2005 Annual Report

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2005 Annual Report MEDICOVER IN BRIEF

• Revenue for 2005 amounted to €59.2 million (€42.9 million) representing 38 percent revenue growth versus last year (17 percent). Excluding acquisition effects, the revenue growth amounted to 33 percent.

• Constant currency growth compared to last year amounted to 28 percent for the year

(excluding acquisition effects 23 percent). • Membership growth was strong with 50,800 new members added during year (22,900),

resulting in a closing member base of 190,700 (139,900), some 36 percent above last year’s level.

• The operating profit (EBIT) for the year amounted to €2.0 million (loss of €0.2 million).

• The operating profit before depreciation and amortization (EBITDA) for the year amounted to €5.7 million (3.0 million) or 9.5 percent of revenue (7.0 percent).

• The profit after tax for the year amounted to €1.4 million (loss of €0.9 million) equivalent to a

profit per share of €0.105 for the year (loss of €0.073) and the diluted profit per share was €0.104.

• Net cash inflow from operating activities, after tax payments, was €4.9 million for the year

(inflow of €2.4 million). Medicover Revenue Growth

2005 2004 2003 2002 2001

(€’000) 4th quarter 16,807 12,182 9,437 9,208 8,3493rd quarter 15,045 10,894 9,423 8,416 7,3102nd quarter 14,148 10,133 8,775 8,816 7,5991st quarter 13,236 9,697 8,907 8,824 6,843 Total 59,236 42,906 36,542 35,264 30,101 FINANCIAL CALENDAR 2006 Annual General Meeting – Tuesday 9 May 2006 th

3 month report 2006 – 17th May 2006

6 month report 2006 – 23rd August 2006

9 month report 2006 – 16th November 2006

Preliminary report 2006 – 27th February 2007

OTHER INFORMATION ISIN-code SE0000395170 Abbreviated name on the Stockholm Exchange O-list MCOV

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2005 Annual Report

TABLE OF CONTENTS 2005 Review

Message from the Chief Executive Officer Group Functions:

o Finance o Information Systems and Technology o Operations o Medical Services o Business Development o Legal and Corporate Services

Market Commentaries 2005: Clinics Business

o Introduction o Poland o Romania o Hungary o Czech Republic o Estonia

Laboratory Business

o Introduction o Romania o Poland o Clinical Trials

About Medicover:

o Vision, Mission and Operating Principles o Advisors, Auditors and Analysts o Organization o Management o Board of Directors

Financial Report 5 year Summary

Directors’ Report Auditor’s Report Consolidated Income Statement Consolidated Balance Sheet Consolidated Statement of Changes in Shareholders’ Equity Consolidated Cash Flow Statement Statement of Segment Information Notes to the Accounts The Share and Ownership

Contact details

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2005 Review Message from the Chief Executive Officer Fredrik Rågmark

Dear Shareholders,

Strong operational performance in 2005 During 2005 Medicover completed its first 10 years of operation. We are proud of how much has been accomplished over these ten years, and also of Medicover’s strong performance during 2005 itself: Medicover generated revenues of €59.2 million for the year (achieving 38 percent annual growth). Operating profit before depreciation and amortization (EBITDA) amounted to €5.7 million or 9.5 percent of revenue, compared to €3.0 million or 7.0 percent of revenue in 2004. Operating profit (EBIT) reached

€2.0 million and net profit after tax amounted to €1.4 million, both significant improvements on the prior year. More than 50,000 new members joined our clinics businesses, where revenue reached €47.0 million representing 36 percent growth, helping us to reach a year-end member-base of 190,700, an increase of 36 percent over 2004. Our laboratory business continued to achieve strong revenue growth, reaching €14.0 million for the year. This represents 51 percent growth, with 28 percent organic growth and 23 percent from acquisitions in Poland, complementing our geographic coverage and test range. Developments in our markets In 2005 the economies of Central Europe grew almost four times as fast as the economies of the euro-zone countries, boosted by the benefits of EU integration. Romania continued its progression towards EU membership, and the country is expected to join the Union from January 2007. Recent elections have brought new governments to power in Romania (November 2004) and Poland (September 2005). Upcoming elections in the Czech Republic are also likely to result in a new government. However, the political changes do not show signs of addressing the low levels of public satisfaction with state healthcare services. This situation, characterized by an increased level of disposable income and a lack of adequate healthcare services, creates an environment in which private healthcare services can thrive. However, we believe Medicover also has an important role to play in facilitating healthcare reform: We provide choice for local citizens and employers, help relieve demand pressure on the state systems and encourage the growth of structured private health funding, thereby increasing the levels of transparency and reducing corruption. Securing future success

We will retain our emphasis on continually improving our operational performance, and in 2005 we established the Chief Operating Officer (COO) role within Medicover with this goal in mind. The COO role has a distinct execution focus, allowing better management separation between shorter term operational excellence and longer term development.

At the same time, we recognize that our markets are characterized by constant change and innovation, with new competitors continually emerging. We need to keep developing and investing to secure our market leadership in the future. The following are examples of the initiatives we are pursuing to secure our leadership position:

Establishing Medicover’s insurance license. We anticipate increasing demand for individual voluntary health insurance (VHI) in Central Europe, especially in Poland and Romania. A health insurance license within the Group will allow us to structure our services for individual customers and thereby significantly enlarge our potential market.

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2005 Review

Developing a presence in the Polish private hospital sector. We have secured land for a green-field hospital in Warsaw and acquired a large minority stake in the only current private hospital in Warsaw. This will ensure Medicover has control over our provision of high quality inpatient care for our members, and we believe it will stimulate the growth of our individual (insured) client base.

Enhancing quality of clinical care. Our proprietary Electronic Medical Records (EMR) system features automated clinical guidelines for common conditions, which helps to guarantee that each patient will receive consistent, best-practice healthcare, irrespective of where and when the consultation takes place. Medicover managed close to two million medical visits in our service network in 2005. To further develop and maintain quality with such visit volumes, automation is a necessity.

Expanding Synevo’s range and coverage. We are continuing to expand the Synevo laboratory network, adding new testing capabilities and realizing economies of scale. We believe we have a unique ability to combine our laboratory network across the region with our quality assured network of clinics and physicians, thereby offering an increased range of services to the clinical trials industry.

Developing our organization and people

Medicover is the largest private sector employer of qualified medical staff in Central and Eastern Europe. For example, we directly employ more than one percent of all licensed physicians in Poland, and more than one third of all licensed occupational health physicians in Estonia. Overall we employ and contract with more than seven thousand physicians in our five countries of operation and two lines of activities, representing more than three percent of the entire licensed physician base in these countries. We consider the human talent base in Central and Eastern Europe a unique asset, both to the development potential of the region in general and to Medicover in particular. We employ on a full- and part-time basis some 2,000 young and dynamic people – the average age is 36 – but they are also well qualified, with more than 60 percent having at least one university degree. Our staff turnover rate remains below 10 percent, despite the new opportunities Central Europe’s doctors have for employment overseas. These talented employees need an organization within which they can improve their skills and demonstrate their abilities and we are proactive in providing this. The grouping of our businesses into divisions will make it easier for similar businesses to share insights and achieve synergies. The management processes we have introduced give us a common language for planning priorities and setting targets. Finally, our new performance management system, which includes 360 degree feedback for each senior manager, helps our managers to understand better their own strengths and weaknesses, and ensures they have ongoing incentives to develop. Contribution back to our communities At Medicover we have always believed that there is a social responsibility for businesses to contribute back to their communities. This is reflected in long term initiatives, such as the Romanian “Medicover Days”, which are annual 2-day gatherings of the Romanian medical community to present and discuss new developments in healthcare as well debate research papers. It is also reflected in our response to crisis, such as the tragic collapse of the trade hall roof in Katowice in January, where our ambulance staff worked side by side with the state emergency services. I am very happy to announce that the Medicover Foundation has now been established. This is a separate not-for-profit entity which will undertake further initiatives to improve health standards and healthcare in our communities. Medicover has contributed €50,000 as funding capital to the Foundation, and this donation has been generously matched by our Chairman, Mr. Jonas af Jochnick, with a personal contribution of €50,000.

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2005 Review

Conclusions and outlook I believe that Medicover has achieved significant progress in its first ten years. We pioneered quality-focused healthcare in Central Europe and remain the market leader, retaining our original quality focus. It is because of our commitment to change and innovation that we have come so far, and it is only through the same commitment that we will retain our leadership. We have a full development agenda for 2006, which will consolidate operational excellence in our current activities, continued attractive revenue growth rates and further improving financial results, and investing in the capabilities we will need to serve our customers in the future. All this is only possible through our dedicated staff working together in teams across our markets, and I would like to finish this commentary by extending a warm thank-you to all of them for their commitment to keeping Medicover the leading private healthcare company in Central and Eastern Europe. Fredrik Rågmark Chief Executive Officer - March 2006

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2005 Review

GROUP FUNCTIONS Finance Joe Ryan – Chief Financial Officer

Revenue

Revenue increased in 2005 by a strong 38 percent to €59.2 million (17 percent), 33 percent excluding acquisition effects (16 percent). At constant exchange rates this growth was 28 percent (19 percent); excluding acquisition effects, 23 percent (15 percent).

All business lines and all countries increased revenues. Membership growth was also robust in 2005, reaching a closing member base of 190,700, some 36 percent above last year’s level. The strong revenue growth is a result of the stronger employment market in our two key countries of operation,

Poland and Romania, where corporations are looking at the benefits that their employees receive, and are focusing on reliable and consistent healthcare services as an attractive employment benefit and also as a duty of a responsible employer. The additional factors of lower absenteeism and higher motivation are extra incentives for employers to provide and extend benefits. In the other smaller countries, revenue has also grown, however the relatively smaller size of these businesses results in small absolute contributions. It is encouraging to be able to report the continuing strong revenue growth, reflecting the opportunities within our markets.

The laboratory business has grown in Romania, due to organic growth and the full effect of the three new hospital outsourcing contracts in the middle of 2004 affecting both revenue and contribution. The Polish laboratory business has performed well, with the acquisition of Euro Lab Wroclaw Sp. Zoo at the end of March 2005 and the much larger acquisition of Medyczne Eurolab Sp. Zoo at the end of July 2005. The integration of these newly acquired laboratories was partially completed at the end of the year, and will be completed over 2006. During the year we established our Clinical Trials activities as a separate business unit. The Clinical Trials activities provide high quality laboratory testing and logistics support for clinical trials sponsored by pharmaceutical companies throughout the region. The laboratory services markets in Poland and Romania are fragmented and competitive; however quality of service is a problem with many operators, including some laboratories run by hospitals. Reimbursement rates are low compared to Western Europe or the US and the range of special or esoteric tests is much more limited. These factors have resulted in the opportunity for Medicover to provide services to hospitals, medical practices or partners that are seeking a reliable and consistently high quality service at a reasonable price.

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2005 Review

Medicover Revenue Growth, €'000 2001 2002 2003 2004 2005

4th Quarter 8,349 9,208 9,437 12,182 16,807

3rd Quarter 7,310 8,416 9,423 10,894 15,045

2nd Quarter 7,599 8,816 8,775 10,133 14,1481st Quarter 6,843 8,824 8,907 9,697 13,236

0

10,000

20,000

30,000

40,000

50,000

60,000

2001 2002 2003 2004 2005

€'000

4th Quarter

3rd Quarter

2nd Quarter

1st Quarter

Operating Result

The operating profit for the year amounted to €2.0 million, a significant improvement from the operating loss of €0.2 million in 2004. All quarters in 2005 showed positive operating profits as the revenue growth has passed through to profit contribution in the bottom line. Operating profit is an important milestone for the Group’s development, and has resulted from the growth and performance of our two major markets in Poland and Romania and the smaller markets gaining scale to make contributions.

Operating EBITDA for the year amounted to €5.7 million representing 9.5 percent of revenue, up from €3.0 million representing 7.0 percent of revenue in 2004. Medical costs have reduced by 1.0 percent of revenue to 61.5 percent in 2005 compared to 62.5 percent in 2004. The medical costs as a ratio to revenue differ over each market and business line, with the largest variation related to the stage of development and scale of the business. Scale effects will tend to improve the ratio. However, as a service business, our largest cost is staff and salaries, which is likely to have an upward real inflation over the coming few years. Staff costs equated to 41 percent of revenue in 2005, a reduction of 1 percent on the prior year level, and 1,587 staff were employed at year end on a full-time basis equivalence, an increase of 22.9 percent on the prior year.

Depreciation of €3.6 million (6.2 percent of revenue) reduced as a percentage of revenue by 0.6 percentage-points from 6.8 percent of revenue in 2004. This is due to a more intensive use of assets in 2005.

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2005 Review

Investment Activities

Investment activities provided a net profit of €1.4 million recognized in the income statement for the year. A credit of €0.3 million was recognized directly in shareholders’ equity as a reserves provision relating to the fair value adjustment of the unlisted portfolios. Amounts recognized as above in equity are transferred to the income statement when the related asset is liquidated. This activity has substantially been terminated, and the remaining assets carried at €2.7 million will be liquidated in 2006 and potentially a small amount in 2007. In 2005 €0.5 million of cash was received from investments sold.

Financial Costs

Interest costs over the year were €0.7 million which is in line with the prior year and mainly relates to the additional interest charge accrued under the IFC loan, which is related to EBITDA. The amount accrued for 2004 and 2005 will be paid in mid-2006.

Income Tax

The income tax charge for 2005 was €1.3 million, €0.7 million more than the €0.6 million charge in 2004. Excluding deferred tax movements, the overall charge of €1.4 million for 2005 was €1.0 million higher compared to the tax charge of €0.4 million in 2004 due to increased profitability of the underlying business units, mainly in the Polish and Romanian operations.

Net Profit

The net profit for the year was €1.4 million compared to the loss of €0.9 million incurred in 2004, which was reflected in the diluted profit per share of €0.105 (2004: loss of €0.073).

Operating Ebitda as % of Revenue, past 5 years in €'000

6,000 12.0%5,651

5,000 10.0%9.5%

4,000 8.0%

3,0187.0% Operating ebitda

3,000 6.0%5.4%

1,9582,000 4.0%

1,331 3.8%

1,000 2.0%380 1.3%

- 0.0%2001 2002 2003 2004 2005

% of revenue

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2005 Review

Acquisitions

During 2005 Medicover made a number of acquisitions, acquiring two laboratory businesses in Poland and a private hospital in Warsaw. Confusingly both laboratory companies were called Eurolab; however they were independently owned and had no linkage. In March 2005 we acquired 100 percent of Eurolab located in Wroclaw, and at the end of July acquired 100 percent of Eurolab located in Lodz. The Lodz business was a considerably larger business and transaction. Both businesses have performed to financial expectations post acquisition. The Eurolab Lodz acquisition includes payments over two years conditional upon certain financial targets being achieved. These payments have been accounted for in the acquisition price as based upon current performance we expect them to be paid. An additional contingent payment would be due if certain performance conditions are achieved, however this contingent payment has not been recognized in the acquisition price yet as the likelihood of the conditions being fulfilled can not be ascertained yet with sufficient reliability. During 2005 we also acquired just under 40 percent of Centrum Medyczne Damiana (CMD) a company based in Warsaw offering clinical and hospital services to a broad range of clients, Medicover included. CMD has been ranked the best private hospital in Poland in 2005 by Wprost in its “First private hospital ranking” and is recognized in the Warsaw market as a good quality provider. We believe that with Medicover's support CMD can be expanded and improved to support not only Medicover's members but also a wide range of customers. The investment has been accounted for as an associate. No gain or loss has been recognized in the 2005 income statement for the investment.

Cashflow

Cash inflows generated by operations before working capital changes and tax payments were €5.7 million for the year, an increase of €3.0 million compared to the comparable cash inflow of €2.7 million in 2004. Net cash inflow from operating activities after tax payments amounted to €4.9 million compared to €2.4 million for 2004, representing a conversion of EBITDA to operating cash inflows of 86 percent.

Cash net of short term debt amounted to €8.1 million at year end. €1.6 million was repaid to the IFC in mid-October upon maturity of the facility. The investment in fixed assets of €4.9 million was in line with the 2004 level. The investments in the year were directed into the laboratory activities in both Romania and Poland and the medical businesses in these two countries. The remaining cash balance will be used for further development of the business. The business is continuing to improve its cash generating capabilities.

Goodwill and Intangible Assets Amortization arising from IFRS 3 ‘Business Combinations’

From 1 January 2005 when the full application of IFRS 3 “Business Combinations” came into effect, goodwill arising from business combinations is no longer amortized and instead is subject to an annual assessment for impairment according to IAS 36 “Impairment of Assets”. Any impairment adjustments in the future are reflected as an expense in the income statement. The effect of this change is a reduction in the annual amortization charge by approximately €0.3 million. This change has no impact on cash flow. The standard also requires in place of goodwill the identification of individual intangible assets, such as customer relationships or contracts, and that these are then amortized, usually over a much shorter life than goodwill would previously have been amortized over. This in effect leads to a quasi amortization of what would have previously been accounted for as goodwill. The expense in the 2005 income statement for this ‘quasi goodwill amortization’ was €0.1 million.

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2005 Review

Share-based Payment From 1 January 2005 the Group has applied IFRS 2 "Share-based Payment". This standard requires an entity to recognize share-based payment transactions in its financial statements, including share option transactions. Under the transition rules in the standard, the adoption of the standard gave rise to 129,000 of the share options above being expensed or partially expensed in the income statement and the remaining balance will continue to be accounted for under the existing accounting policy, until expiry or exercise. The charge for share options to the income statement for 2005 was €82,000.

Shareholders’ Equity Shareholders’ equity increased over the year by €14.1 million to €23.5 million. Following the rights issue in mid-2005, an additional 1,780,703 shares were issued resulting in a total increase in shareholders’ equity of €11.3 million, €10.0 million of which was recorded as share capital and the remaining €1.3 million as share premium. Shareholder’s equity includes the profit for the period, the positive adjustment to reflect the fair value adjustments for unlisted investments, the positive movement in the translation reserve and cash received for the exercise of share options fulfilled with treasury shares.

