Interim Report January - September 2001

Interim Report January-September 2001 Highlights · Revenue amounted to E7.3 million (4.8 million) for the quarter, a continued strong increase of 51 percent versus the corresponding period last year. · Revenue for the nine months amounted to E21.7 million (14.1 million), an increase of 55 percent versus the corresponding period last year. · Prepaid membership rose to 83,800 (65,000), up 2,500 for the quarter and 18,800 or 29 percent versus the corresponding period last year. · The operating loss amounted to E0.3 million (-0.5 million) for the quarter and E0.7 million (-1.8 million) for the nine months. · Operating profit before depreciation amounted to E0.2 million (- 0.2 million) for the quarter and E0.8 million (-0.8 million) for the nine months. · The loss after tax for the quarter amounted to E1.6 million (- 2.1 million), equivalent to E0.13 (0.18) per share, and to E4.7 million (-11.2 million) for the nine months, or E0.40 (-0.95) per share. · · The acquisition of First Medical Clinic of Prague, the leading corporate healthcare provider in the Czech Republic, was finalised after the conclusion of the reporting period. To our shareholders I am pleased to report that we were able to maintain our revenue growth versus last year, even though we saw an expected slowdown in the growth trend during the third quarter. This was achieved amidst a tougher economic situation in Europe in general and Poland in particular. Third- quarter revenue increased by 51 percent from the corresponding period in 2000, to E7.3 million. Revenue for the nine months was E21.7 million, a 55-percent increase compared with the corresponding period last year. The total number of prepaid members again grew after a slow second quarter, rising by 2,500 to a total of 83,800. Most of this growth, or 2,100 members, was in Poland. As expected, the slowing Polish economy and static membership in the second quarter, together with a depreciation of the Polish currency, resulted in a slight decrease in Polish revenue compared with the previous quarter. The operating result for the quarter weakened to a loss of E0.3 million, versus a loss of E0.1 million for the second quarter and E0.5 million for the third quarter last year. The operating loss for the nine months amounted to E0.7 million, against E1.8 million for the corresponding period last year. Operating profit before depreciation amounted to E0.2 million for the quarter and E0.8 million for the nine months, compared with a loss of E0.8 million for the first nine months of 2000. Medical costs amounted to E4.4 million or 59.7 percent, against E4.4 million or 57.2 percent for the second quarter. The percentage increase was driven by additional fixed medical costs in new facilities to accomodate further growth. During the quarter we expanded capacity through new facilities in Warsaw, Lodz and Budapest. Scale efficiencies continue to reduce variable medical costs. Distribution, selling and marketing costs amounted to E1.0 million for the quarter and E3.0 million for the nine months, representing 13.6 percent of revenue. This compares with E0.7 million in the third quarter of 2000 and E2.2 million for the first nine months of 2000, or 15.7 percent of revenue. Administrative costs amounted to E1.8 million for the quarter, or 24.3 percent of revenue, and E5.3 million or 24.5 percent for the nine months. This compares with E1.6 million for the third quarter of 2000 (33.3 percent of revenue) and E4.7 million for the first nine months of 2000 (33.4 percent of revenue). Investment activities Investment activities showed a net loss of E0.7 million for the quarter, mainly driven by reduced values of Russian bonds, compensated only partly through gains on the remaining Russian equity portfolio. Investment management costs continue to decline and will fall further during the coming quarter. No valuation changes occurred in the portfolio in the third quarter. Most of the companies in the portfolio are performing in line with expectations, with those directly dependent on consumer demand primarily experiencing the result of a weaker economy. Naturally, the present economic climate will impact our exit horizons. We no longer expect to finalise the two anticipated exits this year. How much longer the overall exit period will be largely depends on the extent of the present downturn in the global and regional economies, where we, however, focus on value realisation. We still maintain our view, however, that the years leading up to eu accession for the Central European countries will involve a significant degree of trade buyer activity. Liquidity Net debt was reduced by E0.5 million during the quarter, from E12.3 to 11.8 million. Including undrawn loan facilities, E11.5 million of cash or readily convertible instruments was available to the company. Financial costs Interest charges amounted to a net of E0.3 million for the quarter, versus E0.5 million in the corresponding quarter of the previous year. For the nine months, interest charges amounted to a net of E0.7 million, versus E0.9 million in 2000. Overall debt levels are comparable with the prior period, with interest received on loan investments and cash balances offsetting interest charges. Operational review Poland Medicover Poland grew its revenue by 49 percent compared with the third quarter last year, to E5.4 million. Revenue for the nine months amounted to E16.1 million, against E10.3 million last year, a 56 percent increase. Compared with the second quarter 2001, however, revenue fell by E0.2 million or 4 percent. The decrease is a function of static membership reported for the second quarter, together with a depreciation of the zloty against the Euro of around 8 percent during the third quarter. It is encouraging to report resumed growth in Polish membership, with 2,100 members joining during the quarter. We continue to experience a satisfactory level of new sales activity despite the tougher economic environment, while growth in existing client accounts is significantly below the levels previously seen. This is due to corporations' reluctance to extend existing benefits or their being forced to downsize employment or benefit packages because of the present economy. The loss of clients from existing accounts, which we reported for quarter two, reduced during the third quarter, despite a generally tougher economic situation. We consider this, together with our continued level of new sales activity, as an indication that healthcare is an employee benefit which is relatively uncyclical. We are continuing to invest in our medical infrastructure. During late summer a new facility was opened in Warsaw, replacing the first facility opened in 1995. A further facility was opened in Lodz, a city of around 1.2 million people where Medicover has been active since 1997 and is presently servicing some 2,000 members. We continued to expand the network of participating independent physicians across the country, to approximately 100 by the end of the quarter. By developing this network as a complement to our own managed facilities, we are able to better service our customers through a wider choice of locations and services. Poland's new government took office in early October. The new administration has issued strong statements on its intentions to invigorate growth in the