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3 T H E I N V E S T M E N T F U N D F O R C E N T R A L A N D E A S T E R N E U R O P E

DANISH INTERNATIONAL INVESTMENT FUNDS:

ANNUALREPORT2002

THE INVESTMENT FUND FOR CENTRAL AND EASTERN EUROPE (IØ)Bremerholm 4 DK-1069 Copenhagen KDenmarkTel + 45 33 63 75 00Fax + 45 33 32 25 24E-mail: ioe@ioe.dk · www.ioe.dk

IØ-MOSCOW Str Aviamotornaia 8 A, Building 2, 2nd floor111024 MoscowRussiaTel + 7 095 931 91 25Fax + 7 095 931 91 26E-mail: ioe-mow@ioe.dk

IØ-WARSAWOddzial w WarszawieUl. Mokotowska 23 m. 8PL-00-560 WarsawPolandTel + 48 22 621 13 77Tel + 48 22 850 04 48Fax + 48 22 621 83 63E-mail: ioe@ioe.pl

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DANISH INTERNATIONAL INVESTMENT FUNDSDANISH INTERNATIONAL INVESTMENT FUNDSDanish International Investment Funds is the umbrella term for IFU, IØ and IFV. Each of the Funds operates in its specific geographical sphere:

l IFU in developing countries with a per capita income below the World Bank’s upper limit for new loans (USD 5,185 in the year 2003)

l IFV in developing countries with a per capita income above the same limitl IØ in Central and Eastern Europe and in the Asian part of the former Soviet Union

EUROPEAN CO-OPERATIONIFU, IØ and IFV are members of the European Development Finance Institutions (EDFI). Besides the Danish Funds, there are 12 othermembers. They are all bilateral finance institutions offering capital for the development of the private sector in developing countriesand countries that are in a transition process towards market economy. The objective of EDFI is to further co-operation and to safe-guard common interests in relation to the European Commission and its institutions, including the European Investment Bank (EIB).

Text consultant Jesper Jespersen (TextPartner) · Photos Flemming Jeppesen, Lars Lindskov · Layout Linda Balle · Print Trekroner Tryk · ISSN 0906-3560 541 422Printed Matter

� HEAD OFFICE Copenhagen

� OFFICES Beijing Johannesburg Moscow New Delhi Warsaw

� ADVISER OFFICES São Paulo Togo

� ADVISERS Bangkok Beijing Bucharest Budapest Buenos Aires Cairo Chennai CopenhagenIstanbul Lahore London Luxemburg Mexico City Montevideo Moscow Nairobi New DelhiPretoria San Jose Sandton Santiago de Chile São Paulo Selangor Seoul Singapore SuzhouTallinn Vilnius Washington D.C.

3

CONTENTS

Statement by the Management on the Annual Report 4

Auditor’s Report 5

The Management’s Review 6

Accounting Policies 18

Income Statement for 2002 23

Balance Sheet at 31 December 2002 24

Cash Flow Statement for 2002 25

Notes 26

The Management’s Review on MIØ 30

Criteria for MIØ Financing and New Projects in Brief 33

The Supervisory Board 34

Big Bang moves Activities East 36

Relocation as Part of an Offensive Strategy 39

Co-operation with IØ – Why and How 40

IØ – Resources 44

Investment Portfolio 46

Organisation and Staff 51

4

STATEMENT BY THEMANAGEMENT ONTHE ANNUAL REPORT

THE EXECUTIVE BOARD:Sven Riskær, Managing DirectorJørgen Dan Jensen, Deputy Managing DirectorFrank Norman Larsen, Deputy Managing Director

We have today presented IØ’s annual report for the year 2002.

The annual report has been presented in accordance with the Danish Financial Statements Act. We consider

the applied accounting policies appropriate for the annual report to provide a true and fair view of the Fund’s

assets, equity and liabilities, financial position and the results.

THE SUPERVISORY BOARD:Johannes Poulsen, ChairmanAgnete Raaschou-Nielsen, Deputy ChairmanLars AndersenSigurd Ø. AndersenElsebeth BudolfsenLars KolteKjeld RanumMichael RasmussenCarsten StaurKaren Wermuth

5

TO THE SUPERVISORY BOARD OF IØ

We have audited the annual report of IØfor the financial year ended 31 Decem-ber 2002, pages 6-32.The annual report is the responsibilityof the Fund’s Supervisory Board andthe Executive Board. Our responsibilityis to express an opinion on the annualreport, pages 6–32, based on our audit.

BASIS OF OPINIONWe conducted our audit in accordancewith Danish Auditing Standards. Thosestandards require that we plan and per-form the audit to obtain reasonable as-surance that the annual report is free ofmaterial misstatement. An audit in-cludes examining, on a test basis, evi-dence supporting the amounts and dis-closures in the annual report. An auditalso includes assessing the accountingpolicies used and significant estimatesmade by the Supervisory Board and theExecutive Board, as well as evaluatingthe overall annual report presentation.

We believe that our audit provides a rea-sonable basis for our opinion. Our audit has not resulted in any quali-fication.

OPINIONIn our opinion, the annual report givesa true and fair view of the Fund’s finan-cial position at 31 December 2002 andof the results of its operations and itscash flows for the financial year thenended in accordance with the DanishFinancial Statements Act.

Hellerup, 20 March 2003

Deloitte & ToucheStatsautoriseret Revisionsaktieselskab

Torgny PahleState Authorised Public Accountant

Morten S. RengeState Authorised Public Accountant

AUDITORS’ REPORT

6

DKKm 2002 2001 2000 1999 1998

� INCOME STATEMENT

Dividends and interest income from projects 60 69 34 31 24

Value adjustments (8) (40) (25) (134) (45)

Other expenses related to projects 0 (1) 0 (1) (2)

Gross contribution from projects 52 29 9 (104) (23)

Operating expenses, net (32) (30) (29) (29) (28)

Financial income, net 58 41 35 26 49

Net income for the year 77 40 15 (107) (2)

� BALANCE SHEET 31 DECEMBER

Investments in projects, net1 941 1,023 920 863 641

Funds committed to projects 454 252 239 360 394

Total balance 1,903 1,821 1,686 1,590 1,584

Total equity capital 1,895 1,818 1,674 1,574 1,571

� CASH FLOW STATEMENT

Operating activities 81 71 39 25 45

Investing activities (150) (191) (126) (353) (125)

Financing activities 2 48 78 109 158

� ADDITIONAL DATA

New projects contracted (no.) 28 25 26 27 29

Exited projects (no.) 24 34 14 19 9

Portfolio of projects (no.) 175 171 180 168 160

Investments contracted 412 485 381 381 344

Share capital investments in projects at cost 857 882 847 728 487

Project loans at cost 695 686 581 570 454

Total investment in projects at cost 1,553 1,568 1,427 1,298 941

Accumulated value adjustments (612) (545) (508) (435) (301)1Investments in projects, net 941 1,023 920 863 641

THE MANAGEMENT’S REVIEW

FINANCIAL HIGHLIGHTS

7

The financial highlights have been restated for 2002 and 2001 as a consequence of the

changes in accounting policies effected in 2002.

For 1998 - 2000, the reserves against losses have been booked against the project as-

sets when calculating the total balance, and actual income from sale of shares have

been reclassified to value adjustments in the income statement.

2002 2001 2000 1999 1998

� KEY RATIOS

Gross contribution from projects/Investment

in projects, net 5.48% 2.80% 0.96% -12.07% -3.57%

Net income for the year/Average

total equity capital 4.17% 2.31% 0.94% -6.82% -0.13%

Operating expenses, net/Average

investment in projects at cost 2.05% 1.97% 2.14% 2.61% 3.77%

Total equity capital/Total assets 99.60% 99.81% 99.26% 98.99% 99.16%

Accumulated value adjustments/Investment

in projects at cost -39.42% -34.75% -35.58% -33.51% -31.93%

Investments contracted/New projects

contracted (no.) 14.714 19.400 14.654 14.111 11.862

Total investment in projects at cost/Portfolio

of projects (no.) 8.873 9.171 7.930 7.724 5.883

8

The objective of Denmark’s support to Danish invest-ments in Central and Eastern European countries is toassist the reformist forces in these countries in achievingincreased economic growth and development of tradeand industry as well as to foster closer economic co-op-eration between Denmark and Central and Eastern Eu-rope for the benefit of the East-West relationship in gen-eral as well as of Danish business and employment.

The Danish Parliament, December 14, 1989:

The Act on Support to Danish Investments in Central and Eastern Europe

MAIN ACTIVITIESIØ is part of a range of official Danish activities all aimed atpromoting the economic development and the reform pro-cess in Central and Eastern Europe and stimulating co-oper-ation between the countries and the European Union. IØ is an independent, self-governing entity, limited in its li-ability to the extent of its net worth only. The Danish Minis-ter of Foreign Affairs appoints the Supervisory Board and theManaging Director. The Fund operates in accordance withbusiness principles with a strong commitment to good cor-porate governance, high environmental standards and socialresponsibility.IØ provides advisory services, share capital participation,loans and guarantees on commercial terms for investmentsin production or service companies in Central and Eastern Eu-rope. The Fund’s revenues are generated by interests, divi-dends and profits from the sale of shares.A special facility for environmental projects (MIØ) is man-aged as an integral part of IØ. The purpose of the facility isto contribute to environmental and occupational health andsafety improvements in projects with Danish ownership.By collaborating with IØ, the partners, in addition to financ-ing, gain access to IØ’s sister Fund IFU’s knowledge accu-mulated through 35 years of global involvements and to anextensive network of advisers and contacts.All figures stated in this report are inclusive of MIØ unlessotherwise stated.

TOTAL EQUITY CAPITAL DKK 1,895.1m EUR 255.3m

Number of projects since the establishment 335

Number of countries in which IØ has invested 16

MAIN FEATURES AT 31 DECEMBER 2002

9

PROGRESS IN IØ’S AREA OF ACTIVITIES

MILESTONE SET IN COPENHAGENAt the European Union (EU) summit inCopenhagen in December 2002, a totalof ten countries, of which eight arecountries in which IØ has establishedthe major part of its project companiesduring the last 12 years, were invitedand accepted in principle to join the EUas full members, effective in 2004.This indicates that the economies ofthese countries have been adjustedfrom centralised to market-driveneconomies, one of the fundamental ob-jectives that IØ was established to helpthem promote.In view of the upcoming EU enlarge-ment, the Danish Government findsthat IØ should not participate in newprojects as from the joining of the EUby the new member states. The eightaccession countries presently accountfor more than 65 per cent of IØ’s in-vestment activities.IØ will continue its activities in the othercountries. Focus will be on Bulgaria,Russia, Romania, the Ukraine and otherEastern European countries includingthe countries of ex-Yugoslavia that fi-nally seem to be free of armed conflicts.In all of these countries the need for for-

eign investments is huge and increas-ing, but until recently the reform pro-cess and transition to well-functioningmarket economy has been slower.Danish companies are already showingsignificantly growing interest in increa-sing their activities in many of thesecountries. In 2002, IØ established anoffice in Moscow to meet their needs.All taken into account, IØ anticipates ashort-term decrease in the overall levelof new investments during 2003-04.The regaining of new investment mo-mentum will depend to a large extenton the economic and political develop-ment in the larger countries such asRussia and the Ukraine. IØ has re-ceived a large number of enquiries con-cerning these countries, which manyDanish investors consider as the futurelow-cost areas with high competitive-ness in a wide range of productive ar-eas. IØ also anticipates an increasingnumber of Danish investments in theBalkan countries if the current positivedevelopment in this region continues.It is in this context encouraging thatIØ’s pipeline of new project proposalsby 31 December 2002 was on a higherlevel than at any previous year-end.

10

In 2002, IØ participated in the creationof 28 new projects in co-operation withDanish companies and local partners inCentral and Eastern Europe. Further-more, the Fund allocated additional fi-nancing for 12 existing projects. Theseresults for 2002 were close to expecta-tions at the start of the year. In the2001 report a similar number of newinvestments was predicted for 2002.

IØ’s total investments in new and exist-ing projects in 2002 were DKK 412m.In comparison with 2001, this was anincrease in the number of investmentsin new projects but a minor decline inthe amount of IØ’s total investments.In 2002, 22 of the new projects were inthe countries that are about to join theEU, and the Baltic countries accountedfor 10 of the new projects. Outside the

RESULTS FOR

ECONOMIC SLOW-DOWN2002 was affected by lower economicgrowth in the leading economies char-acterised by declining company rev-enues and fluctuating share prices.This had a significant impact on a num-ber of countries who primarily export toWestern economies. The impact in Cen-tral and Eastern Europe has beensmaller than in the rest of the world.The present global uncertainty follow-ing the terrorist attack against the USAon 11 September 2001 and the cur-rent situation in Iraq is reducing thepotential interest from Danish compa-nies in initiating investments abroad.Preliminary calculations of the volumeof global Foreign Direct Investments in2002 indicate a continuation at thelevel of 2001, when investments stag-nated in Central and Eastern Europe.According to an estimate by the UnitedNations Conference on Trade and De-velopment (UNCTAD), the inflow ofFDI to this region was USD 27bn, sim-ilar to the previous year. The picturewas complicated by a rise in somecountries and a decline in other coun-tries. Russia seemed to maintain itslevel of about USD 3bn. Also the flowto Romania, Croatia and Bosnia and

Herzegovina is expected to remain un-changed. On the other hand flowsshould rise, to a.o. Albania and Bulgariawhile a decline is expected in the formerYugoslav Republic of Macedonia and inthe Ukraine. The divergent trends areassociated with not only external butalso internal factors among which thepace of privatisation is crucial.

SOUND DANISH ECONOMYThe Danish economy did well through-out 2002 and maintained a surplus onboth the public accounts and the bal-ance of payments.In 2002, projections that Denmark willhave a shortage of manpower in thelong term were widely proclaimed.These projections are mainly based ona projection of current demographicdevelopment. The risk of manpowershortage combined with high wage lev-els are now factors mentioned by busi-ness leaders increasingly as reasons forreallocating the labour intensive part oftheir production to countries with anample workforce in order to remaincompetitive in the years to come. IØwill play an active role in close co-op-eration with Danish companies in thisprocess in the target countries of IØ.