Conclusion

Medicover is demonstrating that the required financial performance from our business can be achieved, whilst expanding and continuing to invest in our systems, products and services as well as integrating and growing the business through acquisitions. In 2006 Medicover will continue to show improvement in financial performance supporting our long term stability and growth. Information Systems and Technology Anthony Cameron – Group IT Director

Throughout 2005 we continued to invest in information systems and technologies which remain a key asset in supporting the rapid business development and growth of Medicover and of Synevo Laboratories. We further extended our system capabilities, particularly in support of clinical service delivery. The implementation of Electronic Medical Records (EMR) proved to be a particularly successful project. In Warsaw, Medicover clinics transitioned from being entirely paper based at the start of the year to wholly electronic medical records based by the third quarter. Contrary to the experiences of many other international healthcare organisations, the transition was achieved very smoothly and with the strong support of

clinicians throughout the EMR development and implementation phases. By the third quarter, 62 percent of clinic consultations throughout Poland were being performed by doctors utilising computer based medical records and with the support of clinical guidelines covering diagnosis and treatment of the most common health conditions. The EMR was subsequently implemented in Medicover Estonia and over 2006 it will be rolled out to at least two of the remaining three markets, including our second largest, Romania. We invested in the extension of our proprietary laboratory information system, to meet and exceed emerging international standards and to support the very latest of laboratory analysers which offer significant improvements in the range of laboratory tests and a reduction in turnaround times. The system was implemented in a further four locations in Poland as part of the process of introducing standard Synevo operational procedures in all our laboratories. We also added to our existing capability to interface laboratory systems with the information systems of our larger clients. For our smaller clients, we provided a PC based application to support them in managing their referrals and to electronically requisition laboratory tests and results. This solution provides a significant reduction in administrative workload for both Synevo and our clients and also ensures that clients have immediate access to test results.

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2005 Review

Across both Medicover and Synevo, we continued to develop tools and build our expertise in the analysis of statistical data and the effective utilization of derived knowledge for the improvement of patient services and delivery of optimum health care. In response to increasing demand for online services, we launched a new Medicover website, introducing a fresh and updated image as well as extending the health related content to include health calculators, newsletters and information resources. Growing numbers of our clients now use Medicover’s internet site in preference to the call centre, taking advantage of the ability to browse various options before booking an appointment with their preferred clinician at the most convenient time and clinic location. Receipt of an award for Medicover Poland’s site in the category “best new website of the year”, in a competition sponsored by Newsweek Polska, was a further indication of the overall success of our internet services developments. The year ended with all key 2005 objectives for information systems and technology having been achieved while restricting IT operational costs to 3 percent of annual revenue. Having updated our strategy for information systems and technology covering the period to 2009, we look forward with confidence in the ability of our current suite of corporate information systems to support strong growth by Medicover and Synevo Laboratories. The systems will also provide a firm foundation for solutions to meet the needs of planned new business lines including Clinical Trials and Hospital Services. We intend to maintain the current balance between internal IT resources and external suppliers, retaining within our company a small professional team of information and project management specialists while working in partnership with external suppliers for software development and technical infrastructure services. We enter 2006 confident that we will continue to build on past achievements and deliver the information systems and IT services essential to support another successful year for Medicover and Synevo. Operations Dr. Lajos Fábián – Chief Operating Officer

Following the year end reorganization of the Group, the Operations function covers execution of all current plans and projects in Medicover, excluding Synevo laboratories.

The main focus for 2005 remained on service quality. Our service delivery system had to manage a significantly higher member base and visit volume in 2005 compared to the prior year, with total number of visits across our five markets approaching 2 million for the year. Medicover is a service business and the level of our quality, internal and external, whether visible or not to our customers is a major contributor to our long term business

success and growth. In 2005 we finished re-organizing the medical service delivery organization, establishing two main separate functions, the “Business Line” function and the “Medical Service” functions not only in Poland, but in all of our markets. The “Business Line” function includes the management of all service delivery sites, such as our own clinics, network sites, on-site clinics, dental-practices, hospital partners and so on. The peer level “Medical Service” function on the other hand, is responsible for all quality assurance and quality control, medical guidelines, continuous medical education, etc. This structure allows us to recruit the most appropriate managers for each function, one which is more business and people management oriented and the other which is more scientific support and quality control oriented, demanding different competencies and skills.

We further developed our new performance management system during the year, involving all management teams. The quality of optimal medical care is the most important driver in this system, and is regularly measured by independent third party assessors and peer reviews.

Of a significant number of ongoing initiatives to further improve the quality control and cost management of our medical services, the most important contribution consisted of the Electronic Medical Records (EMR) system implementation and the further development of our medical guidelines. Both of these are further described below under the Group Medical Director’s section. Examples of other initiatives currently running are as follows:

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2005 Review

• We cascaded the new performance management system down the entire medical delivery

organization in order to improve skill recruitment, talent retention and development.

• We finalized an internal organizational benchmark process comparing our staffing models and ratios and established a system in order to avoid duplication of efforts and to enable the identification and implementation of best practices across the entire organization.

• We established internal capability to prepare the medical delivery system for entering into “inpatient” care, primarily in Poland, and also developed a core hospital management team in order to be able to cope with increasing resource demand in this field.

• We further strengthened and upgraded our medical services and business line middle management in all markets.

Medical Services Piotr Soszynski – Group Medical Director

In order to further strengthen Medicover’s commitment to providing quality service to our members, a Medicover Group Medical function was established in 2005. The Group Medical Director integrates medical service delivery and operations on a corporate level, being primarily responsible for the co-ordination of overall quality assurance, organization of services, utilization and cost optimization, as well as for the sponsorship of new technologies and systems implementation, which provide support for physicians and medical staff. In addition, the Group Medical Director plays a key role in supporting various scientific, medical and ethical aspects of the Medicover business.

During 2005 we continued several initiatives directed at organizational effectiveness and quality of service. Besides further rollout of our performance management system introduced in 2004, our main focus was on information technology and quality improvement projects. We continued the development of Electronic Medical Records (EMR), achieving an advanced coverage in 2005 in Poland, successful implementation in Estonia, piloting in Romania, while preparing the launch in Hungary and in the Czech Republic. This will enable a better and faster service for our customers, improve the efficiency of medical record retention and retrieval and most importantly bring information systems technology aids to diagnosis and treatment of disease, improving consistency and quality of service.

We continued to develop and implement scientifically backed, evidence based medical guidelines, in the first phase for the most frequently diagnosed diseases that can be translated into information systems algorithms, serving as a background decision support system integrated into EMR and assisting the whole medical delivery chain. In 2005 we achieved coverage for the top 90 most frequently handled medical conditions and we are further continuing this activity in 2006. EMR with integrated, and continuously reviewed medical guidelines, will serve as a powerful tool to ensure the quality of care given by our own physicians, as well as in our third party contracted network, ensuring high quality optimal medical care to all of our customers.

Other important quality-oriented activities expanded during 2005 were:

• We continued international benchmarking of quality control measures between Medicover locations, focusing on standards of service, access to care and customer satisfaction. Additionally, development of Key Performance Indicators in clinical care and outcomes will have a positive impact on the quality of Medicover healthcare.

• We further developed systems for continuous medical education for physicians. In all countries, clinic employees attended extensive client service training, which resulted in improvements in client satisfaction rates.

• We launched a project to synchronize Medicover’s occupational health services, develop an integrated IT system supporting service delivery, and capitalize on a common regional strategy in this important business segment.

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In 2006 we will continue our focus on optimal care provision for Medicover’s members while managing costs; EMR rollout to other countries and locations, together with the extension of our international guidelines for another set of diagnoses; further strengthening education and performance of our medical staff as well as quality management and development of our Quality Policy and Standards for services and clinical outcomes. Business Development Richard Sands – Group Business Development Director

The Business Development function supports the rest of the Medicover organization by identifying opportunities for long term, profitable growth, and positioning Medicover to take advantage of them. The principal activities are: 1. Analysis: Evaluating developments in markets and competition, and identifying future opportunities for Medicover. 2. Influencing: Lobbying regulators to create environments in which private healthcare can develop successfully.

3. Relationship building: Working with financial companies, services providers and other business partners to provide joint products and services. 4. Capability building: Coordinating Medicover's discretionary resources to create the skills and capabilities needed in the future. 5. Change management: Supporting the Chief Executive Officer (CEO) in leading the group through the multiple changes implied by the above. Most of these activities are structured as specific projects, run and managed by staff temporarily assigned to these tasks. The activities of the business development function during 2005 can be divided into two streams: The first stream concentrated on analyzing new business areas for Medicover to develop in future years. The second stream concentrated on preparing Medicover’s organization and management processes for future growth. New business areas In the early part of 2005 we completed our analysis of the opportunity to provide high quality hospital services in Warsaw. The positive assessment of this opportunity, both as a service to our clients and as a future source of profitable growth for Medicover, is reflected in the actions we have already taken to invest in hospital capacity, and to commence development of Medicover’s own greenfield hospital in the city. The second area analyzed was the opportunity to expand our range of services for the Clinical Trials industry. Synevo has been experiencing increasing demand for central laboratory services and we have established a separate business unit in Poland and Romania to serve clinical trials clients. The Clinical Trials unit will also provide Site Management services, cooperating with Medicover’s network clinics to identify patients to participate in clinical trials, and ensuring that the trials are conducted to the highest quality standards. The third area analyzed was the provision of health insurance. We anticipate that, as the Central European economies mature, many more individuals will wish to secure high quality private healthcare for themselves and their families, and that health services structured as insurance will be the optimal way to meet their needs. We have commenced the process to obtain a health insurance license and we are developing new products and distribution channels to meet the needs of health insurance customers.

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2005 Review

Developing Medicover’s organization Developing the new business areas just described will require focus and commitment. However success in new business areas must not be achieved at the expense of continuing strong performance from our current businesses. We have made a number of changes to our organization and processes to help us simultaneously achieve excellent short term operational performance, and long term full potential of our growth opportunities. This can be illustrated by the introduction of the Chief Operating Officer (COO) role for all Medicover clinics businesses and the new Hospital business in Poland. The COO focus is on the current year’s performance ensuring operational plans and budgets are achieved. We have also developed and implemented a Balanced Scorecard tool as well as further developed our project management resources.

Legal and Corporate Services André Lindekrantz – Group Legal Counsel

Medicover Group operates in the CEE Region throughout Poland. Romania, Hungary, the Czech Republic and Estonia. Since the fall of communism, all the aforementioned countries have gone through a process of rapid economic growth accompanied by far-reaching changes and development of their legal systems. In addition, the accession of Poland, Hungary, the Czech Republic and Estonia to the European Community caused major changes in the legal environment, which still requires adjustments and further development of administrative systems to support the relatively recently implemented European Community rules and directives.

In this rapidly changing legal environment, the function of Group Legal Counsel comprises not only day-to-day corporate administration with respect to the operating and holding companies within the Group but also support to the Board of Directors and senior management in developing the strategy of the Group. The primary task is to ensure that all commercial activities are conducted within the framework of local and European legal and ethical rules. The aims are:

• To support business decisions from a legal point view.

• To identify potential legal risks of the operations of the Group in the relevant markets, both today and in the future, and assessing these legal risks in relation to commercial goals of the Group.

• To take necessary initiatives to mitigate such risks.

• Active participation in the decision making process of the Board of Directors and senior management by providing legal expertise and advice.

• Ensuring quality and cost-efficiency of local legal assistance.

During the last year, the main task for the group legal function was to actively participate and provide legal advice in connection with the preparation for the rights issue (completed in May 2005), by which the share capital of the company was increased by approximately €10 million euro, as well as several acquisitions and mergers, performed by or within the Group, and contract negotiations with clients and partners of the Group.

By developing the internal legal resources of the Group and ensuring the quality of the external legal advice, today the Group is prepared to take advantage of the rapid economic growth in Central Europe and to continue its operations and implement its growth strategy in conformity with local legislation.

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2005 Review

MARKET COMMENTARIES Clinics Business Introduction to Medicover Healthcare Services Business Model 2005 was a strong year for our Clinics Business. Revenue reached €47.0 million which represented a strong 36 percent growth versus the prior year. Membership growth was correspondingly strong with more than 50,000 new members joining during the year, reaching a year-end memberbase of 190,700. Medicover is much more than a health service provider. We seek to be part of the healthcare infrastructure in the countries where we operate, ensuring that all funds invested through Medicover in healthcare deliver maximum health benefit. Medicover’s Clinics Business model is unique in combining all the following features: 1. It is an integrated model, combining the raising of funds for healthcare, the allocation of those funds and the provision of health services. Only an integrated model can maximize health benefits: a standalone private clinic has no incentive to control the costs to patients of the services it provides. A standalone fund raising organization has no effective mechanism to control the quality of the care provided. By being both a fund raiser and service provider Medicover overcomes these limitations. 2. Medicover serves two levels of customers (employers and employees) and success derives from exceeding the expectations of both groups: through corporate relationship building and demonstrated return on investment, Medicover grows demand for quality healthcare services amongst employers. Medicover also develops the value of business with each company based on the service quality and satisfaction experienced by each individual user. 3. Medicover takes a long term perspective, based on prepayment for health services. It is important for our members that we invest today to ensure their health in the future, rather than spending only to address existing medical problems. This in turn is important for our corporate customers, who recognize that a healthy workforce is more motivated and productive. Finally it is important for Medicover itself, since we invest in building knowledge and creating systems to provide healthcare more efficiently in the future. 4. It is a network business. In addition to our own clinics Medicover works with independent doctors, third party clinics and hospitals whose services are complementary to our own. It also works with financial organizations such as banks and insurers to access wider channels for fund raising. In this way Medicover maximizes service and choice for its members, and co-ordinates service delivery with other providers in the healthcare industry. 5. It is a multi-country business. Apart from Medicover, the healthcare sectors of the Central European countries are almost entirely separate from each other. Medicover is therefore uniquely placed to achieve economies of scale above the country level and, importantly, to share knowledge and experience between national markets. Medicover also has an unrivalled advantage in its ability to serve multinational corporations operating throughout the region. The result is a healthcare business which is both complementary to the state systems in Medicover’s national markets, yet independent of those systems for its success. It is a vital position to occupy in relation to these economies at their current stage of development, manifested by rapid economic growth with increasing expectations from both citizens and employers regarding the availability and quality of healthcare, and state health systems which lack the technology, responsiveness and funding necessary to be able to meet those expectations. Each of Medicover’s markets has its specific features, and each business is at a different stage in its development. The following sections describe how our national businesses are tailored to their environments, and how they have developed during 2005. The underlying business model and approach is common to all.

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2005 Review

Poland Agnieszka Szpara – Managing Director

In 2005 Medicover Poland’s revenue increased by 40 percent to €33.4 million in comparison to the prior year; in constant currency terms revenue increased by 23 percent. The prepaid membership base increased by 35.5 percent from 93,200 to 126,300 members at year-end.

The Polish economy in 2005 In 2005, the growth of the Polish economy slowed in the first half of the year and accelerated during the second half, with an overall GDP growth of 3.2 percent (compared to 5.4 percent in the prior year). Although there was an increase in foreign direct investment (+7.5 percent) and net exports (+4.2 percent), the main reason for the GDP slow down was a reduction in private consumption (-1.7 percent) and domestic demand (-4

percent). The period immediately following EU accession (June–December 2004) and the transitional period (January-June 2005) did not portray real trends in economic development. Consequently, year-end statistics and more importantly 2006 statistics will more accurately reflect the underlying economic conditions in Poland. The 2005 second half growth was mainly driven by the positive development of three economic performance indicators: net exports, low inflation and a good balance of payments. Industrial production grew by 9.2 percent compared to 13.7 percent in 2004. Consumption started to accelerate during the last quarter of the year and, combined with a lower unemployment rate (17.6 percent in December), stimulated real wage growth, which has a growing effect in real terms (0.3 percent in December) and supports growing productivity in Poland. The Polish Zloty, which was expected to suffer from political uncertainty due to parliamentary and presidential elections in the second half of 2005, exceeded market expectations and strengthened. By the end of the year, the Zloty depreciated by 8.6 percent compared to the USD (3.25/$ in December) but was 5.6 percent stronger compared to the euro (3.85/€). The outlook for the Zloty is still positive, although the political situation may impact the value of the local currency.

Healthcare market and reforms

In 2005 the healthcare market development was based on two main processes: public healthcare development, which was battling unresolved fundamental issues regarding financing and provision planning, and private healthcare development, which was supported by organic decisions of customers but was struggling with the lack of regulations around public-private partnership.

2005, being the year of parliamentary and presidential elections, was marked by politicians’ plans to develop the healthcare industry, creating hope and public debate. Market participants were expecting solid plans and commitments about potential reforms and furthermore decisions regarding reorganizing the system. The reform plans voiced by the politicians were aimed at restructuring public hospital debt, calculating and defining real case/procedures costs, defining a guaranteed basket of services covered by obligatory health insurance and preparing the market for additional complementary health insurance. The Law and Justice (PIS) central-right party won the elections and declared their main objective was to have more control over the state budget.

In 2005 the Polish healthcare system continued to suffer further from unresolved issues relating to the public insurance and provision systems, mainly regarding hospital services. The governing Health Ministry had no political interest from the present governing coalition in making difficult decisions about the healthcare financing system. The status quo was expected to be challenged by the new coalition taking over government in October. To date, however, the new central-right (PIS) government has proposed solutions which are very general, have no elements of real change and require a long term planning process with a group of experts. At the end of the year, the new Ministry of Health faced a crisis situation when the primary care doctors’ coalition went on strike against the proposed capitation fee for 2006.

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2005 Review

The delaying of major reforms will support the continuation of under funding in the system, as well as an inefficient distribution of existing resources. The existence of one centralized National Health Insurance Fund (NFZ) creates a monopoly in the public funding collection and spending, without any pressure for efficiency or quality improvement. The increase in mandatory payroll health contributions by an additional 0.25 percent was aimed at increasing the overall public budget. In combination with higher employment figures (+1.2 percent) the public funds were enhanced by an inflow of an additional PLN 1.4 billion. The NFZ funds constituted 58 percent of total healthcare spending in 2005, with the out-of-pocket spending (OOP) accounting for 32 percent of market value while the remaining 10 percent comprised other expenditures. The two main streams of OOP spending related to the pharmaceutical co-payments and unofficial payments for extra services to public entities, mainly hospitals (the so called “Grey Zone’”). The value of the Grey Zone, estimated at PLN 8-10 billion, means there is a need to introduce long term reforms converting these payments into transparent structured payments, i.e. insurance products or corporate benefits.

