decrease within thelast years.

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Providing existing clients with additional properties as they expand is animportant aspect of our business. In fact, over 65% of our new projects are for existing tenants. Another key factor for us is to ensure that we always have sufficient scope to build, and that means having land next to business parks. This achieves two strategic aims first, it prevents our competitors from developing aposition; and it ensures we have sufficient holdings for future developments.

For this reason, as we generate money we reinvest it into CTPs core business. In this way, we always have astrategic position moving forward and we can buy actively to prevent others from doing so. It also ensures that we have thehigh-quality, skilled and experienced organisation we need to keep our clients satisfied at all times otherwise, they would certainly leave us and choose not to select us as their partner in growth.
Remon L. Vos, Managing Director, CTP, Czech Republic

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Theonly businesses associated with thereal estate industry in theTop 500 ranking are seven Polish and four Czech construction companies. This is despite thefact that thesector showed thegreatest increase in revenues of all theindustries we address in this report.

This growth largely stemmed from preparations for this summers Euro 2012 tournament in Poland and Ukraine, which mainly benefitted Polish businesses. Net income growth was negative, however, depressed by higher than anticipated costs of construction.

Table 9: Top 10 in theReal Estate and Construction within Central Europe (All revenue and net income figures are in EUR million) Rank Top 500 Rank Top 500 Rank LY Company name Country Revenue from sales 2011 1 2 3 4 5 6 7 8 9 10 137 154 166 168 191 238 264 279 353 387 151 166 162 182 146 283 444 234 155 295 Budimex Strabag Polska Polimex-Mostostal Skanska Polska Metrostav PBG Mostostal Warszawa Skanska CR EUROVIA CS STRABAG CR Poland Poland Poland Poland Czech Republic Poland Poland Czech Republic Czech Republic Czech Republic 1,339.1 1,220.2 1,171.6 1,158.4 1,045.6 891.0 824.4 793.5 646.4 612.7 Revenue change (%) 2011- 2010 20.7% 21.3% 12.5% 22.6% 0.8% 29.9% 28.1% -17.3% -12.5% -9.8% Net income 2011 63.3 31.8 25.0 97.7 35.2 41.4 -31.1 2.7 39.4 17.0 Net income change (%) 2011- 2010 -5.4% -34.5% -16.4% 84.5% 39.2% -8.1% N/A -93.2% 43.8% 43.3% 181.4 169.1 168.2 Revenue from sales Q1 2012 255.9 117.9 243.2 Revenue change (%) Q1 2012 Q1 2011 26.6% -34.3% 9.1% N/A 10.4% 39.7% 20.9% N/A N/A N/A

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Leadership perspectives
In my view, agood leader should be avisionary of change and development and always follow therule that running forward is thekey to success. This implies that theleader should have adeep understanding of thecompanys market and in-depth knowledge to support feelings and predictions with business analysis. It is not only theleaders determination, but also theteamwork which enables anorganization to meet its business objectives. Therefore, agood leader should be able to persuade his staff to look in thesame direction.
Konrad Jaska, Former Chairman of theManagement Board, Polimex-Mostostal, Poland

For me, it is responsibility that defines leadership, which is why our company leadership strategy is to give people both theresponsibility and theopportunity to deliver theachievements that will help them believe in themselves and take pride in their performance. It is recognizing in this way that our people are our most important asset that helps our company to move forwards.
Remon L. Vos, Managing Director, CTP, Czech Republic

In my view thebest business leaders in todays world are those who can balance therequirement of growing thebusiness in asustainable and profitable way with thecurrent uncertainties of themacroeconomic environment and theheightened risk this entails.
Attila Kvesdy, Partner in Charge, Tax, Deloitte Hungary

Central Europe TOP 5002012

91

CE Top 500 ranking

Rank Company name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 PKN Orlen MOL KODA Metinvest Naftogaz of Ukraine EZ Lotos PGE Energorynok Jeronimo Martins ORLEN Lietuva PGNiG AUDI Hungaria RWE Transgas KGHM PETROM Volkswagen Slovakia Tauron AGROFERT Slovnaft Ukrzaliznycia

Country Poland Hungary Czech Rep. Ukraine Ukraine Czech Rep. Poland Poland Ukraine Poland Lithuania Poland Hungary Czech Rep. Poland Romania Slovakia Poland Czech Rep. Slovakia Ukraine

Industry LY Rank E&R E&R Mfg Mfg E&R E&R E&R E&R E&R CB&T E&R E&R Mfg E&R E&R E&R Mfg E&R CB&T E&R CB&T Mfg Mfg CB&T TMT E&R Mfg E&R CB&T Mfg TMT E&R CB&T E&R E&R Mfg E&R E&R Mfg E&R Mfg E&R E&R CB&T E&R CB&T CB&T E&R E&R 1 2 3 6 4 5 11 9 7 10 15 8 12 13 17 14 21 23 27 31 19 NEW 25 18 16 30 20 32 28 64 22 50 NEW 37 41 36 38 35 33 34 42 45 24 46 44 39 43 58 48

