INVESTMENT OPPORTUNITY PRESENTATION privatization of inland and international waterway transport company

jugoslovensko reno brodarstvo

July 2010

Investment Opportunity Presentation INLAND AND INTERNATIONAL WATERWAY TRANSPORT COMPANY

TABLE OF CONTENTS 1 Purpose of Presentation.................................................................................................................3 2 Notice to Recipients.......................................................................................................................3 3 Investment Opportunity.................................................................................................................3 4 River Transport In Serbia..............................................................................................................5 5 Introduction to the Company.........................................................................................................6 6 Activities........................................................................................................................................6 7 Organizational Structure and Labour Force..................................................................................8 8 Financial Reports.........................................................................................................................10 9 Future Prospects..........................................................................................................................11 10 Country Profile..........................................................................................................................11

Investment Opportunity Presentation INLAND AND INTERNATIONAL WATERWAY TRANSPORT COMPANY

Purpose of Presentation

The Privatisation Agency of the Republic of Serbia (the Agency) has appointed a Consortium of Consultants BPA London and Tomi & Partners Law Offices (the Consultants), to advise the Agency on the privatisation of Jugoslovensko reno brodarstvo (the Company). This Investment Opportunity Presentation has been prepared by the Consultants for the purpose of giving brief introduction to the Company and the market in which it operates, with the objective of soliciting expressions of interest from potential buyers in the forthcoming international tender for their sale to be held by the Agency. 2 Notice to Recipients

This Investment Opportunity Presentation has been distributed solely to assist the recipients in deciding whether or not they are interested, as potential buyers, in the sale of Jugoslovensko Reno Brodarstvo. All investors are encouraged to visit the Company. Any statements made and information included in this Presentation are made or included solely for that purpose. Neither the Agency, BPA London and Tomi & Partners Law Offices, or other consultants, nor any of their employees, representatives or agents make any express or implied representation or warranty as to the accuracy or completeness of any statement or information contained in this Presentation, in whole or in part, and none of such persons shall have any liability to the recipients relating to or arising from its or their use of any such information. The recipients are not entitled to rely on the accuracy or completeness of any such information or statement. The Consultants draw your attention to the fact that most of the information used by them in preparing this Presentation was furnished to the Consultants by the management of the Company. 3 Investment Opportunity

In the Tender, the Agency will offer to sell 70% of the socially owned capital of the Company. The remaining 30% of the socially owned capital will be distributed: up to 15% to the Companys current and former employees and at least 15% to the Privatization Registry. According to Serbian Business Registry Agency, the equity of the Company has the following structure: Capital Structure (in %) Socially owned Private % 99.98 0.02

Investment Opportunity Presentation INLAND AND INTERNATIONAL WATERWAY TRANSPORT COMPANY

The sale of the shares will offer buyers a unique opportunity to: Acquire an enterprise which is the leaders in the Serbian waterway transport business and with a significant market share in its own region; Enter a transport sector which is likely to experience a very high growth rate in the region, with that growth due to accelerate with economic development and planned production increases of large industrial enterprises (such as, US Steel, Lafarge BFC, NIS, Petrohemija) who are significant users of waterway transport and the anticipated expansion of the copper mining and smelting company, RTB Bor, following its privatization; Benefit from the existing business, contacts, experience and know-how of a quality management team and skilled and experienced workforce, the ownership of a fleet of vessels and equipment; Establish a corporate presence in a region whose geographical position provides very important natural advantages for the intensive use of river transportation.

Investment Opportunity Presentation INLAND AND INTERNATIONAL WATERWAY TRANSPORT COMPANY

River Transport In Serbia the Danube from the Hungarian border (km 1,433) to the Bulgarian border (km 845), over a total length of 588 kilometers; the Sava, which joins the Danube at Belgrade (km 1,170), provides some 207 kilometers of navigable waterway leading into the neighbouring states of Croatia, Bosnia and Herzegovina and Slovenia; the Tisa, which joins the Danube (km 1,215), has 164 kilometers of navigable waterway to the Hungarian border; the Tamis and the Begej rivers which are partially canalized, provide a total of 118 kilometers of navigable waterway and are part of DTD Hydrosystem; the DTD Hydrosystem in the Province of Vojvodina, has an overall length of some 600 kilometers of which over half is navigable by vessels of up to 650 tones.