The healthcare industry in Poland started 2006 with a list of open issues which need to be addressed by the new government. The public’s expectations of the so called “basket of medical procedures” refunded by NFZ, a sensitive topic in itself, will create significant discussions during the coming months.

Developments in Medicover Poland in 2005

Medicover Poland’s revenue increased by 40 percent from €24.0 million in 2004 to €33.4 million in 2005. Constant currency revenue growth was 23 percent for the year. Our estimate of total market growth in 2005 is about 25 percent, indicating that our growth is consistent with the total market growth. The premium business was the main contributor (88 percent of total revenue) to this increase in net revenue.

Total membership increased by 35.5 percent from 93,200 members at the end of 2004 to 126,300 in December 2005. This increase was largely due to new sales, which were twice as high compared to the prior year and was comparable with the previous year’s growth of the existing portfolio. The main reason for the increase was the signing of high membership volume contracts with nationwide, network employers as well as product upgrades and extensions generated within existing client portfolios. This illustrates the continuing positive outlook of employers regarding private healthcare as a result of the development in the local economy and growing demand for employee benefits as part of remuneration packages.

Disenrollment from the existing client portfolio was on a comparable level in 2005 with that of 2004. The growing competitiveness of the market illustrates the increasing interest in the healthcare industry, involving more new players i.e. insurers, more focus on healthcare benefits in employers’ decisions and the improving economy. Strengthening of our brand was the main contributing factor to our success in the highly competitive environment.

Despite the continued price pressure caused by the economic environment, we have largely been able to maintain our price levels by introducing new benefits and performing extensive work on client retention and loyalty programs.

New clinics and expansion of infrastructure

Medicover Centers: As a response to a maturing market, growing customer expectations and a necessity to differentiate on service levels, a new Medicover Center was opened in Warsaw, replacing one of the former centers in the main business area. The new center has 1,300 m² and increased our total medical space in Warsaw by 15 percent.

Growing market demand in the cities outside the capital city resulted in an expansion of existing space capacity in Łodz, the most dynamic premium market in 2005. The new area of 150 m² was utilized to provide high quality diagnostic services including x-ray and ultrasound.

Dental: The dental service is highly rated by Medicover members as an extension of the regular medical coverage. We now provide dental services in Warsaw, Wrocław and Gdańsk through modern dental centers, offering comprehensive dentistry techniques and equipment. In 2005 good results were achieved due to the promotion of our implant services.

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On-site clinic locations: The network of Medicover’s centers, staffed by our own employees, which are located on the premises of larger employers grew by two new locations in 2005: at a Kredyt Bank branch in Warsaw, member of the Belgium KBC group; and at a Philips lighting division in North-West Poland. Subsequently, the on-site clinics started to cooperate with local National Health Funds, contracting services for public patients as a supplementary source of revenue. Very positive trends were recorded by the existing on-site clinics with contracts growing in value by 64 percent.

This increased the overall number of Medicover owned and operated facilities from 27 to 29 in Poland.

Network providers: The number of Medicover affiliated providers rose from 289 clinics in December 2004 to 302 clinics in December 2005. The number of cities where there are affiliated providers increased from 180 to over 215. Affiliated clinics must conform to Medicover’s accreditation program, which was developed jointly with the best medical quality experts. The network of affiliated partners increases its value year on year as a complementary service to Medicover clinics, but also as a stand alone coordinated system. The increase in network partners is stimulated by the growing number of patients eligible for the network products and services, such as through our relationship with Kredyt Bank, accounting for 220 points of service across the country.

Pharmacy: The first Medicover pharmacy store was opened in April 2005. The store is located next to one of the Warsaw Medicover Centers. Our aim is to offer Medicover members convenience and rapid service, i.e. no waiting time and drugs prepared on time. Innovative solutions were introduced in order to provide pharmaceuticals in other Medicover Centers. Each Center is equipped with a point for prescription collection, which are afterwards transferred to the pharmacy and pharmaceuticals are delivered to the customers at a specified place. This is the best option to cover all Medicover customers’ needs and create a real value chain of services.

Clinical guidelines: In 2005 we continued the development and introduction of clinical guidelines to support best-practice among our physicians. The clinical guidelines are prepared by Medicover’s medical best practitioners in knowledge sharing working teams and are verified and approved by the Medicover Medical Advisory Board. The Medical Advisory Board consists of highly regarded medical experts in the Polish medical community. In 2005, based on effectiveness criteria, we selected and prepared an additional 61 clinical guidelines. Moreover, in 2005, all existing guidelines were converted into Information Systems algorithms and integrated into our Electronic Medical Records.

EMR (Electronic Medical Records) is a fully operational IT system for doctors and medical management. This includes components covering all necessary data collected during a doctor’s visit (symptoms, diagnosis, referrals, and pharmaceuticals), tests results, referral feedback, Occupational Health certificates etc. The EMR functionality increases the quality of service by offering complete historical information to doctors as well as promoting best practices. EMR enables medical management to track doctors in compliance with clinical guidelines, verify the outcome of medical treatments and navigate the costs associated with defined diagnoses. The EMR tool creates the platform to introduce Evidence Based Medicine into all levels of medical procedures. The EMR functionality was operationally introduced at 200 working stations in Warsaw clinics. Further expansion is planned for 2006.

Professional training: In 2005 Medicover Poland employed 800 physicians, both full-time and part-time. This represents more than 1.1 percent of the Polish physician community, so we believe our training programs and professional standards can serve as a precedent for other private and public organizations. Our medical education system is a critical development tool for medical professionals. Medicover emphasizes the Continuous Medical Education program for all physicians. In addition, we organized internal and external seminars involving leading medical experts. In 2005, Medicover continued its highly regarded National Conference for Physicians, open to all physicians, offering doctors a variety of training sessions as well as an introduction to Medicover quality assurance procedures and standards. In addition the necessity to improve skills of middle management was addressed by opening an internal Medicover Academy called Nucleus. As opposed to standard management training courses, the Medicover Academy focuses on the areas specific to medical management, medical operations, HR skills and capabilities, areas which are very unique and defined as specific know-how of the Medicover organization.

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Call Center and on-line appointment booking: In 2005, the central telephone information system was further developed. Besides the main functions launched in 2004 (the ability to schedule doctors’ visits, receiving information about services nationwide as well as the medical advice function staffed by doctors and nurses) new functionalities were adopted in 2005. The first new functionality enables small and medium sized enterprises as well as individual clients to obtain professional back office services to manage their contracts. Secondly, central clinic appointment booking facilities are offered to clients via internet services, resulting in the comprehensive contact center (subsequently reminders are sent by sms, and e-mail). The new 24-hour call center is based on a comprehensive telecommunication platform and is operated by 60 highly trained staff, handling in excess of 75,000 telephone calls per month.

Web site based health management tools: In 2005 Medicover developed and introduced a wide range of functionalities for patients and customers, both individual as well as corporate. One practical improvement was the on-line booking system for all Medicover Centers in Poland. Customers can get web site based medical information and advice, presented in a modern and user-friendly way. The new Medicover Poland web site was named best new web site in 2005 at the Webstarfestival (www.webstarfestival.pl), a prestigious marketing event. It includes “Stay healthy and active with us”, under which we provide various types of information, advice, and personal health calculators enabling our clients to manage their health on a daily basis. Our “Sport and Health Program” increased its partners and became a more advice driven decision support tool. The interactive features of the system will enable our clients to contact Medicover, whether at home, on vacation or in the office.

Competition

Competitors invested in increasing their networks and service provisions in 2005. We regard competition as positive in helping the overall market growth. In 2005 the larger private healthcare organizations maintained the initiative, the Association of Private Employers in Healthcare, with a focus on protecting the rights of private healthcare providers and also to support policy development for healthcare reform. The visible results of the Association were seen in its consultation on new regulations prepared by the Ministry of Health before enactment.

In Poland, our two main competitors are Lux-Med and Centrum Medyczne. According to our own estimates, we have maintained our relative business size, with Medicover Poland being approximately double their size in value. This is the result of offering more developed, higher premium products. Both of these competitors actively developed their national networks of clinics in 2005 by opening new regional locations.

In 2005, insurance companies decided to enter the health insurance market more visibly. The growing demand from individuals stimulated by the drive for alternative solutions to public services, underlines the future growth potential of this market segment.

Products

In the course of 2005 Medicover developed and launched new products as well as achieving revenue growth from high-end products. For example: the Platinum Program as a choice for those who expect a comprehensive medical product supported by guaranteed hospitalization access in the best international hospitals in the event of diagnosed critical illnesses; the “Senior Home Assistance”, a product targeting parents of Medicover members, providing full scope of medical services at various levels, but more importantly 24-hour home assistance service based on individual monitoring devices, allowing rapid medical intervention; and a “Yellow” card, a product dedicated to corporations allowing access to Medicover Centers with a limited scope of services, resulting in a lower unit price.

In line with our corporate mission statement, active health management programs were also introduced: “Wellness” a program that relates to employees of corporations, helps individuals to monitor and change their lifestyle based on privatively accessible intranet decision-making tools, and helps HR management to benchmark the well-being of the employee population versus the average population. The “Health Index” is a tool providing employers with measures of the health status of a given population and the evidence-based prophylactic or prevention programs to diminish negative trends.

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Outlook for 2006

In 2006, economic growth should follow the trend of long-term increase, although growth will probably not exceed 5 percent. Growth is likely to be fuelled by increasing domestic demand, investment and private consumption. In addition, lower interest rates and improved utilization of EU funds will also support growth. A further appreciation of the Polish Złoty could negatively influence the competitiveness of local producers. The unemployment rate will continue to decrease, as in the second half of 2005, resulting from a growing level of inward investments.

In 2006, the market development will primarily depend on whether political stability returns, which after the elections and lack of support from the government has resulted in a failure to push forward economic reform. The main expectation however focuses on the Health Care Minister to define a main stable development path and draft the necessary regulations.

Medicover Poland will continue to develop its national service provision. We will improve our existing services, and add new clinic capacity in several cities across the country. Also, in line with the continuous development of service integration provided to our members, we will launch more extended pharmacy services, dental pre-paid products and more specific employee assistance programs. More focus will be provided into individual market segments and cooperation with banks and insurers.

Romania Gabriel Ionescu – Managing Director

In 2005 Medicover Romania’s revenue increased by 54 percent to €6.5 million, while the prepaid membership base increased by 44 percent from 24,100 to 34,800 members at year-end, demonstrating the market potential in Romania.

The Romanian economy in 2005

The Romanian economy performed well during 2005 with GDP growth of 4.0 percent. Inflation over the year has not reduced to the expected level, with consumer price inflation at 8.5 percent year on year at the end of 2005.

The strengthening of the local currency (Romanian lei) compared to the euro continued, from over 4.00 to less than 3.45, with an annual average of 3.62. Mid-year 2005, Romania successfully redenominated its currency, removing four zeros.

The largest privatization in 2005 was the Romanian Commercial Bank which was purchased by the Austrian Erste Bank for over €3.4 billion. At the same time, the Savings Bank’s privatization was blocked due to the much lower than expected offers received by the government. Several other privatizations were successfully completed such as electrical and gas distribution companies. A new stand-by agreement was not signed with the International Monetary Fund but negotiations will continue in 2006.

No major legal changes occurred in 2005, however a set of 17 laws related to healthcare were debated at length and were finally issued early in 2006 as Governmental Emergency Ordinances. The old private health insurance law was not yet operational due to missing application norms, while a new law has already been proposed, however with no major improvements or changes compared to the previous law. The promised basic package to be offered by the National Health Fund has not yet been drafted. At the end of the summer, a new Minister of Health was appointed.

Political changes

After general and presidential elections in late 2004, a new government was appointed and promised to deliver all the requirements for Romania’s EU accession in January 2007. The main focus was on corruption related issues, with several institutional changes made. Despite evident improvements in the public authorities’ efficiency on corruption, there have been no successful major corruption court cases.

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Market development and trends

The size of the Romanian healthcare market measured per capita remained among the lowest in the region. During 2005, the public health budget was increased aimed at, among other objectives, paying 2-3 years debt built up to pharmaceutical suppliers. Plans for major restructuring of the public healthcare system were initiated. Among other plans, it was decided to re-organize only 8 major emergency hospitals while other emergency hospitals would be transformed into triage emergency hospitals. In 2005, the average salary for healthcare professionals increased by 48 percent in euro terms. Even so, the average salary is just below €200 per month, which does little to help reduce corruption within the public health system.

2005 was the year of the launch of private health insurance. After the Medicover-Aviva launch was initiated, we were followed by Interamercian, Allianz, Generali, Asiban and three additional insurance companies announced launches for 2006. The main private providers of medical services in Bucharest opened new facilities and offered new services in 2005. During 2005, the corporate market for pre-paid healthcare in Bucharest is estimated to have increased by around 25 percent in value terms, which positions Medicover with an approximate 34 percent market-share in Bucharest.

Developments in Medicover Romania in 2005

In 2005 Medicover Romania’s revenue increased by 54 percent to €6.5 million, while the prepaid membership base increased by 44 percent from 24,100 to 34,800 members at year-end, clearly showing the growth potential in Romania.

In February 2005 we launched Vero as the private health insurance product brand, developed in partnership with Aviva. Media coverage was strong and public interest was higher than expected.

Outlook for 2006

We expect the continuing strong performance of the Romanian economy will grow demand for quality healthcare services as an attractive component of remuneration packages. We will continue to grow our corporate member base, both within existing corporate clients as well as through new accounts.

We will continue to add to our product and services offering, seeking to meet the increased demand and expectations of our customers. We expect to further build on our health insurance product in cooperation with Aviva. We will closely evaluate the results of this and in addition draw conclusions for our other markets.

2006 will be the year of regional expansion to cover a wider area of Romania; we plan to open new Medicover facilities in the major cities around Romania and we will upgrade the partnership status with several of our network partners which will help our partners and us to grow and provide better healthcare services.

We will also continue to develop our network of third party affiliated providers (outpatient and inpatient), further developing our capabilities to serve our corporate clients across the country.

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Hungary Peter Grossmann – Managing Director

In 2005 Medicover Hungary’s revenue increased by 16 percent to €3.1 million. Membership grew by 2,800 new members, reaching a year-end membership base of 8,000.

The Hungarian economy in 2005

GDP growth of 4.1 percent was recorded in 2005. The inflation rate for 2005 was 3.6 percent. The unemployment rate climbed from 6.3 percent to 7.3 percent and productivity and industrial output grew by 7.7 percent in 2005. The Hungarian Forint strengthened during 2005 – the average euro exchange rate was HUF 248.0 in 2005 compared to HUF 251.8 in 2004 - the central bank continued cutting rates, reaching 6.0 percent in 2005, down from 9.5 percent in 2004.

Size of the Hungarian healthcare market

The current level of spending on healthcare in Hungary amounts to 7.8 percent of GDP, which is at the high end in the CEE region and equal to the UK rate. However, the absolute GDP per capita is half of the UK level and the distribution of funds is different. The National Health Insurance Fund (NHIF) accounts for the majority of all healthcare expenditure, with a 70 percent share.

Medical services covered neither by the NHIF nor by the state are classified as out-of-pocket expenses, which can be estimated at some 1 to 3 percent of total healthcare expenditure.

There are only a small number of privately owned clinics, managed by medical professionals who are primarily employed at public hospitals. Additional private health insurance funds, which are also a means to finance Medicover services, are available and their subscribers benefit from generous tax exemptions.

In April 2005, as part of the so called “Hundred Steps Programme”, the government announced reform measures including in the following areas: emergency services, cancer prevention, controlling prescription and consumption of pharmaceuticals with an objective of achieving “real” contribution payments for every single insured person. A three level health insurance system which could also significantly increase Medicover’s potential client base is currently under discussion; however any real changes in the healthcare system can only be expected after the general elections to be held in April 2006. Developments in Medicover Hungary in 2005

Premium revenue representing 82 percent of the total net revenue in 2004 and 85 percent of the total net revenue in 2005 increased by 21 percent from €2.2 million in 2004 to €2.6 million in 2005.

We opened a medical facility on the Buda side of Budapest, located at an office development site, which has been well received by our clients.

We have entered into co-operation with Aranykor, one of the largest pension fund managers in Hungary, to provide a tax efficient means of funding Medicover’s services.

Outlook for 2006

GDP growth is likely to remain at around 4 percent and inflation is expected to decrease further. After the elections in April, the new government, regardless of whether right or left wing, will have to act decisively on reducing the budget deficit. This may bring about the long expected, inevitable healthcare reform.

Given Medicover’s growth expectation, the current two Budapest facilities will reach their capacity limit by the end of the year. Consequently, we will be reviewing the alternatives for establishing further service points in Budapest.

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We aim to leverage the opportunities provided by our existing client portfolio and to seek new corporate accounts. Product enhancement and development will support this strategy by adapting our services to local market needs. Czech Republic Marcel Toporcak – Acting Managing Director

Revenue in the Czech Republic for the year amounted to €2.1 million, representing 4 percent growth compared to the previous year.

The relatively low growth is the outcome of ongoing restructuring of the revenue stream with focus on growth in premium sales (+ 10 percent) and occupational healthcare (+ 16 percent) and a decline in fee-for-service business (- 12 percent).

The membership base increased by 2,500 members in 2005, to a year end base of 14,800 members.

The Czech economy in 2005

The Czech Republic remains attractive for foreign direct investment (FDI). The carmaker Hyundai announced that it is to build a new car plant in the Czech Republic. Over 60 percent of the Czech Republic's exports are now directed to the EU15. GDP growth is estimated to have reached 4.9 percent in 2005. The average rate of unemployment remained high at 9 percent despite solid GDP growth. Consumer price inflation remained stable at 1.9 percent year on year. Strong export performance means that the current-account deficit is expected to be around 3.3 percent of GDP in 2005.

The political sensitivity of public finances (healthcare and pension reforms) left the fiscal deficit as a key threat to medium-long term economic stability and EMU targets. Key reforms of healthcare and pension systems have been postponed.