Rank Company name 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 Samsung Electronics Magyar Hyundai Motor Mfg Czech ISD Energy Company of Ukraine ArcelorMittal Kryvyj Rih Vilniaus prekyba Energa ALPIQ ENERGY SE U.S. Steel Koice Eurocash ENEA Volkswagen Pozna MVM JSW MAXIMA group Nokia Komrom Aurubis EFT Carrefour Polska EZ Distribuce Magyar Telekom Telefnica Czech Rep. Ukrtatnafta epro Philips Industries Magyarorszg Flextronics Hungary Tesco-Global Fibria Trading International Orlen Petrocentrum MORAVIA STEEL Donetskstal Barum Continental E.ON Hungria E.ON Energie Eni esk republika Fozzy Group Lasy Pastwowe Panrusgz Centertel NIS Lidl Polska General Motors Mfg Poland OKD E.ON Energiaszolgltat Lukoil Bulgaria Polkomtel Lewiatan TINECK ELEZRNY Makro Cash and Carry Polska JP EPS

Country Hungary Czech Rep. Ukraine Ukraine Ukraine Lithuania Poland Czech Rep. Slovakia Poland Poland Poland Hungary Poland Lithuania Hungary Bulgaria Serbia Poland Czech Rep. Hungary Czech Rep. Ukraine Czech Rep. Hungary Hungary Hungary Hungary Poland Czech Rep. Ukraine Czech Rep. Hungary Czech Rep. Czech Rep. Ukraine Poland Hungary Poland Serbia Poland Poland Czech Rep. Hungary Bulgaria Poland Poland Czech Rep. Poland Serbia Poland

Industry LY Rank CB&T Mfg Mfg E&R Mfg CB&T E&R E&R Mfg CB&T E&R Mfg E&R E&R CB&T TMT Mfg E&R CB&T E&R TMT TMT E&R E&R CB&T Mfg CB&T CB&T E&R Mfg Mfg Mfg E&R E&R E&R CB&T PS E&R TMT E&R CB&T Mfg E&R E&R E&R TMT CB&T Mfg CB&T E&R TMT 29 149 59 NEW 55 49 51 NEW 47 84 68 72 65 74 60 26 88 118 52 90 57 56 82 67 40 119 62 53 91 94 75 83 63 87 77 167 98 54 69 99 123 NEW 79 71 80 70 81 112 66 101 73

GE Infrastructure Central & Eastern Europe Holding Korltolt Hungary Felelssg Trsasg GE Hungary Metro Group FOXCONN CZ INA Fiat UNIPETROL Agrokor ArcelorMittal Poland TPSA DTEK Chimimport Lotos Paliwa Lukoil Neftochim Kia Motors Slovakia Petrol Group SPP Samsung Electronics Slovakia EZ Prodej AUTOMOBILE-DACIA BP Rompetrol Rafinare Tesco Polska Kompania Wglowa Mercator Group PKP Slovensk elektrrne E.ON Fldgz Trade Hungary Poland Czech Rep. Croatia Poland Czech Rep. Croatia Poland Poland Ukraine Bulgaria Poland Bulgaria Slovakia Slovenia Slovakia Slovakia Czech Rep. Romania Poland Romania Poland Poland Slovenia Poland Slovakia Hungary

100 PTC

94

Rank Company name 101 NEK

Country Bulgaria Czech Rep. Czech Rep. Poland Czech Rep. Slovakia Croatia Czech Rep. Czech Rep. Czech Rep. Poland Slovenia Poland Poland Hungary Croatia Ukraine Romania Poland Poland Ukraine Ukraine Hungary Ukraine Czech Rep. Romania Slovenia Czech Rep. Poland Ukraine Czech Rep. Slovenia Ukraine Romania Estonia Poland Poland Poland Czech Rep. Poland Slovakia Czech Rep. Poland Romania Hungary Hungary Poland Poland Hungary

Industry LY Rank E&R CB&T CB&T E&R CB&T Mfg CB&T Mfg TMT Mfg PS CB&T LS&HC CB&T Mfg E&R Mfg E&R LS&HC CB&T Mfg E&R E&R Mfg E&R CB&T CB&T CB&T E&R CB&T CB&T E&R E&R CB&T CB&T CB&T RE CB&T CB&T CB&T Mfg CB&T CB&T Mfg E&R Mfg E&R CB&T CB&T LS&HC NEW 96 107 76 105 89 97 120 135 78 92 NEW 110 100 102 85 NEW 116 103 108 NEW 95 NEW 122 NEW 106 141 114 148 126 256 NEW 197 163 150 326 151 130 137 NEW 176 136 NEW 416 157 179 139 113 131 138

Rank Company name 151 Statoil 152 Farmacol 153 Shell Polska 154 Strabag Polska 155 Ferrexpo Group 156 Asseco 157 GSK 158 Interpipe 159 SPAR Magyarorszg 160 Shell Czech Rep. 161 Achema 162 Tallink 163 MAN Truck & Bus 164 Kyivstar GSM 165 Metro Cash & Carry Romania 166 Polimex-Mostostal 167 Panasonic AVC Networks Czech 168 Skanska Polska 169 Fiat Powertrain 170 Slovnaft esk republika 171 MAKRO Cash & Carry R 172 Revoz 173 Philip Morris Ukraine 174 Samsung Electronics 175 TELEKOM SRBIJA 176 Galnaftogaz 177 LG Electronics Mawa 178 ARCELORMITTAL GALATI 179 Richter Gedeon 180 Epicentr K 181 Penny Market CR 182 T-Mobile Czech Rep. 183 T-HT Group 184 Volkswagen Motor Polska 185 Krka Group 186 ISD DUNAFERR 187 Kompania Piwowarska 188 DELTA 189 Boryszew 190 PCE Paragon Solutions 191 Metrostav 192 Nibulon 193 Foxconn Slovakia 194 PHOENIX lkr. velkoobchod 195 LG Electronics Wrocaw 196 197 J.P. Morgan Energy Europe Energetick aprm. holding

