ECOLABEL Vipco, Vipress, Viprint, Vimag, Vimax, Libna Print

2

C O N T E N T

I. BUSINESS REPORT ......................................................................................... 4

1. INTRODUCTION ........................................................................................... 5

1.1. STATEMENT OF THE MANAGEMENT BOARD .................................... 6

1.2. COMPANY PROFILE ............................................................................... 8

1.3. MILESTONES IN THE COMPANY’S HISTORY – 70 YEARS OF PRODUCTION IN KRŠKO ............................................................................. 10

1.4. KEY ACHIEVEMENTS IN 2009 IN FIGURES ....................................... 11

1.5. SIGNIFICANT EVENTS IN 2009 ........................................................... 11

1.6. RISK MANAGEMENT ............................................................................ 12

1.7. CORPORATE GOVERNANCE STATEMENT ....................................... 13

1.8. THE COMPANY’S VISION AND MISSION ........................................ 17

2. BUSINESS REPORT...................................................................................... 18

2.1. ANALYSIS OF OPERATIONS ............................................................... 19

2.2. PRODUCTION ........................................................................................ 22

2.3. SALES....................................................................................................... 25

2.4. PURCHASING ........................................................................................ 27

2.5. RESEARCH AND DEVELOPMENT ACTIVITY ..................................... 28

2.6. INVESTMENT ACTIVITY ........................................................................ 28

2.7. PERSONNEL ............................................................................................ 29

2.8. THE COMPANY’S EXPECTATIONS IN 2010 ..................................... 32

3. ENVIRONMENT .......................................................................................... 33

3.1. ACHIEVEMENTS IN 2009 ..................................................................... 34

3.2. ENVIRONMENTAL IMPACT ................................................................. 35

II. FINANCIAL REPORT .................................................................................. 38

1. FINANCIAL STATEMENTS FOR 2009 ....................................................... 39

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1.1. BALANCE SHEET AS AT 31 DECEMBER 2009 in EUR...................... 40

1.2. INCOME STATEMENT FOR THE PERIOD FROM 1 JANUARY TO 31 DECEMBER 2009 in EUR .............................................................................. 42

1.3. CASH FLOW STATEMENT FOR THE PERIOD FROM 1 JANUARY 2009 TO 31 DECEMBER 2009 ..................................................................... 43

1.4. STATEMENT OF CHANGES IN EQUITY FOR 2009 ........................... 44

1.5. STATEMENT OF CHANGES IN EQUITY FOR 2008 ........................... 45

2. NOTES TO THE FINANCIAL STATEMENTS ............................................... 46

2.1. ACCOUNTING POLICIES AND ASSUMPTIONS .............................. 47

2.2. NOTES TO THE FINANCIAL STATEMENTS ......................................... 51

2.3. SIGNIFICANT EVENTS FOLLOWING THE END OF THE 2009 FINANCIAL YEAR.......................................................................................... 65

4

I. BUSINESS REPORT

5

1. INTRODUCTION

6

1.1. STATEMENT OF THE MANAGEMENT BOARD In spite of the global financial and economic crisis, which affected the company’s operations, it performed well in 2009. It ended the year with a profit of EUR 3.1 million. Thus, the profit was 23% higher than planned. The company was therefore able to cover part of its loss from 2008, which was the result of expected expenses in the future years and the revaluation of assets in the former chemical pulp production plant. Despite the significantly deteriorated operating conditions, we recorded a minimum drop (1%) in sales revenue or EUR 95.3 million in terms of value. The consequences of the financial and economic crisis were felt in the sale of paper on the Italian market. The volume of sales was almost halved because of the liquidation proceedings against our exclusive buyer in Italy. Despite the problems on this market, we managed to compensate for the loss with the sales on other markets and ensured that all our capacities were utilised. We managed to considerably increase the volume of sales in some western markets (e.g. Germany) and the markets of south-eastern Europe (e.g. Greece and Serbia). We also strengthened our position in Slovenia, where we managed to achieve 4% growth. In the structure of sales, we increased the proportion of newsprint and improved newsprint paper. Nevertheless, we are still planning continuous growth in the proportion of recycled papers for graphic purposes, which is the fruit of our own development activities. Flexibility of production and sales are two important factors which represent the company’s competitive advantage in the crisis conditions. Quick responsiveness to the market situation and adaptation of the production range to the customer’s demands are crucial for long-term growth in sales and profitability. The company's production activity was very successful in 2009; we exceeded the planned quantity of paper production (187,231 tonnes) as well as the total quantity of produced wood pulp and deinking fibres (173,329 tonnes). Labour productivity was up 4%. The level of integration of paper and fibre production process increased by 3 percentage points. This guarantees a better return on the end paper product. The overview of operations of paper producers in Europe shows that the total volume of production dropped by more than 10% because of the crisis. Deteriorating operating conditions, which are primarily reflected in reduced demand (30% down, according to estimates), are a great challenge for all manufacturers in the sector. In response to the conditions, some companies contracted their capacities and cut operating costs. Vipap responded to the crisis conditions by adjusting its portfolio to the current needs of customers, by providing better customer service and by paying a great deal of attention to the costs of raw materials and energy. Due to favourable price ratios, the latter had a positive impact on the company’s financial results. The company’s investment activity was slightly more modest than planned. Given that the company earmarked more than EUR 140 million for environmental rehabilitation and technological modernisation of production machines and equipment in previous years, there was no need for further significant investments, in terms of paper quality. The value of investment expenditure was EUR 3.4 million. In terms of investment amount, the largest proportion (EUR 2.0 million) was earmarked for the second phase of the rehabilitation of the boiler for steam production in the energy production unit. The first phase was successfully completed in 2008. Much more emphasis was placed on research and development in the area of developing private recycled paper brands, which is the company’s core future orientation in terms of production and marketing activities. In this area, the company also cooperates with external research institutions and earmarks funds for the research activity (Pulp and Paper Institute). In 2009, the company completed the process of obtaining the environmental permit. The acquisition of the environmental permit is a very important recognition for the company, especially in terms of successful investments in technological modernisation of paper and

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fibre production. In the area of new product development, we follow the guidelines of European legislation regarding sustainable development of our products and raw materials. The acquisition of the EU environmental label (Ecolabel) for the range of new in-house developed products is considered a huge success. This contributes significantly to increasing the competitiveness of products, and indicates that the company's development policy is environmentally-friendly. The company is actively formulating the policy of the paper industry in Slovenia, as a role model for sustainable development. The company’s 2009 results show that we have actively responded to the crisis situation and operating conditions and managed to establish, together with the employees, stable operations that will guarantee our future existence and development. We are aware that we will have several obstacles to overcome in 2010, but remain optimistic for the future.

Management Board

8

1.2. COMPANY PROFILE The principal activity of the company is the production of fibres and paper and the sale of paper. Vipap Videm Krško d.d., Tovarniška 18, 8270 Krško is entered in the companies register under application number 1/0398300 at the District Court of Krško. The majority owner is the Ministry of Finance of the Czech Republic, which holds 96.5% of shares, while 3.5% are the company’s own shares. The company has three associated companies: - Vipreh d.o.o. which is currently not performing the activity for which it was registered; - Ekopa d.o.o. which sorts paper and purchases waste paper from Serbia, Montenegro,

Albania and Macedonia and sells paper to these countries. It is fully owned by Vipap Videm Krško d.d. and represented by Vera Cerle. It is a small company with 2-3 employees throughout the year. It provides services exclusively for the parent company.

- Levas Krško d.o.o. is a company employing disabled persons, established and entered in the court register on 23 May 1991 under reg. no. 1-1779/00. Vipap Videm Krško d.d. owns 84.48% of the company, which is represented by Roman Ganc. The activities Levas Krško d.o.o. are wide-ranging, comprising both production and service activities. Its principal activity is the production and drying of palettes for Vipap Videm Krško d.d. and other buyers. The service activity includes security, carpentry and a metal workshop, an automotive repair shop and electrical/mechanical services.

Operations between associated persons are multi-tiered, meaning that each company is essentially independent, with the parent company holding a majority stake in Ekopa d.o.o. and Levas Krško d.o.o. The companies have established direct capital ties on the basis of the Corporate Income Tax Act (ZDDPO-2). In view of the relatively small scope of operations with associated companies, Vipap Videm Krško d.d. is not obliged to compile consolidated financial statements (provision of Article 56, Paragraphs 8 and 9 of the Companies Act and the Slovenian Accounting Standards). The scope of associated companies' operations does not affect the true and fair presentation of the financial position, the income statement, the cash flows and the changes in equity. Based on the criteria as at the annual balance sheet date for the last two consecutive financial years, the number of employees and net sales revenue and in accordance with the Companies Act (ZGD), the company is classified as large company. The company’s bodies are the General Meeting of Shareholder, Supervisory Board and Management Board. The five-member Management Board is led by Oldřich Kettner. The nine-member Supervisory Board is led by Pavel Trenda. The Chairman of the General Meeting of Shareholders is Marko Sikošek. The company had 445 employees as at the end of the year.

9

VIPAP VIDEM KRŠKO D.D.

Activity

Manufacture of paper and fibres

Ownership

Ministry of Finance of the Czech Republic

Organisational form

Public limited company

Share capital

EUR 78,387,660

Nominal value of one share

EUR 41.70

Company identification number

SI 23087226

Registration number

5971101

President of the Management Board

Oldřich Kettner

Other members of the Management Board

Jožica Stegne – Deputy President, Miloš Hábrnal, Jože Cerle and Dragan Kranjc

Chairman of the Supervisory Board

Pavel Trenda

Other members of the Supervisory Board

David Šťastný, Radek Lacko, Dušan Vaněk, Miroslav Lébl, Miro Senica, Franc Kukovičič, Albertina Županc and Marjan Jurman

Employees

445 (31 December 2009)

Sales in 2009

182,952 tonnes of paper

Production in 2009

187,231 tonnes of paper

Subsidiaries

Ekopa d.o.o. and Levas Krško d.o.o.

Telephone

+386 (0)7 48 11 100

Fax

+386 (0)7 49 21 115

E-mail

vipap@vipap.si

Web site

http://www.vipap.si

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1.3. MILESTONES IN THE COMPANY’S HISTORY – 70 YEARS OF PRODUCTION IN KRŠKO The origins of the company date back to 1939, when Franc Banač built a pulp factory at Videm pri Krškem, in the then completely undeveloped region of Spodnje Posavje, and employed 180 local people. Today, Vipap Videm Krško is one of the key promoters of development in the Krško region. In 1996, the ownership of the company was taken over by ICEC Holding from Ostrava and in 1998 by the Investment and Post Bank Prague, while it is currently owned by the Ministry of Finance of the Czech Republic. year VIPAP VIDEM KRŠKO D.D. 1938 Selected location in Krško

1939 Test pulp production

1946 Restart of the factory

1955 Start-up of paper machine (PS) 1

1963 Start-up of paper machine (PS) 2

1972 Start-up of paper machine (PS) 4

1975 Start-up of paper machine (PS) 3

1976 Start-up of the new pulp plant

1990 Reconstruction of paper machine (PS) 1

1996 The factory is taken over by the ICEC Holding from Ostrava

1998 The factory is taken over by IPB Prague

1999 Start-up of the PRS5

2000 The factory is taken over by ČSOB Prague Modernisation of paper machine (PS) 3 Reconstruction of the bleaching plant

2001 Modernisation of paper machine (PS) 1

2003 Start-up of co-generation (Phase 1) Modernisation of the deinking plant Modernisation of the wood pulp production plant Modernisation of paper machine (PS) 2

2004 Shutdown of paper machine (PS) 4

2006 Shutdown of the chemical pulp production plant

2007

Completion of the second phase of the purification plant

2008

Modernisation of paper machine (PS) 3 Modernisation of boiler 4

2009

70 years of production in Krško Modernisation of boiler 4

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1.4. KEY ACHIEVEMENTS IN 2009 IN FIGURES

2007 2008 2009 Index 2009/2008

Financial information Net sales revenue (in EUR thousand) 95,213 97,064 95,300 98,2 Operating profit/loss (in EUR thousand) 4,874 (6,213) 6,849 310,2 Profit or loss for the period (in EUR thousand)

1,935 (6,648) 3,123 246,8

Investment activities Value of investments (in EUR thousand) 5,729 17,311 3,400 19,6 Performance indicators Value-added per employee (EUR thousand)

60 44 64 145,5

Return on equity in % 2,4 (8,4) 4,0 212,4 Return on total assets in % 2,6 (2,7) 3,7 337,0 Revenues per employee (in EUR thousand)

206 214 212 99,1

Data on production Amount of produced paper (in tonnes) 182,408 181,027 187,231 103,4 Amount of produced deinking (in tonnes)

145,141 144,813 152,840 105,5

Amount of produced wood pulp 18,341 17,682 20,489 115,9 Data on employees No. of employees as at 31 December Average no. of employees

452 462

448 454

445 450

99,3 99,1

1.5. SIGNIFICANT EVENTS IN 2009 September 2009 Several events were organised this year to celebrate the 70th anniversary of production at this location. In the beginning of September 2009, we organised the first internal assessment of wine, where 20 of our employees – wine producers presented their wines. They presented 31 samples of 13 sorts of wine. On 15 September, we welcomed, together with many of our business partners and other guests, the Czech delegation led by the president of the Czech Republic Václav Klaus who commissioned the modernised paper machine 3. Another purpose of the meeting was to talk with some high-ranking representatives from the economy and the municipal structures. The solemn event was concluded with the concert of the famous Slovene musician Vlado Kreslin. On the nineteenth of September, a meeting of employees was organised, in the scope of which we also carried out the competition in preparing goulash and other forms of entertainment and games. The purpose of these events was to celebrate the 70th anniversary of production at this location and the conclusion of the 13-year investment cycle, in which the company carried out many modernisations in line with its development plan.