Political outlook

The general election in June 2002 created a coalition government of the Czech Social Democratic Party (CSSD), the Christian Democratic Union-Czechoslovak People's Party (KDU-CSL) and the Freedom Union (US), with a majority of two seats. In June 2004 the government, led by Vladimir Spidla, collapsed. Mr Spidla's former deputy, Stanislav Gross, formed a new government with the same coalition. This administration collapsed in April 2005 and Jiri Paroubek became the new prime minister. The Czech Social Democratic Party (CSSD) will remain in power until the next parliamentary election scheduled for June 2006. The opposition (centre-right Civic Democratic Party (ODS)) is ahead in the opinion polls, although the difference between ODS and the CSSD is minor.

Healthcare sector

A tentative estimate of the total health expenditure is 7.6 percent of GDP. Public expenditure on health represents approximately 91 percent of total health expenditure. The absolute cost of healthcare grew faster than average consumer prices while the proportion between the public sources of financing, which is above 90 percent, and private spending, among the lowest in EU, remains constant.

Healthcare has been the subject of a political battle between the ruling coalition and the opposition. The debate has been between a National Health Service concept, promoted by the Social Democrats and a patient centric/individual healthcare account concept promoted by the Civic Democrats. The Civic Democratic Party (opposition) won the regional elections, controlling regional healthcare.

Today primary care and ambulatory specialized care outside of the hospital environment are private. The majority of hospitals are still owned by the state or municipal government. Many hospitals survive with local government subsidies and grants.

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The current mandatory social health insurance system is very generous in terms of scope of services covered by social insurance, and given the funding gap it may be necessary to redefine the scope of services covered, without compromising health coverage and financial protection.

Developments in Medicover Czech Republic in 2005

We experienced a positive trend in prepaid business growth (premium sales and occupational health) combined with a decrease in the fee-for-service revenue stream resulting in Medicover 2005 year end revenue of €2.1 million.

Restructuring of the Czech provision facilities was completed in 2005 with a new clinic to service our clients in Prague. We successfully adapted medical capacity in Brno to local demand complementing the new clinic in Prague 4, achieving the high facility standards that Medicover aims to provide.

Outlook for 2006

Real GDP growth is expected to be around 4.6 percent in 2006, driven by a resurgence in private consumption and foreign capital investment. The koruna’s exchange rate is expected to strengthen.

Fiscal consolidation requiring a fundamental reform of the pension and healthcare system is expected to start after general elections scheduled for June 2006.

Rising domestic demand is expected to push up the external deficit to 3.7 percent of GDP in 2006.

The priority for Medicover Czech in 2006 is to grow our prepaid membership base and capitalise on our new clinic in Prague.

Estonia Tonũ Velt – Managing Director

Medicover Estonia’s revenue for 2005 rose by 18 percent to €1.8 million, while the prepaid membership base increased by 33 percent from 5,100 to 6,800 members by year end. Estonian economy in 2005 Estonia has experienced rapid economic growth in recent years. Although this growth has been partially based on a growing debt burden, Estonia's economic outlook is relatively favourable. Productivity, household income and corporate profitability have been growing fast and this trend is

projected to continue in the medium term. According to a forecast by Eesti Pank, economic growth amounted to 8 percent in 2005 and will remain slightly below 7 percent in 2006 and 2007. The demand conditions will continue to be favourable, driven by rapid income growth, credit supply and optimistic expectations. On the other hand, the gradually improving external environment and the impact of integration into the EU trade market will ensure sufficient export demand growth. Employment growth has been accelerating since 2005 - demand for labour for production has grown considerably due to the increased economic activity. As a result, wage growth has also been accelerating since the beginning of 2005. Employment growth amounted to 1.4 percent by the end of 2005, however it is expected to slow gradually. According to the latest forecast, nominal wage growth accelerated to 11.7 percent in 2005 and is expected to decline to the nominal GDP growth in the years ahead. In 2005, the consumer price index rose by 4.2 percent mainly due to the increase in oil prices, however it is expected to slow. The share of motor fuel in the consumer basket is twice as large in Estonia as elsewhere in Europe, thus its impact in Estonia is much more pronounced.

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Estonian healthcare market Current levels of spending on healthcare in the Estonian Republic amount to 5.7 percent of GDP and the main source of funding is a 13 percent social health tax. 1.3 million people are covered by the public health insurance in Estonia. The financing of the public system is balanced. A sub section of the healthcare market is the occupational medicine market. This market is regulated by the public authorities but paid for by employees directly to providers. Medicover Estonia has historically had a larger focus on occupational medicine services compared to other Medicover regions. 600,000 Estonians are employed, generating around 105,000 occupational medicine visits each year or an annual value of around €3.4 million. Medicover Estonia developments in 2005 Medicover Estonia’s revenue in 2005 rose by 18 percent to €1.8 million, while the prepaid membership base increased by 33 percent from 5,100 to 6,800 members by year end. Occupational health services continue to be the main area of activity representing 63 percent of the total turnover, outside Tallinn where this activity represents up to 90 percent. Our stated strategy, to complement the occupational medicine offered to our corporate clients with premium prepaid services, is working well and the prepaid component of 2005 revenue increased to 28 percent. Outlook for 2006 Estonia’s current economic climate favours our development plans and there is a clear need among business employers to show more social responsibility towards employees. Together, this should enable us to achieve the targets set for 2006. The positive economic outlook for Estonia as well as our strong market position should allow us to continue to see healthy growth in our business throughout 2006.

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2005 Review

Laboratory Business

Introduction to Medicover Laboratory Business Model

The Laboratory Services business provides quality assured, rapid and efficient laboratory test results for clients in both public and private health sectors. The industry is divided into hospital based, inpatient laboratories and outpatient laboratories, serving non-hospital based physicians. Today Medicover laboratories operate in the Romanian and Polish markets, where about half of all tests are provided for public sector institutions. Private sector clients include private providers such as Medicover, cash paying walk-in customers and organizations conducting clinical research.

In 2005 Laboratory Services achieved strong growth with full year revenue of €14.0 million, including inter-segment revenue of €1.6 million, an increase of 51 percent compared to last year. This strong growth was driven by acquisitions in Poland, in addition to robust organic growth. Integration of the laboratory acquisitions continued, including the implementation of shared laboratory management systems and also the launch of a new brand name for our laboratory activities on the Polish market: “Synevo – Medicover Laboratory Services”.

The laboratory services markets in Europe are highly fragmented and the Central European countries are no exception. The Central European region (defined as new EU member states plus EU candidate countries for 2007) has a total population of more than 100 million. Medicover estimates that the total laboratory services market in this region is worth over €1 billion. The market has substantial further growth potential, bearing in mind that the average value of laboratory tests per capita in this region is less than one third of the per capita value in Western Europe. Medicover is ideally positioned to lead the consolidation of this industry in Central Europe, based on its regional presence, local market knowledge, established networks and infrastructure.

Future growth is expected to derive from multiple sources, which will include further laboratory outsourcing contracts from hospitals, acquisition of selected private sector laboratories throughout the region, an increasing range and sophistication of tests and additional value added services, such as, for example, web based availability and analysis of test results in close to real time. Growth will enable further integration to achieve economies of scale and cost efficiency.

Laboratory Services – Romania Virgil Ivan – Managing Director – Synevo Romania (Medicover Laboratory Services)

Revenue for 2005 amounted to €8.0 million (€6.2 million) representing 30 percent revenue growth compared to last year.

During 2005, all tenders for the outsourcing of laboratory services within public hospitals were blocked by the newly appointed Ministry of Health. In 2005, the Ministry of Health elaborated on a radical legislative reform within the healthcare sector. This reform included seventeen laws such as “Public Hospital law”, “Public Health Insurance law”, “Private Health Insurance law”, “Pharmacy law” etc. all of which will be introduced in 2006. Additionally, in a change to the public system, both medical and administrative positions are to be distinct at managerial level.

The value of the Romanian laboratory market in 2005 amounted to approximately €112 million. Of this, tests performed in hospitals represented around €78 million (412 laboratories in hospitals), with the rest of the test market represented by investigations for outpatients. In 2005, 430 private laboratories covered the “outpatient” market. Synevo Romania is the largest private laboratory services provider with 8 laboratories across the country. In 2005, the Synevo Laboratories Network comprised 8 laboratories with 1,100 referral doctors from all over the country. We have developed our tests range and are planning to introduce toxicology tests in 2006, which will attract new customers.

Page 28

2005 Review

No new laboratories have been acquired, however we have developed existing laboratories, in particular in Suceava, Radauti and Campulung Moldovenesc.

Outlook for 2006

The improving environment for our laboratory business is expected to continue to boost organic growth while we are actively seeking further acquisition opportunities. We will open at least one new laboratory in the second quarter of 2006. We expect the new health legislation to come into force during the second quarter and this will encourage effective and efficient outsourcing of services to private providers and support the development of the private health insurance market. Laboratory Services – Poland Wojciech Budacz – Managing Director – Synevo Poland (Medicover Laboratory Services)

Polish laboratory revenue for 2005 amounted to €6.0 million, representing a 95 percent increase compared to 2004, of which organic growth represented 23 percent.

The size of the Polish laboratory market, which we estimate to be around €400 million in 2005, saw further expansion of the private sector, reaching approximately €40 million, driven mainly by privatization (outsourcing) of hospital laboratories. Of a total of 1,800 laboratories operating on the market, half are located in hospitals. At

the end of 2005, more than 30 hospital laboratories were operated by private companies; the country’s largest outsourced hospital laboratory is operated by Synevo.

2005 was a year of strong revenue growth, stemming from both new business acquisitions and organic growth. We acquired 3 companies: Eurolab Łódź, Eurolab Wrocław and Prodok Zielona Gora; operating 5 laboratories in the central and western part of the country. These acquisitions allowed us to expand our coverage and customers’ access to our diagnostic service through a network of 10 laboratory sites. Six Synevo laboratories are located in hospitals based on outsourcing contracts. At the same time we successfully introduced the Synevo brand onto the Polish market, and enhanced our organizational capabilities from a staff, organizational and sales & marketing perspective. This resulted in several new contracts including the winning of three public tenders in hospitals located in the central and eastern part of Poland (Warsaw, Lublin, Łódź).

During 2005, we stayed focused on the consolidation and restructuring of our operations. We continued to improve our business efficiency through operational cost reduction, purchasing power consolidation and benefits from new information systems.

Our focus on high quality service was confirmed by achieving the ISO 170125 accreditation for our second laboratory located in Warsaw which gives Synevo a unique market position within the Polish market.

Outlook for 2006

We expect to be able to continue our strong revenue growth, from organic growth driven by our sales & marketing capabilities and the positive impact of the 2005 acquisitions. We shall continue to build the Synevo brand among targeted customers using all available channels of communication. We expect further operational cost reductions through the standardization of business processes and increasing purchasing power as a result of the company size and close cooperation with the Synevo and Medicover organizations. We will expand our geographical presence by focusing on cities where Medicover Poland operates their clinics to leverage business synergies. The quality of service delivered to our customers will remain our highest priority. We will broaden our diagnostic expertise and tests spectrum in order to serve our customers’ increasing demand, including clinical trials.

Additionally we will benefit from further development of new information systems, allowing us to increase our competitive advantage by improving customer satisfaction and operational management of the organization. We will continue to build on our organizational capabilities through professional development of staff and actively embedding the Medicover corporate culture.

Page 29

2005 Review

Clinical Trials During 2005 we extended the clinical trials activities to Bucharest, complementing the already established presence in Gdansk, Poland. This has created the capability for us to provide the highest standard laboratory and logistic services for investigation sites in all parts of Romania as well as across the region. We also completed the cross-validation of our facilities in Gdansk and Bucharest with a partner laboratory in the USA, confirming our ability to offer central laboratory services for European sites in global projects. We have proven this capability by providing laboratory tests and logistics for projects conducted in Russia, the UK and the USA. Over 2005 Medicover has increased its service supporting clinical drug research. We undertook 67 projects with 46 conducted in Polish laboratories and 21 in Romanian laboratories. Medicover provided laboratory and logistic services for sites in Poland, the Czech Republic, Hungary, Slovakia, Romania, Lithuania, Latvia, Russia and the United Kingdom. In total we performed more than 136,000 tests for more than 12,600 visits connected to clinical studies. In 2006 we anticipate further growth in clinical trials laboratory services, and we will commence the provision of site management services for clinical trials, working with Medicover’s network of independent clinics to identify suitable trial participants and to ensure that trials are conducted with consistently high quality standards. In this way our clients will have access to a representative population of several million potential trial participants.

Page 30

About Medicover VISION, MISSION AND OPERATING PRINCIPLES

Vision: To be the leading private healthcare company in Emerging Europe

Mission: To keep our customers as healthy as possible

Medicover 10 Operating Principles

1. An innovative growth oriented company in the private health care industry in Central and Eastern Europe.

2. A company always striving to be number one in our industry in each market where we operate.

3. A company never becoming complacent and regarding competition as a constant force to further improve and develop.

4. A company founded on decentralized responsibility and accountability.

5. A company built on entrepreneurial spirit, cost consciousness and a “Can do” attitude.

6. A company with healthy profitability to ensure long-term financial stability.

7. A company recognizing and rewarding talent, providing good training and career development.

8. A company always seeking excellence in customer service and care.

9. A company where all employees are proud to work and feel their contribution matters.

10. A company recognized for being part of the local community and taking a social responsibility.

Page 31

About Medicover

ADVISORS, AUDITORS AND ANALYSTS Principal bankers Svenska Handelsbanken Luxembourg Branch 146, Boulevard de la Pétrusse L-2330 Luxembourg, Luxembourg

Analysts working for Medicover

Hagströmer & Qviberg - Stockholm Natalie Tibajeva Phone: +46 8 696 17 00 E-mail: natalie.tibajeva@hq.se

Jakobson Finansanalys Torbjorn Jakobson Phone: +46 8 566 133 30 E-mail: jakobson.finansanalys@com.itv.se

Auditors KPMG Reviseurs d'Entreprises, Belgium Marc Hoydonckx Reviseur d'Entreprises, Belgium. Auditors for Medicover Holding S.A. since 1997

Page 32

About Medicover

ORGANIZATION Medicover Group is currently organized into nine Business Units (BUs), with Group-wide support functions in the following areas: Finance, Information Technology, Medical and Quality, Business Development and Legal & Corporate. Healthcare Services comprises the five clinics BUs and the new hospital BU in Poland. Laboratory Services comprises the two BUs in Poland and Romania, alongside our Clinical Trials BU. The Group Executive team is composed of the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Group Legal Counsel, Group Medical Director, Group IT Director and Group Business Development Director. The Group Executives together with the Managing Directors of the main business units form the senior management team. Structure Organizational chart

Clinics Business- Poland- Romania- Hungary- Czech Republic- Estonia

Board of Directors

CEOLegal andCorporateServices

InformationTechnology

LaboratoryServices

HealthcareServices Finance Medical and

QualityBusiness

Development

RomaniaPoland

Clinical Trials

Hospital Business

Page 33

About Medicover

MANAGEMENT

Fredrik Rågmark • Chief Executive Officer • Born: 1963 • Joined Medicover (Oresa Ventures): 1997 • Previous employment: Managing Director Oresa Ventures,

Business Development Manager, Oriflame Eastern Europe • Educational background: BA Economics, Stockholm School of

Economics, Master of Law, University of Stockholm • Number of shares in Medicover: 183,715

Joe Ryan • Chief Financial Officer • Born: 1965 • Joined Medicover (Oresa Ventures): 1997 • Previous employment: UK. Chartered Accountant BDO Binder

Hamlyn. Internal audit, Philip Morris Inc. Switzerland • Educational background: BSc. and BEng. University of

Manchester. ACA Institute of Chartered Accountants of England & Wales, ACT Association of Corporate

• Treasurers. • Number of shares in Medicover: 22,404

André Lindekrantz • Group Legal Counsel • Born: 1963 • Joined Medicover (Oresa Ventures): 1998 • Previous employment: Attorney at law (advocate) at the

international lawfirm White & Case, Stockholm, providing legal advice relating to investments in Central and Eastern Europe

• Educational background: Master of law, Faculty of law, University of Lund, Sweden. University degrees in Slavonic languages (Polish and Russian), University of Lund, Sweden

• Number of shares in Medicover: 5,714

Page 34

About Medicover

Anthony Cameron • Group IT Director • Born: 1959 • Joined Medicover: 2001 • Previous employment: 1998 - 2001, Managing Director

of UK based healthcare informatics consultancy company. 1987 - 1998 National Health Service (UK) organizations, including Director of Information Systems and Technology (1992 - 1998)

• Educational background: MSc. Healthcare Informatics, University of Southampton, U.K.

