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Disclaimer Information and opinions contained herein are based upon sources that are believed to be reliable but are not guaranteed to be accurate or complete.

Location and Address:

VULKAN NIS is located close to the city of Nis, 270 km from Belgrade, the capital city of Yugoslavia. The company has access to the Belgrade – Nis highway, to the Nis railway station and to the Nis International Airport. The Nisava River is 200 m away from the company. Address: Mramorski put bb, 18000 Niš, Yugoslavia Phone: +381.18.363.407, 362.257 Fax: +381.18.365.856, 363.326 Web site:; e-mail: Belgrade Representative Office: Topličin Venac 3.1, 11000 Belgrade Phone: +381.11.632.575, 626.222 Fax: +381.11.626.187

Sector: Activities:

Rubber industry Established in 1937, Vulkan is the largest Yugoslavian producer of conveyor belts and rubber products. The Company produces a wide variety of rubber products, including conveyor belts, flooring and technical sheets, rubber hoses, rubbercoated rollers and plates, rubber boots and footwear materials, and other rubber products. Vulkan is ISO 9002 certified. Conveyor belts accounted in 2000 for 35.8% of company’s sales, flooring and technical sheets represented 19.7% of total sales, rubber hoses 11.5%, rubber boots and footwear materials 11.2%, and other products 11.8%. The production is organized on different flows. Main equipment is 15-30 years old. Infrastructure is in relatively good shape, but requires additional investment (especially for the power supply).

Legal status and ownership:

Vulkan is organized as a joint-stock socially owned company under the Yugoslavian law. 1.66% of the Company’s shares are owned by private shareholders, with the balance of 98.34% representing socially owned capital; out of these, 70% will be offered for sale to potential strategic buyers


The Company employs 965 people, out of which 62 are university graduates.


1999 Capacity utilization (%) 19.3% 69.8% 18.5% 59.0% 68.5% 68.1% Output 23,630 891,532 38,011 216,146 129,457 149,590

1998 Output 26,616 1,041,240 196,251 134,627 126,696 186,970

Capacities and output:

Product Conveyor belts (m) Technical and flooring sheets (kg) Footwear materials (kg) Rubber shoes (pairs) Rubber hoses (m) Other products (kg)

Output 38,642 907,097 202,989 177,060 136,994 170,127

Capacity 200,000 1,300,000 1,100,000 300,000 200,000 250,000

Market position:

In 2000, 84% of the company’s sales were domestic, with the balance represented by exports. Traditionally, most of the Company’s products have been sold in the EU states (Germany, Italy, Spain, United Kingdom, Holland etc.) or the US. In terms of distribution, 45% of the output is sold directly to the clients, 42% through third party distributors, and the remaining 13% through retail or wholesale. Income Statement I-VI2001 2000 1999 EUR'000 EUR'000 EUR'000 Net Sales Revenues 2,685.29 13,612.71 7,464.09 Changes in the Value of Inventories 990.78 2,011.01 1,649.60 Other Operating Revenues 57.58 6.73 Gross Operating Yield 3,676.07 15,681.30 9,120.42 Costs of Goods, Materials and Services 2,125.37 8,918.28 4,450.63 Labour Costs 692.66 3,850.34 2,326.46 Depreciation 41.74 153.37 93.40 Other Operating Expenses 202.01 1,128.85 831.96 Operating Profit 614.28 1,630.46 1,417.98 Financial Revenues 9.33 617.45 98.42 Financial Expenses 130.41 1,352.13 171.45 Profit from Ordinary Activities 493.20 895.77 1,344.95 Extraordinary Revenues 6.23 478.49 5.03 Extraordinary Expenses 282.14 28.29 374.44 Total Profit 217.30 1,345.97 975.54 Tax on Profit 8.38 3.75 Net Profit for the Financial Year 217.30 1,337.59 971.80 Revaluation Revenues 676.16 7,096.44 2,285.22 Revaluation Expenses 835.55 10,180.79 3,223.52 Net Profit after Adjustments 57.91 (1,746.76) 33.49 Exchange Rate DIN/EURO (year avg.) 59.51 14.92 11.73 Balance Sheet I-VI2001 2000 1999 EUR'000 EUR'000 EUR'000 Intangible Assets Total Fixed Assets 3,361.26 2,815.44 6,545.81 Current Assets 3,182.27 2,420.69 5,256.93 Long Term Financial 91.60 75.77 178.10 Investments Accruals 0.13 Loss of previous & current year 536.82 444.11 Non-operating assets 36.63 37.34 92.20 Total Assets 7,208.72 5,793.35 12,073.05 Current Liabilities 2,123.82 1,626.81 2,292.21 Long Term Loans Total Liabilities 2,123.82 1,626.81 2,292.21

