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69 <p align="center"><br>
70 <font face="Arial" color="#000080" size="2"><b>Year 2000 Preparations</b></font></p>
71 <p class="MsoBodyText" style="margin-right:2.15pt;mso-pagination:widow-orphan;
72 tab-stops:21.3pt"><span style="font-size: 10.0pt"><font face="Arial" color="#000080" size="2">We
73 at PLIVA d.d. are fully aware of the need for Y2k compliance to avoid any
74 business disruption associated with computer software, hardware and
75 embedded systems that are incapable of managing dates beyond the year
76 1999. This project includes the assessment of vendors and business
77 partners, in addition to our internal processes. Our main goal is to
78 ensure that we are Y2k compliant in all respects early enough to avoid any
79 interruption of production or other services. <o:p>
80 </o:p>
81 </font></span></p>
82 <p class="MsoBodyText2" style="margin-right:2.15pt;mso-pagination:widow-orphan"><span style="font-size:10.0pt;mso-ansi-language:EN-GB"><font face="Arial" color="#000080" size="2">Major
83 initiatives are underway to ascertain the compliance status of all
84 business-critical vendors, suppliers and service providers, and
85 comprehensive contingency plans are being developed. As part of our
86 contingency planning, we are developing Business Continuity Plans for
87 those areas that are critical to our business. These Business Continuity
88 Plans are designed to mitigate disruptions to our business flow with the
89 arrival of the Year 2000 and are independent of our external providers'<span style="color:red">
90 </span>Year 2000 compliance.<o:p>
91 </o:p>
92 </font></span></p>
93 <p class="MsoBodyText2" style="margin-right:2.15pt;mso-pagination:widow-orphan"><span style="font-size:10.0pt;mso-ansi-language:EN-GB"><font face="Arial" color="#000080" size="2">For
94 a detailed description of our Year 2000 Preparedness, please find below
95 our <b style="mso-bidi-font-weight:
96 normal"><i style="mso-bidi-font-style:normal"><a href="#statement">YEAR 2000
97 COMPLIANCE STATEMENT</a></i></b>. It provides answers to most commonly
98 asked questions regarding our Year 2000 efforts, goals and strategy.<o:p>
99 </o:p>
100 </font></span></p>
101 <p class="MsoBodyText" style="margin-right:2.15pt;mso-pagination:widow-orphan"><span style="font-size: 10.0pt"><font face="Arial" color="#000080" size="2">Should
102 you require any additional information related to this issue, please
103 contact <b style="mso-bidi-font-weight:
104 normal"><i style="mso-bidi-font-style:normal">Jerko Zic</i></b>, Y2K manager:<span style="mso-spacerun: yes">&nbsp;
105 </span>PLIVA, Prilaz baruna Filipovica 25, 10000 Zagreb Croatia; Phone: <b style="mso-bidi-font-weight:
106 normal">+385 1 378 1 329</b>, Fax:<span style="mso-spacerun: yes">&nbsp; </span><b style="mso-bidi-font-weight:normal">+385
107 1 378 1 862</b>, E-mail: <b style="mso-bidi-font-weight:normal"><i style="mso-bidi-font-style:
108 normal"><span class="MsoHyperlink" style="color: blue"><a href="mailto:Jerko.Zic@pliva.hr">Jerko.Zic@pliva.hr<o:p>
109 </a></o:p>
110 </span></i></b></font></span></p>
111 <p class="MsoBodyText" align="center" style="margin-right:2.15pt;text-align:center;