• Number of shares in Medicover: 6,782

Dr. Lajos Fábián • Chief Operating Officer • Born: 1961 • Joined Medicover: 2004 • Previous employment: Until 2004 Regional General

Manager of Abbott Labs (Chicago, IL, USA) Eastern European and Mediterranean Regional Office, Switzerland and prior, various country General Management and other senior management functions at Falck AS, Denmark and Schering AG, Germany. In late 80s practicing MD and University Assistance Professor

• Educational background: BA in Marketing/Economy - 1994; Specialist in Traumatology - 1992; Specialist in surgery - 1990; Medical Doctor (General Medicine) – 1986

• Number of shares in Medicover: nil

Richard Sands • Business Development Director • Born: 1961 • Joined Medicover: 2004 • Previous employment: Partner, Accenture (Central and

Eastern Europe); Senior Manager, Bain & Company (Poland and U.K.); Ernst & Young (UK)

• Educational background: MA Mathematics Oxford University; ACA Institute of Chartered Accountants in England & Wales, MBA London Business School

• Number of shares in Medicover: 9,691

Page 35

About Medicover

Dr. Piotr Soszynski • Group Medical Director • Born: 1957 • Joined Medicover: 2005 • Previous employment: 2000-2005 Clinical Research

Director, AstraZeneca Clinical Research Region Central-Eastern Europe; 1997-2000 Medical Director, Bayer Pharma Poland; 1982-1997 intern-assistant professor of medicine, Medical Center for Postgraduate Education, Warsaw, Poland

• Educational background: 1989 specialist in internal medicine; 1988 PhD from Medical Center for Postgraduate Education, Warsaw; 1982 MD (Medical Doctor) from Medical University of Warsaw. Fellowships at leading US academic institutions: 1990-92 University of Cincinnati Medical Center (Fogarty International Center Award), 1992-94 Harvard Medical School

• Number of shares in Medicover: nil

Agnieszka Szpara • Managing Director Poland • Born: 1969 • Joined Medicover: August 1994 • Educational background: Warsaw School of Economics • Number of shares in Medicover: 8,000

Tonu Velt • Managing Director Estonia • Born: 1964 • Joined Medicover: 2002 • Previous employment: After Sales Director Scania Estonia

1992-2001, Project Manager Pärnu Regional Hospital 2001-2002

• Educational background: MBA, Faculty of Economics and Business Administration, University of Tartu

• Number of shares in Medicover: nil

Gabriel Ionescu • Managing Director Romania • Born: 1962 • Joined Medicover: October 2003 • Previous employment: Monsanto Romania, various

consulting and advisory functions. • Educational background: M.Sc Engineering (fine mechanics),

Business school at Georgetown University (USA) • Number of shares in Medicover: 2,500

Page 36

About Medicover

Peter Grossmann • Managing Director Hungary • Born: 1968 • Joined Medicover: 2005 • Previous employment: Managing Director Steelcase Hungary

Kft., Area Director Steelcase Central Southern Europe, Strategy Manager, Eli Lilly France, Marketing Director, Eli Lilly Hungary

• Educational background: Budapest University of Economics (Hungary), Vienna University of Economics (Austria). INSEAD MBA (Singapore and France)

• Number of shares in Medicover: nil

Wojciech Budacz • Managing Director Synevo Poland

(Medicover Laboratory Services) • Born: 1961 • Joined Medicover (Synevo Medicover Laboratory services):

July 2004 • Previous employment: Strategy and Operations Director Eli

Lilly Poland, Sales Director Eli Lilly Poland, Country Manager Baltic States Eli Lilly Suisse

• Educational background: Medical Doctor Collegium Medicum Jagiellonian University in Cracow, Poland 1992

• Number of shares in Medicover: 2,500

Virgil Ivan • Managing Director – Synevo Romania (Medicover Laboratory

Services) • Born: 1961 • Joined Medicover: 1998 • Previous employment: Laboratory Director – “Rombel

Medical S.A.” since 1995, Biochemist Specialist – “Coltea” Clinical Hospital Bucharest

• Educational background: Bachelor in Biology- University of Bucharest, Specialist in Biochemistry

• Number of shares in Medicover: nil

Page 37

About Medicover

BOARD OF DIRECTORS

Jonas af Jochnick

• Born: 1937 • Elected to the Board: 1997 • Present employment: Executive Chairman of Medicover • Previous employment: Chairman Oriflame Eastern

Europe S.A. • Educational background: Law degree Stockholm University

1962, MBA Harvard Business School 1966 • Present board assignments: Medicover Holding S.A., Oriflame

International, various companies in the Medicover Private equity portfolio, various educational institutions

• Number of shares in Medicover: 4,999,893

Arno Bohn

• Born: 1947 • Elected to the Board: 2001 • Present employment: Partner Bohn Consult GmbH,

Freiburg/Germany • Previous employment: CEO General Electric Company,

Germany, Vice President General Electric Company, USA • Educational background: School of Economics, Lörrach,

Germany • Present board assignments: CEO Project Hope e. V. Germany,

Member of the Board of Directors Project Hope USA, Member of the Board MEDinsite AB Stockholm, Sweden

• Number of shares in Medicover: 19,028

Sören Gyll • Born: 1940 • Elected to the Board: 1997 • Present employment: None • Previous employment: Rank Xerox, Sales Operations

Manager, Marketing Manager, Vice President, Uddeholm Sweden AB, President, Uddeholms AB, Executive Vice President, Uddeholms AB, President and CEO, Procordia AB, President and CEO, AB Volvo, President and CEO

• Present board assignments: SKF AB, Skanska AB, SCA the Swedish Cellulose Company, Medicover S.A., Fenix Outdoor AB. Memberships: The Royal Swedish Academy of Engineering Sciences

• Number of shares in Medicover: nil

Margareta Nordenvall • Born: 1954 • Elected to the Board: 2001 • Present employment: MD Consultant, Former MP • Previous employment: CEO, Sophiahemmet AB, private

hospital in Stockholm, manager and gynecologist in private practice at Skeppsbron Clinic

• Educational background: MD, Karolinska Institute 1978, PhD Karolinska Institute 1990, MBA Sloan School of Management 2002

• Present board assignments: Medicover Holding S.A., AB Mando, Feelgood Svenska AB, Focal Point AB, EUW

• Number of shares in Medicover: 2,500

Page 38

About Medicover

Fredrik Rågmark • Born: 1963 • Elected to the Board: 1997 • Present employment: Chief Executive Officer of Medicover • Previous employment: Managing Director Oresa Ventures,

Business Development Manager, Oriflame Eastern Europe • Educational background: BA Economics, Stockholm School of

Economics, Master of Law, University of Stockholm. • Number of shares in Medicover: 183,715

Peter Wikström • Born: 1943 • Elected to the Board: 1997 • Present employment: none • Previous employment: Assistant Manager Hambros Bank,

Manager The Toronto Dominion Bank, Finance Director Kooperativa Förbundet (KF), Director Enskilda Fondkommission, Co-founder and Partner Maizels Westerberg & Co., Senior Advisor Nordea Corporate Finance

• Educational background: BA Economics, University of Lund • Present board assignments: Medicover Holding S.A.,

Chairman of the Board Ando AB • Number of shares in Medicover: 45,714

Fredrik Stenmo

• Born: 1971 • Elected to the Board: May 2005 • Present employment: Director of Celox SA. • Previous employment: Investment Manager at FSN Capital,

Senior Associate at BancBoston Capital, SEB Acquisition Finance

• Educational background: Master of Law and a degree in Economics from Lund University, Sweden

• Present board assignments: PiezoMotor Uppsala AB, Swelox AB

• Number of shares in Medicover: 55,000

Page 39

2005 Financial Report

Page 41

5 year Summary

All figures in €'000, unless otherwise stated As of and for the year ended December 31 Consolidated income statement data : 2005 2004 2003 2002 2001

Revenue 59,236 42,906 36,542

35,264

30,101 Medical provision costs (36,406) (26,810) (22,900) (21,085) (18,051)

Contribution 22,830 16,096 13,642 14,179 12,050 Distribution, selling and marketing costs (5,514) (4,311) (4,251) (4,258) (4,039) Administrative costs (11,665) (8,767) (7,433) (8,590) (7,631) Depreciation and amortization (3,642) (3,203) (3,040) (2,856) (2,357) Operating profit/(loss) 2,009 (185) (1,082) (1,525) (1,977) Net investment income / (loss) (1) 1,354 397 821 (20,718) (7,210) Financial expenses, net (686) (532) (803) (1,236) (1,468) Profit/(Loss) before tax 2,677 (320) (1,064) (23,479) (10,655) Income tax (1,275) (578) (700) (378) 208 Profit/(Loss) after tax 1,402 (898) (1,764) (23,857) (10,447) Consolidated balance sheet data : Intangible fixed assets 7,592 4,695 3,832 3,445 3,398 Tangible fixed assets 11,077 9,250 7,527 8,031 8,811 Other assets 6,419 2,530 4,255 16,968 39,948 Receivables 6,271 4,207 3,403 3,217 3,527 Cash and cash equivalents 9,247 3,201 2,186 2,882 3,441 Total assets 40,606 23,883 21,203 34,543 59,125 Interest-bearing liabilities 5,913 6,250 4,847 15,614 15,478 Other liabilities 11,144 8,212 6,419 6,746 7,252 Shareholders' equity 23,549 9,421 9,937 12,183 36,395 Total equity & liabilities 40,606 23,883 21,203 34,543 59,125 Consolidated cash flow statement data : Operating profit/(loss), before tax 2,677 (320) (1,064) (23,479) (10,655) Adjustments for non-cash items 2,418 2,314 2,576 22,635 7,628 Change in net working capital 593 285 (439) 285 1,427 Interest and bank charges paid 652 704 434 986 1,137 Income taxes paid (1,426) (616) (660) (326) (93) Cash flow from operating activities 4,914 2,367 847 101 (556) Cash flow from investment activities (8,503) (2,903) 10,291 (51) (4,740) Cash flow from financing activities 9,518 1,353 (11,443) (435) 7,835 Net effect of exchange (gain) / loss on cash balances 117 198 (391) (174) 95 Increase / (Decrease) in cash and cash equivalents 6,046 1,015 (696) (559) 2,634 Data per share: Total number of shares outstanding (year-end) 14,245,627 12,464,924 12,464,924 12,464,924 12,464,924 Weighted average number of shares 13,303,984 12,283,284 12,150,962 12,117,996 11,931,015 Weighted average number of shares after dilution 13,515,720 12,435,284 12,285,264 12,315,501 12,140,015 Profit/(Loss) per share in Euro 0.105 (0.073) (0.145) (1.969) (0.876) Profit/(Loss) per share after dilution in Euro 0.104 (0.073) (0.145) (1.969) (0.876) (1) The investment activities were classified as discontinuing and the shareholders approved the sale of the majority of the private equity portfolio in January 2003.

2005 Financial Report

Page 42

DIRECTORS’ REPORT We are pleased to be able to report a strong year for Medicover, with continued robust revenue growth, strong member growth and improving results. Revenue for 2005 reached € 59.2 million, a strong 38 percent increase on the prior year, reflecting the underlying strength in the local economies as well as the demand for quality healthcare services and the leading market position of Medicover. Member growth was correspondingly strong with more than 50,000 new members joining during the year, reaching a year-end member base of just above 190,000 members, some 36 percent above last year’s level. The absolute member growth for 2005 was the strongest so far recorded for the company and was more than twice last year’s level. The laboratory business, which represented 21 percent of 2005 consolidated revenues, continued to report strong growth. External lab revenues amounted to € 12.4 million for the year, an increase of 46% versus last year of which 20% was organic growth. The operating result (EBIT) reached € 2.0 million or 3.4 percent of revenue for the year versus last year’s small deficit. The operating profit before depreciation and amortization (EBITDA) amounted to € 5.7 million or 9.5 percent of revenue, a marked improvement on last year’s level of € 3.0 million or 7.0 percent of revenue. Profit after tax for the year amounted to € 1.4 million versus last year’s loss of € 0.9 million. Net cash inflow from operating activities after tax payments was € 4.9 million for the year (inflow of € 2.4 million). Strong economic growth throughout the region in 2005 and likely to continue in 2006 The economies in Central and Eastern Europe (CEE) recorded strong growth in 2005, the region grew at around 5.5 percent in 2005, nearly four times as fast as the 12 euro zone countries, and expects a similar growth performance in 2006. Key Operating Ratios

4Q 2005 4Q 2004 %

Change Year 2005

Year 2004

% Change

Member Base

190,700

139,900 36.31%

190,700

139,900 36.3%

Revenue €000's

16,807

12,182 37.97%

59,236

42,906 38.1% % of Revenue Medical costs 62.9% 62.8% 0.08% 61.5% 62.5% -1.0% Sales & Marketing 9.8% 9.8% -0.04% 9.3% 10.0% -0.7% Administration 17.9% 19.9% -2.03% 19.7% 20.4% -0.7% Depreciation& Amortization 6.4% 6.2% 0.14% 6.2% 6.8% -0.6% Operating EBITDA 9.5% 7.5% 1.99% 9.5% 7.0% 2.5% Operating EBIT 3.2% 0.8% 2.37% 3.4% -0.4% 3.8%

Investment activities The investment result amounted to € 1.4 million for the year. During the year, € 0.1 million has been received from equity shares sold and € 0.5 million from private equity fund liquidations. Liquidity Cash net of short term debt amounted to € 8.1 million, an increase of € 7.1 compared to the prior year end. The remaining cash balance will be used for further development of the business. The business is continuing to improve cash generation capabilities.

2005 Financial Report

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Cash flow Cash inflow generated by operations before working capital changes and tax payments was € 5.7 million (inflow € 2.7 million) for the year. Working capital movements amounted to € 0.6 million cash inflow (inflow € 0.3 million) for the year. € 1.4 million of tax payments were made for the year (€ 0.6 million). Net cash inflow from operating activities after tax payments was € 4.9 million (inflow € 2.4 million) for the year. Cash outflows for capital expenditure for the year were € 4.9 million (outflow € 4.8 million), slightly higher than in the prior year. 2005 has been a strong expansion year in the laboratory activities and also in the two largest markets of Poland and Romania, which have been supported with an increase and upgrade of fixed capacity. Financial costs Finance costs after foreign exchange costs were € 0.7 million (€ 0.5 million) for the year. The IFC facility has now been repaid in full which will lead to a reduction in financing costs from this facility of € 0.5 million in 2006. Operational review Revenue Our core Pre-paid business (including occupational health), which represents 69 percent of total revenue, reached € 41.1 million for the year, representing growth of 36 percent on the prior year. The underlying member-base grew a corresponding 36 percent, reaching 190,700 by year-end. Overall corporate client retention remains above 90 percent, which is a positive and important sign of the attractiveness and competitiveness of our service offering. Fee-for-service revenue, this is our cash paying customers, which represents 8 percent of our revenue, increased by 39 percent to € 4.7 million for the year. Laboratory revenue, representing 21 percent of revenue (excluding inter-segment revenue), grew 46 percent to reach € 12.4 million, the organic growth rate was 20 percent. Other revenue, including the recently started pharmacy activity in Poland reached € 1.1 million or 2 percent of revenue. Medical Medical costs for the year amounted to € 36.4 million or 61.5 percent of revenue (the Medical Cost Ratio, MCR) versus a 62.5 percent the prior year. Medical costs show a different pattern in our two different lines of activity, the Clinics Business and in the Laboratory Business. The laboratory business shows a higher proportion of medical costs which is a reflection of the development stage of the business and the integration work with the recent acquisition. The medical and operations teams in our Clinics division have managed close to two million patient visits during the year. The introduction and roll-out of our electronic medical record system and the integrated clinical guidelines decision support system, have significantly contributed to our ability to accommodate significant growth inpatient-visit volume, with maintained or improved customer service and managed costs. Other Sales and Marketing costs for the year amounted to € 5.5 million or 9.3 percent of revenue versus 10.0 percent the prior year. Of the overall sales and marketing spend, approximately 70 percent is related to our corporate direct sales force, 20 percent pure marketing costs and the balance relates to sales management and support staff. Of the absolute sales and marketing cost increase in 2005 versus 2004 (€ 1.2 million), more than 90 percent is coming out of Poland, driven by strong sales results and increased promotional and marketing activities to support the rapidly growing market. Our corporate direct sales force consists of approximately 100 people, including support functions, across the five markets, with around half of the staff in Poland.

2005 Financial Report

Page 44

Administrative costs for the year amounted to € 11.7 million or 19.7 percent of revenue versus 20.4 percent the prior year. 85% of the absolute increase in the overall administrative costs in 2005 relate to our two largest markets in Poland (63%) and Romania (23%) both on the clinics side and the laboratory side. Depreciation and amortization (excluding comparative goodwill amortization) amounted to € 3.7 million for the year or 6.2 percent of revenue, compared to 6.8 percent the prior year. Poland Medicover Poland recorded strong growth in 2005, reaching revenue of € 33.4 million for the year, equivalent to 40 percent organic revenue growth. Constant currency revenue growth was 23 percent for the year. The pre-paid revenue, which represents 88 percent of Polish revenue, saw 36 percent growth. The revenue growth was driven primarily by strong underlying member-growth, reaching 33,100 new members for the year, which was more than four times the prior year new member intake. The year-end member-base of 126,300 is up 36 percent on the prior year level. We estimate that the pre-paid healthcare market in Poland grew approximately 25 percent in 2005, which would indicate that Medicover is gaining market share. Corporate client retention remains above 90 percent, similarly an important ratio for our competitiveness. Romania In the Romanian market we reported revenue of € 6.5 million for the year, an organic growth rate of 54 percent. Pre-paid revenue in Romania, representing 71 percent of total revenue, increased 59 percent versus last year. Member-growth was robust throughout the year, with 10,700 new members for the year, reaching a year-end member-base of 34,800, which was 44 percent above the previous year. The estimate on total market growth in 2005 is in the range of 20-25 percent, indicating that also in the fast growing Romanian market we are gaining market share. Hungary Medicover Hungary recorded revenue of € 3.1 million for the year, an increase of 16 percent. Pre-paid revenue, which in Hungary represents 85 percent of total revenue, grew 21 percent for the year. Member-growth for the year was 2,800 new members, reaching a year-end member-base of 8,000. Czech Republic Revenue in the Czech Republic reached € 2.1 million for the year, which was an increase of 4 percent on the prior year. Pre-paid revenue, which in the Czech Republic represents 64 percent of total revenue, grew 10 percent versus the prior year. Member-growth for the year was 2,500, reaching a year-end member-base of 14,800. Estonia Medicover Estonia reported revenue of € 1.8 million for the year, up 18 percent on the prior year. Prepaid revenue, which in Estonia represents 28 percent of revenue, recorded 25 percent growth. Our business in Estonia remains dominated by cash-paid occupational medicine contracts with corporate clients. This activity represents 63 percent of total revenue and recorded 17 percent growth in 2005.

2005 Financial Report

Page 45

Laboratory Services Our laboratory activities, which trade under the name “Synevo- Medicover Laboratory Services” reported revenue for the year of € 14.0 million (including inter-segment revenue of € 1.6 million), representing 51 percent growth versus the previous year, of which 28 percent was organic growth. Synevo Romania reached revenue of € 8.0 million for the year (including inter-segment revenue), representing organic growth of 30 percent. Synevo Poland had revenue of € 6.0 million for the year (including inter-segment revenue), representing growth of 95 percent on the previous year, of which 23 percent was organic growth. During the year we established our Clinical Trials activities as a separate business unit. Within the Clinical Trials activities we provide high quality laboratory testing for clinical trials sponsored by pharmaceutical companies throughout the region.

Dividend

The Board of Directors do not recommend the distribution of a dividend for 2005.

Work of the Board

The Board had five meetings in 2005; four regular meetings and an additional one during the year. If other business is required to be discussed in-between these regular meetings, then additional meetings are scheduled as required. The following issues are on the agenda of each regular meeting: the financial results of the company and of each of the markets, the outlook for the business, operational review of each market and sales results. From time to time the board meets and has presentations on various business and company development issues from executive management outside of the regular meetings and has the opportunity to make inquiries as to the business performance or issues.

