Higher Profits & Increased Competitiveness

Why Macedonia? Competitive Location Excellent Infrastructure Competitive Workforce Investment Incentives Investor - friendly Government Higher Profits & Increased Competitiveness

Location and Transport Infrastructure Two Pan-European corridors: East-West Corridor 8 North-South Corridor 10 Road network: 9,205 km Railway network: 900 km Two international airports: Skopje Ohrid International ports*: Thessalonica (Greece): 250 km Durres (Albania): 300 km * Distance from Skopje

Political and Economic Outlook Political, monetary and macroeconomic stability Strategically located for future expansion First country in SEE to sign a SAA with the EU in 2001 EU and NATO candidate country FTAs with numerous countries Business oriented Government Welcoming and decisive government ready to serve investors

Foreign Investment Regime Macedonian Constitution guarantees fair treatment of foreign investors Complete protection of the ownership rights of foreign investors Republic of Macedonia is member of MIGA (Multilateral Investment Guarantee Agency) Investment protection treaties with numerous countries 100% foreign ownership of a company allowed No restrictions for repatriation of profits

Economic Indicators GDP GROWTH(%) INFLATION Low inflation: avg < 2% annually over the last 10 years 5,0 6,1 5,0 2007: 2.3%; 2008: 8.3%; 2009: -0.8%; 2010: 1.6%; 2011: 3.9% -0.9 2,9 3,0 CURRENCY 2006 2007 2008 2009 2010 2011 EXPORT BY YEAR (US$ bn) Macedonian Denar pegged to the DM/ for the last 15 years ( 1= MKD 61.3) 3,4 4,0 2,7 3,3 4,4 AVERAGE GROSS SALARY IN 2011 497 per month 0,9 2007 2008 2009 2010 2011 Q1.2012 FDI as a percentage of GDP 699 587 410 252 296 78 2007 2008 2009 2010 2011 Q1.2012 Source: National Bank of the Republic of Macedonia CREDIT RATINGS 2011 Standard & Poor s: BB Fitch: BB+ BUDGET DEFICIT & STATE DEBT Budget Deficit, 2011: 2.6 % of GDP State Debt, Q1.2012: 26.8 % of GDP

Unbeatable Fiscal Benefits 10% Corporate & Personal income tax (among lowest in Europe) 0% Tax on retained earnings Double taxation treaties with many European countries 0% tax for operation in a Technological Industrial Development Zone Real estate taxes at 2% - 4% VAT at 18%, with 5% on specific items FTAs with EU, EFTA, CEFTA countries; Turkey and the Ukraine; providing access to over 650m customers Corporate Income Tax Personal Income Tax (highest rate) General VAT Rates Macedonia* 10% Macedonia* 10% Macedonia 18% Romania 16% Czech R.* 15% Turkey 18% Czech Republic* 19% Romania 16% Slovakia 19% Slovakia 19% Slovakia 19% Czech Republic 20% Poland 19% Ukraine 30% Ukraine 20% Hungary 19% Poland 32% Poland 22% Turkey 20% Hungary 32% Romania 24% Croatia 20% Turkey 35% Croatia 25% Ukraine 25% Croatia 45% Hungary 25% * Flat rate Source: PricewaterhouseCoopers (Taxes at a glance 2011), National Investment Promotion Agencies

Social Security Contributions Macedonia - Social Security Contributions 2008 2009 2010 2011 2012 21,2% 9,2% 19,0% 7,5% 18,0% 7,3% 18,0% 7,3% 18,0% 7,3% 1,6% 0,5% 1,4% 0,5% 1,2% 0,5% 1,2% 0,5% 1,2% 0,5% Pension Insurance Health Insurance Employment Insurance Additional Health Insurance Comparison - Social Security Contributions Macedonia Turkey Poland Serbia Croatia Hungary Czech Republic 27% 27% 27% 27% 33.5% 31.2% - 34.1% 37.2% 37.2% 44% 45% 28.4% 32.5% Slovakia Ukraine Romania 48.6% 39.8% - 49.7% 44.5% - 55.7% Source: PricewaterhouseCoopers (Taxes at a glance 2011), National Investment Promotion Agencies