Country Poland Poland Poland Poland Ukraine Poland Poland Ukraine Hungary Czech Rep. Lithuania Estonia Poland Ukraine Romania Poland Czech Rep. Poland Poland Czech Rep. Czech Rep. Slovenia Ukraine Poland Serbia Ukraine Poland Romania Hungary Ukraine Czech Rep. Czech Rep. Croatia Poland Slovenia Hungary Poland serbia Poland Hungary Czech Rep. Ukraine Slovakia Czech Rep. Poland Czech Rep. Czech Rep. Poland Poland Latvia

Industry LY Rank E&R LS&HC E&R RE Mfg TMT LS&HC Mfg CB&T E&R Mfg CB&T Mfg TMT CB&T RE TMT RE Mfg E&R CB&T Mfg CB&T Mfg TMT E&R Mfg Mfg LS&HC CB&T CB&T TMT TMT Mfg LS&HC Mfg CB&T CB&T Mfg Mfg RE CB&T Mfg LS&HC Mfg E&R E&R Mfg E&R CB&T 147 124 145 166 175 230 125 459 133 132 263 229 NEW 154 127 162 104 182 186 290 117 121 396 177 153 226 109 173 169 209 160 142 140 158 164 188 192 86 243 274 146 152 111 144 115 NEW NEW 168 172 NEW

102 Tesco Stores CR 103 Kaufland esk republika 104 PSE Operator 105 AHOLD Czech Rep. 106 PCA Slovakia 107 Konzum 108 ArcelorMittal Ostrava 109 Siemens 110 TPCA Czech 111 Poczta Polska 112 PS Mercator 113 Pelion (PGF) 114 Auchan Polska 115 Magyar Suzuki 116 HEP Group 117 Ostchem 118 PETROTEL LUKOIL 119 NEUCA 120 Emperia Holding 121 123 125 122 TNK-BP Commerce OWG Group Energoatom 124 TVK 126 esk drhy 127 BAT Romania 128 Gorenje Group 129 OMV esk republika 130 Kaufland Polska 131 Kernel 132 EP Energy 133 HSE Group 134 ATB Market 135 KAUFLAND Romania 136 Baltic International Trading 137 Budimex 138 BAT Polska Trading 139 PKP Cargo 140 Bosch Group R 141 Synthos 142 Tesco Stores SR 143 PCA LOGISTIKA CZ 144 Azoty Tarnw 145 LUKOIL Romania 146 Jabil Circuit Magyarorszg 147 MVM Trade 148 Real 149 Castorama 150 CHINOIN

Continental Automot. Czech Rep. Czech Rep.

198 Philips Lighting 199 KHW 200 Uralchem Trading

Central Europe TOP 5002012

95

Rank Company name 201 DELHAIZE SERBIA DOO

Country Serbia Poland Poland Slovenia Czech Rep. Poland Romania Poland Poland Poland Romania Poland Hungary Slovakia Romania Latvia Romania Ukraine Romania Ukraine Hungary Romania Hungary Bulgaria Romania Ukraine Poland Croatia Slovakia Poland Ukraine Hungary Hungary Slovakia Ukraine Hungary Poland Poland Ukraine Poland Poland Poland Poland Hungary Poland Czech Rep. Poland Poland Poland

Industry LY Rank CB&T CB&T Mfg E&R CB&T Mfg E&R Mfg CB&T Mfg E&R Mfg E&R E&R E&R E&R TMT E&R E&R Mfg Mfg CB&T E&R E&R TMT Mfg Mfg CB&T E&R E&R E&R E&R LS&HC LS&HC TMT CB&T E&R RE CB&T CB&T Mfg CB&T CB&T CB&T E&R CB&T CB&T CB&T E&R CB&T NEW 199 171 298 178 215 336 201 183 190 213 184 159 180 195 228 93 NEW 216 NEW 258 189 198 221 174 309 343 214 242 NEW 194 291 203 240 185 318 181 283 208 272 187 202 219 220 233 196 254 191 265 268

Rank Company name 251 ELM 252 Auchan Magyarorszg 253 Basell Orlen Polyolefins 254 Ruch 255 Toshiba Television CE 256 Prask energetika 257 esk pota 258 Bulgargaz 259 MOL Energiakeresked 260 Eesti Energia 261 Unilever Polska 262 BorsodChem 263 BILLA CR 264 Mostostal Warszawa 265 Selgros 266 MTS Ukraine 267 269 Dalkia Polska J&S Energy 268 PHOENIX Pharma Hungary 270 Telekom Slovenije Group 271 Stredoslovensk energetika 272 Everen 273 VODAFONE Romania 274 Eustream (former SPPpreprava) 275 Ferona 276 Polomarket 277 ABC Data 278 Anwil 279 Skanska CR 280 Tu Holding 281 Mobis Slovakia 282 CMC Zawiercie 283 JP SRBIJAGAS 284 Empik 285 SELGROS CASH & CARRY 286 VAE 287 KGHM Metraco 288 PLL LOT 289 SIJ 290 Orlen Petrotank 291 Electrolux Poland 292 Vodafone Czech Rep. 294 Polski Koks 295 Slovnaft Polska 296 MOL romania 297 Grupa ITI 298 Flextronics Poland 299 Orange Slovensko 300 Transelectrica