Financial highligths (Serbian Accounting System, non-audited) Important note: Until 5th December 2000 the official exchange was kept at 1DM = 6.00 DIN. Since 6th December 2000 a controlled float has maintained a stable 1DM = 30.00 DIN rate. For illustration, the black market rates in the same period were: January 1999 1DM = 8.40 DIN August 1999 1DM = 12.40 DIN December 1999 1DM = 21.00 DIN January 2000 1DM = 21.00 DIN December 2000 1DM = 30.00 DIN

Ordinary Share Capital Socially Owned Capital Reserves Undistributed Profit Accruals Non-operating liabilities Total liabilities Exchange Rate DIN/EURO (year-end) Fixed assets:

69.78 4,143.87 485.52 348.90 3.85 32.98 7,208.72 59.71

57.72 3,428.17 401.67 240.89 3.92 34.17 5,793.35 58.68

135.32 8,036.06 941.54 568.39 99.53 12,073.05 11.73

The Company has a total land area of 255,387 sqm, out of which built area accounts for 28,915 sqm. The main production buildings includes ‘Elastomer hall’ (28,915 sqm), ‘Vulcanization hall’ (6,767 sqm), ‘Technical Rubber Items hall’ (6,051 sqm), ‘Technical goods and hoses hall’ (6,051 sqm) and ‘Utilities & Maintenance hall’ (1,849 sqm). Main equipment consist of mixing lines (Emarfa type, commissioned in 1973/86/89), technical and floor panel production lines (Utava, 1984/80), footwear material lines (Marangoni, Utava, 1986/84), rubber footwear line (Svit, 1969/82) and rubber hoses line (Osterman, 1972/81/88).

Upside potential:

Vulkan is an integrated rubber company, ISO 9002 certified, with a strong management team and good reputation, built over the past 65 years; The two main products (conveyor belts and flooring and technical sheets), accounting for over 60% of the total output, enjoy a good quality; flooring sheets are appreciated by export partners; The expected reconstruction and development of the Yugoslavian mining and power sectors may boost Company’s sales; Partnering with an established international rubber items manufacturer may allow Vulkan to enter currently inaccessible markets.

Proposed transaction:

The Privatisation Agency of the Republic of Serbia intends to sell 70% of the socially owned capital in Vulkan in the context of the Serbian privatisation programme. In accordance with the Law on Privatisation, up to 15% of the remainder will be distributed free of charge to the company employees, while at least 15% will be offered to the public through the Privatisation Registry. A Consortium formed by Central Europe Trust Company Ltd. (financial advisor) and Altheimer & Gray (legal advisor) was appointed as exclusive sell-side advisor for the privatisation of 5 companies, including VULKAN. The Consultant is currently preparing a due dilligence report; based on its conclusions, a privatisation strategy will be submitted for approval to the authorities and further implemented. The privatisation solution currently envisaged is a trade sale, open to a strategic investor or a consortium of strategic and/or financial investors, for the whole 70% equity stake put for sale.

Tentative calendar:

March / April 2002 – the privatisation strategy approved by the Government; April 2002 – the official invitation for tender to be published; information memoranda and tender books made available to all interested investors; April / May 2002 - interested investors perform their own due dilligence; a Data Room will be opened in Vulkan; June 2002 – deadline for submitting the (binding) bids; June / July 2002– qualified bidders are invited to start negotiations; July 2002 – final negotiations with the Selected Bidder and Shares Sale – Purchase Agreement conclusion.

Other information

Any interested investor may send a (non-binding) letter of intent. Upon

request, preliminary on-site visits may be organized. All communication or inquiries related to the present document or the the privatisation of Vulkan should be directed to the Consortium. The Company shall not be contacted without the prior consent of the Consortium. Contacts: Tom Lampl Managing Director, Central Europe Trust Marble Arch Tower 55 Bryanston Street London W1H 7AA England Tel: +44 207 258 7100 Fax: +44 207 258 7101 Adrian Rusu Principal Central Europe Trust Bucharest Office 4 Gavril Musicescu St. Bucharest 1 – Romania Tel: + Fax: + Obie L. Moore Managing Partner Altheimer & Grey Bucharest Office 28C General C. Budisteanu St. Bucharest 1 – Romania Tel: +40.1.312.4950 Fax: +40.1.312.4951

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