Average Gross Monthly Salary Average gross monthly salary ( ) in selected countries of Central and Eastern Europe in 2011 1.525 989 1.043 649 722 763 786 825 831 497 512 Macedonia Serbia Bosnia and Montenegro Hungary Slovakia Poland Estonia Czech Herzegovina Republic Croatia Slovenia Average gross monthly salary ( ) Source: The Vienna Institute for International Economic Studies (wiiw)

Competitiveness for Investments in Macedonia Price Level Index for Investments 54 61 62 65 65 72 73 80 81 85 88 100 Macedonia Serbia Romania Bulgaria Turkey Hungary Croatia Poland Czech Republic Slovakia Slovenia EU27 Average Price Level Index for Construction 35 39 44 47 47 58 61 69 71 76 83 100 Macedonia Serbia Romania Bulgaria Turkey Hungary Croatia Czech Republic Source: Eurostat, December 2010 Poland Slovakia Slovenia EU27 Average

Skopje in the Top 5 Small Cities in Human Resources FDI Magazine 2010/11 Rankings Top 5 Small Cities in Europe: Human resources Rank City Country 1 Lille (Nord) France 2 Edinburgh UK 3 Lisbon Portugal 4 Lyon France 5 Skopje Macedonia FDI Benchmark across 223 European cities and 142 European regions Judging criteria Unemployment rate Total world top-500 universities Number of universities Number of university students European business school rankings Graduates, tertiary Gross enrolment rate, tertiary Gross enrolment rate, secondary Gross enrolment rate, primary Labour force with tertiary education Public education expenditure Human resources in sciences and high-tech industries Economically active population

Sustainable Work Force Supply 41.5% of population under 30 High intellectual capital 65% increase in total number of undergraduate degrees in 2009 compared to 2006 85+% of high school graduates enrolled in universities in 2008 Multiple vocational high schools in each city Tailor-made training programs through Vocational Schools or Universities 6% of GDP spent on education Number of enrolled students in Colleges and Universities Number of graduates in Colleges and Universities 48.368 57.011 64.254 63.437 57.894 6.213 8.360 10.839 10.232 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010 2006 2007 2008 2009

Excellent Language Skills Every child in Macedonia begins to learn English in the first grade of primary school Two foreign languages are mandatory in high school: English, and either German, French, or Russian English is also taught for two years at University level Regional languages (Serbian, Croatian, Bulgarian, Albanian and Greek) are widely spoken Foreign Languages Studied Students in Primary Schools, % of Total Students in Secondary Schools, % of Total English 98% 96% French 18% 32% German 6% 21% Italian - 2% Russian 1% 2% Turkish 3% 2% Source: State Statistical Office of the Republic of Macedonia (Education 2009/2010) and Ministry of Education and Science

INVESTMENT OPPORTUNITIES

Investment Opportunities Target Sectors Machine and Automotive components ICT Medical Devices and Pharmaceuticals Agribusiness and Food Processing Energy sector Real Estate & Construction Textile Tourism

Investment Opportunities Machine and Automotive Components Industry Existing engineering and manufacturing tradition Legacy of skills available to new investors Component production started in the 1960 s to supply Zastava, Serbia Companies primarily supply the aftermarket Johnson Controls, Johnson Matthey, Kemet, Teknohose, (Free Economic Zones), Kromberg & Schubert, Hi-Tech to supply OEM s Markets are Europe, Russia, Turkey, Africa Most companies have ISO 9001 / TS 16949 quality certification

Investment Opportunities ICT Sector Best telecommunication networks in the region the system is 100% digital Leading multinational hardware and software suppliers (Microsoft, HP, IBM) have local sales and support services in Macedonia 100,000 PCs for every school child; free internet sessions provided by the government IT skills shortage in Western economies and growing demand for outsourcing services Macedonia can be your solution! Availability of well-educated staff at competitive costs Quality assurance and standardization procedure intitialized

Investment Opportunities Healthcare Sector, Medical Devices and Pharmaceuticals Existing pharmaceutical industry exports to over 30 countries worldwide Strong educational system, with an abundance of medical and pharmacy graduates Supportive regulatory environment Licensing arrangements in place with many of world s leading pharmaceutical companies Availability of serviced industrial sites Manufacturing tradition

Investment Opportunities Agribusiness and Food Processing Industry Unique combination of Continental and Sub- Mediterranean climates Environmentally friendly production practices Technologies for food processing Excellent access to regional markets Strong reputation for quality food products The greatest investment opportunities: fruits and vegetables production, storage distribution and processing industries wine production sheep and goat cheese production

