ANNUAL REPORT 06 INTRODUCTION

BRINGING NEW DIMENSIONS TO LIFE We at Sava design, encourage and develop operations jointly to give new dimensions to life. This is particularly noticeable in the Tourism division where we operate under the brand name Sava Hotels&Resorts.

Pannonian Spas and Sava Hoteli Bled combine our services in eastern Slovenia and Bled; in the past eight years we have invested over 85 million euros in renewing existing and building new facilities and equipment. By the year 2011 we shall have invested a further 50 million euros and offered our guests hotel and other tourist services at an even higher level of quality enhanced through care for the health and well-being of our guests.

One of the most recent acquisitions is the luxury 5* hotel INTRODUCTION Livada Prestige - the first of its kind in the world that provides black thermal water in its rooms. The renovated hotels Park and Golf with wellness centres in Bled both aim to provide premium quality as well. Currently we are building the 4* Grand Hotel Primus in Ptuj and further new plans are awaiting realisation.

By discovering and implementing new opportunities, ANNUAL REPORT 2006 we are bringing a new dimension to the lives of our guests and opening up development opportunities in the local environment and regions, thus enabling the growth and consolidation of the Sava Group.

Therefore, let these new dimensions of life guide us through the annual report.

3 INDEX

INTRODUCTION 1. PROFILE OF THE HOLDING COMPANY SAVA D.D...... 6 2. ORGANISATIONAL STRUCTURE OF THE SAVA GROUP ...... 7 3. MILESTONES IN OUR HISTORY ...... 11 4. SIGNIFICANT FINANCIAL DATA AND INDICATORS ...... 12 5. SURVEY OF MORE IMPORTANT EVENTS AND ACHIEVEMENTS ...... 14 5.1. More important events and achievements in 2006 ...... 14 5.2. More important events and achievements after the accounting period ...... 15 6. REPORT FROM THE CHAIRMAN OF THE BOARD OF MANAGEMENT ...... 16 7. MANAGEMENT AND ADMINISTRATIVE BODIES ...... 20 7.1. Board of Management ...... 20 7.2. Supervisory Board ...... 22 8. REPORT BY THE SUPERVISORY BOARD ...... 27 9. THE CORPORATE GOVERNANCE SYSTEM ...... 32 10. RISK MANAGEMENT ...... 37 11. FINANCIAL MANAGEMENT ...... 43 BUSINESS ANALYSIS 12. THE SAVA SHARE AND OWNERSHIP STRUCTURE ...... 47 13. DEVELOPMENT STRATEGY ...... 55 14. GENERAL ECONOMIC CONDITIONS ...... 61 15. BUSINESS OPERATIONS OF THE SAVA GROUP ...... 62 15.1. Business performance ...... 62 15.2. Assets and liabilities structure ...... 67 16. BUSINESS OPERATIONS BY DIVISION ...... 69 16.1. Rubber Manufacturing division with the Foreign Trade Network ...... 69 16.2. Tourism division ...... 71 16.3. Real Estate division ...... 74 16.4. Other Operations ...... 76 16.5. Investment Finance division ...... 78

ANNUAL REPORT 2006 INTRODUCTION 17. BUSINESS OPERATIONS OF SAVA D.D...... 80 17.1. Business performance ...... 80 17.2. Assets and liabilities structure ...... 84 18. OUTLOOK FOR 2007 ...... 86 19. MARKETING ...... 87 19.1. Managing brand names ...... 87 19.2. Focusing on the customer ...... 88 20. STRATEGIC PURCHASING AND SUPPLIERS ...... 89 21. DEVELOPMENT OF BUSINESS PROCESSES ...... 92 22. QUALITY ASSURANCE SYSTEM ...... 93 23. EU PROJECTS ...... 95 24. DEVELOPMENT OF INFORMATION SUPPORT ...... 97

4 SUSTAINABLE DEVELOPMENT REPORT 25. SUSTAINABLE DEVELOPMENT IN THE SAVA GROUP ...... 99 26. HIGHLIGHTS OF THE YEAR ...... 100 27. THE DEVELOPMENT OF THE EMPLOYEES ...... 107 27.1. Concern for employees ...... 107 27.2. Concern for employees outside of working hours ...... 113 27.3. Concern for employee safety and health at work ...... 113 28. STANDARDS AND POLICIES REGARDING OCCUPATIONAL SAFETY AND HEALTH ...... 116 29. IMPORTANT ACKNOWLEDGEMENTS AND AWARDS IN 2006 ...... 117 30. DEVELOPING THE SOCIAL COMMUNITY ...... 123 30.1. Sponsorships and donations ...... 123 30.2. Integration of employees in the social community ...... 125 31. PROTECTING THE ENVIRONMENT AND FIRE SAFETY ...... 126 31.1. Environmental protection ...... 126 31.2. Efficient energy management ...... 127 31.3. Fire safety ...... 132 31.4. Environmental safety in the future ...... 132 FINANCIAL REPORT 32. FINANCIAL STATEMENTS OF THE SAVA GROUP WITH NOTES IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS ...... 134 INTRODUCTION 32.1. Audited consolidated financial statements of the Sava Group in accordance with International Financial Reporting Standards ...... 134 32.2. Composition of the Sava Group ...... 139 32.3. Notes to the financial statements of the Sava Group in accordance with International Financial Reporting Standards ...... 141 32.4. Statement by the Board of Management for the Sava Group ...... 173 32.5. Independent Auditor’s Report for the Sava Group ...... 174 33. FINANCIAL STATEMENTS OF THE COMPANY SAVA D.D. WITH NOTES IN ACCORDANCE WITH SLOVENE ACCOUNTING STANDARDS ...... 175 33.1. Audited financial statements of the company Sava d.d. in accordance with Slovene ANNUAL REPORT 2006 Accounting Standards ...... 175 33.2. Notes to the audited financial statements of Sava d.d. in accordance with Slovene Accounting Standards ...... 184 33.3. Explanations in connection with the transition to the revised Slovene Accounting Standards ...... 205 33.4. Statement by the Board of Management for the company Sava d.d...... 207 33.5. Independent Auditor’s Report for the company Sava d.d...... 208 STATEMENT ON CONFORMITY WITH THE CORPORATE GOVERNANCE CODE FOR SLOVENIA . . 209 CONTACT PERSONS ...... 211 GRI INDEX ...... 215

5 1. PROFILE OF THE HOLDING COMPANY SAVA D.D.

Firm: Sava, druœba za upravljanje in financiranje, d.d. Abbreviated company name: Sava, d.d. Head office: Ækofjeloæka c. 6, 4000 Kranj, Slovenia tel: 04 206 50 00 fax: 04 206 64 46 e-mail: [email protected] http://www.sava.si

Registration No: 5111358 VAT-ID No: SI 75105284 Entry No. in court register: 10024800 Date of entry in court register: 26/04/1996

Company's share capital as at 31/12/2006: SIT 20,069,870,000 (€83,750,083.46)* Nominal value of a share: SIT 10,000 No. of shares on 31/12/2006: 2,006,987 ordinary freely transferable personal shares Shares listed on: Ljubljana Stock Exchange, d.d., stock exchange listing Share name: SAVA Chairman of the Board of Management: Janez Bohoriå Members of the Board of Management: Vinko Peråiå and Emil Vizoviæek Chairman of the Supervisory Board: Stanislav Valant, MA Deputy Chairman of the Supervisory Board: Miran Kalåiå

The nature of our business and most important company and involves the purchase and sale of activities: real estate, formation of subsidiaries and ANNUAL REPORT 2006 INTRODUCTION • Managing companies in which Sava d.d. has a companies and take-over of equity in Slovenia and majority or significant ownership share. abroad, joining businesses in an association with • Providing financing and leasing of real estate, and commercial interests, and making commercial forming and managing competence centres of contracts of all types. knowledge. * The translation to the euro currency is for information • Managing portfolio investments. purposes only and made on the basis of the exchange rate • All other commercial business that directly or €1= SIT 239.64. The translation of the share capital into indirectly contributes to achieving the goals of the euros will be dealt with at the Shareholders' Meeting in 2007.

6 Sava HoteliBled connectsallthreetourismcompanies and north-east Slovenia.Theumbrellabrand name Resorts andincludestwotourist destinations:Bled It operatesunderthebrand nameofSavaHotels& Tourism area ofenvironmentalprotection. vehicles, thegraphicsandpaperindustry,in motorcycles, automobiles,industrialandagricultural demand inthebuildingindustry,manufactureof innovative industrialrubberproductsthatarein in RussiaandItaly. network companiesandtworepresentativeoffices Sava-Schäfer d.o.o.,SavaRolsixforeigntrade management operatethecompaniesSava-GTId.o.o., by thecompanySavatechd.o.o.Underits In Group includes26subsidiariesand3jointventures. which actsasitsadministrativecentre,theSava Finance. InadditiontotheparentcompanySavad.d., Real Estate,OtherOperationsandInvestment divisions suchasRubberManufacturing,Tourism, The companiesoftheSavaGroupoperateinfivemain Organisational structureoftheSavaGroup(companieson27March2007) SAVATECH Corp.PortOrange-95% SAVA TRADEd.o.o.,Split,Croatia-70% SAVATECH TRADELtd.,London SAVA TRADEs.r.o.,Prague SAVA TRADESp.z.o.o.,Warsaw SAVA TRADEGmbh,Munich SAVA-GTI d.o.o.,Ptuj SAVA-SCHÄFER d.o.o.,Kranj-50% SAVA ROLd.o.o.,Zagreb-76% SAVATECH d.o.o.,Kranj Rubber Manufacturing FOREIGN TRADENETWORK RUBBER MANUFACTURING SAVA GROUP STRUCTURE OFTHE ORGANISATIONAL 2. is oneofthestrongestSava divisions. TERME PTUJd.o.o.,Ptuj Moravske Toplice-97.61% TERME 3000d.d., Bled -95.77% G &PHOTELIBLEDd.o.o., Bled -99.68% GRAND HOTELTOPLICEd.o.o., GOLF INKAMPBLEDd.d., We develophighquality development isundertaken Radenci -100.00% TERME RADENCId.o.o., Lendava -93.02% TERME LENDAVAd.d., TOURISM SAVA NOVAd.o.o.,Zagreb SAVA IPd.o.o.,Ljubljana SAVA, d.d.-HOLDING BOARD OFMANAGEMENT ACTIVE MANAGEMENT SAVA IMGd.o.o.,Poreå-50% PC AGd.o.o.,Velenje-50% SAVA IPNd.o.o.,Ljubljana-100% IP NOVAAd.o.o.,Ljubljana-100% IP NOVAd.o.o.,Ljubljana-100% REAL ESTATE that areexpected tobringanabove-aver profitable financial investmentsandinnovative plans holding companySavad.d.Its keytaskistoinvestin Investment Finance disabled workers. Medical inStoritved.o.o.,which employsandtrains Sava d.o.o.,whichmanagesenergy,and Other Operations company requirements. operation involvesprovidingservicesforSavaGroup our ownrealestate;animportantpartofthe its sixsubsidiaries.Webuildforthemarketandlease Real Estate d.o.o. withTermeBanovci Lendava d.d.,TermePtujd.o.o.,andRadenci spa resorts:Terme3000d.d,MoravskeToplice, destination calledPannonianSpas,whichincludesfive east Sloveniawehaveformedthelargestwellness European holidayresortthatBledoncehad.Innorth- endeavouring torevivetheformerimageofaselect that operateinBled.Bydirectinginvestmentsweare ENERGETIKA SAVAd.o.o.,Kranj GEA SOLInt.d.o.o.,Kranj* BIOOL d.o.o.,Kranj* d.o.o., Kranj SAVA MEDICALINSTORITVE includes thecompanySavaIPd.o.o.and d.o.o., Kranj-100% ENERGETIKA ÅRNOMELJ OTHER OPERATIONS include thecompaniesEnergetika operations arecarriedoutby the FINANCIAL INVESTMENTS DIVISIONS INVESTMENTS INSAVAGROUP * The companyisstagnant. ownership Companies undermajoritySavad.d ownership Companies under100%Savad.d. - Jobd.o.o.,Maribor27.00% Limbd.o.o.,Ptuj-37.50% - - Merkurd.d.,Kranj20.03% - GorenjskaBankad.d. Investments inassociates Kranj -41.35% INVESTMENT FINANCE age return. 7 ANNUAL REPORT 2006 INTRODUCTION The golf course in idyllic Bled is the largest in Slovenia with the longest tradition of 70 years. Pleasure in playing on grassy carpets by the lake has been combined with the range of services provided by the Sava Tourism division under the brand name Sava Hoteli Bled. Those who wish to enjoy playing at the longest hole in Slovenia take a ride to Moravske Toplice to play on the Golf Livada golf course which, as a natural park, embraces the thermal resort complex of Terme 3000.

BRINGING NEW DIMENSIONS TO LIFE

8 MOVEMENT - infinite greens lure one to play The King’s Golf Course, Golf & Country Club Bled The Lake Golf Course, Golf & Country Club Bled

The Livada Golf Course, Moravske Toplice

The Livada Golf Course, Moravske Toplice

BRINGING NEW DIMENSIONS TO LIFE MOVEMENT 2006 2002 2000 1998 1997 1972 1967 1948 1946 1920 IN OURHISTORY MILESTONES 3. Sava d.d.fortheperiod2007-2011isadopted. head forthenextfive-yearmandate.TheIntegratedStrategy oftheSavaGroupandcompany The SupervisoryBoardconfirmsthepresentofManagement withJanezBohoriåatthe Sava d.d.asthegoverningcompanyofGrouprestructures intoaholdingcompany. The SavashareislistedontheLjubljanaStockExchange. business. Itdirectsitsbusinesstotrading,chemicals,tourism,realestateandfinancialinvestments. Sava beginsinvestmentoperationsandtake-oversbeyonditstraditionalrubbermanufacturing Sava Tiresd.o.o. Two jointventurecompaniesstarttooperate:GoodyearEngineeredProductsEuroped.o.o.and Sava paysoutitslong-termpartnerSemperit–Continental. A jointventureforthemanufactureofradialtyreswithSemperitisconcluded. A licencecontractforthemanufactureofdiagonaltyreswithcompanySemperitisconcluded. We starttousethepatentedbrandnameSava. tyres andtubesisintroducedthemanufactureofconveyorbeltsV-beltscommences. Nationalisation andchangeinthenametoSAVARubberProductsFactory.Massproductionofcar In 1921itstartstoproducerubberproductswithinthecompanyVulkan. ATLANTA importandexportcompany,theforerunneroftoday’sSava,isestablishedinKranj. A jointventureagreementbetweentheSavaconcernandGoodyearcorporationissigned. 11 ANNUAL REPORT 2006 INTRODUCTION 4. SIGNIFICANT FINANCIAL DATA AND INDICATORS

SIT in millions The Sava Group according to International Index Financial Reporting Standards 2004 2005 2006 2006/2005 FINANCIAL DATA AND INDICATORS Sales 56,386 58,462 40,566 69* Export 16,050 18,162 21,506 118 Added value 17,539 19,291 16,743 87* Total pre-tax profit 12,512 10,468 9,732 93 Net profit 11,651 9,216 8,166 89 Net cash flow (profit + amortisation) 14,438 12,814 11,467 89 Balance sheet total 142,189 156,006 161,658 104 Non-current assets 118,350 130,276 140,463 108 Current assets 23,839 25,730 21,195 82 Equity 90,553 94,157 103,652 110 Non-current liabilities 17,306 20,161 24,374 121 Current liabilities 34,330 41,688 33,632 81 Investment in property, plant and equipment 8,890 9,018 8,889 99 INDICATORS Net profit / operating revenue - % 19.0 15.0 20.1 134 Total income / equity - % 17.1 11.9 10.3 87 Net profit / equity - % 16.0 10.5 8.6 82 Net earnings per share - SIT 5,971 4,573 4,065 89 Independence rate (equity / balance sheet total) - % 64 60 64 107 ANNUAL REPORT 2006 INTRODUCTION Liquidity (current assets / non-current liabilities) - % 62 62 63 102 SHARE Nominal value - SIT 10,000 10,000 10,000 100 Book value - SIT 45,754 46,421 51,352 111 Market value 31/12 - SIT 43,966 43,215 55,506 128 Dividend paid per a share - SIT 560 620 640 103

* In 2006 the Trade and the rest of Chemicals divisions were sold, therefore the sales volume and added value decreased, whereas financial impacts increased.

12 e 0,0 okhus29262388 114 2.3 3,856 2.6 109 3,394 104 2.9 124.2 3,164 84 256,177 106 113.4 245,921 235,722 6.7 2,564 94.0 3,047 6.3 No. ofannouncementsinmedia 3,017 Sponsorships anddonations-SITinmillions 6.1 per 200,000workhours Share ofemployeesinpreventivemedicalcheck-ups-% Average salary-SIT Added valueperemployee-SITinmillions 94 Employees on31December SOCIAL DATA Sava Group 135,614 143,989 127,808 Use ofnaturalsources,drinkingwater-m CO Direct andindirectgreenhousegasemissions- Use ofenergysourcesinGWh ENVIRONMENTAL DATA Sava Group sick leave-No.ofinjurieswith Work-related injurieswith 2 erctni huad 535. 12 97 51.2 52.6 45.3 - metrictoninthousands 3 in thousands 0420 062006/2005 2006 2005 2004 0420 062006/2005 2006 2005 2004 912. 97 129 29.7 19.1 23.0 0 1 7 94 575 613 607 Index Index 13 ANNUAL REPORT 2006 INTRODUCTION 5. SURVEY OF MORE IMPORTANT EVENTS AND ACHIEVEMENTS

5. 1. More important events and achievements in 2006

JANUARY The company Gea Sol terminates its operation. The most vital part of its operation, energy consulting, is transferred to the company Energetika Sava d.o.o.

FEBRUARY The Supervisory Board of Sava d.d. adopts a resolution that in the next five-year period from 17 July 2006 to 16 July 2011 the company is further managed by the present Board of Management: chairman Janez Bohoriå and members Vinko Peråiå and Emil Vizoviæek.

The Sava share starts to be listed in the new index of south-eastern Europe, Southeast Trade Index (SETX), designed by the Vienna Stock Exchange.

MARCH Through an increase in the capital of the company Merkur d.d. and additional purchases of shares Sava d.d. becomes an important 19.6 per cent shareholder.

Sava d.d. sells its entire stake in the company NFD Holding d.d.

With an investment in kind Sava d.d. increases its share capital in the companies Grand Hotel Toplice d.o.o. Bled, Savatech d.o.o. and Sava-GTI d.o.o.

APRIL We open the renovated Park Hotel in Bled, the second largest building in Slovenia.

Merkur d.d. purchases from Sava d.d. a 96.87 per cent stake in the company Sava Trade d.d.

Sava d.d. sells all shares of the company Mercator d.d.

MAY Sava d.d. buys a 28 per cent stake in Terme Ptuj d.o.o. from Perutnina Ptuj d.d. ANNUAL REPORT 2006 INTRODUCTION

Sava d.d. is repeatedly ranked among the first five best companies in the campaign Best Relations with Investors and other Interest Groups Portal.

The 12th Shareholders’ Meeting of Sava d.d. is held.

JUNE By selling all shares of the company Teol d.d. to the company Orka d.o.o. Sava ensures the continued existence and development of Teol as well as most of the jobs.

Sava d.d. purchases from its subsidiary Terme 3000 d.d. its entire stake in the company Terme Ptuj d.o.o., thereby becoming the sole owner of the company.

14 5.2. the accountingperiod More importanteventsand achievementsafter SEPTEMBER NOVEMBER DECEMBER FEBRUARY JANUARY AUGUST MARCH JULY manufacture) fromtheEuropeanRegionalDevelopmentFund. (79.9 milliontolars)forthedevelopmentandinvestmentproject(optimisingrubberprofiles To increasecompetitivenessthecompanySavatechd.o.o.obtainsagrantof0.3millioneuros Sava d.d.acquiresa27percentstakeinthecompanyJOB,ZavarovalnoZastopanjed.o.o.,Maribor. company GolfIstrad.o.o. The companyGolfinKampBledd.d.sellsitsentire20percentstakeIstrabenztothe The companyEnergetikaÂrnomeljd.o.o.isformedbyus. to promotethedevelopmentoftouristsightsandregions. (500 milliontolars)ofnon-returnablefundsfromtheEuropeanRegionalDevelopmentFund The projectofbuildinga4*hotelinthecompanyTermePtujd.o.o.receives2.1millioneuros We completetherenovationofLjutomer3*hotelJeruzalem. associated companyintheSavaGroup. By increasingtheownershipstaketo20.03percentcompanyMerkurd.d.becomesan Sava d.d.expropriatesallsharesofLaækoBrewery development andfirstplaceincommunicationtoo. best Slovenianannualreport.Wewinfirstplaceinthecategoryofreportingonsustainable Finance magazineselectsthe2005AnnualReportofSavaGroupandd.d.as government oftheRepublicSlovenia,JanezJanæa. hotel LivadaPrestigeinMoravskeToplice.ThenewisopenedbyPrimeMinisterofthe The greatestinvestmentintheSavaGrouplatelyhasbeenfinished–constructionof5* the naturistcampsiteSonåniGajarefinished. The renovationofanaturistswimmingpoolinTermeBanovciandtheaccompanyingfacility a foundationstonefornew4*hotelinPtujtobefinishedattheendofSeptember2007. Together withMinisteroftheEconomyRepublicSlovenia,AndrejVizjak,MA,welay made acquaintedwiththe2007BusinessPlan. for theSavaGroupandcompanyd.d.businessperiod2007-2011.Itisalso At its14thregularmeetingtheSupervisoryBoardofSavad.d.adoptsIntegratedStrategy begun. rubber manufacturingandtourism.Activitiesforcounter-supplies totheFinnishfirmPatriaare environmental protectionandrescueaswellotherdevelopment andtechnologyareasof Minister KarlErjavecopenupnewpossibilitiesforco-operation intheareaofproductsfor Arrangements madetomarkthevisitbyMinistryofDefence representativeswithDefence total capitalin thiscompany. After transactions arecompleted,Savad.d. willown1,282,966sharesin totalor23.33ofthe Sava d.d.fulfilsthecondition forpurchasingaqualifiedstakeinthecompanyAbankaVipa d.d. tourism companytodoso. well aspromotionofSlovene cultureinSlovenianHouseBrusselsasthefirst Slovene The companiesfromSava’s Tourism divisionorganiseasuccessful14-daypresentation as 15 ANNUAL REPORT 2006 INTRODUCTION 6. REPORT FROM THE CHAIRMAN OF THE BOARD OF MANAGEMENT

Dear Shareholders,

In this eventful business year the Sava Group successfully fulfilled its strategic goals and at the same time underwent restructuring. We are delighted to present the shareholders and the public with the results and content of last year’s business and achievements, which has complemented the past period of development.

The business operations of the Sava Group were marked by two events having long-term effects. With the announced sale of the Trade division, a withdrawal from the Chemicals division and simultaneously entering the ownership structure of the joint stock company Merkur d.d. with a significant one-fifth ownership stake, we have implemented the declared strategic restructuring of the Group. By doing so, Merkur d.d. has become an associated company in the Sava Group.

In the managements of all subsidised companies, competence centres of knowledge and the Board of Management of the holding company we have devoted considerable effort to performing a thorough analysis of global economic trends and our own development potential. We have also envisaged development scenarios for the period ahead. Based on all that we have done, we have produced an integrated strategy of development by 2011, which is supported by the strategy and goals of each individual operation and the companies of the Sava Group.

Our business achievements demonstrate that we have successfully implemented the set goals and even in 2006 advanced to newly established strategic policies and goals, particularly concerning our principal goal

ANNUAL REPORT 2006 INTRODUCTION - asset growth. The book value of the share as the criteria of such growth was a good tenth higher. We surpassed our plans and made a step ahead to achieving the set goal of a 32 per cent increase in assets in the next five-year period.

On account of our achievements we are facilitating the implementation of the outlined dividend policy. The shareholders of Sava d.d. have good reason to be satisfied also due to the more than 30 per cent annual increase in the value of the share on the Ljubljana Stock Exchange.

