Podravka Group

Istanbul, 2nd SEE Corporate Governance Roundtable, 30-31 May 2002. Podravka – a Leading Central European Food (and Pharma) Business

é The largest food company and the second largest pharmaceutical company in Headquarters of Podravka and Belupo International subsidiaries and representative offices é One of the largest branded food Home market: Croatia (2001 Sales: HRK1,414 mm) businesses in CEE with leading brands Core international markets (universal ) and (2001 sales: HRK920 mm) Other emerging European markets Podravka (dried , ready-made meals (2001 Sales: HRK86 mm) Other Western markets etc.) (2001 Sales: HRK 116 mm)

Moscow é Sales 2001: 343 million EURO Riga

é Leading Croatian corporate listed on the Warsaw Kiev

Zagreb stock exchange since 1998. Prague Geretsried Bratislava Budapest é Strong distribution network with facilities Ljubljana Belgrade and sales staff covering key emerging Koprivnica

European markets Skopje

é Modern production facilities in Croatia, , and Note: Podravka also have representative office in Australia

Istanbul, 2nd SEE Corporate Governance Roundtable, 30-31 May 2002 2 Podravka Worldwide

• Presence in more than 40 countries. • 25 companies in 15 countries. • Strategic market CEE. • Short Term priority: full coverage of markets in CEE & SEE. • Entered Yugoslavia, Ukraine and Baltic in the 2001. • Turkey, Italy, Greece, Bulgaria end year 2002. • Export emphasis on selected products. • Podravka’s presence on the market • Vegeta strongest brand.

Istanbul, 2nd SEE Corporate Governance Roundtable, 30-31 May 2002 3 Podravka Operates in a Fast Growing Market …

GDP growth in selected CEE countries – 2001 é Central and Eastern European GDP expected %

to continue growing at levels above Western 5,0% 4,8% 3,9% 3,9% 4,1% Europe due to convergence with EU driven by 3,4% high FDI inflow and improving productivity 3,0% 3,1% levels 1,2%

é As a number of CEE countries prepare for Czech Poland

entry into EU between 2003 and 2005, inflation Russia Croatia Bulgaria Slovakia rates are falling Romania Hungary Slovenia

é Large population pool of approximately 80 mm Inflation in selected CEE countries 2001 % in Central Europe 34,5%

é Podravka currently generates 44,3% of sales 21,6% outside Croatia – predominantly in other CEE 8,4% countries 7,4% 7,4% 7,1% 5,3% 4,9% 4,7%

é Relative nascence of CEE markets ideal to roll Czech Poland Russia Croatia Bulgaria Slovakia Hungary out new products Romania Slovenia

Istanbul, 2nd SEE Corporate Governance Roundtable, 30-31 May 2002 4 … With an Improving Macro-economic Outlook

GDP growth (real) é Croatia represents Podravka’s home % market (55,7% of sales) 6 4,1% 4 3,7% 2 2,7% 0 (0,4%) é Following a period of recovery, (2) Croatia has entered into a period of 1999 2000 2001 2002F robust growth Inflation % 8 é 6,2% Inflation has stabilised around a level 6 4,9% 4 of 5.0% 4,8% 2 4,2% 0 1999 2000 2001 2002F é Croatian Kuna exchange rate increasingly follows Euro Croatian Kuna exchange rates (spot rate-average) HRK Dollar 9 8 7 Euro 6 Jan-99 Jun-99 Nov-99 Apr-00 Sep-00 Mar-01 Aug-01 Jan-02

Istanbul, 2nd SEE Corporate Governance Roundtable, 30-31 May 2002 5 Podravka’s Business Structure

Podravka food Belupo pharma Non-core

Prodravka dd (food trading and production) 100% 100%

Belupo doo Non-Core assets

é Koprivnica Tiskarnica Structure Podravka’s domestic and é Hotel Podravina International Belupo trading international food trading é subsidiaries Podravka Inzenjering subsidiaries

é Vegeta é Cardiovascular é Hotel and restaurants in é Meat delicatessen é Osteomuscular Koprivnica é Podravka dishes é CNS é Printing facilities é Dolcella é Dermatology é Engineering facilities é Fruit and vegetables é Beverages Products é Children’s food Total food sales 2001: HRK1,911 mm1 Total pharma sales 2001: HRK544 mm1 Total non-core sales 2001: HRK82 mm 

Istanbul, 2nd SEE Corporate Governance Roundtable, 30-31 May 2002 6 Podravka Organisation Structure