Investment Opportunities Textile sector Esteemed reputation of Macedonian textile producers on the European Union market High flexibility and readiness to adapt to the demands of foreign markets Exceptional relation between product quality and costs Modern equipment 1-2 days distance to European Union markets Foreign investment welcomed in the readymade clothing and knit production industries

Investment Opportunities Tourism Summer Destinations Numerous tectonic, glacial and manmade lakes, 50 in total Large Ohrid, Dojran and Prespa lakes Wartersports, archeological, wine, eco and rural tourism In 2011, increase in foreign tourists from EU of 38% Winter Destinations Over 45 mountain peaks over 2.000m Around 70% of the territory is mountainous, many locations have more than 100 days of snow Opportunities for development and enhancements of hotels and resorts on many locations

Investment Opportunities Tourism Historical and Culture Heritage 4,293 archeological sites 992 churches and monasteries 23,000 icons (2nd most valuable collection in the world) 228 mosques, inns, Turkish baths and old bazaars, 47 towers and fortresses Spa tourism Territory rich with geothermal waters More than 60 thermal springs Identified locations for construction of new spa centers and hotels

Strategic Projects ENERGY SECTOR Focus Strong commitment of the Government for developing the energy sector through public and private investments National strategy based on diversifying the sources and types of energy use Focus on completing the Strategy for the exploitation of the renewable sources of energy Planned Activities Gas Transmission System The feasibility study for expanding the national gas transmission system is completed Rapid investment in completing the national gas transmission system with support from international financial institutions 250 350mn Strong commitment to supporting the development of regional gas transmission pipelines Focus on diversifying the source of gas available to consumers in the country

Investment Opportunities Strategic Projects ENERGY SECTOR Hydro Power Plants PPP with PE ELEM for the construction of a combined cycle heat and power plant (investment value 250mn) CHP Energetika An ongoing tender procedure under the auspices of the IFC advisory services for HPP Cebren and Galiste (investment value 600mn) HPP Boskov Most (investment value 90mn) Vardar Valley system of HPPs along the Vardar river (investment value 1.5 bn) CHP ENERGETIKA HPP CEBREN HPP GALISTE HPP BOSKOV MOST VARDAR VALLEY 300MW(e),150MW(h) 2.000 GWh(e), 500 GWh(h) 250 million H=192.5 m 333/347 MW 840/876 GWh 340 million H=141.5 m 193.50 MW 262.50 GWh 200 million H=44.4 m 68.2 MW 117.54 GWh 70 million 200 MW (e) 1.5 billion

Strategic Projects ENERGY PROJECTS Small Hydro Power Plants Potential for construction of 400 SHPPs with total installed capacity of 250 MW and average annual electricity production of 1100 GWh Completed tender procedure for 65 SHPPs with total capacity of 60 MW, annual production of 233 GWh and investment value of 60mn Renewable Energy Measurement of wind potential; Preparation of a feasibility study Study for Reliability of the Power System and Connection of Wind Power Plants Solar potential: the annual solar radiation is 1385 kwh/m 2 Climate characteristics - continental climate with hot and dry summers, and high intensity of solar radiation

Investment Opportunities Strategic Projects ENERGY SECTOR Gasification of the Republic of Macedonia Planned routes and possible connections for construction Existing condition of pipeline in the Republic of Macedonia Total length of pipeline - 98 km pipe, Ø 530 mm and of 54 bar; Capacity 800 million m 3 per year up to 1000 million m3 per year; Connected cities Kriva Palanka, Kratovo, Kumanovo and Skopje. Total potential consumption in 2020 approximately 1300 million m 3 /year Potential consumption in households, service sector and industry in 2020-500 million m 3 /year in energy sector in 2020-800 million m 3 /year Planned Activities Gas Transmission System Phase I - priority sections with lengths, estimated at 85 million Klechovce-Stip-Kavadarci-Prilep-Bitola 190 km Stip-Radovis-Hamzali-Strumica-R. Greece 110 km Skopje-Tetovo-Gostivar branch to Kicevo 110 km Phase II - priority sections with lengths, estimated at 145 million Gostivar-Kicevo-Ohrid-Struga-Kafasan 114 km Bitola-Ohrid 64 km Hamzali-Novo Selo-border of R. Bulgaria 25 km and other small sections in length of 250 km