Along with the financial results we would particularly like to emphasise the role of employees in achieving strategic goals and the success of the Sava Group. A favourable annual yield reflects that we have tackled

16 have considerably surpassedourplansby 24and17percent,respectively. afore-mentioned businesseventswerereflected inthepre-taxprofit andnetprofitoftheGroup, which directed intoaportfoliopurchase ofsharesandanincreaseincapitalthecompany Merkurd.d.The in agivenmomentcouldbring thehighestbenefitforassetowners.Theacquired assetsweremainly also duetothesaleofcertain financialinvestments.Wehaveestimatedthattheperformed strategicmoves Significantly surpassingthe businessplanalongwiththeefficientperformanceof Group subsidiarieswere achievements. of improvedcostmanagementandefficientsupervision ofbusinessassets,tobeonethemoreimportant We considertheoperationalsuccessofsubsidiaries, whichwereenhancedby73percentastheresult consolidated salesrevenuesbyupto19percent,thus exceedingtheplannedfigureby9percent. the saleofTradedivision,companies Grouphaveconsiderablyincreasedthevalueof profit. Whilethetotalvolumeofsalesincomparisonwith lastyeardecreasedbyagood30percentdueto activities, whichhaveallincreasedthevolumeoftheiroperationsandendedbusinessyearwitha business results.Atthesametime,itopeneddoorsforacceleratedgrowthinotherinvestment Restructuring oftheinvestmentportfoliobysellingtwooperationshassignificantlyimpactedlastyear’s Changes intheinvestmentportfolioprovideastrongbusinessimpetus enhance theefficiencyofutilisingsynergiesamongvariousoperationsourbusinessenterprise. management model.Thecompetencecentresofknowledgestrengthentheircentralrolewhichisto Our businessachievementsmakeitincreasinglyapparentthatwehavedelineatedagood potential, andwealreadybegantoimplementthesegoalslastyearwiththecreationofover100newjobs. on thepartofouremployees.WewillcontinuetocreatenewjobsinwhichTourismdivisionhasgreat appropriately humanresourcemanagementandselectedefficientformsofencouraginginnovationactivities 17 ANNUAL REPORT 2006 INTRODUCTION Rubber Manufacturing successful in taking over a leading role in the sales of the entire Group

After selling the Trade division, Rubber Manufacturing with the Foreign Trade Network escalated its sales volume by 20 per cent, thereby contributing a 57 per cent share in the total sales structure. The profit, which has more than doubled, proves that we are highly competent in utilising our market position as an established manufacturer in market niches, especially in the markets of the European Union. The business year that has been most successful for the company Savatech d.o.o. thus far, together with the annual growth of the company Sava-GTI d.o.o. that has been increased by one third both predict the successful implementation of the vision we have created for one of the most financially solid operations of the Sava Group, achieving a leading position in their market niches in Europe and an organic growth rate of 9 per cent annually on average.

Investments in tourism produce encouraging results

Vast investments that in the past were directed to the Tourism division have already produced favourable results. This was verified by an increase in sales revenues amounting to 6 per cent, representing one third of all sales revenues of the Group, as well as higher pre-tax and net profit of the division. It expressly proved in the subsidiaries that investing in new programmes and capacity in the development of tourism is the right approach. The companies where intensive investments were underway in new programmes such as a water amusement park in Terme Ptuj, the renewal of swimming pool and hotel facilities in Terme Lendava, or investments in the company G&P Hoteli Bled d.o.o., enhanced their sales last year and generated profit. Only in the company Grand Hotel Toplice d.o.o. were the effects of investments made in the past diminished through costs whose increase was too high. Consequently, in the future we will put in a great deal of effort in their management.

In Tourism, the main investment achievement was the construction and opening of the new 5* hotel Livada Prestige in Terme 3000 d.d. in Moravske Toplice. Ahead of us is our new venture: building a 4* hotel in Terme Ptuj to be opened this autumn.

We expect that by building high-quality hotel facilities in Pannonian Spas and utilising the potential and efficiency of the Sava Hotels&Resorts Bled brand, we will assure that the Tourism division develops in line with the bold goals to be implemented by 2011.

Real Estate rounded up the profitable operations of all divisions

The divisions Real Estate and Other Operations continue to be a minor yet still significant part of the Sava Group. Completing certain projects in Real Estate in 2006 resulted in a 14 per cent increase in net profit and revenues that were even 63 per cent higher. In Slovenia and Croatia we have already begun to implement new projects to contribute to the consolidation of a leading position that this operation has in the development of real estate in Slovenia and to an expansion in the volume of operations in Croatia. ANNUAL REPORT 2006 INTRODUCTION

We are satisfied that the company Sava Medical in Storitve d.o.o. generated a profit. Due to the nature of its business the company does not produce a large share in the business results of the Group. However, it does provide employment for people with limited working abilities, which is for the benefit of the entire Group. As expected, both companies from the field of power generation and distribution have not yet performed a higher volume of operations, but in the future we anticipate their continual growth and improving success.

18 Investment activity

Last year the holding company Sava d.d. was successful in balancing the structure of its investment portfolio and was able to substantially increase its value by utilising market movements and opportunities. By purchasing and selling ownership stakes, we have taken important strategic measures to reducing the diversification of investments and, consequently, to implementing our vision, which envisages that we should become the most profitable financial pillar in Slovenia by 2011 through managing the investment portfolio in an efficient manner.

In March 2007 we made another significant step by signing contracts, on the basis of which we shall acquire a 23 per cent stake in Abanka Vipa d.d. The ownership stake in Abanka Vipa d.d. is as important as a 41 per cent stake in Gorenjska Banka d.d.

By 2011 business growth will be supported by investments in an amount that will exceed 310 million euros (74.3 billion tolars). Of this amount 124 million euros (29.7 billion tolars) will be invested in the renewal of technology, buildings and equipment, and 186 million euros (44.6 billion tolars) will be earmarked for financial investments. Even in 2007 we will complete certain important investments in tourism, continue with the construction of real estate for the market and modernise our facilities in Rubber Manufacturing.

In all of these operations we will proceed with the restructuring of the product and services portfolio to improve their innovation and competitive power on a global scale, achieve a higher added value and a 15 per cent return on capital in Group subsidiaries by 2011.

A high platform for further growth

Together with members of the Board of Management, Vinko PerËiË and Emil Vizoviπek, we believe that the goals as outlined for 2007 are ambitious yet realistic and feasible. On this occasion I would like to thank on their behalf and mine too the directors of the companies and the competence centres of knowledge as well as all employees in the Sava Group for their fruitful co-operation.

The achievements made in 2006 demonstrate that the platform for attaining growth in the future period of development is firm and set high enough. In the strategy we have also clearly delineated the paths to achieving these goals, which are all oriented to sustainable development. In relation to this we are among INTRODUCTION the first Slovene companies to join the initiative by the United Nations entitled Global Compact, which encourages comprehensive social responsibility. This continues to be our policy in achieving strategic goals which, due to the long-term focus of our policy, is only one of the steps to ensure the further successful growth and development of the Sava Group. ANNUAL REPORT 2006

Janez BohoriË Chairman Sava d.d. Board of Management

19 7. MANAGEMENT AND ADMINISTRATIVE BODIES

Janez Bohoriå

7. 1. Board of Management

Sava d.d. is managed by a 3-member Board of Management: Chairman: Janez Bohoriå Members: Vinko Peråiå and Emil Vizoviæek

This Board of Management has managed the company since 1996; the present mandate expires in July 2011.

JANEZ BOHORIÅ University graduate in chemical technology, 65 years old, Chairman of the employed at Sava for 41 years. Board of Management Responsible for strategic development of operations, finance and risk management, marketing, human resources, law, organisation and corporate communications, and operations of the Investment Finance division.

Janez Bohoriå is chairman of the Assembly of the Slovene Chamber of Commerce and Industry, committee chairman of the USP Institute (Learning Company), member of the Awards Committee of the Republic of Slovenia for Business Excellence, member and honorary member of numerous organisations, founder of Lionism in Slovenia and co-ordinator for the development of Lionism in Macedonia, member of the managing committee of the Managers’ Association, honorary member of the Slovene Tourist Board and member of the Economy Collegiate body at Ljubljana University.

Membership of Supervisory Boards: • Member of the Supervisory Board of Merkur d.d., Kranj • Member of the Board of Golnik Hospital ANNUAL REPORT 2006 INTRODUCTION

Membership of the Supervisory Boards of Sava Group companies: • Chairman of the Supervisory Board of Terme 3000 d.d., Moravske Toplice

20 ebro h employedatSavafor31years. Responsibleforthedevelopmentofbusinessqualitysystems,R&Dand Board ofManagement Member ofthe employedatSavafor43years. Responsibleforthedevelopmentofsystemsplanning,monitoringand Board of Management Member ofthe EMIL VIZOVIÆEK EmilVizoviæek VINKO PERÅIÅ Vinko Peråiå • Chairmanof the SupervisoryBoardofLimb d.o.o.,Ptuj Membership oftheSupervisory BoardsofSavaGroupcompanies: board oftheEconomicDevelopment Fund. and ResearchAssociationwith itsheadofficeinBrussels,andmemberofthe Excellence, memberoftheeconomycommission SloveneBusiness Association, memberoftheboardNationalFoundation forBusiness the boardofTechnicalMuseumSlovenia,member oftheManagers’ Industries attheSloveneChamberofCommerceandIndustry, memberof Emil Vizoviæek with theForeignTradenetworkandnewoperations. development andsupervisionofRubberManufacturingoperations together continual improvementssystem,theareaofsafety, aswellthe University graduateinchemicaltechnology,62yearsold, • MemberoftheSupervisoryBoardTerme3000d.d.,MoravskeToplice • ChairmanoftheSupervisoryBoardG&PHoteliBledd.o.o., Membership oftheSupervisoryBoardsSavaGroupcompanies: • ChairmanoftheSupervisoryBoardGozdnoGospodarstvoBledd.d., Membership ofSupervisoryBoards: chairman ofSavaCyclingClub. the SloveneInstituteforAuditing,memberofManagers’Association,and Financiers andAuditorsoftheRepublicSlovenia,chairmanBoard Workers inKranj,memberoftheBoardFederationAccountants, Vinko Peråiå purchasing, andTourismRealEstateoperations. auditing businessoperations,thedevelopmentofinformaticsand University graduateineconomics,63yearsold, is chairmanoftheAssociationAccountingandFinancial is memberoftheboardAssociationChemical 21 ANNUAL REPORT 2006 INTRODUCTION Stanislav Valant, MA

7. 2. Supervisory Board

STANISLAV VALANT, MA University graduate in economics, MBA, 57 years old. Chairman of the Chairman of the Board of Management of Nacionalna Finanåna Druœba d.o.o., Supervisory Board Ljubljana.

His functions up till the present: membership of the Board of Management in Ljubljanska Banka d.d., Ljubljana, heading the project to establish the Ljubljana Stock Exchange d.d., Ljubljana, and presiding over the Slovene Banks Association.

Principal current functions: • Chairman of the Association of Management Companies, Ljubljana • Honorary Chairman of the Supervisory Board of the Ljubljana Stock Exchange d.d., Ljubljana • Chairman of the Supervisory Board of Etol d.d., Celje and Hoteli Bernardin d.d. Portoroœ • President of the Slovene Ski Association • Member of the managing committee of the Managers’ Association

MIRAN KALÅIÅ University graduate in law, 59 years old. Deputy Chairman of the Director of the Institute for Work Safety d.d., Ljubljana. Supervisory Board His functions up till the present: director of the specialised services sector in Hermes, Foreign Companies Representation d.o.o., Ljubljana, director of implementing the insurance system at the Institute of Pension and Disability Insurance of Slovenia, deputy chairman and chairman of the Republic Committee for Labour and member of the Executive Council of the Republic of ANNUAL REPORT 2006 INTRODUCTION Slovenia, head of the project to establish the Pensions company at SKB d.d., Ljubljana and chairman of its temporary board, chairman of the management committee ZRSZ, project manager to establish ZVPSJU, co-chairman of the ZVPSJU committee and deputy managing director of ZPIZ.

Principal current functions: • Vice-chairman of the Government of the Republic of Slovenia Board for Disabled Persons • Member of the Council of the Government of the Republic of Slovenia for mental health • Deputy Chairman of the Committee for Closed Mutual Pension Funds for Public Employees in the Republic of Slovenia

22 GORAN BIZJAK University graduate in economics, 48 years old. Member – shareholder Procurator in the company Poslovna Cona Komenda d.o.o. representative His functions up till the present: assistant to the director of the Fund of the Republic of Slovenia for developing small businesses, head of the sector to draw up and manage the budget of the Republic of Slovenia, chairman of the SOD management committee and its director, member of the Board of Management in Casino Portoroœ and member of the Supervisory Board of Triglav Insurance d.d., Ljubljana.

JANEZ BOJC University graduate in economics, 45 years old. Member – shareholder Deputy director in the companies KD Group d.d. and KD Holding d.d. Ljubljana. representative His functions up till the present: director of Ljubljana Kinematografi d.d. Ljubljana, assistant to the director of Zadruœna Kmetijska Druœba d.o.o. Ljubljana, deputy director KD Group d.d., Ljubljana, director KD Holding d.d. Ljubljana, director KD Investments d.d., Ljubljana

Principal current functions: • Chairman of the Supervisory Board of the insurance company Adriatic Slovenica d.d. Koper • Chairman of the Supervisory Board of the company Œito d.d., Ljubljana

JANKO KASTELIC University graduate in economics, 57 years old. Member – shareholder Director of the company Fidina d.d. representative His functions up till the present: assistant managing director of the company Slovenijales, consultant in Triglav Insurance d.d. Ljubljana, and chairman of the fund managers DZU Triglav.

Principal current function: • Member of the Supervisory Board of Terme Âateœ d.d., Âateœ ob Savi

TOMAŒ KUNTARIÅ, MA University graduate in law, MBA, 41 years old. Member – shareholder Assistant to the president of the Management Board of Gorenje d.d., Velenje. representative His functions up till the present: director of the legal department of Kapitalska Druœba d.d., Ljubljana, consultant to the sector director of the Institute for Pension and Disability Insurance of Slovenia, member of the Management Board of Kapitalska Druœba d.d. Ljubljana.

JANEZ JUSTIN Mechanical technician, 61 years old. Member – employee President of the Trade Union for the Chemical, Non-metal and Rubber representative Manufacturing industries (KNG) at Sava-Goodyear.

His functions up till the present: president of KNG Slovenia, member of the INTRODUCTION board of the European Mine, Chemical and Energy Workers’ Federation (EMCEF), member of the board of the International Federation of Chemical, Energy, Mine and General Workers' Unions (ICEM), member of the negotiating teams for collective agreements for chemical and rubber manufacturing and the non-metal industries of Slovenia, member of the negotiating team of employees in EMCEF negotiating with EU directorates.

JOŒEF COPEK University graduate in labour organisation, 61 years old, retired. Member – employee His functions up till the present: director of the general sector in Sava d.d., representative Kranj, director of the company Sava Medical and Services d.o.o., Kranj, in the Sava Group, member of the council of Basic Healthcare of Gorenjsko, member of the council of Kranj Social Services. ANNUAL REPORT 2006

MIHA RESMAN University graduate in economics, 31 years old. Member – employee Head of financial investments in the Strategic Finance division of the representative company Sava d.d., Kranj. Head of investor relations and member of the expert team for take-overs and mergers.

Principal current functions: • Chairman of the Workers’ Council of Sava d.d., Kranj • Member of the Supervisory Board of Merkur d.d., Kranj • Member of the Supervisory Board of NFD Holding d.d., Ljubljana

23 In the wellness centres we are continuing the well-established tradition of spa resort tourism enhanced through the most recent findings and amenities of the present. The famous tradition of Rikli’s natural healing is integrated in the Æiva wellness centre in Bled, while another modern wellness centre is being built in the new Grand Hotel Primus in Ptuj.

BRINGING NEW DIMENSIONS TO LIFE RELAXATION - of body and soul The Æiva Wellness Centre, Hotel Golf

The Wellness Centre, Terme Radenci

The Luisa Studio, Grand Hotel Toplice

The Wellness Centre, Hotel Livada Prestige

BRINGING NEW DIMENSIONS TO LIFE RELAXATION The AnnualReportwassubmitted forauditingtoaselectedauditoratthe12 company anditsfinancialposition. Supervisory Board,thebusinessreportgivesafair view ofdevelopmentandbusinessresultthe that thecompanyisexposedto.Onbasisofdata thattheBoardofManagementsubmittedto the company.TheBusinessReportcontainsanin-depth analysisonthematerialrisksanduncertainties operations oftheSavaGroupinfieldresearchand developmentanddataaboutthesubsidiariesof business eventsthattookplaceaftertheendof year,anticipatedgrowthofthecompanyand Companies ActinItems1to19ofParagraph1,Article 69. TheBusinessReportcontainsallthesignificant treasury shares.Theexplanationstothefinancialstatements containalltheinformationprescribedby contained intheAnnualReport.Thecompanyhascorrectly createdlegalreservesandforits constituents thatareprescribedbylegislationtoproduce theindividualstatementsandreportsare Report iscommontoboththeAnnualandConsolidatedReport.Allessential Consolidated AnnualReportconsistsofalltheprescribedcontentstoo,wherebyitstandsthatBusiness to allthestatements,CashFlowStatement,StatementofChangesinEquityandbusinessreport.The consists ofthefinancialreportthatincludesBalanceSheet,IncomeStatement,enclosureswithnotes the obligatorycomponentsasprescribedbycurrentlyvalidCompaniesAct-1.TheAnnualReport It hasdeterminedthatthe2006AnnualReportswereproducedwithinlegaldeadlineandcontainall 2006 AnnualReportfromtheBoardofManagementandConsolidatedReport. The SupervisoryBoardofthejointstockcompanySavahasreviewedformalaspectsconcerning Components oftheAnnualReportandConsolidated accumulated profit2006 Group andtheproposalforusing 2006 consolidatedAnnualReportoftheSava 2006 AnnualReportofthecompanySavad.d., On theresultsofexaminingaudited the jointstockcompany.The auditorsKPMGd.o.o.SlovenijaproducedanAuditors' Reporton6April2007. BOARD THE SUPERVISORY REPORT BY 8. th Shareholders' Meetingof 27 ANNUAL REPORT 2006 INTRODUCTION Paragraph 3 of Article 256 of the Companies Act prescribes that the Board of Management must present the compiled Annual Report together with the Auditors' Report to the Supervisory Board without delay. The Board of Management of Sava d.d. did this on 12 April 2007. We therefore determine that the aforementioned legal provision was observed.

Method and scope of examining the conduct of the company

The Supervisory Board performed its supervisory function mainly at Supervisory Board meetings. It also established a commission to prepare the written report from the Supervisory Board on the 2006 Annual Report and other tasks in accordance with the Code of Corporate Governance for Slovenia and the law. The commission consisted exclusively of Supervisory Board members, whereas the associates of the company, including the internal auditor, collaborated in its work.

The Supervisory Board held six meetings. At these meetings individual members of the Supervisory Board exercised their right under Paragraph 1, Article 274(a) of the Companies Act, which enables all members of the Supervisory Board to examine all the bases for producing the Annual Report. In accordance with the legal provision the Supervisory Board has the right to revoke such a right from an individual member, but the Supervisory Board did not adopt any resolution on this matter in 2006.

The Supervisory Board meetings in 2006 took place on 16 February, 15 March, 20 April, 10 August, 17 November and 14 December.

The Supervisory Board consists of six members elected by the Shareholders’ Meeting and three members proposed by the Workers’ Council. All members being elected by the Shareholders’ Meeting acted independently in making decisions. In making decisions concerning individual resolutions adopted in the past year, none of the members excluded himself due to a conflict of interest.

The most important resolutions of the Supervisory Board

In 2006, the Supervisory Board adopted three important resolutions in connection with appointing the Board of Management, adopting of a new strategy of the Sava Group and restructuring the Trade division, as follows: A. The Supervisory Board appoints Janez BohoriË as Chairman of the Board of Management of the company, and Vincenc PerËiË and Emil Vizoviπek as members of the Board of Management. The Chairman and members of the Board of Management were appointed for a mandate of five years until 16 July 2011; B. The Supervisory Board gave its consent to the Integrated Strategy of the Sava Group and the company Sava d.d. 2007-2011; C. The Supervisory Board agreed with the proposed plan for restructuring the Trade division in the Sava Group. The Supervisory Board also agreed with a contract on the purchase of Merkur shares.

The Supervisory Board pursued and adopted resolutions on the most important matters of the company on an ongoing basis. A summary of other more important resolutions of individual meetings of the Supervisory Board (in chronological order) is given in the following wording: ANNUAL REPORT 2006 INTRODUCTION • The Supervisory Board became acquainted with the 2006 Business Plan. (11th meeting). • The Supervisory Board adopted elements of individual work contracts for the chairman and members of the Board. • The Supervisory Board confirmed and endorsed the audited 2005 Annual Report from the Board of Management, audited consolidated 2005 Annual Report and a written report by the Supervisory Board about the annual report from the Board of Management for 2005, the consolidated 2005 annual report and the proposal for using the accumulated profit (12th meeting). The Supervisory Board motioned the proposal by the Board of Management about using the accumulated profit and other proposals for resolutions to be adopted by the Shareholders’ Meeting that had been prepared by the Board of Management.

28 • The Supervisory Board proposed the Shareholders’ Meeting appoint KPMG Slovenija d.o.o., Æelezna cesta 8a Ljubljana, as auditor of the 2006 financial statements. • The Supervisory Board and the Board of Management adopted the statement on conformity with the Corporate Governance Code for Slovenia. • The Supervisory Board became acquainted with the business operations in the period January - March 2006. • The Supervisory Board gave its consent to the resolution by the Board of Management to appoint Iva Æagar, MA, and Miran Hude as procurators of Sava d.d. for a period of five years. • The Supervisory Board became acquainted with the business operations in the period January - September 2006 (13th meeting). • The Supervisory Board became acquainted with the report on the business operations of the Sava Group and the holding company Sava d.d. for the period January - June 2006. • The Supervisory Board became acquainted with the 2007 business plan of the Sava Group (14th meeting). • The Supervisory Board appointed a commission for the preparation of a written report by the Supervisory Board consisting of Janko Kastelic as chairman, and Stanislav Valant, MA, and Miha Resman as members.

Furthermore, the Supervisory Board pursued reporting about long- and short-term financial investments, treasury shares, share price and the movement of the shareholders’ structure. After each Supervisory Board meeting the minutes of the meeting were written and adopted with a resolution.

Reporting by the Board of Management

In the 2006 business year reporting by the Board of Management enabled the Supervisory Board to suitably implement its supervisory role. The reports by the Board of Management were usually produced according to individual areas with a synthetic review of all business impacts. These involved the operations of the divisions: Rubber Manufacturing with the Foreign Trade Network, Tourism, Real Estate, Other Operations and Investment Finance, thereby enabling one to monitor positive and negative effects of individual operations of the Sava Group. The Supervisory Board was also allowed to make a review of individual companies or production and service programmes within separate divisions. The interest of the Supervisory Board primarily referred to the business operations of larger companies and production programmes and the consolidated statements of the entire Sava Group.

In its reports the Board of Management presented all the most important categories that affect the business

of the joint stock company Sava and the Sava Group. These are the categories of profit, turnover, costs, INTRODUCTION added value, etc. Furthermore, comparative statements for the previous year and planned statements for the current and future two years were added to the statement for 2006. In this way the Supervisory Board could continuously examine the trend with respect to the past and planned business performance.

Business performance assessment

The Supervisory Board examined the business operations of Sava d.d. and the Sava Group during the year based on the submitted 2006 Annual Report. The Annual Report for the Sava Group was prepared in accordance with International Financial Reporting Standards for the second time and the Annual Report for Sava d.d. was prepared in accordance with new Slovene Accounting Standards for the first time. The ANNUAL REPORT 2006 consolidated report for the Sava Group gives a transparent presentation of the assets and the business result of the Group, since assets are valued at fair value. It also provides a good survey of the operations of individual parts of the system, both subsidiaries, associates and the parent company itself. The Annual Report for Sava d.d. with the financial statements explains and establishes the accumulated profit, which is subject to decision-making at the Shareholders’ Meeting.

The Supervisory Board analysed the movement of certain significant financial data and indicators in comparison with the previous year and the planned ones for 2006 and ascertained the following:

29 • Net sales revenues in the Sava Group were achieved at 169.3 million euros (40,566 million tolars) and were 9 per cent above plan and 31 per cent lower than last year, yet 19 per cent higher taking into account the same Group structure. • The pre-tax profit of the Sava Group totalling 40.6 million euros (9,732 million tolars) was 24 per cent higher than planned or 7 per cent lower than last year’s profit; • Net profit of the Sava Group for 2006 was generated in the amount of 34.1 million euros (8,166 million tolars) and was 17 per cent above plan and 11 per cent less than in the previous year. • Return on capital (pre-tax profit per equity) amounted to 10.3 per cent and was 1.9 percentage points above plan and 1.6 percentage points lower than last year. • Return on capital of the Sava Group (net profit per equity) amounted to 8.6 per cent and was 1.1 percentage points above plan and 1.6 percentage points lower than last year. • Added value per employee in the Sava Group amounted to 28,000 euros (6.7 million tolars) and was 1 per cent above plan and 6 per cent more than last year.

The Supervisory Board ascertains that the profit and return on capital in the Sava Group have decreased in the past three years, partly as a consequence of consolidating operations as well as adapting the reporting system according to international standards. However, in the same period the profit and return on capital has increased in Sava d.d., especially due to the effects of managing financial investments. A new strategy of the Sava Group 2007-2011 foresees a substantial growth in profits and return on capital of subsidiaries and an increase in the share of capital of these companies in the total profit of the Sava Group.