Serbia has a waterway network of approximately 1,600 km, comprising:

On June 27, 2006, the European Agency for Reconstruction published the final version of the Master Plan and Feasibility Studies of the Serbian Inland Waterway Transports Network. This document represents the basis for further and more extensive development of the international waterway network in Serbia. The first objective of the study was to prepare a Master Plan for Inland Waterways Transport in relation to the present situation and the potential capacity of waterway transport. The second objective was to prepare three Feasibility Studies, for: restoring unhindered navigation; rehabilitating the Serbian waterway transport network, taking into consideration the Master Plan recommendations; and defining a Port Development Plan.

Investment Opportunity Presentation INLAND AND INTERNATIONAL WATERWAY TRANSPORT COMPANY

Introduction to the Company

JRB was founded in Belgrade in 1947, as a company specializing in public inland waterways transportation in the Serbian and regional inland waterway network. In 1962 JRB was responsible for introducing new transportation technology on the Danube - the system of convoy pushing which significantly improved the capacity and efficiency of the Companys operations. In 1980, the fleet was further expanded and improved by the introduction of the two most modern and powerful ships of the time, the barge haulers Karlovac and Karadjordje which can haul convoys of 16 barges, with capacity of up to 25,000 tones in the lower Danube sector. 6 Activities

JRB is the fourth largest company of its type in the lower Danube region. Its operations span the whole length of the Danube which is navigable by large inland waterway vessels, from Odessa on the Ukrainian Black Sea coast and Constana at the mouth of the Danube-Black Sea canal to Kehlheim in Germany. The transport of cargoes is primarily contracted through a competitive spot market and the Company has been successful in winning an increasing share of business, particularly in the transport of petroleum products and other liquids. The following services are offered by JRB in the national and international markets: Transport of mixed dry cargoes, Transport of containers and liquids, Transport of merchandise packed in bales between Danube harbours, International freight forwarding services, Transport of tourist passengers, Overhaul and maintenance of ships and equipment, Tank cleaning services for Serbian and foreign vessels, Import and export services for its own needs and those of foreign shipping companies which it represents.

Investment Opportunity Presentation INLAND AND INTERNATIONAL WATERWAY TRANSPORT COMPANY

Fleet capacity Vessel description Ships Push boats Tug boats Self-propelled vessels Liquid cargo Dry Cargo Passenger ships Workshop boats Barges Liquid Cargo Tank barges Tanks Self-propelled vessel Dry cargo Covered Barges Open Barges Gravel Barges Self-propelled vessel Closed Barges Unit 16 14 2 2 1 1 2 2 122 59 42 16 1 63 28 30 2 1 2 Capacity kW T 18,552 16,783 1,769 1,827 3,138 551 1,246 1,276 1,892 822 144 191,072 84,715 63,214 20,255 1,246 106,357 46,714 50,608 2,944 1,891 4,200

Transport of Goods in Tons 2005 1,304,73 1 2006 2007 2008 2009

1,298,247 1,452,606 1,407,355 740,205

Sales Structure Sales Structure (%) Domestic market Foreign markets 2005 30 70 2006 38 62 2007 58 42 2008 66 34 2009 40 60

Investment Opportunity Presentation INLAND AND INTERNATIONAL WATERWAY TRANSPORT COMPANY

Organizational Structure and Labour Force ASSEMBLY

MANAGING BOARD

DIRECTOR

COMMERCIAL SECTOR

TRANSPORT SECTOR

TECHNICAL AND MAINTENANCE SECTOR

BUSINESS DEVELOPMENT SECTOR

FINANCE AND ACCOUNTING SECTOR

LEGAL AND HR SECTOR

COMMON SERVICES SECTOR

Employee Age Structure as at 30.06. 2009

Age Number of employees -25 5 25-35 36 35-45 104 45-50 111 50-55 125 55-60 85 60+ 9

Costs of Salaries (EUR)

Year Costs of salaries Average number of employees Monthly gross salary per employee

2005 3,779,419 644 489

2006 4,265,833 628 566

2007 5,260,109 588 745

2008 5,260,984 560 783

2009 4,013,024 486 688

Investment Opportunity Presentation INLAND AND INTERNATIONAL WATERWAY TRANSPORT COMPANY

Number of employees as at 21.06.2010 was 475.