DEVELOPMENT IN IØ’S AREA OF ACTIVITY

11

new EU territory, 6 investments weremade in Georgia, Romania, Russia andthe Ukraine.The average size of IØ’s injection ofshare capital and loans into the newprojects in 2002 was DKK 13m. Morethan 60% of the new projects weremade in co-operation with small Danishpartners with less than 50 employees. IØ’s result for 2002 was a profit of DKK77.4m compared to a profit of 40.3min 2001. Compared to 2001, the resultfor 2002 is positively impacted by alarge relative improvement in the con-tribution from value adjustments re-lated to IØ’s share capital investments.On the other hand, value adjustmentsrelated to project loans were signifi-cantly more negative than in 2001. IØ’s project investments are to a highdegree located in countries with uncer-tain political and economic conditions.

Further, IØ’s investments take place inprojects with high commercial risk.This means that the fair value of the in-vestments by nature is difficult to mea-sure with accuracy, which can givecause to significant fluctuations in IØ’sresults from year to year.Other risk factors are fluctuations inforeign currency exchange rates andfluctuations in interest rate on projectloans and on liquid funds.As a consequence of the adoption of thenew Danish Financial Statements Act,the Fund’s accounting policies havebeen changed in a number of materialareas. Overall, these changes have im-plied a decrease of the profit for 2002by DKK 2.9m as well as a total increaseof DKK 59.7m in the equity as of 31December 2002. Each change and theoverall effect thereof are described un-der accounting policies.

Number of investments in new projects 28

Number of additional financing of existing projects 12

New projects IØ’s investments DKK 358.3m EUR 48.3m

Total investments DKK 1,883.6m EUR 253.7m

IØ’s investments in new and existing projects DKK 412.0m EUR 55.5m

Disbursement of share capital and loans DKK 233.5m EUR 31.5m

IØ’s equity capital at year ending 31.12.02 DKK 1,895.1m EUR 255.3m

Year end result DKK 77.4m EUR 10.4m

Estimated Danish exports generated from the investments DKK 720.9m EUR 97.1m

Estimated employment effect in Denmark of this export 1,442

Estimated job creation in host countries 4,738

12

1 Baltic Property Trust Baltic Countries 20.8 20.8 402 TK Development Baltics Baltic Countries 7.8 18.8 26.6 63 Maersk Sealand Czech Republic 59.4 59.4 844 nkt cables a.s. Czech Republic 36.7 36.7 5665 Georgian Egg Georgia 4.1 4.1 2136 Dan-Farm Holding Hungary Hungary 1.5 1.5 207 Jysk Baltics Latvia 12.5 12.5 2208 Stema Latvia Latvia 1.5 1.5 359 Latvidan Agro Latvia 12.0 12.0 17

10 Lauku Agro Latvia 3.0 3.0 411 Randers Reb Production Lithuania 7.5 10.0 17.5 7312 La-Nika Lithuania 2.0 2.0 39313 Espersen Lietuva Lithuania 15.0 15.0 18014 UAB Jurbalita Lithuania 0.4 0.4 5015 Danexport Polska Poland 8.0 8.0 3516 TransElectro Poland Poland 2.3 2.3 2517 MBL Poland Poland 10.0 10.0 22518 FARO Szczecin Poland Indirect 0.0 2219 Palsgaard Poland Poland 0.2 0.2 420 Villa Bona Terra Romania 3.7 5.9 9.7 10021 Broen ADL Russia 4.0 4.0 4022 Dan-Slovakia Slovakia 35.0 35.0 8523 Slovakian Farm Invest Slovakia 11.9 11.9 1524 Ecco Slovakia Slovakia 20.0 25.0 45.0 1,50025 DRI-Slovak Slovakia 9.2 9.2 28026 3J Holding Ukraine 4.6 4.6 327 Danish Textiles Ukraine 1.5 1.5 50028 Sokalska Hosiery Factory Ukraine 4.2 4.2 3

TOTAL 111.7 246.6 358.3 4,738

29 Cembrit CZ a.s. Czech Republic 25.7 25.730 Baltifalt Estonia 2.6 2.631 Gaizeni Latvia 0.5 0.532 Lietuvos Draudimas Lithuania 2.4 2.433 Saerimner Lithuania 2.5 2.534 Azuolas Lithuania 2.0 2.035 BlueTel Baltic Lithuania 1.5 1.536 Inreco Polska Poland 0.7 0.737 Voigt Promotion Poland 0.6 0.638 Remek Poland 7.4 7.439 Agrileasing Romania 1.1 1.140 ZAO Mineral Wool Russia 6.7 6.7

TOTAL 10.8 42.9 53.7

GRAND TOTAL 122.5 289.5 412.0

*) incl. overrun commitments **) incl. guarantees

Co-financing by the Environmental Facility for Central and Eastern Europe (MIØ)

23 PROJECTS WERE EXITED IN 2002

INVESTMENTS CONTRACTED IN 2002

NEW PROJECTS Expectedemployment

Project name Country Shares* Loans** Total (persons)

IØ’S INVESTMENT (million DKK)

Project name Country Shares* Loans** Total

FURTHER FINANCING OF ONGOING PROJECTS

13

KNOWLEDGE AND HUMAN RESOURCES

IØ is managed by its sister Fund IFU (TheIndustrialization Fund for Developing Coun-tries) which embarked on a major organisa-tional restructuring from 1 January 2002.The geographical grouping of the staff wasreplaced by a project process orientedgrouping.The overall aim is to strengthen the effi-ciency and effectiveness of work in order toachieve higher quality in the Fund’s projectportfolio and in general financial results.Important elements are ongoing adjust-ments to external demands by optimalcombinations of available human resourcesinto expert teams according to the specificneeds of the individual project.The country-specific expertise is alsostrengthened through a more systematic as-signment of tasks to IØ’s offices abroad be-ing closer to the projects with IØ participa-tion, and at the same time a continued ex-pansion of the adviser network and usehereof.The organisational change was an opportu-nity to rationalise a number of functions androutines.Knowledge is one of IØ’s material assets.Therefore emphasis has been placed onmaintaining and developing this resource.

IØ’s knowledge is mostly embedded in thestaff in Copenhagen, the offices abroad andwith the network of advisers. Therefore, it isimportant to maintain and continuously de-velop the staff and to adjust the frameworkso that the acquired skills can be utilised inthe best possible way in the day-to-day workto the benefit of projects with IØ participa-tion.Within the new structure, teams are createdon an ad hoc basis. This has significantlyimproved the exchange of informationamong staff members – as well as with ex-ternal advisers. The year 2002 was markedby intensive activity within supplementarytraining, internally as well as externally.The entire staff of the Funds (IFV, IFU andIØ) was in 2002 convened to attend a oneand a half day seminar in Copenhagen. Thisprovided a good opportunity for consolidat-ing a common team spirit.Since the beginning of 1993, 11 traineesengaged by IØ or its sister Funds (IFU andIFV) have completed or are in the process ofcompleting a MBA Degree at the Scandina-vian International Management Institute(SIMI) in Copenhagen. In relation to IØ, oneof these is from Russia and one is fromPoland.

Staff Seminar, Copenhagen 2002

14

The relationship between IØ’s head office in Denmark, theoffices abroad and the advisers helps strengthen the coun-try-specific knowledge available to IØ’s projects. With the opening of an office in Moscow in August 2002, IØhas created a strong platform for supporting Danish-Russianinvestment co-operation. In parallel to what the Warsaw of-fice has done for years, the office in Moscow is expected toassist a large number of Danish companies with the planningand implementing of projects in Russia and the rest of theCIS member countries, i.e. the former Soviet republics. Theoffice will also provide assistance to Russian business peo-ple and local companies who wish to co-operate with Danishcompanies about investments.The adviser network is assisting IØ and its customers in re-lation to the establishing of new projects and to the moni-toring of existing projects.At year end, 13 advisers in 8 countries were associated withIØ compared to 12 advisers the year before.

IØ is administrated by its sister Fund IFU, which deal withthe activities in developing countries. In addition, IFU ad-ministrates IFV with investments in growth markets. The to-tal number of permanent staff at the end of 2002 was 81.

The average age of the staff was 41 years, and the averageseniority was 8.3 years.

FACTS ABOUT THE STAFF

OFFICES ABROAD ANDADVISER NETWORK

53% Female 47% Male

77% Employed at the head office 23% Outside DK

15

ENVIRONMENT, OCCUPATIONAL HEALTH AND SAFETY AND CORPORATE GOVERNANCE

In 2001, IØ carried out its first in-house environmental impact and occu-pational health and safety (OHS) as-sessment of the projects co-financed byIØ. A new account was made at the turnof the year 2002–03. It included 130projects. The remaining 45 of the 175projects at that time were either in theprocess of being implemented or exitedand were therefore not included.The primary purpose of the assessmentis to identify projects and areas wherespecial efforts towards improvementsmay be called for.As in 2001, the 2002 assessment waspositive. In terms of external environ-mental impact all projects except twoobtained a score of “fair”, “good” or“excellent”. In the area of OccupationalHealth and Safety (OHS), all the pro-jects obtained classifications rangingfrom “fair” to “excellent”The “fair” classification is the accept-able starting point. To improve thescore, the company will have to showclear indications of good performance. IØ continued to review the performanceof the project companies with regard toall major human rights resolutions andILO core conventions, such as protec-tion against child labour and forcedlabour, equal remuneration for men andwomen, freedom of association, theright to collective bargaining, andwhether alternative consultative proce-dures have been established betweenmanagement and employees. The re-view also looked at whether the projectcompany paid wages that met the legalminimum, and whether its major sup-pliers complied with certain rules. Italso tried to verify that the project com-pany operated in an accountable man-ner in its business transactions (goodcorporate practice).

Of the 102 companies covered so far bythe review, none was classified as “criti-cal”. Seven companies were classifiedas having “poor” performance, and thisimmediately prompted IØ to addressthe matters of concern. In general, IØ inco-operation with its partners is seekingcontinuously to further increase aware-ness of the environmental conditions aswell as OHS conditions in the projectcompanies.

ENVIRONMENTAL IMPACT

OCCUPATIONAL HEALTH AND SAFETY

CORPORATE GOVERNANCE

� Critical� Poor� Fair��Good� Excellent

16

In the short- to medium-term, the redi-rection of the IØ investment activitiesto the “non-accession” countries inEastern Europe will mean an initialdrop in the investment level. Althoughnoticeable, the slowdown is likely to beof relatively short duration, as it may beexpected that the dropout of invest-ments in the “accession countries” willbe overtaken by a new drive of activeDanish investor interest in those East-ern European countries which remainoutside the EU, and which for manyyears to come will be seen as highlycompetitive in terms of both labour costand investment cost.For the year 2003 it is expected thatnine new projects – the last – will be im-plemented in the accession countries,while it is expected, based a.o. on thepipeline already available, that 10 to15 new projects will be presented forapproval, in particular in countries suchas Russia, the Ukraine, Romania, Bul-garia, Croatia and Serbia. In this con-text, it is encouraging that the situationin Russia seems to be moving quickly

and steadily towards political stability,improved governance and sustainableeconomic growth in the years to come.Similar optimism can be drawn fromthe significant governance improve-ments and the move towards politicaland economic stability in both Bulgariaand Romania and the ex-Yugoslavcountries. Considering the increasing global com-petition, the Danish companies will in-creasingly have to take those factorsinto consideration when planning thedevelopment of their future invest-ments. An increasing investment flowtowards the remaining group of EasternEuropean countries (non-EU members)will open new challenges and opportu-nities for IØ and its Danish partners,and substantial steps including open-ing of an office in Moscow have beentaken in preparation hereof.Considering the depressed outlook forthe global economy and a historicallylow interest rate, a substantially lowernet result is expected in 2003 than re-alised in 2002.

Following the agreement reached inCopenhagen in December 2002 foreight Eastern European countries tojoin the European Union, IØ will ceaseall new investments in the EU acces-sion countries Latvia, Estonia, Lithua-nia, Poland, the Czech Republic, Hun-

gary, Slovakia and Slovenia as fromMarch 2003.

No other events have occurred betweenthe balance sheet date and this datethat could materially influence theevaluation of this annual report.

EVENTS AFTER THE BALANCE SHEET DATE

OUTLOOK FOR 2003

Broen, Danish partner in project for production of gas valves in Russia

18

CHANGES IN ACCOUNTING POLICIESAs a consequence of the adoption of thenew Danish Financial Statements Actthe accounting policies have beenchanged as follows:

INTEREST INCOME RELATED TOPROJECTSInterest received on loans to projects isaccrued and recognized as incomewhen earned. Formerly, interest wasrecognised as income at the time ofpayment, and charged not-yet receivedinterest was included directly in thebalance sheet as interest receivableand reserves against losses.

INVESTMENTS IN PROJECTSShare capital investments in projectsare after initial recognition at cost ad-justed to fair value. Value adjustmentsare recognised in the income state-ment. Formerly, share capital invest-ments were measured at cost and pro-visions against losses were accountedfor separately.Project loans are after initial recogni-tion at cost adjusted to fair value. Valueadjustments are recognised in the in-come statement. Formerly, projectloans were measured at cost and provi-

sions against losses including currencylosses were accounted for separately.

DERIVATIVE FINANCIAL INSTRUMENTSDerivative financial instruments (for-ward contracts and swaps) related toproject loans and receivables from saleof shares denominated in foreign cur-rency are adjusted to fair value andrecognised in the balance sheet asother receivables or other payables. As-sets hedged by such instruments areadjusted into DKK using the exchangerates at the balance sheet date. For-merly, derivatives were not recognisedseparately in the balance sheet, whilehedged assets were adjusted into DKKusing the hedging rate.

OTHER EXPENSES RELATED TOPROJECTSInterest on syndicated capital related toIØ’s loans to projects is recognised asexpense according to the accrual prin-ciple. Formerly, interest on syndicatedcapital was recognised as expense atthe time of payment by IØ (which wasidentical to the time of IØ’s receipt ofinterest on the related project loans),and accrued not-yet paid interest onsyndicated capital were included di-

ACCOUNTINGPOLICIES

This annual report has been prepared in accordance with the provisions of the Danish

Financial Statements Act governing reporting class C enterprises (large).

19

rectly in the balance sheet as current li-abilities and a reduction in reservesagainst losses.

PROVISIONS AGAINST LOSSESProvisions against losses are offset asvalue adjustments against the relatedassets. Formerly, both assets and re-lated provisions against losses wererecognised separately as assets and lia-bilities, respectively.

CASH FLOW STATEMENTIn the cash flow statement bonds havebeen separated from cash.

COMPARATIVE FIGURESComparative figures and the financialhighlights shown on page 4 have beenrestated to reflect the changes in ac-counting policies.