The Supervisory Board ascertains that the Board of Management of the company was successful in 2006 as all the set goals were implemented. The strategic restructuring of the Sava Group should be highlighted; it includes the sale of trading operations and a final withdrawal from chemicals operations. In the scope of the new strategy of the Sava Group 2007-2011, the company started in the beginning of 2007 to implement a purchase of major interests in shares of Abanka Vipa, thereby assuming the role of a significant investor in the banking sector. This role will be further strengthened in case the merger of Gorenjska Banka and Abanka Vipa is successfully implemented. For the Tourism division the revised strategy outlined a considerable increase in corporate success, which is measured by an increase in the present, relatively, low return on capital from 2 per cent to 12.7 per cent in 2011. By directing an important share of these investments from the Investment Finance division to banking and owing to its anticipated expansion in financial brokerage, the division will turn to the largest and most important operation within the Sava Group in the future.

When reviewing the Annual Report of Sava d.d. and the Sava Group the Supervisory Board became acquainted with contracts that offer the company an opportunity - the option to purchase or sell significant stakes in associates as well as certain shares from the groups of investments in non-current securities available for sale. The Supervisory Board obtained assurances by the Board of Management that the financial statements included all disclosures in connection with contracts of this type.

Proposal for using accumulated profit

The Supervisory Board examined the proposal for using accumulated profit. ANNUAL REPORT 2006 INTRODUCTION

It ascertained that the profit was distributed in accordance with Article 230 of the Companies Act-1, while the proposal for using accumulated profit comprises the data prescribed in Paragraph 4 of Article 293 of the aforementioned Act.

The Supervisory Board assessed whether there was a possibility for challenging such a resolution about using accumulated profit in line with Paragraph 1 of Article 399 of the Companies Act 1. It determined that there was no such possibility since the proposal by the Board of Management anticipated that the amount of 5,610,421.29 euros was distributed to shareholders, which is the amount exceeding 4 per cent of share capital in cumulative terms totalling 3,350,062.70 euros.

30 When endorsing the Annual Report, the Supervisory Board supported the proposal by the Board of Management to form other reserves for one half of the net profit that remains after using accumulated profit for the purposes from Paragraph 1 of Article 230 of the Companies Act-1.

Based on Paragraph 3 of Article 298 of the Companies Act-1, the Supervisory Board proposed that the Shareholders’ Meeting adopts a resolution on using accumulated profit as proposed by the Board of Management.

Auditor's Report

The Supervisory Board has examined the Auditor's Report and determined that the auditor's opinion is an affirmative one.

The auditor has also presented his views in the report to the Supervisory Board and collaborated in the meeting of the commission of the Supervisory Board for the preparation of the report by the Supervisory Board on the 2006 Annual Report.

The Supervisory Board has no comments on the Auditor's Report. It determines that the Auditor’s Report contains the constituents prescribed in Paragraph 2 of Article 57 of the Companies Act-1. The auditor has confirmed that the financial reports have been produced in accordance with Slovene Accounting Standards, the accounting policies of the company and by employing corresponding provisions of International Accounting Standards.

Comments of the Supervisory Board on the 2006 Annual Report and the 2006 Consolidated Annual Report

The Supervisory Board has no comments on the 2006 Annual Report and the 2006 Consolidated Annual Report that would withhold it from the adoption of a decision to endorse the Annual Report and the Consolidated Annual Report.

Endorsement of the 2006 Annual Report and the Consolidated Annual Report

The Supervisory Board hereby endorses the 2006 Annual Report and the 2006 Consolidated Annual Report of the Sava Group. INTRODUCTION The Supervisory Board received the 2006 Annual Reports within an open deadline, i.e. before one month expires including the day the 2006 Annual Reports were submitted to the Supervisory Board.

Kranj, 19 April 2007 Stanislav Valant, MA ANNUAL REPORT 2006 Chairman of the Supervisory Board

31 The corporate governance system of Sava d.d. incorporates the entire system of management and supervision of the Group including all the mechanisms 9. of supervision covering internal THE CORPORATE and external regulations and GOVERNANCE operations. Current practices in responsible corporate SYSTEM management are being continually updated, thereby enhancing system efficiency and transparency.

Ensuring conformity with The two-tier corporate the recommendations of the governance system and the Corporate Governance Code for possibilities for introducing Slovenia a one-tier system

The corporate governance system in Sava d.d. and its Sava d.d., its subsidised joint-stock companies and subsidiaries is based on legal provisions, rules of the larger subsidiaries of the Sava Group with limited Ljubljana Stock Exchange, internal organisational liability are managed according to the two-tier regulations and books of rules, as well as on the system. adoption and transfer of good and established business practices; the Corporate Governance Code We are still examining what benefits the one-tier for Slovenia represents the main foundation for system, something that the revised Companies Act setting up the system. makes possible, could bring to the individual companies of the Sava Group. We follow the experiences of By limiting the membership of supervisory boards companies which have already introduced this model in to a maximum of three, the members of the Slovenia, and we intend to introduce it in subsidiaries Management Board of Sava d.d. have adapted to the where it will prove successful. changes as set out in the Companies Act and the Code in 2006. The preparation of proposals for Shareholders’ Meeting: strong implementing these changes is a task assumed by the Reporting Team, which is to report on its work to support by shareholders the Board of Management. Shareholders of the company exercise their rights in We have established that the current practice of the company matters through the Shareholders’ Meeting. corporate governance system in Sava d.d. follows Convening meetings and dealing with other matters the recommendations as defined in the new, of importance for their performance is determined ANNUAL REPORT 2006 INTRODUCTION up-dated version of the Code from February 2007 by the company statute in accordance with current with certain deviations. The Statement concerning legislation. The entire wording of the Articles of conformity with the Corporate Governance Code for Association is announced on the Sava d.d. website Slovenia is announced in this report. Together with http://www.sava.si the entire content of the Corporate Governance Code of Slovenia it is available on our website www.sava.si The convening of the Shareholders’ Meeting is under Shareholder Relations. announced at least thirty days in advance in the Official Gazette, Finance magazine, on the website http://seonet.ljse.si and our website www.sava.si where comprehensive material for the Shareholders’ Meeting is provided as well.

32 Acommission todrafttheSupervisoryBoard • AhumanresourcescommissionconsistingofMiran • Supervisory Boardasawhole. appointed, whileothertasksweredealtwithbythe proposal forusingaccumulatedprofitwere Supervisory BoardontheAnnualReportand commission forthepreparationofareportfrom 2006 ahumanresourcescommissionand proposals concerningmoreimportantdecisions.In appoint specialcommissionsforthepreparationof It iscommonpracticefortheSupervisoryBoardto Board. procedures pertainingtotheworkofSupervisory Articles ofAssociationthecompanyandrules tasks andmethodofworkingaredefinedinthe key importanceforthecompany.Itscompetencies, involved intakingdecisionsregardingmattersof implementing corporateinterests.Itisdirectly monitor theworkofBoardManagementin The centralroleoftheSupervisoryBoardisto Supervisory Boardmembersexpiresin2008. Workers’ Council.Themandateofthepresent employee representativesandelectedbythe Shareholders’ Meeting,whilethreemembersare shareholders’ representatives–areelectedbythe with thepossibilityforre-election.Sixmembers– members whoareelectedforafour-yearmandate The SupervisoryBoardofthecompanyincludesnine of Management co-operation withtheBoard supervision andproductive Supervisory Board:efficient At the12 of allshares. was veryhigh;participantsrepresented81percent shareholders present.Attendanceofthemeeting adopted bymorethana95percentmajorityofthe Management andtheSupervisoryBoardwere Supervisory Board.AllproposalsbytheBoardof auditor, andremuneratingthemembersof gement andSupervisoryBoard,appointingan appropriation ofprofit,relievingtheBoardMana- May 2006shareholdersmadeadecisionconcerning profit appropriation, whichactuallyundertakes report onthe annualreportandaproposal on members. agreement withindividualBoard ofManagement 17 July2011,anddrafted a proposalaboutthe extended foranotherfive-year period,i.e.until mandate ofthepresentBoardManagementbe Joœef Copekasmembersproposedthatthe Kalåiå aschairmanwithStanislavValant,MA,and th regular Shareholders’Meetingheldon31 Co-operationinanddevelopment,discussion • Co-operationinandadoptionofadecision • Discussiononandadoptionoftheannualreport • Appointment oftheBoardManagementSava • the mostimportant: out ofallthetasksperformed,followingwere In 2006theSupervisoryBoardmetinsixsessions; Management in 2006: The keytasks performedbytheBoard of assistance. which wassuccessfullyupgraded in2006,isofgreat so, amodernmanagerinformation system(MIS), to thecompanyandentire SavaGroup.Indoing risk managementandallsignificantmattersrelating implementation ofastrategy,futuredevelopment, regularly reportstotheSupervisoryBoardon by thestatuteandlaw.TheBoardofManagement Management andtheSupervisoryBoardisdefined The methodofco-operationbetweentheBoard defined intheBoardofManagementRegulations. individual membersoftheBoardManagementare Group. Theindividualbusinessareascoveredby strategic managementandgovernanceoftheentire responsibility. Itsmaintaskistoprovideefficient in aself-dependentmannerandontheirown conducting businessforthebenefitofcompany The BoardofManagementrunsSavad.d.by began on17July2006. Supervisory Boardforanewfive-yearmandatethat Board ofManagementwhichisappointedbythe The companySavad.d.isledbyathree-member five-year mandate a newstrategyforthe Board ofManagement: mandate. Board ofManagementafterbeginningitsnew period 2007-2011,whichwassubmittedbythe Group andthecompanySavad.d.forbusiness adoption oftheIntegratedStrategySava Teol d.d. division operationsandthesaleofcompany concerning thestrategicrestructuringofTrade 2005. the SavaGroupandcompanyd.d.for d.d. forthenextfive-yearperiod–until2011. proposal oftheSupervisoryBoardreport. an interviewwiththeauditoranddrafteda members examinedtheannualreport,carriedout Stanislav Valant,MA,andMihaResmanas consisting ofJankoKastelicaschairman, the taskofanauditcommission.Thecommission 33 ANNUAL REPORT 2006 INTRODUCTION • Successful business operations of the entire Sava • occasional consultations if so required by the Group and the parent company Sava d.d. nature of the business. • Successful restructuring of the Trade division and final withdrawal from the Chemicals division by Representatives of the Sava d.d. management are selling the company Teol d.d. actively engaged in governing and managing the • Preparation of the Integrated Strategy of the Sava subsidiaries as members of their supervisory Group and the company Sava d.d. for the business boards. Their tasks include regular assessment of period 2007-2011; in the next five-year period our the implementation of corporate strategic policies corporate governance system will be adapted to and their efficiency, giving approvals to strategic its implementation and development. decisions and appointing or recalling members of the management bodies, as well as their Governing and managing the remuneration. subsidiaries of the Sava Group In 2006, the following appointments and changes in the management teams of the subsidiaries took Operations of subsidiaries are based on the place: strategy, policies and guidelines on management • extending the mandate to directors of the defined at the Group level. The Board of Management companies Savatech d.o.o. (until April 2010), Sava of Sava d.d. efficiently supervises operations and Rol d.o.o., Zagreb, Sava Trade d.o.o., Split (until manages investments in subsidiaries, thereby June 2008), Sava Trade Sp.z.o.o., Warsaw (until assuring long-term success of the Group as a whole. the end of 2010), Golf in Kamp Bled d.o.o. (until March 2010), Golf in Park Hoteli Bled d.o.o. (until In the subsidiaries daughter companies the July 2008); governing company Sava d.d. holds a major stake, • terminating the mandate to one of the two directly or indirectly, and the majority of voting directors of the company Grand Hotel Toplice rights. In joint venture companies Sava d.d. has a d.o.o., Zvone Æpec, the sole director of the half stake and an equal role in performing ownership company being Andrej Æprajc, MA (until September voting rights. 2007); • recalling the director of the company Terme In 2006, Sava d.d. carried out and successfully Radenci d.o.o., Milan Hojnik, and appointing Duæan concluded the procedure of squeezing out minority Bencik who as director of the company appoints shareholders from the company Golf in Kamp Bled Milan Karoli as his proxy in November; d.d. The ownership of all shares provides a new • appointing a procurator of the company Sava Nova impetus to the integration process of the tourism d.o.o. Zagreb, Marko Rozman (for an indefinite companies operating under the brand name of Sava period of time); and Hotels Bled. Integration, which facilitates more • appointing Stanko Cvenkel, director of the efficient utilisation of synergies and achieves company Energetika Ârnomelj d.o.o. (for an business savings, is due to be performed in 2007. indefinite period of time), who proceeds to manage the company Energetika Sava d.o.o. as Managing subsidiaries takes place at several levels: well. • organising and directing the preparation of annual plans and development strategy of divisions and Changes and appointments in the management of companies and monitoring their implementation; subsidiaries were underway in the beginning of • regular weekly meetings of the Board of Sava d.d.; 2007 too: • regular monthly meetings of the directors’ council of • Gregor Aœman was appointed director of the the Sava Group, which consists of members of the company Sava-Schäfer d.o.o. until the end of 2010 Board of Management, directors of subsidiaries and due to the expiry of the mandate of the previous

ANNUAL REPORT 2006 INTRODUCTION directors of competence centres of knowledge; director Iztok Dolenc, MA; • business conferences of the Sava Group held twice • the new director of the company Sava Trade s.r.o., a year and other regular events at the Group level Prague, Milan Vik (until the end of 2008) was (annual purchasing conference, 20 Keys annual appointed and the present director of the conference, etc.); company Roman Drapela recalled; and • joint education and training at the Group level or • extension of the mandate of the directors of the individual operations; company Terme Lendava d.d. (until March 2008), • meetings and other forms of regular co-operation Terme Ptuj d.o.o. (until the beginning of 2011) and within competence centres of knowledge; G&P Hoteli Bled d.o.o. (until March 2012). • general assemblies in subsidiaries and Supervisory Board meetings of subsidiaries; and

34 The model of active management

stment Fin Inve ance

Cost Control and Operational Excellence g Strategic in Corporate Emil Vizoviæek, r Board Member Accounting, Planning R u Communications and Analysis e t Director: Director: a c l a Lidija Bregar Mojca Globoånik f E u s Internal Audit t n Strategic Finance Director: Miha Dolinar Director: a a Board of t Duæa Haloœan e M Management r Business Finance Sedej, MA e Director: Janez Bohoriå b Iva Œagar, MA Quality Systems b Chairman Director:

u Risk Joœe Vodiåar, MA R Emil Vizoviæek Management Member Director: Safety Vlasta Mekiæ Vinko Peråiå Director: Member Janez Fabijan Strategic Purchasing EU Projects Director: Marko Ætebe Director: Zvonko Beliå Strategic HR, Law and Informatics Organisation Director: Strategic Director: Georg Pollak Controlling O Tatjana Lozar t Director: h Antonija Pirc, MA sm er ri Op ou er T ati ons

The competence centres At the end of 2006 there were 13 competence centres of knowledge active within the Sava Group. of knowledge: matrix In 2007 we will adapt the strategic controlling INTRODUCTION organisation of managing function and design it as an independent key strategic areas competence centre.

An important active management tool of the External and internal audit subsidiaries is the matrix organisation of professional functions in the Sava Group, which facilitates the The external audit in Sava d.d. is carried out by the utilisation of synergies among various activities. auditing company KPMG Slovenija d.o.o. We have collaborated with the same auditing company for The competence centres of knowledge are contact several years, which contributes significantly to risk ANNUAL REPORT 2006 points which connect specialists in the same management and improves the internal controlling professional fields and from various divisions of the system due to better knowledge about the business Sava Group. Their co-operation provides more group. We respect the recommendation by the efficient utilisation of synergies, a standard approach Corporate Governance Code for Slovenia on changing to the implementation of adopted business policies, the responsible auditor every five years. and development and circulation of knowledge within the Group. The scope of business of the competence Since 2005 the internal audit has operated as a centres of knowledge is defined by the Board of competence centre. It judges and evaluates the Management Regulations. The administrator of a management, performance and information particular competence centre is one of the members processes from the aspect of reliability and fairness of the Board. of accounting and other information, process

35 Sava d.d.

Growth in the reporting volume 3,856

No. of announcements by Sava d.d. 3,394 in the electronic information system of 3,164 the Ljubljana Stock Exchange called SEOnet

No. of announcements concerning the Sava Group in the media 1,632 1,527 78 47 29 45 25

2002 2003 2004 2005 2006

success and efficiency, protecting assets and • plans concerning future operations; and conformity with the legislation, regulations and • information on development issues, other areas contracts. It performs regular audits in all Sava of our business operations and other so-called Group companies and proposes measures for price-sensitive pieces of information. improvements in areas that are most important for risk management. News is announced in the electronic information sy- stem of the Ljubljana Stock Exchange called SEOnet, Transparent information for on our website www.sava.si and, in cases defined in the Articles of Association, also in the Official Gazette shareholders and the general RS and Finance magazine. To communicate with public shareholders, analysts and the media we make use of numerous other communication tools, both Business transparency is implemented by providing personal and for the mass market. regular and timely information about the company’s position and more important changes in operations In 2006, we announced 45 price-sensitive pieces of intended for shareholders, financial analysts, information on SEOnet, which is comparable to the financial establishments, the mass media and the previous year. Despite a decrease in the number of general public. operations, reaction from the media strengthened thanks to increased communication activity. In this The method, procedures and responsibilities for period the media reported about us in 3,856 reporting are defined by internal regulations on announcements – 462 more than in the year before. reporting by Sava d.d. as a public joint venture company. A reporting team consisting of the The quality of our communication is confirmed by the directors of the competence centres with their awards received. Our 2005 annual report was associates ensures that the system is carried out awarded the title of Best Slovene Annual Report and developed. The preparation and announcement according to Finance Magazine and it also won ANNUAL REPORT 2006 INTRODUCTION of documents regarding business for external another two first places: in the Sustainable Reporting reporting is co-ordinated by the competence centre category and the Communication category. Since this Corporate Communications in close co-operation competition had begun, our annual reports have with the competence centres Strategic Accounting, always been ranked among the best. Planning and Analysis and Strategic Finance. For several years now we have been ranked in the In line with legislation, the rules of the Ljubljana select group of Slovene companies for the Portal Stock Exchange and recommendations from the Award for best relations with investors and other Corporate Governance Code we announce: interest groups. • quarterly, bi-annual and annual reports;

36 The systemofriskranking-accordingtovariouscriteria important risks. regularly totheBoardofManagementonmost part ofthecultureinentireSavaGroupandreport nature oftherisk.Wepromoteriskmanagementas managed foreachareaseparatelywithregardtothe All risksarepursuedandmonitoredcentrally anindividualbusinessfunction(financial, • anindividualoperationorcompanyintheSava • theentire SavaGroup(corporateandgeneralrisks); • view oftheirimportancefor: We drawadistinctionamongthreetypesofriskin and rankriskbyapplyingthepropermethodology. international guidelinesinthisareaandhelpsdefine The competencecentreRiskManagementpursues management system organisation oftherisk The role,principlesand Frequency ofevent Probability ofoccurrence Influence onoperations Influence byfactor Type ofrisk Risk Criteria Sava Group marketing, purchasing,etc.). Group; and MANAGEMENT RISK 10. Highly probable Permanent Very high Strategic Internal Hazard Opportunity Financial Probable External Annual High Unlikely, almostunlikely Hazard andopportunity Intenal andexternal Quarterly, bi-annual processes andactivities. integral elementinall and acontinuallydeveloping a partofourbusinessculture Risk managementisbecoming improving businessresults. system ingoodtime,thereby environment andbusiness and risksappearinginthe We recogniseopportunities Sava Group. collaboration withallmanagerialstructuresinthe The riskmanagementsystemhasbeendevelopedin to riskmanagement A systematicapproach one fifthahazardorthreat. and anopportunity,onefifth three quartersofriskscanrepresentbothahazard according tosixcriteria.Weestablishedthatalmost identified riskswererankedandevaluated participated intheregistrationprocess.The companies andcompetencecentresofknowledge of 2005.Almost150employeesfromalldivisions, entire SavaGroupwhichwehadpreparedattheend of theresultsasystematiclistrisksin In 2006,weestablishedacentraldatabasebyvirtue Operational Results Medium Low, negligible Contingent Monthly Seldom 37 ANNUAL REPORT 2006 INTRODUCTION More important risks in the currency and have made preparations in accordance with our plan. The introduction of the euro decreases Sava Group and operations foreign currency risk. in 2006 Risk of building location, infrastructure and CORPORATE AND GENERAL RISKS logistical links. In this area we work together with both the regional and broader local community. Risks in implementing and further developing the Risks of this type have a major impact on the strategy of the Sava Group. This kind of risk is development of Tourism. managed by using the system of internal controls. A standardised and consistent system of strategic and FINANCIAL RISKS operational planning as well as reporting on and regularly supervising the implementation of the This type of risk is managed centrally in the holding strategy and set goals forms the basis for the part of the competence centre Business Finance. At efficient supervision of economic risks. In 2006 we the Group level we have defined a uniform approach upgraded the manager information system for the for all companies to banks and a standard interest needs of the entire Sava Group, thereby improving policy within the Group and others. We follow reporting and planning. movements and report on the effects resulting from the introduced measures in monthly directors’ Investment-based risks. We are continually council meetings. improving the criteria for making competitive investments and optimising the basic structure of Individual financial risks and an analysis of their our operations and financial investments. Should sensitivity are described in the financial report in the development of an investment in the planned detail. direction be threatened, we always have another option available. In 2006, we finally discontinued the MARKETING-BASED RISK AND PRODUCT- Chemicals division and through strategic AND SERVICE-BASED RISK restructuring ensured a new start for the trading companies. Due to the varied Group structure and diverse customer segments it is sensible to organise the Risk of issued shares. With the exception of ordinary management of these risks at the level of a risks that are characteristic for all securities on the particular operation. Risks are bound to occur Ljubljana Stock Exchange, we are unaware of any risk especially when ensuring the competitive power of that would significantly influence a change in the our products and services and entering new markets value of the Sava share. More details about this type and customer segments. We focus on products and of risk are available in the chapter on the Sava share. services where we can achieve a leading position through our own development and collaboration with Risk of responsibility and safeguarding assets that external institutions. We continually monitor our can be insured with banks. In 2006, we improved competitors, perform market analyses and measure and standardised insurance conditions in Tourism. customer satisfaction, while developing sales and We also improved coverage for product liability in after-sales services. Rubber Manufacturing and fire protection in all operations. Due to the general increase in claims for PURCHASING-BASED RISK AND THE damages arising from civil liability we are devoting RISK OF PRICE INCREASES IN MATERIALS, more attention to preventive measures. RAW MATERIALS, ENERGY SOURCES AND SERVICES Risk of change in the legislation. We are a large entity ANNUAL REPORT 2006 INTRODUCTION with a strong team of specialists of various The competence centre Strategic Purchasing in professions and that facilitates swift implementation association with the management teams of and adapting to changes in legislation. individual Group companies are responsible for the management of risk and utilising opportunities in Risk of taking European structural funds. The purchasing. We therefore seek substitute raw competence centre EU Project regularly follows calls materials and suppliers, making use of synergies in and monitors project implementation. linking up with interested partners both within and outside of the Group. More on this topic in the Risk of introducing the euro currency. We have been chapter Purchasing. well prepared for the introduction of the euro

38 Protection andFireSafety. More ontheserisksinthechapterEnvironmental risksassociatedwithglobalpoliciesconcerning • environmentalrisksinplaceswherethe • theriskofpollutionassociatedwithnature • centre Safety.Themostimportantare: These typesofriskaremanagedbythecompetence ENVIRONMENT-BASED RISKS Employees. More onthistopicinthechapterTheDevelopmentof theshortageincertainprofessions:collaboration • employeeremunerationandmotivation:promoting • theneedforcontinualacquisitionofnew • competenceand responsibilityofemployees: • relate to: Organisation. Wefacethefollowingtypesofriskthat by thecompetencecentreHR,Lawand Opportunities anddangersinthisareaaremanaged PERSONNEL-BASED RISK energy sources. efficiently useenergyandutiliserenewable Energetika Savad.o.o.,whosemissionisto and externalmarketwehaveformedthecompany energy: fortheinternalrequirementsofGroup and environmental protectionandvariousprojects; and collaborationwiththeorganisationsfor of thelocalandbroadergeneralsocialcommunity, creative co-operationinpromotinganawareness companies oftheTourismdivisionoperate: impacts arefarbelowthelegallyprescribedlimits; introduced, andundesirableenvironmental negligible duetotheprecautionarymeasures Rubber Manufacturing:theriskispractically in theareaofemployeetrainingandre-training. with educationalinstitutions,employmentservices prize system;and young associates,awards,commendationandthe the SavaAcademy; and organisinggeneralspecialisedtraining, knowledge: cultureoflifelonglearning,enabling rotation; horizontal andverticalpromotion,personnel public andinternalinvitations,thesystemof promote thegenerallyacceptedcultureofrisk • furtherdevelopthesystemformonitoring • developtheriskmanagementmethodologyfor • improvethemethodologyfornotifyingsystem • developthemethodologyofkeepinganup-to-date • tocontinuallyupgradethemethodologyforrisk • system are: The mainlong-termgoalsofourriskmanagement and operations. this factisafundamentalruleinallofourdecisions developing componentofallprocesses;considering The riskmanagementsystemisacontinually risk managementsystem Further developmentofthe decision-making. information ofmanagementteamstofacilitatetheir of themaingoalsforuninterruptedandtimely information systemfortheentireSavaGroupisone Strategic Informatics.Establishingastandard Such risksaremanagedbythecompetencecentre INFORMATION-BASED RISKS the SavaGroup. business processesandflowofinformationwithin management andbalanceddevelopmentof and programme implementationinriskmanagement; individual typesofrisk; users; risk database; identification andreactiontothem; identification andshortentimesfortheir 39 ANNUAL REPORT 2006 INTRODUCTION Together with other experts, physicians in our thermal spa resorts have been developing new ways to preserve and restore health. Terme Radenci utilises the experience gathered over 125 years of practice. The Thermalium centre in Terme 3000, which utilises the natural benefits and uniqueness of black thermal water to improve health, is noted as being one of the most modern therapeutic and wellness centres in this part of Europe.