Investment Opportunities Strategic Projects ENERGY SECTOR Combined heat power plants CHP Energetika - installed power 300 MW (e), 150 MW (h) - consumption 300-450 million m 3 TEC Negotino - installed power 210 MW (e) - consumption 300-450 million m 3 TEC Oslomej - installed capacity 125 MW (e) - consumption 200 million m 3 Small combined heat plants - Opportunity to invest in small combined heat plants by building a pipeline network in the Republic of Macedonia

Investment Opportunities Strategic Projects ENERGY SECTOR Gas transmission (distribution) system Existing gas transmission (distribution) system Kumanovo Strumica Potential consumption in households, service sector and industry in the cities 2015 170 million m 3 /year 2040 1.136 million m 3 /year Planned gas transmission (distribution) system SKOPJE PRILEP GOSTIVAR TETOVO STIP BITOLA 2015 80 million m 3 /year 2015 7 million m 3 /year 2015 3 million m 3 /year 2015 6 million m 3 /year 2015 2 million m 3 /year 2015 7 million m 3 /year 2040 500 million m 3 /year 2040 48 million m 3 /year 2040 23 million m 3 /year 2040 42 million m 3 /year 2040 24 million m 3 /year 2040 47 million m 3 /year 80 million 27 million 21 million 26 million 18 million 31 million

Strategic Projects INFRASTRUCTURE PROJECTS Motorway Corridor 8 Package 1: Total length of road sections to be constructed is 138 km Concession project includes building, maintenance, collection of tolls and management of road sections. Total cost of Concession Project is 434mn

Strategic Projects INFRASTRUCTURE PROJECTS Motorway Corridor 8 Package 2: Total length of road sections to be constructed is 141 km Concession project includes building, maintenance, collection of tolls and management of road sections Total cost of Concession Project is 558mn

Strategic Projects INFRASTRUCTURE PROJECTS Railroad Corridor 8 Package 3: Construction of the railroad toward Bulgaria Total financing needed: 420mn

Strategic Projects 2009-2014 INFRASTRUCTURE PROJECTS Privatization of Macedonia Post Liberalization and development of the postal market (a new Law on Post Services was adopted in compliance with EU directives). A study for defining the privatization model of AD Makedonska posta with determined scope (percentage) of the privatization and the timeframe for its realization is being prepared. The future minority shareholder (49%) would manage AD Makedonska posta

Investment Opportunities Real Estate & Construction Real Estate & Construction City Skopje Ohrid Real estate project Skyscrapers Hotels (3 hotels in the center of the city; 1 hotel near to the airport) Shopping and business centers, including golf terrain Sport and recreational center Business center Locations available as a result of land transformation of army barracks (commercial and business centers and residential areas) Hotels (along the lake cost)

Investment Opportunities Real Estate & Construction Skopje The Second Best City For Real Estate Investment In Europe Global Property Guide 2011 Rankings City Gross Rental Yield (% per annum) 1 Budapest 7.18% 2 Skopje 6.39% 3 Amsterdam 5.11% 4 Istanbul 5.82% 5 Zagreb 4.56% Long Term Investment Rating Judging criteria Rental Yields Taxes and Costs Tenancy Laws Economic Environment

Investment Opportunities Privatization Projects JSC OHIS Skopje 75.6% of shares owned by the state Total revenues (2008) = 15mn; 897 employees Located on an attractive location in the capital city - Skopje Largest local chemical producer (detergents, soaps, chemicals, etc.) Locally available skilled workforce Strong brand recognition of chemical products on regional markets The nature of the industry compels significant improvements in the environmental conditions and standards TKP Prilep 84% of common and 100% of preferred shares owned by the state Total revenues (2008) = 16mn; 1183 employees Strong tradition in producing cigarettes since 1875 Production capacity of 4.65 billion sticks per year Producer of cigarettes with local and regional brands with internal management of all stages of production (production, fermentation, processing, packaging) Local supply of tobacco with over 6000 contractors Cooperation with BAT, Phillip Morris, SOCOTAB, Japan Tobacco etc.