EFFECT OF CHANGES IN ACCOUNTING POLICIESThe aggregate effect of these changes in accounting policies is a decrease ofT.DKK 2,846 on the profit for the year2002 and an accumulated increase ofthe equity and facility capital at 31 De-cember 2002 of T.DKK 59,749.The effect of the changes is specifiedbelow:

EFFECT OF CHANGES IN ACCOUNTING POLICIES

Equity capial 01.01.2001 prior to adjustments 1,673,758,605

Adjustment to Annual Account Act of 2001

Value adjustments of share capital investments,

project loans and derivatives 36,552,684

Interest income from projects 17,200,652

Other expenses related to projects, net of value adjustments (80,454)

Total effect 53,672,882

Adjusted equity capital as of 01.01.2001 1,727,431,487

Result 2001 prior to adjustments 31,366,901

Adjustment to Annual Account Act of 2001

Value adjustments of share capital investments, project loans and derivatives (3,180,050)

Interest income from projects 11,638,859

Other expenses related to projects, net of value adjustments 80,454

Operating expenses, net 382,373

Total effect 8,921,636

Adjusted result 2001 40,288,537

Result 2002 prior to adjustments 80,251,500

Adjustment to Annual Account Act of 2001

Value adjustments of share capital investments,project loans and derivatives 15,612,956

Interest income from projects, net of value adjustments (18,484,623)

Operating expenses, net 26,116

Total effect (2,845,550)

Adjusted result 2002 77,405,950

20

ACCOUNTING POLICIES IN GENERAL

RECOGNITION AND MEASUREMENTAssets are recognised in the balancesheet when it is probable that future eco-nomic benefits will flow to the Fund, andprovided that the value of the assets canbe measured reliably.Liabilities are recognised in the bal-ance sheet when the Fund has a legal orconstructive obligation as a result of aprior event, and it is probable that fu-ture economic benefits will flow out ofthe Fund, and the value of the liabilitiescan be measured reliably.On initial recognition assets and liabili-ties are measured at cost. Measurementsubsequent to initial recognition is ef-fected as described below for each item.Information brought to IØ’s attentionbefore the time of presentation of theannual report that confirm or invalidateaffairs and conditions existing at thebalance sheet date are considered atrecognition and measurement.Income is recognised in the incomestatement when earned, whereas costsare recognised by the amounts at-tributable to this financial year. Valueadjustments of financial assets and lia-bilities are recorded in the incomestatement as value adjustments.

FOREIGN CURRENCY ADJUSTMENTForeign currency transactions are ini-tially recognised using the exchangerate at the transaction date. Loans, re-ceivables, payables and other monetaryitems denominated in foreign curren-cies that have not been settled at thebalance sheet date are adjusted intoDKK using the exchange rate at the bal-ance sheet date. Exchange rate adjust-ments that arise between the rate at thetransaction date, or the rate at the bal-ance sheet date, and the one in effectat the payment date are recognised inthe income statement as value adjust-

ments, financial income or financial ex-penses.

DERIVATIVE FINANCIAL INSTRUMENTSIØ enters into forward exchange con-tracts and cross currency swaps tohedge future transactions concerningselected foreign currency loans and re-ceivables from sale of shares.On initial recognition in the balancesheet, derivative financial instrumentsare measured at cost and subsequentlyadjusted to fair value. Derivative finan-cial instruments are recognised asother receivables or other payables.Changes in the fair value of derivativefinancial instruments classified as andcomplying with the requirements forhedging the fair value of a recognisedasset or a recognised liability arerecorded in the income statement asvalue adjustments together withchanges in the value of the hedged as-set or the hedged liability.

THE ENVIRONMENTAL INVESTMENT FACILITY FOR CENTRAL AND EASTERN EUROPE(MIØ)MIØ is established as an independentrevolving facility under Agreement ofJanuary 13, 1995 between IØ and TheDanish Environmental ProtectionAgency, and as such forms a separateaccounting unit. The proceeds from en-vironmental project companies, whichare financed with facility capital, can beutilised to finance new environmentalprojects. The financial statements forMIØ are included in the financial state-ments for IØ by combining items of asimilar nature and eliminating transac-tions between MIØ and IØ, except thatMIØ’s net result is deducted before thenet result for the year, and MIØ’s equitycapital is shown as facility capital.

21

DIVIDENDS FROM PROJECTSDividends from projects net of with-holding taxes, if any, are recorded at thedate of declaration.

INTEREST INCOME RELATED TOPROJECTSInterest income on loans to projects areaccrued and recognised as they areearned.

VALUE ADJUSTMENTSAll adjustments to fair value on sharecapital, project loans, interest on pro-ject loans, dividends from projects andother project related receivables andpayables are recognised as value ad-justments, including exchange rate ad-justments and adjustments to actualresults from disposal of share capitalinvestments in projects.For disbursements to projects estab-lished within three years before the bal-ance sheet date, and where no valueadjustment is provided as specific pro-vision against losses a general value ad-justment is provided as a general provi-sion against losses at a rate of 10 percent of cost for loans and 15 per cent ofcost for share capital.

OTHER EXPENSES RELATED TOPROJECTSOther expenses related to projects com-prise interest expenses to syndicatedcapital, grants to projects and variousexpenses.

OPERATING EXPENSES, NETThe administration and accounting ofall together four funds/facilities aremanaged by The Industrialization Fundfor Developing Countries (IFU). At pre-sent this includes IFU, IØ, The Environ-mental Investment Facility for Centraland Eastern Europe (MIØ) and The In-vestment Fund for Emerging Markets(IFV). The total operating expenses, netof income related to operating activities,incurred by IFU are divided at year-endbetween IFU, IØ, MIØ and IFV accord-ing to an activity dependent ratio.

FINANCIAL INCOME AND EXPENSESFinancial income and expenses com-prise interest income on cash andbonds, realised and unrealised capitalgains and losses on bonds, interest ex-penses, exchange rate adjustments oncash and bank charges.

INCOME STATEMENT

SHARE CAPITAL INVESTMENT INPROJECTS, NETShare capital investments in projectcompanies are measured at fair value,i.e. net of or including value adjust-ments relative to cost.

PROJECT LOANS, NETLoans to project companies are mea-sured at fair value, i.e. net of or includ-ing value adjustments relative to cost.

FUNDS COMMITTED TO PROJECTSFunds, which on the balance sheet dateare committed to investments, are

shown as a part of the fixed assets andnot as cash or bonds.

OTHER RECEIVABLESOther receivables are measured at fairvalue. Included in other receivables areprepayments of costs relating to subse-quent financial years.

CASH AND BONDSThe major part of IØ’s liquid capital isinvested in an ad hoc mutual invest-ment fund set up in accordance withlaw on special mutual investment fundsNo. 476 of June 10, 1997. The mutual

BALANCE SHEET

22

fund, established in co-ownership withIFU, IFV and MIØ as the only other in-vestors, may according to its invest-ment policy, as approved by the funds,only invest in publicly traded bonds de-nominated in DKK or EUR. The stated amounts of cash and bondsreflect IØ’s (pro rata) share of the un-derlying bonds and cash in the mutualfund. The bonds in the mutual fund arestated at the official prices quoted onthe balance sheet date, except forcalled bonds which are stated at parvalue. Realised and unrealised gains orlosses on bonds are recorded in the in-come statement.

PROVISION AGAINST LOSSESProvision against losses comprises an-ticipated losses related to guaranteeagreements.

SYNDICATED CAPITALSyndicated capital is investment capi-tal received from third parties and in-vested in projects on their account andrisk. Syndicated capital only becomesdue to the extent that IØ receives pay-ments from these projects. Syndicatedcapital is measured at fair value similarto share capital investments and loansinvested directly by the Fund.

CURRENT LIABILITIESCurrent liabilities include deferred in-come, which is comprised of receivedincome for recognition in subsequentfinancial years. Current liabilities aremeasured at fair value.

...BALANCE SHEET

23

2002 2001DKK 1,000 DKK 1,000

NOTE

Dividends from projects 607 12,945 1/ Interest income and fees related to projects 59,467 56,5442/ Value adjustments (8,476) (40,148)3/ Other expenses related to projects (74) (723)

GROSS CONTRIBUTION FROM PROJECTS 51,524 28,618

Operating expenses, net (31,926) (29,549)

OPERATING INCOME (LOSS) 19,598 (931)

4/ Financial income 58,123 40,534 4/ Financial expenses (315) 686

NET INCOME FOR THE YEAR 77,406 40,289

NET INCOME FOR THE YEAR, MIØ (31,411) (18,431)

NET INCOME FOR THE YEAR, IØ, EXCLUSIVE MIØ 108,817 58,720

The net income for the year has been transferred to the equity and facility capital, respectively.

INCOME STATEMENT

CASH FLOW STATEMENT

The cash flow statement has been prepared in accordancewith the direct method and shows IØ’s cash flow from oper-ating, investing and financing activities as well as IØ’s cashposition at the beginning and end of the year. Consequently,the cash flow statement cannot be directly reconciled to theincome statement and the balance sheet.

Cash comprises cash at hand less short-term bank debt.

24

2002 2001DKK 1,000 DKK 1,000

NOTEFIXED ASSETS 2002 2001

Share capital investment in projects at cost 857,389 882,365 Value adjustments (366,167) (373,138)

5/ Share capital investment in projects, net 491,222 509,227 Project loans at cost 695,305 685,927 Value adjustments (245,946) (171,793)

6/ Project loans, net 449,359 514,134 7/ Funds committed to projects 453,787 251,580

Total fixed assets 1,394,368 1,274,941

CURRENT ASSETS

Interest receivable related to projects 10,354 28,839 8/ Other receivables 12,191 28,554 9/ Bonds 352,465 288,918

Cash 133,292 199,953

Total current assets 508,302 546,264

TOTAL ASSETS 1,902,670 1,821,205

ASSETS

2002 2001DKK 1,000 DKK 1,000

NOTEEQUITY CAPITALPaid-in capital beginning of year 1,398,800 1,398,800

10/ Accumulated reserves 74,262 (34,555)

Total equity capital, exclusive MIØ 1,473,062 1,364,245

11/ FACILITY CAPITAL (MIØ) 422,063 453,474

Total equity and facility capital 1,895,125 1,817,719

PROVISION AGAINST LOSSESGuarantees 4,345 1,220

12/ SYNDICATED CAPITAL 3,023 1,254

Total provisions 7,368 2,474

13/ CURRENT LIABILITIES 177 1,012

Total liabilities 177 1,012

TOTAL EQUITY CAPITAL AND LIABILITIES 1,902,670 1,821,205

14/ AVAILABLE EQUITY CAPITAL AND CLEARANCES IN PRINCIPLE15/ CONTINGENT LIABILITIES

LIABILITIES AND EQUITY CAPITAL

BALANCE SHEET 31 DECEMBER

25

2002 2001DKK 1,000 DKK 1,000

NOTE

CASH FLOW FROM OPERATING ACTIVITIES

Dividends from projects received 612 13,491 Interest from projects received 74,808 37,803 Other project related payments 4,201 4,490 Operating expenses, paid (33,229) (28,186)Financial income, net 34,551 43,689

Net cash from operating activities 80,943 71,287

CASH FLOW FROM (TO) INVESTING ACTIVITIES

Received from sale of shares 187,593 191,336 Received from project loans 138,520 111,509 Paid-in share capital in projects (81,466) (162,323)Disbursement of project loans (152,016) (227,880)Invested in bonds (242,436) (104,089)

Net cash from (to) investing activities (149,805) (191,447)

CASH FLOW FROM (TO) FINANCING ACTIVITIES

Proceeds from syndications related to projects 56 63 Repayment of syndications related to projects 2,145 (2,071)Paid-in capital received during the year 0 50,000

Net cash from (to) financing activities 2,201 47,992

NET CHANGE IN CASH (66,661) (72,168)

CASH BEGINNING OF YEAR 199,953 272,121

CASH END OF YEAR 133,292 199,953

CASH FLOW STATEMENT

26

2002 2001DKK 1,000 DKK 1,000

1 Interest income and fees related to projects

Paid in interest from project loans 50,139 52,639 Interest from receivables 4,310 1,574Front-end fees 2,713 2,029 Guarantee commission 1,684 153 Other fees 621 0 Grants for projects etc. 0 149

59,467 56,544

2 Value adjustments

Share capital investments (note 5) 42,815 (20,861)Project loans (note 6) (66,002) (22,674)Interest 3,672 (5,258)Guarantees (3,124) 8,007 Other 22,294 1,111 Syndicated capital 175 (2)Exchange rate adjustments (13,596) 267 Derivatives 5,290 (738)

Value adjustments end of year (to income statement) (8,476) (40,148)

3 Other expenses related to projects

Interest expenses related to syndications 53 561 Grants to projects 0 149 Stamp and share sale duties 3 0 Various expenses 18 13

74 723

4 Financial income and expenses

Financial income

Interest income, cash and bonds 4,655 37,820 Gain on bonds 53,468 2,714

Financial income 58,123 40,534

Financial expenses

Interest expenses, bank charges and exchange rate adjustments (315) 686

Financial expenses (315) 686

Financial income and expenses 57,808 41,220

5 Share capital investment in projects, net

Share capital investment in projects at cost beginning of year 882,365 846,549 Paid-in share capital in projects during the year 81,466 162,323 Cost of shares sold during the year (102,696) (116,173)Write-offs at cost during the year (3,746) (10,334)

Share capital investment in projects at cost end of year 857,389 882,365

Value adjustment beginning of year (373,138) (312,476)Write-offs *) 3,746 10,334 Income from sale of shares *) (39,590) (50,135)Value adjustments during the year (note 2) 42,815 (20,861)

Value adjustment end of year (366,167) (373,138)

Share capital investment in projects, net end of year 491,222 509,227

*) Stated relative to historical cost. Reversal of existing value adjustments, if any, at the time of these transactions are shown as value adjustments.

NOTES

2002 2001DKK 1,000 DKK 1,000

6 Project loans, net

Project loans at cost beginning of year 685,927 580,904 Disbursements during the year 152,016 227,880 Repayments during the year (138,520) (111,509)Exchange rate adjustments during the year relative to cost (120) (238)Project loans transferred to other receivables during the year (137) (737)Write-offs at cost during the year (3,861) (10,373)

Project loans at cost end of year 695,305 685,927

Accumulated value adjustments beginning of year (171,793) (158,973)Write-offs *) 3,861 10,373 Exchange rate adjustments relative to cost (12,012) (519)Value adjustments during the year (note 2) (66,002) (22,674)

Accumulated value adjustments end of year (245,946) (171,793)

Project loans, net end of year 449,359 514,134

Accumulated value adjustments end of year are comprised of:Exchange rate adjustments relative to cost (10,120) 1,892 Value adjustments excl. exchange rate adjustments (235,826) (173,685)

(245,946) (171,793)

*) Stated relative to historical cost. Reversal of existing value adjustments, if any, at the time of these transactions are shown as value adjustments.