BRINGING NEW DIMENSIONS TO LIFE HEALTH SERVICES - programmes for health and well-being BRINGING NEW DIMENSIONS TO LIFE HEALTH SERVICES Sava Groupdecreased from18percent inthe in theyearbefore.Theshare ofloansgivenbythe than 83percent,or2percentage pointsmorethan The shareofbankloansin2006 amountedtomore business requirements,wherebyweconsiderthe the parentcompany.Itisbasedonbalancing other businessentitiesisco-ordinatedatthelevelof The indebtednessofsubsidiarieswithbanksand Sava Group optimum solvencyofthe Ensuring andmaintaining by creditortype Structure ofraisedloans Sava Group MANAGEMENT FINANCIAL 11. 31/12/2005 31/12/2006 100 120 140 160 20 40 60 80 0 Bank in theSavaGroup. controlled financialoperations develop thesystemofcentrally Finance, istomaintainand the competencecentreStrategic vision, whichisimplementedby parent companySavad.d.Our this areahasbeendevisedbythe Group. Thebusinesspolicyfor optimum solvencyoftheSava activities toensureandmaintain is oneofthemostimportant The financialfunctionofSavad.d. partly inRealEstate. activity inthecompanies Tourismdivisionand amount ofloansisconnected withinvestment previous yeartoabout14 per centin2006.The in thesameway. balance solvency,isbeingagreedandco-ordinated which ensuressolvencyandtheuseofcreditlinesto internal regulationofavailablecashsurpluses, raises loansonlyformeetingitsrequirements.The debtors arethecompaniesalone,whereasSavad.d. defined bytheindividualbankorcreditor.Asarule, limits ofexposuretothegroupsubsidiaries Sava Group (31/12/2005) (31/12/2006) ~ ~ 18% 14% Others (31/12/2005) (31/12/2006) 0.22% 2.84% 43 ANNUAL REPORT 2006 INTRODUCTION Sava d.d.

Structure of mutual crediting at 31/12/2006

Sava d.d.

Subsidiaries

76% 24%

The parent company Sava d.d. granted loans to 24 per cent. In 2005, this ratio was a bit more subsidiaries in about 76 per cent of cases, whereas favourable for the parent company and amounted to the subsidiaries granted loans to Sava d.d. in about 56 and 44 per cent, respectively.

Sava Group

Foreign currency structure 100 of loan portfolio (in %) 23.60 25.73 80 Foreign currency 76.40 74.27 Tolar 60

40

20

0 31/12/2005 31/12/2006

The foreign currency structure of the loan portfolio Despite an increase in the interest rate in the was approximately the same in 2006 and 2005. European monetary market, the price for tolar and ANNUAL REPORT 2006 INTRODUCTION During preparations for the introduction of the euro foreign currency loans was levelled due to take-over transactions and balancing solvency were macro-economic policy measures and the approaching carried out in the tolar currency until the end of 2006. membership of the European monetary union.

44 the endof2006. 3.53 percentattheendof2005to4.25 rating oftheSavaGroup,interestraterosefrom primarily thevariableinterestrateandhigh Despite simultaneouslyadaptingtotheincreasein an interestrateincludingthevariablepart. followed thistrendbothatafixedinterestrateand foreign currencyloanstwice.Domesticbanks increased itsstartinginterestrateEURIBORfor monetary market.TheEuropeanCentralBank aggravated bothintheforeignanddomestic In 2006,theconditionsforcontractingdebtswere interest ratepolicytomeetsuchchanges. Central Bank,thereforeweadaptedourloanand this ratelieswithinthecompetenceofEuropean the EURIBORrateforforeigncurrencyloans;defining increased in2006too,especiallythevariablepartof In termsofcost,theinterestrategradually partly inRealEstate. investment activityintheTourismdivisionand previous year.Aslightchangeisstillduetobrisk remained atapproximatelythesamelevelasin The structureofcreditindebtednessbymaturity by maturity(in%) Structure ofcreditindebtedness Sava Group Short-term credits Long-term credits 100 20 40 60 80 0 31/12/2005 too. that willbeofferedthehighestbenefitsinfuture remain sought-afterbusinesspartnersanddebtors We expectthecompaniesofSavaGroupto financial assetsassecurityforinsurance. debts withnoadditionalplacementofitsmaterialor As arule,theparentcompanySavad.d.contracts Real Estatedivision. and prematurerepaymentoflong-termdebtsinthe per centduetothefinalsaleoftradingbusiness balance sheetassets)wasdecreasedbyabout60 The operationofofferingbusinessguarantees(off- protect againstthis. and otherfinancialinstrumentsofferedbybanksto rate, webegantomakeuseofinterestrateswaps future increaseinthevariablepartofinterest interest-based riskresultingfromtheanticipated In ordertoprotectourselvesagainstthe 53.46 46.54 31/12/2006 51.88 48.12 45 ANNUAL REPORT 2006 INTRODUCTION BUSINESS ANALYSIS trend ontheLjubljanaStockExchange.InOctober considerably andthesharepricepursuedbull second halfof2006interestintheSavasharegrew (40,800 tolars)and190euros(45,600tolars).Inthe value inthefirsthalf-yearmovedbetween170euros achieved avalueof176.8euros(42,364tolars).Its SBI20. OnthefirstdayofyearSavashare ascending trendoftheSloveneStockExchangeIndex The valueoftheSavasharechangedwithin Movement oftheSavashare and turnoverin2006 Sava shareprice Movement ofthe Sava d.d. STRUCTURE AND OWNERSHIP THE SAVASHARE 12. Turnover Sava 150 170 190 210 230 250 price ( € a e a p a u u u e c o Dec Nov Oct Sep Aug Jul Jun May Apr Mar Feb Jan ) asset valueby252percent. Sava shareenhancedtheir long-term investorsinthe In thelastfive-yearperiod Ljubljana StockExchange. positive atmosphereatthe share valuewasalsoduetothe performance theincreasein In additiontothegoodbusiness than atthebeginningofyear. (55,506 tolars)or31percentmore achieved avalueof231.6euros trading dayin2006theSavashare (39,000 and56,200tolars).Onthelast fluctuated between160and235euros In 2006theSavashareprice securities marketsandoutstandingmarketsolvency. company Savad.d.,aswellpositivetrendsinthe achieved byboththeSavaGroupandparent the Savasharevalueweregoodbusinessresults The mostimportantfactorsthatimpactedgrowthin 231.6 euros(55,506tolars). share onthelasttradingdayin2006amountedto (48,000 tolars)forthefirsttime,andvalueof Sava sharepricesurpassedthelimitof200euros ( € in thousands) turnover 100 150 200 250 50 0 47 ANNUAL REPORT 2006 BUSINESS ANALYSIS 48 ANNUAL REPORT 2006 BUSINESS ANALYSIS Note: WhencalculatingtheearningsofSavasharewehavetaken into considerationthepaymentsofpastdividends. available attheendof2006.Thisresultsinaverage share, hadassetsof3,524euros(844,500tolars) invested 1,000euros(239,640tolars)intheSava Long-term investorswhoattheendof2001 index duringthewholeperiodat0.03asitwason3January2002. Note: TobeabletocomparethedataSBI20indexwasadaptedsoaskeepratiobetweenSavasharepriceand share from2002to2006 investment intheSava Annual earningsof Sava d.d. 2002 to2006 and turnoverfrom Sava shareprice Movement ofthe Sava d.d. earnings Savashare Average annual SBI 20 Average annualearnings SBI 20 Sava 100 150 200 250 price ( 50 2006 2004-2006 2002-2006 period 0 € ) 2002 1015205 0320 052006 2005 2004 2003 per cent). earnings oftheSBI20stockexchangeindex(23.9 percentage pointshigherthantheaverageannual annual earningsof28.7percent,whichis4.8 17.6% 53 54 45 40 35 30 25 23.9% 27.3% 28.7% 32.5% average annualearnings(in%) 38.2% SBI 20 Ownership bynumberofsharesat31/12/2006 public andprivateinvestorsinSloveniaabroad. numerous alsoindividualmeetingswithpotential and foreigncapitalmarket.In2006,weheld open dialoguewithallparticipantsinthedomestic development ofthecompanythroughafairand We managetoachievethestrategicandlong-term market all membersofthecapital a fairandopendialoguewith Relations withshareholders: Participation oftheSavashareinimportantstockexchangeindicesasat31/12/2006 seventh yearrunning,andforseveralyearsnowithas of theSloveneStockExchangeIndexSBI20for The Savasharehasbeenincludedinthecomputation indices of variousstockexchange Incorporation incomputations vr1001500 ,0,2 54.9% 20.7% 6.4% 2.4% 1,101,024 0.0% 416,052 15.7% 127,690 47,142 0.1% 5 0.2% 315,079 1.0% 98.7% 12 28 169 16,656 Total over 100,001 10,001-100,000 1,001-10,000 101-1000 1-100 Ownership bynumberofshares 0.41% 2.28% America Austria 6.21% Slovenia Dow JonesSOXEUenlargedTMI South-east EuropeTradeIndex Slovene StockExchangeIndexSBI20 term growthanddevelopment. solid foundationsandattractivepotentialforlong- recognised thecompanyasasuccessfulonewith the internationalbusinessenvironmenthas companies fromsouth-eastEurope.Thismeansthat international indiceswhichquotethelargest been includedintheDowJonesandother per centattheendof2006. funds, banksandinsurancecompaniestotalled17.7 1.1 percentagepoint.Theshareofinvestment 0.4 percentagepoint,andthatoflegalentitiesby of 2005thestockforeigninvestorsincreasedby Sava d.d.Incomparisonwiththesituationatend influenced theownershipstructureofcompany shares ofSlovenecompanieshassignificantly The increasedinterestofforeigninvestorsinthe and naturalpersons17.5percent. on 31December2006represented82.5percent, legal entitiesintheownershipstructureofSavad.d. investors totalled2.2percent.Theproportionof amounted to97.8percent,whereasthatofforeign stock ofdomesticinvestorsattheend2006 shareholders enteredintheSavasharebook.The On 31December2006therewere16,870 data ontheshare Ownership structureandkey odr odr hrscapital shares holders holders 68010 ,0,8 100% 2,006,987 100% 16,870 hr-sae o fholdingin no.of share- share- o f%o oa Share- Total %of No. of tt structure State Share in v mioSIT v mioSIT index 49 ANNUAL REPORT 2006 BUSINESS ANALYSIS 50 ANNUAL REPORT 2006 BUSINESS ANALYSIS 10 largestshareholdersat31/12/2006 Ownership ofsharesbycategoryat31/12/2006 Ownership ofsharesbystateat31/12/2006 te hrhles2.%588,573 46,754 29.3% 72,496 2.3% 52,500 3.6% 1,418,414 2.6% 70.7% 133,300 77,640 6.6% 68,000 179,500 3.9% 8.9% 3.4% 190,653 375,542 9.5% 18.7% 222,029 11.1% Total Other shareholders Total 10largestshareholders 352,096 Banka Koperd.d. 17.5% Gorenjska Bankad.d. 702,548 Nacionalna FinanånaDruœbad.o.o. 35.0% Etol d.d. 232,195 Zvon EnaHoldingd.d. 597,926 11.6% Radenska d.d. 29.8% 122,222 NFD Holdingd.d. 6.1% NFD 1InvestmentFundd.d. Slovene CompensationFundd.d. Kapitalska Druœbad.d. 10 largestshareholders Total Natural persons Other legalentities Banks andinsurancecompanies Investment funds State institutions Ownership ofcategory Total Great Britain Luxembourg Germany Austria Uruguay Slovenia Ownership bystate wesi shares ownership wesi shares ownership 0%2,006,987 100% 2,006,987 100% fNo.of % of fNo.of % of by state v mioSIT v mioSIT v mioSIT 97.8% 100% 0.1% 0.3% 0.4% 0.4% 1.0% % n/a Additional dataontheshare n/a * Thedatafor2002and2003waspreparedaccordingtoSASasvalid until 2005. Key dataontheSavashare shares, thevalueofwhichamountedto224,400 On 31December,Savad.d.had3,289treasury TRADING WITHTREASURYSHARES Average dailytradingwithshares jbjn tc xhneSV SAV SAVA SI0031108457 ISIN –international securitydesignation n/a Ljubljana StockExchange 31.02% n/a Stock exchange 162.8 n/a n/a -1.43% 231.6 1.48% n/a 172.2 234.3 58.16% 31.02% 180.3 1.41% 116.0 199.4 -2.52% 0.05% 183.5 2.00% 72.49% 94.4 183.5 59.57% 115.4 2.00% -0.52% 121.0 P /B 68.9 118.8 - atyearend 74.49% 222 125.2 - lowest - highest 208 P /E - capitalyield 1,170 - dividendyield Earnings pershare 344 - atperiodend - lowest 1,090 n/a - highest Share price(in ( Total amountofdividendspaid Share ofdividendinnetprofit Dividend pershare(in Net profitpershare(in 2,006,987 (No. ofshares) 2,006,987 2,006,987 Average dailyliquidity( 1,720,987 Share bookvalue(in 1,720,987 31 December( Market capitalisationon No. ofshareson31December € 2 1 – duetotransitionIFRSsthedatafrompreviousyearsisnotcomparable. – thelevelofdividendfor2006hasnotyetbeendefined. in millions) € 2 € ) nmlin)243186382328464.9 352.8 368.2 198.6 204.3 in millions) € € € n/a ) € in thousands) . . . . n/a 2.7 2.6 2.3 ) 2.3 ) n/a 02 03 0420 2006 2005 2004 2003* 2002* 0. 731072. 42.4 21.8 170.7 37.3 101.9 . . . . n/a 5.4 5.2 4.7 3.9 1 1 1 1 1 1 1 There wasnotradingwithtreasurysharesin2006. represents 0.16percentofthetotalsharesissued. purchase price.Thenumberoftreasuryshares euros (53,787,000tolars)withregardtotheaverage n/a n/a n/a n/a n/a n/a n/a 1 1 1 1 1 1 1 10.4 % 14.0 % n/a n/a 14.0% 10.4 % 9. 9. 214.3 193.7 190.9 491. 17.0 19.1 24.9 6 3 108% 93% 96% . . 13.7 9.6 9.5 13.8 9.0 10.5 7.4 4.7 7.4 hr aeissuer Share name Code of v mioSIT v mioSIT 2 2 2 2 51 ANNUAL REPORT 2006 BUSINESS ANALYSIS Explanations about the methodology for the • The P/E index is calculated as a fraction of market calculation of key data price of the Sava share on the last day of the year (or the highest and lowest market prices in the • Book value of the Sava share equals the fraction calendar year) and profit per share. product of the difference between equity of the • The P/B index is calculated as the fraction of the Sava Group without minority interest and the price of the Sava share on the last trading day of the weighed average number of ordinary shares year and book value of the share in the same period. excluding treasury shares. • Net profit per share is calculated so that the net SHARE BOOK VALUE profit belonging to Sava d.d. (numerator) is divided with the weighed average number of ordinary The book value of the Sava share at the end of the year shares in the accounting period (denominator). amounted to 214.3 euros (51,352 tolars). When • Share of dividends in net profit equals the fraction calculating the book value the number of treasury product of dividend per share and the number of shares was deducted from the total number of shares. Sava shares on the ex-dividend date in the share register and net profit on the last day of the year. COMPANY SECURITIES OWNED • Dividend yield equals the fraction of dividend per BY THE BOARD OF MANAGEMENT share and market price of the Sava share on the AND SUPERVISORY BOARD MEMBERS last trading day of the year. • Capital yield equals the fraction of the market On 31 December 2006 the members of the Board of price of the share in the beginning and the market Management and Supervisory Board of Sava d.d. price of the share at the end of the year. owned 2,685 shares in the joint stock company Sava • Market capitalisation equals the multiple of the d.d., or a 0.13 per cent stake in total company number of Sava shares and the market value of capital. In comparison with the previous year the shares on the last day of the year. situation did not change.

v mio SIT No. No. of of Board of Management shares at Stake shares at Stake members owning Sava shares Position 31/12/2005 in capital 31/12/2006 in capital Janez Bohoriå Chairman 706 0.035% 706 0.035% Vinko Peråiå Member 717 0.036% 717 0.036% Emil Vizoviæek Member 1,140 0.057% 1,140 0.057% Total 2,563 0.128% 2,563 0.128%

No. No. of of Supervisory Board members, shares at Stake shares at Stake owning Sava shares Position 31/12/2005 in capital 31/12/2006 in capital Miran Kalåiå Vice-chairman 86 0.004% 86 0.004% Janko Kastelic Member 36 0.002% 36 0.002% Total 122 0.006% 122 0.006% ANNUAL REPORT 2006 BUSINESS ANALYSIS Board of Management and Supervisory Board members total 2,685 0.134% 2,685 0.134%

CROSS-LINKS WITH OTHER COMPANIES • Sava d.d. had a 19.5 per cent stake in the company NFD1 Delniæki Investicijski Sklad d.d., and NFD1 According to the criteria of the Corporate Governance had a 9.5 per cent stake in the company Sava d.d. Code, on 31 December 2006 Sava was cross-linked • Sava d.d. had a 41.3 per cent stake in Gorenjska on the basis of the following ownership connections: Banka d.d., and Gorenjska Banka d.d. a 2.6 per cent stake in the company Sava d.d.

52 on thecompany websitewww.sava.siand incases (www.ljse.si). Access toinformationisalso provided Ljubljana StockExchangevia thee-systemSEOnet information areannounced on thewebsiteof Periodical announcementsand otherprice-sensitive * Thestateddatesarethoseplanned andmaybechangedduringtheyear. Calendar ofmoresignificantannouncementsin2007 factorsofsystematicrisk-takingcharacteristicfor • are dueto: Risks associatedwithinvestmentintheSavashare IN THESAVASHARE RISKS ASSOCIATEDWITHINVESTMENT any provisionsinthisregard. The ArticlesofAssociationSavad.d.donotinclude INCREASE INSHARECAPITAL APPROVED CAPITALANDCONDITIONAL shares inKDDtwoworkingdaysaftertheShareholders’Meetingwill Please note:onlythoseshareholderswhoareregisteredasholdersof odn opn aadd Thursday,31May2007 Friday,21December2007 for 2008 Monday,12November2007 Business PlanoftheSavaGroupandholdingcompany Savad.d. and theholdingcompanySavad.d.forperiodJanuary-September 2007 Business reportandunauditedfinancialstatementsofthe SavaGroup Friday,17August 2007 the holdingcompanySavad.d.forperiodJanuary-June 2007 Business reportandunauditedfinancialstatementsofthe SavaGroupand Wednesday,30May2007,or Sava Groupandtheholdingcompanyd.d.forperiod January-June2007 Summary ofthebusinessreportandunauditedfinancialstatements ofthe holding companySavad.d. Resolutions ofthe13thregularSupervisoryBoardMeeting be entitledtodividends. 13 and theholdingcompanySavad.d.forperiodJanuary-March2007 28February2007 Friday, 20April2007 Call forthe13 Friday,20April2007 Statement onConformitywiththeCorporateGovernanceCodeforSlovenia Friday,20April2007 Sava d.d.for2006 Audited annualreportoftheSavaGroupandholdingcompany Friday, 30March2007 holding companySavad.d.for2006 Summary oftheauditedannualreportSavaGroupand of theSavaGroupfor2006 Business reportandunauditedconsolidatedfinancialstatements of theholdingcompanySavad.d.for2006 Type ofannouncementorevent uiesrpr n nuie iaca ttmnso h aaGop Monday,21May2007 Business reportandunauditedfinancialstatementsoftheSavaGroup uiesrpr n nuie nosldtdfnnilsaeet Wednesday, Business reportandunauditedunconsolidatedfinancialstatements business, changesintaxlegislationandregulations d.d. suchaschangedconditionsintheissuer’s all securitieslistedontheLjubljanaStockExchange th eua hrhles etn ftehligcmaySv .. Wednesday,30May2007 regular Shareholders’MeetingoftheholdingcompanySavad.d. th eua hrhles etn ftecmaySv .. Thursday,26April2007 regular Shareholders’MeetingofthecompanySavad.d. Sava sharerankssecondoutoffour ordinators ontheLjubljanaStockExchanged.d. in theSavashare.Asreportedbyliquidityco- minimise investmentriskinconnectionwithinvesting capital market,thecompanySavad.d.endeavoursto strategy andtakingintoaccountthesituationin By diversifyinginvestmentsinlinewiththeintegrated factorsofnon-systematicrisk-takingthatare • company’s website. changed, this will benotifiedinduecourse onthe planned announcementdates andeventsbe Gazette andthenewspaper Finance.Shouldthe stipulated bythecompanystatute alsointheOfficial foreign currencyrisk). company (investment,interest,solvencyand connected withtheoperationofeveryindividual and relating tothesecuritiesmarketand announcement orevent* Friday, 17August2007 (Anticipated) dateof liquidity groups. force majeure v mioSIT ; 53 ANNUAL REPORT 2006 BUSINESS ANALYSIS 54 ANNUAL REPORT 2006 BUSINESS ANALYSIS tel: +38642065518,690 e-mail: [email protected], Karmen Meœnar Information onDividendPayments tel: +38642066068 e-mail: [email protected], Strategic Finance Miha Resman Investor Relations business information Contact personsfor , HeadofFinancialInvestmentsin , CreditAnalyst - e-mail:[email protected] www.sava.si - onthecompany'swebsite: the generalpublicisavailable: Further informationforshareholders,themediaand tel: +38642065819 e-mail: [email protected], Lidija Bergar Corporate Communications , Director Westrengthenedourrole asaresponsibleand • created255newjobs,themajoritybeingin the We • ThebookvalueoftheSavashareexceeded • Wemadesubstantialinvestmentsinourfurther • profitwasgeneratedintheamountof34 Net • Weachievednetsalesrevenuesof169million • Thecompetencecentresofknowledgecontributed • consolidatedthecompetitivepositionofour We • BysellingtheTradedivisionandmakingfinal • implemented thusfariscorrect: which haveconfirmedthattheoutlinedstrategyas We aredelightedwithourachievementsin2006, AND SURPASSINGPLANS 2006: OPTIMISINGTHEPORTFOLIO development. consideration theprinciples ofsustainable ensured thatthegoalstobeimplemented tookinto active memberofthesocialcommunity andstrictly Tourism division. by morethan10percent. value of214euros(51,352tolars),andthusrose in fixedassetsandfinancialinvestments. 30 billiontolars)wereearmarkedforinvestments development: morethan125millioneuros(over surpassing ourbusinessplanby17percent. million euros(8.2billiontolars),thereby annual salesvolumeincreaseinthepast3years. than plannedand10percentagepointsabovethe euros (40.6billiontolars),whichis9percentmore originating fromefficiencyandsalesintheGroup. significantly totheutilisationofsynergies leading positionsinselectmarketsegments. divisions andcompaniesintheGrouptoachieve portfolio ofannexedcompanies. internal structure,therebystrengtheningthe restructured theGroupandconsolidatedits withdrawal fromtheChemicalsdivisionwe STRATEGY DEVELOPMENT 13. Goal: toenhanceGroupassets. further growthanddevelopment. period until2011,determinedour Strategy oftheSavaGroupfor and, throughtheIntegrated the basisofSavaGroupdivisions the period2003-2007,restructured and surpassedthekeygoalsfrom We haveprematurelyachieved significance fortheSavaGroup. development, 2006wasofspecial With respecttostrategic FROM ASOLIDFOUNDATIONTONEWGOALS 2007-2011 -priorities Development strategy of financialinvestments. capital) insubsidiariesandan increaseinthevalue least a15percentreturnon capital(totalprofiton shows anincreaseintheassets oftheSavaGroup:at The compassoffuturedevelopment (2007-2011) to achieveatleasta10percentreturnoncapital. respectively, wemanagedtosurpassoursetmaingoal: 2005 andtwoyearsbeforetheexpirationofperiod, increasing businessprofitability.Evenbytheendof aimed atdevelopingcompetitivemainprogrammesand In thefollowingperiod(2003-2007) of thelargestbusinessenterprisesinSlovenia. promoted ourgrowthandachievedthepositionofone overs, establishingcompaniesandorganicgrowthwe on thegrowthofbusinessvolume.Throughtake- In thefirstfive-yearperiod(1997-2002) development oftheSavaGroup. operations wehavebegunanewchapterinthe our ownership.Withthedecisiontoembarkuponnew rubber productionprogrammesthatremainedunder concentrated ontheconsolidationofindustrial products forthecarindustrytoaforeignpartner,we to sellapartofrubbermanufacturingwhichmakes the strategyfrom1997when,aftermakingadecision strategy involvestheenhancementandupgradeof divisions andfunctionalstrategies.Thedevelopment corporate strategy,businessstrategiesofindividual strategy whichcombinestheelementsof At theendof2006weadopteddevelopment our policywas we focused 55 ANNUAL REPORT 2006 BUSINESS ANALYSIS In remarkable dishes from Prekmurje, Prlekija and Gorenjsko we foster original flavours and ingredients. Our chefs do an outstanding job in combining them with modern culinary guidelines, and are therefore regularly awarded and acknowledged in gastronomic competitions. One of the chefs is the winner of a Michelin Star, one the most prestigious chef awards in the world.