Country Hungary Hungary Poland Poland Poland Czech Rep. Czech Rep. Bulgaria Hungary Estonia Poland Hungary Czech Rep. Poland Poland Ukraine Poland Hungary Poland Slovenia Slovakia Poland Romania Slovakia Czech Rep. Poland Poland Poland Czech Rep. Slovenia Slovakia Poland Serbia Poland Romania Lithuania Poland Poland Slovenia Poland Poland Czech Rep. Poland Poland Romania Poland Poland Slovakia Romania

Industry LY Rank E&R CB&T Mfg CB&T Mfg E&R PS E&R E&R E&R CB&T Mfg CB&T RE CB&T TMT E&R LS&HC E&R TMT E&R E&R TMT E&R CB&T CB&T CB&T Mfg RE CB&T Mfg Mfg E&R CB&T CB&T E&R Mfg CB&T Mfg E&R Mfg TMT E&R E&R E&R E&R TMT Mfg TMT E&R 193 225 260 200 NEW 241 232 NEW 253 244 217 280 237 444 239 231 NEW 223 NEW 218 236 206 210 224 304 264 284 307 234 227 NEW 402 271 267 255 NEW 278 252 333 341 273 249 165 211 363 306 279 NEW 257 322

202 Grupa Muszkieterw 203 Ciech 204 GEN-I Group 205 Globus R 206 Swedwood 207 E.ON GAZ Romania 208 Grupa Can Pack 209 PKP PLK 210 Tele-fonika Kable 211 ROMGAZ 212 Grupa Saint-Gobain 213 TIGZ 214 Zpadoslovensk energetika 215 Enel Romania 216 Latvenergo 217 Nokia Romania 218 220 Southern GOK Azovmash Group 219 GDF SUEZ Energy Romania 221 Robert Bosch Elektronika 222 CARREFOUR Romania 223 OMV Hungria 224 OMV Bulgaria 225 ORANGE Romania 226 Atlant-M 228 Specja 229 Prirodni plin 230 ZSE Energia 231 Elektrownia Rybnik 232 Gazprom sbut Ukraina 233 HUNGAROPHARMA 234 TEVA Magyarorszg 235 Slovak Telekom 236 Roshen 237 Shell Hungary 238 PBG 239 Kolporter 240 MHP 241 Michelin Polska 242 BSH 243 Animex 244 Rossmann 245 FGZ 246 ywiec 247 Lidl esk republika 248 Media-Saturn 249 Koksownia Przyja 250 AB

227 RENAULT INDUSTRIE ROUMANIE Romania

293 GDF SUEZ Energia Magyarorszg Hungary

96

Rank Company name 301 Slovnaft Petrochemicals 302 Totalizator Sportowy 303 SANOFI-AVENTIS 304 Orbico 305 Lekkerland Polska 306 U.S. STEEL SERBIA 307 Electrolux Lehel 308 PKP Energetyka 309 Spar Slovenia 310 HIDROELECTRICA 311 Real - Hypermarket 312 313 Mlekovita ENEA Wytwarzanie

Country Slovakia Poland Hungary Croatia Poland Serbia Hungary Poland Slovenia Romania Romania Poland Poland Poland Poland Hungary Czech Rep. Slovenia Lithuania Czech Rep. Poland Hungary Poland Bulgaria Czech Rep. Romania Poland Poland Ukraine Poland Poland Poland Poland Ukraine Czech Rep. Czech Rep. Poland Poland Poland Poland Poland Romania Czech Rep. Hungary Poland Lithuania Czech Rep. Poland Poland

Industry LY Rank E&R CB&T LS&HC CB&T CB&T Mfg Mfg E&R CB&T E&R CB&T CB&T E&R CB&T Mfg PS E&R E&R E&R E&R CB&T Mfg Mfg E&R TMT CB&T Mfg CB&T E&R Mfg E&R Mfg CB&T CB&T CB&T E&R CB&T Mfg Mfg Mfg Mfg TMT CB&T CB&T CB&T E&R CB&T CB&T TMT 302 289 308 NEW 207 250 297 266 281 247 246 312 NEW 277 390 275 NEW 360 340 346 337 460 375 NEW 293 481 321 379 NEW 270 285 393 323 NEW 400 329 319 339 294 347 143 377 269 301 317 311 NEW 385 282 313

Rank Company name 351 MOLTRADE-Mineralimpex 352 354 Interagro BNK-Ukraine 353 EUROVIA CS 355 Foxtrot 356 Engrotu 357 E. Leclerc 358 Maspex 359 Philip Morris Polska 360 Jihomoravsk plynrensk 361 koda Praha Invest 362 MEDIPLUS EXIM 363 P&G Trading Ukraine 364 AmRest 365 Johnson Controls Aut. Soustky 366 Atlantic Grupa 367 Kaufland Slovakia 368 Palink 369 KITE 370 EZ Electro Bulgaria 371 CEDC 372 Veolia Voda esk republika 373 Achema 374 Lidl Magyarorszg 375 Philip Morris Magyarorszg 377 Lek Group 378 MVM Paksi Atomerm 379 ThyssenKrupp Energostal 380 EPS 381 Ferrero Polska 382 BAT Magyarorszg 383 MICHELIN Hungria 384 WIZZ Air Hungary 385 Arctic Paper 386 Energokrak 387 STRABAG CR 388 esk spolenost pro plat. karty 389 Ukrtelecom 390 SYNTHOS Kralupy 391 Esppol 392 LPP 393 Zentiva International 394 Nikopol Ferroalloys Plant 395 Sokow 396 398 Continental Matador Rubber Delphi Poland 397 Mercedes-Benz 399 Wglokoks 400 Rimi Latvia