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October 2009 On 21 October 2009, the General Meeting of Shareholders of Vipap Videm Krško d.d. was convened, with the following agenda:

• Opening of the General Meeting of Shareholders at noon by Oldřich Kettner • The General Meeting of Shareholders unanimously elected and appointed its working

bodies. • It was briefed on the Annual Report for the 2008 financial year. • Deloitte Revizija d.o.o., (Davčna ulica 1, Ljubljana) was appointed auditor for the 2009

financial year. • It acknowledged the appointment of a new member of the Supervisory Board

The 5th market conference was carried out in October, organised for the company’s business partners (potential and existing buyers of paper), at which the company’s marketing strategy was presented as well as its new products, results and the planned development of new products. The conference represents direct contact with agents, buyers and printers, which are important in terms of the company's sales and development. November 2009 Active participation at the International Meeting of the Slovenian Paper Industry: the 13th Day of the Slovenian Paper Industry and the 36th International Annual Symposium of DITP, organised by the Chamber of Commerce and Industry of Slovenia - Paper and Paper Processing Industry Association and the Pulp and Paper Engineers and Technicians Association of Slovenia (DITP). This year’s topics were 3E (Economy, Ecology and Energy) and the sustainable nature of the paper industry. The main topic of the event was a briefing on the Memorandum of the Slovenian paper industry in terms of increasing the visibility of the Slovenian paper and paper processing industry among the drivers of the economic environment. 1.6. RISK MANAGEMENT Business risks Market risks The competition on the paper market is fierce, because of the strong influence of the Middle East, China and Russia. With the changed macroeconomic operating conditions on almost all key markets, which occurred because of the global financial crisis, the risk is constantly increasing. The company’s sales strategy is constantly adjusted/modernised in accordance with the findings and developments on the market. Market risks are significantly mitigated by flexible production and own high-quality human resource potential. The financial crisis and recession also increased the level of uncertainty on raw materials markets. Long-term partnerships remain the strategic orientation of purchasing, but based solely on competitive terms. Risks associated with development The company is constantly facing new risks associated with new products, as it is always developing its own new products, recycled products in particular, which replaced the wood-free range of products that were still produced out at the time of chemical pulp production. Here we face the risk of the unsatisfactory quality of new products, the risk of insufficient orders and quantities and the non-profitability of new products. The risk of unsatisfactory quality is being resolved in the development and technology sector in cooperation with production and the Pulp and Paper Institute from Ljubljana. The monitoring of the effects of investments is crucial.

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Risks associated with environmental protection Risks associated with environmental protection are mainly the risks of ecological disasters or accidents that could negatively impact the environment, and the risks of paying fines for non-compliance with the regulations and standards in the area of environmental protection. Such risks are always present and must therefore be anticipated and managed. Thus, the company has set up an ecological service which employs experienced technicians engaging solely in the analysis of ecological parameters and the efficient resolution of ecological problems, as well as ensuring compliance with the applicable laws. Financial risks Foreign exchange risk The company's import and export orientation exposes it to foreign exchange risk. Since the company mainly exports to markets where the currency is USD, fluctuation of the EUR/USD exchange rate is important. In 2009, the exchange rate fluctuated and the US dollar weakened, which had a negative impact on the expansion of the sale of newsprint on traditional US dollar markets. The prices of raw materials are mainly set in EUR, with the exception of the purchase of coal, the price of which is in USD. Interest rate risk Interest rate risk is the possibility of a change in the reference interest rate on the financial market, mainly due to raised long-term loans linked to a variable EURIBOR. A part of long-term and short-term loans is secured by a fixed EURIBOR until their repayment. The policy of interest rate hedging enables the company to minimise the risks of increasing costs of financing in the context of a fixed margin. Liquidity Risk Risks related to ensuring the solvency of the company were balanced by efficient long-term and short-term cash management. In the short term, we ensured solvency through the weekly, monthly, semi-annual and annual planning of cash flows, and by the renewal of old and the approval new short-term credit lines at banks. We increased the scope of short-term loans in order to ensure an adequate cash flow. Cash assets for major investments were provided by raising long-term loans which enabled us to close the financial construction of a project. We assess that liquidity risk in 2009 was low, owing to appropriate cash flow planning and the willingness of banks to provide financing to the company. In 2009, we settled all liabilities in accordance with annuity schedules for the repayment of long-term loans to banks and other financial institutions. The company settled its liabilities to other business partners in accordance with the agreed payment deadlines and minimum delays which did not affect operations. 1.7. CORPORATE GOVERNANCE STATEMENT The corporate governance principles of VIPAP Videm Krško d.d. are based on valid regulations in the Republic of Slovenia, the company's internal acts and established good business practices. The company is managed according to a two-tier system, in which the company is managed by the Management Board, whose work is supervised by the Supervisory Board. The company's governing bodies are:

• Management Board • Supervisory Board • General Meeting of Shareholders

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General Meeting of Shareholders Pursuant to the provisions of the Companies Act, the General Meeting of Shareholders is the highest body of the company. At the General Meeting, the shareholders exercise their will directly and adopt fundamental and statutory decisions. The General Meeting of Shareholders takes decision regarding the following:

• Adoption of the annual report, • Use of distributable profit, • Appointment and recall of members of the Supervisory Board, • Granting of discharge to members of the management or supervisory bodies, • Amendments to the Articles of Association, • Measures to increase and decrease the company’s capital, • Winding-up of the company, and status transformation, • Appointment of an auditor, and • Other matters, if so stipulated by law or the Articles of Association.

The General Meeting of Shareholders is responsible for adopting the annual report, only if the Supervisory Board has not approved it or if the Management Board and the Supervisory Board propose that the decision on the adoption of the annual report be made by the General Meeting of Shareholders. As a rule, the Management Board submits the proposal for the convening of the General Meeting once a year. Supervisory Board Pursuant to Article 282 of the Companies Act (ZGD-1), the Supervisory Board is obliged to verify the annual report of the company on a yearly basis and the proposal for the use of distributable profit, which are submitted to the Supervisory Board by the Management Board. The Supervisory Board is obliged to indicate in the report how and to what extent it verified the company's management during the year, and adopt a position regarding the independent auditor's report. At the end of its report, it must state whether, after final examination, it has any comments on the annual report and whether it confirms the annual report. If the Supervisory Board approves the company's annual report, the report is adopted. The work of the Supervisory Board is presented in detail in the report on the method and the results of examining the annual report of Vipap Videm Krško d.d. The Supervisory Board of Vipap Videm Krško d.d. comprises: Shareholder representatives: Pavel Trenda – Chairman of the Supervisory Board, David Št’astný – Deputy Chairman of the Supervisory Board Radek Lacko – Member Dušan Vaněk – Member Miroslav Lébl – Member Miro Senica – Member Employee representatives: Franc Kukovičič Albertina Županc Marjan Jurman Management Board Vipap Videm Krško is managed by the Management Board, which is appointed by the Supervisory Board. The Management Board comprises five members: President of the Management Board, Deputy President of the Management Board and three members.

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The company's Management Board comprises: Oldřich Kettner - President Jožica Stegne – Deputy President Miloš Hábrnal – Member Jože Cerle – Member Dragan Kranjc – Member The Management Board manages the company and adopts business decisions independently and directly. It meets at least once a month. Its principal task is the coordination of opinions, the unanimous adoption of decisions, and voting only in exceptional cases. The Management Board carries out its tasks in accordance with the law and the company's Articles of Association. The term of office of the members of the Management Board is five years, with the possibility of re-appointment. Pursuant to organisational rules and the rules of procedure of the Management Board, the members of the Management Board also have operational tasks in the area of managing, implementing and organising work, which enables direct cooperation between the Management Board and the other management levels.

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1.8. THE COMPANY’S VISION AND MISSION

Vision The vision of Vipap Videm Krško d.d. is to preserve and further develop its position as a leading manufacturer of newsprint and recycled paper on the markets of south-eastern Europe, and to produce paper of a higher quality and at a price that is based on the integrated production of fibres from waste paper and the mechanical processing of wood with its own personnel. With an integrated offer and range of papers, the quality of its products and services and through quality work in all business functions, the company is able to ensure growth and economic efficiency. With an emphasis on environmentally friendly production technology, sustainable development and the promotion of innovative work in this area, the company will ensure the development and preservation of the natural environment. Sustainable development of automated and ecologically adapted production processes and the use of renewable sources of raw materials enable the company to produce nature-friendly recycled and wood pulp-based papers.

Mission The company’s basic mission is to produce and market recycled and wood pulp-based papers. We have years of experience, exploit new know-how and are focused on quality. We will continue to respond quickly and adjust to the desires of our customers. In the future, we will continue to put special emphasis on the optimal use of production technologies, the efficient use of the company's internal and external sources, and on the development and marketing of innovative products that are acceptable in terms of energy consumption, environmental impact and quality. All of the above will enable us to improve the company’s competitive advantage (flexibility and quick response to the market situation), which will reflected in the satisfaction of employees, business partners and owners. The company’s vision and mission are achieved with the implementation of a quality policy and the pursuit of the company’s objectives. Its complex operating objective is reflected in ensuring the quality growth of sales in terms of value and increased profitability, with the basic economic guideline being the balance of all production capacities, in the context of achieving the maximum total contribution margin. The company implements individual operating policies (e.g. quality policy, financial policy, sales and purchasing policy, energy policy and other) with the aim of achieving the individual operating objectives specified in its operational strategy and its annual plans and economic operating plans.

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2. BUSINESS REPORT

19

2.1. ANALYSIS OF OPERATIONS

OPERATING RESULTS

Despite the difficult operating conditions, Vipap Videm Krško d.d. ended 2009 with a positive operating result of EUR 6.8 million, representing 7.1% of the company’s revenues. Net profit for the period totalled EUR 3.1 million or 3.3% of the company’s revenues. Operating results are better than in the past two years and better than foreseen in the annual plan.

OPERATING REVENUES

Revenues from paper sales increased sharply until 2009 on account of favourable price fluctuations and increased quantities sold, which closely followed market demand and favourable production trends. In 2009, we recorded a decline in paper sales revenue due to falling prices at the end of the year. In the segment of European paper sales, a 25% drop in demand was recorded in 2009. The company compensated for this by restructuring its sales and increasing sales on other markets.

-6.600 -4.600 -2.600

-600 1.400 3.400 5.400

in E

UR

thou

sand

2007 2008 2009

Operating profit

Net profit for the period

70.000 75.000 80.000 85.000 90.000 95.000

100.000

in E

UR

thou

sand

2007 2008 2009

Net operating revenues

20

MANAGEMENT FEES

The main item of operating expenses is the material costs of production, namely the costs of used raw materials (waste paper, wood, chemical pulp) and energy costs (fuel and electricity). Therefore, the management of these resources was one of the most important areas of work at the company, which was successfully implemented in 2009, as the total material costs per tonne of production decreased, amounting to EUR 314 per tonne in 2009, which is EUR 50 per tonne or 14% less than the previous year. We managed to decrease the specific use of energy products and maximise favourable electricity prices in the low tariff applied to paper machine production and wood pulp production, which consume large amounts of electricity. The lower specific use of raw materials and energy products is the result of intensive technological investments in recent years.

INVESTMENTS The company’s development plan comprises all areas of its operations, with a focus in the past on the gradual modernisation of the existing and installation of new production lines, on environmental investments, and on logistics and warehouse areas. In doing this, we had to follow the programme of environmental and technological rehabilitation of the company, which was the principal guideline for the implementation of investment activities in the area of environmental protection, and comprised the identification of essential environmental impacts and their reduction, the harmonisation of operations and technological processes with the requirements of the European directive on integrated pollution prevention and control and national legislation, the reduction of specific consumption of raw materials and energy and the raising of employees' environmental awareness. The sustainability of all processes enables the harmonisation of the company’s strategy with European legislation and the paper industry's strategy. Over the past 13 years, we have invested EUR 141 million in the environmental rehabilitation and technological restructuring of the company, while increasing the volume of paper production by 26% to 187,231 tonnes per year. Due to the economic and financial crisis, the effects of which the company began to feel in 2009, the investment policy was also very selective this year. We invested EUR 3.4 million, the most important investment being the modernisation of energy boiler 4.