Sören Gyll, Peter Wikstrom, Jonas af Jochnick, and Fredrik Rågmark were appointed members of the board in the spring of 1997. Arno Bohn and Margareta Nordenvall were appointed members of the board in the spring of 2001. Fredrik Stenmo was appointed a member of the board in the spring of 2005. Mr af Jochnick is Executive Chairman and Mr Fredrik Rågmark is Chief Executive Officer, all other directors are non executive directors and have no other duties in the Group.

3 March 2006 Jonas af Jochnick

2005 Financial Report

Page 46

To the shareholders

INDEPENDENT AUDITOR’S REPORT We have audited the accompanying consolidated balance sheets of Medicover Holding S.A. and its subsidiaries (“the Group”) as of 31 December 2005, 2004 and 2003, and the related consolidated income statements, the consolidated statements of changes in shareholder’s equity and the consolidated cash flow statements for the years then ended. These consolidated financial statements are the responsibility of the Company’s directors. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. Unqualified audit opinion on the consolidated financial statements We conducted our audit in accordance with International Standards on Auditing as issued by the International Federation of Accountants. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Group as of 31 December 2005, 2004 and 2003, and of the results of its operations and its cash flows for the year then ended in accordance with International Financial Reporting Standards, as adopted by the EU. Brussels, 6 March 2006

Klynveld Peat Marwick Goerdeler Reviseurs d’Enterprises Represented by

Marc E. Hoydonckx

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CONSOLIDATED INCOME STATEMENT Year to 31 December

Note

2005 €’000

2004 €’000

2003 €’000

Revenue 59,236 42,906 36,542

Operating expenses

Medical provision costs (36,406) (26,810) (22,900)

Distribution, selling and marketing costs (5,514) (4,311) (4,251)

Administrative costs (11,665) (8,767) (7,433)

Depreciation and amortization 8,9 (3,642) (3,203) (3,040)

Total operational expenses (57,227) (43,091) (37,624)

Operating Profit/(loss) 2,009 (185) (1,082)

Investment profit 1,354 453 921

Investment management costs - (56) (100)

Net investment profit 1,354 397 821

Interest income 193 43 72

Interest expense (845) (747) (506)

Foreign exchange gain/(loss) (34) 172 (369)

Total financial expenses (686) (532) (803)

Profit/(loss) before tax 2,677 (320) (1,064)

Income tax 6 (1,275) (578) (700)

Profit/(loss) for the period 1,402 (898) (1,764)

Per ordinary share information: 23 2005 2004 2003

Profit/(loss) per share €0.105 €(0.073) €(0.145)

Diluted profit per share €0.104

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CONSOLIDATED BALANCE SHEET As at 31 December

Note 2005 €’000

2004 €’000

2003 €’000

Non current assets

Purchased goodwill 8 4,167 3,036 2,421

Intangible fixed assets 8 3,425 1,659 1,411

Tangible fixed assets 9 11,077 9,250 7,527

Total fixed assets 18,669 13,945 11,359

Private equity funds 996 763 1,490

Deferred tax asset

7 542 414 475

Investment in associates 10 2,253 - -

Total non-current assets 22,460 15,122 13,324

Current assets

Equity shares 1,295 375 1,240

Private equity funds 359 400 688

Inventories 974 578 362

Receivables 11 6,271 4,207 3,403

Cash and cash equivalents 9,247 3,201 2,186

Total current assets 18,146 8,761 7,879

Total assets 40,606 23,883 21,203

Share capital and reserves 23,549 9,421 9,937

Non –current liabilities

Loans payable 13 4,812 4,143 4,530

Deferred tax liability 7 346 131 313

Total non-current liabilities 5,158 4,274 4,843

Current liabilities

Loans payable 13 1,101 2,107 317

Provision for unearned premiums 1,915 1,998 1,473

Trade and other payables 12 8,883 6,083 4,633

Total current liabilities 11,899 10,188 6,423

Total liabilities 17,057 14,462 11,266

Total shareholders’ equity and liabilities 40,606 23,883 21,203

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CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

€’000

Share Capital

Reserve for own shares

Additional Paid in Capital

Accumu- lated

Losses

Revalua- tion

Reserve

Transla- tion

Reserve

Total

Opening balance as at 1 January 2003

66,366 (1,914) 27,068 (78,551) - (786) 12,183

Movement on reserve for own shares 299 (253) 46

Loss for the period - - - (1,764) - - (1,764)

Effect of exchange rate differences on translation

-

-

-

-

-

(528)

(528)

Closing balance as at 31 December 2003

66,366 (1,615) 26,815 (80,315) - (1,314) 9,937

Opening balance as at 1 January 2004

66,366 (1,615) 26,815 (80,315) - (1,314) 9,937

Movement on reserve for own shares 1,049 (794) 255

Loss for the period - - - (898) - - (898)

Revaluation private equity funds - - - - (379) (379)

Effect of exchange rate differences on translation

-

-

-

-

-

506

506

Closing balance as at 31 December 2004

66,366 (566) 26,021 (81,213) (379) (808) 9,421

Closing Balance as previously disclosed as at 31 December 2004

66,366 (566) 26,021 (81,213) (379) (808) 9,421

Adjustment to closing balance for first time application of IFRS 2

- - - (36) 36 - -

Opening balance as at 1 January 2005

66,366 (566) 26,021 (81,249) (343) (808) 9,421

Movement on reserve for own shares 373 (124) - - - 249

Rights Issue 9,994 - 1,319 - - - 11,313

Net profit for the period - - - 1,402 - - 1,402

Revaluation private equity funds - - - 276 - 276

Employee share compensation costs - - - - 82 - 82

Effect of exchange rate differences on translation

-

-

-

-

-

806

806

Closing balance as at 31 December 2005

76,360 (193) 27,216 (79,847) 15 (2) 23,549

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CONSOLIDATED CASH FLOW STATEMENT Year to 31 December

Note 2005 €’000

2004 €’000

2003 €’000

Profit/(loss) before tax 2,677 (320) (1,064) Adjustments for: Depreciation 8,9 3,651 2,920 2,752 Amortization of goodwill 8 (9) 283 288 Gain on disposal of fixed assets (23) (179) (68) Investment portfolio gain (1,354) (298) (743) Dividends received (13) (156) (6) Interest expense 845 747 506 Interest income (193) (43) (72) Unrealized foreign exchange gain/(loss) 166 (256) 353 Cash flow from operations before working capital changes and tax payments

5,747 2,698 1,946

Changes in operational assets and liabilities:

(Increase) in receivables and inventories (916) (192) (793) Increase in payables 1,509 477 354 Cash generated by operating activities before tax payments

6,340 2,983 1,507

Income tax paid (1,426) (616) (660) Net cash flow from operating activities 4,914 2,367 847 Investing Activities

Loan investments repaid - - 286 Proceeds from sale of private equity funds 477 637 193 Acquisition of fixed assets 9 (4,854) (4,761) (3,011) Proceeds from sale of fixed assets 9 98 865 209 Proceeds from sale of equity shares 64 1,151 613 Investment in associates 10 (2,253) - - Acquisition of subsidiaries, net of cash acquired 3 (2,241) (994) (77) Disposal of subsidiaries, net of cash sold - - 12,000 Interest received 193 43 72 Dividends received 13 156 6 Net cash flow from investing activities (8,503) (2,903) 10,291

Financing activities

Proceeds from the share capital issue 11,313 - - Sale of treasury shares to fulfil employee share 250 255 46 Loans repaid (1,632) - (13,441) Loans received - 1,441 2,500 Interest paid (413) (343) (548) Net cash flow from financing activities 9,518 1,353 (11,443)

Net effects of exchange gain/(loss) on cash balances

117 198 (391)

Increase/(Decrease) in cash and cash equivalents

6,046 1,015 (696)

Cash and cash equivalents Cash balance as at 1st January 3,201 2,186 2,882 Total cash balance as at 31 December 9,247 3,201 2,186 Increase/(Decrease) in cash and cash equivalents

6,046 1,015 (696)

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STATEMENT OF SEGMENT INFORMATION

€’000

Medical Investment Total

Year to 31 December 2005 2004 2003 2005 2004 2003 2005 2004 2003

External medical sales:

Poland 38,494 26,616 23,301 - - - 38,494 26,616 23,301

Romania 13,657 9,945 7,698 - - - 13,657 9,945 7,698

Other 7,085 6,345 5,543 - - - 7,085 6,345 5,543

Total external medical sales 59,236 42,906 36,542 - - - 59,236 42,906 36,542

Investment income - - - 1,354 453 921 1,354 453 921

Segment (loss)/profit 2,009 (185) (1,082) 1,354 397 821 3,363 212 (261)

Interest income 193 43 72 - - - 193 43 72

Interest expense (845) (747) (506) - - - (845) (747) (506)

Foreign exchange (loss)/gain (70) 184 (208) 36 (12) (161) (34) 172 (369)

Net (loss)/profit before taxation

1,287 (705) (1,724) 1,390 385 660 2,677 (320) (1,064)

Non-cash expenses:

Depreciation 3,651 2,920 2,752 - - - 3,651 2,920 2,752

Amortization (9) 283 288 - - - (9) 283 288

Foreign exchange (gain)/loss 70 (184) 208 (36) 12 161 34 (172) 369

Unrealized investment (gain)/loss - - - (936) 495 (805) (936) 495 (805)

Total non-cash expenses

3,712 3,019 3,248 (972) 507 (644) 2,740 3,526 2,604

Assets:

Poland 13,364 9,255 7,408 - - - 13,364 9,255 7,408

Romania 6,872 5,736 4,058 - - - 6,872 5,736 4,058

Other 17,720 7,354 6,319 2,650 1,538 3,418 20,370 8,892 9,737

Total assets 37,956 22,345 17,785 2,650 1,538 3,418 40,606 23,883 21,203

Capital expenditure 4,854 4,761 3,011 - - - 4,854 4,761 3,011

Liabilities 17,057 14,462 11,266 - - - 17,057 14,462 11,266

The segment information above is presented in respect of the Group’s business and geographical segments. Business segments are comprised of medical (the provision of comprehensive health care and medical services) and investment (a portfolio of private equity investment funds and investments quoted in active markets) segments. A secondary analysis of the medical business information is also presented based on the geographical location of customers and assets. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

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NOTES TO THE ACCOUNTS 1. Status and Principal Activity Medicover Holding S.A. ("the Company") is a company registered in Luxembourg with registered address at 20 rue Philippe II, L 2340 Luxemburg and company registration number B 59021. The principal activity of the Company is to provide comprehensive health care from basic services to complex surgery in an integrated delivery environment and to combine this delivery with risk sharing and affordable payment methods. In addition the Company has a portfolio of investments quoted in active markets and participations in private equity investment funds in developing companies operating in non-medical sectors which is being discontinued and sold. The financial statements for the year ending December 31, 2005 were authorized by the Board of Directors on February 15, 2006.

2. Summary of Significant Accounting Policies

These consolidated financial statements of the Company and its subsidiaries (“the Group”) have been prepared in accordance with International Financial Reporting Standards (IFRSs) promulgated by the International Accounting Standards Board (IASB), and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC).

(a) Statement of Compliance

The Group reports under International Financial Reporting Standards (IFRS), formerly or commonly referred to as International Accounting Standards, (IAS). The European Union requires EU listed companies to publish their financial statements in accordance with IFRSs except for certain sections of IAS 39 “Financial Instruments: Recognition and Measurement” for periods starting from 1 January 2005. These financial statements comply with IFRS and also the EU requirements.

The group has adopted and applied in full all revised and new standards from 1 January 2005.

(b) Basis of preparation The consolidated financial statements are presented in Euro, rounded to the nearest thousand, except for per share information or where specifically mentioned on a different basis. They are prepared on the historical cost basis except for certain financial assets at fair value through the income statement. Up until December 31, 2004, the Romanian operations used the Euro as its measurement currency. From January 1, 2005 the Romanian Lei is used as its measurement currency as the majority of transactions are now denominated in Romanian Lei. Except for as noted in (m) below, the accounting policies have been consistently applied by the Group and are consistent with those used in the previous year.

(c) Principles of consolidation

The Group prepares consolidated financial statements, which aggregate the assets and liabilities, revenue and expenses of the Company and its subsidiaries. A subsidiary is an entity over which the Company exercises control through ownership or otherwise. A listing of the Group’s principal subsidiaries is set out in note 22. All inter-company balances, profits and transactions are eliminated upon consolidation.

(d) Revenue Revenue represents:

i) Earned premiums in respect of insurance contracts, formerly disclosed as fixed rate contract amounts received for access to a predetermined range of medical services.

ii) Fees paid for access to medical services on a per-usage basis (fee for

service).

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(e) Insurance Contracts

IFRS 4 “Insurance Contracts” is the first International Standard applicable to accounting for insurance contracts. The standard has a broad definition of insurance contracts, or contracts that have characteristics of insurance, and applies both to regulated type insurance business and other commercial contracts that have risk transfer elements. A large proportion of the Group’s activities are providing not only medical services but also providing payment and financial systems to finance the cost of this care. Some element of risk is transferred to and managed by the Group and these arrangements fall under the definition of Insurance Contracts as defined by IFRS 4. From 1 January 2005 the Group has accounted for the majority of its fixed rate medical contracts as insurance contracts. The revenue earned on the contracts (earned premiums) is apportioned over the term of the contract on a straight line basis. Costs of servicing these contracts are incurred mainly in respect of operating medical facilities. Costs not yet invoiced are estimated from experience at the end of each period and accrued for in the income statement. A deferred revenue liability is established in the balance sheet in respect of unearned premiums.

(f) Insurance Contract acquisition costs Insurance contract acquisition costs represent commissions, salaries and direct costs associated with selling and acquiring insurance contracts, previously referred to as fixed fee medical contracts. All of these costs are expensed in the period when incurred regardless of the duration of the contract.

(g) Financial assets at fair value through income statement

Equity shares are quoted in active markets and are classified as ‘financial assets at fair value through income statement’ and all realized and unrealized profits and losses arising on these investments are recognized in the consolidated income statement. The fair value of the portfolio investments is their quoted market price at the balance sheet date. All purchases and sales of portfolio investments are recognized at the date of settlement. IAS 39 has changed multiple times since its issue. The effect of the latest changes is that we have designated certain assets that were marked to market through the profit and loss as continuing to be marked to market through the profit and loss account. In effect the change in IAS 39 will have no impact.

(h) Available for sale financial assets

Private equity investment funds, classified as ‘available for sale financial assets’, are current and non-current investments comprising unlisted equity shares. They are stated at fair value, except where fair value cannot be established reliably in which case the securities are carried at cost. Any resultant gain or loss on investments measured at fair value is recognized in a revaluation reserve in equity. These investments are held with the objective of realising a capital gain from a future sale. All purchases and sales of private equity investment funds are recognized at the date of settlement. Private equity funds are reviewed annually and revalued by the Directors on a case by case basis. Amounts recognized in equity as explained above are transferred to the income statement if the asset concerned is impaired or liquidated.

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(i) Foreign currencies (i) Translation of foreign currencies Foreign currency revenue and costs are translated to Euro at the rate ruling at the time of the transaction. Foreign exchange differences arising on translation are recognized in the income statement. (ii) Translation of foreign operations The major currency translation rates used in these financial statements are as follows: Balance Sheet Rate € Annual Average Rate € 2005 2004 2003 2005 2004 2003United States Dollar 1.18 1.34 1.26 1.25 1.25 1.09 Polish Zloty 3.86 4.08 4.75 4.03 4.54 4.39 Hungarian Forint 253 246 262 248 252 254 Romanian Lei 3.68 3.97 4.11 3.62 4.05 3.75 Czech Kroner 29.0 30.5 32.4 29.8 31.9 31.8 Assets and liabilities of foreign operations are translated to Euro at the exchange rates ruling at the balance sheet date with the exception of goodwill and fair value adjustments arising on consolidation, which are kept at historical cost. Foreign exchange differences arising on translation are recognized directly in the translation reserve in shareholders’ equity. Up until December 31, 2004, the Romanian operations used the Euro as its measurement currency. From January 1, 2005 the Romanian Lei is used as its measurement currency as the majority of transactions are now denominated in Romanian Lei.

(j) Leasing (i) Operational Payments made under operating leases are recognized in the consolidated income statement on a straight-line basis over the term of the lease. (ii) Financial Financial leases are capitalized on the balance sheet and the corresponding liability represents the outstanding principal.

(k) Discontinuing operations Previously the investment activities were presented as discontinuing operations. At December 31, 2005 the disposal of these activities is substantially complete. As financial assets within the scope of IAS 39 are excluded from the scope of IFRS 5: ‘Non-current Assets Held for Sale and Discontinued Operation’, they are no longer disclosed as discontinued.

(l) Inventories Inventories are valued at the lower of cost or net realisable value using the first in first out method.

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(m) Intangible fixed assets

(i) Goodwill: Goodwill represents the difference between the fair value of the consideration paid for an acquisition and the fair value of the Group’s share of the net identifiable assets of the acquired company at the date of the acquisition. In compliance with IFRS 3 “Business Combinations”, applied partially from 31 March 2004 and in full from 1 January 2005, where intangible assets are identified in the acquired company, such as ongoing contracts or customer lists, these are valued to form part of the net identifiable assets. Goodwill arising from business combinations is not amortized but is subject to an annual impairment test, according to IAS 36 “Impairment of Assets’. Any impairment adjustments are reflected as an expense in the income statement. Prior to 1 January 2005, goodwill was amortized over its expected useful life on a straight line basis. Goodwill arising from business combinations is allocated to cash generating units, where synergies are most likely to arise from the acquisition. These cash generating units form the basis of any future assessment of impairment of the carrying value of the acquired goodwill. (ii) Software: Software is stated at cost less accumulated amortization. Software is amortized on a straight-line basis over 5 years. (iii) Other intangibles: Other intangibles, mainly consisting of customer relationships and contracts are amortized over the estimated useful life.