Country Hungary Romania Czech Rep. Ukraine Ukraine Slovenia Poland Poland Poland Czech Rep. Czech Rep. Romania Ukraine Poland Czech Rep. Croatia Slovakia Lithuania Hungary Bulgaria Poland Czech Rep. Lithuania Hungary Hungary Slovenia Hungary Poland Czech Rep. Poland Hungary Hungary Hungary Poland Poland Czech Rep. Czech Rep. Ukraine Czech Rep. Poland Poland Slovakia Ukraine Poland Slovakia Poland Poland Poland Latvia

Industry LY Rank E&R CB&T RE E&R CB&T CB&T CB&T CB&T CB&T E&R Mfg LS&HC CB&T CB&T Mfg CB&T CB&T CB&T CB&T E&R CB&T E&R Mfg CB&T CB&T Mfg LS&HC E&R Mfg E&R CB&T CB&T Mfg CB&T Mfg E&R RE CB&T TMT Mfg CB&T CB&T LS&HC Mfg CB&T Mfg Mfg Mfg E&R CB&T 156 NEW 155 NEW 286 296 310 212 259 276 245 361 443 395 338 NEW 479 332 468 328 373 NEW 263 364 305 496 362 320 NEW 324 349 342 404 405 345 358 295 348 303 334 424 383 325 204 352 NEW 384 NEW 261 357

314 Indesit 315 ZAP 316 Magyar Posta 317 OTE 318 OMV Slovenija 319 Lukoil Baltija 320 E.ON Distribuce 321 abka 322 Porsche Hungaria 323 BASF 324 Naftex Petrol 325 Inventec (Czech) 326 CARGILL AGRICULTURA 327 Impexmetal 328 Action 329 Coal of Ukraine 330 TRW Poland 331 RWE Polska 332 Police 333 Inter Cars 334 BaDM 335 OKTA 336 esk lkarnick 337 BENZINA 338 Cargill (Polska) 339 Magneti Marelli 340 Mondi wiecie 341 Sharp Mfg Poland 342 Celsa Huta Ostrowiec 343 ROMTELECOM 344 Dopravn podnik hl. m. Prahy 345 Szerencsejtk 346 Mlekpol 347 LESTO 348 GECO Tabak 349 Nestle 350 P4 (Play)

376 Samsung Electronics LCD Slovakia Slovakia

Rep. of Mac. E&R

Central Europe TOP 5002012

97

Rank Company name 401 Metro-Kereskedelmi 402 Maxima Latvija 403 Polski Tyto 404 RWE Energie 405 D Cargo 406 Telenor Magyarorszg 407 PHARMOS 408 PEGATRON Czech 409 International Paper Kwidzy 410 Cargill A.T.Ukraine 411 Cyfrowy Polsat 412 Prvn energetick 413 Bumar 414 Alliance Healthcare 415 Anwim 416 Alcoa-Kfm 417 Vtkovice 418 Kruszwica 419 Optima Pharm 420 Elko 421 Toyota Motor Mfg 422 Dbica 423 424 GS HOLDING a.s. GEN Energija Group

Country Hungary Latvia Poland Czech Rep. Czech Rep. Hungary Czech Rep. Czech Rep. Poland Ukraine Poland Czech Rep. Poland Czech Rep. Poland Hungary Czech Rep. Poland Ukraine Latvia Poland Poland Czech Rep. Slovenia Slovakia Romania Poland Romania Poland Romania Czech Rep. Ukraine Slovakia Ukraine Ukraine Romania Croatia Hungary Slovakia Czech Rep. Croatia Poland Czech Rep. Ukraine Czech Rep. Poland Czech Rep. Czech Rep. Lithuania Slovakia

Industry LY Rank CB&T CB&T CB&T E&R CB&T TMT LS&HC Mfg Mfg CB&T TMT E&R Mfg LS&HC E&R Mfg Mfg CB&T CB&T TMT Mfg Mfg Mfg E&R E&R CB&T CB&T CB&T E&R Mfg E&R Mfg Mfg E&R CB&T Mfg PS Mfg E&R CB&T E&R Mfg Mfg CB&T E&R E&R Mfg E&R E&R E&R 299 359 369 238 353 327 355 381 367 382 NEW 434 262 376 458 420 455 414 NEW 330 354 449 NEW NEW 423 433 392 411 407 NEW 391 487 NEW NEW NEW 457 351 431 386 356 370 450 NEW NEW 366 NEW 429 NEW 394 NEW