BRINGING NEW DIMENSIONS TO LIFE CULINARY DELIGHTS - imagination and innovation BRINGING NEW DIMENSIONS TO LIFE CULINARY DELIGHTS .Tostrengthenthemodelofactivemanagement 4. Tomaintainastrongbusinessportfolioin 3. Tocontinuallyoptimisethestructureoffinancial 2. Todeveloptheabilities ofemployeesand 1. commands: Group isrepresentedbythefollowingstrategic The basisforanincreaseintheassetsofSava enterprise withdiversedivisions. utilising synergiesinarelativelylargebusiness goal istoachieveexcellenceinoperationsby We havedevelopedabusinessmodelwhosebasic UNIQUE BUSINESSMODEL business. of specialvaluesadaptedtotheirparticularscope Individual divisionshavedesignedanadditionalset represented bythevaluesofSavaGroup. business andconnectallpartsoftheGroupare The commonfoundationsthatdirectoureveryday proceed withourmission. In thefollowingdevelopmentperiodweshall AND ENHANCINGOURVALUES WE AREONCOURSEWITHOURMISSION Responsibilitytowardsthenaturalandsocial • A healthy,contentandmotivatedworkforce. • Mutualrespect. • Fairandethicalconduct. • Aninnovativeapproach,efficiency,adaptability • Settingdemandinggoalsandtheirrigorous • Excellenceineverythingwedo. • VALUES oftheSavaGroup Tocreateattractiveopportunitiesforemploying • Toensurethattheexpectationsofour • MISSION oftheSavaGroup operations. that increasesthegrowthand profitabilityofour divisions. in aperiodofcyclicalfluctuations inindividual role andwhichfacilitatesconsistentgrowtheven subsidiaries whereweachievealeadingmarket investments andthoseinGroupsubsidiaries. ethical andorientedtoresults. maintain acommonculturewhichisadaptable, environment. and self-initiative. implementation. the bestpersonnelavailable. exceeded. partners andtheenvironmentarecontinually customers, employees,shareholders,business imitate. our businessmodel–somethingthatisnoteasyto mentioned elements,allofwhichcreatediversityin It isourfirmcommitmenttointegratetheafore- centres ofknowledgewillholdaspecialplace. managing theGroup,whereascompetence company Savad.d.willfurtherplayacentralrolein divisions. TheBoardofManagementtheholding improve theutilisationofsynergiesamongindividual develop amodelofactivemanagementthatwill In ordertoachieveourgoalsweshallcontinue ACTIVE MANAGEMENT analysis ofinternalandexternal factors. strategic goalsonthebasisofacomprehensive We havedevelopedtheambitiousvisionand VISION OFTHESAVAGROUP Asapriorityweplace: • Toenterthenewstrategicperiodwithalower • THE MAINCONCEPTSANDPOLICIES: ASSET GROWTHASAPRIORITY STRATEGIC POLICIESANDGOALS: WeattachgreaterimportancetotheROCE • Thevalueofcompanyassetsisenhancedby • Toensureefficientmanagementand • Totraincompaniesundermajorityownershipto • MISSION oftheholdingcompanySavad.d. long-termgrowthinthevolumeofbusiness - growth in assetvalueasabasiccriteriaof - consolidated andreadytodevelop. number ofoperationswhich,however,arebetter consequently, requiredprofitability. among operationswithadiverseriskrateand, methodology, andensuredindicatorcomparability indicator, whichwehaveimprovedintermsof profitability. success fortheholdingcompanies;and portfolio too. efficient managementoftheinvestment supervision ofcompanyoperations. strategic expertise. management systemsavailableandkey financial poweroftheSavabrand,best specific branchusingthemarketingand achieve anabove-averagereturnintheir 59 ANNUAL REPORT 2006 BUSINESS ANALYSIS 60 ANNUAL REPORT 2006 BUSINESS ANALYSIS A growthinthevolumeandsuccessofoperations. • to 22euros(5,272tolars)in2011. adopted bytheShareholders’Meeting–willincrease annual growthindividend–providedthisproposalis Net earningsperSavasharewithastable3cent Rewardingshareholdersandimplementingthe • (66,860 tolars). The sharebookvaluein2011willriseto279euros A growthintheassetsofSavaGroup–our • December 2006are: Our keystrategicgoalsby2011asoutlinedin KEY STRATEGICGOALSBY2011 Byutilisingsynergies,continualoptimisingthe • Wewillbecomethegreatestvaluefor • On accountofexcellenceandinnovationin • VISION oftheSavaGroup Returnonequity(ROE1–totalprofitequity) - Profitabilityofoperationsinsubsidiaries–ROCE - With8percentannualgrowthonaveragethe - adopted dividendpolicy. principal goal. increasing theassetsofSavaGroup. contribute tostrengtheningthesuccessand transferring bestpracticeswewillactively portfolio ofrealandfinancialinvestments attractive employmentopportunity. customers andinvestorsaswellthemost more than50percentuntil2011. products andserviceswewillincreasesalesby 15.8 percent. will increasesignificantlyandattainavalueof – willachieve11.1percent. billion tolars). sales volumewillexceed257millioneuros(61.6 create about300newjobs. the SavaGroup;innextfive-yearperiodwewill In 2011morethan2,800peoplewillbeemployedin Thecreationofnewjobs. • invested inthegrowthofoperationsourdivisions. 310 millioneuros(74.3billiontolars)willbe Highinvestmentinthefurtherdevelopmentof • chapter entitledOperationsbydivision. goals forindividualoperationsareannouncedinthe website www.sava.si,whilestrategicpoliciesand business strategy2007-2011 the SavaGroupandcompanyd.d.for The completesummaryofthe goal. in determiningthepathtoachievethisprincipal growth intheassetsofSavaGroupandflexibility strictly followtherouteofourdevelopment: opportunities aswehavedoneuptillnow.Wewill future weshallperceiveandimplementnew period is,bynomeans,aninflexibleone.Inthe The strategyoftheSavaGroupinnextfive-year financial, market,processandemployeeaspects. goals arepursuedaccordingtoindividualarea:the according tothebalancedindicatorsystemwhere activity matrixandmainsuccessindicators individual componentsarecarriedoutbyusingan development strategyoftheSavaGroupandits The continualmonitoringandimplementationofthe MONITORING STRATEGYIMPLEMENTATION Sava Group. Netprofitwillbegeneratedintheamountof - until 2011willfluctuateineachindividualyear. 44.2 millioneuros(10.6billiontolars);itsvalue Integrated Strategyof is availableonthe In comparison withlastyearthecreatedturnover • TOURISM Newmarketsandnichesemergedinrubber • A priceincreaseinrawmaterials andenergycould • Competitivenessinthemarketofindustrialrubber • GrowthofSloveneindustrialproductionin2006 • RUBBER MANUFACTURING divisions. present belowthecharacteristicsforeachof Since economicconditionshaddifferentimpactswe last year’samountby23percentalsoattheyearend. cent. Slovenecompaniesspentloansthatexceeded 1.25 percent,andattheyearendstood3.5 Central Bank.Throughouttheyeartheyincreasedby interest rate,whichisdeterminedbytheEuropean Our operationswereaffectedmorebychangesinthe increased muchfasterthanlabourcosts. changes incalculatingincometaxnetsalaries inflation rateachievedwas2.5percent.Dueto with foreigncountrieswasenhanced,andthe environmental protection,thevolumeofexchange the areascoveringequipment,transportationand quite favourable.Investmentswereconsiderablein In general,industrialmovementsinSloveniawere over 1.5billion euros(360billiontolars). in thisbranchincreasedby 4percent,reaching demanded alargervolumeofsalesservices. manufacturing, whilecustomersatthesametime not betotallytransferredintoconsumerprices. putting pressureonprices. products continuedtogrowkeener,thereby amounted to7.2percent. CONDITIONS ECONOMIC GENERAL 14. and theriseininterestrates. of rawmaterialsandenergy impacted bythepriceincrease have beensignificantly companies intheSavaGroup GDP. Theoperationsofthe with a5.2percentgrowthin by strongindustrialactivity in Sloveniahavebeenmarked Macro-economic movements Internationally,theyearwascharacterisedby • fromtourisminEuropeincreasedby4 Revenues • Thestructureofforeignguestschanged:fewer • Thenumberofforeignguestsincreasedwhilethe • Sloveniastillremainsexport-driveninthetourism • Anincrease in thepricesoffossilfuelsenhanced • Financialincentivesforenvironmental energy • Energetika Savad.o.o. OTHER OPERATIONS–thecompany ConditionsintheSlovene marketremained • IntheSlovenemarketfavourableweather • REAL ESTATE development ofnewtouristdestinations. per centannuallyonaverage. from Sweden,Spain,Japan,CanadaandAustralia; perceived anincreaseinthenumberofguests Croatia, Russia,USA,SerbiaandMontenegro.We Austria andGreatBritainmorefromItaly, guests fromGermany,Netherlands,France, domestic tourismexpanded. duration oftheirstayshortenedandthevolume share inthesalesstructure. industry; salestoforeignguestshada58percent interest intherationalconsumption ofenergy. European countries. projects inSloveniaarenot ashighinother considerably too. estate intheGorenjskoregionincreased and ontheSlovenecoast,priceofreal unchanged; thegreatestdemandwasinLjubljana works inrealterms. growth inthevalueofperformedconstruction conditions contributedtoahigh15.5percent 61 ANNUAL REPORT 2006 BUSINESS ANALYSIS The business year was marked by the strategic restructuring of the Group from an active 15. manager of the Trade division BUSINESS into an important owner of a stake in the business enterprise OPERATIONS Merkur. Business performance OF THE SAVA GROUP is further confirmed by the planned values that were exceeded in all main performance indicators.

15. 1. Business performance

SALES REVENUES

9 per cent higher than planned or 19 per cent higher than last year, amounting to 169.3 million euros (40.6 billion tolars).

Sava Group € in millions Sales revenues 170 160 150 140 130 120 110 100 planned 2006 achieved 2006

When calculating comparison data for the past year we took into consideration the same composition of the Group, which in real terms shows progress in the Group's operations.

TOTAL PRE-TAX PROFIT

24 per cent higher than planned, or 7 per cent lower than last year, amounting to 40.6 million euros (9.7 billion tolars). ANNUAL REPORT 2006 BUSINESS ANALYSIS Sava Group € in millions Total pre-tax profit 50

40

30

20

10

0 planned 2006 achieved 2006

62 * In2006Tradeand therestofChemicalsweresold, thusmakingthesalesvolumelower, whereasthefinancialimpactincreased Survey ofsignificantdataonthebasisconsolidatedincomestatementSavaGroup the SavaGroupgeneratedaprofit. Net profitwas11percentlowerthanlastyearonaccountofstrategicrestructuring.However,alldivisionsin 17 percenthigherthanplanned,amountingto34.1millioneuros(8.2billiontolars). NET PROFIT Structure oftotalpre-taxprofit Net profit Sava Group a 81-,5 156125 -1,566 -1,252 89 93 134 -861 98 8,166 9,732 20.1% 89 107 80 9,216 10,468 3,719 75 15.0% 4 12,512 11,651 3,784 5,016 8,146 19.0% 24,436 50 4,463 3,932 4,692 30,426 9,163 128 121 5,966 997 69* 30,948 3,895 66* 11,580 2,984 60.0% 9,022 Net profitoftheSavaGroup attributable toSavad.d. 1,992 40,566* 40,694* - Netprofit/operatingrevenues in% 4,827 49.5% 58,462 Net profitoftheSavaGroup 4,685 61,446 Tax 50.6% 56,386 61,213 Total pre-taxprofit Share intheincomeofassociates Net financingincome Earnings beforeinterestandtaxes(EBIT) and amortisation(EBITDA) Earnings beforeinterest,taxes,depreciation - Coverage/operatingrevenuesin% Coverage TOTAL OPERATINGREVENUES Other revenues Net salesrevenues Financial ReportingSystem Sava GroupaccordingtotheInternational 9,732 3,719 10,468 12,512 3,784 5,016 3,933 324 4,692 310 3,894 3,468 673 1,682 1,217 Pre-tax profit Share intheincomeofassociates Financial result Newly accruednegativegoodwill Profit fromoperationswithoutnegativegoodwill 10 20 30 40 0 planned 2006 0420 062006/2005 2006 2005 2004 0420 2006 2005 2004 achieved 2006 SIT inmillions SIT inmillions € inmillions Index . 63 ANNUAL REPORT 2006 BUSINESS ANALYSIS Income statement of the Sava Group per quarter in 2006 SIT in millions Jan - Mar Apr - Jun Jul - Sep Oct - Dec 2006 2006 2006 2006 Net sales revenues from goods and services sold 8,394 10,155 10,660 11,357 Change in inventories 14 -303 1,013 -1,887 Other operating revenues 234 407 101 549 Operating revenues 8,642 10,259 11,774 10,019 Costs of goods, materials and services -5,147 -5,567 -6,459 -5,588 Labour costs -2,641 -2,719 -2,792 -3,363 Depreciation and amortisation -748 -731 -801 -1,021 Write-offs -21 -27 -18 -99 Other operating expenses -84 -910 -138 -823 Operating expenses -8,641 -9,954 -10,208 -10,894 Operating income 1 305 1,566 -875 Financial income 508 1,182 1,453 2,824 Financial expenses -345 -553 -438 -912 Net financing income 163 629 1,015 1,912 Share in the income of associates 830 1,230 1,340 1,616 Pre-tax profit 994 2,164 3,921 2,653 Tax -131 -365 -42 -1,028 Net profit for the year 863 1,799 3,879 1,625 Net profit for the year attributable to: - equity holders of the parent 884 1,774 3,846 1,642 - minority interest -21 25 33 -17 Net profit for the period 863 1,799 3,879 1,625

OPERATING REVENUES: • Net sales revenues were 9 per cent higher than planned and 19 per cent better than last year’s • We generated operating revenues of 169.8 million performance. euros (40,694 million tolars), which is 34 per cent - In the structure Rubber Manufacturing has a 57 below last year’s figure. This decrease is due to the per cent share, Tourism a 33 per cent, and Real sale of the Trade and Chemicals divisions which, in Estate an 8 per cent share. The remaining 2 per terms of sales, has formed an extremely strong cent is due to companies of other operations part of the Group in the past. (Sava d.d. and Other Operations). - 53 per cent of consolidated sales revenues were

ANNUAL REPORT 2006 BUSINESS ANALYSIS generated in foreign markets.

64 Subsidiariesimprovedoperatingperformanceby • Theseamountto4.2millioneuros(997 • AND TAXES(EBIT): EARNINGS BEFOREINTEREST operating expensesa5percentshare. have a29,depreciationan8andwrite-offsother services havea58percentsharewhilelabourcosts million tolars).Costsofgoods,materialsand These amountedto OPERATING EXPENSES in 2006 Structure ofsalesrevenuesbydivision Sava Group use ofoperatingassets. due tostrictsupervisionoverthebestreasonable even 73percentcomparedtolastyear,whichis division. is lowermainlyduetothesaleofTrade tolars); comparedtothepreviousyearthisfigure OTHER OPERATIONS REAL ESTATE TOURISM FOREIGN TRADENETWORK RUBBER MANUFACTURINGwith 165.6 millioneuros (39,696 Thefinancialresultintheamountof15.5million • Financialexpensesintheamountof9.4million • Financialrevenuesintheamountof24.9million • NET FINANCINGINCOME the saleoffinancialinvestmentsSavad.d. year’s figure;thiswasachievedentirelythrough euros (3,719milliontolars)is2percentbelowlast year andahigherindebtednessduringtheyear. the increasedvariableinterestrate(Euribor)last banks onthelastdayofyear.Thereasonsliein slightly higherdespitethelowerindebtednesswith per cent;incomparisonwithlastyeartheyare than lastyear.Interestforbankloansrepresent70 euros (2,248milliontolars)are9percenthigher company Savad.d. revenues weregeneratedmainlybytheholding interest andexchangeratedifferences.Financial received dividends,andtheremaining8percentis the saleoffinancialinvestments,9percentis the majorpartor83percentisduetoprofitin is 2percentmorethanlastyear.Initsstructure euros (5,967milliontolars)weregenerated,which 7 33% 57% 8% 2% 65 ANNUAL REPORT 2006 BUSINESS ANALYSIS SHARE IN THE INCOME OF ASSOCIATES • Tax on profit amounts to 6.5 million euros (1,566 million tolars), or 25 per cent more than last year. • These revenues refer to Gorenjska Banka d.d., • The effective tax rate amounts to 16 per cent, and Merkur d.d., and JOB d.o.o. and amount to 20.9 is therefore 4 percentage points higher than last million euros (5,016 million tolars), which is 7 per year as a consequence of the changes in tax cent more than last year. legislation, which reduces possible relief in • 9.4 million euros (2,250 million tolars) were paid as connection with investment-based risk. dividends, or 45 per cent of revenues, the difference in the amount of 11.5 million euros (2,766 million NET PROFIT tolars), or 55 per cent, being due to the remaining profit of associates with regard to the capital Net profit of the Sava Group was generated in the method employed to evaluate investments in amount of 34.1 million euros (8.2 billion tolars), and associates. is therefore 17 per cent higher than planned. When compared to last year it is 11 per cent less. TOTAL PRE-TAX PROFIT RETURN ON CAPITAL The profit of the Sava Group before taxation in the amount of 40.6 million euros (9.7 billion tolars) is 24 • When calculating the ratio between pre-tax profit per cent higher than planned, or 7 per cent lower and the average balance of capital, the return on than last year. capital amounts to 10.3 per cent, which is 1.9 percentage points more than planned or 1.6 TAX percentage points less than last year. • When calculating the ratio between net profit and • Tax liability amounts to 6.7 million euros (1,596 the average balance of capital, the return on million tolars), the ascertained liability from newly capital amounts to 8.6 per cent, which is 1.1 accrued and risen and deferred temporary percentage points more than planned or 1.9 differences totalling 0.2 million euros (30 million percentage points less than last year. tolars).

Contribution to the return on capital of the Sava Group by profit type v mio SIT 2004 2005 2006 Profit from operations without negative goodwill 1.7% 1.9% 0.7% Newly accrued negative goodwill 4.8% 0.4% 0.3% Financial result 5.4% 4.3% 3.9% Share in the profit of associates 5.3% 5.3% 5.3% Tax -1.2% -1.4% -1.6% Net profit 16.0% 10.5% 8.6% ANNUAL REPORT 2006 BUSINESS ANALYSIS

66 15. 2. Intheliabilitiesstructureequityhasa64percent • EQUITY ANDLIABILITY Property,plantandequipmentinvestment • ASSETS time lastyear. tolars) andis4percenthigherthanatthesame amounted to674.6millioneuros(161,658 The balancesheettotalonthelastdayofyear BALANCE SHEETTOTAL structure Assets andliabilities 31/12/2006 Assets structureat Sava Group and currentliabilitiesa21percentshare. Non-current liabilitieshavea15percentshare share or4percentagepointsmorethanlastyear. investment inassociates26,non-currentsecurities property representa40percentshare,and 2006 2005 2004 100,000 120,000 140,000 160,000 20,000 40,000 60,000 80,000 0 investment equipment, plant and property, property 59,759 64,824 65,129 investments companies associated 25,657 in 29,034 42,240 securities Amongtotalliabilitiesloanshavethelargestshare • InassetstructurebydivisionInvestmentFinance • Withregard tolastyear’sinvestmentinassociates, • DuetothesaleofTradedivisionassetsin • current non-

account ofintensiveinvestmentinTourism. composition is9percenthigherthanlastyearon The indebtednessofcompaniesinthepresent period lastyearduetothesaleofTradedivision. tolars). Theyare2percentlowerthaninthesame in theamountof185millioneuros(44,335 32,141 divisions a13percentshare. has a61percent,Tourism26,andother statements. associated companiesintheconsolidatedfinancial and employingtheequitymethodtoevaluate purchases ofastakeinthecompanyMerkurd.d. higher investmentvalueinassociatesarethe assets are45percenthigher.Thereasonsforthe especially inTourism. increased duetoextensiveinvestmentactivity property, plantandequipmentinparticular the Groupwerereducedconsiderablyatfirst.Then 15 percentshare. available forsale19,andcurrentotherassetsa 33,430 30,818 current assets other non- 793 2,988 2,276 netre operating inventories 10,558 10,543 7,669 receivables other and 11,525 12,025 6,189 equivalents cash and loans, cash 1,756 3,162 7,337 assets

total 142,189 156,006 161,658 67 ANNUAL REPORT 2006 BUSINESS ANALYSIS Sava Group

Liabilities structure at 200,000 31/12/2006 161,658 150,000 156,006

2004 142,189

2005

100,000 103,652 94,157

2006 90,553

50,000 41,688 34,330 33,632 24,374 20,161 17,306 0 equity non-current current total equity liabilities liabilities and liabilities

INVESTMENTS:

• The companies of the Sava Group earmarked 37.1 • For investment in the capital market the holding million euros (8,889 million tolars) for investment company Sava d.d. earmarked 87.9 million euros in infrastructure, which is at the same level as last (21,068 million tolars). year;

Sava Group

Structure of investments in infrastructure by division in 2006

TOURISM INVESTMENT FINANCE RUBBER MANUFACTURING OTHER OPERATIONS

70% 15% 4% 11%

DATA ON THE VALUE OF THE SAVA SHARE and the weighed average number of ordinary AS AT 31/12/2006: shares excluding treasury shares amounted to 17 euros (4,065.43 tolars) in 2006. • The share book value calculated as the ratio ANNUAL REPORT 2006 BUSINESS ANALYSIS between the value of the capital of the Sava Group NUMBER OF EMPLOYEES without minority interest and the weighed average IN THE SAVA GROUP of the number of ordinary shares excluding treasury shares amounted to 214.3 euros (51,352 • On 31/12/2006 there were 2,564 people employed tolars) on 31/12/2006 or 11 per cent more than by the Sava Group or 16 per cent less than at the last year. end of last year due to the sale of the Trade division • The market value of the Sava share on 31/12/2006 and the remaining part of the Chemicals division. amounted to 231.6 euros (55,506 tolars) or 8 per With regard to the comparable composition of the cent above the book value. Sava Group, its companies increased the number of • Net profit per share calculated as the ratio between employees by 151. the net profit of the Group belonging to Sava d.d.

