ĐURO ĐAKOVIĆ Grupa d.d.

Investor Presentation • Jul 14, 2017

Investors Presentation

Secondary public offering of the shares of the company Đuro Đaković Grupa d.d.

July 2017

ĐĐ – Secondary public offering of the new shares 2017

Presenters

1

• About the Company 2
• Key investment considerations 3
• Restructuring process 4
• Financial overview 5
• Business segments overview 6
• Offering of the new shares 7

DISCLAIMER

Please be advised that this document represents only an unofficial English translation of the original document published by Đuro Đaković Grupa d.d., which was made in Croatian language. In case of any discrepancies between the original Croatian text and this English translation, the Croatian text shall prevail.

Tomislav Mazal

President of the Management Board

• In 2009 became a member of the Supervisory Board of the Đuro Đaković Holding and then its President
• Since 2011 has been a member of the Management Board, in charge of Defence program, foreign markets development, marketing and legal affairs
• In May 2014 appointed as the President of the Management Board of Đuro Đaković Holding

Marko Bogdanović Member of the Management Board

• Joined the company in May 2012 as the member of the Management Board
• Since September 2014 until 2015 he has been performing the function of Executive Director at Đuro Đaković Inženjering

Slaven Posavac

Director, Group Finance, Accounting and Controlling Sector

• Joined the company in July 2012 as the Corporate finance Director
• Since September 2015 he has been performing the function of the Director of Finance, Accounting and Controlling Sector of Đuro Đaković Group and since December 2015 also the function of the President of the Supervisory Bord of the company Đuro Đaković Specijalna vozila and Đuro Đaković Industrijska rješenja

About the Company

Key data and business segments

Đuro Đaković Group ("Group"):

	Đuro Đaković Specijalna vozila d.d.
Đuro Đaković Grupa d.d.	Đuro Đaković Industrijska rješenja d.d.
("ĐĐ" or the "Company")	Đuro Đaković Strojna obrada d.o.o.
	Đuro Đaković Energetika i infrastruktura d.o.o.

• Number of employees: 1,007 employees as of 31 March 2017
• Group restructuring process initiated in 2014 has resulted in significant business improvement due to:
• Organizational optimization
• Focusing on profitable programs
• Optimization of the use of capacities
• Entry to foreign markets
• In 2016 and Q1 2017 increase of revenues and export and positive business results are observed

Operating revenues and profitability (HRK mn) Revenue structure (2016)

Source: Audited consolidated financial report of the Company for 2016 and 2015, Unaudited consolidated financial report of the Company for Q1 2017

1) Consists of power production, distribution and supply of entities in the industrial zone and in smaller part outside of the industrial zone and lease activities for premises in the zone with custom, tax and other benefits

Description Business segments

Source: Audited consolidated financial report of the Company for 2016

Most significant events in historic development

1921	2003	2012	2014	2017
 Incorporating General Assembly	 Listing of the shares on Zagreb Stock Exchange	 Conclusion of significant contracts	 Beginning of restructuring; capital increase	 Business improvement; restructuring continues
 Construction and repair of wagons and locomotives, railway bridges and bridge constructions, machinery production, construction and equipping of railroads, railroads management	 Shares of the company Đuro Đaković Holding d.d. are listed on the Regular market of the Zagreb Stock Exchange	 Cooperation agreement signed with Patria Land Systems Oy on production, placing on the market and sale of Patria AMV 8x8 vehicles by the Company	 Business strategy until 2020 and a comprehensive restructuring plan adopted, foreseeing reorganization of production and programs, financial restructuring and optimization of	 Achieved targets in 2016 and Q1 of 2017 due to positive effects of implemented restructuring measures  Remaining goal – financial restructuring (planned capital increase by public offer of the new
etc.		 Cooperation agreement signed with Kongsberg Defence & Aerospace on production, placing on the market and sale of remote weapon station	organization structure  Capital was increased by public offer of the new shares, resulting in gathering of HRK 87.2 million	shares)
		 Cooperation with Patria lead to significant agreement on supply and equipping of armoured vehicles for the Ministry of defence of the Republic of Croatia

Shareholders structure and share price development

Nominal capital:

7,596,684 shares; HRK 151.9 mn

• Nominal price per share: HRK 20.00
• Market price per share: HRK 41.89 (28 April 2017)
• Market capitalization: HRK 318.2 mn (28 April 2017)