Investment Opportunity Presentation INLAND AND INTERNATIONAL WATERWAY TRANSPORT COMPANY

Financial Reports
31.12.2009 25,798,529 10,940 25,485,260 302,329 2,847,163 1,050,728 44,645 1,751,790 28,645,692 26,601,407 18,818,506 81,730 8,470,061 30,556 749,076 1,487,410 1,336,433 61,811 97,029 1,177,593 707,852 28,645,692 31.12.2008 29,197,086 13,928 28,816,571 366,587 3,874,640 856,965 86,760 2,930,915 33,071,726 30,977,721 20,366,407 53,058 9,523,911 40,507 1,074,852 1,570,140 82,956 118,328 1,368,856 523,865 33,071,726 31.12.2007 28,902,660 14,955 28,358,263 529,442 4,226,465 966,503 28,093 3,231,869 33,129,125 31,329,380 22,773,480 29,999 7,646,770 879,131 1,531,850 198,710 1,333,140 267,895 33,129,125

BALANCE SHEET (EUR) Fixed assets Intangible assets Property, plant, equipment and natural assets Long-term financial investments Current assets Inventories Fixed assets held for sale Short-term receivables, investments and cash TOTAL ASSETS Equity Core capital Reserves Revaluation reserves Unrealised securities holding loss Retained earnings Loss Long-term provisions and liabilities Long-term provisions Long-term liabilities Short-term liabilities Deferred tax liabilities TOTAL EQUITY AND LIABILITIES

INCOME STATEMENT (EUR) OPERATING REVENUES Sales Revenues from undertaking of outputs and goods for own purposes Other operating revenues OPERATING EXPENSES Costs of material Costs of salaries, fringe benefits and other personal expenses Depreciation costs and provisions Other operating revenues OPERATING INCOME / (LOSS) Financial revenues Financial expenses Other revenues Other expenses INCOME / (LOSS) BEFORE TAX Tax expense for the period Deferred tax expense for the period Deferred tax revenue for the period NET INCOME / (LOSS)

2009 8,613,518 8,301,352 106,642 205,524 10,136,275 3,355,029 4,020,277 1,164,226 1,596,743 -1,522,757 289,707 121,384 204,300 139,542 -1,289,675 228,430 -1,518,105

2008 15,022,348 14,668,713 97,397 256,238 15,323,257 6,804,936 5,291,295 1,391,491 1,835,535 -300,909 448,600 206,078 1,146,218 357,797 730,034 221 40,533 770,346

2007 14,683,779 13,934,367 166,246 583,167 14,307,741 5,666,871 5,268,384 1,255,853 2,116,633 376,038 267,796 199,600 533,592 323,887 653,939 72,698 581,241

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Investment Opportunity Presentation INLAND AND INTERNATIONAL WATERWAY TRANSPORT COMPANY

Future Prospects

The Company anticipates a continuing growth of its business over the next five years due to: Increasing economic activity in Serbia and the region as a result of economic recovery and development and the planned production increases of large industrial enterprises (such as, US Steel, Lafarge BFC, NIS, Petrohemija) who are significant users of waterway transport and the anticipated expansion of the copper mining and smelting company, RTB Bor, following its privatization; Expansion of the tonnage capacity and intensity of transport movements as a result of significant improvements in the waterway, navigation and port facilities of the Danube and connecting canals and waterways as part of the development of the Trans-European Transport Network Corridor VII; An expected in Asia-Europe transit cargo traffic using the Black Sea and Danube Basins as a result of economic growth and development and improvements in the Caspian-Volga-Don-Black Sea waterway system and the Black Sea-Danube canal connections.