Polish economy while also acknowledging the importance of the independence of the central bank. The disinflation process has largely been successful, with annual inflation approaching 4 percent, but at the expense of very high real interest rates of over 10 percent and slowing economic growth. With a rising budget deficit and high unemployment, the government recognises the importance of stimulating economic growth. The central bank is starting to soften its policy, with a recent interest rate reduction of 1.5 percent, to 15.5 percent, bringing total interest rate reductions for the year to 5 percent. Romania Medicover Romania continued its strong growth, with third quarter revenue of E1.3 million, a 64 percent increase versus the corresponding period last year and a 3-percent increase on the previous quarter. Revenue for the nine months amounted to E3.8 million, up 46 percent over last year. Prepaid membership was flat for the quarter at 9,600 members. During the quarter Medicover signed its largest prepaid contract to date in Romania, representing an annual value exceeding E0.5 million, with a textile business located in Focsani, a city three hours north-east of Bucharest. The contract, which covers more than 2,000 people, will provide comprehensive healthcare services to employees and their families. Medicover will construct a modern facility at the plant, where service is expected to commence in the spring of next year. It is very encouraging to see, in the more price-sensitive Romanian market, that responsible employers realise the benefits and are willing to invest in the health and well-being of their staff. We are encouraged by this first pilot contract in the significant Romania textile industry. The laboratory business in Romania continues to grow strongly, with well in excess of 2 million tests forecasted for the full year, almost doubling last year's volume. Several new laboratories outside of Bucharest are planned for construction during the coming quarters. Hungary Medicover Hungary reported revenue for the quarter of E0.3 million, an 82 percent increase versus the corresponding period last year, and E1.0 million for the nine months, a 60 percent increase. The growth in Hungary is fully driven by the prepaid business. Fee-for-service income is flat from last year. Prepaid members increased by 400 for the quarter, to 2,800, more than double last year's figure of 1,200. The new second facility in Budapest, located in a prime business district, will open for clients on 19 November. Increased investments are being made in sales and distribution to support the new facility. Estonia Revenue in Estonia declined to E0.1 million, versus E0.2 million for the previous quarter. Estonia is still largely dependent on the seasonal fee- for-service business, with revenue expected to again rise in the fourth quarter. We are recruiting new management for the Estonian business and expect to see growth in the prepaid business during the coming year. Expansion to Czech Republic After the end of the reporting period a binding agreement was signed on the acquisition of 100 percent of First Medical Clinic of Prague, with the acquisition being effective mid-November. The acquisition will be paid for in cash, and the terms are strongly linked to the future growth of the business. First Medical is the leading provider of prepaid healthcare services to the corporate market in the Czech Republic. The company was established in 1992 and has developed a business model largely similar to Medicover's. It charges corporate customers a prepaid fee for a range of healthcare services delivered through its own facilities and staff as well as a nationwide network of participating physicians. There are currently around 7,000 members from around 30 companies. Average premiums are approximately 60 percent of the levels for Medicover Poland reflecting a more narrow service range. Around 60 full-time staff are employed in the company. First Medical's expansion has largely come about through word of mouth and client referrals. Medicover believes significant opportunity exists to raise volumes by investing in direct sales and marketing efforts. Revenue for the full year 2001 is expected to be around E1.5 million, with a slightly positive operating result. The company has no debt. The acquisition will generate a goodwill balance of E(0.8 million), which will be amortised over 10 years. We will invest in sales, marketing, product development and support over the coming two years. Prague and the Czech Republic are underdeveloped in respect of Medicover's services and offer the same strong potential as Warsaw for the development of the Medicover concept. Fourth quarter outlook Business sentiment continues to erode in Europe, and the economic growth forecast for the Euro zone for 2002 has now been lowered to 1.7 percent. The economies in Emerging Europe are by no means insulated from developments elsewhere in Europe and the rest of the world. Particularly export-driven gdp growth to the main trading partners in Europe will suffer from the marked slowdown in economic activity. Counterbalancing this is a continued strong inflow of investments to capture cost advantages in manufacturing versus Western Europe, as well as industry positioning ahead of future eu market integration. Foreign Direct Investment in the region totalled $14.4 billion in 2000 with $18.8 billion expected for 2001. The largest economy in the region is Poland, which is also where Medicover has the majority of its business. After undergoing a painful process of disinflation and mismatched fiscal and monetary policies, which resulted in high real interest rates, slowing economic growth, high unemployment and weak domestic consumption, the new Polish government is starting to implement harsh policies to ensure a return to the growth levels enjoyed throughout most of the 1990's. We believe the present administration is approaching the structural problems in the economy in a credible manner. The budget proposal for 2002 is being debated by parliament, and the specifics of how budget deficit reductions shall be achieved through expense reductions and tax increases have not yet been settled. The outlook for Medicover in this environment is positive. The interest in private healthcare as a complement to the underfunded public system will continue to rise as consumer demand increases and corporate and individual spending power grows. Jonas af Jochnick November 2001 ------------------------------------------------------------ This information was brought to you by Waymaker The following files are available for download: The Full Report The Full Report

About Us

Medicover is a leading international healthcare and diagnostic services provider in Poland, Germany, Romania, Ukraine and certain other markets, primarily in Central and Eastern Europe (“CEE”). Additionally, Medicover is in the process of entering the fast-growing Indian healthcare market in order to expand its geographical footprint and further leverage its emerging markets capabilities. Medicover offers a broad range of healthcare services and a significant hub-and-spoke diagnostic laboratory network, supported by extensively developed proprietary software and information systems infrastructure. Medicover operates through two divisions: Healthcare Services and Diagnostic Services.