Rank Company name 451 452 Oscar Downstream Volvo Polska

Country Romania Poland Bulgaria Poland Romania Lithuania Poland Ukraine Poland Romania Poland Serbia Romania Ukraine Poland Poland Czech Rep. Hungary Ukraine Lithuania Slovakia Serbia Romania Hungary Poland Czech Rep. Czech Rep. Hungary Latvia Slovakia Ukraine Slovenia Serbia Poland Czech Rep. Czech Rep. Ukraine Czech Rep. Croatia Poland Poland Ukraine Slovakia Croatia Poland Slovakia Poland Bulgaria Romania

Industry LY Rank E&R Mfg TMT Mfg Mfg CB&T RE Mfg CB&T CB&T Mfg CB&T E&R CB&T CB&T LS&HC CB&T Mfg Mfg Mfg Mfg CB&T Mfg CB&T LS&HC Mfg Mfg E&R E&R Mfg CB&T CB&T LS&HC CB&T Mfg CB&T Mfg Mfg E&R CB&T Mfg CB&T Mfg Mfg E&R TMT PS E&R Mfg TMT NEW NEW 350 288 491 NEW NEW 418 389 428 331 461 436 440 425 NEW 387 437 NEW NEW NEW 452 NEW 415 378 NEW NEW 441 398 427 NEW 413 368 498 432 445 NEW NEW NEW 409 467 406 NEW NEW 422 399 469 NEW NEW 482

453 Mobiltel 454 Valeo 455 CONTINENTAL AUTOMOTIVE 456 457 Sanitex Trakcja - Tiltra

458 Motor Sich 459 Netto 460 CFR CALATORI 461 Kopex 462 VICTORIA GROUP 463 Electrocentrale Bucuresti 464 Furshet 465 TZMO 466 Grupa Sanofi 467 SPAR CR 468 Opel Southeast Europe 469 470 471 473 Dneprospetsstal Indorama Polymers Europe Johnson Controls International Michelin Romania

472 Mercator-S 474 Penny Market HU 475 ACP Pharma 476 477 KODA INVESTMENT Mobis Automotive Czech

425 OMV Slovensko 426 JTI Romania 427 Avon 428 Philip Morris Romania 429 Elektrownia Poaniec 430 Celestica Romania 431 Prask plynrensk 432 Kriukov car building works 433 434 435 Continental Matador Truck Tires VS Energy Lemtrans

478 SE-CEE Schneider Electric 479 Latvijas Gze 480 Mondi SCP 481 AeroSvit 482 ACH 484 TARKETT 485 Kronopol 486 Philip Morris CR 487 488 489 KODA TRANSPORTATION OPZ TANK ONO

483 Phoenix Zdravotncke zsobovanie Slovakia

436 ALRO 437 Zagrebaki Holding 438 Lear Corporation Hungary 439 Vchodoslovensk energetika 440 Metalimex 441 HEP - Proizvodnja 442 ZAK 443 444 446 448 450 EVRAZ VTKOVICE STEEL Khleb Investbud Petrodom Czech Coal ZSE Distribcia

490 Podravka 491 Stalprodukt 492 PKP Intercity 493 494 Donetskelectometal eleziarne Podbrezov

445 Dalkia esk republika 447 Import Volkswagen Group 449 Lietuvos dujos

495 HEP-Operator 496 Nokia Poland 497 eleznice SR 498 499 Barter Stomana Industry

500 RCS & RDS

98

Methodology

TheCentral Europe Top 500 ranking is compiled based on consolidated company revenues for thefiscal year ending 2011. Therankings is based on revenues reported by aparticular legal entity operating in Central Europe. Theranking groups companies by industry and country. We also display theranking of the25 largest Central European companies by market capitalisation asof July 2012 and alist of themajor foreign groups in theregion. Deloitte has sourced theinformation by individually approaching thecompanies themselves, from publicly available sources and estimates based on acomparison with last years results and our research. We have ranked banks and insurance companies by total assets and gross written premium respectively. Thegross written premium of insurance companies includes both premiums from life and non-life operations, despite thefact that in certain areas these companies operate asseparate legal entities. Thelist of major foreign investors in theregion is made up of aggregated revenues of those Top 500 companies controlled by investors. These figures are only approximate, asthey donot include, inter alia, intra-group sales and itis possible that they also donot contain therevenues of all subsidiaries in theregion. Missing data In cases where revenue for thefiscal year 2011 was not available, we used thereported 2010 revenue in local currency asaproxy for 2011. Thelist does not include companies that were invited to participate in theranking, but who informed us in writing or verbally that they would not be taking part this year.

Revenue calculation Revenue has been calculated in Euros at therelevant average exchange rates for 2010, 2011, and thefirst quarters of 2011 and 2012. Therevenue for subsidiaries of large groups has been shown separately for those subsidiaries which operate in different industries, subsidiaries or countries than theconsolidating entity and are large enough to enter thelist on their own. In our research, we also examined companies from Albania, Moldova and Kosovo. However they have not entered theTop 500 list due to their relatively low revenues. Data gathered from public sources has not been confirmed by representatives of thecompanies themselves. Deloitte is not responsible for theaccuracy or correction of third party data gathered from public sources or provided by thecompany. Therevenue for subsidiaries of large groups has been shown separately for those subsidiaries, which operate in different industries, subindustries or countries than theconsolidating entity and are large enough to enter thelist on their own. Deloitte ranking does not include holding structures or other types of business conglomerates with subsidiaries operating in various industries and different markets, trade strategies and separate management and whose consolidation on holding (conglomerate level) is rather atotal sum of sales incomes of thesubsidiaries acting in therelevant industries and markets. We donot present companies with several business units, out of which none can be treated asthemain one, investment funds, leasing companies or other financial services companies, which are not banks or insurance companies. Russia/Belarus For thepurposes of this analysis, our ranking includes companies in Central and Eastern European countries with theexception of Russia and Belarus. In both cases we were unable to find reliable data that could be used in therankings. Thesize of theRussian economy and some of its major companies also makes industry and country comparisons difficult.