	Shareholder	Number of shares	Market capit. (HRK mn)	Share (%)
1	Republic of Croatia	3,844,004	161.0	50.6%
2	Nenad Bakić	898,419	37.6	11.8%
3	PBZ CO OMF	288,740	12.1	3.8%
4	PBZ – Custodian account	236,132	9.9	3.1%
5	Interkapital vrijednosni papiri –	Custodian account 90,593	3.8	1.2%
6	Đuro Đaković Grupa d.d.	46,993	2.0	0.6%
7	Erste&Steiermarkische Bank –	Custodian account 43,094	1.8	0.6%
8	Other minority shareholders	2,148,709	90.0	28.3%
	Total	7,596,684	318.2	100.0%

DDJH-R-A:

Relatively high "turnover speed", i.e. achieved turnover observed as % of market capitalization (for 2016 at the level of approximately 11%)

Source: SKDD, ZSE, (28 April 2017)

About the Company

Overview of the most important business concluded in 2016 and 2017

Restructuring implemented to a significant extent	 Optimized operational and organizational structure  Modernized production for the purpose of increasing profitability
Revenue growth achieved and conditions established for stable business operations	 Turn-around in long-term business stagnation trend as a result of:  Implemented restructuring measures  Proven capabilities of the Company for expanding to new markets in key business segments, signing new contracts and maximizing the utilization of the production capacities
Positive trend in profitability	 After a long-term period, in 2016 and Q1 2017 positive EBITDA achieved  Cost-optimization – increase in costs lower than increase in operating revenues
Further growth potential	 Retaining the focus on market approach and signing of the new contracts  Along with the Industry and Energetics and Transport segments, which have created the conditions for further stable business, Defence segment, as the most profitable business segment, offers a significant potential for contribution to further growth  Remaining goal: financial restructuring

Restructuring process

Process overview

	Decision on the complete restructuring of the Group (2014)	Executed up to now:	Remaining:
 	Main reasons for restructuring: • Continuity of negative business results • Obsolescence of production technology • Dependency on domestic market and investment cycles • Suboptimal human resources structure • Lack of own capital in financing sources 5 restructuring segments:  Organizational  Program  Production  Legal  Financial	 Organizational restructuring:  Merging several companies of the ĐĐ Group to ĐĐ Industrijska rješenja, merging ĐĐ Slobodna zona to ĐĐ Strojna obrada  ĐĐ Elektromont extracted and sold via employee stock ownership model  Planned sale of ĐĐ Energetics and Infrastructure not executed (considering the company's positive business results)  Program restructuring :  Termination of several corporate functions and organization units  Relocating R&D function and marketing and sales responsibilities to subsidiaries  Establishing Human resources; Finance, Accounting and Controlling; Legal Department, as well as Internal Audit Department  Reorganization of sales (key-client principle)  Production restructuring :  Investment in modernization of production facilities – providing conditions for profitable production  Legal restructuring / Optimization of number of employees:  Number of employees was gradually decreased from 1,126 (prior to the restructuring process) to 974 in 2016  In Q1 2017 trend of employment for definite period of time is continued, for the purposes of contracted business	 Financial restructuring: improvement of financing sources (gathering fresh capital by issuing new shares)  Finding a strategic partner for certain production segments (as in cooperation with Patria)  Completing organization and program restructuring of the company ĐĐ Industrijska rješenja d.d.  Expanding to the markets of the EU and beyond (MENA, Eastern Europe etc.)  Maintaining and improving operating indicators  Optimization of realized investments and finding possibilities for synergy of certain production and sale segments

(HRK mil.)	2014.	2015.	2016.	Q1 2016.	Q1 2017.
Operating income	382	395	578	103	153
Growth (%)	-	3%	46%	-	49%
EBITDA	(66)	(30)	10	(3)	13
EBITDA margin (%)	(18%)	(8%)	2%	(3%)	9%
EBIT	(84)	(50)	(14)	(9)	7
EBIT margin (%)	(22%)	(13%)	(3%)	(8%)	4%
Net profit / (loss)	(96)	(64)	(35)	(11)	7
Net margin (%)	(25%)	(16%)	(6%)	(11%)	5%
(HRK mil.)	31.12.2014.	31.12.2015.	31.12.2016.		Q1 2017.
Net debt	(171)	(264)	(296)		(346)
Non-current fin. assets	(136)	(210)	(193)		(192)
Current fin. assets	(89)	(92)	(131)		(169)
Cash	33	37	26		13
Given loans, deposits and similar	20	1	2		2

Development of the key performance indicators

Operating revenues and EBITDA margin (HRK mn)

Comments

• Shift in the business operations as a result of: 0 167 198
• Modernization of production and improvement of manufacturing calculations
• Optimizing utilization of capacities (cost-efficiency)
• Better utilization of resources in all business processes (realised decreased growth of costs in comparison to growth of revenues)
• Market expansion and closing of new business deals
• Export growth: income from export was 21% higher in 2016 as compared to 2015, in Q1 2017 it increased three times as compared to a comparable period
• Room for further improvements:
• A very small share of the most profitable segment Defence in the total income (6.9% share in income for 2016)
• The expected results in the future period as a result of additional restructuring measures in the Industry and Energetics segment