250

270

290

310

330

350

370

in E

UR

/t

2007 2008 2009

Material costs/production

21

FINANCIAL LIABILITIES

Minimum growth in indebtedness is the result of the company’s investment activity (environmental and technological). Despite intensive investments in the recent years, the company managed to cover a portion of investments with its own assets.

0

4.000

8.000

12.000

16.000

20.000

in E

UR

thou

sand

2005 2006 2007 2008 2009

Value of investments

36.000

39.000

42.000

45.000

in E

UR

thou

sand

2007 2008 2009

Financial liabilities

22

PERFORMANCE INDICATORS

Profitability indicators, such as return on equity (ROE) and return on assets (ROA) indicate that the company performed well in 2009, as they stood at 4% and 3.7%, respectively.

The indicator of value-added per employee was up 45% in 2009, reaching EUR 64,000. The company managed to neutralise the negative effects of the crisis in 2009 by implementing measures in all areas of operations. The indicator of revenues per employee recorded a minimum decline as a result of the previously mentioned fall in sales revenue.

2.2. PRODUCTION The company’s primary activity was the production of paper on three paper machines and production of own fibres (wood pulp and deinking) in two production plants. The total quantity of production in 2009 was a record-breaking 187,231 tonnes of paper as final products, and 173,329 tonnes of own fibre, all of it used for paper production. The level of integration of fibre and paper production in 2009 met expectations, namely 93% (89.8% in 2008), with emphasis placed on ensuring the maximum use of production capacities

-9

-6

-3

0

3

6

in %

2007 2008 2009

Return on equity in %

Return on assets in %

0

50

100

150

200

250

in E

UR

tho

usan

d

2007 2008 2009

Value-added peremployee Revenues per employee

23

based on recycled fibres. Integration is higher than in the previous year owing to higher production of newsprint and a gradual increase in the production of deinking due to expanded productivity after the investment in paper machine 3. The company’s production by year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Total 271,521 269,838 281,618 256,689 276,532 292,810 240,515 182,408 181,027 187,231

Paper

150,438

155,861

165,944

145,689

166,004

181,631

178,812

182,408

181,027

187,231

Cellulose 121,083 113,977 115,674 111,000 110,528 111,179 61,703 0 0

Paper production in 2009 was relatively constant, with record quantities of produced paper achieved, but down 1% on the planned level. Paper machines 1 and 2 did not reach the planned quantities while paper machine 3 exceeded the plan by 9%. Failure to achieve the planned values was the result of the structure of production on paper machine 1 and problems with the efficiency of paper machine 2 in the first half of the year, which were eliminated during the year. The structure of paper production changed in 2009 compared with 2008 in favour of newsprint papers, mainly due to the changing market situation, which dictated increased demand for newsprint and recycled papers. In order to reduce the operating defects on machines, we introduced several improvements last year (protection of GRS PS1, wet part scraper on PS2, on-line equipment for cleaning the hardware on PS2 and PS3, reconstruction of PS3, etc.) that improved the situation in specific segments. On account of all the modernisations carried out in recent years, labour productivity measured as the volume of production per employee is constantly increasing. In 2000 and 2001, it amounted to 272 tonnes of produced paper per employee and to 421 tonnes per employee in 2009, which is also a 4% increase on the previous year.

100000

110000

120000

130000

140000

150000

160000

170000

180000

190000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Paper production by year

24

LABOUR PRODUCTIVITY BY YEAR

Structure of net production in 2008 and 2009

ACTUAL 2008 ACTUAL 2009 INDEX Quantity in

tonnes Quantity in

tonnes 09/08

Paper machine 1 63,505 35.1 59,051 31.5 93.0 Paper machine 2 65,602 36.2 65,499 35.0 99.8 Paper machine 3 51,920 28.7 62,681 33.5 120.7

Total 181,027 100.0 187,231 100.0 99.2 Production on paper machine 1 Despite many transitions, stable production was one of the main goals this year in the production programme on paper machine 1. Quantity production lagged behind the annual plan (index 92) due to the structure of production and problems with production efficiency. The recycled programme, with the following types of papers, was produced on PS1: Vimag, Viprint, Vipco, Vipress and Vimax. We obtained the European environmental label (Ecolabel) for all these types of paper at the end of the year. The production volume of these products was lower than foreseen in the annual plan. Given the market situation, we decided to produce newsprint paper (SOF1) and the improved newsprint paper (Libna Print) on this paper machine. We also ran a test production of Libna Silk. Production on paper machine 2 Production on this paper machine was focused on newsprint papers, while the improved newsprint paper Libna Print was only produced for a period of two months. In August 2007, we began the regular production of newsprint paper with a basic weight of 42.5 g/m2, which we continued in 2009. The annual plan was not achieved in terms of quantity (index 97). Production on paper machine 3 Last year, this machine was used to produce newsprint paper with a basic weight of 45 g/m2 and also paper with a basic weight of 42.5 g/m2 since May. In terms of quantity, the annual plan was exceeded by 5,436 tonnes or 9%. The main reason for exceeding the plan was stable production with the highly efficient use of time, a small quantity of rejected products

150

200

250

300

350

400

450

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Labour productivity

25

and excellent start-up after the investment. This year, we also carried out test production of small quantities of Directory VIP and Viplus Print. Finishing of paper A portion of production of paper machine 1 is cut on a transverse cutting machine into various formats; in 2009, it cut 8,967 tonnes. Given the structure of paper and market demand, no increase in demand was expected.

QUANTITY OF PRODUCED PAPER BY PAPER MACHINE IN 2009

PS132%

PS235%

PS333%

Production of own fibres The volume of production of own fibre (deinking and wood pulp) was sharply higher than last year's production (up 15%). Because of the existing market situation in 2009, the structure of paper production focused on the production of newsprint, which is made from own fibres, deinking being the basic raw material. For this reason, we were able to utilise all the capacities of the deinking production plant and produce record quantities of fibres. The quantity of wood pulp production was also above the planned level. Almost the entire production was carried out at the time of low-tariff electricity supply. Production of own fibres in the paper sector

ACTUAL 2008 ACTUAL 2009 INDEX Quantity in tonnes Quantity in tonnes 09/08

DEINKING 144,813 152,840 105.5 TGW 17,682 20,489 115.9 TOTAL 162,495 173,329 106.7 2.3. SALES Due to the economic crisis, we faced a severe slump in the demand for all types of paper in 2009, and in particular recycled paper. Nevertheless, we ensured the full utilisation of the company's production capacities, which is a huge success in the given situation. We sold 182,952 tonnes of paper, similar to the level recorded in 2008. Sales revenue was slightly lower due a drop in sales prices. We generated EUR 95.3 million in revenues, which is only 1% less than in 2008. In this respect, we could say that sales results were very good in view of the severely deteriorated operating conditions.

26

In terms of sales volume, the most significant markets are: Slovenia (17.9%), Serbia (11.3%), Hungary (11.2%), Greece (8.8%), Germany (8.5%) and Italy (8.3%). We recorded considerable growth in sales on the domestic market and the markets of Germany, Greece and Serbia.

REVENUES FROM THE SALE OF PAPER BY YEAR IN THOUSAND OF TONNES

In the structure of revenues from sales of paper, the largest proportion (66%) is represented by sales of newsprint. The value of sales by type of paper in EUR thousand:

ACTUAL 2008

IN % ACTUAL 2009 IN % INDEX 09/08

Newsprint 57,404 61 60,490 66 105.4 Improved newsprint 77 0 2,079 2 2,700.0 Recycled (coated and non-coated)

36,088 39 29,523 32 81.8

Total sales of paper 93,569 100 92,092 100 98.4

STRUCTURE OF THE SALES OF PAPER IN THE LAST TWO YEARS

70.000 75.000 80.000 85.000 90.000 95.000

100.000

in E

UR

thou

sand

2007 2008 2009

Net operating revenues

2009

Newsprint66%

Recycled 32%

Improved newsprint

2%

2008

Improved

newsprint 0%

Recycled 33%

Newsprint 67%

27

Recycled papers (paper machine 1): In 2009, we sold 47,318 tonnes of recycled papers, which is approximately 12,000 tonnes or 21% less than in the previous year. These products represent a segment of paper with higher value added compared to newsprint. They account for 26% of total sales. The volume of sales dropped significantly compared with the previous year due to the economic crisis and the so-called down-grading on the sales side. Improved newsprint paper (PS1, PS2 and PS3) In 2009, we produced improved newsprint on all paper machines, most intensively on paper machine 1. We sold a total of 3,946 tonnes of this type of paper. These papers include Libna Print, Libna Print Silk, Viplus Print and Directory Vip. The proportion of sales of these types of paper was up sharply in 2009, reaching 2.2% of total paper sales. Newsprint (paper machines 1, 2 and 3) In 2009, newsprint was produced on all three paper machines. The volume of sales was up 6.6% compared with the previous year. As a result of this increase, part of the production of recycled papers on paper machine 1 was replaced by the production of newsprint. Thus, we successfully adapted to the changing market conditions. Finishing of paper Sales of format-size paper totalling 8,046 tonnes were lower than the previous year due to reduced demand. Nevertheless, the market share of the printing segment is growing in terms of reels, which are cheaper and preferred by printers, as they enable faster printing. 2.4. PURCHASING In 2009, we faced a high level of unpredictability on the raw materials markets. There were significant changes on the purchase markets for raw materials and materials, characterised by two contrasting trends in prices. In the second half of 2009, the purchase price of electricity dropped, while, the prices of principal raw materials, such as waste paper and chemical pulp, began rising rapidly towards the end of the year. The amount of purchases for the needs of production of paper and own fibres, including investments, totalled EUR 65 million. This represents a 20% fall compared with the previous year, mainly due to lower investments and partly due to lower electricity prices.

OVERVIEW OF THE PURCHASE OF RAW MATERIALS AND MATERIALS IN THE LAST TWO YEARS BY MARKET

2008

Domesticmarket

49%51%

2009

Foreign market

43%

Domestic market

57%

28

STRUCTURE OF PURCHASED RAW MATERIALS AND MATERIALS

2.5. RESEARCH AND DEVELOPMENT ACTIVITY In 2009, the company optimised its technological processes of producing fibres and paper, and thus achieved the more stable quality of the existing production programme and lower specific use at maximum operating capacities. We developed a new product for the programme produced on paper machine 1 in the group of Libna Silk publication papers for all weight categories, and a Directory VIP new product for paper machine 3 with a basic weight ranging from 36 to 40 g/m² and a Viplus Print new product for all weight categories for paper machines 1, 2 and 3. This allowed the company to utilise additional capacities obtained through intensive investments in past years, and thus improve its competitiveness and maintain the share of quantities sold on the market we dominate, despite the current turbulent situation on the market. We also continued developing the new generation of products from so-called waste together with external institutions (e.g. TOC, ICP and ZAG), and are preparing to begin the pilot production of highly efficient absorbents of hydrophobic substances. The second set of activities in the development of the new generation of products was carried out in the development of the so-called technical papers, which is related to future strategic decisions regarding the company’s continuing development. 2.6. INVESTMENT ACTIVITY In view of the financial and economic crisis, the company opted for a selective investment policy in 2009. This was the reason why the intensive investment activity from previous years was slowed slightly. In 2009, we invested EUR 3.4 million in technological and environmental investments, the most important investment being the second phase of the modernisation of boiler 4 in the amount of EUR 2 million. With successful implementation, we ensured the stable, cost-efficient and safe generation of heat in the form of steam for the needs of production and the technological processes of own fibres and paper. Throughout the year, we participated in projects related to investment in the connection of waste waters of the Municipality of Krško to our purification plant.

Chemicals17%

Spare parts -maintenance

11%

Fibres, waste paper and grinding wood

35%

Energy30%

Hardware2%

Packaging2%

Investments3%

29

Investments by year in EUR thousand

1997- 2000

2001 2002 2003 2004 2005 2006 2007 2008 2009

Environmental investments

15,462 3,707 4,710 52,585 2,033 609 1,997 3,273 1,512 306

Technological investments

8,329 8,000 7,509 2,162 978 767 6,177 2,456 15,799 3,094

Total year 23,791 11,707 12,219 54,747 3,011 1,376 8,174 5,729 17,311 3,400 Cumulative 23,791 35,498 47,717 102,464 105,475 106,851 115,025 120,754 138,065 141,465

Investments in 2009 in EUR thousand REALISATION 2009 Environmental investments

306,885

Rational use of energy products Co-incineration K5, phase 2

155,973 62,258

Efficient use of process water 46,539 Other (noise rehabilitation, biological purification of waste

waters) 42,115

Technological investments 3,093,600 Modernisation of K4 Investment maintenance Modernisation of paper machine 3 Monitoring of vibrations in paper production Hydrant system, automatic fire alarm

1,966,485 459,804 382,070 74,684 74,316

Processing for the optimisation of paper production 43,313 Processing for the optimisation of fibre Energy-related modernisation Other (e.g. facilities, logistics and warehouses)

42,399 41,763 8,766

INVESTMENT TOTAL 3,400,485 In 2009, we began preparing drafts for strategic decisions on the future development and investment cycle. 2.7. PERSONNEL Employment The number of employees in the company is falling slightly, although no major fluctuation in the labour force has been noticed in the recent years, with the exception of 2006, when we halted the production of chemical pulp. As at the last day of 2009 we employed 445 people. There are still 5 employees from the 2006 Redundant Worker Programme at the company who have been assigned to suitable positions until a final resolution is reached.