7 Funds committed to projects

Funds at an amount equivalent to undisbursed contractual commitments allocated for investments are shown on the balance sheet as part of the project assets.

Amounts payable on project agreements 312,665 178,556 Guarantees 51,629 8,135 Binding commitments 89,493 64,889

Funds committed to projects 453,787 251,580

8 Other receivables

Dividends receivables 4,718 50,127 Receivables from sale of loan etc. 137 160 Receivable front end fees 1,522 720 Other project related receivables 5 21

6,382 51,028 Value adjustments (2,355) (25,028)

4,027 26,000

Derivatives *) 4,551 0Administrative receivables 1,380 1,295 Current accounts 2,233 1,259

12,191 28,554

*) Stated amount concerns a hedged amount of USD 6.0m with term from 2003 to 2010.

27

NOTES CONTINUED

28

2002 2001DKK 1,000 DKK 1,000

9 Bonds

Listed bonds 789,818 528,878 Accrued interest receivables from bonds 16,434 11,620

Bonds end of year 806,252 540,498

Transferred to funds committed to projects (453,787) (251,580)

Bonds end of year 352,465 288,918

10 Accumulated reserves (IØ)

Accumulated reserves beginning of year (34,555) (144,133)Effect of changes in accounting policies 0 50,858 Net income for the year 108,817 58,720

Accumulated reserves end of year 74,262 (34,555)

11 Facility capital (MIØ)

Paid-in capital beginning of year 499,000 449,000 Paid-in capital received during the year 0 50,000 Accumulated reserves beginning of year (45,526) (29,911)Effect of changes in accounting policies 0 2,816 Net income for the year (31,411) (18,431)

Facility capital (MIØ) end of year 422,063 453,474

12 Syndicated capital

Syndicated capital is investment capital received from third parties and invested in projects on theiraccount and risk. Syndicated capital only becomes due to the extent that IFU receives paymentsfrom these projects.

Joint Venture Programme (JOP) 8,626 9,096 Others 2,279 0

Syndicated capital in total 10,905 9,096 Value adjustments (7,882) (7,842)

3,023 1,254 13 Current liabilities

Syndicated sale of loan payable 0 80 Other project related debt 168 2Derivatives 0 739 Current accounts 0 184 Deferred income 9 7

177 1,012 14 Available equity capital and clearances in principle

The available equity capital is reached as follows

Total equity capital 1,473,062 1,364,245 Reserves against losses 4,345 1,220 Syndicated capital 3,023 1,254 Project participation (1,404,722) (1,303,780)

Available equity capital 75,708 62,939

Clearances in principle for new projects amount to 474,459 171,725

15 Contingent liabilities

The total lease and rental commitments amount to DKK 0.1m (DKK 0.2m in 2001)- hereof due within the following year DKK 0.1m (DKK 0.2m in 2001)

NOTES CONTINUED

Randers Reb, Danish partner in project for production of rope in Lithuania

30

The Investment Fund for Central andEastern Europe (IØ) handles the ad-ministration of the Environmental In-vestment Facility for Central and East-ern Europe (MIØ)The funds for MIØ’s financing of pro-jects or components of IØ projects areallocated by the Ministry of the Envi-ronment. All MIØ investments are re-ported to the Danish EnvironmentalProtection Agency for approval.The aim of MIØ is to contribute to envi-ronmental and Occupational Healthand Safety (OHS) improvements in pro-jects with Danish ownership.MIØ invests only in commercially viableprojects in which Danish companies areco-investors. MIØ can participate in theprojects with share capital and/or loans.Furthermore, MIØ can invest in thesame countries as IØ.In view of the upcoming EU enlarge-

ment, the Danish government finds thatMIØ, like IØ, should not participate innew projects as from the joining of theEU by the new member states. Thus re-sources and investment initiatives willincreasingly be redirected towards thenon-accession countries and in particu-lar to North West Russia including thearea around Saint Petersburg and theKaliningrad enclave between Lithuaniaand Poland.In 2002, MIØ approved investments ofa total of DKK 73.1m in three new pro-jects in the Czech Republic, Polandand Slovakia and DKK 2.5m in a pro-ject in Lithuania where IØ had alreadyallocated financing. MIØ allocated ex-tra financing of DKK 39.8m to three ex-isting projects in the Czech Republic,Poland and Russia that had alreadybeen allocated MIØ financing.The four new projects in MIØ’s portfolio

TOTAL FACILITY CAPITAL DKK 422.1m EUR 56.9m

Number of projects since the establishment 44

Number of countries in which MIØ has invested 9

MAIN FEATURES AT 31 DECEMBER 2002

THE MANAGEMENT’S REVIEW ON MIØ

31

came under the following categories:transport, spare parts for the automo-bile industry, production of parts fordisability equipment and the agricul-tural sector. By having invested a total of DKK679m in 44 projects since its incep-tion, MIØ has already made a signifi-cant contribution to environmental im-provements in Central and Eastern Eu-rope. Furthermore, MIØ has con-tributed towards the transfer of Danishenvironmental technology. In mostcases, the effect is not only local, butalso cross-border, contributing to a bet-ter environment globally, as in the caseof reduced emissions of greenhousegases.In 2002, the number of investmentswas slightly smaller than expected.MIØ’s net result for 2002 was a loss ofDKK 31.3 compared to a loss of DKK

18.4 in 2001. The main explanationfor the result in 2002 is negative valueadjustments related to project loans.The accounting policies for MIØ areidentical to those applicable for IØ andhave consequently from this year beenadopted to meet the requirements ofthe Danish Financial Statements Act.Environmental awareness will un-doubtedly continue to increase both atcountry level and at company level inCentral and Eastern Europe. AlthoughMIØ’s geographical area of activities ishenceforth limited significantly, therewill still be a huge demand for envi-ronmental improvements in connec-tion with Danish corporate invest-ments that will require MIØ financing.An interesting new area of activity ofrapidly increasing importance is linkedto “CO2 trade” under the Kyoto Agree-ment.

2002 2001DKK 1,000 DKK 1,000

Dividends from projects 0 8 Interest income and fees related to projects 10,521 10,857 Value adjustments (53,442) (36,796)

GROSS CONTRIBUTION FROM PROJECTS (42,921) (25,931)

Operating expenses, net (5,888) (5,806)

OPERATING INCOME (LOSS) (48,809) (31,737)

Financial income 17,634 13,570 Financial expenses (236) (264)

NET INCOME FOR THE YEAR (31,411) (18,431)

The net income for the year has been transferred to the facility capital.

INCOME STATEMENT

32

2002 2001DKK 1,000 DKK 1,000

FIXED ASSETS 2002 2001

Share capital investment in projects at cost 119,822 135,837 Value adjustments (72,018) (60,376)Share capital investment in projects, net 47,804 75,461 Project loans at cost 202,178 159,490 Value adjustments (86,098) (38,437)Project loans, net 116,080 121,053 Funds committed to projects 103,535 105,577

Total fixed assets 267,419 302,091

CURRENT ASSETS

Interest receivable related to projects 929 2,653 Other receivables 4,936 249 Bonds 115,800 129,881 Cash 32,979 19,523

Total current assets 154,644 152,306

TOTAL ASSETS 422,063 454,397

ASSETS

2002 2001DKK 1,000 DKK 1,000

FACILITY CAPITALPaid-in capital beginning of year 499,000 449,000 Paid-in capital received during the year 0 50,000 Accumulated reserves (76,937) (45,526)

Total facility capital 422,063 453,474

CURRENT LIABILITIES 0 923

Total liabilities 0 923

TOTAL FACILITY CAPITAL AND LIABILITIES 422,063 454,397

LIABILITIES AND FACILITY CAPITAL

BALANCE SHEET 31 DECEMBER

33

MAERSK INLAND RAIL TERMINALCZECH REPUBLIC S.R.O.The company will establish a multi-modal container facility outside ofPrague. The facility will be a tranship-ment terminal for the Czech Republicand its neighbouring countries, includinglarge parts of Russia, Poland, Slovakia,Hungary, Austria, and Romania. The han-dling of containers will be transferredfrom road to rail and vice versa. Thegoods will then be shipped via Bremer-haven and Hamburg in Germany, or Rot-terdam in the Netherlands. Evolvingtransport from road to rail will reduce en-ergy consumption by an estimated 50 percent. Furthermore, total polluting emis-sions released to the atmosphere will bereduced by up to 70 per cent. Approxi-mately 17,000 road transports and 15mroad kilometres will thereby be saved peryear. The Danish partner is Mærsk A/Sthrough Maersk Agency s.r.o.

MBL POLAND SP.ZO.O.In 1998, the Danish producer MBL A/Scompleted the move of its labour inten-sive production of components forwheelchairs to Poland. In 2002 MIØ ap-proved to co-finance an expansion of thePolish company including an investmentin new environmentally friendly paint andsurface coating facilities. The new facili-ties replace production out-sourced tosubcontractors who produce in an envi-ronmentally hazardous way based on ob-solete technology, neglecting the safety

of workers. With the new technology atMBL Poland Sp. zo.o the health andsafety of workers and the external envi-ronment has been properly considered.

EUROSTART, S.R.O., SLOVAKIAIn 2002, the Danish partner Dansk Ren-overingsindustri A/S acquired the existingcompany Eurostart, s.r.o. Eurostart reman-ufactures used starters and alternators forcars. The plan is to double or treble cur-rent production over a three-year period.The positive environmental effect of theproject is significant. A survey shows thatthe remanufacturing of starters requiresonly 9 per cent of energy and 11 per centof raw materials compared to manufactur-ing of new starters. For alternators, thefigures are 14 and 12 per cent respec-tively. Most of the waste from the remanu-facturing is recycled as raw materials likecopper, aluminium and steel.

SAERIMNER UAB, LITHUANIAThe company is owned by a group of Dan-ish pig producers who also run two for-merly state-owned pig farms in Lithuaniathat account for an annual production of60,000 fattened pigs a year. Up till nowthe farms have used manure lagunas inaccordance with Lithuanian standardsand approval by the Lithuanian authori-ties. With MIØ financing, manure tankshave now been constructed according toDanish standards. Their use will result ina reduction of atmospheric emissionsand of unpleasant smells.

NEW PROJECTS IN BRIEF

CRITERIA FOR MIØ FINANCINGWhen allocating MIØ financing, some or all of the following environmental and OHS requirements must be satisfied:� Direct positive effects of a new project (for instance water purification or hazardous waste treatment plants)� Indirect positive effects of establishing the production of environmental protection equipment (for instance emission

filters or equipment for water treatment plants)� Positive effects of the rehabilitation of an industrial plant that has hitherto had considerable negative environmental

consequences, but whose industrial process now becomes “cleaner”� Positive effects of transferring environmental expertise, e.g. by establishing a consulting company, or by investing

in an existing one� A more efficient use of energy resources, energy saving methods or the use of less polluting energy� Improved standards of environmental performance with the aim of attaining EU standardsThe Danish Environmental Protection Agency gives the final seal of approval to the environmental aspects of all MIØ investments.

34

The Danish Minister of Foreign Affairs appoints the Chairman, the Deputy Chairman and other

members of the Supervisory Board for a three-year period. Each appointment is personal.

The Minister of Foreign Affairs also appoints the Managing Director.

The current Supervisory Board has been appointed for the period August 2000 to August 2003.

The Board usually convenes on a monthly basis. On the recommendation of the management, it

makes decisions about investments and key issues.

The rules of disqualification follow the provisions of the Public Administration Act (Act No. 571

of December 19, 1985, §§3–6). The principle is that a member of the Board or an employee can-

not participate in the discussion of a case involving a company in which the person in question has

a special interest.

Board members may not buy or sell shares or other securities issued by companies of which they

have obtained special knowledge through board work. To prevent insider trading, the Board au-

thorises an updated list at each meeting of the listed companies for which the Board believes they

have inside information; however, the prohibition of utilising knowledge from Board work applies

in general.

All information received by the Board members, orally or in writing, is confidential.

THE SUPERVISORY BOARD

35

Johannes Poulsen, Chairman (1942), member since

1997. M.Sc. (Economics and Business Administration).

Director, BUUR INVEST A/S. Other board memberships:

IFU**, IFV**, AXCEL IndustriInvestor A/S, AXCEL II A/S,

AXCEL Management A/S, Bukkehave A/S, Dantherm

Holding A/S, Eksport Kredit Finansiering A/S,

FLS Industries A/S, F.L. Smidth A/S, Lyskilde Holding

A/S, Frandsen-Lyskilde A/S, Det Fælles Udgiverselskab

A/S, Investeringsforeningen BANCO, Eksport Kredit

Fonden, Extend Reach Corporation.

Agnete Raaschou-Nielsen, Deputy Chairman (1957),

member since 2000. Ph.D. (Economics). Managing

Director, Zacco Denmark A/S. Other board memberships:

IFU*, IFV*, Skandinaviska Enskilda Banken A/S*, Centre

for Business History and Centre for Law, Economics and

Financial Institutions (Copenhagen Business School).

Lars Andersen (1958), member since 1994.

M.Sc. (Economics). Managing Director, The Economic

Council of the Labour Movement. Other board

memberships: IFU, IFV, DSB, Danish Trade Council.

Sigurd Ø. Andersen (1951), member since 2000.

M.Sc. (Engineering). Managing Director, Burmeister &

Wain Scandinavian Contractor A/S. Other board

memberships: IFU, IFV, Pedregal S. de RL., BWSC A/S,

BWSC Guam Inc., BWSC Mindanau Inc., BWSC Panama

S.A., Brancheforeningen for Biogas.

Elsebeth Budolfsen (1947), member since 2000.

M.Sc. (Pharm). Managing Director, T-cellic A/S.

Other board memberships: IFU IFV, Ferrosan A/S,

Fertin Pharma A/S, NSGene A/S, VækstFonden.

Lars Kolte (1950), member since 1997.

Degrees in Economics (Universities of Århus,

Wisconsin, Brügge). Managing Director, Eksport Kredit

Fonden. Other board memberships: IFU, IFV, Nordic

Investment Bank.

** Chairman * Deputy Chairman

Kjeld Ranum (1938), member since 1994.