Supervisory Board

Management Board

Board Board Member; President of the Deputy President of Board Member; Member;Domestic & CFO Board; CEO the Board Foreign Markets SEE Markets

Corporate Corporate Strategic Human R&D Business Belupo Finance Communication Marketing Resources Development President

Finance Director

Vegeta Podravka dishes Lino, dolcela Fruit and Beverages Danica d.o.o. Mill and and snack vegetable bakery

Croatian market South-East Europe Middle Europe East Europe market West Europe market market market and overseas

Istanbul, 2nd SEE Corporate Governance Roundtable, 30-31 May 2002 7 History/Recent Developments

Apr-2002 5-yr contract between Podravka d.d. and Nestlé Corp. Sales, Logistics and Distribution Agreement regarding Nestlé’s cetrain products to be sold in Croatia & SEEurope

Oct-2000 Opening of Vegeta plant in tax free zone in Poland

May-2000 Opening of new Vegeta plant in Croatia

Mar-2000 Appointment of new management team

Sept-1999 Opening of Belupo pharmaceutical complex

Nov-1998 Initial Public Offering on Zagreb Stock Exchange

Istanbul, 2nd SEE Corporate Governance Roundtable, 30-31 May 2002 8 Current Podravka Shareholder Structure

Shareholders’ stake é 7 institutional shareholders control appr. 50% of equity

é Over 20,000 individual shareholders comprise 34,24% of equity Other legal entities 12,9% HFP 12.97%

Shareholders as per 10-May-2002 Kapitalni Fond Shareholders No. of shares % stake 12,13% HFP (Government controlled) 783,953 12.97% Kapitalni Fond (Government 732,990 12.13% controlled) Individual EBRD 636,000 10.53% Shareholders 34,24% EBRD 10,53% Dom Fond 264,675 4,38% PBZ 255,084 4,22% Franck 229,630 3,80% Dom Fond 4,38% Treasury shares 161,903 2.68% PBZ 4,22% Hypo Alpe Adria 129,639 2.15% Franck 3,80% Individual shareholders 2,068,754 34,24% Hypo Alpe Adria bank 2,15% Other legal entities 780,068 12,90% Treasury shares 2.68% Total 6,042,696 100%

Total = 100%

Istanbul, 2nd SEE Corporate Governance Roundtable, 30-31 May 2002 9 Podravka Share Price Performance

Podravka share price performance for period Jan 2001- Apr 2002

é Most liquid stock on Croatian stock exchange Mkt Capt: HRK ( m)2 as at 30-04-2002 HRK é Turnover data1 : – Average daily turnover of HRK High: HRK 246 0.70 m ( 94,680) – 16 month turnover of Podravka 260,00 1.400,00 shares: 15.1% of total stock 240,00 1.300,00

turnover 220,00 1.200,00 CROBEX 200,00 1.100,00 é 16 month high/low HRK: 246/139,99 180,00 1.000,00 Avg: HRK 162,58 160,00 900,00 é average price HRK: 162,58 140,00 Podravka Low: HRK 139,99 800,00 2 2 0 0 20 02 0 . 120,00 2 0 .2 .4 700,00 é 0 .2 .3 2 % in total zse Mkt Cap: 3,2% 01 20 2 2 1 0 . 2. 1 0 .2 .1 1 0 20 2 2 100,00 0 0 1. .1 600,00 01 0 .2 1 2 1 0 .2 0 2. 1 1 0 .2 .9 .1 0 0 20 8 2 2 1 0 1 1 1 0 . 2. é Croatian stock exchange regulated by 00 .2 00 00 00 .2 .7 2 .2 2 2 2 .6 2 1. 2 3. 4. 5. 2 Croatian SEC with listing rules 2. 2. 2. 2. modelled on the UK rules

¹ calculated for period Jan 2001 - Apr 2002 2 Exchange rate on 12.04..2001: HRK/ Ã7.3958

Istanbul, 2nd SEE Corporate Governance Roundtable, 30-31 May 2002 10 Listing Requirements – 1st Quotation ZSE

• Free transferability

• Whole class of securities to be listed

• Prospectus required

• Independent audited financials statements

• Three years of operation

• Min. Expected MarketCap: 10 Million Euros

• 25% of Securities in Public

Istanbul, 2nd SEE Corporate Governance Roundtable, 30-31 May 2002 11 Privatistion Process

é Approximately 2/3 of the Croatian Economy has been privatised.

é Impact of improving Corporate Governance

é Transparency

Istanbul, 2nd SEE Corporate Governance Roundtable, 30-31 May 2002 12 EU Accession

é Croatia joined Stabilisation & Association Agreement in 2001.