112 mso-pagination:widow-orphan"><b style="mso-bidi-font-weight:normal"><font color="#000080" face="Arial" size="2"><a name="statement"><span style="font-size: 10.0pt">YEAR
113 2000 COMPLIANCE STATEMENT<o:p>
114 </span></a><span style="font-size: 10.0pt"></o:p>
115 </span></font></b></p>
116 <p class="MsoBodyText" style="margin-right:2.15pt;mso-pagination:widow-orphan"><b style="mso-bidi-font-weight:normal"><span style="font-size: 10.0pt"><font face="Arial" color="#000080" size="2">PLIVA's
117 Definition of Year 2000 Compliance<o:p>
118 </o:p>
119 </font></span></b></p>
120 <p class="MsoBodyText" style="margin-right:2.15pt;mso-pagination:widow-orphan"><span style="font-size: 10.0pt"><font face="Arial" color="#000080" size="2">PLIVA's
121 Definition of Year 2000 Compliance is consistent with that developed by
122 the British Standards Institution. Year 2000 conformity shall mean that
123 neither performance nor functionality is affected by dates prior to,
124 during and after the year 2000. In particular:<o:p>
125 </o:p>
126 </font></span></p>
127 <blockquote>
128 <p class="MsoBodyText" style="margin-top:0cm;margin-right:2.15pt;margin-bottom:
129 0cm;margin-left:18.0pt;margin-bottom:.0001pt;text-indent:-18.0pt;mso-pagination:
130 widow-orphan;mso-list:l0 level1 lfo1;tab-stops:18.0pt"><font face="Arial" color="#000080" size="2"><span style="font-size: 10.0pt">·<span style="font:7.0pt &quot;Times New Roman&quot;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
131 </span></span><b style="mso-bidi-font-weight:normal"><span style="font-size:10.0pt;font-family:Arial">Rule
132 1</span></b><span style="font-size:10.0pt;font-family:Arial"> No value
133 for current date will cause any interruption in operation.<o:p>
134 </o:p>
135 </span></font></p>
136 <p class="MsoBodyText" style="margin-top:0cm;margin-right:2.15pt;margin-bottom:
137 0cm;margin-left:18.0pt;margin-bottom:.0001pt;text-indent:-18.0pt;mso-pagination:
138 widow-orphan;mso-list:l0 level1 lfo1;tab-stops:18.0pt"><font face="Arial" color="#000080" size="2"><span style="font-size: 10.0pt">·<span style="font:7.0pt &quot;Times New Roman&quot;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
139 </span></span><b style="mso-bidi-font-weight:normal"><span style="font-size:10.0pt;font-family:Arial">Rule
140 2</span></b><span style="font-size:10.0pt;font-family:Arial"> Date-based
141 functionality must behave consistently for dates prior to, during and
142 after year 2000.<o:p>
143 </o:p>
144 </span></font></p>
145 <p class="MsoBodyText" style="margin-top:0cm;margin-right:2.15pt;margin-bottom:
146 0cm;margin-left:18.0pt;margin-bottom:.0001pt;text-indent:-18.0pt;mso-pagination:
147 widow-orphan;mso-list:l0 level1 lfo1;tab-stops:18.0pt"><font face="Arial" color="#000080" size="2"><span style="font-size: 10.0pt">·<span style="font:7.0pt &quot;Times New Roman&quot;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
148 </span></span><b style="mso-bidi-font-weight:normal"><span style="font-size:10.0pt;font-family:Arial">Rule
149 3</span></b><span style="font-size:10.0pt;font-family:Arial"> In all
150 interfaces and data storage, the century in any date must be specified
151 either explicitly or by unambiguous algorithms or inferencing rules.<o:p>
152 </o:p>
153 </span></font></p>
154 <p class="MsoBodyText" style="margin-top:0cm;margin-right:2.15pt;margin-bottom:
155 0cm;margin-left:18.0pt;margin-bottom:.0001pt;text-indent:-18.0pt;mso-pagination:
156 widow-orphan;mso-list:l0 level1 lfo1;tab-stops:18.0pt"><font face="Arial" color="#000080" size="2"><span style="font-size: 10.0pt">·<span style="font:7.0pt &quot;Times New Roman&quot;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
157 </span></span><b style="mso-bidi-font-weight:normal"><span style="font-size:10.0pt;font-family:Arial">Rule
158 4</span></b><span style="font-size:10.0pt;font-family:Arial"> Year 2000
159 must be recognised as a leap year.<o:p>
160 </o:p>
161 </span></font></p>
162 </blockquote>
163 <p class="MsoBodyText" style="margin-right:2.15pt;mso-pagination:widow-orphan"><font face="Arial" color="#000080" size="2"><b style="mso-bidi-font-weight:normal"><span style="font-size: 10.0pt">The
164 Year 2000 Problem </span></b><span style="font-size:10.0pt;
165 font-family:Arial"><o:p>
166 </o:p>
167 </span></font></p>
168 <p class="MsoBodyText" style="margin-right:2.15pt;mso-pagination:widow-orphan"><span style="font-size: 10.0pt"><font face="Arial" color="#000080" size="2">PLIVA
169 recognises the Year 2000 Problem as a critical challenge facing businesses
170 world-wide. As explained in more detail below, we at PLIVA are working to
171 uncover and repair any Year 2000 problem we may have, so that our
172 customers, clients and business partners can continue to rely on the
173 availability and safety of our products. We are strenuously attempting to
174 identify and isolate the critical processes that keep PLIVA going and are
175 making vigorous efforts to assure that those processes will continue
176 uninterrupted past January 1, 2000.<o:p>
177 </o:p>
178 </font></span></p>
179 <p class="MsoBodyText" style="margin-right:2.15pt;mso-pagination:widow-orphan"><b style="mso-bidi-font-weight:normal"><span style="font-size: 10.0pt"><font face="Arial" color="#000080" size="2">PLIVA
180 is addressing the Problem<o:p>
181 </o:p>
182 </font></span></b></p>
183 <p class="MsoBodyText" style="margin-right:2.15pt;mso-pagination:widow-orphan"><span style="font-size: 10.0pt"><font face="Arial" color="#000080" size="2">PLIVA
184 began evaluating our own Year 2000 situation in early 1998. Under the
185 sponsorship of a Senior Management Board, a cross-divisional Project Team
186 was created to formulate a unified approach to our overall Year 2000
187 Project. Additionally, an aggressive awareness campaign has promoted
188 recognition of the need for a proactive approach to the Year 2000 Problem
189 at all levels. We are endeavouring to involve every business group,
190 division, department and employee within PLIVA.<o:p>
191 </o:p>
192 </font></span></p>
193 <p class="MsoBodyText" style="margin-right:2.15pt;mso-pagination:widow-orphan"><span style="font-size: 10.0pt"><font face="Arial" color="#000080" size="2">The
194 risk of Year 2000 Problems is not limited to our internal systems. Rather,
195 the greatest vulnerability lies in the possible failures of external
196 business partners and infrastructure service providers over which we have
197 limited influence. However, major initiatives are underway to ascertain
198 the compliance status of all business-critical vendors, suppliers, and
199 service providers and comprehensive contingency plans have been developed.