30

Staff structure The average age of employees at the end of the year was 45.7 years, the highest in the history of paper production. At the end of the year, we employed 29 disabled workers (1 more than in 2008). This indicates the problem of the ageing labour force and the health problems of the employees. To resolve this problem, the company introduced planned scholarships in 2008. Structure of employees in 2008 and 2009

2008 % 2009 % INDEX 09/08 - production 369 82,4 366 82.2 99.2 -administrative services

79 17,6 79 17.8 100.0

Total 448 100 445 100.0 99.3 The existing staff structure improved somewhat in favour of educational levels V, VI and VII. Most employees have finished vocational or secondary schools (57%), while the proportion of employees with educational levels VI or VII rose to 16.4%. Level of education of employees LEVEL AREAS NUMBER OF

EMPLOYEES PROPORTION

(%) 2 WORKERS WITH OCCUPATION 107 24.0 3 2-YEAR SECONDARY SCHOOL

QUALIFICATIONS 11 2.5

4 3-YEAR SECONDARY SCHOOL QUALIFICATIONS

146 32.8

5 4-YEAR SECONDARY SCHOOL TECHNICAL QUALIFICATIONS

108 24.3

6 EDUCATIONAL LEVEL VI 31 7.0 7 EDUCATIONAL LEVEL VII 42 9.4 Total 445 100.0

0

200

400

600

800

1000 N

o. o

f em

ploy

ees

2005 2006 2007 2008 2009

No. of employees

31

Absence from work (absenteeism) Efficiency and good performance is closely related to the quality of the use of employees' working hours. Due to the problem of an ageing labour force at the company level, and the related risk of increased sick leave, a rising number of disability procedures and labour limitations, a high percentage of absenteeism has been noticed. In 2009, we recorded 5.5% downtime resulting from employee sick leave. Employee training Again in 2009, employee training courses were organised on the basis of approved programmes and the annual plan drafted on the basis of established needs in cooperation with the managers of individual departments. The nature of the company’s activity requires permanent expert, environmental and safety competences, which is expressed in the constant need to acquire new skills and knowledge. In 2009, 345 people participated in various forms of education and training. They participated in a total of 2,620 hours of training, meaning 7.6 hours per employee or 5.8 hours per employee in the company. In addition, we continue to finance work-study programmes, compulsory practical work and have granted 3 scholarships. Wages and salaries The wage policy implemented by the company is in line with the collective agreement of the pulp, paper and paper processing industry, rules regarding a stimulating remuneration system, rules on the implementation of the system of wages, work-related reimbursements and other labour costs and resolutions of the Management Board, which aligns the wage policy with the current operating results of the company and the results achieved on the market. In 2009, Annex no. 6 was signed to the collective agreement to align the starting and basic wages in January in the amount of 0.6%. The average salary in 2009 was EUR 1,626, or 4% more than in the previous year and 13% above the industry average. Health and safety at work The situation with regard to health and safety at work improved slightly compared with 2008. We recorded fewer injuries and lost working days due to injuries at work and on the way to work.

SEMI-QUALIFIED

2-YEAR SECONDARY SCHOOL QUALIFICATIONS

3-YEAR SECONDARY SCHOOL QUALIFICATIONS

HIGHER EDUCATION

HIGHER PROFESSIONAL EDUCATION

4-YEAR SECONDARY SCHOOL TECHNICAL QUALIFICATIONS

32

2.8. THE COMPANY’S EXPECTATIONS IN 2010 Due to the impact of the economic crisis, which is reflected in reduced demand and falling prices, no significant growth in operations is expected next year. In view of individual segments of sales, the forecast of market developments in the sales of recycled papers for graphic purposes are more optimistic. We therefore foresee a considerable increase sales of the latter in 2010. Great emphasis is placed on the sales and future development of new recycled and wood pulp-based papers. These types of paper will represent the most important sales segment in the future. We will adapt to the considerably deteriorated conditions in the sale of paper with the flexible production of paper that will follow the needs of the market as closely as possible. We plan the full utilisation of capacities, the maximum use of internal reserves and reduced operating expenses. The main business objectives for 2010 are as follows: - adaptation of the production structure to the current market situation; - maximum engagement with regard to the payment terms of buyers and collection; - utilisation of all internal reserves at the company to reduce operating expenses; - minimum investments (selective investment policy); - faster turnover of cash in inventories and receivables;

- financing of current operations with own assets, as the banking situation will not change

(stricter criteria for obtaining funds); - activities in development and production for a fast response to customer demand; - maximum controlling of all types of costs and implementation of all agreed activities;

and - adaptation and rationalisation of the company’s organisational structure

33

3. ENVIRONMENT

34

3.1. ACHIEVEMENTS IN 2009 The company has been implementing a natural environment policy since 1997. The extensive environmental and technological modernisation of the integrated production of fibres and paper in Krško was completed in 2007. Environmental management was characterised by the following events in 2009: A. ENVIRONMENTAL PERMIT - OVD In December, the company obtained the environmental permit – OVD, evidence that its operations are compliant with the requirements of environmental legislation and other regulations, applicable at the local, national and the EU level. Activities with regard to obtaining the OVD have been carried out since 2005. The company was issued the OVD for a period of 10 years, for the operation of: - industrial plants for the production of fibres from wood pulp and other fibre materials with the capacity of 690 tonnes/day - industrial devices for the production of paper with the capacity of 840 tonnes/day - combustion plants with VTM 127.75 MW - other technologically connected devices OVD is proof and confirmation that the company has a responsible environmental management system, as well as its responsibility to comply with the requirements of the OVD, legislation and regulations, and its commitment to constantly improve its management in all environmental aspects (water, air, waste management, radiation, the handling of hazardous materials and the efficient use of water, energy, raw materials and natural resources).

B. EU ECOLABEL Together with the Environmental Agency of Republic of Slovenia (ARSO), the company carried out the administrative procedure for obtaining or expanding the EU environmental label for 6 ecological products that meet the requirements of EU regulations for copy and graphic papers. Due to the requirements of customers, particularly those from the EU, the company decided to obtain the EU Ecolabel for certain products. We obtained this label for certain products in 2006. In 2009, we re-examined the relevant EU legislation, particularly the environmental criteria for the category of copy and graphic papers. In the report/application submitted by the company in October 2009 and in the administrative procedure, it was established that the products VIPCO, VIPRESS, VIPRINT, VIMAG, VIMAX and LIBNA PRINT met all the criteria for obtaining the Ecolabel in terms of emissions into the water and the air, sustainable forest management, use and handling of hazardous chemicals, waste handling, suitability for use, information on the packaging and atmospheric environmental information. In January 2010, the Environmental Agency of Republic of Slovenia issued Decision no. 35400-326/2005-14.

35

SPECIFICATIONS OF PRODUCTS WITH THE EU ECOLABEL Product name

Fibre composition Intended use Registration no. (code) Made in

EU Ecolabel

VIPCO

• photocopying; • digital printing; • printing of books and

brochures, etc.; • printing of periodicals

and promotional materials;

• multi-colour and black & white offset print

SI/011/01 Krško, SLO

VIPRESS VIPRINT VIMAG VIMAX

• printing of periodicals and promotional materials;

• printing of catalogues, children’s books, colouring books;

• format print; multi-colour and black & white offset print with hot drying (VIPRESS withcold drying)

SI/011/02 SI/011/03 SI/011/04 SI/011/05 Krško, SLO

LIBNA PRINT

• printing of periodicals and promotional materials;

• printing of books; • format print; multi-

colour and black & white offset print with hot and cold drying

SI/011/06 Krško, SLO

C. CENTRAL WATER TREATMENT PLANT KRŠKO In August 2009, we started treating the waste waters of Krško and the surrounding areas at the central waste water treatment plant. 3.2. ENVIRONMENTAL IMPACT Impacts on the immediate and broader environment are monitored through regular measurements. We are constantly adapting to environmental legislation, and operate in line with international environmental standards. The monthly analysis comprises the following environmental indicators: A. Specific use of energy and water B. Specific waste water discharge C. Specific emissions of substances into the atmosphere from the company

Chemical pulp15%

Wood pulp

20%

Recycl.. fibres65%

Wood pulp

; 15%Recycl..

fibres

70%

Chemical pulp; 15%

Chemical pulp

10%

Wood pulp

30%

Recycl..

fibres 60%

36

A. SPECIFIC USE OF ENERGY AND WATER

In recent years, the company has invested a great of effort in reducing the use of energy and water.

Unit of measure

ment

2007 2008 2009

Process water m3b.p.*

19.5 21.6 20.3

Steam GJ/t b.p. 5.27 5.25 4.71 Electricity kWh/t b.p. 872 869 865

B. SPECIFIC WASTE WATER DISCHARGE The indicators of specific waste water discharge have improved over the last three years, as shown in the table and graph below.

Unit of measure

ment

2007 2008 2009

CCO kgO2/t b.p. 2.4 3.1 2.3 GCO5 kgO2/t b.p. 0.11 0.13 0.10 Amount of waste water m3/t b.p. 18.6 17.7 17.5

* b.p. = gross production

0

5

10

15

20

25

2007 2008 2009860

862

864

866

868

870

872

874

Process water

Steam

Electricity

37

C. SPECIFIC EMISSIONS OF SUBSTANCES INTO THE ATMOSPHERE FROM THE COMPANY

Unit of measurement

2007 2008 2009

Sulphur dioxide kg SO2/t b.p. 0,442 0,301 0,294 Nitrogen oxides kg NO2/t b.p. 1,316 1,100 1,033 Carbon dioxide kg CO2/ b.p. 487,14 475,35 433,64

In the last three years the company has reduced its specific emissions into the air.

0

0,5

1

1,5

2

2,5

3

3,5

2007 2008 200916,8

17

17,2

17,4

17,6

17,8

18

18,2

18,4

18,6

18,8

KPK BPK5 Waste water production

0

0,2

0,4

0,6

0,8

1

1,2

1,4

2007 2008 2009400 410 420 430 440 450 460 470 480 490 500

Sulphur dioxideNitrogen dioxideCarbon dioxide

38

II. FINANCIAL REPORT

39

1. FINANCIAL STATEMENTS FOR 2009

40

1.1. BALANCE SHEET AS AT 31 DECEMBER 2009 in EUR Note 31.12.2009 31.12.2008 ASSETS 156,804,870 162,071,087 A. Non-current assets 128,308,257 132,748,895 I. Intangible assets and non-current deferred expenses and accrued revenues 1. a 259,339 129,880 1. Concessions, patents, licences, trade marks and similar rights 259,339 129,880 II. Property, plant and equipment 2. a 120,274,881 123,753,206 1. Property and plant 31,525,852 32,338,703 a) Land 5,320,201 5,320,201 b) Buildings 26,205,651 27,018,502 2. Plant and machinery 80,159,396 70,158,869 3. Other plant and equipment 6,588,995 5,837,310 4. Property, plant and equipment in acquisition 2,000,638 15,418,324 a) Property, plant and equipment under construction and manufacture 1,920,638 15,334,144 b) Advances for tangible fixed assets 80,000 84,180 IV. Non-current investments 3 246,797 246,797 1. Non-current investments, excluding loans 246,797 246,797 a) Shares and participating interests in companies within the group 246,797 246,797 VI. Deferred tax assets 4 7,527,240 8,619,012 B. Current assets 27,721,981 28,499,688 I. Assets (disposal groups) available for sale 5 0 1,462,766 II. Inventories 6 9,885,050 10,077,456 1. Material 5,901,537 6,894,578 2. Work in progress 325,014 272,291 3. Products and merchandise 3,637,232 2,446,248 4. Advances for inventories 21,267 464,339 IV. Current operating receivables 7 16,156,482 13,617,599 1. Current operating receivables due from group companies 24,765 28,440 2. Current trade receivables 15,452,530 11,930,252 3. Current operating receivables due from others 679,187 1,658,907 V. Cash and cash equivalents 8 1,680,449 3,341,867 C. Current deferred expenses and accrued revenues 9 774,632 822,504