10 Country Profile
Official Name: Area: Population: Location: Official Language: Capital: Other Major Cities: Currency: Time Zone: Strategic Location: Borders: The Republic of Serbia 88,361 km2 7,498,001 excluding Kosovo-Metohija South East Europe, central part of the Balkan Peninsula Serbian Belgrade Novi Sad, Ni, Kragujevac, Kruevac, Subotica Dinar (RSD) West European time zone (GMT+01:00) Serbia is situated at the intersection of Trans European Transport Corridors 10 and 7, linking Europe and Asia. The length of the Serbian border is 2,397 km. In the east, Serbia borders Bulgaria, in the northeast Romania, in the north Hungary, in the west Croatia and Bosnia and Herzegovina, in the southeast Montenegro and in the south Albania and Macedonia. Temperate continental, with a gradual transition between the four seasons of the year, warm summers and snowy winters. The average annual temperature is around 12 oC. The average annual precipitation ranges from 600mm to 800mm in the plains and between 800mm and 1,200mm in the mountains. 11

Climate:

Investment Opportunity Presentation INLAND AND INTERNATIONAL WATERWAY TRANSPORT COMPANY

Key macroeconomic indicators

Indicator GDP (in EUR million) GDP per capita (EUR) Real GDP growth (in %) Consumer prices (in %, relative to the same month a year earlier)2) Core inflation (in %, relative to the same month a year earlier)2) NBS foreign exchange reserves (in EUR mil.) Exports (in EUR million)3) Imports (in EUR million)3) Unemployment according to the Survey (in %)4) Wages (average for the period, in EUR) RS budget deficit/surplus (in % of GDP)5) RS public debt (external + internal, in % of GDP)5) RSD/USD exchange rate (average, in the period) RSD/USD exchange rate (end of period) RSD/EUR exchange rate (average, in the period) RSD/EUR exchange rate (end of period)
1) 2) 3)

2001 12,821 1,708 5.6 40.7 20.5 1,325 2,693 -5,023 12.2 89.9 -0.2 104.8 66.71 67.67 59.78 59.71

2002 16,028 2,137 3.9 14.8 4.4 2,186 3,125 -6,387 13.3 151.1 -4.3 71.9 64.70 58.98 60.66 61.52

2003 17,306 2,313 2.4 7.8 6.1 2,840 3,847 -7,206 14.6 176.9 -2.6 63.7 57.56 54.64 65.13 68.31

2004 19,026 2,549 8.3 13.7 11.0 3,117 4,475 -9,543 18.5 194.6 -0.3 50.9 58.44 57.94 72.70 78.89

2005 20,306 2,729 5.6 17.7 14.5 4,935 5,330 -9,613 20.8 210.4 0.3 50.6 66.90 72.22 83.00 85.50

2006 23,305 3,144 5.2 6.6 5.9 9,025 6,949 -11,971 20.9 259.5 -1.9 40.1 67.01 59.98 84.10 79.00

2007 28,785 3,899 6.9 11.0 7.9 9,641 8,686 -15,578 18.1 347.6 -1.7 31.4 58.39 53.73 79.96 79.24

2008 33,418 4,546 5.5 8.6 10.3 8,160 10,157 -17,878 13.6 358.4 -1.8 26.3 55.76 62.90 81.44 88.60

2009 30,3851) 4,158 -3.0 6.6 4.1 10,602 8,478 -13,237 16.1 337.9 -3.4 32.4 67.47 66.73 93.95 95.89

NBS estimate. Retail prices until 2006. Trade with Montenegro is registered within relevant transactions as of 2003. 4) Source: Labour Force Survey, Statistical Office. 5) Source: RS Ministry of Finance Bulletin. Note: Data are subject to corrections in line with the official data sources.

For more information please contact: Privatization Agency of the Republic of Serbia Aleksandra Jezdovi Project Manager Email: ajezdovic@priv.rs Tel: +381 11 3020 855 Fax: +381 11 3020 816 BPA London Limited Malcolm Magee-Brown Director Email: m.magee-brown@bpalondon.eu Tel: +44 20 7283 0079 Fax: +44 20 7785 9173 Ivan Risti Project Manager Email: ristic.ivan@sbb.rs Tel/Fax: +381 11 318 2211 Mob: +381 64 110 9684

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