M.Sc. (Engineering). Director. Other board

memberships: IFU, IFV, Svejsefabrikken Migatronic

A/S**, Superfos Packaging A/S, B.U.H.L.-Randers

A/S**, Randers Reb A/S*, Aarhus Oliefabrik A/S**,

HEMPEL A/S, United International Enterprises Ltd.,

Det Fælles Udgiverselskab A/S, Danish Trade

Council**.

Michael Rasmussen (1964), member since 2000.

M.Sc. (Economics) and AMP (Insead). Member of

the Executive Board, Nordea Bank Denmark A/S.

Other board memberships: IFU, IFV, Nordea Kredit

A/S*, Nordea Finance, Nordea Bank Poland, Danish

Trade Council, LRF Kredit A/S, Council of Danish

Ship Finance

Carsten Staur (1954), member since 2000.

MA. State Secretary, Ambassador, Ministry of

Foreign Affairs. Other board memberships: IFU, IFV.

Karen Wermuth (1954), member since 2000.

LLM. Under Secretary, Ambassador, Ministry of

Foreign Affairs. Other board memberships: IFU, IFV.

36

BIG BANG MOVESACTIVITIES EAST

IØ is facing a significant change. In De-cember 2002, eight Central Europeancountries were approved by the Euro-pean Union as new member countries,an event referred to as the Big Bang. Af-ter this it has been decided that IØ can-not participate in financing new pro-jects in these countries. Even though IØwill continue to be involved in existingprojects, the Fund can only inject addi-tional capital into the projects undervery special circumstances.It is a significant change, since morethan half of IØ’s investments have beenmade in the eight future EU countries. In the countries that were not invitedinto the EU there is still a mission to becarried out. They have not progressed sofar in their transition to market econ-omy, and Danish companies still have aneed to share the risk with IØ as a fi-nancial institution, and a need for theadvice IØ can provide by virtue of its ex-pertise and experience. By promotingforeign investments, IØ also contributesto the integration of those countries intothe common European economy.For quite some time, IØ has strength-ened its activities further to the eastand in the Balkans.

The opening of IØ’s office in Moscow inAugust 2002 clearly indicated that thiscountry, so rich in resources, is ex-pected to become very important toDanish investors. In recent years, the instability in theRussian economy has caused the ma-jority of Danish investors to break offtheir preparations just prior to decidingto implement a project in Russia. How-ever, many of them are in a waiting po-sition. Should development be favour-able, they are in a position to actquickly. Danish companies are also showing anincreasing interest in investing in theUkraine. In the last couple of years,mainly agro-businesses or companiesassociated with that sector and the tex-tile and clothing industry have consid-ered investing in the Ukraine.In the years to come, IØ will also makea special effort to assist with the estab-lishment of Danish companies in theBalkans. The many conflicts in the For-mer Republic of Yugoslavia have had adeterrent effect. But with the situationstabilising, a foundation has been laidfor economic progress that could alsobenefit Bulgaria and Romania.

37

Chris Wine, Romania

Romania is one of the countries where IØ expects to makethe most investments in the years to come. Until now only 10projects have been established in Romania. One of the rea-sons is the slow Romanian transition process. Now the coun-try hopes to obtain membership of the EU during the next ac-cession round, which will require a faster pace of reform.An example of a new project in 2002 is Chris Wine Interna-tional, which plans to start production of quality wine in Ro-mania. This implies training and educating the project man-agers and employees.Chris Wine is one of the biggest wine companies in Scandi-navia. The company has bottling facilities in Denmark andFrance, where it also operates vineyards.

ROMANIA

Compared to the size of Denmark, IØ and its partner com-panies have made a significant contribution to developingthe economy in the countries that have been invited to jointhe EU in 2004. Denmark has made a particular effort in theBaltic countries and in Poland. In Poland, IØ is countedamong the main foreign investors.

Czech Republic 32 522.1 1,895.3 2,109

Estonia 13 80.0 531.8 3,956

Hungary 14 224.3 3,344.1 1,060

Latvia 28 231.1 925.4 3,021

Lithuania 29 347.8 1,475.8 4,896

Poland 144 1,184.4 6,622.5 12,538

Slovakia 13 145.8 841.6 2,184

Slovenia 2 55.1 348.6 606

Total 275 2,790.6 15,985.1 30,370

Number of IØ projects IØ’s share capital and Total investments Employment

as of 31 December loans in the projects, in the IØ projects (expected at

2002 DKKm DKKm establishment)

IØ’S CONTRIBUTION TO THE TRANSITION PHASE

38

It is estimated that the DKK 3.7bn in to-tal investments from IØ has generatedtotal investments of approximately DKK23bn, and that approximately 35,800jobs have been created or preserved.The most significant contribution, how-ever, cannot be measured. It is made upof the co-operation and exchange ofknow-how that has taken place betweenDanish partner companies and their em-ployees and the project companies andemployees in Central Europe.The first meetings between representa-tives of a market economy and the off-spring of a centralised economy weresomething of a culture shock. Ten yearsago, a Danish partner said:“Everybody is trying to get something forthemselves, so there is a daily feeling ofbeing led by the nose. Not because theyare worse than we are. They are nice andsociable people, and it is humanly re-warding to spend time with them. But45 years of communism has taughtthem survival skills that used to workthen, but not now”.In Denmark the adaptability of Central

and Eastern European managers andemployees is now regarded with greatrespect.Countless visits to partner companieshave helped promote the transition.The political decision to establish IØwas made by the Danish Parliament in1989, straight after the fall of the Wall.One of the main objectives was to ac-celerate the transition to market econ-omy in the former communist coun-tries. At the same time IØ would assistthe establishment of Danish companiesin the countries. Both objectives have been accom-plished. The integration of the Balticcountries and Poland into the local mar-ket of Danish companies has been fasterthan anyone would have imagined.Especially in the first couple of years,very few investments by Danish compa-nies were made without the participa-tion of IØ. It is reasonable to assumethat the Danish companies would nothave had such an early start and wouldnot have gained such a foothold had IØnot been established.

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

KEY FIGURES ABOUT IØ 1989-2002

� Export from Denmark� Disbursed amounts� Contracted investments� Paid-in capital� Reserves against losses� Equity

BIG BANG MOVES ACTIVITIES EAST...

DKKm

39

There is nothing to indicate that thelarge number of Danish investments inCentral and Eastern Europe, viewed asa whole, will lead to loss of Danish jobs– quite the opposite. The investmentscreate or preserve jobs, both in Den-mark and in the host country.When a Danish company moves part ofits production to another country whereit can operate at a greater advantage,the closing down of jobs happens aspart of an offensive strategy. It is IØ’s experience that in connectionwith partial relocation of the produc-tion, the Danish company can maintainor even expand other parts of the com-pany in Denmark. Often, actual produc-tion is relocated, while product devel-opment, design, marketing and salesare kept or expanded in Denmark. Inmany cases relocation of actual pro-duction results in an increase in totalemployment, because the companygains bigger market shares on a globalscale.

GLOBALISATION PLACES DEMANDS ON EVERYBODY Last year, in their report “EconomicTrends”, the Danish organisation Econ-omic Council of the Labour Movementanalysed the effects of Danish invest-ments in Central and Eastern Europe.The analysis confirmed IØ’s experi-ence. It showed that the Danish invest-ments – while sometimes resulting inloss of jobs in the short term – benefitDenmark in the long term.The investments are particularly usefulbecause most investments lead to Dan-ish companies gaining access to newmarkets, thus enabling them to sellmore products.The profitability of producing in e.g.Central and Eastern Europe is not onlya consequence of low wages. In manycases it is necessary to place the pro-duction close to where the products aremarketed, to allay the costs of expen-

sive long-distance transport. An exam-ple would be beer production. In othercases a production facility is requiredto be situated close to the raw materi-als. An example of this would be theslaughtering of pigs. Often a company’srequest to operate is not considered bythe national authorities if it does nothave a department in the country inquestion. This is true, for example, forthe construction industry.Only a few of the investments in whichIØ has participated recently have re-sulted in the direct loss of Danish jobs.The loss of jobs should be measuredagainst the claim of the Danish partnersthat the investments secure the exis-tence of Danish companies and usuallymake them more competitive.The report from the Economic Councilof the Labour Movement can be ob-tained through IØ. It can also be foundon IØ’s homepage www.ioe.dk. The projects also have a positive effecton the Danish economy and employ-ment situation thanks to the exports ofproduction equipment to the projects.The effect on exports of the approvedinvestments in 2002 is estimated to beDKK 720m during the first five years ofthe projects. Using a statistical conver-sion factor this will generate one-yearemployment for 1,440 people.In Central and Eastern Europe it is esti-mated that the investments in 2002will result in a generation or conserva-tion of 4,700 jobs.

RELOCATION AS PART OF ANOFFENSIVE STRATEGY

40

By collaborating with IØ, partners gain, in addition to financing, access to the knowledge accumu-

lated through 35 years by its sister Fund IFU and through 12 years by IØ. Furthermore, access is

gained to IØ’s network of advisers and contacts.

CO-OPERATION WITH IØ– WHY AND HOW

Danish companies in particular wish to gain access to IØ’s knowledge of investments and operation ofcompanies in Central and Eastern Europe.Central and Eastern European investors request IØ’s assistance in establishing contact with appropriateDanish companies.IØ’s commitment to co-operate through its participation in the investment increases credibility and cre-ates confidence.

THROUGH THE PARTNERSHIP WITH IØ, DANISH COMPANIES WILL:Gain access to IØ’s experience from previous investments in the same sector or country.Have the opportunity to make use of IØ’s advisers in the geographic areas in question or within specificareas of expertise.Benefit from the respect which IØ enjoys with authorities in the investment countries, based on the merefact that IØ has been established by the Danish state.

INVESTORS IN CENTRAL AND EASTERN EUROPE HAVE GOOD REASONS TO SEEK CO-OPERATION WITH DANISH COMPANIES:Because the Danish business structure is characterised by small enterprises and a high number of entre-preneurs, entrepreneurs from Central and Eastern Europe find it easy to see eye to eye with Danish busi-ness people. Danish companies hold a strong position within many sectors.

IØ’S SHARE OF THE FINANCING IS ALSO IMPORTANTThe risk is spread on more parties. IØ is more willing to take a risk than commercial banks. Due to IØ’s close contacts with Nordic, European, international and local financial institutions, IØ is of-ten able to make complete financing arrangements.In priority countries, the partners can draw on IØ’s special facilities to finance preparatory studies andfirst visits.

�

�

�

�

�

�

�

�

�

�

�

�

WHY CO-OPERATE WITH IØ?

41

IØ may subscribe for shares and/or grant loans and issue loan guarantees.IØ can normally finance up to 25 per cent of the total investment including working capital. IØ subscribes to a maximum of 30 per cent of the share capital and usually not to a largershare than the Danish partner. The loans usually mature within up to 5 years, and often a period of grace is offered.

IØ’S PART OF THE FINANCING

Both large and small projects, including pilot projects, areeligible for financing. This applies whether they are green-field projects, expansion of existing projects or privatisationof state-run businesses.The investment is conditional on IØ viewing the project ascommercially viable and the participation of a Danish com-pany.Host countries of investments must belong to the group offormer communist states in Central and Eastern Europe orthe Asian part of the former Soviet Union. The Central Euro-pean countries that the EU has accepted as new membercountries are no longer eligible.

IØ recommends that companies contact IØ early on duringpreparations. Only then will they benefit fully from IØ’s par-ticipation.In the beginning of the process, IØ’s Board may grant a pre-liminary approval of the project – a declaration of Clearancein Principle. This can facilitate negotiations with authorities,project partners and lenders.When preparations are drawing to a close, IØ will arrange in

HOW IØ WORKS

ELIGIBILITY

100 % Share Capital

No Local Partner

Share Capital & Loan

With Local Partner

� IØ � Danish Partner � Local Partner � Project Loans

60%

40%

35%

35%

30%

60%

40%

50%

30%

35%

35%

50%

No Local Partner With Local Partner

] Shar

e Ca

pita

l

] Loan

42

most cases for the partners to meet at a seminar run by anindependent facilitator to ensure that they share a full andclear understanding of each other’s business motives andobligations prior to the final investment decision.The signing of the shareholders’ agreement and/or the loanagreement between IØ and the partners marks the conclu-sion of the project preparations. IØ usually takes a seat onthe board of the project company, which allows the partnersto benefit continuously from the Fund’s knowledge.Once a project company is consolidated – usually after 6–8years – IØ withdraws. IØ’s shares are sold at terms oftenagreed by the partners at the beginning of the project. Thecapital returned to IØ can then be used for new investments.

Together with its sister Fund IFV (The Investment Fund forEmerging Markets), IØ is administered by IFU (The Industrial-ization Fund for Developing Countries). The three Funds arecollectively termed the Danish International Investment Funds.The Funds are members of European Development FinanceInstitutions (EDFI). This is an organisation with the objectiveof furthering mutual co-operation between the 13 memberagencies and safeguarding common interests in relation tothe European Commission and its institutions, including theEuropean Investment Bank (EIB).

SISTER FUNDS AND INTERNATIONAL CO-OPERATION

POLISH AWARD TO IØ

On 7 October 2002, IØ received the Polish Navigator Award in recognition of the 150 business pro-jects that the Fund has helped establish in Poland in co-operation with Danish and Polish companies.The award was presented to IØ in connection with the annual Baltic Economic Forum in Gdansk,which in 2002 was launched under the honorary patronage of the President of the Republic ofPoland, Mr Aleksander Kwasniewski, and the Minister of Foreign Affairs, Mr WlodzimierzCimoszewicz.The organiser of the Baltic Economic Forum is the Gdansk Institute for Market Economics (GIME),a non-governmental, independent scientific research institute established in 1989.The award was given to IØ by GIME in co-operation with the Polish State Agency for Foreign In-vestment (PAIZ).The award is given to Scandinavian enterprises, which are setting a good example for business co-op-eration with Poland, and whose investments have a significant, positive impact on the Polish econ-omy. It has been granted twice before, to the Swedish companies Vattenfall (2000) and IKEA (2001).Lisbeth Erlands, resident representative at IØ’s office in Warsaw, accepted the award on behalf of IØ.

HOW IØ WORKS...

43

Financing may be offered from many sources. But IØ’s em-pirical material and expertise are unique. Experience and ex-pertise follow the money from IØ. IØ underwent a reorgani-sation in January 2002 with the aim of creating a flexible or-ganisation. The flexibility will ensure that the right peoplewith the relevant experience and the proper expertise are al-ways available to companies making plans for or implement-ing projects.