41

Note 31.12.2009 31.12.2008 EQUITY AND LIABILITIES 156,804,870 162,071,087 A. Equity 10 79,072,844 75,949,654 I. Called-up capital 78,387,660 78,387,660 1. Share capital 78,387,660 78,387,660 II. Share premium account 2,459,406 2,459,406 III. Profit reserves 1,751,061 1,751,061 1. Legal reserves 96,744 96,744 2. Reserves for treasury shares and own participating interests 3,557,093 3,557,093 3. Treasury shares and own participating interests (as a deductible item) -3,557,093 -3,557,093 4. Other reserves 1,654,317 1,654,317 IV. Revaluation surplus 0 0 V. Retained earnings -3,525,283 0 VI. Net profit or loss for the period 0 -6,648,473 Profit or loss for the year 0 -6,648,473 B. Provisions and non-current accrued expenses and deferred revenues 11 3,500,448 3,760,109 1. Provisions for pensions and similar liabilities 2,801,885 3,537,069 2. Other provisions 670,449 191,341 3. Non-current accrued expenses and deferred revenue 28,114 31,699 C. Non-current liabilities 18,453,169 37,573,488 I. Non-current financial liabilities 18,453,169 37,547,974 2. Non-current financial liabilities to banks 12 16,481,037 34,589,884 4. Non-current financial liabilities 13 1,972,132 2,958,090 II. Non-current operating liabilities 0 25,514 2. Non-current trade payables 0 25,514 D. Current liabilities 54,517,736 44,175,327 II. Current financial liabilities 14 27,781,702 7,848,947 2. Current financial liabilities to banks 26,815,019 6,752,150 4. Other current financial liabilities 966,683 1,096,797 III. Current operating liabilities 26,736,034 36,326,380 1. Current operating liabilities to group companies 890,528 1,028,237 2. Current trade payables 15 18,987,855 28,110,663 4. Current operating liabilities from advances 967,430 1,137,635 5. Other current operating liabilities 16 5,890,221 6,049,845 E. Current accrued expenses and deferred revenues 17 1,260,673 612,509

Note: The financial statements must be interpreted together with the relevant notes presented under Point 2.2. Notes to the financial statements.

42

1.2. INCOME STATEMENT FOR THE PERIOD FROM 1 JANUARY TO 31 DECEMBER 2009 in EUR Note 2009 2008 1. Net sales revenue 18 95,299,977 97,064,194 2. Change in inventories of products and work in progress 1,237,753 -1,709,221 3. Capitalised own products and services 4. Other operating revenue (including revaluation operating revenue) 19 703,930 2,508,989 5. Costs of goods, materials and services 68,563,703 77,839,575 a) Historical cost of goods and material sold and materials used 58,787,593 65,884,763 b) Service costs 20 9,776,110 11,954,812 6. Labour costs 21 11,434,765 11,432,503 a) Salaries and wages 8,449,995 8,453,141 b) Social security costs 1,594,137 1,527,019 c) Other labour costs 1,390,633 1,452,343 7. Write-downs 9,406,821 13,797,020 a) Depreciation and amortisation 8,104,352 7,141,638

b) Revaluation operating expenses for intangible assets and property, plant and equipment 335,845 3,266,719

c) Revaluation operating expenses for current assets 966,624 3,388,663 8. Other operating expenses 22 987,165 1,007,786 Operating profit or loss 6,849,206 -6,212,922 11. Finance income from operating receivables 23 131,013 563,103 b) Finance income from the operating receivables due from others 131,013 563,103 13. Finance costs for financial liabilities 24 2,349,736 2,317,939 b) Finance costs for loans received from banks 2,193,663 2,028,910 d) Finance costs for other financial liabilities 156.073 289,029 14. Finance costs for operating liabilities 25 541,500 176,461

b) Finance costs from trade payables and liabilities from bills of exchange 541,500 176,457

c) Finance costs for other operating liabilities 0 4 Net profit or loss from ordinary activities 4,088,983 -8,144,219 15. Other revenue 26 143,905 262,826 16. Other expenses 17,926 24,218 Extraordinary items 125,979 238,608 17. Income tax 27 0 0 18. Deferred taxes -1,091,772 1,257,138 19. Net profit or loss for the period 3,123,190 -6,648,473

Note: The financial statements must be interpreted together with the relevant notes presented under Point 2.2 Notes to the financial statements.

43

1.3. CASH FLOW STATEMENT FOR THE PERIOD FROM 1 JANUARY 2009 TO 31 DECEMBER 2009 2009 2008 A. Cash flows from operating activities a) Income statement items 11,379,247 1,712,531

Operating revenue (except from revaluation) and finance income from operating receivables 95,986,314 100,016,904

Operating expenses, excluding amortisation and depreciation (except revaluation) and finance costs from operating liabilities -83,515,295 -99,561,511

Income taxes and other taxes not included in operating expenses -1,091,772 1,257,138 b) Changes to net current assets (and accruals and deferrals, provisions and deferred tax receivables and liabilities) of balance sheet operating items -8,122,643 17,292,628 Opening less closing operating receivables -1,553,841 5,836,069 Opening less closing deferred costs and accrued revenue 47,872 -55,702 Opening less closing deferred tax assets 1,091,772 -1,257,139 Opening less closing assets (disposal groups) held for sale 1,462,766 3,212,598 Opening less closing inventories 238,651 1,546,243 Closing less opening operating liabilities -9,670,526 5,175,060 Closing less opening accrued expenses and deferred revenue, and provisions 260,663 2,835,499 Closing less opening deferred tax liabilities c) Net cash flow from operating activities (a + b) 3,256,604 19,005,159 B. Cash flows from investing activities a) Receipts from investing activities 992,095 1,115,833 Receipts from interest and participation in profit relating to investing activities 0 0 Receipts from disposal of intangible assets 40,000 310,638 Receipts from disposal of property, plant and equipment 952,095 805,195 b) Expenditure from investing activities -4,916,718 -19,523,834 Expenditure for the acquisition of intangible assets -172,697 -172,697 Expenditure for the acquisition of property, plant and equipment -4,744,021 -19,351,137 c) Net cash flow from investing activities (a + b) -3,924,623 -18,408,001 C. Cash flows from financing activities a) Receipts from financing activities 9,790,989 13,852,635 Receipts from paid-in capital 0 0 Receipts from increase in non-current financial liabilities 8,318,000 7,280,558 Receipts from increase in current financial liabilities 1,472,989 6,572,077 b) Expenditure for financing activities -10,784,388 -13,267,742 Interest paid on financing activities -1,978,782 -2,201,330 Expenditure for non-current financial liabilities 0 -8,178,118 Expenditure for current financial liabilities -8,805,606 -2,888,294 Dividends and other profit participation c) Net cash flow from financing activities (a + b) -993,399 584,893

D. Closing balance of cash and cash equivalents 1,680,449 3,341,867 x) Net cash flow for the period (sum of Ac, Bc and Cc) -1,661,418 1,182,051 y) Opening balance of cash and cash equivalents 3,341,867 2,159,816

Note: The financial statements must be interpreted together with the relevant notes presented under Point 2.2. Notes to the financial statements.

44

1.4. STATEMENT OF CHANGES IN EQUITY FOR 2009

Effect in

EUR

Share capital Legal Reserves for Treasury Other Retained

Net profit/loss Share Surplus from Total

reserves treasury

stakes shares profit

reserves profit/loss for the

year premium account revaluation

A. Opening balance for the period 78,387,660 96,744 3,557,093 -3,557,093 1,654,317 -6,648,473 0 2,459,406 0 75,949,654 B. Transfers to capital 0 0 0 0 0 0 3,123,190 0 0 3,123,190 a) Entry of net profit or loss for the period 0 0 0 0 0 0 3,123,190 0 0 3,123,190 b) Entry of special capital revaluation adjustments 0 0 0 0 0 0 0 0 0 0 C. Transfers within capital 0 0 0 0 0 3,123,190 -3,123,190 0 0 0 a) Distribution of net profit as an equity component by resolution of the Management and Supervisory Boards 0 0 0 0 0 3,123,190 -3,123,190 0 0 0 b) Coverage of loss as deductive equity component 0 0 0 0 0 0 0 0 0 0 f) Other reclassifications of equity components 0 0 0 0 0 0 0 0 0 0 D. Transfer from capital 0 0 0 0 0 0 0 0 0 0 d) Decrease in assets pursuant to the resolution of the General Meeting of Shareholders and increase in liabilities to shareholders 0 0 0 0 0 0 0 0 0 0 E. Closing balance for the period 78,387,660 96,744 3,557,093 -3,557,093 1,654,317 -3,525,283 0 2,459,406 0 79,072,844

Note: The financial statements must be interpreted together with the relevant notes presented under Point 2.2. Notes to the financial statements.

45

1.5. STATEMENT OF CHANGES IN EQUITY FOR 2008

Share capital

Legal Reserves for

Treasury Other Retained Net profit/loss

Share Surplus from Total reserves treasury

stakes shares profit

reserves profit /

loss for the

year premium account

revaluation A. Opening balance for the period

78,442,664

96,744

3,557,093

-3,557,093

1,838,129

0

0

2,404,402

0

82,781,939

B. Transfers to capital 0 0 0 0 0 0 -6,648,473 0 0 -6,648,473 a) Entry of net profit or loss for the period 0 0 0 0 0 0 -6,648,473 0 0 -6,648,473 b) Entry of special capital revaluation adjustments

0 0 0 0 0 0 0 0 0

C. Transfers within capital

-55,004

0

0

0

0

0

0

55,004

0

0

a) Distribution of net profit as an equity component by resolution of the General Meeting of Shareholders

0 0

0

0 0

0

0

0 0 0

b) Coverage of loss as deductive equity component

0 0 0 0 0 0 0 0 0 0

f) Other reclassifications of equity components

-55,004 0 0 0 0 0 0 55,004 0 0

D. Transfer from capital 0 0 0 0 -183,812 0 0 0 0 -183,812

d) Decrease in assets pursuant to the resolution of the General Meeting of Shareholders and increase in liabilities to shareholders

0 0 0 0 -183,812

0 0 0 0 -183,812

E. Closing balance for the period 78,387,660 96,744 3,557,093 -3,557,093 1,654,317 0 -6,648,473 2,459,406 0 75,949,654

Note: The financial statements must be interpreted together with the relevant notes presented under Point 2.2. Notes to the financial statements.

46

2. NOTES TO THE FINANCIAL STATEMENTS

47

2.1. ACCOUNTING POLICIES AND ASSUMPTIONS The financial statements for 2009 are compiled in accordance with the Slovenian Accounting Standards (valid since 1 January 2006) and with the basic accounting assumptions of matching (accrual basis), a going concern basis, consistency of valuation and consideration of the principles of prudence and fair value. The requirement for a true and fair presentation of the assets, financial position and operating result shall prevail. A key element of the notes is the presentation of valuation methods and write-downs of values, i.e. accounting policies for individual items in the annual balance sheet and income statement. The SAS prescribe the principal qualitative characteristics of financial statements (coherence, relevance, reliability and comparability). SAS 24 and 25 have been taken into account when disclosing balance sheet items. Besides the income statement and the balance sheet, the company also compiled a cash flow statement and statement of changes in equity. A statement of financial position is compiled in the double-entry balance sheet format. It has two columns: data as at 31 December 2008 and 31 December 2009. The income statement is in sequential format and is prepared in Format I. The cash flow statement is compiled according to Format II. The cash flow statement discloses changes in the balance of cash and cash equivalents arising from operations, investing and financing. The statement of changes in equity is a basic financial statement, which provides a true and fair presentation of changes to components of equity for the financial year and has the form of a composite table presenting changes in all equity components. The rules and procedures used by management in compiling and presenting the financial statements are based on the principles set out above, wherein some of the accounting policies are optional, with management being able to select to use one of a number of variants. Below is a summary of the general accounting policies and the accounting policies used by the company in relation to valuing individual balance sheet items:

− Property, plant and equipment that meet recognition conditions are initially recognised at historical cost. This comprises the purchase price, import duties and non-refundable purchase taxes, demolition costs, the costs that can be directly ascribed to them for making them fit for their intended use, and the costs of testing whether the asset is functioning properly. Tangible fixed assets are activated when they are made ready for use. Their value is verified upon each compilation of final accounts and the fixed asset is impaired, if necessary. Following recognition, the historical cost method is used as the method of valuation. Property, plant and equipment are depreciated individually using the straight-line method. Costs incurred subsequently with respect to an item of property, plant and equipment increase its historical cost when they increases its future economic benefits in excess of the future economic benefits originally estimated.

− An intangible asset is defined as identifiable non-monetary asset without physical

substance. It is valued at historical cost, including import duties and purchase taxes. Following recognition, the historical cost method is used as the method of valuation. Intangible assets are amortised using the straight-line method.

− Financial investments in equity are initially valued at fair values while any

subsequent valuations are based on historical cost.

