1. WHY Hungary? WHAT in Hungary? Gergely Mikola Chairman, British Chamber of Commerce in Hungary Director of Corporate and Regulatory Affairs in CEE, BAT

2. A call for action Two major mistakes in business: –Focusing too much on what we sell instead of focusing on the customer –Keep doing the same thing and expect a different result

3. Why Hungary?

4. Main macroeconomic indicators in Central Europe 2011Bulgaria Czech Republic Hungary PolandRomaniaSlovakia Inflation3,4% 2,1% 3,9% 5,8% 4,1% GDP per capita *$ 7.202$ 20.444$ 14.050$ 13.540$ 8.863$ 17.644 GDP growth **1,6%0,6%1,4%4,3%1,9%3,3% Export statistics (bn) $ 28,1$ 138,5$ 110,1$ 193,9$ 62,7$ 77,4 Import statistics (bn) $ 30,9$ 133,2$ 105,9$ 208,0$ 73,1$ 74,3 Unemployment rate11,2%6,7%10,9%9,7%7,4%13,5% Minimum wages (EUR) 122.7319,2280.6348.7157.2317 Source: Eurostat, 2011; Economist Intelligence Unit, 2012; IMF, 2011, Trading Economics, 2011 Statistical Office of the Republic of Serbia, 2011 *IMF staff estimates **Trading Economics estimates

5. Budget deficit as percentage of GDP in 2012

6. State debts Europa.eu

7. Lower Labour Costs – Western Europe vs. Hungary Minimum wages (EUR) 20102011 Bulgaria 122.7122,7 Romania 141.6157,2 Slovakia 307,7317,0 Hungary 271.8280,6 Czech Republic 302,2319,2 Poland 320,9348,7 Hourly labour costs (EUR) 2011 Bulgaria 3,5 Romania 4,2 Slovakia 8,4 Hungary 7,6 Czech Republic 10,5 Poland 7,1 Lembo Tanning, PhD: Labour Costs and Productivity Analysis of East-European Countries Average gross annual earnings in EU states, 2012

8. High quality labour pool available throughout the country  400,000 students in 70 higher education institutions  100,000 majoring in business administration faculties  90% of students speak English  20% of fresh graduates have international experience  61% of students have professional experience  Seniors and executives with several years of experience readily available

9. External reality Increasing global competition Troubled Europe Strong regional race for investment Local challenges Internal reality Boardroom and webex fights Internal competition for funds Increasing shareholder demand and costbase vs. stagnating/shrinking disposable funds Reality

10. Investors’ view Geographical location Labour market, employment quality and cost Political environment Regulatory environment –Complexity –Change frequency Infrastructure Consumer/partner/competition Financial and ITC systems Tax environment Incentives …

11. Hungary - most active industries/sectors Automotive industry Manufacturing Information and communication technology Chemicals and pharmaceuticals Transportation and logistics Agriculture

12. Overview of existing service sectors

13. BAT Central Europe Business Unit Established in April 2012 12 end-markets – (Bulgaria, Serbia, Montenegro, Czech Republic, Slovakia, Albania, Kosovo, Slovenia, Bosnia, Macedonia, Croatia, Hungary) BAT Hungary as cluster leader Number of employees: appr. 1400 3rd biggest volume contributor in Europe

14. Why BAT HU? 1.100 years heritage in tobacco production with 20 years presence of BAT 2.Mature organisation with highly skilled employees 3.Central geographical location, good infrastructure

15. Strategy recommendation The 3 C’s C ompetitiveness –Know what you are –Know what you are not –Know what you do best C onsistency –Keep the storyline C ommunication –Say it –Do not assume I know what you want to say –Do assume I read newspapers –Tell others so that they tell others