200 <o:p>
201 </o:p>
202 </font></span></p>
203 <p class="MsoBodyText" style="margin-right:2.15pt;mso-pagination:widow-orphan"><span style="font-size: 10.0pt"><font face="Arial" color="#000080" size="2">The
204 Year 2000 Project team has developed and produced a Year 2000 Program,
205 which details the internal process to be followed in addressing PLIVA Year
206 2000 issues. It is a comprehensive document that addresses both
207 information technology and other concerns and provides the framework by
208 which status is measured and reported. PLIVA is, therefore, concerned with
209 every aspect of exposure to risk created by Year 2000 compliance issues. <o:p>
210 </o:p>
211 </font></span></p>
212 <p class="MsoBodyText" style="margin-right:2.15pt;mso-pagination:widow-orphan"><span style="font-size: 10.0pt"><font face="Arial" color="#000080" size="2"><b><i>PLIVA’s
213 Year 2000 Project has five primary phases:<o:p>
214 </o:p>
215 </i></b></font></span></p>
216 <p class="MsoBodyText" style="margin-right:2.15pt;mso-pagination:widow-orphan"><span style="font-size: 10.0pt; color: navy"><font face="Arial" color="#000080" size="2"><b>Phase
217 I-Awareness<o:p>
218 </o:p>
219 </b></font></span></p>
220 <p class="MsoBodyText" style="margin-right:2.15pt;mso-pagination:widow-orphan"><span style="font-size: 10.0pt"><font face="Arial" color="#000080" size="2">Phase
221 I defines the Year 2000 problem and gains executive level support and
222 sponsorship. Year 2000 Project team was set up in PLIVA to develop an
223 overall strategy and to co-ordinate activity. This team initiated basic
224 research and began the process of investigating how the Year 2000 Problem
225 could affect the systems and procedures in corresponding areas. The
226 investigations have started and the standards for documentation,
227 compliance assessment, and testing have been developed. The standards for
228 all-new development, acquisitions, and services have been created. <o:p>
229 </o:p>
230 </font></span></p>
231 <p class="MsoBodyText" style="margin-right:2.15pt;mso-pagination:widow-orphan"><span style="font-size: 10.0pt; color: navy"><font face="Arial" color="#000080" size="2"><b>Phase
232 II-Inventory</b></font></span></p>
233 <p class="MsoBodyText" style="margin-right:2.15pt;mso-pagination:widow-orphan"><span style="font-size: 10.0pt"><font face="Arial" color="#000080" size="2">Phase
234 II encompasses preliminary problem determination, extending communication
235 and awareness of the Year 2000 Project throughout PLIVA, and compiling an
236 inventory. This inventory includes IT assets (i.e. hardware, applications,
237 operating systems, database software, embedded software, interfaces,
238 etc.), non-IT assets (systems, which are primarily laboratory and process
239 automation devices) and key business service and material vendors and
240 business processes. <o:p>
241 </o:p>
242 </font></span></p>
243 <p class="MsoBodyText" style="margin-right:2.15pt;mso-pagination:widow-orphan"><span style="font-size: 10.0pt; color: navy"><font face="Arial" color="#000080" size="2"><b>Phase
244 III-Assessment and Planning</b></font></span></p>
245 <p class="MsoBodyText" style="margin-right:2.15pt;mso-pagination:widow-orphan"><font face="Arial" color="#000080" size="2"><span style="font-size: 10.0pt">During
246 this phase each inventoried item is assessed to evaluate the risk relative
247 to the Year 2000 Problem. The assessment process defines the disposition
248 of each system, identifies priorities, and results in the development of
249 plans for the final two phases. Prioritisation is based on criticality to
250 the business, risk of failure, time horizon to failure, and dependence on
251 other critical inventory items. Once the inventory is prioritised, a
252 disposition is determined for each critical item</span><span lang="EN-US" style="font-size:10.0pt;font-family:Arial;mso-ansi-language:EN-US">;</span><span style="font-size:10.0pt;font-family:Arial">
253 &quot;Critical systems&quot; are those most important to the company's
254 global operations, followed by &quot;essential&quot; systems.&quot;<span style="mso-spacerun: yes">&nbsp;
255 </span>For each critical non-compliant item, a project plan is developed
256 that details resource requirements, vendor and product sources, timelines,
257 and identified testing procedures. These plans also address business