48

− Inventory items of material and merchandise are initially recognised at the actual historical cost, which comprises the purchase price, import duties and other non-refundable purchase taxes, and the direct costs of procurement. Original purchase price is reduced by the amount of discounts. The average price method is used to value the use of inventories. Inventories of material and merchandise are revalued for impairment if their carrying amount exceeds their market or net realisable value. Based on the balances of material inventories, the company establishes long-term stocks of unnecessary material, where there have been no transactions for one year or more, and devalues it in the books of account.

− In 2006 (31 August 2006), the company carried out an appraisal of the fixed assets

of the chemical pulp production, which was discontinued for environmental reasons. These fixed assets are disclosed in the balance sheet under non-current assets available for sale. They are valued at fair value (selling price less costs of sales). Certain current assets available for sale in 2007 have been impaired since the appraised value exceeded the expected selling price. Due to the current possibility to sell the remaining equipment, the company made another impairment of assets in 2008. At the end of 2009, the company again disclosed the former non-current assets for the sale as property, plant and equipment.

− Inventory units of products or work in progress are valued by production costs,

namely: all variable costs, all fixed costs of cost centres in which products are manufactured, as well as all costs of other production cost centres.

− Receivables of all types are initially recognised at amounts recorded in the

relevant documents under the assumption that the amounts owed will also be paid. Receivables are initially recognised on the basis of an issued invoice. Receivables are revalued for impairment if their book value exceeds their fair value (i.e. the recoverable amount). Receivables are revalued to eliminate impairment if their fair value or the recoverable amount exceeds their book value. Value adjustments of receivables are made individually. Receivables denominated in a foreign currency are valued in the financial statements according to the middle exchange rate of the Bank of Slovenia on the balance sheet date. Exchange rate differences represent ordinary finance income or costs. The amount of receivables for deferred taxes with justification of recognition is also disclosed.

− Due to the transition to SAS 2006, the calculation of the opening balance of

individual accounting categories could result in deferred tax receivables or liabilities, or the deferred taxes could result in temporary differences between the operating and tax balance sheet. Deferred tax receivables arose from the formation of provisions for expected costs that will only be recognised for tax purposes when the provisions are used for that purpose. The company only calculates deferred taxes for significant amounts (severance pay, loyalty bonuses, value adjustments of receivables, unused tax loss and those arising from assets available for sale). The applied tax rate is determined on the basis of the schedule for the use of provisions formed. The company expects taxable profits in the future.

− Cash and cash equivalents are disclosed by components and automatic

overdraft on current accounts held with banks. They comprise euro and other currency balances on bank accounts, euro and other currency petty cash balances and the balances of current deposits with banks.

49

− Current deferred expenses and accrued revenues comprise receivables and/or deferred expenses occurring during the year and temporarily accrued revenues.

− Total equity comprises called-up capital, the share premium account, profit reserves, undistributed net profit or loss for the year and the capital revaluation adjustments. Profit reserves comprise: reserves for treasury shares and treasury shares. The companies is obliged to calculate the effect on profit or loss for the year if a general capital revaluation is carried out.

− Provisions and non-current accrued expenses and deferred revenues comprise

provisions for pensions and similar liabilities, other provisions and non-current accrued and deferred items. They are formed for current liabilities arising from past events involving obligations, for which the settlement period is not definitely set, where the amount can be reliably measured. They may be treated as debts in a wider sense since they differ from liabilities to owners. Non-current accrued expenses and deferred revenues comprise deferred revenues expected to cover estimated costs or expenses in a period of more than one year. The purpose of provisions is to accumulate amounts in the form of accrued costs or expenses that will be available in the future to cover incurred costs or expenses.

− Non-current liabilities comprise non-current financial liabilities. They are recognised

in association with the financing of own funds that must be settled or repaid, particularly in cash, over a period of more than one year. Non-current financial liabilities to banks comprise loans raised by borrowers with creditors. Non-current financial liabilities are liabilities to lessors in the case of a financial lease. Non-current liabilities are disclosed in the balance sheet as amounts recorded in the relevant documents under the assumption that the creditors will require their repayment. They are measured using the effective interest rate method. Non-current foreign debt is converted to domestic currency at the middle exchange rate of the Bank of Slovenia as at the last day of the year.

− Current liabilities comprise current financial liabilities and current operating

liabilities. Current financial liabilities are loans raised with creditors, the settlement of which is expected within one year. Current financial liabilities also include liabilities to lessors arising from a financial lease which fall due within one year. Current operating liabilities are liabilities that fall due within a period of less than one year. Current operating liabilities comprise trade payable, liabilities to employees for work performed, current liabilities to financiers relating to interest and similar items, current tax liabilities to the government, including calculated value added tax, and current liabilities arising from the distribution of profits. A special type of current liabilities is liabilities to suppliers for advances and short-term securities received. They are disclosed in amounts recorded in relevant documents (invoices, credit notes, contracts).

− Current accrued expenses and deferred revenues include unused annual leave

for the current year. According to SAS 12, current accrued expenses and deferred revenues should not hide reserves.

− Revenues are increases in economic benefits during the accounting period in the

form of increases in assets or decreases in liabilities. They affect the amount of equity through profit or loss. Revenues are classified as net sales revenue, other operating revenues, finance income from operating receivables and other revenues. Revenues are recognised if increases in economic benefits are associated with increases in assets and the increases can be measured reliably. Revenues are recognised together with the receivables arising from a sale, i.e. when the seller of goods has transferred to the buyer all rights and risks of ownership. The revenues arising from the sale of products and material are

50

measured based on the selling prices stated in invoices and other documents, less discounts approved when the sale is made or subsequently. Potential cash discounts also reduce sales revenue. Other operating revenues include subsidies, grants and revenues from the sale of waste. Revaluation operating revenues are gains arising from the sale of fixed assets reduced by value adjustments of operating receivables arising from the elimination of impairments and write-offs of operating liabilities. Finance income from operating receivables is revenue from accrued interests and exchange rate gains. Other revenues are compensations received arising from recognised damage to fixed assets.

− Expenses are reductions of economic benefits during the accounting period in the

form of decreases in assets or increases in liabilities, which affect the amount of equity through profit or loss. Costs of goods, materials and services include the historical cost of goods and materials sold, cost of materials used and costs of services. Labour costs include wages and salaries, costs of social security and other labour costs. Write-downs include the costs of amortisation/depreciation, revaluation operating expenses for intangible assets and property, plant and equipment, and revaluation operating expenses for current assets. Other operating expenses include expenses for environmental protection and bonuses paid to students. Financial expenses arising from financial liabilities include interest on loans and exchange rate losses related to foreign currency debt. Financial expenses from operating liabilities include interest on liabilities and expenses from the revaluation of debt and receivables. Other expenses include fines and compensation.

51

2.2. NOTES TO THE FINANCIAL STATEMENTS 2009 20081a. Intangible assets 259,339 129,880 Intangible assets comprise software (EUR 3,945) and emission coupons (EUR 255,394). Table of intangible assets for 2009 in EUR

Property Emissions coupons Total rights

1. Historical cost Balance as at 1 January 2009 97,113 122,697 219,810 Increase 0 172,697 172,697 Decrease 0 -40,000 -40,000 Balance as at 31 December 2009 97,113 255,394 352,5072. Value adjustment Balance as at 1 January 2009 -89,930 0 -89,930 Amortisation -3,238 0 -3,238 Decrease 0 0 0 Balance as at 31 December 2009 -93,168 0 -93,1683. Carrying amount Balance as at 1 January 2009 7,183 122,697 129,880 Balance as at 31 December 2009 3,945 255,394 259,339

As at 31 December 2009, the company has no liabilities arising from the purchases of intangible assets. The amortisation rate is 20%. These assets are not pledged as collateral nor do they have any ownership restrictions. The company received a decision regarding emission coupons from the Ministry of the Environment and Spatial Planning according to which it is entitled to 172,697 coupons for 2009. The company expects to be obliged to give the Ministry of the Environment and Spatial Planning 137,820 coupons (by the end of April 2010) based on the calculation of obligation for 2009. As at 31 December 2009 the balance of coupons stood at 255,394. 2008

2007

1.b. Intangible assets 129.880 273.354 Table of intangible assets for 2008

Propertyrights

Emissionscoupons Total

1. Historical cost Balance as at 1 January 2008 97,113 260,638 357,751 Increase 0 172,697 172,697 Decrease 0 -310,638 -310,638 Balance as at 31 December 2008 97,113 122,697 219,8102. Value adjustment Balance as at 1 January 2008 -84,397 -84,397 Amortisation -5,533 0 -5,533 Decrease 0 0 0 Balance as at 31 December 2008 -89,930 0 -89,930 3. Carrying amount Balance as at 1 January 2008 12,716 260,638 273,354 Balance as at 31 December 2008 7,183 122,697 129,880

52

2.a Property, plant and equipment

The following depreciation rates were used (in %): - buildings, construction facilities, 1.3 - 10.0 - prefabricated facilities 2.0 - 8.0 - landscaping 3.3 - equipment 4.0 - 20.0 - computers, computer equipment 33.3 - vehicles 10.0 - 30.0 in EUR 2009 2008 Changes in property, plant and equipment in 2009: 120.274.881 123.753.206

Item Land Construction Equipment Equipment Advances Total buildings

under construction

1. Historical cost Opening balance as at 1 January 2009 5,320,201 35,010,254 123,955,972 15,334,144 874,002 180,494,573

Additions – new purchases 0 0 148,500 3,221,742 499,798 3,870,040 Increases – acquisitions from investments 0 0 12,117,841 -12,117,841 0 0 Other increases in fixed assets 0 433,834 4,161,237 -4,409,775 0 185,296 Decrease 0 -48,383 -112,160 -418 -503,979 -664,940 Transfer of current assets held for sales 0 0 1,427,559 0 1,427,559 Balance as at 31 December 2009 5,320,201 35,395,705 141,698,949 2,027,852 869,821 185,312,528

2. Value adjustment Opening balance as at 1 January 2009 0 -7,991,752 -47,959,794 0 -789,821 -56,741,367 Increases - depreciation 0 -1,008,858 -7,092,256 0 0 -8,101,114 Other increases in fixed assets 0 81,661 25,553 -107,214 0 0 Impairments of existing fixed assets 0 -311,467 0 0 0 -311,467 Transfer of current assets held for sale 0 0 -16,990 0 0 -16,990 Decrease 0 40,362 92,929 0 0 133,291 Balance as at 31 December 2009 -9,190,054 -54,950,558 -107,214 -789,821 -65,037,647

3. Carrying amount Balance as at 1 January 2009 5,320,201 27,018,502 75,996,178 15,334,144 84,181 123,753,206 Balance as at 31 October 2009 5,320,201 26,205,651 86,748,391 1,920,638 80,000 120,274,881

As at 31 December 2009, the company had EUR 14,226,450 in long-term loans for the purchases of fixed assets and EUR 3,076,599 of liabilities arising from a financial lease. Fixed assets in the amount of EUR 58,010,381 were pledged as collateral for non-current financial liabilities (Item 11). Other increases in fixed assets are modernisations of existing fixed assets and increase in the costs of decommissioning of construction facilities (EUR 185,297). The company gradually decommissions unused facilities used for the production of chemical pulp until 2006. Due to high rehabilitation costs, it increased the cost of decommissioning and at the same time established provisions that will be used to cover liabilities arising from the decommissioning of

53

the facility. At the same time, it carried out an impairment due to the remaining present value of these facilities. Due to the longer period of time required for disassembly of the equipment from the chemical pulp segment of production, the company disclosed this equipment as fixed assets on 31 December 2009 (previously disclosed as current assets available for sale). € 2008 2007 2.b Property, plant and equipment 123,753,206 114,888,266

Changes in property, plant and equipment in 2008:

Item Land Construction Equipment Equipment Fixed

assets Equipment Total

buildings – financial

lease chemical pulp (67001)

under construction Advances

1. Historical cost Opening balance as at 1 January 2008 5,320,201 34,740,300 116,382,255 6,713,636 0 2,140,476 1,272,535 166,569,403

Increases - acquisitions 0 27,373 237,854 0 17,519,052 1,562,711 19,346,990 Increases – acquisitions from investments 0 183,459 2,420,200 0 -3,119,161 0 -515,502 Other increases in fixed assets 0 63,157 1,122,274 6,791 -1,206,223 0 -14,001

Decrease 0 -4,035 -2,925,369 -1,669 0 -1,961,244 -4,892,317 Balance as at 31 December 2008 5,320,201 35,010,254 117,237,214 6,718,758 0 15,334,144 874,002 180,494,573

2. Value adjustment Opening balance as at 1 January 2008 -7,164,597 -40,888,569 -2,838,150 0 0 -789,821 -51,681,137

Increases - depreciation -1,000,248 -5,680,240 -455,617 0 0 0 -7,136,105 Other increases in fixed assets 169,839 80,436 0 0 0 0 250,275 Transfers – fixed assets available for sale 0 0 0 0 0 0 0

Decrease 3,254 1,822,173 173 0 0 00 1,825,600 Balance as at 31 December 2008 -7,991,752 -44,666,200 -3,293,594 0 0 -789,821 -56,741,367

3. Carrying amount Balance as at 1 January 2008 5,320,201 27,575,703 75,493,686 3,875,486 0 2,140,476 482,714 114,888,266 Balance as at 31 December 2008 5,320,201 27,018,502 72,571,014 3,425,164 0 15,334,144 84,181 123,753,206

in EUR 2009 2008 3. Non-current investments 246,797 246,797

Historical cost31.12.2009

Adjustment 1.1.2009

Decreaseof adjustment

Increase of

adjustment

Adjustment31.12.2009

Book value 31.12.2009

Vipreh d.o.o., Krško (100%) 44,489 (44,489) 0 0 (44,489) 0Ekopa d.o.o., Krško (100%) 42,693 (21,160) 0 0 (21,160) 21,533Levas d.o.o., Krško (84.48%) 421,243 (195,979) 0 0 (195,979) 225,264Total participating interests 508,425 (261,628) 00 0 (261,628) 246,797 The registered office of Vipreh d.o.o. is Tovarniška 18, Krško. The company disclosed a loss of EUR 473 in 2009. The amount of equity as at 31 December 2009 was EUR 6,411. The registered office of Ekopa d.o.o. is Tovarniška 18, Krško. The company disclosed a net profit in the amount of EUR 15,605 in 2009. The amount of equity as at 31 December 2009 was EUR 173,466.