Investment Opportunities Privatization Projects JSC EMO Ohrid 64% of common shares and 100% of preferred shares owned by the Government of the Republic of Macedonia Total revenue (2008) = 16mn; 1919 employees Established in 1972 as a leading Macedonian supplier and manufacturer of electromechanical components and systems with design, manufacturing and installation capability Strong brand name in the region, Middle East, Africa and Russia with 45% of sales for export Locally available highly qualified workforce JSC Eurokompozit Prilep 100% Government owned Total revenue (2008) = 2.5mn; 457 employees Extensive expertise and experience in production of special purpose products since 1952 Civilian production programme [wound products, spare parts for locomotives, honey comb, molding composites] Military production programme [rocket launchers, ballistic helmets and vests, mortar shells, bayonet, upgrades of military vehicles] Partners include Hyundai Heavy Industries, Haeffly Test AG, Passoni Villa, Koncar, etc.

Investment Opportunities Technological Industrial Development Zones - TIDZs

Investment Opportunities Technological Industrial Development Zones - TIDZs Infrastructure Benefits Electrical grid outlet, new power substation in place Telecommunications network Central heating Lighting Fire safety system - Airport Fire Department minutes away Security monitoring system Water, sewage and waste treatment plant Gas pipeline, etc.

Investment Opportunities Technological Industrial Development Zones - TIDZs Fiscal Benefits TAX Corporate tax TIDZs 0% for the first 10 years TAX RATES Outside TIDZs 10% CUSTOMS DUTY PRODUCT TIDZs Outside TIDZs Raw materials 0% Up to 15% Personal income tax 0% for the first 10 years 10% Equipment 0% 5% - 20% Value added tax 0% 18% Property tax 0.1% - 0.2% 0.1% - 0.2% Excise taxes 0% 5% - 62% Free connection to utilities Subsidy of up to 500,000 towards building costs Green Customs Channel available at border for rapid export from Zone to EU countries Land in a TIDZ in Macedonia is available under long-term lease for a period of up to 99 years

TIDZ Skopje 1 55mn investment over 500 employees catalyst production $40mn automotive components plant; 150 employees initially increasing to 500; Integrated circuits JOHNSON MATTHEY JOHNSON CONTROLS KEMET SIGNING OF THE AGREEMENT TEKNOHOSE ANNOUNCING BEGINNING OF CONSTRUCTION WORK IN TIDZ SKOPJE 1 PRODIS GROUP ANNOUNCING BEGINNING OF CONSTRUCTION WORK IN TIDZ SKOPJE 1 SAMVARDHANA MOTHERSON GROUP ANNOUNCED BEGINNING OF CONSTRUCTION WORK IN TIDZ SKOPJE 1

TIDZ Stip PROJECT SCOPE 2 nd project in Macedonia $20mn Investment 1400 employees Construction of cut & trim plant for car seats CONSIDERED COUNTRIES Macedonia, Moldova and Tunisia

Investment Projects outside of TIDZs SIZE OF INVESTMENT SIZE OF INVESTMENT 20mn 2000 employees Production of cable installations Start of operations Q2 2012 over $4mn 150 new full time jobs + 300/350 new seasonal jobs Tobacco facility in Kavadarci

What They Say Macedonia offers the company just-in-time delivery and minimal freight costs. Philippe Simon VP of Global Electronics Johnson Controls We are very satisfied with the support provided by the Macedonian Government and its institutions and Bitola municipality. The decision for investment in Macedonia represents an important step in our expansion as part of the strategy for international output. Martin Passern Managing Director Kromberg & Schubert This will be JM s mega-european plant and the largest ever single investment project. Colin Jaffray, Director, Strategic Planning Johnson Matthey PLC Macedonia was chosen because of its international competitiveness, because of our positive existing corporate experience here and above all because of the support and professionalism that we have received from all Government institutions during the analysis process. Steven Meylemans Project Manager Johnson Controls

MACEDONIAN EXPORT OPPORTUNITIES

Macedonian Export Opportunities Macedonian producers can serve as global suppliers of various products and services Most potential and competitive Macedonian industries for export: Machine and Automotive components ICT Components production Programming and software production Outsourcing services Macedonia can be your solution! Agribusiness and Food Processing Fresh and processed fruits and vegetables Wine production Sheep and goat cheese production Textile Ready-made clothing and knit production Logistics and Distribution Transportation and warehousing