(n) Tangible fixed assets Tangible fixed assets are stated at cost and depreciated on a straight-line basis over their estimated useful life. The following are indications of the estimated useful life by asset class:

Building 2-5 %

Leasehold Improvements 0-33%

Equipment 4-20%

Vehicles 20-25%

Other 0-33%

To enable certain leasehold premises to be adapted for use as medical clinics, rental costs have been incurred during an adoption phase before the premises could be used. These costs were capitalized as part of the leasehold improvement as they were directly attributable to bringing the asset to its condition as a medical clinic.

(o) Receivables Trade receivables are stated at nominal value less a provision for doubtful receivables where applicable.

(p) Payables Trade and other payables are stated at nominal value.

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(q) Impairment

The Group reviews its assets, including goodwill, annually to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated from discounting expected future cash flows, or using the net selling price that could be realized for that asset, which ever is higher. The recoverable amount is the higher of the net amount that could be realized in selling the asset and the value in use to the Group. In assessing value in use, the estimated future cash flows of the asset or the cash generating business unit to which the asset is attributed are discounted to their present value. The discount rate is estimated as a pre-tax rate reflecting the risks specific to that asset, business unit or cash generating unit. An impairment loss is recognized in the consolidated income statement whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses recognized by the above method are allocated first to reduce the carrying amount of any goodwill allocated to the cash generating unit and then to reduce the carrying amount of the other assets in the cash generating unit. Any impairment loss in respect of goodwill is not reversed if the conditions indicating its impairment are reversed or improve. In respect of other assets an impairment loss is reversed if there has been a change in the conditions indicating the original estimate of impairment.

(r) Borrowing costs Borrowing costs are expensed in the period in which they are incurred, or related to. Directly attributable costs and arrangements fees for borrowings are offset against the associated borrowing when initially incurred. In subsequent periods the offset is progressively reversed to the income statement as an additional interest cost on a basis that reflects an even cost of the loan over its duration, which approximates the effective interest method.

(s) Derivative financial instruments

The Group uses derivative financial instruments to hedge its exposure to foreign exchange risks arising from operational and financing activities. The Group does not hold or issue derivative financial instruments for trading purposes. Derivative financial instruments are recognized initially at cost. At each subsequent reporting date they are restated at fair value. The fair value of forward exchange contracts is their quoted market price at the balance sheet date, being the present value of the quoted forward price. Recognition of any resultant unrealized gain or loss depends on the nature of the item being hedged, and whether the hedge matches the exposure completely or partially.

(t) Hedging Hedge of monetary assets and liabilities: Where a derivative financial instrument is used to economically hedge the foreign exchange exposure of a recognized monetary asset or liability, no hedge accounting is applied and any gain or loss on the hedging instrument is recognized in the consolidated income statement.

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(u) Employee benefits

(i) Share incentive plan:

The Company issues share options to certain senior management as part of its retention and motivation policy. The accounting policy for share options has been revised from 1 January 2005 to comply with the requirements of IFRS 2 “Share based payments”. The value of options issued is estimated with reference to an option valuation model and the resulting option value is amortized over the vesting period of the options on a straight line basis reflecting the requirement of the employee to continue employment within the Group. Adjustments are made to take into account the likelihood of the options being exercised and these adjustments are revised annually to reflect in the option cost the number of options that finally vest. At the first application of this standard on 1 January 2005, 64,000 options were retrospectively accounted for on this basis, resulting in an adjustment to retained earnings of €36,000. The remaining balance of 415,000 options outstanding at 31 December 2004 continue to be accounted for under the previous accounting policy. The previous policy recognizes upon issue of any shares, related to the exercise of these former 415,000 options, a normal issue of shareholder’s equity, and no income statement movement is recorded.

(ii) Defined contribution plan:

The Group makes contributions to statutory pension funds on behalf of employees in the Group’s countries of operation. In addition the Group makes contributions to defined contribution pension funds on behalf of certain employees.

(v) Deferred tax Deferred tax is provided for temporary differences, which are based on the differences between financial statement carrying amounts and income tax bases of assets and liabilities using enacted or substantially enacted income tax rates and laws. Deferred tax assets are recognized to the extent that their recoverability is deemed to be probable.

(w) Cash and cash equivalents

Cash and cash equivalents consist of cash at bank and in hand together with term deposits and highly liquid debt instruments with original maturities of three months or less.

3. Acquisitions The Group acquired all of the shares in Euro Lab Wroclaw Sp. Zoo at the end of March 2005. The consideration for the acquisition was €62K settled in cash. Goodwill of €70K was recognized on the acquisition at 30 June 2005. The Group acquired all of the shares in Medyczne Eurolab Sp. Zoo and Prodok Sp. Zoo at the end of July 2005. The total consideration for the acquisition was €2,958K, with €2,247K settled in cash and €711K in deferred payments contingent on the achievement of certain profitability performance targets. An additional contingent consideration of €687K may be payable in the case of renewal of certain contracts. Goodwill of €1,201K was recognized on the acquisition at 30 September 2005. Goodwill has arisen on the acquisitions because of customer relationships that did not meet the criteria for recognition as intangible assets at the date of the acquisition.

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The fair value of the assets acquired and liabilities assumed has been provisionally determined as follows: Carrying

Amounts Fair value

adjustments Recognized

values €’000’s €’000’s €’000’sCash 68 - 68 Inventories 177 - 177 Accounts receivables 759 58 817 Property, plant and equipment 349 120 469 Intangible assets - 1,360 1,360 Deferred tax asset 10 - 10 Trade payables (527) - (527) Other payables (135) - (135) Third party loans (62) (151) (213) Deferred tax liability - (268) (268)Net identifiable assets and liabilities 639 1,119 1,758 Goodwill on acquisition 1,263Consideration paid, satisfied in cash 3,021 Cash acquired (68) Deferred cash payment (712)Net cash outflow 2,241 Adjustments to these provisional values may arise and be recognized within twelve months of the acquisition date. Fair value adjustments are mainly relating to the recognition of customer contracts and relationships. Included in the consolidated profit and loss account for the year ended December 31, 2005 is a profit of €63K relating to Euro Lab Wroclaw Sp. Zoo and a profit of €120K relating to Medyczne Eurolab Sp. Zoo and Prodok Sp. Zoo. If all the acquisitions had occurred on January 1, 2005, Group consolidated revenues would have been €60,916K and net profit would have been €2,111K.

4. Staff costs Staff costs are composed as follows: 2005 2004 2003 €’000 €’000 €’000Wages and salaries 20,071 14,906 13,692 Statutory pension contribution 1,349 1,075 887 Social Security 1,991 1,462 1,416 Other employment benefits 792 542 473 Defined contribution pension payments 67 68 66Total staff costs 24,270 18,053 16,534

The Group employed the following staff directly: 2005 2004 2003 Full time equivalent basis at year-end 1,587 1,291 1,187

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5. Operating Leases

The Group has entered into leases for property to operate offices and clinics. These leases may be for several years, or may be subject to renewal on revised terms, such as revision of lease rates in line with an inflation index, or foreign exchange rate. No financial covenants or restrictions have been granted in respect of these operating leases. There are no contingent rents recognized in the income statement. Lease payments were as follows: 2005 2004 2003 €’000 €’000 €’000Property lease payments 4,365 3,524 2,961

The total of future minimum non-cancellable property operating lease payments is as follows: 2005 2004 2003 €’000 €’000 €’000Within one year 3,996 3,190 3,024 Years two to five 12,461 10,508 10,319 After 5 years 2,647 3,926 3,335 19,104 17,624 16,678

6. Income Tax 2005 2004 2003 €’000 €’000 €’000Withholding tax (33) (162) (352) Deferred tax charge (160) (236) (402) Deferred tax credit 307 172 186 Corporation tax (1,389) (352) (132) (1,275) (578) (700) The Company is subject to an investment company tax in Luxembourg. The tax it pays is based on interest payments on any bonds it may have issued or dividends it pays its shareholders, with a minimum payment of €48K per annum. Withholding tax is generally not recoverable by the Company. The corporate tax rate in Poland is 19% for 2005 (2004: 19%; 2003: 27%) and, in the other countries varied from 16% to 26% (2004: 16% to 28%; 2003: 18% to 31%). The subsidiary tax charges are relating to the Polish and Romanian operations. Carried forward losses of €1.2 million were used against foreign income taxes in the year (2004: € 1.2 million; 2003: €0.7 million). An analysis of the corporation tax charge is as follows: 2005 2004 2003 €’000 €’000 €’000Fixed amount tax charge 48 48 48 Subsidiary tax charges 1,339 304 27 Tax on gain of sale of investments 2 - 57Total charge 1,389 352 132

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Following is a reconciliation of the tax charge for the Group. 2005 Average Nominal

tax rateTax

amount €’000 Profit before tax 2,677 18% 482 Tax exempt revenue (1,354) 18% (244) Disallowed expenses 905 18% 163 Non deductible expenses 2,867 18% 516 Subsidiary tax losses not recognized 498 18% 90 Withholding and fixed tax charge 81 Financial expenses 686 18% 123 Other 356 18% 64Total 1,275 No reconciliation has been performed in prior years due to losses incurred.

7. Deferred taxes Deferred tax assets and liabilities are as follows: 2005 2004 2003 €’000 €’000 €’000Assets: Tax losses available for offset against future profits

86 109 225

Deferred Revenue 121 138 - Accruals 343 133 122 Debtors 17 30 29 Property, plant & equipment (16) 17 89 Other (9) (13) 10Deferred tax assets 542 414 475 Liabilities: Property, plant & equipment (106) (131) (313) Intangible assets (240) - - Deferred tax liabilities (346) (131) (313) Net deferred tax asset 196 283 162

Subsidiaries of the Group have unrecognized tax losses at December 31, 2005 amounting to €7.4 million (in 2004 €8.6 million; in 2003 €7.0 million) that are available to be offset against the future profits for periods between five to seven years. These losses have not been recognized as deferred tax assets as the probability of their eventual use is not sufficiently certain.

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8. Intangible fixed assets Purchased

Goodwill €’000s

Software

€’000s

Other Intangibles

€’000s

Total

€’000sCost: 31 December 2002 20,791 1,602 593 22,986 Effect of changes in foreign exchange rates - (91) (42) (133) Additions 473 594 65 1,132 Reclassifications - 29 - 29 Disposals - (10) - (10) 31 December 2003 21,264 2,124 616 24,004 Effect of changes in foreign exchange rates - 109 34 143 Additions 1,064 580 110 1,754 Adjustments to values initially recognized (166) - - (166) Disposals - (8) (81) (89) 31 December 2004 22,162 2,805 679 25,646 Effect of changes in foreign exchange rates 60 80 63 203 Additions 1,263 1,073 1,418 3,754 Adjustments to values initially recognized (200) - - (200) Disposals - (145) (12) (157) Reclassifications - (4) 1 (3) 31 December 2005 23,285 3,809 2,149 29,243 Amortization: 31 December 2002 (18,555) (778) (208) (19,541) Effect of changes in foreign exchange rates - 40 16 56 Charge for the year (288) (370) (33) (691) Disposals - 4 - 4 31 December 2003 (18,843) (1,104) (225) (20,172) Effect of changes in foreign exchange rates - (54) (15) (69) Charge for the year (283) (380) (83) (746) Disposals - 19 17 36 31 December 2004 (19,126) (1,519) (306) (20,951) Effect of changes in foreign exchange rates - (41) (3) (44) Charge for the year 8 (546) (191) (729) Disposals - 59 13 72 Reclassifications - 1 - 1 31 December 2005 (19,118) (2,046) (487) (21,651) Net Book Value: 31 December 2003 2,421 1,020 391 3,832 31 December 2004 3,036 1,286 373 4,695 31 December 2005 4,167 1,763 1,662 7,592 Goodwill of €373K arising from the acquisition of Nova Medical Sp. Zoo, completed in July 2003 has been adjusted by €166K to reflect the use of provisions (€47K) and subsequent recognition of deferred tax assets (€119K). Goodwill of €1.1 million arising from the acquisition of the Analco businesses, completed in July 2004 has been adjusted by €200K. Under the acquisition agreement of June 2004 to acquire the Analco businesses, binding arbitration has been started to recover a claim of €321K, arising from guarantees given by the vendor.

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The following parts of the group’s activities have significant carrying amounts of goodwill: 2005 2004 2003 €’000 €’000 €’000Laboratory business 2,371 1,240 354 Polish Medical service business 1,361 1,361 1,570 Other units without significant goodwill 435 435 497 4,167 3,036 2,421 The recoverable amounts are based on value in use calculations which use cash flow projections based on actual operating results and five-year projections. Cash flows for a further 20-year period are extrapolated using a 5 percent growth rate and are appropriate because medical care and laboratory services are long term growth businesses. A pre-tax discount rate of 9 percent has been used in discounting the projected cash flows.

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9. Tangible fixed assets Freehold

land & Buildings

€’000

Leasehold Improvements

€’000

Equipment

€’000

Vehicles

€’000

Total

€’000

Cost: 31 December 2002 1,283 3,649 9,625 1,298 15,855 Effects of changes in foreign exchange rates

(176) (304) (845) (135) (1,460)

Additions 17 711 2,239 716 3,683 Disposals - (583) (476) (246) (1,305) Reclassifications 94 (120) 3 (6) (29) 31 December 2003 1,218 3,353 10,546 1,627 16,744 Effects of changes in foreign exchange rates

116 268 937 154 1,475

Additions 732 1,158 3,024 628 5,542 Disposals (1,241) (1,135) (920) (410) (3,706) Reclassifications (3) 35 (48) (41) (57) 31 December 2004 822 3,679 13,539 1,958 19,998 Effects of changes in foreign exchange rates

47 256 759 117 1,179

Additions - 1,298 2,568 804 4,670 Disposals - (94) (938) (339) (1,371) Reclassifications 30 (38) 8 - - 31 December 2005 899 5,101 15,936 2,540 24,476 Depreciation 31 December 2002 (111) (1,776) (5,403) (534) (7,824) Effects of changes in foreign exchange rates

15 194 548 54 811

Charge (21) (532) (1,988) (263) (2,804) Disposals - 256 239 105 600 31 December 2003 (117) (1,858) (6,604) (638) (9,217) Effects of changes in foreign exchange rates

(3) (175) (619) (65) (862)

Charge (20) (482) (1,694) (329) (2,525) Disposals 132 817 630 235 1,814 Reclassifications - (51) 51 42 42 31 December 2004 (8) (1,749) (8,236) (755) (10,748) Effects of changes in foreign exchange rates

(1) (100) (426) (41) (568)

Charge (17) (546) (2,013) (417) (2,993) Disposals - 30 638 241 909 Reclassifications - - (1) 2 1 31 December 2005 (26) (2,365) (10,038) (970) (13,399) Net Book Value: 31 December 2003 1,101 1,495 3,942 989 7,527 31 December 2004 814 1,930 5,303 1,203 9,250 31 December 2005 873 2,736 5,898 1,570 11,077 At December 31, 2005 €1.4 million of total tangible fixed assets are held under finance leases.

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10. Investments in associates During the period a share of just below 40% of the ordinary share capital of Centrum Medyczne Damiana Sp. Zoo (CMD) was acquired for €2,253K. CMD has one class of share capital. The following financial summary information for CMD relates to the year ended December 31, 2004 (in € ’000 translated at 2005 exchange rates). Financial information is not yet available for 2005 and hence the post acquisition profit or loss has not been equity accounted. 2004 €’000 Assets 3,539 Liabilities 1,788 Equity 1,751 Revenue 8,932 Profit/Loss for the year 532

11. Receivables

2005 2004 2003 €’000 €’000 €’000 Trade receivables 5,160 3,427 2,496 Amounts due from related parties - 15 297 Other receivables 158 76 13 Prepayments 953 689 597 6,271 4,207 3,403

Trade receivables are shown net of provisions for doubtful receivables. The charge in the profit and loss for 2005 is €116K. (2004: €104K; 2003: €91K). Refer to note 21 in relation to transactions with related parties.

12. Trade and other payables 2005 2004 2003 €’000 €’000 €’000 Accounts payable 3,811 3,030 2,034 Other liabilities 1,731 810 763 Accruals 3,174 1,595 1,330 Amounts due to related parties 167 648 506 8.883 6,083 4,633

Refer to note 21 in relation to transactions with related parties.

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13. Loans Payable 2005 2004 2003 €’000 €’000 €’000 Non-current loans payable Loans 3,559 3,688 4,234 Finance lease liabilities 713 455 296 Other 540 - - Total non-current loans payable 4,812 4,143 4,530 Current loans payable Loans 211 1,532 27 Finance lease liabilities 482 404 237 Overdrafts 196 171 53 Other 212 - - Total current loans payable 1,101 2,107 317 An analysis of periods in which the above loans fall due is as follows:

€’000 Less than one year 211 Between one and five years 3,559 More than five years - Total 3,770

Finance lease commitments analysed between principal and future interest charges are payable as follows:

Commitment

€’000 Interest

€’000 Principal

€’000 Less than one year 605 123 482 Between one and five years 760 47 713 Total 1,365 170 1,195 A subsidiary, ABC Medicover Holdings B.V. repaid a long term loan of $2.0 million in one instalment on October 15th 2005. A supplemental interest payment determined with reference to the consolidated earnings before interest, tax, depreciation, and amortization (EBITDA) of Medicover Holdings N.V. and its subsidiaries is due in June 2006. The Company has an unsecured loan facility of €3.5 million with Celox S.A., a related party, with interest charged at EURIBOR plus 2.5% per annum. Fair value is not materially different from nominal value. Refer to note 21 in relation to transactions with related parties.

14. Contingencies Under the acquisition agreement of June 2004 to acquire the Analco businesses, binding arbitration has been started to recover a claim of €321K, arising from guarantees given by the vendor. Under the 2002 purchase agreement to acquire First Medical of Prague, a potential profit share may be payable to the vendors if cumulative profits in the years 2005 to 2008 exceed €1.4 million. No amount has been recognized in these financial statements for this. In the normal course of business, subsidiaries may either be the subject of litigation concerning medical malpractice or employment matters, pending or threatened in the jurisdictions of the subsidiaries’ operations. Management view as remote the likelihood of any material claim being found in favour of the claimant for any litigation in process, pending or threatened; accordingly, no provision for any such claims are made in these financial statements.