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Thought leadership

Central Europe CFO Survey www.deloitte.com/cecfo TheDeloitte CE CFO Survey is aunique collection of 6 locally tailored reports reflecting theopinions of 265 CFOs of leading companies in theCentral European region. Thefindings are based on thesecond edition of aDeloitte survey undertaken in January in theregions six largest economies Croatia, Czech Republic, Hungary, Poland, Romania and Slovakia. All theunique reports provide fascinating insights into CFO opinions at akey moment in economic history.

FSI Customer Experience Survey https://www.deloitte.com/ces This unique report includes ananalysis of theneeds and preferences of retail banking customers in thefeatured countries, and provides cross-country benchmarking. It gives financial institutions aroadmap that they will find particularly indispensable at atime when thechallenges of new customer and market trends are becoming increasingly complex and hard to predict.

CE Private Equity Confidence Survey www.deloitte.com/cepe Deloittes Central European Private Equity Confidence Survey reflects theexpectations of private equity professionals focusing on Central Europe. Thesurvey has been conducted twice ayear since March 2003 and theresults are based on questionnaires sent to professionals in private equity firms active in thefollowing Central European countries: Estonia, Lithuania, Latvia, Poland, Czech Republic, Slovakia, Hungary, Romania, Moldova, Bulgaria, Macedonia, Slovenia, Croatia, Bosnia & Herzegovina, Serbia, Montenegro, and Albania.

Property Index: Overview of European Residential Markets www.deloitte.com/cz/pi This publication analyses factors influencing thedevelopment of residential markets and compares residential property prices in selected European countries and cities. Our goal is to provide you with European residential market data on aregular basis. How doEuropeans live, and for how much? This issue focuses especially on housing specifics and theprices of own housing in selected countries in Western and Central Europe.

Global Economic Outlook - 3rd quarter 2012 www.deloitte.com/globaleconomicoutlook Deloitte Researchs Global Economic Outlook offers timely insights from Deloitte Researchs team of economists about thetrends and events that are shaping themarketplace. This edition offers economic outlooks for theEurozone, theUnited States, China, theUnited Kingdom, Japan, India, Russia, and Brazil.

More information on our recent publications can be found at www.deloitte.com


100

Contacts

Client service responsibilities are akey element of our partners roles. Their commitment to quality and integrity in leading client service teams ensures we deliver excellence to our clients.

Function leaders Audit/Enterprise Risk Services Wolda Grant +421 (2) 58249184 wogrant@deloitteCE.com Tax & Legal Jaroslav kvrna +420 246042636 jskvrna@deloitteCE.com Consulting Christoph Greving +420 246042720 chgreving@deloittece.com Financial Advisory Bla Seres +36 14286936 bseres@deloitteCE.com

CE Top 500 project team Financial Advisory team Tomasz Ochrymowicz +48 (22) 5110456 tochrymowicz@deloitteCE.com Patryk Darowski +48 (22) 5110411 pdarowski@deloittece.com Bartosz Malinowski +48 (22) 5110879 bmalinowski@deloittece.com Clients & Markets Halina Fraczak +48 (22) 5110021 hfranczak@deloittece.com Ewa Rzeczkowska +48 (0) 225110800 erzeczkowska@deloittece.com Anna Bracik +48 (0) 22 511 05 62 abracik@deloittece.com Cezary Rykowski +48 (22) 3483505 crykowski@deloittece.com

Office Managing Partners Albania and Kosovo Maksim Caslli +355 44517931 mcaslli@deloitteCE.com Bulgaria Sylvia Peneva +359 (2) 8023127 speneva@deloitteCE.com Czech Republic Josef Kotrba +420 246042366 jkotrba@deloitteCE.com Estonia Veiko Hintsov +372 6406512 vhintsov@deloitteCE.com Hungary Gbor Gion +36 14286827 ggion@deloittece.com Latvia Igor Rodin +371 67074101 irodin@deloitteCE.com Lithuania Timothy Mahon +370 (5) 2553002 tmahon@deloittece.com Poland Marek Metrycki +48 (22) 5110707 mmetrycki@deloitteCE.com Romania and Moldova Ahmed Hassan +40 (21) 2075260 ahhassan@deloitteCE.com Serbia, Macedonia, Montenegro, and Republika Srpska Milo Macura +381 113812111 mmacura@deloitteCE.com Slovakia Marin Hudk +421 (2) 58249211 mhudak@deloitteCE.com Slovenia, Croatia, and Federation of Bosnia and Herzegovina Eric Olcott +385 12351945 eolcott@deloitteCE.com Ukraine Vladimir Vakht +380 444909000 vvakht@deloitte.ua