54

The registered office of Levas d.o.o. is Tovarniška 18, Krško. The company disclosed a net profit in the amount of EUR 4,106 in 2009. The amount of equity in the balance sheet as at 31 December 2009 was EUR 776,691, net sales revenue amounted to EUR 2,732,487 and the value of assets totalled EUR 2,184,925. Given the relatively small scope of operations with associated companies, the company Vipap Videm Krško d.d. is not obliged to compile consolidated financial statements (provision of Article 56, Paragraphs 8 and 9 of the ZGD-1 and the SAS). The scope of associated companies' operations does not affect the true and fair presentation of the financial position, operating results, cash flows and changes in equity. If revenues or assets of a subsidiary exceed the threshold value (5%) of the revenues or assets of the controlling company, the conditions for the compilation of consolidated statements are met. in EUR 2009 2008 4. Deferred tax assets 7.527.240 8.619.012 1.1.2009 Decrease Increase 31.12.2009 Severance payments 102,087 1,463 0 100,624 Loyalty bonuses 21,926 797 0 21,129 Devaluation of non-current assets available for sale 3,104,812 213,585 0 2,891,227 Creation of value adjustments of receivables 718,170 0 183,899 902,069 Unused tax loss 4,379,519 981,683 0 3,397,836 Additionally created provisions 292,498 89,029 10,886 214,355 TOTAL 8,619,012 1,286,557 194,785 7,527,240

The company applied a 20% tax rate in the calculation of deferred tax assets.

in EUR 2009 2008 5. Assets (disposal groups) held for sale 0 1,462,766 This item comprises assets the company intends to sell. In 2006, these were valued on the basis of an appraisal report from PIT d.o.o. according to the historical cost methodology (for the majority of assets) and the comparable sales methodology (for the remainder). As the company was only able to sell very little of its equipment in 2009 and will have to extend the time frame for the complete rehabilitation of the chemical production plant, the residual value of equipment (EUR 1,410,568) is disclosed in the statements as at the end of 2009 as property, plant and equipment.

55

in EUR 2009 2008 6. Inventories 9,885,050 10,077,456

Inventory type

Balance as at 31 December

2009 Inventory surpluses

Inventory deficits

Impairment due to

change in quality

Impairment to realisable

value Material 5,887,976 50 626 0 46,245 Small inventory 13,561 0 0 0 0 Work in progress 325,014 0 0 0 0 Products 3,628,432 6,935 6,276 0 74,340 Merchandise 8,800 0 0 0 0 Advances for inventories 21,267 0 0 0 0 Total 9,885,050 6,985 6,902 0 120,585

The book amount of inventories as at 31 December 2009 did not exceed the net realisable value. The inventories of material are impaired as at 31 December 2009, as their book value exceeds their realisable value. Significant inventories of material include: waste paper (EUR 550,254), basic raw materials (EUR 1,553,247), maintenance material (EUR 2,798,955) and spare parts (EUR 936,027). The inventories of work in progress comprise paper reels prepared to be cut to format (EUR 325,014). The inventories of products comprise inventories of paper in the form of reels (EUR 3,218,780) and inventories of paper cut to format (EUR 409,652). As at 31 December 2009, the company impaired inventories of finished products (EUR 74,340) as their production price was higher than the selling price, reduced by selling costs. Inventories of raw materials and material have not been pledged as collateral. Inventories of finished products in the amount of EUR 2,000,000 have been pledged as loan collateral.

in EUR 2009 2008 7. Current operating receivables 16,156,482 13,617,599

Balance as at 31

December 2009 Collateralised

receivables Receivables

without collateral Outstanding

receivables Due in 1 year

Maturity of more than

1 year

Value adjustment

as at 1 January

2009 Reduced adjustment Increased

adjustment

Value adjustment

as at 31 December

2009 Book value as at

31 December 2009

Current trade receivables 20,368,272 8,401,780 11,966,492 11,154,266 5,057,276 4,156,730 -3,992,315 7,685 -931,112 -4,915,742 15,452,530 Current operating receivables from group companies 24,765 0 0 24,765 0 0 0 0 0 0 24,765 Current operating receivables from others 1,388,937 0 0 0 0 0 -709,750 0 0 -709,750 679,187

Total 21,781,974 8,401,780 11,966,492 11,179,031 5,057,276 4,156,730 -4,702,065 7,685 -931,112 -5,625,492 16,156,482

56

in EUR 2009 20088. Cash and cash equivalents 1,680,449 3,341,867 31.12.2009 31.12.2008Petty cash 730 242Transaction accounts 1,029,719 481,564Short-term deposits 650,000 2,860,061Total 1,680,449 3,341,867

In EUR 2009 2008 9. Current deferred expenses and accrued revenues 774,632 822,504

Type of deferral Balance as at 1 January 2009 Created Utilised

Balance as at 31 December 2009

Deferred expenses 504,965 7,901,736 -7,919,223 487,478 Accrued revenues 317,539 15,602 -45,987 287,154 Total 822,504 7,917,338 -7,965,210 774,632

Current deferred expenses comprised: current receivables from the state arising from VAT (EUR 469,180) and a portion of expenses for 2010 (EUR 18,299). Current accrued revenues comprise the amount relating to volume discounts for purchased raw materials and material for 2009 (EUR 52,653). Volume discounts will be granted upon the payment of all liabilities arising from purchases for 2009. The remaining portion is the value of sold and undelivered goods (EUR 234,500).

in EUR 2009 2008

10. Equity 79,062,903 75,949,654 The company's shareholders as at 31December 2009 were:

Number of

sharesNumber of

voting rights% of voting

rightsThe Czech Republic - Ministry of Finance 1,814,007 1,814,007 100.00Vipap Videm Krško d.d. 65,793 0 0.00TOTAL 1,879,80 1,814,007 100.00

Share capital of the company comprises 1,879,800 shares with a nominal value of EUR 41.70. The shares are freely transferable and carry one vote each at the General Meeting of Shareholders which takes decisions with 100% of voting rights present. On 4 September 2008, the General Meeting of Shareholders decided that the company’s nominal shares are to be converted into no-par value shares as follows: each share with the nominal value of SIT 1,000 or EUR 4.17 after conversion is replaced by one no-par value share. No-par value shares are merged on the basis of a 10:1 ratio. One no-par value share is worth EUR 41.70. Treasury shares are valued at historical cost, which is EUR 54.065. The share capital of the company totals EUR 78,387,660 and is divided into 1,879,800 no-par value shares. The difference in the value of EUR 55,003.99 resulting from the conversion of share capital was allocated to the share premium account.

57

Distributable profit for 2009: in EUR A. NET PROFIT FOR THE PERIOD 3,123,190B. NET LOSS FOR THE PERIOD 0C. NET PROFIT BROUGHT FORWARD 0D. NET LOSS BROUGHT FORWARD -6,648,473

- coverage of net loss brought forward fromprevious years 3,123,190

E. DECREASE IN SHARE PREMIUM ACCOUNT 0F. DECREASE IN PROFIT RESERVES 0 - decrease in other profit reserves 0 - decrease in legal reserves 0 - decrease in share premium account 0G. INCREASE IN PROFIT RESERVES 0 - increase in legal reserves 0 - increase in reserves for treasury shares 0 - increase in statutory reserves 0 - increase in other profit reserves 0H. DISTRIBUTABLE PROFIT I. DISTRIBUTABLE LOSS 3,525,283

Taking into account the revaluation of capital based on growth in the consumer price index would result in a net loss of EUR 1,836,232. in EUR 2009 2008 11. Provisions and non-current accrued expenses and deferred revenues 3,500,448 3,760,109

Provisions

Balance as at 1 January

2009 Created Utilised

Balance as at 31 December

2009 Provisions for severance pay at retirement 533,856 0 -18,367 515,489 Provisions for loyalty bonuses 149,567 0 -6,721 142,846 Provisions for building decommissioning costs 68,645 362,058 -15,648 415,055 Provisions for contingent liabilities 2,853,645 108,852 -818,947 2,143,550 Total 3,605,713 470,910 -859,683 3,216,940 Current accrued expenses and deferred revenues 122,697 172,697 -40,000 255,394 Non-current deferred revenues 31,699 0 -3,585 28,114 Total 3,760,109 643,607 -903,268 3,500,448

In 2009, we used provisions for severance pay and loyalty bonuses established in 2006 and 2007. Provisions arising from severance pay were reduced due to retirements (EUR 18,146) and the elimination of unnecessary provisions (EUR 221). Provisions for loyalty bonuses were reduced due to the payment of loyalty bonuses in the current year (EUR 6,721). The most recent actuary calculation of provisions for severance pay and loyalty bonuses of employees was performed on 31 December 2008.

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Actuary calculations for provisions for severance pay at retirement and loyalty bonuses were provided by the company 3sigma d.o.o. Ljubljana, certified actuary, pursuant to SAS 10 and IAS 19. The calculation was carried out on 31 December 2005 due to the creation of provisions and on 31 December 2006 due to the high turnover of employees in 2006. The 2006 calculation was based on data submitted regarding employees and on the assumption regarding the growth in average wages in the Republic of Slovenia (3.5% p.a.), and based on employee turnover and conditions for retirement (Article 36 of the Pension and Disability Insurance Act – ZPIZ). The calculation as at 31 December 2008 was based on submitted data and on the assumption that the annual growth in wages would be 1.5%. Severance pay at retirement is calculated in accordance with the criteria of two average gross wages in the Republic of Slovenia for the previous three months or in the amount of two average gross monthly wages of the employee in the last three months prior to retirement, whichever is more favourable for the employee. In the calculation of loyalty bonuses, the criteria of basic wages for tariff class I of the collective agreement of the pulp, paper and paper products industry (1 as the basis for 10 years of work at the company, 1.5 as the basis for 20 years of work at the company and 2 as the basis for 30 years of work at the company). The selected discounted interest rate is 7.65% per annum, which was the return on 10-year corporate bonds with a high credit rating in the euro area at the end of 2008. Provisions for the costs of building decommissioning include the planned costs of building decommissioning in the former chemical pulp production plant. The facility is being rehabilitated gradually. In 2009, we established created provisions arising from the planned costs of rehabilitation of these facilities in 2010. On 31 December 2008, the company created provisions for contingent liabilities to former employees based on the recognition of continuity of employment at the company (not limited to the last employer). In 2009, the company increased its provisions for the value of default interest until 31 December 2009 (EUR 108,852) and reduced its provisions for the value of utilised provisions (EUR 784,440) and the value of unnecessary provisions (EUR 34,507). Non-current accrued expenses and deferred revenues increased by the amount of emission coupons acquired from the MESP for pollution of the atmosphere with CO2 for 2009 (172,697 coupons) and reduced by the sale of coupons for (40,000). The book value of one coupon is EUR 1). Provisions for non-current deferred revenues were decreased by the accrued depreciation on donated fixed assets. Non-current deferred revenues are amounts of non-depreciated fixed assets acquired free of charge.

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In EUR 2009 2008 12. Non-current financial liabilities to banks 16,481,037 34,589,884

Creditor Balance as at 31 December 2009 Not due

Short-term maturity

Long-term maturity

Date of final maturity Interest Rates

Domestic bank 3,360,000 3,360,000 720,000 2,640,000 1. Aug. 2014 3-month EURIBOR + 1.75%

p.a. Domestic bank 2,490,000 2,490,000 996,000 1,494,000 1. June 2012

3-month EURIBOR + 2.75% p.a.