é Subject to ratification by Parliaments of EU member countries

é Formal application for joining EU – 2003.

Istanbul, 2nd SEE Corporate Governance Roundtable, 30-31 May 2002 13 Laws Regulating CROSEC Activities

• Law on Issuance and Sale of Securities (‘95)

• Law of the Amendments and Changes to the Law on the Issuance and Sale of Securities (’98)

• Law for the Takeover of Joint Stock Companies (’97)

• Law on Investment Funds (’95, ’96)

• Law on Investment Funds (’95)

Istanbul, 2nd SEE Corporate Governance Roundtable, 30-31 May 2002 14 Rules of Discolosure – ZSE (1)

• Annual reports independently audited, within four months from the end of the financial year

• Semiannual reports within three months from the end of the semiannual period

• Changes and new developments of the main business activities

• Shareholder & Supervisory Board meetings (date, agenda, proposed decisions)

• Changes in Management and Supervisory Board

Istanbul, 2nd SEE Corporate Governance Roundtable, 30-31 May 2002 15 Rules of Discolosure – ZSE (2)

• Major changes in the ownership structure

• New issues of securities

• Mergers & Acquisitions procedures

• Trading in own (treasury) shares

• Trading by members of the Management and Supervisory Board

• Transactions with related parties

Istanbul, 2nd SEE Corporate Governance Roundtable, 30-31 May 2002 16 The Importance of Disclosure

• Shareholders rights & their equitable treatment

• Attracting & retaining financial resources

• Improvement of the investment climate

• Following first rate international standards of Corporate Governance & Transparency

Istanbul, 2nd SEE Corporate Governance Roundtable, 30-31 May 2002 17 Role of the Management Board

• External international auditor engaged 5 years ago (E&Y, Vienna; PWC, Zagreb)

• Accounting organised according to the IAS

• Investors relation department established in 2000.

• Roadshows for existing & potential investors

Istanbul, 2nd SEE Corporate Governance Roundtable, 30-31 May 2002 18 Role of the Auditor (1)

• Appointed by GSM

• An independent opinion on the truth and fairness of the financial statements as a whole

• Assesment of risk of material misstatement and effectiveness of controls

• But, cannot substitute Management’s responsibility

Istanbul, 2nd SEE Corporate Governance Roundtable, 30-31 May 2002 19 Role of the Auditor (2)

• Auditing semmi-annual & annual reports

• Making financial reports for: • Mother company • Consolidated financial reports for the Group • Financial reports of subsidiaries in Croatia & abroad

• Presenting financial reports to the Management Board & Supervisory Board

• Management Letter – prepared solely for the use of Management Board in order to improve weaknesses due to their potential effect on the future performance

Istanbul, 2nd SEE Corporate Governance Roundtable, 30-31 May 2002 20 Podravka’s Key Initiatives

é Extend and consolidate position in new markets (Baltics, Balkans) Sales & é Improve existing distribution network (ECR) marketing é Extend brand to additional product lines

é Improve focus on core activities Strategic/ é financial Consider new acquisitions on a selected basis é Manage future capex needs

é SAP Support é systems ISO 9001:2000 (awarded to all Vegeta brands) é HACCP

Istanbul, 2nd SEE Corporate Governance Roundtable, 30-31 May 2002 21 Podravka’s Objectives (1)

More International

é Penetrate new markets and strengthen position in existing markets by better following consumer trends

é International inside (changing culture and habits)

é Management of the Group – Multilocal; more influence of international staff on corporate strategy; Headquarters coordinates activities and sets goals

“Satisfying Customers Needs Beyond Their Expectations”

é Local taste philosophy as main orientation

é Convenience food (easy to use)

Consequence: Multilocal R&D

Istanbul, 2nd SEE Corporate Governance Roundtable, 30-31 May 2002 22 Podravka’s Objectives (2)

Increasing Shareholders’ Value

é Sustainable growth and development

é Double –digit growth of revenues

é Continuous improvement of profitability

é Focus on core growth product areas

Istanbul, 2nd SEE Corporate Governance Roundtable, 30-31 May 2002 23 Contact

Nevenka Cerovsky, B. Sc. (Econ.)

Member of the Board, CFO

PODRAVKA d.d.

Tel: 385 48 651 102; 385 1 4877 812

Fax: 385 48 621 793; 385 1 4877 813

E-mail: [email protected]

Istanbul, 2nd SEE Corporate Governance Roundtable, 30-31 May 2002 24 Discussion

Istanbul, 2nd SEE Corporate Governance Roundtable, 30-31 May 2002 25