COUNTRY EXPERIENCEAn important aspect is IØ’s country-specific experience withinvestments in 16 countries in Central and Eastern Europe.

BUSINESS EXPERIENCEIn the same way, IØ has overall knowledge of most businesssectors and has had the opportunity to gather general expe-rience from a number of investments within the individualsectors. With 335 projects now in its portfolio, the Fund hasat some point or other been involved in almost all types ofproduction or services.

PARTNER EXPERIENCEIØ also has unique knowledge when it comes to partner rela-tions. The law determines that a Danish partner has to be in-volved in a project for IØ to participate. In the past, it was amain rule that a local partner was involved, but in more andmore cases projects are carried through as purely foreign in-vestments. Recent research shows that the positive effectsof the investments in the receiving country depend more onother factors and less on ownership. In the past 10 years, IØ has gained considerable insight intothe strengths of partnerships, and also their pitfalls. To bet-ter utilise the strengths and to avoid the pitfalls, IØ almostalways suggests that to complete the preparations, the part-ners should meet for a final review of motives, distribution ofresponsibility, etc. before the money is invested. The pur-pose of these pre-investment meetings is to make a final val-idation of the business plans with the participation of all par-ties involved.

FINANCING EXPERIENCEIØ’s experience of putting together total financing solutionsis valuable to the investors.IØ co-operates closely with a number of international, Euro-pean and local financing institutions, and has a good knowl-edge of local sources of financing.

WITH MONEY COMES ADVICE

44

IØ – RESOURCES

PORTRAITS OF TWO ADVISERS

THE ADVISER NETWORK

At the end of 2002, IØ had 13 advisers.

The network is extended continuously with the purpose of offering the best possible guidance when it

comes to choice of partners, preparation and implementation of the projects.

Most of the advisers are senior business people with considerable commercial experience. I.e. they have

run their own business or have held a leading position in a company. They have an in-depth knowledge

of local business culture, investment authorities, local financing institutions, accountants, lawyers etc.

Companies entering into dialogue with IØ can draw directly on advisers who have special expertise or lo-

cal knowledge of the area in which establishment of the project is contemplated.

Henrik de Jonquières, educated in TheEast Asiatic Company (ØK), has 18years of international experience asmanaging director of companies inBrazil, Japan, the Philippines, Thailandand the UK, amongst others. He is nowan adviser to IØ. This is an example ofhow IØ, through its network of advisers,gains access to senior managerial expe-rience, which can only be obtained bybeing a leading figure in the interna-tional business community. But there ismore:“Several of the companies I haveheaded have been joint ventures withIØ’s sister Fund IFU. Therefore I know

the Funds from the other side of thetable, and that is an advantage”, saysHenrik de Jonquières.He believes that it is very important tocreate an understanding between part-ners, and not just between IØ’s invest-ment officers and the company man-agers, but also between the partnersfrom what are often very different cul-tures. People view the world differently.This fact is often the actual reason whythings start to go wrong in a projectcompany.“Then my job is to straighten thingsout, to create clarity and understandingand thus a better foundation for good

45

KNOWS HOW TO OVERCOME LEGAL HURDLES

JØRGEN DAN JENSEN IS RETIRING

decisions, which the partners can sup-port. Just as it is my job as a facilitatorat pre-investment meetings to aim thespotlight on possible problems beforethey arise. On the surface it may appearthat the partners agree and are ready toenter into mutual commitments. But ifyou dig deeper they do not always havethe same understanding of the agree-ment. This has to be uncovered and dis-

cussed up front. Otherwise the collabo-ration may develop unsuccessfully.”At year end, Henrik de Jonquières wasa board member in the following projectcompanies:

� Kristensen Baltic SIA, Riga, Latvia� UAB Balticos Kopija, Vilnius, Lithuania� UAB Azuolas, Vilnius, Lithuania� UAB Utzon, Siauliai, Lithuania

Deputy Managing Director Jørgen DanJensen has decided to retire from theDanish International Investment Fundsas from the end of April 2003 after 33years of employment and will from thenbe attached to IØ as senior adviser.As a young economist he was employedat the time of infancy of the Industrial-ization Fund for Developing Countries(IFU). Jørgen Dan Jensen is often givena good deal of the credit for the develop-ment of IFU from the time when the first

uneasy steps were taken till the 1990s,when it was recognised as a model insti-tution.When in 1989-90 IØ was formed overthe IFU mould and with IFU acting asfund manager, Jørgen Dan Jensen wasgiven the responsibility of developing thenew institution as a reliable financialpartner for Danish commercial investors.His resignation has accelerated theFund’s transition to a two-person Execu-tive Board.

Vladimir Krakhmalev, a Moscow basedlawyer with diploma in InternationalPrivate Law from the Moscow State In-stitute of International Relations, andcertificate from Euromoney Legal Train-ing in London.Krakhmalev has been associated withIØ since 1996. At that time, he was al-ready well established in the law firm“JUREX, Partners” in Moscow, in whichcompany he now has a position as se-nior partner.Krakhmalev is most often used, whenIØ or a joint venture needs a legal opin-ion, consultancy or a referendum on le-gal aspects of a business proposal,transaction, or implementation of a pro-ject. His fingertip knowledge on theever changing law complex has been ofhelp to many IØ partners over the years,not least in the light of the radical

transformation of the business environ-ment which took place in the 1990s,when the communist regulation wasdiscarded and a market oriented west-ern-like legislation was built up.Some Danish investors find it difficultto adapt to the Russian Law system ingeneral and complicated and rigid Rus-sian currency and tax regulations, hesays, but adds:“When they start doing business inRussia they get used to it and overcomesuch “inconveniences”.”The lawyer sees no difficulties in theco-operation between Danish and Rus-sian partners stemming from culturaldifferences:“Of course, there are sometimes mis-

understandings on the personal level.They are there, whenever human beingswork together.”

46

INVESTMENT PORTFOLIO AS AT 31 DECEMBER 2002

CENTRAL EUROPEEuro Mall Holding Real estate activities TK Development 30.0 90.0 1,900.0 1 2001-

Total 1 Project 30.0 90.0 1,900.0 1

BALTIC COUNTRIESBaltic Property Trust Real estate Baltic Property Trust 20.8 200.0 40 2002-TK Development Baltics Development of real estate TK Development 7.8 18.8 333.0 6 2002-

Total 2 Projects 28.6 18.8 533.0 46

BELARUSBeldandor Consulting Kampsax 0.1 0.6 2 1996-1997Maersk Medical Belarus Medical/precision instruments Maersk Medical 0.2 3.6 7.8 25 1992-Technology Science Chemical industry Three Stones Company 0.0 0.3 3.0 3 1995-1997

Total 3 Projects 0.2 3.9 11.4 30

BOSNIA & HERZEGOVINAHorizonte BH Enterprise Financial institution No Danish partner 6.9 125.0 6 1997- #Panonska pivovara Saraj. Beer distribution Tuborg International 3.8 2 1998-2001

Total 2 Projects 6.9 128.8 8

BULGARIABrunata Energy consulting Brunata 0.1 0.4 4 1992-1995Nowaco-Bulgaria Storage/distrib. of food prod. Nowaco 1.8 4.0 20.0 30 2000-Porsaco Fabricated metal products Porsaco 0.1 0.3 2 1994-1996Toptex Textiles B&C Textiles 0.3 2.0 50 1998-UMS Tervel Sunflower extraction United Milling Systems 7.8 93.0 125 1995-1996

Total 5 Projects 10.1 4.0 115.7 211

CROATIATuborg Croatia I Brewery Tuborg International 20.2 55.0 210 1994-Tuborg Croatia II Brewery Tuborg International 37.8 320.0 130 1995-

Total 2 Projects 58.0 375.0 340

CZECH REPUBLICBaltom Road maintenance Inreco 2.2 9.9 3 2001-Bohemian Waste Sewage and refuse disposal Marius Pedersen 0.9 4.0 5 1992-2001Brno Shopping Center Shopping center TK Development 5 1999-2001 #Cembrit CZ a.s. Fibre cement products Dansk Eternit Holding 42.8 69.9 201.0 259 1992-Cembrit Moravia Fibre cement products Dansk Eternit Holding 20.6 25.5 126.5 230 1993-Central Sticks Wood products Norwood 2.2 12.0 10.0 15 1995-2002CRI (CZ) Software / consultancy Computer Resources Int. 2.0 12.0 40 1993-1999CTT Research and development Dansk Eternit Holding 2.5 5.0 6 1992-1997Dancco Praha PVC pipes Naturgas Syd 12.9 60.0 115 1990-1992Danflax Textiles Dansk Stålservice 0.6 1.2 4.5 6 1992-Dan-Moravia Agrar Agricultural production Moravia Invest 16.5 24.5 20 1998-DISA Industries Machinery and equipment DISA 61.5 168.7 220 1997-EKO-Chlebicov Sewage and refuse disposal Marius Pedersen 3.6 18.5 8 1994-2001Elio Slezsko Sewage and refuse disposal Marius Pedersen 1.8 7.0 5 1995-2001Euro Mall Czech Holding Real estate activities TK Development 3 2001- #H W Garant Wholesale and distribution BHJ 5.8 11.0 81.4 180 2001-Hydrotech International Hydraulic systems Svendborg Brakes 5.1 19.1 80 2001-Ivesko Ventilation equipment IVS 0.1 0.7 2.9 6 1992-Lifeline Bohemia Retail textile company United Textile Group 2.5 8 2000-Lousa & Christensen Auditing firm Erik Nielsen & N.H Christensen 0.2 0.9 6 1993-1997Maersk Logistics Warehousing/distribution Mærsk 34.5 76.9 42 2001-Maersk Sealand Container terminal operation Maersk Czech 59.4 122.5 84 2002-Merfin Europe Pulp and paper products Niro 24.6 255.4 60 1995-Morabo a.s. Roofing material Dansk Eternit Holding 6.2 28.1 20 1996-Moravska Skladkova Sewage and refuse disposal Marius Pedersen 2.0 6.7 10 1993-2001nkt cables a.s. Cables and conductors No Danish partner 36.7 314.0 566 2002-Nowaco Food trading and cold stores Nowaco 7.0 28.5 40 1994-2001Regios Sewage and refuse disposal Danwaste 7.3 24.0 20 1994-2001Sedba Baking Food and beverages Havnemøllerne 0.4 1.2 15 1992-1995SSHL Sewage and refuse disposal Marius Pedersen 5.1 5.9 3 1993-2001TK Development Czech H. Real estate TK Development 11.3 20.0 200.0 9 1997-2001 #Zivotice Agriculture and farming DLF-Trifolium 1.6 4.2 73.8 20 1995-

Total 32 Projects 161.7 360.4 1,895.3 2,109

ESTONIABaltifalt Construction Colas Danmark 2.9 2.6 19.8 140 1997-Bunim Welding Production of metal components Jern Holding 2.4 20.0 120 1998-2002Falck Baltic Safety services Falck 26.8 122.0 3,000 1998-Flexa Eesti Wood products Flexa Møbler 3.6 3.1 23.7 125 1994-1997Flex-Heat Energy production/distribution Justsen Energi./Flexa Holding 0.5 1.5 2 1996-2000Hansa Graanul Wood pellets VE-Gruppen 6.0 25.2 14 2001-

Activity/product Danish Partner(s) IØ Participation Total Investment Employment PeriodShares Loans

(DDK million) (DDK million) (DDK million) (Persons)

47

Holsteinborg Wood products Holsteinborg 0.3 2.5 2 1994-1995Nycomed SEFA Chemical industry Nycomed Danmark 8.0 21.5 32 1993-1999OÜ Notio Puit Furniture Notio Møbler 1.1 0.6 4.7 31 1997-Radisson SAS Hotel Hotels SAS Hotels 13.4 241.3 220 1999-Rationel Eesti Wooden windows Viking Window 2.3 2.0 12.0 60 1995-2002Treilor Road pavement Colas Danmark 7.6 60 1999-Vest-Wood Eesti Production of doors/furniture Vest Wood 4.5 30.0 150 1999-

Total 13 Projects 53.2 26.8 531.8 3,956

GEORGIAGeorgian Egg Production of egg Scanbrid International 4.1 21.2 213 2002-Georgian Natural Products Production of hazel nuts Venndt A/S 1.6 0.6 3.6 140 1999-

Total 2 Projects 5.7 0.6 24.8 353

HUNGARYCapella Food and beverages Niels Buchholst 0.4 1.7 5 1993-1994Danagrico Production Pasteurised liquid eggs Danæg Products 4.0 16.0 20 2001-Danagricola Egg products Danæg Products 0.1 0.2 5 2001-Dan-Farm Holding Hungary Pig production and farming Dan-Farm Holding 1.5 41.7 20 2002-Hungarian Tel. and Cable Telecommunications TDC 62.4 1,285.9 380 1999-2002Inreco Hungary Road construction Inreco 0.5 0.5 9.7 10 1995-Intermag Agriculture and farming Frøkompagniet 1.2 14.6 9 1990-1992Kelet-Nógrád-Com Post and telecommunications TDC 4.9 27.6 419.0 200 1994-1997Kolos Food and beverages Kolos 41.3 13.2 95.5 29 1993-Mentor Informatika Computer and rel. activities Mentor Informatik 0.1 2.2 13 1992-1994Pannon GSM Post and telecommunications TDC 23.7 1,200.0 200 1994-1996Raba-Com Post and telecommunications TDC 4.1 20.2 175.0 66 1994-1997TOPP Group Cold goods distribution TOPP Group 3.5 20.0 20 1996-2000Wavin Kft. Rubber and plastic products Nordisk Wavin 15.0 62.6 83 1992-