Domestic bank 1,885,714 1,885,714 942,857 942,857 1. Dec. 2011 6-month EURIBOR + 3% Domestic bank 6,173,999 6,173,999 882,001 5,291,998 1. Dec. 2016 6-month EURIBOR + 2.7% Domestic bank 472,375 472,375 470,706 1,669 1. Dec. 2010 T + 4% Domestic bank 1,142,857 1,142,857 1,142,857 0 1. Sep. 2010 6-month EURIBOR + 1.95% Domestic bank 682,571 682,571 682,571 0 2. Aug. 2010 5.75% + 0.75% fixed Domestic bank 300,000 300,000 300,000 0 2. Aug. 2010 6-month EURIBOR + 1.6% Domestic bank 1,522,500 1,522,500 609,000 913,500 3. Jan, 2012 6-month EURIBOR + 1.5% Domestic bank 1,630,000 1,630,000 1,630,000 20. Oct. 2016 3M EURIBOR + 5.5%p.a. Domestic bank 2,500,000 2,500,000 1,000,000 1,500,000 13. Feb. 2012 6-month EURIBOR + 2.9% Foreign bank 219,458 219,458 87,784 131,674 27. June 2012 6-month EURIBOR + 1.0425% Foreign bank 3,225,547 3,225,547 1,290,208 1,935,339 1 June 2009 6-month EURIBOR + 1.0425% Total 25,605,021 25,605,021 9,123,984 16,481,037

The fair value of loans raised is equal to their book value. Long-term loans (including the portion falling due in 2009 in the amount of EUR 9,123,984) total EUR 25,605,021 and are collateralised by means of pledged fixed assets, pledged inventories of finished products and guarantees of the export corporation. The amount of loans falling due in the period exceeding 5 years is EUR 8,989,011. in EUR 2009 2008 13. Non-current financial liabilities 1,972,132 2,958,090

Creditor Balance as at 31 December 2009 Not due

Short-term maturity

Long-term maturity

Final due date

Interest Rates

Liabilities to the lessor 1,831,757 1,831,757 439,959 1,391,798 2013 3-month EURIBOR

Liabilities to the lessor 733,332 733,332 361,824 371,508 2011 3-month EURIBOR

Liabilities to the lessor 18,630 18,630 14,861 3,769 2011 3-month EURIBOR

Liabilities to the lessor 32,665 32,665 26,057 6,608 2011 3-month EURIBOR

Liabilities to the lessor 125,621 125,621 67,798 57,823 2011 6-month EURIBOR

Liabilities to the lessor 196,810 196,810 56,184 140,626 2013 3-month EURIBOR

Total 2,938,815 2,938,815 966,683 1,972,132 The fair value of liabilities is equal to their book value. Liabilities to the lessor are secured by the retention of ownership rights to fixed assets with a present value of EUR 3,305,431.

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in EUR 2009 2008 14. Current financial liabilities 27,781,702 7,848,947

Creditor Balance as at 31 December 2009 Not due

Date of final maturity Interest rate (%)

Domestic bank 682,571 682,571 2.8.2010 nominal interest rate of NLB

+ 0.75% Domestic bank 300,000 300,000 2.8.2010 6-month EURIBOR + 1.6% Domestic bank 470,706 470,706 1.12.2010 T + 4% Domestic bank 1,142,857 1,142,857 1.9.2010 6-month EURIBOR + 1.95% Domestic bank 609,000 609,000 3.1.2012 6-momth EURIBOR + 1.5% Domestic bank 1,000,000 1,000,000 13.2.2012 6-month EURIBOR + +2.9% Domestic bank 942,857 942,857 1.12.2011 6-month EURIBOR + 3% Domestic bank 882,001 882,001 1.12.2016 6-month EURIBOR + 2.7% Domestic bank 720,000 720,000 1.8.2014 3-month EURIBOR + 1.75% Domestic bank 996,000 996,000 1.6.2012 3-month EURIBOR + 2.75% Domestic bank 2,070,171 2,070,171 11.1.2011 6-month LIBOR + 4% Domestic bank 891,921 891,921 10.12.2010 6-month LIBOR + 4% Domestic bank 4,300,000 4,300,000 16.4.2010 6,1%

Domestic bank 1,300,000 1,300,000 5.2.2010 6-month EURIBOR (3.45%) +

2.8% Domestic bank 1,877,817 1,877,817 14.6.2010 6,4% Domestic bank 751,126 751,126 10.5.2010 6,4% Domestic bank 900,000 900,000 9.6.2010 6,2% Domestic bank 2,000,000 2,000,000 6.5.2010 6,1% Domestic bank 3,600,000 3,600,000 12.5.2010 6,1% Foreign bank 87,784 87,784 27.6.2012 6-month EURIBOR + 1.0425% Foreign bank 1,290,208 1,290,208 1.6.2012 6-month EURIBOR + 1.0425% Short-term portion of long-term loans 26,815,019 26,815,019 Current liabilities to lessors 966,683 966,683 Total 27,781,702 27,781,702

Current financial liabilities are secured by receivables and the short-term portion of long-term loans in the manner set out in the note to Item 12. The fair value of loans raised is equal to their book value. The short-term portion of long-term loans totals EUR 9,123,984. In past years, the company disclosed part of the short-term loans as long-term loans due to the repeated renewal of short-term loans for several years and the general financial situation that allowed for this. Due to the changed financial situation on the banking market, the company reclassified part of short-term loans, previously disclosed as long-term loans, back to short-term loans in 2009. The value of these reclassified short-term loans was EUR 15,620,000. Short-term loans raised by the company with commercial banks shall again be renewed in 2010, as in previous periods. Loans falling due in the first quarter of 2010 in the total amount of EUR 3,193,000 have been renewed with a new repayment deadline in accordance with the bank’s policy of renewing short-term loans (6 or 12-months). In view of the company’s credit rating and cooperation with the banks, it is realistic to expect that other short-term loans falling due in 2010 would be renewed, similar to the past several years. Loans granted by individual banks in the amount of EUR 10,768,000 (six loans) have been renewed in this manner for more than three years. If the company fails to renew the short-term bank loans falling due in 2010 and the negative working capital poses a threat to the company’s liquidity and solvency, the following activities are planned:

• Rehabilitation of the area at the location of the former chemical pulp production and sale of real estate (land) not needed for the existing production process. The land covers 40,600 m2. The estimated value of the land is EUR 3.2 million.

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• Sale of production equipment according to the sale and lease back principle. The total value of independent production sites (paper machine 1, 2 and 3 and deinking and grinding plant) is EUR 50,697,000. Considering the risk of sale, we anticipate a 20% reduction in the value of said equipment upon the sale to the leasing company. With the sale of this equipment and its lease back, the company would generate additional working capital in the amount of EUR 40,558,000.

in EUR 2009 2008 15. Current trade payables 18,987,855 28,110,663 in Slovenia 11,848,481 16,599,967 to the rest of the world 6,981,051 11,447,355 accrued goods and services 158,323 63,341 Total 18,987,855 28,110,663

As at 31 December 2009, the company had liabilities due in Slovenia in the amount of EUR 3,622,477 and current liabilities in the amount of EUR 8,226,004. In the structure of liabilities to the rest of the world, EUR 2,201,320 was due and EUR 4,779,731 was current. The company has the following operating liabilities to associated companies: Levas Krško d.o.o. (EUR 215,560), Ekopa d.o.o (EUR 668,579) and Vipreh d.o.o. (EUR 6,389). in EUR 2009 2008 16. Other current operating liabilities 5,890,221 6,049,845

This item comprises liabilities to the government (EUR 3,579,039), liabilities to the former owner ICEC Holding Ostrava (EUR 856,303), liabilities for interest (EUR 301,514), liabilities for wages (EUR 492,557), contributions arising from salaries (EUR 171,794), liabilities for employer contributions (EUR 125,183), payroll tax liabilities (EUR 105,315), other employment earnings (EUR 50,418), VAT liabilities payable in January 2010 (EUR 167,159) and other (EUR 40,939).

in EUR 2009 2008 17. Current accrued expenses and deferred revenue 1,260,673 612,509

Type of deferral Balance as at 1

January 2009 Created Utilised

Balance as at 31 December

2009 accrued expenses 612,509 898,886 413,356 1,098,039 current deferred revenues 207,623 44,990 162,633 Total 612,509 1,106,509 458,346 1,260,672 Current accrued expenses and deferred revenues comprise costs that will arise as liabilities in 2009, including removal and destruction of rejects that arose in 2009 (EUR 341,159), unused annual leave for 2009 (EUR 309,839), a liability to the MESP pursuant to the final decision for 2009 (EUR 298,982) and liabilities arising from costs related to sales (EUR 146,053). Current deferred revenues (EUR 162,633) comprise interest charged to customers, which are disclosed as revenues upon payment.

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in EUR 2009 200818. Net sales revenue 95,299,977 97,064,194Slovenia 23,773,670 23,624,218Austria 12,549,961 13,086,995Germany 9,509,502 10,936,266Serbia 8,350,130 4,881,985Greece 7,860,219 4,084,591Italy 7,837,311 14,744,906Romania 3,560,491 3,912,065Turkey 2,811,718 3,846,544France 2,348,153 2,130,451Croatia 2,289,139 3,519,099Belgium 1,974,260 2,446,401Switzerland 1,789,883 0Montenegro 1,563,243 0Bulgaria 1,282,021 1,247,683Macedonia 1,097,531 2,062,349Slovakia 1,037,742 693,162Hungary 1,025,011 690,314Kosovo 893,120 0Bosnia and Herzegovina 847,221 1,036,903Czech Republic 712,767 1,063,170Albania 688,968 721,604Poland 569,093 1,290,435The Netherlands 421 162,543Other countries 483,180 115,728Other 445,222 766,782Total 95,299,977 97,064,194 Breakdown of revenues by business areas 2008 2009 Sales of paper 94,854,755 96,297,412Other 445,222 766,782Total 95,299,977 97,064,194

in EUR 2009 2008 19. Other operating revenues 703,930 2,508,989

Other operating revenues include revenues from the sale of emission coupons (EUR 557,200), revenues from the reversal of provisions (EUR 54,119), sales of fixed assets (EUR 69,954) and other.

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EUR

2009 2008 20. Service costs 9,776,110 11,954,812 Cost of transport services 3,269,022 3,487,810 Costs of fixed asset maintenance 2,526,249 2,692,958 Costs of payment transactions, banking services and insurance 855,386 781,477 Costs of intellectual and personal services 238,880 286,057 Contract-based work, session fees 133,295 104,029 Rents 440,600 444,224 Costs of trade fairs, advertising and representation 74,704 69,830 Costs arising from production and provision of services 20,784 28,848 Reimbursement of employee work-related costs 54.982 77,295 Costs of auditing the annual report 19,500 19,500 Provisions 108,852 2,957,812 Costs of other services 2,033,856 1,004,972 Total 9,776,110 11,954,812

In 2009, costs of other services increased due to the start of removal and destruction of technological waste in the production of deinking in accordance with environmental legislation. in EUR 2009 2008 21. Labour costs 11,434,765 11,432,503 Salaries and wages 7,888,987 7,920,088 Cost of pension insurance 956,604 903,220 Costs of other social security insurance 637,533 623,799 Other labour costs 1,951,641 1,985,396 Average number of employees (based on hours worked) 435.27 441.27

Other labour costs (EUR 1,951,641) include the following: employee wage compensations (EUR 561,008), meal allowance (EUR 522,857), travel allowance (EUR 383,906) annual leave allowance (EUR 336,000) and other (EUR 147,870). Gross receipts by group (ZGD-1) In EUR 2009 Members of the Management Board 995,252 Other employees with individual employment contracts 108,110 Members of the Supervisory Board 147,118 Total 1,250,480

As at 31 December 2009, the company had the following liabilities: EUR 33,542 to members of the Management Board, EUR 4,803 to other employees with individual employment contracts, EUR 6,017 to internal members of the Supervisory Board and EUR 3,200 to external members of the Supervisory Board.

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In EUR 2009 2008 22. Other operating expenses 987,165 1,007,786 The company’s other operating expenses include: expenses for environmental protection of EUR 930,946, taxes irrespective of labour costs of EUR 10,403, contributions and membership fees of EUR 27,400 and other. In EUR 2009 2008 23. Finance income from operating receivables 131,013 563,103 Exchange rate gains 105,035 74,670 Interest revenues 25,978 488,433 Total 131,013 563,103

In EUR 2009 2008 24. Finance costs for financial liabilities 2,349,736 2,317,939

This item comprises interest on loans (EUR 2,193,663) and interest on instalments arising from leasing contracts falling due in the current year (EUR 156,073). In EUR 2009 2008 25. Finance costs for operating liabilities 541,500 176,461 Interest on liabilities 118,151 111,938 Expenses for revaluation of debts and receivables 423,349 64,523

In EUR 2009 2008 26. Other revenue 143,905 262,826

This item comprises compensations received (EUR 139,966) and other (EUR 3,939).