1. New Approaches to Growth in Ukraine E&E Bureau Regional Competitiveness Conference Kyiv, Ukraine June 16, 2009

2. 2 What Typically Drives Growth  Capital investment  Labor productivity  Use of technology  Successful growth over the last eight years in Ukraine, as well as CEE, was mainly attributed to debt-financed expansion, little attention paid to productivity  Productivity in CEE is typically between one to two fifths of that in the West Economic Growth

3. 3 Productivity Levels  Measured as GDP per hour worked in current prices, USD Source: OECD estimates,of productivity levels, http://stats.oecd.org/WBOS/index.aspx; for Russia – McKinsey estimates of productivity levelhttp://stats.oecd.org/WBOS/index.aspx State Statistical Committee of Ukraine

4. 4 Productivity – Why Low?  Poor management Accounts for 30-80% of the productivity gap with the US Source: OECD, STAN Bilateral Trade Database 2006/I and OECD calculations based on OECD ITCS database. Sep. 2007 http://www.oecd.org/document/20/0,3343,en_2649_34833_39106836_1_1_1_1,00.html  Lack of technology Accounts for 20-60% of the gap with the US

5. 5 Productivity Gains Crucial  Increasing productivity is key to sustainable economic growth Make better use of the resources companies already have Bring in new technology by attracting foreign direct investment (FDI)  According to Raiffeisen, CEE will outperform the developed world for at least the next decade Central and Eastern European countries will grow about 4.3% for the next five-eight years, then slow to 3.2%.

6. 6 Horizon Capital  Over $600 million under management in three funds: Emerging Europe Growth Fund II (2008) $390 million fund $15-40 million deal size Consumer good/services, B2B, financial services Currently investing Emerging Europe Growth Fund (2006) $132 million fund 11 investments in the region, one full and one partial exit Making follow-on investments in existing portfolio only Western NIS Enterprise Fund (1995) $150 million fund size 10 investments in the region outstanding Invested $151 million in 118 companies Making follow-on investments in existing portfolio only

7. 7 HCA Working toward Growth  Providing capital for investing into modern technology and equipment  Focusing efforts to reduce costs within portfolio companies as appropriate to increase productivity  Stress testing portfolio companies in light of local currency devaluation, with a focus on minimizing currency exposures and ensuring liquidity  Focusing on sustaining profitability and fundamental operational improvements, with less emphasis on revenue growth  Identifying those investment cases that are built to withstand the cycle

8. 8 Contact information: Natalie A. Jaresko Co-Managing Partner Horizon Capital 4 Rayevskoho st. Kyiv 01042 Ukraine tel. +380 44 490 5580 fax +380 44 490 5589 e-mail: njaresko@horizoncapital.com.uanjaresko@horizoncapital.com.ua www.horizoncapital.com.ua