Total 14 Projects 135.2 89.1 3,344.1 1,060

LATVIAAir Baltic Corporation Air transport SAS 15.9 18.4 130.0 300 1995-Ballegaard Wood products Ballegaard 0.5 2.3 15 1994-1996Balta Insurance Codan 82.3 238.0 1,000 2001-Balta Insurance Insurance and pension funds Tryg-Baltica 2.9 7.4 12 1992-1993Baltic Candles Production of candles P. Brøste/Langeland Design 0.5 1.4 25 1997-2000Danlat Agro Agriculture Danlat Agro 1.2 5.2 8 1999-Danlat Inform Whole Sale Computer and rel. activities Bornholms Skibsradio 0.2 0.6 2.4 15 1991-1999DLT-AUCE Clothing Godske Kjoler/Spectre/Power K. 0.6 1.2 125 1996-1997DLT-Saiva Clothing Godske Kjoler/Spectre/Power K. 2.5 47.0 500 1993-1997East Metal Metal production East Metal Trade 1.5 3.3 50 2000-East Wood Building materials East Wood Trade 1.8 7.0 85 1998-Gaizeni Pig breeding Danlat Gruppen/Okkels 0.3 3.8 15.0 20 2001-Godske Latvian Textile Textiles Godske Kjoler 1.6 6.5 30 1997-2002HoP Riga Tobacco House of Prince 6.4 117.6 360 1992-2001Hotel Cesis Hotel activity Danlat Gruppen 0.8 0.8 6.0 30 1998-Incentive Research and development Incentive 0.1 0.4 1.2 5 1993-1995Jysk Baltics Retail shops Skemman (Jysk) 12.5 50.0 220 2002-Kaas Steel Steel constructions Kaas Stålkonstruktion 3.7 16.5 60 2000-Kakenieki Agriculture and farming Dansk-Lettisk Kartoffelavl 0.2 1.5 12 1994-2002Labiba Un Kvalitate Agriculture P. Andresen Nygaard 1.3 0.6 5.1 6 1999-Lanell Int. Clothing Kinell Fashion/Kirsten Lyngsø 0.2 0.5 21 1993-1996Latvall Wood pellets Spanvall 1.9 3.5 17.3 13 1997-Latvia Timber Int. Wood products Vejen Trælasthandel 6.3 5.6 16.5 30 1992-1996Latvidan Agro Production of slaughter pigs Torpgaard Holding 12.0 33.6 17 2002-Lauku Agro Production of grain for feed Torpgaard Holding 3.0 18.0 4 2002-Let-Line Water transport DFDS Dan Transport Group 1.6 2.5 14.0 8 1994-1996Stema Latvia Processing of fish Ideal Huse 1.5 12.1 35 2002-TK Properties Baltics Shopping center Th. Kristensen Properties 12.7 19.0 148.7 15 2000- #

Total 28 Projects 135.3 95.8 925.4 3,021

LITHUANIAABB ELGA Fabricated metal products ABB Energi 0.7 3.0 5 1993-1995ABB Tekhnika Construction ABB A/S 0.4 2.5 3 1994-1995Azuolas Furniture production Bodilsen 2.3 2.0 10.0 150 2001-Baltijos Kopia Publishing and printing Damgaard-Jensen/Århus Neokopi 0.4 1.5 20 1994-Bio Ekra Waste water engineering BioBalance A/S 0.2 0.4 3 1996-2002Bité GSM Post and telecommunications TDC 29.4 165.0 300 1996-2002BlueTel Baltic Telecommunications BlueTel 3.0 1.5 10.0 45 2001-Comliet Post and telecommunications TDC 10.3 30.7 33 1992-2001DanBaltTrans Land transport Andreas Andresen 0.8 0.3 3.1 15 1994-Dara Food Agriculture and farming IME 0.0 0.4 1.2 40 1992-1999Engel-Dali Clothing F. Engel 0.4 1.4 60 1995-1999Espersen Lietuva Fish processing Espersen 15.0 50.8 180 2002-Gelezies Lauzas Recycling H.J. Hansen Genvindingsind. 1.9 8.0 40 1996-1999Gitolita Textiles Gito 0.3 1.8 105 1995-1996LA-NIKA Baltic Clothing United Textile Group 1.4 4.6 100 1994-2000La-Nika Textile production United Textile Group 2.0 5.7 393 2002-Lietuvos Draudimas Insurance Codan 88.0 524.9 2,000 2000-Minijos Nafta Extraction of oil and gas DONG 0.1 22.9 30.0 8 1995-1999

Activity/product Danish Partner(s) IØ Participation Total Investment Employment PeriodShares Loans

(DDK million) (DDK million) (DDK million) (Persons)

48

Modematic Electrical machinery/equipment Relæmatic/Løsekraut 1.0 3.5 15 1995-NCC Fegda UAB Construction NCC Danmark 18.1 3.4 89.0 50 1997-Randers Reb Production Production of rope Randers Reb 7.5 10.0 40.0 73 2002-Saerimner Pigfarm Danish Lithuanian Holding 7.5 21.0 90 2000- #Svyturys Brewery Brewery Carlsberg Int. 70.6 337.8 292 1999-UAB Jurbalita Flower decorations El-Flora 0.4 0.9 50 2002-Utzon Production of fish nets/ropes Utzon 7.0 16.0 30 2001-Vilniaus Margarino Gam. Food and beverages Dragsbæk Margarinefabrik 2.5 3.8 14.9 26 1997-Vilniaus Tauras Brewery Brewery Bryggerigruppen 23.4 58.5 500 2000-Wavin Baltic Rubber and plastic products Nordisk Wavin 3.9 18.0 100 1995-2002Wood Team Production Furniture Wood Team Denmark 5.1 0.2 21.6 170 1997-2002

Total 29 Projects 206.7 141.1 1,475.8 4,896

POLANDAalborg Polska Trade company Aalborg Portland 0.0 0.2 4 1996-Aalborg Portland Cement Aalborg Portland 7.5 20.0 7 1995-1996Agrocorm Machinery and equipment Cormall Holding 1.1 8.3 18 1990-1995Allerpasz Wholesale of feeds Brdr. Bylling 8.0 34.0 25 2001-Alsybet Concrete pipes Sydbeton 1.4 2.1 6.8 18 1992-Anonymous Production of cables Anonymous 7.5 118.8 426 1998-2000BAAC Auditing firm Alsø & Breinholt/Christiansen 0.5 0.1 1.8 11 1990-1998Bank Wlasnosci Procown. Banking Nordea 12.0 268.0 20 1999-2001Bauma Unicon Paving stones Unicon Beton 2.2 1.9 94.3 37 1994-2000Baxi Radan Production of boilers Baxi 4.9 8.8 36.5 140 1999-2001BDO Polska Auditing firm RIR Revision 0.5 1.1 15 1991-1995BelTiCa-Poland Textiles Belika Strikvarefabrik 1.2 5.6 275 1997-Berendsen Poland Laundry Sophus Berendsen 11.1 82.1 390 1993- #BL-Invest Real estate activities ABC Hansen/Skiold Holding 2.2 8.4 1 1998-BL-Kutno Agricultural machinery Maskinfabrikken BL 0.6 2.8 40 1998-Bording Polska Production of envelopes F.E. Bording 1.0 0.4 1.9 5 1996-2001Budodana Energy production/distribution Smedana 0.1 0.7 20 1995-1996Bytom Ren.Energy Gen. Landfill gas extraction ESCO International 6.3 3.1 15.0 3 2000-C. H. Reduta Shopping center TK Development 5 1997-2001 #C. H. Targówek Shopping center TK Development 5 1997-2001 #C.H.Reduta II Shopping center TK Development 5 2000-2001 #C.H.Targowek II Shopping center TK Development 5 2000-2001 #C.J.International Land transport C.J. International 0.3 3.5 120 1991-1996Centrum Handl. Chorzow Shopping center TK Development 5 1998-2001 #Centrum Handlowe Bytom Shopping center TK Development 5 1998-2001 #Centrum Handlowe Sosnowie Shopping center Euro Mall (TKF) Holding 5 1999-2001 #CET Electrical machinery/equipment NKT Cables 0.3 5.5 25 1993-1998Chlodnice Nissens Polska Radiators for vehicles Nissens Kølerfabrik 0.0 0.5 3.1 5 1998-2001Credin Polska Food and beverages Palsgaard Industri 5.8 6.0 9 1994-Cygate Polska Computer and rel. activities Erik Westerberg 3.0 8.0 11 1996-2001Danagri Invest Real estate activities Cormall Holding 0.4 1.2 1 1998-2001Danexport Polska Whole sale and distribution BHJ 8.0 30.2 35 2002-Danipol Textiles Performance Group 2.0 15.3 500 1992-Danish Farm. Consultants Agriculture and farming Pol-Dan 2.3 4.0 20.1 30 1995-Danlux Wood products Dan-Imex 1.4 1.7 35 1993-2000Danselbud Real estate activities Noratel Denmark 4.0 1 1996-1998DISA Air pollution control equip. DISA 59.6 62.2 140 2000-DLH Finér Wood products Dalhoff Larsen & Hornemann 3.5 14.3 30 1995-1999DLH Nordisk Wood products Dalhoff Larsen & Hornemann 27.6 28.9 16 1994-1999DP Batteries Batteries Alkaline Batteries 2.0 7.7 17.3 72 1991-1995Druk X-Press Publishing and printing Power Print Polen 0.1 0.5 2.3 10 1991-1994Dyrup Polska Chemical industry Dyrup 4.8 61.9 66 1994-2002EIEE Education EIEE 0.3 0.7 4 1994-1996Elda Electrical machinery/equipment LK 33.0 154.4 1,200 1994-1999 #Elopak Pulp and paper products Schouw Packing 15.9 8.4 40.0 11 1993-2002Elopak Finance Financial institution Schouw Packing 7.8 28.8 1 1995-1996Elsamprojekt Polska Consultancy Elsamprojekt 0.4 1.6 6 1990-1998Elserv Marketing & financial services LK 24.1 1 1998-1999Energo Zycie Life insurance company Tryg-Baltica 157.2 30 2000-2001Energo-Asekuracja Non-life insurance Tryg-Baltica 45.4 335.6 320 1999-2001ESCO International A/S Energy production/distribution HME Contractors 4.0 53.7 2 1997-1998 #ESCO International S.A. Energy production/distribution HME Contractors/DIFKO Energi 8.4 8.7 336.4 15 1997-2000Espersen Polska Food and beverages Espersen 3.9 11.5 14.2 75 1994-Euro Mall Holding Real estate activities TK Development/Steen & Strøm 6.0 60.6 304.3 2 1997-2001 #Euro Mall Poland Holding Real estate activities TK Development 25 2001- #Exbud-Nova Road material Novejfa 1.0 2.7 23.0 185 1995-2001Expol Building products Dras 3.0 12.0 60 1993-1996Fabryka Wafli MIRAN Food and beverages Frima Vafler 1.7 0.7 4.0 10 1994-Famacorm Real estate activities Kongskilde Industries 0.1 3.7 1 1994-1999FARO Szczecin Whole sale and distribution BHJ 1.0 22 2002-FishinSea Processing of fish products FishinSea 0.8 1.6 5.7 56 1992-Fiskars Slupsk Fabricated metal products Fiskars Danmark 3.0 0.4 9.5 44 1991-1999Fiskars Warsaw Trade company Fiskars Danmark 0.0 0.1 5 1996-1996Fomar Roulunds Friction materials Roulunds Braking 33.2 8.4 144.4 850 1996-Gedsted Auto Vehicle spare parts Gedsted Autoophug 1.3 5.7 10 1994-2001GMT-Poland Food and beverages Globe Meat Technology 12.4 44.6 450 1996-GP Batteries Whole sale of batteries Alkaline Batteries 1.0 4.0 11 1993-1995Greensam Consulting engineers Hørning Maskinfabrik 0.3 0.8 0 1992-1995

Activity/product Danish Partner(s) IØ Participation Total Investment Employment PeriodShares Loans

(DDK million) (DDK million) (DDK million) (Persons)