Overview of business segments

Business organisation – 3 market segments

Business segments overview

Industry and Energetics

Order book and revenues (HRK million)

Description

• The segment offers and performs engineering services in the areas of: (i) industrial plants for petroleum and gas, (ii) chemical and petrochemical industry, (iii) energy plants, (iv) food industry, (v) cement industry, and (vi) metallurgy
• Products and services:
• Construction and assembly of electrical, petrochemical and industrial plants
• Construction of metal bridge construction, steel construction and high-rise construction (viaducts, overpasses and similar) and accompanying infrastructure
• Largest share in total income: 65.4% (2016)
• Segment growth rates:
• Income: 25% (CAGR¹'14.-'16.) realization of major projects for HEP, INA, JANAF; 9% (1Q '16.-1Q '17).
• Export: 7% (1Q '16.-1Q '17).

The most significant products of the Industry and Energetics segment

1) Compound annual growth rate

Business segments overview

Transport

Order book and revenues (HRK mil.)

• Products and services:
• Production of freight wagons for different types of goods (independent development of new wagon types, including the customization capability of the existing wagons to specific client requests)
• Service and maintenance of freight wagons, production of parts and components for wagons
• Sole manufacturer of rail freight wagons in the Republic of Croatia
• Segment share in total income: 19.4% (2016)
• Greatest share in total export: 78.8% (2016)
• Segment growth rate:
• Income: 28% (CAGR¹'14 -'16) growth of demand on foreign markets; 277% (1Q '16 - 1Q '17).
• Export: 35% (CAGR '14 -'16)
• Increase of the order book indicates continuous Group capability for expanding on the new markets and realization of stable income from this segment

Most important products from the Transport segment

Business segments overview

Defence

Significant increase of orders in the period 31.12.2014 - 31.03.2017

The most significant products of the Defence segment

Armoured modular vehicle Patria AMV 8x8 Modernised tank M84/T-72

1 2 3 4 Knjiga narudžbi Order book Prihodi Revenues

31.12.2014. 2015 31.12.2015. 2016 31.12.2016. 1Q 2017 31.03.2017.

Offering of the new shares

Terms of the offering and use of proceeds

Offering conditions
 Decision on share capital increase of the Company passed at the General Assembly of the Company of 30 June 2017 ("Decision on share capital increase")
	Public Invitation for subscription of new shares by the Company published on 5 and	6 July 2017 ("Public Invitation")
 Information Memorandum for the offering of new shares is		announced at the Company and ZSE website (exception from the obligation to publish a prospectus1 )
 Number of new shares:	 2,500,000 – 7,600,000
 Final subscription price:	 To be determined after the subscription period, according to the criteria determined by the Decision on share capital increase and Public Invitation
	 All investors who will pay a minimum of HRK 800,000.00 for the New Shares,	for each individual offer
 Subscription right:	 Pre-emptive rights of the existing shareholders are excluded in accordance with the Decision on nominal capital increase (existing shareholders have the right to subscribe for the New shares under the same conditions as other investors)
 Subscription period:	 17 July 2017 (9:00h) – 21 July 2017 (14:00h), with the possibility of extenstion of the Subscription period to the period of 24 July 2017 (9:00h) to 28 July 2017 (16:00h)
 Subscription place:	 Management Board office – Strojarska cesta 20, Zagreb
 Final payment deadline :	 21 July 2017 (15:00h), and in case of extenstion of the Subscription period 28 July 2017 (17:00h) – for all investors except for investors2 Institutional ,  26 July 2017 (10:00h), and in case of extenstion of the Subscription period 02 August 2017 (10:00h)– for Institutional investors
 Date of final price publishing	 24 July 2017, and in case of extenstion of the Subscription period 31 July 2017
 Date of announcing the successfulness of the offering any the number of New shares to be issued	 27 July 2017, and in case of extenstion of the Subscription period 03 August 2017
 Listing:	 Regular market of the Zagreb Stock Exchange
Use of proceeds:
5% 20% 50% 25%	Working capital investment CAPEX New products development Severance payment	 Recent operating results, relevant references and Company's reputation on the domestic and international markets, point to a significant development potential  The planned capital increase procedure and completion of the restructuring process support the Company's goals to:  continue the positive growth trend and increase competitiveness  create conditions for further development, new investments and

• 1) In accordance with the Capital Market Act, Article 351, paragraph 1, item 3
• 2) As defined in accordance with the Decision on nominal capital increase and Public Invitation

conquering new markets

Q&A