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15. Risk Management and Financial instruments

Market Risk Price risk, from exposure to changes in market prices, is not actively managed for private equity investment funds and equity shares quoted in active markets. The volatility in these items is viewed by management to be part of the normal activity of this segment. Credit Risk Credit risk for the Group relates to customer balances in the ordinary course of business. Compliance with customer’s agreed credit terms is monitored regularly and closely. Certain customers, which are public or quasi-public institutions, may have longer credit periods due to management’s assessment of a lower credit risk. At the balance sheet date there were no significant concentrations of credit risk. Interest Rate Risk The exposure to interest rate risk is limited by agreeing fixed interest rates for the long dated loans payable (see Note 13). Foreign Currency Risk The Group is exposed to foreign currency risk on borrowings that are denominated in US Dollars. The Group hedges its foreign currency exposure in respect of forecasted transactions over the following six months. The Group uses forward exchange contracts to hedge its foreign currency risk. All of the instruments used have maturities of less than one year after the balance sheet date. In respect of other monetary assets and liabilities held in currencies other than the Euro, the Group ensures that the net exposure is kept to an acceptable level, by buying or selling foreign currencies at spot rates where necessary to address short term imbalances. Recognized assets and liabilities Changes in the fair value of forward exchange contracts that economically hedge intercompany payables and borrowings in foreign currencies are recognized in the consolidated income statement. They are generally offset by foreign exchange gains and losses arising on translation of the hedged item to Euro at the balance sheet date. Both the changes in fair value of the hedging instruments and the foreign exchange gains and losses relating to the hedged items are recognized as part of ‘foreign exchange (loss)/gain”. The fair value of forward exchange contracts at the balance sheet date was nil (2004: €135K credit; 2003: €130K credit). Insurance Contracts The Group provides financing structures principally for employer groups to pay for health care services to be provided to their employees and dependents. Under IFRS 4 “Insurance Contacts” these contracts are deemed to be insurance contracts which transfer risk to the Group. The Group has extensive experience in assessing the risk accepted by entering into these insurance contracts. The Group assesses both new business accepted and continuing contracts against internally generated risk profiles and has procedures in place to estimate future cash flows on both proposed and existing business. The risk profiles are adapted for each market the Group operates in. Certain benefits which could lead to larger individual claims are capped. Certain benefits incorporated into the insurance contracts issued are backed by the other insurers. Reinsurance is not used to transfer insurance risk as the scope of large scale losses is naturally limited by the facility based medical service model and the restrictions incorporated into the insurance contracts. The Group’s insurance contracts are heavily dispersed across a wide range of employers and geographical locations, with no large concentrations of risk. Furthermore contract terms limit recourse of the contract holder in the case of inability to provide medical services for whatever reason. Generally contracts do not have any cash reimbursement for services provided outside of the Group’s own facilities or network.

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16. Share Capital The authorised share capital of the Company is 16,000,000 ordinary shares with no par value (2004 and 2003: 16,000,000). All shares have equal rights to dividends, and carry one vote. At 31 December 2005 14,245,627 shares had been issued and fully paid (2004 and 2003: 12,464,924 shares). The Extraordinary General Meeting in Medicover Holding S.A. decided on 10th May 2005 to increase the Company’s issued share capital by €10.0 million through a new issue of 1,780,703 shares, each with an accounting par value of €5.61. The total net increase in shareholder’s equity amounted to €11.3 million of which €10.0 million was recorded as share capital and the remaining €1.3 million as share premium. The Company received total net proceeds of €11.3 million after issue costs of €0.3 million. Share premium represents the excess above nominal share value paid by the shareholders upon subscription. The subscribed and fully paid up issued share capital of the Company is € 79,952,162 represented by 14,245,627 shares with no par value. Offset against the paid up capital is a debit reserve for revaluation of € 3,592,461 arising from the different translation rates used when the paid up capital and financial reporting currency were changed from United States Dollars to Euro at the end of 2000. 2005 2004 2003 €’000 €’000 €’000 Subscribed fully paid up capital 79,952 69,958 69,958 Revaluation reserve for share capital translation

(3,592) (3,592) (3,592)

Total 76,360 66,366 66,366

17. Reserve for own shares

The reserve for the Group’s own shares is comprised of the cost of the Company’s shares held by the Group. At the balance sheet date the Group holds 36,132 of the Company’s shares (2004: 100,134; 2003: 285,883).

18. Revaluation reserve A revaluation reserve of €379K was established in 2004 which represents the fair value adjustment of private equity funds, recognized in equity as required by IAS 39 “Financial Instruments: Recognition and Measurement”. During 2005, the reserve was reduced by €276K to reflect the increase in fair value of the private equity funds. These reserves will be transferred to the income statement when the investments are realized.

19. Share incentive plan The Company has adopted a share option incentive plan under which options are granted to certain senior management of the Group. These options are exercisable over a period from 3 to 6 years from date of granting and are conditional upon continued employment in the Group. Number of

Options Options exercise

price Weighted average exercise price

Plan A Plan B Total Options outstanding at 31 Dec 2004

236,202 243,000 479,202 €0.95 to €6.14 €3.76

Options cancelled or expired

(21,668) (7,833) (29,501) €4.43

Options granted in the year - 69,000 69,000 €5.88 to €8.22 €6.01 Options exercised during the year

(48,834) (15,168) (64,002) €3.50 to €4.73 €3.95

Options outstanding at 31 Dec 2005

165,700 288,999 454,699 €3.33 to €8.22 €4.03

Options exercisable at 31 Dec 2005

266,665 €3.50 to €5.41 €3.57

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The Company received cash proceeds of €250K in respect of the 64,002 options exercised during the year. €373K was credited to Reserve for own shares and €124K was debited to Share Premium. The options were exercised during the year when the average market price was €8.06. The options exercisable at the end of the period have an average remaining contractual life of 1.5 years. The Company has 2 share option plans. The first share option incentive plan relates to the transformation of the focus of the activities of the Group, when it became Medicover Holdings S.A. in January 2001. This plan translated and replaced the share options issued to staff in the former investment business and the Medicover subsidiary holdings. This is shown as Plan A above. A number of these options were vested at the time of the re-organization. The second share option incentive plan, approved by the Board is used to retain and motivate staff in the Medicover Group. Awards are made to senior managers on an annual basis and are contingent upon continued employment. Typically these awards are phased over several years with a minimum vesting period of 3 years and priced at the current market price at the time of the award. The detail of this program is shown as Plan B above. From the 1 January 2005 the Group has applied International Financial Reporting Standard 2 "Share-based Payment". This standard requires an entity to recognize share-based payment transactions in its financial statements, including share option transactions. Under the transition rules in the standard the adoption of the standard gave rise to 129,000 of the share options above being expensed or partially expensed in the income statement and the remaining balance will continue to be accounted for under the existing accounting policy, until expiry or exercise. The charge for share options to the income statement for 2005 is €82K (2004 and 2003: nil). The fair value of services received in return for employee share options issued in the period is measured by reference to the fair value of share options granted. The estimate of the share option fair value is derived from the black scholes formula, with the inputs of expected volatility of 35 percent, expected dividends of 0 percent, a term of 5 years, a risk free interest rate of 2.75%, share prices of €5.88 and €8.22 and exercise prices of €5.88 and €8.22 respectively. The derived estimate of the fair values of the options on grant using the above inputs were €2.08 and €2.91 per option respectively. The expected volatility is based on historic volatility and expected changes to future volatility due to market conditions. Share options are granted to employees under a continuing service condition, which is not taken into account in the estimate of the fair value of the grants. There are no market conditions associated with the share option grants. The standard required a restatement of reserves for the 64,000 options outstanding at 31 December 2004 to which the standard has been applied. This restatement was €36K debit to retained earnings.

20. Major Shareholders Shareholders owning 5% or more of the share capital of the Company at 31 December 2005 were: 2005 2005 Number of shares % shareholding

Celox S.A. 4,999,893 35.2 Taube Hodson Stonex Partners Ltd.

1,571,413 11.1

Progress Enterprises S.A. 889,142 6.3 State Street Bank and Trust 733,935 5.2

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21. Related Parties and Related Party Transactions

(a) Directors The Directors of the Company held beneficial interests in the shares of the Company at 31 December 2005 as follows: 2005 Number of shares J. af Jochnick 4,999,893 F. Rågmark 183,715 P. Wikström 45,714 A. Bohn 19,028 M. Nordenvall 2,900 F. Stenmo 55,000

In addition a discretionary trust, of which certain members of the af Jochnick family are possible beneficiaries, holds 889,142 shares. Directors’ compensation was as follows: 2005 2004 2003 €’000 €’000 €’000 Short-term employee benefits 319 306 263 Post-employment benefits 28 25 24 Equity compensation benefits 7 - - Total 354 331 287 The amounts above include non-cash benefits, amounts paid by the group to retirement benefit plans and share based payments in respect of directors. During the year the Executive Chairman, J. af Jochnick received remuneration and benefits from the Group amounting to € nil (2004 and 2003: € nil). No pension contributions were made on behalf of the Executive Chairman. During the year the Managing Director, F. Rågmark received remuneration and benefits from the Group amounting to €285K (2004: €277K; 2003: €226K) inclusive of pension contributions to a defined contributions pension scheme. In addition he held 135,000 share options at an average exercise price of €3.68. Directors’ Terms: The Company has no agreement on severance pay with any Directors, and no Directors have a service contract longer than 12 months. (b) Other Related Parties J. af Jochnick has an interest in the share capital and is a member of the board of Oriflame International S.A. J. af Jochnick has an interest in the share capital and is a Director of Celox S.A., which owns 35.2% of the share capital of the Company.

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During the period, the following transactions were conducted with related parties: 2005 2004 2003 €’000 €’000 €’000 Oriflame International S.A. and subsidiaries Expenses and employment costs incurred on behalf of the Group, and charged at cost

612 594 488

Management charges to the Group for administering offices and employing staff

20 19 18

Sales to Oriflame of healthcare services

(225)

(201)

(200)

Celox S.A. Expenses and employment costs incurred on behalf of Celox S.A. and charged at cost

140 175 275

Management charges to Celox S.A. for administering offices and employing staff

11 14 22

The Company has a loan facility of €3.5 million with Celox S.A. which bears interest at interbank offer rates plus a margin of 2.5% currently 5.3%. In January 2003 Oresa Ventures NV and its business of private equity investing was sold to Celox S.A. Oresa Ventures N.V. continues to hold certain assets for which beneficial ownership was retained by the Group under a trust agreement until they are disposed of or transferred to other group companies. There were three different trust deeds drawn up which were as follows:

a) Trust agreement between Time-Start (trustee) and Medicover Holdings S.A. (beneficiary) under

which the trustee holds the treasury shares of the beneficiary under trust;

b) Trust agreement between Borlag (trustee) and Medicover Holdings S.A. (beneficiary) under which

shares of Medicover Czech Republic are held under trust by the trustee on behalf of the beneficiary;

c) Trust agreement between Oresa Ventures (trustee) and Medicover Holdings S.A. (beneficiary) under

which several equity shares quoted in active markets and private equity investment funds are held

under trust by the trustee on behalf of the beneficiary.

22. Subsidiaries

The following 100 % owned companies are the principal subsidiaries of the Group and included in the consolidated financial statements:

Country Company Activity of Incorporation ABC Medicover Holdings B.V Holding Holland Belro Medical SA. Holding Belgium Hansa Property and Development Sp. Zoo Holding Poland I-start pl Sp. Zoo Pharmacy Poland Labmedlease SRL Leasing Romania Medicolease SRL Leasing Romania Medicover Commercial SRL Insurance Romania Medicover Cz. s.r.o. Medical Czech Republic Medicover Eesti A.S Medical Estonia Medicover Holdings N.V. Holding Dutch Antilles Medicover Investment B.V. Holding Holland Medicover Kft. Holding Hungary Medicover Klinika Rt. Medical Hungary Medicover Rombel SRL Laboratory Romania Medicover SRL Medical Romania Medicover Sp.zo.o. Medical Poland Medicover s.r.o. Medical Czech Republic Medyczne Eurolab Sp. Zoo Laboratory Poland Prodok Sp. Zoo Laboratory Poland Synevo Polska Sp. Zoo Laboratory Poland

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23. Information per share

Earnings per share figures have been calculated on the weighted average basis of 13,303,984 shares in issue during the year (2004 – 12,283,284; 2003 – 12,150,962) and the following earnings. 2005 2004 2003 Profit/(loss) for the year €’000 1,402 (898) (1,764) Profit (loss) per ordinary share € €0.105 €(0.073) €(0.145)

Diluted earnings per share takes into account the dilutive effect of share options were they to be exercised. The dilutive component of share options is calculated by taking into account the exercise price in relation to the average market price for 2005. For 2005 the dilutive effect has been calculated as the equivalent of an additional 211,736 shares in issue during the year (2004 – 152,000; 2003 – 134,302). 2005 2004 2003 Diluted profit per ordinary share € €0.104 N/A N/A

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THE SHARE AND OWNERSHIP Share Capital and ownership structure

The share capital in Medicover is € 79,952,162 divided into 14,245,627 shares, each with an accounting par value of approximately € 5.61 per share. There is only one share class in Medicover and one share entitles one vote. All shares carry equal rights to Medicover’s assets and earnings. As at end of December 2005, the total number of shares transferred to SDRs issued were 11,363,966.

Share Capital Development

The share capital has since 1997 developed according to the table below.

Year Issue/Action Change in No of

Shares

Change in Registered

Share Capital

Total number of Shares in

Issue

Total Registered

Share Capital

1997 Formation of Company 3,699,283 20,761,857 3,699,283 20,761,857 1997 New Issue and initial listing – Note 1 6,000,000 33,674,402 9,699,283 54,436,259 1999 New Issue – Note 2 2,053,406 11,524,537 11,752,689 65,960,796 2000 Change in reporting currency – Note 3 0 0 11,752,689 65,960,796

2001 New Issue – Note 4 712,235 3,997,348 12,464,924 69,958,144 2005 New Issue – Note 5 1,780,703 9,994,018.17 14,245,627 79,952,162 Note 1 Issue of 6,000,000 shares for cash of USD 9.50 per share, with the excess proceeds above nominal

value of USD 5.00 per share allocated to share premium Note 2 Issue of shares for in kind contribution of 2,355,094 minority shares in Medicover Holding N.V at a price

of USD 5.73 per share The excess proceeds above nominal value of USD 5.00 per share were allocated to share premium.

Note 3 In the financial statements the registered share capital is shown offset by a debit of €3,592,461 arising from the different translation rates used when the paid up capital and financial reporting currency were changed from USD to the Euro at the end of 2000.

Note 4 Issue of 353,245 shares for cash at the price of € 5.61 per share to Celox S.A. in conjunction with purchase of remaining 4.99 per cent minority shares in Medicover Holding N.V. the principal operating subsidiary and 358,990 treasury shares acquired by a group company to eventually fulfil the group’s share option program at € 5.61.

Note 5 Issue of shares with preferential rights to shareholders, with a par value of approximately € 5.61 per share. The excess of the subscription price of € 1,319,494 was allocated to share premium.

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Ownership structure Medicover As of 31 December 2005.

No of shares No of shareholders % shareholding No of shares % of shares

0-1,000 1,095 76,04 264,416 1,86

1,001-5,000 220 15,28 486,601 3.43

5,001-10,000 44 3,05 305,277 2,15

10,001-100,000 58 4,03 1,631,180 11,48

100,001- 23 1,60 11,522,021 81,08

Total 1,440 100 14,209,495 100

Largest shareholders The 10 largest shareholders as of 31 December 2005.

Shareholder No of shares %

Celox S.A. 4,999,893 35,19

Taube Hodson Stonex Partners Ltd * 1,571,413 11,06

Progress Enterprises S.A. 889,142 6,26

State Street Bank and Trust 733,935 5,16

Nordea Bank S.A. Luxembourg 617,779 4,35

Eikos 600,800 4,23

Andra AP-fonden 553,485 3,89

Pictet & Cie 359,823 2,53

Close Int. Custody Services Ltd 273,262 1,92Livförsäkrings AB Skandia 266,794 1,88 Total 10,866,326 76,47

*with following accounts: St James's Place Greater European Unit Trust, St James's Place International Unit Trust, International Growth & Value fund, The Partners fund, THS International Exempt Unit Trust, Electric & General Investment Trust, GRD10.

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Relative Performance of the Medicover Share

Contact Details

CONTACT US

Medicover Holding S.A. 20, rue Philippe II L-2340 Luxembourg Phone: +352 26 20 31 10 Fax: +352 26 20 32 34

Medicover Poland ul. Bitwy Warszawskiej 1920 r 18 02-366 Warsaw Poland Phone: +48 22 592 7000 Fax: +48 22 590 7099 E-mail: info@medicover.pl

Medicover c/o Belro Medical S.A. Waterloo Office Park Building O Drève Richelle 161 B-1410 Waterloo Belgium Phone: +32 2 357 55 77 Fax: +32 2 357 55 05 E-mail: info@medicover.com

Medicover Estonia Pärnu mnt, 102c 11312 Tallinn Estonia Phone: +372 605 1550 fax: +372 605 1515 E-mail: info@medicover.ee www.medicover.ee

Medicover P.O. Box 55720 Riddargatan 12 SE-114 83 Stockholm

Medicover Romania 16-20 Grigore Alexandrescu St., 2nd Floor Sector 1 Bucharest Romania Phone: +4021 310 16 99 Fax: +4021 310 17 43 E-mail: romania@medicover.com www.medicover.ro

Medicover Hungary 1132 Budapest Váci út 22-24 Hungary Phone: +36 1 465 3150 Fax: +36 1 465 3160 E-mail: info@medicover.hu www.medicover.hu

Synevo (Medicover Rombel srl ) Str. Ion Campineanu 11, Etaj 4, Sector 1, Bucuresti Tel.: (00 4021) 315 19 10/11 Fax: (00 4021) 315 19 93 E-mail: office@synevo.ro laborator@synevo.ro www.synevo.ro

Medicover Czech Lomnického 1705/5 Prague 4 140 00, Czech Republic Phone: +420 234 630 111 Fax: +420 224 255 730 E-mail: info@medicover.cz www.medicover.cz

Synevo Medical (Poland) Sp.z o.o ul. Dzika 4 , 00-194 Warszawa Tel.: + 48 22 636 37 82 Fax : +48 22 636 37 88 E-mail: biuro@synevo.pl laboratorium@synevo.pl www.synevo.pl

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