Central Europe TOP 5002012

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Industry experts Bulgaria Financial Services Vasko Raichev Chairman +359 28023300 vraichev@deloittece.com Croatia Energy & Resources Ivica Krei Director, Financial Advisory +385 (1) 2351935 ikresic@deloittece.com Financial Services Juraj Moravek Partner, Audit + 385 (1) 2351900 jmoravek@deloitteCE.com Czech Republic Energy & Resources Vladimr Vank Partner-in-Charge, Business Advisory +420 246042361 vvanek@deloittece.com Financial Services Peter Wright Partner, Tax +420 246042888 pewright@deloittece.com Manufacturing Bronislav Pnek Partner, Business Advisory +420 246042264 bpanek@deloittece.com Real Estate & Construction Diana Rdl Rogerov Partner, Audit +420 246042572 drogerova@deloittece.com Technology, Media & Telecoms Zdenk Kek Partner, Business Advisory +420 246042677 zkrizek@deloittece.com Hungary Financial Services Andrs Flp Partner-in-Charge, Financial Advisory +36 (1) 4286937 afulop@deloitteCE.com Lajos Antal Partner, Security & Privacy +36 (1) 4286402 lantal@deloitteCE.com Balzs Mrth Partner, Financial Advisory +36 (1) 4286942 bamerth@deloitteCE.com Pter Szp Partner, Consulting +36 (1) 4286967 pszep@deloitteCE.com Energy & Resources Gbor Gion CEO, Deloitte Hungary +36 (1) 4286827 ggion@deloitteCE.com Real Estate & Construction Attila Kvesdy Partner-in-Charge, Tax +36 (1) 4286728 akovesdy@deloitteCE.com Gbor Kohri Assistant Director, Financial Advisory +36 (1) 4286204 gkohari@deloitteCE.com Technology, Media & Telecoms Pter Szp Partner, Consulting +36 (1) 4286967 pszep@deloitteCE.com Latvia Financial Services Roberts Stugis Partner, Audit +371 67074120 rstugis@deloittece.com Igor Rodin Partner, Tax +371 (6) 7074101 irodin@deloittece.com Lithuania Financial Services Linas Galvel Director, Financial Advisory Services +370 52553022 lgalvele@deloitteCE.com Energy & Resources Saulius Bakas Partner, Audit +370 52553001 sbakas@deloitteCE.com Real Estate & Construction Marius Stalenis Manager, Financial Advisory Services +370 52553023 mstalenis@deloitteCE.com Technology, Media & Telecoms Saulius Bakas Partner, Audit +370 52553001 sbakas@deloitteCE.com Poland Energy & Resources Wojciech Hann Partner, Financial Advisory +48 225110026 whann@deloittece.com Financial Services Zbigniew Szczerbetka Partner, Enterprise Risk Services +48 225110799 zszczerbetka@deloittece.com Micha Dubno Director, Audit +48 (22) 5110699 mdubno@deloittece.com Real Estate & Construction Maciej Kraso Partner, Audit +48 225110360 mkrason@deloittece.com Technology, Media & Telecoms Dariusz Nachya Partner, Consulting +48 225110631 dnachyla@deloittece.com

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Romania Financial Services Oana Petrescu Partner-in-Charge, Consulting +40 (21) 2075288 opetrescu@deloittece.com Energy & Resources Valeriu Binig Director, Financial Advisory +40 (21) 2075431 abinig@deloittece.com Technology, Media & Telecoms Ahmed Hassan Office Managing Partner, Deloitte Romania +40 (21) 2075260 ahhassan@deloittece.com Manufacturing Farrukh Khan Partner, Audit +40 (21) 2075213 farrukhan@deloittece.com Real Estate & Construction Alexandru Reff Partner-in-Charge, Tax & Legal +40 (21) 2075248 areff@deloittece.com

Serbia Financial Services Nada Sui Partner, Business Advisory + 381 (11) 3812113 nsudjic@deloitteCE.com Energy & Resources Darko Stanisavi Director, Financial Advisory + 381 (11) 3812134 dstanisavic@deloitteCE.com Manufacturing Aleksandar Kneevi Director, Audit + 381 (11) 3812261 aknezevic@deloitteCE.com Real Estate & Construction Sran Petrovi Partner, Tax + 381 (11) 3812222 spetrovic@deloitteCE.com Technology, Media & Telecoms Jelena Gali Director, Business Advisory + 381 (11) 3812123 jgalic@deloitteCE.com

Slovakia Cross industries Vladimr Masr President, Deloitte Slovakia +421 (2) 58249133 vmasar@deloitteCE.com Marin Hudk Office Managing Partner, Deloitte Slovakia +421 (2) 58249211 mhudak@deloitteCE.com Financial Services Zuzana Letkov Partner, Audit +421 (2) 58249210 zletkova@deloitteCE.com Energy & Resources Rastislav Kupka Senior Manager, Consulting +421 (2) 58249258 rkupka@deloittece.com Technology, Media & Telecoms Ivan Luica Partner, Consulting +421 (2) 58249266 iluzica@deloittece.com

Ukraine Energy & Resources Artur Ohadzhanyan Partner, Financial Advisory +380 444909000 x3618 aohadzhanyan@deloitte.ua Financial Services Victor Lukashuk Partner, Audit +380 444909000 x2624 vlukashuk@deloitte.ua Manufacturing Inna Kulyk Senior Manager, Audit +380 444909000 x3614 ikulyk@deloitte.ua Technology, Media & Telecoms Andrey Oksenyuk Senior Manager, Audit +380 444909000x2695 aoksenyuk@deloitte.ua

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