68 16. BUSINESS OPERATIONS BY DIVISION

DIVISION OPERATION 16. 1. Rubber Manufacturing The companies in Rubber Manufacturing with the division with the Foreign Trade Network generated sales revenues of 96.1 million euros (23,051 million tolars), or 20 per Foreign Trade Network cent more than last year. 74 per cent of sales STRATEGIC DEVELOPMENT AND GOALS revenues are made in foreign markets. In the structure of total consolidated sales of the Sava Mission Group, Rubber Manufacturing with the Foreign Trade We create comprehensive solutions for various Network has a 57 per cent share. fields where industrial rubber and related products and tyres are applied. In comparison with last year total pre-tax profit has more than doubled and net profit in the amount of Vision and goals by 2011 2.9 million euros (703 million tolars) was higher by • To become the most adaptable manufacturer more than 100 per cent. 4.2 million euros (1,017 in market niches, while making the quality of million tolars) were earmarked for investment. our products comparable to those produced by BUSINESS ANALYSIS our best competitors. For 2007 we plan to generate sales revenues of 96.6 • To become one of the most financially sound million euros (23,140 million tolars) and a total pre- divisions in the Sava Group. tax profit of 3.9 million euros (938 million tolars). 6.3 • To rank among the first three in our market million euros (1,514 million tolars) will be earmarked niches in Europe in terms of revenues for further modernisation of production capacity. generated. • Our organic growth will achieve 9 per cent on In comparison with last year the company Savatech average annually, and the rate of return on d.o.o. – the largest company in Rubber capital employed will be 14.9 per cent. Manufacturing – increased its sales revenues in the amount of 84.4 million euros (20,222 million tolars)

by 23 per cent. 74 per cent of products were sold in ANNUAL REPORT 2006 foreign markets. These were sold in 94 countries, the most important partner still being Germany. Despite unfavourable price movements in the markets of raw materials and energy and pressure on prices from customers, we operated with a net profit in the amount of 1.9 million euros (447 million tolars), which has been the most successful performance thus far. Savatech d.o.o. contributed 61 percent to the total profit of the division.

69 70 ANNUAL REPORT 2006 BUSINESS ANALYSIS our salesposition. strict rationalisationmeasures, whichaggravated European papermanufacturing industryintroduced to thepriceincreaseinrawmaterialsandenergy positive andslightlybelowthefiguresplanned.Due company. Theoperationofthecompanywas the valueinsales,profit,assetsandliabilitiesofthis Trade Networkthereforeincludedonlyonehalfof the RubberManufacturingdivisionwithForeign with theGermanpartnerSchäferAG.Thekeydatafor The company contribution tothetotalprofitofdivision. the companywasdoubled,makinga17percent 31 percentincreaseinsalesfigures.Thenetprofitof utilising competitiveadvantageshasresultedina productivity, successfulqualitymanagementand rapid growth.Itseffortinvestedinincreasing The company been consideredinproportionwiththeownershipstake. * InthedataforRubberManufacturingdivisionwithForeignTradeNetworkjointventurecompanySava-Schäferd.o.o Key datafortheRubberManufacturingdivisionwithForeignTradeNetwork* iblte ,0 ,4 ,7 113 135 205 123 6,970 6,910 225 703 13,880 6,148 5,107 891 11,255 343 4,506 4,842 93 120 9,348 396 248 23,051 1,017 278 19,204 1,097 16,916 609 Investment inproperty,plantandequipment Liabilities Equity Assets Net profit Pre-tax profit Sales revenues Sava-GTI d.o.o. Sava-Schäfer d.o.o. continued itstrendof is ajointventure represent asignificantshare. the divisionstructurethiscompanydoesnot and keencompetitionbothinCroatiaBosnia.In harsh conditionsforbusinessoperationsinCroatia The company requirements oftheCroatianmarket. company SavaTradeSplitd.o.o.,whichsuppliesthe Britain, USA,CzechRepublic,Polandandthe exact. ItincludesfivecompaniesinGermany,Great Trade Network–25percentofproductiontobe programmes aremainlysoldthroughtheForeign Products manufacturedbyrubbermanufacturing FOREIGN TRADENETWORK 0420 062006/2005 2006 2005 2004 Sava Rold.o.o. from Zagrebfacedmore SIT inmillions Index . has DIVISION OPERATION 16. 2. Tourism division Net sales revenues of 57.8 million euros (13,853 STRATEGIC DEVELOPMENT AND GOALS million tolars) surpassed last year’s revenues by 6 per cent. In the total sales revenues structure of the Mission Sava Group Tourism had a 33 per cent share. We provide a diversity of experience. Both pre-tax profit of 2.1 million euros (506 million Vision and goals by 2011 tolars) and net profit of 1.9 million euros (447 • To become a provider of the most diverse million tolars) are higher than last year. tourist services in Slovenia. • To achieve an 18 per cent market share For investments in property and equipment 25.8 according to the number of overnight stays in million euros (6,173 million tolars) were earmarked, Slovenia and 1.5 million overnight stays in which represented 70 per cent of all investments in hotels and campsites. the Sava Group. More important investments in • To create revenues of 84.3 million euros (20.2 Pannonian Spas included the building of a new 5* billion tolars) hotel in Terme 3000 d.d., the start of construction of • To achieve an 18.5 per cent return on sales and a new 4* hotel in Ptuj, renovation of hotel Jeruzalem BUSINESS ANALYSIS a 10.2 per cent return on capital employed. in Ljutomer and completion of a swimming pool in • To introduce uniform operation standards and Banovci. In 2006 all companies in Pannonian Spas an efficient customer management (CRM) will complete the upgrade of the information system model. and its standardisation. • In 2007 we will form a tourism management company (TMC) to manage tourist complexes In 2007 we plan the division will generate sales and water amusement parks in Europe, owned revenues of 65.4 million euros (15,674 million by Sava d.d. or others. tolars), show a total pre-tax profit of 5.7 million euros (1,369 million tolars) and make investments

totalling 21.9 million euros (5,258 million tolars). ANNUAL REPORT 2006

71 72 ANNUAL REPORT 2006 BUSINESS ANALYSIS million euros(585tolars). million tolars)aswellmake investmentsof2.4 and atotalpre-taxprofitof 1.6 millioneuros(388 revenues of21.5millioneuros (5,147milliontolars) In 2007SavaHoteliBledplanstogeneratesales more thanlastyear. million euros(238tolars),or21percent cent morethanlastyear,andanetprofitof1.0 million euros(4,798tolars)intotal,or6per Sava HoteliBledgeneratedsalesrevenuesof20.0 increase ourmarketpotential.Thecompaniesof we willstrengthentheefficiencyofoperationsand Hoteli Bled.Onaccountoftheplannedintegration three companiesoperatingunderthebrandSava In 2006webegantheproceduretointegrateall Sava HoteliBled Key datafortheTourismdivision iblte 5131,7 136119 103 414 109 21,356 26,106 340 447 47,462 17,975 25,467 506 43,442 108 15,133 25,565 126 106 40,697 149 687 6,173 13,853 700 13,043 4,905 12,673 5,951 Investment inproperty,plantandequipment Liabilities Equity Assets Net profit Pre-tax profit Sales revenues tourism market. achieved andthelong-term goodrankinginthe the higherqualityservices offered,higherprices maintenance weredistinctly unfavourable,despite price increasesinlabour,energyandinvestment the companyhadsetwerenotfullyrealisedsince million euros(28tolars).Thebusinessgoals cent morethanlastyear.Itoperatedwithalossof0.1 of 6.4millioneuros(1,543tolars),or8per Grand HotelTopliced.o.o. renovate apracticegreenonthegolfcourse. sewerage systeminthecampsiteandstartedto highest categoryinEurope.Wealsorebuiltthe new marketsandprovidequalityservicesofthe which wasatthelastyear’slevel.Itcontinuedtowin a netprofitof0.2millioneuros(39tolars), revenues of2.8millioneuros(677tolars)and Golf inKampBledd.d. 0420 062006/2005 2006 2005 2004 ended theyearwithsales generated salesrevenues SIT inmillions Index Terme 3000d.d. (4,673 milliontolars). million tolars)andinvestmentsof19.5euros tolars), atotalpre-taxprofitof4.1millioneuros(981 revenues of43.9millioneuros(10,527 In 2007PannonianSpasplantocreatesales last yeartheyoperatedwithanegativeresult. profit of0.9millioneuros(209tolars),while in total,or6percentmorethanlastyear,andanet revenues of37.8millioneuros(9,055tolars) The companiesofPannonianSpasgeneratedsales Pannonian Spas tourist productsandarrangingcongressfacilities. to therenewalofhotelcapacity,introductionnew more thanlastyear.Goodbusinessresultsweredue 0.9 millioneuros(227tolars),or14percent more thanlastyear’slevel.Itgeneratedanetprofitof 10.8 millioneuros(2,578tolars),or7percent G&P HoteliBledd.o.o. unfavourable weatherconditions. disappointing summerseasonasaconsequenceof new 5*HotelLivadaPrestigeandaslightly Hotel Ajdafortwomonthsduetothebuildingof profit madelastyear,thereasonbeingclosureof (139 milliontolars)representedonehalfofthe less thanlastyear.Thenetprofitof0.6millioneuros million euros(3,841tolars),or3percent generated salesrevenuesof16 generated salesrevenuesof capacity andswimmingpoolfacilities. from pastinvestmentsinthe developmentofhotel tolars). Soundandsuccessfuloperationsoriginate year, andmadeaprofitof0.3millioneuros(72 euros (977milliontolars),23percentmorethanlast The companygeneratedsalesrevenuesof4.1million and surpasseditsbusinessdevelopmentgoals. Terme Lendavad.o.o. and itssurroundings. services andthemainstayofdevelopmentinPtuj history. Itwillbecomeafocalprovideroftourist the largestexpansioninoperatingvolumeits completed in2007,thecompanyisembarkingupon investment cycle.Bybuildinganew4*hotel,tobe water facilities,whichisthefirstpartof business performanceistheresultofarranging profit by23percent.Successfulandsound million euros(81tolars)exceededlastyear’s 12 percentmorethanlastyear.Thenetprofitof0.3 amount of4.5millioneuros(1,086euros),or Terme Ptujd.o.o. for moresuccessfulbusinessinthefuture. at least75percent,therebylayingthefoundations improve thegueststructureandincreasecapacityto company wasabletoattractmorepermanentguests, investment inthemodernisationofbuildings the unfavourableenergystructure.Withadditional in reducedsalesofhealthservicesandcostsdueto million euros(84tolars).Themainreasonslie more thanlastyear.Itoperatedwithalossof0.4 13.1 millioneuros(3,151tolars),or5percent Terme Radencid.o.o. generated salesrevenuesinthe improved businessperformance generated salesrevenuesof 73 ANNUAL REPORT 2006 BUSINESS ANALYSIS 74 ANNUAL REPORT 2006 BUSINESS ANALYSIS 16. 3. an appropriatesalarylevel. benefit fromprofessionalandpersonalgrowthwith reliable returnsinthelongrunandouremployees environment. Weensurecompanyownersgain tenants canliveinahealthy,safeandpleasant construct buildingsforthemarketwherebuyersor With ourexpertiseandfinancialstrengthwe Mission STRATEGIC DEVELOPMENTANDGOALS Real Estatedivision Thegoalswillbeachievedbyofferinga • Tocreateaddedvalueperemployeeinthe • Toachievesalesrevenuesof20to27million • ToexpandbusinessvolumeinCroatia. • Toremaintheleadingcompanyforrealestate • Vision andgoalsby2011 the variablepartoftheirsalaries. suitable remunerationforemployeesthrough rate ofreturnoncapitalemployed. amount thatwillassureatleasta7.6percent level. euros (4.8to6.5billiontolars)attheannual development inSlovenia. pre-tax profitof1.2millioneuros(287tolars). of 20.4millioneuros(4,883tolars)andatotal For 2007RealEstateplanstocreatesalesrevenues (183 milliontolars)was14percenthigher. figure, whereasthenetprofitof0.8millioneuros (260 milliontolars)was10percentabovelastyear’s A pre-taxprofitintheamountof1.1millioneuros division hadan8percentshare. total consolidatedsalesoftheSavaGroup therefore deviationsarecommon.Inthestructureof stage ofcompletionconstructionprojects, in thisdivisionarecompletelydependentonthe tolars), or63percentmorethanlastyear.Revenues generated totalling19.7millioneuros(4,726 In theRealEstatedivisionsalesrevenueswere DIVISION OPERATION strategic realestatewassold,andforcertainsites on buildingsandrealestateinSlovenia.Apartof Important andsuccessfulactivitieswereunderway operations inCroatia. special projectsinSloveniaandmonitorrealestate Nova d.o.o.andSavad.o.o.,whichsupervise d.o.o. commencedbusinessforthecompaniesIP In additiontoconductingitsownbusinessSavaIP produce 83percentofitstotalsales. the supportingcompaniesofdivisionand The companies ownership stake. * ThedataforRealEstatetakesintoconsiderationthejointventurecompaniesPCAGd.o.o.andSAVAIMGinproportion Key datafortheRealEstatedivision* iblte ,7 ,4 ,5 91 112 114 95 8,259 2,028 110 183 9,040 10,287 1,814 3 10,854 260 7,975 1,647 161 163 9,620 5 236 155 4,726 193 159 2,895 3,279 200 Investment inproperty,plantandequipment Liabilities Equity Assets Net profit Pre-tax profit Sales revenues Sava IPd.o.o. and IP Novad.o.o. are division’s business. division donotrepresentasignificantpartofthe The operationsofothercompaniesintheRealEstate than atanytimebeforethen. collaborated intheprojectsofSavaGroupmore residential buildingsinIstria.In2006SavaIP the draftingofprojectdocumentationfortouristand building offacilitiesinZagrebcommencedaswell completely finishedandsuccessfullysold.The building. InCroatiathebuildingBalotawas we draftedprojectdocumentationfortheplanned 0420 062006/2005 2006 2005 2004 SIT inmillions Index with the 75 ANNUAL REPORT 2006 BUSINESS ANALYSIS 76 ANNUAL REPORT 2006 BUSINESS ANALYSIS 16. 4. solutions. and thecompanybyintroducingintegrated To decreasethecostsofsupplyingenergytousers Mission Energetika Savad.o.o. STRATEGIC DEVELOPMENTANDGOALS Other Operations Toenablecustomerstogainsavingsinprimary • Toachievea13percentrateofreturnon • Toinvest15millioneuros(3.6billiontolars)to • Vision andgoalsby2011 energy supplyinthecompany. standards, implementthenotionofsustainable energy and,bysurpassingenvironmental capital employedatlowrisk. provide significantgrowth. Sava Group. abilities, therebycontributingtothesuccessof employ lessableindividualswithlimitedworking mainly forinternalusersintheSavaGroup,and To providebusinessservicesatcompetitiveprices, Mission Sava MedicalinStoritved.o.o. Toprovideworkfordifficult-to-employpeople • Tobecomeanevenmoreefficientandprice- • Vision andgoalsby2011 benefit theentireGroup. will bringtaxreliefandlegaladvantagesto from companiesintheSavaGroupawaythat services fortheneedsofSavaGroup. competitive providerofcertainbusiness Key datafortheOtherOperationsdivision tolars) andmadeanetprofitof0.1millioneuros(26 sales revenuesof2.5millioneuros(606 status ofadisabilitycompany.In2006itgenerated The companySavaMedicalinStoritved.o.o.hasthe Årnomelj d.o.o. d.o.o., EnergetikaSavad.o.o.and Medical inStoritved.o.o.,GeaSolInt.Biool Other OperationsincludethecompaniesSava DIVISION OPERATION qiy847689112 172 -34 869 139 1,102 -33 639 46 776 1,971 - 136 46 1,415 542 884 -137 391 1,427 796 -139 -4 0 587 -4 535 0 Investment inproperty,plantandequipment Liabilities Equity Assets Net profit Pre-tax profit Sales revenues minimum negativeresult. 2007, thoughtheseventureswillstillexhibita plans inthefieldofenergywillbeimplemented euros (887milliontolars).Thefirstdevelopment Operations willgeneratesalesrevenuesof3.7million The businessplanfor2007envisagesthatOther in futureweexpectittogrowasustainableway. energy. Businessvolumein2006wasnotlargeand mainly representdevelopmentprojectsinthefieldof million tolars).Othercompaniesinthisdivision 0420 062006/2005 2006 2005 2004 SIT inmillions Index 77 ANNUAL REPORT 2006 BUSINESS ANALYSIS 78 ANNUAL REPORT 2006 BUSINESS ANALYSIS 16. 5. chapter onbusinessoperationsoftheholdingcompany. report indetailontheoperationsofthisdivision represented bythecompanySavad.d.Wetherefore In termsofcontenttheInvestmentFinancedivisionis DIVISION OPERATION and managethegrowthofSavaGroupassets. provide assistancewithfinancingouroperations To optimisethevalueofindividualinvestments, Mission STRATEGIC DEVELOPMENTANDGOALS division Investment Finance maturity attheendof2006 Survey offinancialinvestmentsby Sava d.d. TobethemostprofitableinvestorinSlovenia • Vision andgoalsby2011 2011. Short-term financialinvestments Long-term financialinvestments for generatedprofitthisyeartoo. lower thaninthepast,whichisreflectedfigure of financialinvestmentsin2007willbeconsiderably In accordancewiththeadoptedstrategyvolume sources offinancing. investments; theremainderwasacquiredfromother acquired throughdivestingcertainfinancial majority offundsforfinancialinvestmentswere mainly forinvestmentsinthedomesticmarket.The earmarked 87.9millioneuros(21,068tolars), For investmentsinthecapitalmarketSavad.d. benefits forourshareholders. contributes significantlytotheenhancementof development ofotherbusinessintheGroupand financial investmentsprovidespotentialforfurther performance oftheSavaGroup.Investinginprofitable significant contributiontothetotalbusiness management offinancialinvestmentsandmadea Investment Financecontinuedwiththesuccessful 89% 11% In linewiththeadoptedstrategicpolicywesold IN 2006 DECREASE INFINANCIALINVESTMENTS Within theframeworkofprovidingsuitablereturnsand IN 2006 DOMESTIC FINANCIALINVESTMENTS investments attheendof2006 Geographical surveyoffinancial Sava d.d. ectrdd 4192.94% 8.63% 94,179 700,000 4.85% 14.17% 415,983 4,694,946 1.06% 20.03% 1,700,000 262,841 Dom Holdingd.d. Mercator d.d. Pivovarna Laækod.d. NFD Holdingd.d. Investments NFD 1d.d. Merkur d.d. Investments Foreign financialinvestments Domestic financialinvestments companies in2006. certain financialinvestmentsinforeignanddomestic in thecompanyNFD1,DelniækiInvesticijskiSkladd.d. Merkur d.d.in2006andincreasedtheownershipstake shareholders weacquiredastakeinthecompany long-term securityoftheinvestedassetsour 94% hrscapital shares capital shares 6% o f equity No. of o fequity No. of v mioSIT v mioSIT % of % of 79 ANNUAL REPORT 2006 BUSINESS ANALYSIS 80 ANNUAL REPORT 2006 BUSINESS ANALYSIS 17. 1. (6,967 milliontolars). than lastyear,amountingto29.1millioneuros 55 percenthigherthanplanned,or34more TOTAL PRE-TAXPROFIT Business performance Total pre-taxprofit Sava d.d. OF SAVAD.D. OPERATIONS BUSINESS 17. 10 15 20 25 30 35 0 5 planned 2006 success oftheparentcompany. contributes significantlytothe is investmentfinance,which important partofitsoperation managing subsidiariesan Sava Group.Inadditionto is theparentcompanyof The holdingcompanySavad.d. achieved 2006 € inmillion s Thefinancialstatementsfor2001to2005 were • In2002Savad.d.wasrestructured toforma • Survey ofimportantdataconcerningthebusinessperformanceSavad.d. performance aswelltheoriginallyunplannedsale The businessplanwassurpassedonaccountofgood 45 percenthigherthanplanned,or33more NET PROFIT Net profit Sava d.d. E RFT307428576133 5,706 53 134 140 4,288 100 6,967 3,077 219 7,317 93 5,195 -2,354 5,225 414 1,782 3,785 -2,349 4,657 111 1,906 -2,841 1,821 NET PROFIT TOTAL PRE-TAXPROFIT FINANCING INCOME Operating expenses Other revenues Net salesrevenues holding company. 15 20 25 0 5 planned 2006 favourable marketmovementsandopportunities. of certainfinancialinvestmentsasaresponseto million tolars). than lastyear,totalling23.8millioneuros(5,706 accordance withSAS2006.Thedataiscomparable. financial statementsfor2006werepreparedin prepared inaccordancewithSAS2001,whilethe 0420 062006/2005 2006 2005 2004 achieved 2006 SIT inmillions € inmillion Index s 81 ANNUAL REPORT 2006 BUSINESS ANALYSIS Sava d.d.

Net profit of Sava d.d. by year 7,000 SIT in millions

6,000 5,706 5,000

4,000 4,288

3,000 3,077

2,000

1,000

0 2004 2005 2006

NET SALES REVENUES OPERATING EXPENSES

• Sava d.d. generated sales revenues of 7.4 million • These amounted to 9.8 million euros (2,354 euros (1,782 million tolars), or 7 per cent less million tolars), which was at the level of 2005. than last year. This was due to an increase in the • In the structure goods, material and services had a capital of certain subsidiaries with an investment 36 per cent share while labour costs had a 37 per in kind in the form of equipment and, as a cent, write-offs a 35 per cent and other expenses a consequence, lower rental charges. 2 per cent share. • Net sales revenues mainly represented sales • A considerable amount of these revenues was due within the Sava Group and achieved merely 3 per to managing financial investments. Therefore the cent of the cumulative sales of the entire Group. surplus of the financial result was partly intended • Sales revenues structure: 56 per cent was rent for to cover expenses. offices, 8 per cent for leasing equipment, and 36 per cent a contribution by the subsidiaries for FINANCING INCOME using the brand name and services of competence centres of knowledge. • Financial revenues of 35.8 million euros (8,571 million tolars) were generated, this figure being 28 OTHER REVENUES per cent higher than last year. • Financial expenses in the amount of 5.2 million • These amounted to 0.9 million euros (219 million euros (1,254 million tolars) were 16 per cent lower tolars) and were higher than in 2005. than last year. • They included proceeds from selling real estate • The surplus in financial revenues over financial and the repayment of interest resulting from a expenses amounting to 30.6 million euros (7,317 court settlement in our favour. million tolars) was 40 per cent more than for 2005. ANNUAL REPORT 2006 BUSINESS ANALYSIS

82 • • 32percentof • 75percentof • Financing incomebytypeofoperation tes2 1 0 1 92 -15 -221 -521 107 -221 -772 1,854 6 4,021 0 0 251 -488 -16 183 -786 4,509 1,854 22 -122 -893 5,188 2,726 -223 305 107 0 5,411 2,726 Total Others Subsidiaries Interest Securities Dividends included mainlypaidinteresttosubsidiaries. amount of0.5millioneuros(122tolars) Financial expenses in connectionwiththeoperationsofsubsidiaries. include receivedinterestsandchargedguarantees the amountof1.3millioneuros(305tolars) Financial revenuesinrelationtosubsidiaries the samelevel. which incomparisonwithlastyearremainedat the indebtednessofcompanywithbanks, 3.7 millioneuros(893tolars)weredueto and deposits. euros (107milliontolars)relatedtograntedloans Interest revenues the entirestakeincompanyTeold.d. financial investments,andpartlyfromthesaleof originated partlyfromthesaleofportfolio totalling 0.9millioneuros(223tolars) Financial expenses 43 percentbysellingotherfinancialinvestments. by sellingsecuritiesincertainCroatianfundsand shares ofthecompanyMercatord.d.,25percent euros (5,411milliontolars)weremadebyselling the saleofsecurities level fromthepreviousyear. per centhigher.Otherdividendsremainedatthe Kranj. Incomparisonwithlastyearthisfigureis50 received dividendsfromGorenjskaBankad.d. million euros(2,726tolars),represented Interest expenses financial revenuesgeneratedfrom dividends in theamountof0.4million relating tosubsidiariesinthe from thesaleofsecurities in theamountof22.6million , whichgenerated11.4 eeusepne noervne xessincome expenses revenues income expenses revenues iaca iaca iaca iaca iaca Financial Financial Financial Financial Financial Financial ,7 124737671-,9 5,225 -1,496 6,721 7,317 -1,254 8,571 in theamountof 062005 2006 in INCOME TAX than planned. per centmorethanlastyearand55better million euros(6,967tolars)in2006,or34 The totalpre-taxprofitofSavad.d.amountedto29.1 TOTAL PRE-TAXPROFIT TheBoardofManagementwillproposethatthe • Thisamountedto32.5millioneuros(7,783 • ACCUMULATED PROFIT planned. cent higherthanin2005and45per 23.8 millioneuros(5,706tolars)was33per The generatednetprofitofSavad.d.intheamount NET PROFIT Theattained18.1percenteffectivetaxratewas3 • ThetaxliabilityofSavad.d.amountedto5.3 • dividend policyofthecompany. dividend for2006inaccordancewiththeadopted Shareholders’ Meetingreceiveapaymentof tolars) onthelastdayofyear. per centhigherthaninthesameperiodlastyear. with lastyearthisfigureishigherby38percent. million euros(1,261tolars).Incomparison SIT inmillions 83 ANNUAL REPORT 2006 BUSINESS ANALYSIS 84 ANNUAL REPORT 2006 BUSINESS ANALYSIS 17. 2. last year. tolars), whichis6percenthigherincomparisonwith This amountedto457millioneuros(109,505 BALANCE SHEETTOTAL structure Assets andliabilities Theratiobetweenthenetprofitforfinancial • Theratiobetweenthetotalprofitfor • RETURN ONCAPITAL Movement oftheaccumulatedprofitSavad.d.in2006 (SIT inmillions) Assets structureat31/12/2006 Sava d.d. cuuae rfta 11/067,783 -1,282 7,132 -2,853 -920 Accumulated profitat31/12/2006 Allocation of2006profittorevenuereserves Payment ofdividendsin2006 Adjustment torevisedSAS01/01/2006 Retained profitfrom2005 Net profit percentage pointsmorethanlastyear. capital amountsto7.9percent,whichis1.4 year andtheaveragebalanceofequity:returnon or 1.8percentagepointsmorethanlastyear. balance ofequity:returnamountsto9.7percent, accounting periodbeforetaxandtheaverage 31/12/2006 01/01/2006 100,000 120,000 20,000 40,000 80,000 60,000 0 investment assets and property fixed 18,162 of theyear,or3morethanlastyear. At Savad.d.56employeeswereemployedattheend NUMBER OFEMPLOYEES 19,005 Thesignificantchangesinthelong-termfinancial • Long-termfinancialinvestmentshadthelargest, • ASSETS STRUCTURE strategic restructuringoftheTradedivision. million euros(79,596tolars)weredueto investment structureintheamountof332.1 cent share. an 18andshort-termfinancialinvestmentsa9per tangible fixedassetsandinvestmentpropertyhad i.e. 73percent,shareintheassetsstructure,while investments long-term financial 74,827 79,596 investments short-term financial 9,082 10,077 assets other 948 827 SIT inmillions assets total 103,019

