1. Andrej Škulj, vodja SVZD Uspešni delajo varno in zdravo, Brdo pri Kranju, 7.11.2008 The Cost and Benefit Analysis of providing safety and health at work in the Krka company, d. d., Novo mesto

2. Organization scheme of the Krka group Western Europe and overseas markets Central Europe South- Eastern Europe Eastern Europe

3. Employees 6777 employees Number of people employed in the company and Krka group on 31 December companygroup

4. Development strategy of Krka group Development strategy MISSION To live a healthy life VISION To strengthen the position as one of major pharmaceutical generic companies on the European market VALUES Agility and flexibility Partnership and trust Creativity and efficiency

5. Key strategic goals by 2012 To achieve more than 10-percent of average annual growth rate of the sale. To keep at least 40-percent share of new products in the total sale. To strengthen competitive advantage of product portfolio through a vertical integration and placing selected products on selected key markets as a first generic drug. To improve business indicators. To use efficiently the means and improve cost effectiveness of the products. To improve innovation level. To preserve independence.

6. Integrated management system Permanent improvements Integrated management system INTEGRATED QUALITY SYSTEM RESPONSIBLE BEHAVIOUR SAFETY HEALTH ENVIRONMENT INFORMATION MANAGEMENT QUALITY COMMON GOAL

7. Risk management Risk areaRisk descriptionManagement methodExposure Intellectual propertyViolation of rights from the title of intellectual property of third party Consistent watch over intellectual property of other entities, monitoring patents, design of reservation Moderate Regulatory proceduresChanging legislation or its interpretationConsultation with regulatory authorities in the process of developing the product Moderate Development processThe risk that the developed product will not have appropriate characteristics or will be inappropriate from the view of patent situation Vertically integrated model of businessModerate Reliability of suppliers and contracting partners Possibility of irregular and inappropriate supplies or non competitive prices To analyse the risk of individual suppliers and accepting suitable measures in the case of inappropriate business operation with the supplier Moderate Availability of production capabilities Unplanned stops, disturbances or faults in production Regular preventive maintenance and measuresSmall Environment protectionDanger due to outstanding events with adverse effect on environment Preventive rehearsals and prescribed internal procedures in the case of outstanding event Small Information sourcesRisk of disturbances in business processes due to disturbances in the field of information sources Independent security checks and measures, foreseen in advance, for elimination of disturbances Moderate employeesRisk of losing key employees and lack of professional skilled workers Systematic work with key employees, awards, development of human resources, constant training, measuring organizational culture and atmosphere Moderate Safety and health at workAccidents or injuries at workVerification of technological procedures, computer.-assisted system of risk evaluation Moderate Protection of propertyRisk of alienation of propertyPlan of protectionmoderate

8. Sales of the group and Krka company 781 mio € 100 % Sales of the company Annual growth rates of the company sale Sales of the group Annual growth rates of the group sale

9. Sale by regions Slovenia SE Europe Eastern Europe Central Europe Western Europe and overseas markets SHARES OF REGIONS IN THE KRKA GROUP SALES IN 2007

10. Investments 14,5 % for investments INVESTMENTS OF THE KRKA GROUP IN THE PERIOD 2003-2007 investments Investment shares in the sale

11. Investments – common characteristics Most modern technical solutions and guidelines of good production practice are considered The highest European standards for safety and protection of people and environment are considered Integrated safety

12. Costs of integrated safety - 781 mio € sales 2007 = 100 % - 113 mio € investments 2007 = 14.5 % of sale - V.: What is the SHW share in investments? - O.: ~20% - This is 3% of sale or 23.43 mio €

13. Costs (PPE, HC, training, inspection of WE, maintenance …) Personal protection equipment 0.878 mio € or 0.11 % SHW Key goals and programmes 0.31 0.040 Health care 0.26 0.034 Recreation of employed 0.18 0.024 Training for SHW 0.10 0.013 VSAPZ 0.11 0.013 Risk evaluation 0.04 0.005 Inspection of working equipment 0.04 0.005 Other 0.93 0.120 Total 2.538 mio € 0.324 %

14. Costs of safety and health at work Integrated safety 3% from sale or 23.43 mio € Costs (PPE, HC, training, inspections of WE, maintenance…) 0.3 % from sale or 2.5 mio € TOTAL 3.3% from sale or 25.93 mio €

15. Costs of safety and health at work SHW COSTS IN % FROM THE SALES INCOME SHW in new projects, investments, reconstructions Personal protection equipment Health care Preventive recreation (weekly) Training Preventive inspection of working equipment Risk evaluation other Personal protection equipment Health care Preventive recreation (weekly) Training Preventive inspection of working equipment Risk evaluation other

16. Important Costs related directly to the employees are 10-times lower than the costs of integrated – technical safety SHW costs depend on investments in the current year Every year several million € go to investments, but their share in the sale is every year smaller CONCLUSION: share of SHW costs is according to the sale decreasing from year to year

18. CONCLUSION Although the situation of safety and health at work is improving from year to year, the share of SHW costs is according to the sales decreasing yearly. CONDITION: annual two-cipher sale growth

19. Benefits from providing SHW Less accidents Less severe accidents Smaller sick leave Number of accidents in 12 years Sick leave because of accidents in last 10 years

20. Benefits from providing SHW Lower insurance premiums (investment in sprinkler returns in 10 years) Less incidents Greater reliability of process operation (1 hour of transport system standstill= 20.000 €) Example: 5 hours of standstill represents the same expense as the expense for correct and safe work training

21. Benefits from providing SHW – soft part Good name of a company Candidates for job are more skilled Greater satisfaction and motivation for work (satisfaction with working conditions in 2007 = 4.1 on the chart from 1 to 5) Smaller fluctuation Less faults – experienced and skilled staff Satisfied customers Increase of market share

22. Importance of regulated SHW for a company COMPETITIVE ADVANTAGE