258 processes and identify key technologies that support them. Resources and
259 budgets for these projects have been allocated and accepted. <o:p>
260 </o:p>
261 </span></font></p>
262 <p class="MsoBodyText" style="margin-right:2.15pt;mso-pagination:widow-orphan"><span style="font-size: 10.0pt; color: navy"><font face="Arial" color="#000080" size="2"><b>Phase
263 IV-Renovation</b><o:p>
264 </o:p>
265 </font></span></p>
266 <p class="MsoBodyText" style="margin-right:2.15pt;mso-pagination:widow-orphan"><span style="font-size: 10.0pt"><font face="Arial" color="#000080" size="2">Phase
267 III entails the execution of Phase II decisions, i.e. retain as is,
268 repair, replace, retire or upgrade. Remediation of the non-compliant
269 systems continues throughout this phase of the project. Testing and
270 documentation standards are provided to ensure consistency of results in
271 this implementation phase. <o:p>
272 </o:p>
273 </font></span></p>
274 <p class="MsoBodyText" style="margin-right:2.15pt;mso-pagination:widow-orphan"><span style="font-size: 10.0pt; color: navy"><font face="Arial" color="#000080" size="2"><b>Phase
275 V-Certification<o:p>
276 </o:p>
277 </b></font></span></p>
278 <p class="MsoBodyText" style="margin-right:2.15pt;mso-pagination:widow-orphan"><span style="font-size: 10.0pt"><font face="Arial" color="#000080" size="2">The
279 most critical aspect of the Year 2000 Project involves testing and
280 certifying the results of all remediation efforts. Rigorous testing and
281 intensive efforts will be undertaken so that the systems are remediated
282 and will continue by end of 1999. This testing will attempt to verify that
283 all systems function correctly in both 20<sup>th</sup> and 21<sup>st</sup>
284 century environments. Testing extends to all interfaces with key business
285 partners. <o:p>
286 </o:p>
287 </font></span></p>
288 <p class="MsoBodyText" style="margin-right:2.15pt;mso-pagination:widow-orphan"><span style="font-size: 10.0pt; color: navy"><font face="Arial" color="#000080" size="2"><b>Where
289 Are We Now?<o:p>
290 </o:p>
291 </b></font></span></p>
292 <p class="MsoBodyText" style="margin-right:2.15pt;mso-pagination:widow-orphan"><span style="font-size: 10.0pt"><font face="Arial" color="#000080" size="2">The
293 Year 2000 Project is making steady and rapid progress on all fronts.<span style="mso-spacerun: yes">&nbsp;
294 </span>Approximately 80 % of Information systems have been converted to
295 SAP R/3, a global enterprise resource planning software system. The SAP
296 system is Year 2000 capable and has eliminated the need to update many of
297 existing information systems. All IT-Systems developed in-house are being
298 carefully scrutinised to ensure compliance with Y2K requirements. Any
299 systems not meeting our exacting standards will be adapted or replaced
300 well before the end of the year if necessary. PLIVA has completed all
301 major remediation and testing of important components.</font></span></p>
302 <p class="MsoBodyText" style="margin-right:2.15pt;mso-pagination:widow-orphan"><span style="font-size: 10.0pt"><font face="Arial" color="#000080" size="2">While
303 we are continuing to monitor and evaluate the progress of business
304 partners and infrastructure service providers on whom we rely, we cannot
305 guarantee the results of their efforts. Also PLIVA is developing
306 contingency plans for its critical vendors, customers and suppliers. These
307 plans provide for an increase in inventory to meet customer needs,
308 protecting the integrity of ongoing activities, identifying and securing
309 alternate sources of critical services, materials, and utilities when
310 possible and establishing crisis teams to address unexpected problems.
311 They will be tested, evaluated, and modified during the rest of the year,
312 as additional information becomes available. <o:p>
313 </o:p>
314 </font></span></p>
315 <p class="MsoBodyText" style="margin-right:2.15pt;mso-pagination:widow-orphan"><span style="font-size: 10.0pt"><font face="Arial" color="#000080" size="2">We
316 are convinced that the measures and projects we have undertaken will
317 ensure the continuity of our business, our business processes and
318 functional systems and plants throughout the transition period.</font></span><span style="font-size:10.0pt;font-family:Arial"><o:p>
319 </o:p>
320 </span></p>
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