109,505 5,706 investment inthecapitalmarket. 87.9 millioneuros(21,068tolars)for fixed assets,mainlyforbuildingthemarket,and (1,232 milliontolars)forinvestmentintangible In 2006,Savad.d.earmarked5.2millioneuros INVESTMENTS Onehalfofnetprofit,whichamountedto23.8 • The changesinequitywereasfollows: structure itrepresenteda72percentshare. per centhigherthanlastyear.Intheliabilities 328.3 millioneuros(78,682tolars)was10 The equityofthejointstockcompanySavatotalling LIABILITIES STRUCTURE (SIT inmillions) Liabilities structureat31/12/2006 Sava d.d. to otherrevenuereserves. million euros(5,706tolars),wasallocated 31/12/2006 01/01/2006 100,000 120,000 20,000 40,000 80,000 60,000 0 qiylong-term equity 71,277 Thesurplusfromrevaluationinconnectionwith • 5.3millioneuros(1,282tolars)was • volume andtypeofbusinessitconducts. has sufficientcapitalavailablewithregardtothe with thejointstockcompanySavaas there arenorisksinvolvedinconductingbusiness We estimatethatasfarsolvencyisconcerned, and solventhasafavourablecapitalstructure. The jointstockcompanySavaisbothhighlyliquid FINANCIAL POSITIONOFTHECOMPANY 78,682 tolars). increased by12.5millioneuros(2,985 long-term financialinvestmentsatfairvalue allocated tothepaymentofdividends. liabilities 4,143 6,976 short-term liabilities 27,331 23,447 liabilities other 268 400 liabilities total 103,019 109,505 85 ANNUAL REPORT 2006 BUSINESS ANALYSIS 86 ANNUAL REPORT 2006 BUSINESS ANALYSIS TheSavaGroupwillgenerateatotalpre-taxprofit • Owingtoastrategic decreaseinthesalesvolume • In theoperatingincomestructurerevenuesof • Wewillgeneratenetsalesrevenuesof185million • business andfinancialgoals: In 2007theSavaGroupwillachievefollowing International FinancialReportingStandards. Sava Groupfor2007havebeenpreparedinlinewith Both the2006businessresultsandplanfor expect ittogrowcontinuallyintheyearsahead. Sava d.o.o.isinitsinitialdevelopmentphaseandwe divisions. TheoperationofthecompanyEnergetika Tourism, RealEstateandInvestmentFinance division togetherwiththeForeignTradenetwork, and developmentoftheRubberManufacturing Our mainactivitiesaredirectedtowardsthegrowth profit of30.6millioneuros (7.3billiontolars), of 33.5millioneuros(8billion tolars)andanet associated companieswillbeenhanced. Financing incomearisingfromthestakein to theprofitgeneratedbySavaGroup. Sava d.d.,whichmakesasignificantcontribution both totheSavaGroupandholdingcompany lower profitthanintheyearbefore;thisapplies of financialinvestmentsweplantogeneratea an 8percentshare. Tourism 32,RealEstate10andOtherOperations Trade networkwillhavea50percentshareand Rubber ManufacturingdivisionwiththeForeign net salesrevenuesin2006. euros (44.3billiontolars),or9percentmorethan FOR 2007 OUTLOOK 18. as hasbeenthecaseuptillnow. to theplannedcommonsuccess, make amuchbiggercontribution subsidiaries oftheSavaGroupwill financial investments,whereas sale ofourassetsintheform a considerablylowervolumeinthe the adoptedstrategyweanticipate realistic andfeasible.Inlinewith ambitiously setgoalsfor2007are Management ofSavad.d.,the According totheBoardof strategy inthenextfive-yearperiod. first inimplementingitsintegrated for 2007envisagesthisyearasthe The businessplanoftheSavaGroup Thenumberofemployeeswillincrease,especially • Assetsforsuchextensive investmentswillbe • Weplantoenhancefinancialinvestmentsbymore • Investmentswillmainlybeearmarkedfor • Achangeintheinvestmentpolicywillhavea • Wewillimplementtheadopteddividendpolicy, • 73percentoftheplannedprofitSavaGroup • in thepreviousyear. employ 2,593people–29employees morethan in Tourism;attheendof2007SavaGroupwill banks. portfolio investmentsandpartlybyfinancingfrom provided partlythroughthesaleofcertain than 75millioneuros(18billiontolars). allocated totheseactivities. 40.2 millioneuros(9.6billiontolars)willbe of productioncapacityinRubberManufacturing; market inInvestmentFinanceandmodernisation Tourism division,realestatetobesoldinthe finishing thebuildingofnewhotelfacilitiesin share. mid-term growthinthemarketvalueofSava flow oftheSavaGroup,whichwillbereflectedin favourable effectonthepresentvalueoffreecash amount ofprofit. dividends, sinceitwillnotbeaffectedbythe which envisagesthepermanentannualgrowthof profit. that subsidiariescontribute27percenttototal its associatedcompanies,whereasitisplanned operations oftheholdingcompanySavad.d.and will beduetotheprofitgeneratedbyfinancial and a4.1percentreturnonassets. which representsa7.5percentreturnoncapital 19. 1. and wellnessservicesonaEuropeanscale.In2006 companies offeringthehighestnumberofhealth of services,recognisabilityandpowerasoneour character thatoriginatesfromitstradition,avariety image, whichoughttoexpressconfidence,amodern resorts andispresentlystillbuildingupitsbrand The PannonianSpasbrandunitesfivethermalspa that wereorganisedbytheSloveneTouristBoard. tourism exchanges.Italsotookpartinworkshops participated innumerousimportanttradefairsand strategy ofjointmarketingactivitiesand In 2006,SavaHoteliBledcontinueditsenvisaged Spas brandname. eastern SloveniaareunitedunderthePannonian the nameofSavaHoteliBled,andhotelsinnorth- Gorenjsko regionwemergedthecompaniesunder both inthedomesticandforeignmarket.In division, whichwerebothprotectedandpatented main brandnamesweredesignedintheTourism On accountoftwoseparatetouristdestinations nature ofTourismoperations. of theTourismdivisionstemsfromspecific in alldivisions.Adistinctionthelogonamedesign in theestablishedsystemofnamingcompanies a clearpolicyforourbrandnames,whichisreflected In theholdingcompanySavad.d.wehaveformulated Managing brandnames MARKETING 19. products andservices. market appealofour thus strengtheningthe communication activities, through ahighlevelof reinforce ourcorporateimage of ourbrandnames.Wewill recognition anddevelopment We alsopromotethe and services. inourproducts up trust contributing tobuilding in communicationweare By promotingexcellence design anddevelopthemestosupport thebrand • developthebrandnamesysteminTourism • updatewebsitesincertainpartsoftheGroup; • The mainprojectsthatareplannedfor2007are: June 2006. website ofthecompanySavad.d.waslaunchedin corporate identityonourwebsites–therevamped brand namesinalloperationsandbuildour We prepareannualcommunicationplanstosupport is stillourmainrecommendation. that exceedcustomerexpectations–something donations. Aboveall,thecompanyerectsbuildings individual projects,pressreleases,sponsorshipsand been achievedthroughpromotionalcampaignsfor Slovenia andabroad.Reinforcingthebrandnamehas quality. Thesearelocatedatoutstandingsitesbothin modern architecturaldesigntohighstandardsof division isacompanywhichconstructsbuildingsof The companySavaIPd.o.o.fromtheRealEstate was developed. from “blackwater”–TheThermaliumCollection 3000 andacollectionoffacialcareproductsmade and Ukraine.Anew5*hotelwasopenedinTerme potential suchasScandinavia,GreatBritain,Russia name inthemarketsthatwebelieveshowgreat we launchednumerouscampaignsunderthisbrand names ofeachthetwotouristdestinations. division; and 87 ANNUAL REPORT 2006 BUSINESS ANALYSIS 19. 2. Focusing on the TOURISM customer In Sava Hoteli Bled we concentrate in the markets where no closer co-operation has been established By continually identifying market opportunities and thus far such as Scandinavia, Belgium and Spain. The adopting an integrated approach to customers we same applies to Pannonian Spas as well. We have are making a significant contribution to the long- continued with our active involvement in the SPOT term success of companies in the Sava Group. We consortium, which acquires new flight routes, and will enhance the quality of the information system, participated in the presentation at Charleroi airport which forms the basis for efficient management of in Belgium, from where the low cost carrier WizzAir opportunities and risk associated with customers. has established a direct flight to Ljubljana.

The development and range of our products and We began to market our congress facilities and services is founded on the TOP3-2-1 strategy. This services directly with organisers and conducted means that we are endeavouring to be the first one in successful marketing campaigns for bus tour the state, at least among the two best in the region and operators. The sale of wellness services was among the three best in the world. We focus on promoted through the advertising campaign in the products and services that enable us to achieve a Slovene market, by fliers in foreigh languages, and leading position. an announcement in the wellness catalogue published by the Slovene Tourist Board. We regularly By using sophisticated information support in all of the announced innovations and special offers on the companies we regularly measure customer website, sent e-news to guests who had already satisfaction, introduce measures to improve services stayed at our facilities, and issued a special and use numerous other instruments in customer newspaper. relations management. We have supported these activities with the SAP information system, which Major promotional marketing campaigns in enables business operations to be monitored. Pannonian Spas include the introduction of a central booking system, joint advertising in the media and The continual search for new market opportunities on web portals, joint presentations in larger trading creates an expansion in our business volume and an centres in Slovenia and abroad and other forms of improvement in the present market share. Decisions joint presentation. for entering new markets and segments are based on thorough market analysis and examining the REAL ESTATE specifics of each individual market or segment. One of the main tasks is seeking potential customers and We researched the market by employing periodic developing sales and after-sales services. Through questionnaires and holding interviews with the above-mentioned activities we efficiently reduce customers and potential customers on site, while market-based risks in the long run. introducing the requirements that our main customers will have in the future. We also carried out RUBBER MANUFACTURING the annual customer satisfaction survey. In terms of business volume, recently our principal customer has Thanks to innovative products that meet customer been the state and its ministries and offices, requirements, we are managing to retain an increase respectively. For each building that is sold in the in sales volume. Sales results are excellent and market we prepare a marketing plan with a fixed surpass the 2005 figures by 21 per cent. Foreign advertising volume and budget. markets, especially European Union markets,

ANNUAL REPORT 2006 BUSINESS ANALYSIS account for a three-quarters share in the sales We are proud of the awards that architects and structure. Marketing activities of the company architectural studios, with whom we collaborate, Savatech d.o.o. were carried out as part of sales have received for the projects we have built operations in individual product groups and together. To mention just two of them: the Preæeren depended on the diverse application of products, the Award (Vozliå Architectural Studio for the police markets where they are sold and the specific nature station in Moste, Ljubljana) and the Golden Pen of these markets. Award (Jadranka Grmek, Genius loci for terraced houses in Trnovo, Ljubljana).

88 designingapermanentandprojectgroupsinthe • a strategicshift:fromnegotiationsonbetterprices • poolingvolumeandensuringallcompaniesinthe • we basicallyfocuson: In developingthesupplyfunctioninSavaGroup competitive edgeinalloperations. purchasing wearecontinuallyincreasingour the SavaGroup.Bymaintainingexcellencein conducts, combinesandco-ordinatesthesupplyin competence centreStrategicPurchasing,which the supplymarkethasbeenformulatedin The purchasingpolicyandstrategyofapproachesto and goods(annualdeviationsin%) Price fluctuationsofrawmaterials Sava Group special cases,alsosuppliers; networks ofinternalcustomers,specialistsand,in (coverage); to adecreaseincostsandincreaseaddedvalue purchasing marketappearjointly; AND SUPPLIERS PURCHASING STRATEGIC 20. (Source: ECB,StatisticsPocketBook) Weighted pricefluctuations Price fluctuationsintheSavaGroup 10 12 -4 -2 -6 0 2 4 6 8 2002 -0.1 0.0 figure inrelativeterms. reach adoubledigitpercentage a lagintheeuroregionwill market. Bytheyear2011such lag behindmovementsinthe and assurethatpurchaseprices we willseizeallopportunities the market.Insupplymarket provided byajointappearancein the utilisationofsynergies market-based risksandensure By levellingsupplywereduce percentage points. rise inmarketpricesandourpurchasingby3 In 2006,weincreasedthedifferencebetween sourcingstrategicsuppliersandpartnersinBRIC • development ofcontractingstrategicrelationships • poolinginpurchasingassociations–co-operation • consolidationofastrategicrelationshipwiththe • incorporation ofallpersonnelfromtheSavaGroup • global andrapidlydevelopingareas. for principalpurchasinggroups;and outside theSavaGroup; with interestgroupsorcompaniesalsofrom of rawmaterialsandenergy; Goodyear corporationandco-operationinthearea purchasing; who canmakeacontributiontothequalityof 0320 052006 2005 2004 2003 -0.9 1.6 -3.4 3.8 -2.9 7.1 11.2 -1.9 89 ANNUAL REPORT 2006 BUSINESS ANALYSIS 90 ANNUAL REPORT 2006 BUSINESS ANALYSIS search andintroductionofnewsourcesraw the SavaGroupwehaveprogressedinsystematic In supplyingtherubbermanufacturingcompaniesof 2006, thentheybegantofall,yetremainhigh materials increasedconsiderablyinthefirsthalfof Globally, thepricesofrubbermanufacturingraw (annual deviationsin%) and goodsinRubberManufacturing Price fluctuationsofrawmaterials Sava Group 2005 and2006 natural rubberin Price fluctuationsof (Source: ECB,StatisticsPocketBook) products intheEU Price fluctuationsofindustrial Price fluctuationsinRubberManufacturing SIR 20 SMR 10 RSS 1 SMR L SMR CV60 0.90 1.70 1.90 2.10 2.30 2.50 1.10 1.30 1.50

01/01/2005

01/02/2005

01/03/2005

01/04/2005

01/05/2005 10 12 14 -2 -4 0 2 4 6 8 01/06/2005

01/07/2005

01/08/2005 2002 01/09/2005 -0.1 superfluous expensesfromthesupplierchain. relations withsuppliersinordertoeliminate materials. Wehavedevelopedandexpandedour demand andotherfactorsaswell. due tothefactthatproductsandserviceslagbehind 0.0 01/10/2005

01/11/2005

0320 052006 2005 2004 2003 01/12/2005 -0.9 1.3 01/01/2006

01/02/2006

01/03/2006 -1.0 3.6 01/04/2006

01/05/2006

01/06/2006 7.7 1.9 01/07/2006

01/08/2006

01/09/2006 12.8 5.4 01/10/2006

01/11/2006

01/12/2006 to evernew,variableinternal andexternal Sava Groupadaptsitsorganisationandqualifications dynamic growthratein2007too.Purchasingthe period tocontinuewithavariablebutbalancedand We expecttheglobalmovementfromrecent jointpurchasingcontractsmadewithimportant • Our purchasingpolicyiscarriedoutintwodirections: environment andsocialcommunity. reliability ofdeliveries,aswellitsattitudetothe of asupplier,itsreferences,price,qualityand of asupplierdepends,aboveall,onourassessment In additiontothegeographicalpositionselection Structure ofpurchasingin2006bymarket Sava Group (annual deviationsin%) and goodsinTourism Price fluctuationsofrawmaterials Sava Group suppliers; and Suppliers –foreign Suppliers –EUmarkets Suppliers –domestic (Source: ECB,StatisticsPocketBook) goods intheEU Fluctuations inpricesofconsumer Price fluctuationsinTourism -20 -15 -10 10 -5 0 5 2002 -0.1 markets. Rubber Manufacturingispurchasedinforeign Slovenia, whilethemajorityofrawmaterialsfor The mainsupplymarketoftheTourismdivisionis cooperationwithlocalsupplierswhoseadvantages • global markets. services thatweofferinthedomestic,regionaland improved competitivepositionofproductsand circumstances, therebyofferingsavingsandan 0.0 companies. are permanentavailabilityandtheknowledgeofour 73% 0320 052006 2005 2004 2003 -0.9 2.0 -7.5 22% 4.1 -11.1 6.2 5% -14.2 8.5 91 ANNUAL REPORT 2006 BUSINESS ANALYSIS 92 ANNUAL REPORT 2006 BUSINESS ANALYSIS IncorporatingSavaGroupcompaniesinthe • Adevelopmenttechnologyunitoperatingincertain • of thefollowing: companies wasexercisedandpromotedbymeans for thegrowthandprofitabilityofSavaGroup In 2006aninnovativeapproachasthefoundation competence centresofknowledgeplaythemainrole. initiate measuresforimprovements,wherethe Group. Ifanydeviationisidentified,weimmediately annual andstrategicgoalsofthecompany and thebalanceofachievementscoupledwith provides ongoingmonitoringofprocessefficiency system andthebalancedscorecardmethod The applicationofthekeybusinessindicators systematic changesandimprovements. established deviationsareappliedaschallengesfor the Europeanbusinessexcellencemodel.The achievements. Theprogressismeasuredbyusing influence thegrowthandimprovementofbusiness the controlandchangeofallindicatorswhich Through totalqualitysystemsweareprogressingin networks. technology platformsinSloveniaand products, servicesandtechnologies. In thiswaywemanageriskwhenintroducingnew development instituteandlaboratoriesofSavad.d. innovative ideaswiththesupportof companies toprovidepermanentassessmentof PROCESSES OF BUSINESS DEVELOPMENT 21. improvements. goals achievedand and examiningthe efficiency ofprocedures, innovation, monitoringthe of theSavaGroupthrough We ensuregrowthintheassets comparison withthepreviousyear. implemented proposalsincreasedby32percentin year. Bydoingso,theeconomicbenefitof pooling relatedandcomplementaryproposalslast therefore financiallymoreefficientproposalsby past fouryears,andwehavedesignedcommon increased thenumberofimprovementsduring innovation proposalsfromemployeeswehave Through methodicalactivitiesintheareaofmass motivated company. courses fromtheaspectofalearning,thinkingand manage alltypesofcostandparticipateintraining approach andembracetherationalisationculture, We encourageemployeestofosteraninnovative InvolvingallemployeesintheSavaGroup • Establishinglinkswithothercompaniesand • euros (695milliontolars)in2006. improvements programmewesaved2.9million introducing proposalsgatheredinthecontinual for improvementbasedonthe process ofsystematicallyseekingopportunities development projects. experiences aswellimplementinganumberof obtained in2006tooforacquiringknowledgeand R&D projects;grantsfromvarioussourceswere science institutesbothinSloveniaandabroad 20 Keys method; by thefigureswithindicators forpursuing • thecapacityof ourcentrallaboratory(performing • successfulauditsbycustomersandthe • finishingtheprocedureforobtainingquality • a significantincreaseinthesaleofourproducts • in: The effectsoftheseactivitiesin2006arerevealed a decreaseincostsarisingfromloweringlabour • awayofthinkinginlinewiththephilosophybased • introductionoftheexcellencemodelin • introducingnewandmaintainingcurrent • systems are: the competitivestrengthofourcompanies.These that makeasignificantcontributiontoincreasing successfully introducingandimplementingpolicies Over alongerperiodoftimetheSavaGrouphasbeen savings. achievements intheareaofqualitythatresult SIST ENISO17025standards;and the mostexactingmeasurements)accordingto accreditation institution; 9001 intheentireGroup; management certificateaccordingtoSISTENISO and services; costs. models, definingprocessstability);and on the6Sigmamethod(introducingmathematical business processesoftheSavaGroup; SIST ENISO17025,22000); excellence (SISTENISO9001,SISTISO/TS16949, conformity withtheprinciplesofbusiness standards whichregulatebusinessprocessesin ASSURANCE SYSTEM QUALITY 22. competitive edge. the economyandour quality andincrease and approachestoassure most appropriatemethods we shallintroducethe In individualoperations European systems. which conformstothatof business processmanagement We developandintroduce business processes. managerial toolsandsystematicallyimprove us tomakeuseofnumerousstate-of-the-art systems andtotalqualitymanagementencourage The demandforhighlyefficientmanagement recognition invarioussegments. thereby assuringthatSava’s touristservicesgain create standardstobeusedinSavaHotels&Resorts, companies. Wehavedesignedprofessionalteamsto handling andexperiencesamongindividual division wasdevotedtoexchangingthebest In 2006,thegreatestattentioninTourism TOURISM d.o.o. intheVeloandPrintprogrammes. latter wasalsocarriedoutinthecompanySavatech as thesecondpartofauditbyakeycustomer.The according totheISO/TS16949wasperformedaswell In Sava-GTId.o.o.externalcertificationoftheprocess million tolars)intheperiodofpastfiveyears. (24 milliontolars),andabout560,000euros(134 Manufacturing amountedtoabout100,000euros higher. SavingsinproductqualityRubber product qualityinthiscompanybeing0.55percent company Sava-GTId.o.o.wasespeciallysuccessful– cent despitealargenumberofnewproducts.The with ourexpectations.Productqualitywas99per evaluation ofprocessstability,whichwasinline In 2005/2006wecontinuedwiththedigital RUBBER MANUFACTURING 93 ANNUAL REPORT 2006 BUSINESS ANALYSIS 94 ANNUAL REPORT 2006 BUSINESS ANALYSIS audits. increasing theperformanceefficiencyofinternal SIST ENISO9001and22000,thereby new andcurrentinternalauditorsforthesystems In 2006,weconductedcomprehensivetrainingof employee knowledge. operation, workingtimeorganisation,andexpanding organisation, goalmanagement,workingteam Keys In thecompaniesofSavaHoteliBled5keys standardising thequalitymanagementsystem. companies weresuccessfulwhenupgradingand Lendava d.d.andTermePtujd.o.o.provedthese audit inthecompaniesTerme3000d.d., audit wassuccessfullycompleted.Thefollow-up audit ofallmanagementsystems.Thefollow-up In TermeRadencitheappraisersperformedajoint won abronzemedalinthecampaign. Hoteli Bledd.o.o.ThecompanyG&P submitted by:GrandHotelTopliced.o.o.andG&P participated. Theself-assessmentapplicationwas the year2006twocompaniesfromTourism In theSlovenecampaignforbusinessexcellence method wereintroduced:cleaningand 20 Sava Grouparecertifiedaccordingtothisstandard. company Savad.d.Indoingso,allcompaniesofthe process accordingSISTENISO9001intheholding In 2006wesuccessfullyperformedacertification The holdingcompanySavad.d. improving andupgradingthissystem. Furthermore, itprovedhasbeencontinually conformity withthestandardSISTENISO9001. audit ofthequalitymanagementsystemandits The companySavaIPd.o.o.passedtherepeated REAL ESTATE Self-assessmentaccordingtotheEuropean • Self-assessmentaccordingtothe • A 5percentannualdecreaseincostsdueto • Goals by2011 450 and550pointsby2011. business excellencemodelwillrisetobetween model willrisefrom1.83in2005to42011. system maintenance. lower quality,orcoststhatwerelinkedto 20 Keys in alloftheEuropeanstates and regions. invested bytheEUtocreatesustainable development and abalanceofdevelopment withtheefforts the SavaGroup,anopennesstobusinesspartners European projectsreflectthedevelopmentalnatureof In additiontoobtainingadditionalfundingthe In2006wealso introduced10indicatorsto • Encouragedassociatestorecogniseopportunities • Incorporatedassociatesfromsimilarfieldsand • Ensuredtheuninterruptedflowofactivitiesfor • Encouragedthemanagementofsubsidiariesto • Informed andreportedtothedirectors’councilof • onEUprojects. Lectured • Collaboratedintransferringgoodpracticewith • Involvedassociatesintrainingcourseswiththe • Trainedassociatestoefficientlyplanandperform • out numerousactivitiesin2006asfollows: development andeducation.Thereforewecarried Sava Group,especiallyintheareaofinvestment, is toobtainEuropeangrantsforallcompaniesinthe The maingoalofthecompetencecentreEUProjects enhance theefficiencyofouroperations. their dailywork. for thesystematicutilisationofEuropeanfundsin strengthen corporateidentityandloyalty. to theconsolidationofsocialnetworkand various companiesinjointprojectstocontribute established contactwithprojectdevelopers. project planningandimplementation prepare asetofprojectideas. the SavaGroupaboutourwork. regard toobtaininggrantssuccessfully. Sava Academy. projects. EU PROJECTS 23. co-financed byEUgrants. our companieswillbe all oftheprojectsin development until2011: We haveenvisaged assistance. we provideprofessional European grants,forwhich of theSavaGrouptoobtain We encouragethecompanies IntheLeonardodaVincimobilityprojectwe • theLeonardodaVinciprogrammepilotproject For • TheenvironmentalprotectionprojectinRubber • GrantsfromtheEuropeanRegionalDevelopment • GrantsfromtheEuropeanSocialFundfor • for theirimplementationasfollows: amounting to2.8millioneuros(671tolars) In 2006wedrewup24plansandobtainedfunding operations. projects, fromwhichweintendtodrawfundsforour collaborate indevelopmentandeducational transfer ofgoodpracticestoobtaingrantsand business achievements.Wewillalsoencouragethe able toadaptchangeandbecomeoriented take anenterprisingandinnovativeapproach,be In thefuturetoowewillencourageemployeesto training courses tobeevenhigherin2007. we expectthenumberof participants onsuch courses. Owingtothegood experiencetheyhad 21 ofouremployeesattended thesetraining one-week trainingcoursein the Europeanstates. performed thepersonnelexchange scheme–a we begantoimplementitattheendof2006; in collaborationwithsixpartnersfromthreestates be appliedintherubbermanufacturingindustry; we producedaninnovativeeducationalprojectto spring 2007. very good;thefinalresultswillbeannouncedin Norwegian FinancialMechanism,wasassessedas Manufacturing, appliedtotheinvitationfrom build newtouristaccommodationfacilities. projects intourismwherethefundswillbeusedto development ofrubberprofilesandfortwo institute ofthecompanySavatechd.o.o.,for Fund forco-financingresearchinthedevelopment individuals inallcompaniesoftheGroup. educating employeesanddifficult-to-employ 95 ANNUAL REPORT 2006 BUSINESS ANALYSIS 96 ANNUAL REPORT 2006 BUSINESS ANALYSIS Intheareaofmicro-andnano-technologieswe • WecollaboratedintheinvitationforNATURA2000 • EU projectefficiency Sava Group Thesuccessofsubmittedapplicationstoexceed • 40appliedprojectsincompanieseveryyear. • 60projectideasannually. • Goals by2011 shall repeatedlyapplyforthegrantinfuture. manage toassurereciprocity.Consequently,we good appraisals,however,thepartnerdidnot the companySavatechd.o.o.Theprojectreceived innovative technologyregardingrubberplugsin Union forresearchworkinthedevelopmentof the 6thFrameworkprogrammeofEuropean applied totheinvitationfromMNTERA-NETwithin promote co-existencewithnature. Biodiversity inGolfCourses,seekingtopublicly with theprojectinvolvingPresentationof 40 percent. Efficiency (%) Submitted 10 15 20 25 30 o fpoet efficiency% no. ofprojects 0 5 2006 60.00 Jan 1 52.17 e a p a u u u e c o Dec Nov Oct Sep Aug Jul Jun May Apr Mar Feb 4 52.17 4 48.00 per cent. above theEuropeanaverageofbetween15and25 fluctuates between40and60percent.Thisiswell the percentageofsuccessfulapplications,which We measuretheefficiencyofourworkaccordingto European Union. Slovenia andthedevelopmentconceptsof correspond moretothedevelopmentprogrammeof plastics andtextiles–adaptedourplansto technology platforms–intheareasofmetal, Last yearourcompaniesthatwereinvolvedinthree 6 36.84 19 39.47 19 63.16 19 63.16 19 59.52 23 59.52 23 62.79 24 67.44 24 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 0.00 continuingwithaproceduretostandardisethe • complementingthemanagers’informationsystem • carryingoutextensiveplanningandintroducing • by changingfromtheSAPsystemtoMicrosoft • year inallofthedivisions: the implementationofstrategiesadoptedinthis In 2006,webegantocarryoutchangesthatsupport business informationareagreatasset. and thedesignofindependentinternalcentres knowledge ofinformationscience,skilledpersonnel co-operation withcorporatemanagement,excellent encourages change.Indoingso,continualandclose supports theintroductionofinnovativeideasand companies andincollaborationwithusersit Sava Groupactivelypursuesthedevelopmentof The competencecentreStrategicinformaticsinthe designingastandardisedcomputermodel - byintroducingtheSAPsystemforfinanceand - information platforminTourism: success ofcompanybusinessoperations; Group asoneofthemaintoolsformonitoring for businessreportingatthelevelofentireSava the euro-currency; system; thus takingourfirststepsinstandardisingthe program platformand64-bitserverarchitecture, which weshallutilisetothefullinnewcompanies. support systemforatypicaltouristcompany, catering informationsystemROS;and applications usingthestandardhoteland controlling, andstandardisingcomputer SUPPORT OF INFORMATION DEVELOPMENT 24. their competitiveedge. Group, whichstrengthens value inalldivisionsofthe facilitate thecreationofadded In thiswaywesupportand of informationsources. ensuring theefficientutilisation standards available,thereby with thebestpracticesand for informaticsinaccordance integrated managementsystem We areestablishingan carryingoutaplantoupgradetheSAPsystem; • settingupanIntranetportal; • continuingwiththeintroductionofremotecontrol • startingtheprojecttostandardiseelectronic • the envisagedstrategicpolicies: advanced operationsandintroductionofchangesto The plansfor2007involvethecontinuationof continuingwiththeintroductionofsafety • starting tointroduceauniformcustomerrelationship • Tointroduceanintegrateddocument system. • Tocontinuallyupgradetheinformation • Tomanagetheinformationstructure ofthe • Tomaintainbusinessprocessesbyproviding • Goals by2011 simplify andimproveusersupport; tools andaccesstoworkstations,whichwill features andsafetyimprovementsmoreeasily; maintenance aswellintroducinginnovative efficient systemsupervision,managementand mail systeminordertoprovidesimplerandmore work procedures. regulations governinginformationinadministrative management system(CRM)inTourism;and stability, reliabilityandefficiency. technology systemintheareaofsafety, Sava groupcentrally. technologies. support forintroducingnewIT-solutionsand 97 ANNUAL REPORT 2006 BUSINESS ANALYSIS SUSTAINABLE DEVELOPMENT REPORT