49

Grene Agricultural machinery P. Grene 16.5 89.2 250 1998-Hercules Poland Fabricated metal products Hercules 1.5 7.3 15 1994-1996HTH Ekspert w Kuchni Kitchen furniture HTH Køkkener 3.0 1.1 14.5 120 1999-InfoCenter Directory service provider Yellow Tel 5.7 11.6 3 2000-Inreco Polska Road renovation Inreco 0.8 1.9 5.0 20 1994-Inreco-Emulsja Sp. z o.o. Asphalt emulsion Inreco 1.4 5.2 1 1999-ISOwent Machinery and equipment JKF Industri 0.9 4.9 9 1996-Karwice Farming Karsten Birkedal Jensen 2.1 26.8 10 1998-Katowice Ren.Energy Gen. Landfill gas extraction ESCO International 5.9 2.8 15.0 3 2000-Kongskilde Polska I Machinery and equipment Kongskilde Industries 0.0 0.7 3.3 73 1994-Kongskilde Polska II Machinery & equipment Kongskilde Industries 6.0 12.0 150 1998-Kongskilde Polska III Machinery & equipment Kongskilde Industries 20.0 50.0 250 2001-KVF Poland Clothing Vestergaard Frandsen 0.4 0.3 1.9 90 1995-Legajne Energy Gen. Extraction of oil and gas ESCO International 2.7 0.2 11.7 2 1997-Logstor-Pol Heating pipes Løgstør Rør 0.1 0.2 0 1991-1996Lubna Energy Gen. Biogas ESCO International 3.7 12.0 2 1997-Maersk Polska Warehousing and distribution Maersk Holding Poland 34.5 103.1 100 1999- #Malarska Hørberg Sale of paints Malerfirmaet Hørberg 0.3 0.3 2.0 3 1992- *Marburg Fast food Slagteriregion SYD 1.3 2.5 70 1991-1993Max Derby Refrigeration Derby 7.9 67.7 260 1993-2001MBL Poland Production of spare parts MBL 10.0 54.3 225 2002-ME-FA International Fabricated metal products Me-Fa 1.0 3.6 10 1995-1998Mira Polska Non-metallic mineral products Mira Byggeprodukter 1.2 8.3 50 1998-2002Multiram Fabricated metal products Melstrup & Lomholt 0.3 0.7 5 1995-2000Noratel Electrical machinery/equipment Noratel Denmark 1.3 1.9 4.5 95 1992-Nowe Slaskie Kable Production of wires and cables NKT Cables 19.3 275.6 25 1999-Okocim Brewery Carlsberg 77.0 830.3 1,173 1996-OSM Krotoszyn Food and beverages Niro 3.8 51.0 210 1995-2002P. Nielsen & Partners Firm of lawyers P. Nielsen & Partners 0.2 0.7 7 1990-1997Palsgaard Poland Sale of emulsifiers Palsgaard Industri 0.2 1.5 4 2002-Pantom Poland Food and beverages Pantom 0.3 0.5 1.9 5 1993-2000Podan-Pfeiffer Slaughterhouse machinery Pfeiffer 0.9 2.2 5 1992-1996Polconsul Construction ISC Holding 0.3 1.3 3 1990-1994Poldanor Agriculture and farming Polen Invest 7.9 28.6 82.0 135 1994-Policon Production of 3D labels Jørgen Clemmensen Holding 1.1 0.7 4.0 6 2001-Polline Fishing equipment Hvalpsund Net 1.3 3.9 10 1997-2002Polrubber Rubber products Danrubber 0.5 1.8 0 1991-1995Pol-Sun Wholesale of solariums Dan-Sun 0.5 2.5 4 2000-2002Pomrol Agro Agriculture and farming Polen Invest 2.4 2.0 14.3 75 1996-2001Prime Food Food and beverages Polen Invest 23.5 19.1 206.0 150 1993-Print Partner Manufacture of plastic packing J. & R. Frydenberg 0.4 1.6 3 1999-Radiowo Ren.Energy Gen. Landfill gas extraction Hedeselskabet 11.7 4.8 26.5 3 2000-Radisson SAS Wroclaw Hotel SAS Hotels 14.9 170.8 120 2000-Remek Car starters and alternators Elstock 9.9 29.6 120 2001-Rockwool Malkinia Insulating material Rockwool International 35.0 140.0 150 1995-1996Rockwool Polska Insulating material Rockwool International 21.1 34.7 98.0 554 1993-2002Rol-Dan Growing of crops Dangro Invest 4.4 12.2 20 1999-Rosti (Polska) Prod. of plastic components Rosti 25.0 91.3 150 1999-SAS Radisson Krakow Hotel SAS Hotels 17.9 219.8 134 2001-Scandic Food Food and beverages DDG Holding 4.8 100.0 50 1997-SFK Electrical machinery/equipment NKT Cables 7.5 118.8 470 1993-1997SGS Poland Distribution & transportation Scandinavian Garment Service 1.0 8.0 11 1997-2000Siltec Electrical equipment Silcon 9.5 37.8 70 1998-Sonion Polska Sp. z o.o. Medical/precision instruments Microtronic 3.0 2.0 18.0 50 1997-Sopot Bank Bank Næstved Diskontobank 1.0 5.4 7.4 40 1993-1996Sosnowiec Ren.Energy Gen. Landfill gas extraction ESCO International 5.9 2.8 15.0 3 2000-Sotofte Polska Real estate development Søtoftegård 2.8 6.7 20.0 6 2001-Stok Emballering Pulp and paper products Stok Emballering 1.5 5.0 28 1995-2001Synoptik Polska Optical retail chain Synoptik 3.8 30.0 80 2000-Tarco Vej Construction Tarco Vej 0.1 0.3 0 1992-1996TK Development Polska Real estate TK Development 5.0 20.0 158.0 16 1996-2001TopWasa Insurance TopWasa 8.4 30.0 2 1992-1995TransElectro Poland Transformer production TransElectro 2.3 5.7 25 2002-Unicon Beton Ready-mix concrete Unicon Beton 22.1 8.5 172.4 38 1995-Unicon Beton Gdansk Ready-mix concrete Unicon Beton 21.6 20 1997-Unicon Beton Gdynia Ready-mix concrete Unicon Beton 6.2 16 1998-Unicon Beton Myslowice Ready-mix concrete Unicon Beton 13.6 18 1998-Unicon Beton Warsaw II Ready-mix concrete Unicon Beton 22.5 20 1997-Unicon Beton Warsaw III Ready-mix concrete Unicon Beton 9.5 14 1998-Vallo Holding Food and beverages Vallø Saft 4.7 18.0 190.0 25 1996-Voigt Promotion Production of flags Klaus Voigt 2.0 4.9 30 2000-Wavin Metalplast-Buk PVC pipes Nordisk Wavin 9.9 93.5 425 1991-1997Woody Sale of building material Dalhoff Larsen & Hornemann 8.5 17.4 40 1996-1999X-Press Bikers Courier services ViaBaltic/Budstikken 0.3 0.5 1.5 40 1996-Zelmech Electric domestic appliances Metro Therm 3.6 18.3 105 1999-Zylber König Food and beverages Danpol Copenhagen 2.0 9.8 22 1996-1998

Total 144 Projects 515.1 669.3 6,622.5 12,538

ROMANIAAgraria Majeco Agriculture and farming Manfred Johannesen 0.0 0.1 1 1992-1994Agrileasing Leasing activity Agriholding 1.6 16.5 5 2000- #APM Terminals Romania Container terminal A.P. Møller 29.8 49.6 30 2001-

Activity/product Danish Partner(s) IØ Participation Total Investment Employment PeriodShares Loans

(DDK million) (DDK million) (DDK million) (Persons)

50

BlueTel Telecommunication equipment BlueTel 1.1 2.7 10 1999-Carlsrom Beverage Beer distribution Carlsberg Int. 0.1 10 1995-HITROM Insulating material Rockwool International 12.0 14.5 800 1998-2002Kuma Romania Marble basin production Kuma Produkter 1.2 1.8 27 1999-Richter Romania Leather furniture upholstery Richter 0.5 2.1 22 2000- #United Romanian Breweries Brewery Carlsberg Int. 9.5 9.8 260.0 160 1995- #Villa Bona Terra Production of wine Chris-Wine 3.7 5.9 22.5 100 2002-

Total 10 Projects 26.8 48.3 369.8 1,165

RUSSIABroen ADL Production of gas valves Broen 4.0 10.4 40 2002-Belsoe Russia Production of cereals Nutana Holding 3.3 8.0 50 2001- #Danfoss Machinery and equipment Danfoss 24.3 70.0 50 1993-DRTG Telecommunication GN Store Nord/TDC 20.0 80.0 60 1993-1996DRTG R-J-K Telecommunication GN Store Nord/TDC 20.0 370.0 1 1995-1998EBI Suppliers Machinery and equipment EBI Suppliers 6.2 1.2 21.2 40 1992-1995Harry's Russia Food production Dan Cake 4.6 10.1 40.6 200 1998- #Iceberg Ice cream Scan System Group 0.3 1.0 4.8 35 1994-2002KAR-KO RUS Agriculture and farming Kar-Ko 0.5 1.7 5 1993-1995Neda Paging Telecommunication GN Store Nord 2.0 7.5 48 1993-1998PEH/PBCM Metal packaging products PLM Holding 51.6 947.2 229 1997- #Roulunds Rus Production of V-belts etc. Roulunds Fabriker 2.5 20.7 50 1998-2000Sabroe Russ Machinery and equipment York Refrigeration 0.9 0.0 10.0 10 1992-1999Sadolin Garments Production of garments Sadolin Trade 0.5 2.4 300 1998-Sadolin Properties Renting of real estate Kalinka Trade 0.2 1.2 3.5 1 1999- #Sadolin Sestroretsk Production of garments Kalinka Trade 0.9 3.5 300 1999-Scanbech Rubber and plastic products Scanbech 2.8 0.8 11.6 16 1996- *Shawood Wood products Velux International 8.0 41.0 50 1991-SISL Fishing Ørskov Værft/Royal Greenland 30.0 530.0 180 1997- #St. Petersburg Taxophones Payphone operators GN Store Nord/Ascom Nordic 6.5 11.5 50.0 90 1994-2001Stimorol Chewing Gum Chewing gum (packaging) Dandy 20.8 57.8 58 1995-1999Sunny Cake Food products Dan Cake 9.8 91.8 3 1997-1999TK Development Pushkin Construction TK Development 1.4 15.0 65.0 1 1995- #Vladimir of Scandinavia Textiles retail trade Danko Trade 2.6 10.3 15 1998-1999ZAO Dirol Chewing gum Dandy 74.2 68.2 665.0 304 1997-2002 #ZAO Mineral Wool Insulating material Rockwool International 47.6 48.8 262.0 500 1998-ZMI St.Petersborg Machinery and equipment EBI Suppliers 0.2 1.0 80 1995-1996

Total 27 Projects 288.4 214.8 3,387.1 2,716

SLOVAKIACRI (SK) Computer and rel. activities Computer Resources Int. 0.0 0.3 0.4 5 1996-1999Dan-Slovakia Pig farming Slovakia Invest 35.0 127.0 85 2002-DRI-Slovak Car starters and alternators Dansk Renoverings Industri 9.2 28.3 280 2002-Dusan Rajcan Kiln drying of sawed wood Danish Hardwood 1.6 2.1 24 2000-Ecco Slovakia Shoe production Ecco Sko 20.0 25.0 165.2 1,500 2002-Euro Mall Slovakia Hold. Real estate activities TK Development 3 2001- #Lifeline Textiles retail trade La-Nika 1.0 3.0 40 1995-1996Lifeline Slovakia Retail textile company United Textile Group 2.0 5.4 12 2000-Pohronie Sewage and refuse disposal Marius Pedersen 1.8 6.8 30 1996-2002Povazie Sewage and refuse disposal Marius Pedersen 1.6 6.3 30 1996-2002Radisson SAS Carlton Hotel complex Tractebel/SAS Hotels 35.1 351.7 130 1999-Saris Sewage and refuse disposal Marius Pedersen 1.5 5.7 30 1996-2002Slovakian Farm Invest Pig production farm Christian Nors Holding 11.9 139.8 15 2002-

Total 13 Projects 21.0 124.8 841.6 2,184

SLOVENIADanfoss Compressors Compressors Danfoss 54.0 342.5 600 1996-Wilhjelm Slovenia Drying of wood Wilhjelm 1.1 6.1 6 1999-2000

Total 2 Projects 1.1 54.0 348.6 606

UKRAINE3J Holding Distribution centre P. Jahn 4.6 5.6 3 2002-Danam Farms Farming and pig breeding ABC Hansen 2.5 7.0 10 2000-Danish Textiles Prod. of velour fabrics PVN Holding 1.5 30.7 500 2002-Dronningborg Ukraine Machinery and equipment Dronningborg Industries 0.6 82.4 2 1996-2000Novokasa Real estate/sewing operation Novotex 3.0 11.6 5 2001-Sokalska Hosiery Factory Real estate PVN Holding 4.2 17.8 3 2002-

Total 6 Projects 0.6 15.8 155.1 523

Grand total 335 Projects 1,684.6 1,957.5 22,985.8 35,763

Activity/product Danish Partner(s) IØ Participation Total Investment Employment PeriodShares Loans

(DDK million) (DDK million) (DDK million) (Persons)

IØ participation is the accumulated sum in DKK of IØ’s contracted investments in all project companies since project start. The list includes ac-tive projects as well as projects where IØ’s participation has been terminated. Consequently, the figures cannot be related to the figures in the bal-ance sheet at year end. Investment in shares includes overrun commitments, and investment in loans includes guarantees. Total investment is thetotal investment in all project companies in DKK as originally foreseen at the appraisal stage. The number of employees is the number expectedto be employed at the appraisal stage.

*Operation discontinued # Investment through a holding company

Co-financing by the Investment Facility for Central and Eastern Europe (MIØ)

PROJECT DEVELOPMENT DEPARTMENT

Morten ChristiansenDepartment Director

Rena ChenInvestment Officer

Bjørn JakobsenHead of Secretariat

Jens RixenSenior Legal Adviser

Michael HedegaardInvestment Officer

Erik LarssonInvestment Officer

Michael Wedel SørensenEnvironmental Adviser

Søren HeilmannSystem Administrator (IT)

Bente LarsenChief Librarian

Torben KjærInvestment Officer

EXECUTIVE BOARD

Sven RiskærManaging Director

Jørgen Dan JensenDeputy Managing Director *(Until 30 April 2003)

Frank Norman LarsenDeputy Managing Director

Niels Gravgaard LaursenDepartment Director

Lone Bjørn HansenChief Accountant

Max KruseSenior Investment Officer

INVESTMENT MANAGEMENT DEPARTMENT

Torben HussDepartment Director

Brian M. AndersenInvestment Officer

Jens BayerSenior Investment Officer

Malene K. KristensenInvestment Officer

Martin M. KristensenSenior Investment Officer

Tatiana M. ManzonInvestment Officer

Hans-Jørgen NyegaardInvestment Officer

Peer MunkholtSenior Investment Officer

Svend J. HeinekeDepartment Director

Steen LarsenInvestment Officer

Jørn Fredsgaard SørensenInvestment Officer

Henrik JepsenDepartment Director

SECRETARIAT COMM./INFO/SERVICE UNIT LEGAL UNIT ENVIRONMENTAL UNIT IT UNIT

Kenneth KristiansenSystem Administrator (IT)

Morten K. JensenFinance Officer

Martin RømerInvestment Officer

Ib AlbertsenSenior Regional Co-ordinator(Asia)

Elisabeth ScheinemannInvestment Officer

Natalia SvejgaardInvestment Officer

Henning WongInvestment Officer

Birgitte Christensen Chief Archivist

ARCHIVES

*As of 1 May 2003, Senior Adviser to IFU

CORPORATE ADMINISTRATION DEPARTMENT

SPECIAL OPERATIONS DEPARTMENT

FINANCE DEPARTMENT

ADVISERS

Uffe Bundgaard-JørgensenDenmark (Facilitator)

Jan E. Ditlevsen Denmark (Facilitator)

Vladimir KrakhmalevMoscow, Russia

Henrik de JonquièresDenmark (Facilitator)

Tonny Bech PedersenDenmark

José M. RuisánchezWashington D.C., USA

Olga SmirnovaMoscow, Russia

Arvydas SekmokasVilnius, Lithuania

Piotr LemieszekInvestment Officer

Lisbeth ErlandsResident Representative

WARSAW, POLAND

IØ OFFICES

Agnieszka GrousInvestment Officer

Endre KovacsBudapest, Hungary

Hemming JørgensenLuxemburg (Facilitator)

Mikael OlufsenDenmark (Facilitator)

Indrek OravTallinn, Estonia

Irena ZatsepinaInvestment Officer

Zbigniew GluchowskiResident Representative

MOSCOW, RUSSIA

Nicolae CuneBucharest, Romania

SUPERVISORY BOARDJohannes Poulsen (Chairman)Agnete Raaschou-Nielsen (Deputy Chairman)Lars Andersen Sigurd Ø. AndersenElsebeth Budolfsen Lars Kolte Kjeld Ranum Michael Rasmussen Carsten Staur Karen Wermuth

EXECUTIVE BOARDSven Riskær (Managing Director)Jørgen Dan Jensen (Deputy Managing Director)Frank Norman Larsen (Deputy Managing Director)

COMPANY AUDITORSDeloitte & Touche Statsautoriseret Revisionsaktieselskab

THE INVESTMENT FUND FOR CENTRAL AND EASTERN EUROPE

BREMERHOLM 4 DK-1069 COPENHAGEN K DENMARK TEL +45 33 63 75 00 FAX +45 33 32 25 24 IOE@IOE.DK WWW.IOE.DK