98 toactasa partner withthesocialcommunityin • tomakeavaluablecontributionlifethatisworthy • to become themostsuccessfulandsought-after • development are: The goalsthatweimplementinsustainable development inthisarea. adapting toguidelinesandencouragingthe strategy andgoalsofsustainabledevelopment, established in2006.Itsbasictasksareplanningthe is supervisedbyaspecialsustainabilityteamthatwas The performanceofsustainabledevelopmentatSava them. employees, whichiswhywedevotespecialcareto strategy is,undoubtedly,resourcefulandloyal management withenergy.Thefoundationofour environment-friendly technologyandcareful advanced developmentorientationsistheuseof establish responsiblepartnershiprelations.Oneofthe and trustofthelocalcommunity,thereforewestriveto We canbesuccessfulonlywhenenjoyingthesupport attractive opportunitiesforemployingnewpersonnel. partners andtheenvironment,therebycreating our customers,employees,shareholders,business In thiswaywecontinuallysurpasstheexpectationsof a “goodcorporatecitizen”inallareasofourbusiness. and improvetheirqualityoflife.Weendeavourtoactas through theproductsandserviceswhichareuseful Our responsibilitytowardscustomersisshown these issuesshouldbemore enhanced; our employees,customersand shareholdersabout should beimprovedfurther, and theawarenessof that safety,healthandenvironmental protection of afutureandactwithresponsibility,whichmeans ambitions inlinewithcorporatevalues; employees areabletofulfiltheirabilitiesand natural andsocialenvironmentwhereallofour partner inthesustainabledevelopmentof Slovene managerofcapitalandaresponsible IN THESAVAGROUP DEVELOPMENT SUSTAINABLE 25. social environment. towards thenaturaland associates, andresponsibility satisfied andmotivated co-operation andlearning, values: mutualrespect, we fosterandenhanceSava’s of sustainabledevelopment community. Followingthepath our involvementinthesocial business strategyisnamely social responsibilityand The keypartofourcorporate main activityoftheSavaGroup. Sustainable developmentisthe to beginin2007. the initiativeUNGlobalCompact in October 2006,thecompanySava becameafounderof Owing toourdecisionsupport theseprinciplesin rights, labour,theenvironment andanti-corruption. adopted principlesthatinvolvetheareaofhuman international code,whichcombinesteninternationally Our companyhasaccesstotheGlobalCompact GRIreporting(GlobalReportingInitiative). • 10sustainabledevelopmentprinciplesasdefined • basiclabourstandardsasdeterminedbythe • fundamentalrightsasdefined bytheUnited • on thefollowingguidelines: The principlesofoursocialresponsibilityarebased adults. child labourintheSavaGroupasweemployonly free willofbothemployeeandemployer.Thereisno each jobweconcludeacontractwhichisbasedonthe on thepreventionofforcedandcompulsorylabour;for of discrimination.Werigorouslyobservetheprovisions dealing withco-workers,thereforetherearenocases European Uniondirectivesregardingequalityin All companiesintheSavaGroupstrictlyfollow them inlinewithrecommendations. activities andbegantosystematicallysupervise labour andsocialprinciplesin2006werevisedour In compliancewithinternationalstandardsfor tomaintainexcellenceinbusinessoperationsas • toreducetheundesiredimpactofouroperations • by GlobalCompact;and International LabourOrganisation; Nations’ UniversalDeclarationofHumanRights; advocated inourpolicy. management withenergy;and on theenvironmentandtoensureresponsible order todevelopmutuallyandachievesetgoals; Slovenia, whichis 99 ANNUAL REPORT 2006 SUSTAINABLE DEVELOPMENT REPORT 100 ANNUAL REPORT 2006 SUSTAINABLE DEVELOPMENT REPORT FEBRUARY OF THEYEAR HIGHLIGHTS 26. JANUARY MARCH The 36 ensure youngassociatesasafeandhealthyworkingenvironment. campaign oftheEuropeanAgencyforOccupationalHealth andSafetyentitled which promoteshealthyandsafework.Atthesametime weareinvolvedinthepreventive We collaborateinthe We assistinthehumanitarianaidcampaignforDarfur. Association. Grand HotelTopliced.o.o.signsasponsorshipagreementwiththeSloveneBartenders’ changes thataretobeintroducedinthisarea. education andthesituationinlabourmarket,existingscholarshipsystem Minister Zverandeconomistsweprovideinformationaboutthepossibilitiesforfurther In themeetingwithstudentsofTechnicalSchoolCentreKranjandMinisterDrobniå, Combination thatisheldinKranjandMedvode. From 30Januaryto5FebruarySavad.d.sponsorstheFISYouthWorldCupinNordic history andotherimportantmilestonesintheformationofSlovenia. cultural heritageandtoclarificationoftherolethatTIGRorganisationhadinSlovene defended SloveneterritoryinVelikoCerje;thisisourcontributiontothepreservationof We supporttheerectionofpan-Slovenianmonumentinmemorypeoplewho Pannonian spas. in Terme3000d.d.catering andtourismprofessionsemploymentopportunities in In co-operationwiththeSecondary SchoolforCateringandTourismfromRadenciwe present traditionally sponsoredbySava d.d.Visitorscanviewperformanceswithnoadmission fee. In SavaGroup’scompaniesCCSafetyrunsapreventive verified withcertificatesinthecompaniesSavatechd.o.o. andSava-Schäferd.o.o. The environmentmanagementsystemaccordingtothe ISO14001standardisrepeatedly protection. d.o.o. adoptanewpolicyconcerningoccupationalhealthandsafetyenvironmental The rubbermanufacturingcompaniesofSavatechd.o.o.,Sava-Schäferd.o.o.andSava-GTI th week ofSlovenedramatakes placeinthePreæerenTheatreKranj.Theeventis Science fortheEconomy forum. March –aMonthofSafety A SafeStart campaign, to APRIL JUNE JULY MAY At theendofmonth 10 90 We supporttheeventorganisedbySlovenian-Russian Associationontheoccasionof exhibition inthenationallibraryMunich. We developcollaborationwiththeassociation closer totheEuropeanUnion. of lecturesbyreputableprofessors,analystsanddiplomats aboutbringingtheBalkanstates We helpIFIMES(InternationalInstituteforNear-Eastand BalkanStudies)toorganiseaseries In co-operationwith Associates In BledHotelParkafinaleventforthethirdgenerationof Kranj Together withtheScouts’AssociationandMunicipalityofKranjweorganise We preparethe Company The companyG&PHoteliBledd.o.o.winstheacknowledgement among theyoung. professional cyclistTadejValjavecandSavaCyclingClubtopopularisethesportofcycling We presentSavaCyclingClub’snewcontinentalteamfor2006aswellajointprojectofthe achieves successinternationally. We signasponsorshipagreementwithBledRowingClub,theSlovenesportsorganisationthat Together withRTVSloveniawecelebratethe15 Castle. Sava d.d.sponsorsthestagingofopera importance ofahealthywaylife. Terme 3000d.d.supportsthefirstDMrecreationalraceinordertomakewomenawareof The international39thGrandPrixKranjorganisedbySavaCyclingClubtakesplace. the charityMayor’sRace. Sava d.d.sponsorstheManagers’CharityBallaswell Cankarjev Dom. Terme Ptujd.o.o.,organisedby PtujBallooningClubandsupportedbyTermePtuj. 30 We takeoversponsorshipintheballetspectaclebyWilliamForsythe, management certificateaccordingtotheISO14001/2004standard. The companiesSavatechd.o.o.andSava-Schäferreceiveanewenvironment potential ofourtourismindustryintheEuropeanUnion. the impactofgovernmentreformsondevelopmenttourisminSloveniaand devoted toaninnovativeapproachachievingacompetitiveedgeinthetourismindustry, th th anniversary ofbuildingtheRussian ChapellocatedattheroadtoVræiå. anniversary oftheradiobroadcast cleaning educationalcampaignforthefifthtimeinrow. , distributedbythemanageresssectionofManagers’Association. takes place. Report onResponsibleHandling Finance magazine theSavaGrouporganises th Ptuj InternationalBallooning Festival2006takesplacein Studio at17 The BarberofSeville th for theRubberManufacturingdivision. Growing Book anniversary oftheradiochannelA1and . Youth Week that takesplaceinKhiselstein and assistinorganisingan Sava Academy,Promising Tourism Focus Impressing theTsar Manageress-friendly events inKranjand Let’s Clean , whichis , in 101 ANNUAL REPORT 2006 SUSTAINABLE DEVELOPMENT REPORT AUGUST In Bled we host the international strategic conference South Caucasus 2008.

In Terme Ptuj we organise the first national championships in toboggan rides.

SEPTEMBER We sponsor the Summer Grand Prix in ski-jumping (FIS) in Kranj.

For associates in the Tourism division and representatives of local tourist organisations and the Development Agency of Gorenjsko we organise the Tourism and Entrepreneurship congress, one of the lecturers being Ray M. Cassar, a renowned authority on tourism.

We sponsor the 2nd International Symposium of the Slovene Neurosurgical Society on the cavernose sinus that is held in Ljubljana.

The traditional charity golf tournament of friendship for the President’s Cup takes place in Bled. The funds raised are donated to create a new children’s playground in Bled.

The Olympic Chef Team organises a charity event in Bled, which is sponsored by Sava Hoteli Bled.

With a cultural performance in the Preæeren Theatre in Kranj we honour our most deserving associates.

OCTOBER CC Safety prepares the 5th Safety Conference of the Sava Group under the slogan Safety and Health at Work is the Concern of all Employees. All senior and junior managers of the Sava Group participate in the safety conference.

In the traditional preventive campaign October – a Month of Fire Safety we make associates aware of how important fire safety measures are and train them to handle apparatus should there be a hazard of fire breaking out or a fire in its initial stage.

In the 53rd Catering Tourist Meeting organised in Terme Âateœ by the Catering and Tourism Association at the Slovene Chamber of Commerce in co-operation with the Slovene Tourist Board, the associates from Sava’s tourism division win 17 gold, 27 silver and 10 bronze medals in the national catering and tourism elite for their performance.

In Rogaæka Slatina awards are presented to the best managers of more than 30 swimming pools, thermal spas and water amusement parks who participated in the summer campaign entitled Best Slovene Swimming Pool 2006. Votes for the best facility are cast in the radio shows Good Morning, Slovenia; Thermal Park in Terme Ptuj wins a special acknowledgement for the most clean and tidy environment and swimming pool, Terme 3000 and Campsite Bled win 3rd place – the former in the larger pool category and the latter in the category of registered campsite, natural lake and river spas.

We achieve high rankings in the My Country – Beautiful and Hospitable campaign organised by the Slovene Tourist Board. Terme 3000 d.d. wins an acknowledgement for the most tidy health resort and thus 1st place among the larger spas. Terme Lendava wins 2nd place in the

ANNUAL REPORT 2006 SUSTAINABLE DEVELOPMENT REPORT smaller spas category. Campsite Terme Ptuj prides itself upon 1st place and the acknowledgement Seal of Hospitability 2006 in the mid-sized campsite category, whereas the campsite in Terme 3000 wins 2nd place in the large-sized campsite category.

In Preæeren’s birth-place home in Vrba, which is sponsored by the Sava Group, the international project Bridges between the Rivers Drava and Sava is presented, which was co- produced by the members of the Sava Literary Society.

102 NOVEMBER DECEMBER our employeesandsociety. ordinating aprofessionalcareerandfamilylifeaswellourgeneralresponsibilitytowards We jointheproject basis ofwhichisthermalwater. Sava d.d.sponsorsacharitymanagerconcertinCankarjevDom. Group employees. We organiseaNewYear’seventwhereSantaClausgivespresentstothechildrenofSava Savatech d.o.o.andSava-Schäfer A regularannualmeetingtakesplacewithresidentswholiveinthevicinityofcompanies In Terme3000d.d.wepresentauniqueskincarecollection received thecompanyaward. service periodjubileesaswellformerSavaemployeesnowretiredandwho Prior toNewYear’sDayweorganisethetraditionalmeetingofemployeescelebratingtheir education. flattering awardisduetooursystematicinvestmentinknowledgeandconcernforemployee The SavaGroupreceivestheacknowledgement responsibly accordingtoenvironmentalandsocialprinciples. agencies fromtheUnitedNationsOrganisation,economyandcivilorganisationstoact Global Compact We decidethattheSavaGroupshouldgainaccesstoinitiativebyUnitedNationscalled operation. Sava GoodyearandtheBoardofManagementd.d.exchangetheiropinionsonco- In itsregularAnnualMeeting,representativesoftheWorkers’Council,TradeUnionKNG , whichadvocatesencouraginglinkingupwithandcollaborationamong Family-friendly Company , sincewearewellawareoftheimportanceco- TOP 102006EducationManagement. Thermalium CollectionGalex , the This 103 ANNUAL REPORT 2006 SUSTAINABLE DEVELOPMENT REPORT The plains of Prekmurje and the Alpine idyll at Bled lake ravish the body and soul. For all those who love genuine contact with nature we have renovated a naturist swimming pool in the campsite SonËni Gaj in Terme Banovci, the first naturist campsite with a thermal water bathing pool in Europe.

BRINGING NEW DIMENSIONS TO LIFE NATURE - beauty and luxury BRINGING NEW DIMENSIONS TO LIFE NATURE

106 27. 1. employees (232)werenewlyemployedinTourism. employment andanewhotelinTerme3000most permanent position.Duetotheseasonalincreasein employed forafixedperiodoftimeand46gained companies oftheSavaGroup,whom344were 390 associateswerenewlyemployedinthe by RubberManufacturingwith39percent. share ofemployeeswith55percent,andisfollowed Group’s composition;Tourismstillhasthelargest Nevertheless, therewerenogreaterchangesinthe off theTradeandChemicalsdivisions. in 2006.Thedecreasethisfigureisduetoselling Sava Groupdecreasedfrom3,062in2005to2,499 In 2006,theaveragenumberofemployeesin OF EMPLOYEES THE AVERAGENUMBERANDSTRUCTURE Concern foremployees OF EMPLOYEES THE DEVELOPMENT 27. opportunities foremployment. create themostattractive achievement. Wetherefore to changeandorientedgood be enterprising,adaptable innovative approachandto our employeestofosteran of personnelweencourage development andmotivation education, training, Through theproperselection, and satisfaction. demonstrating thehighlevelofemployeeloyalty fluctuation percentageasrelativelylow,thus share inthenumberofemployees,weestimate its seasonalnatureofbusiness,hasthelargest which demandshighemploymentflexibilitydueto more thanlastyear.SincetheTourismdivision, amounted to11.1percent,whichwas0.6cent The totalfluctuationintheSavaGroup2006 termination accordingtothelaw. given bytheemployer,and22.7percentwasdueto termination ofcontract,in26percentnoticewas cent ofthefluctuationwasduetoanagreed less thanintheyearbefore.InGroup51.3per 259 employeeslefttheSavaGroupin2006,whichis sales. account ofanincreaseinproductioncapacityand the companiesemployed138newassociateson Tourism isfollowedbyRubberManufacturing,where 107 ANNUAL REPORT 2006 SUSTAINABLE DEVELOPMENT REPORT v mio SIT Average No. of No. of no. of employees employees Index employees 31/12/2005 31/12/2006 2006/2005 1-12 2006 Sava d.d. Kranj 53 56 106 56 RUBBER MANUFACTURING 941 1,001 106 970 Savatech d.o.o., Kranj 757 808 107 782 Sava-GTI d.o.o., Kranj 84 88 105 83 Sava-Schäfer d.o.o., Kranj 43 42 98 43 Sava Rol d.o.o., Zagreb 10 11 110 11 Foreign Trade Network 47 52 111 51 TOURISM 1,328 1,397 105 1,373 Grand hotel Toplice Bled d.o.o., Bled 149 146 98 152 Golf in Kamp Bled d.o.o., Bled 51 52 102 56 G&P Hoteli Bled d.d., Bled 217 225 104 229 Terme 3000 d.d., Moravske Toplice 374 443 118 395 Terme Lendava d.d., Lendava 124 132 106 124 Terme Ptuj d.d., Ptuj 78 82 105 84 Terme Radenci d.d., Radenci 335 317 95 333 TRADE 573/// Sava Trade d.d., Ljubljana 311 / / / MG Market d.d., Ljubljana 262 / / / CHEMICALS 61 Teol d.d., Ljubljana 61 REAL ESTATE 19 19 100 19 Sava IP d.o.o., Ljubljana 19 19 100 19 OTHER OPERATIONS 72 91 126 81 Sava Medical in Storitve d.o.o. 69 88 128 78 Energetika Sava d.o.o., Kranj 3 3 100 3 TOTAL SAVA GROUP 3,047 2,564 84 2,499

EDUCATIONAL STRUCTURE OF EMPLOYEES of employees with 1st, 2nd and 8th level of education increased, whereas the number of employees with 4th In comparison with the previous year the educational and 5th level of education decreased. In the coming

ANNUAL REPORT 2006 SUSTAINABLE DEVELOPMENT REPORT structure of employees did not substantially change. year we shall further improve the educational The changes in the structure are mainly due to the structure of employees, since 4.2 per cent of all sale of the Trade and Chemicals divisions. The number employees study part-time.

108 positions have a25percentshare.Inthe parent In theSavaGroup womeninseniormanagerial In theSavaGroup52percentofemployeesareolder AGE STRUCTUREOFEMPLOYEES by genderin2006 Age structureofseniormanagement Sava Group at 31December2006 Age structureofemployees Sava Group at 31December2006 Educational structureofemployees Sava Group 4 Male Female 1 3 8 7 6 5 2 th th th th th rd nd st &9 level –incompleteprimaryschool level –upto2yearsofvocationalschool level –higheranduniversityeducation level –technicalcollege level –secondaryschool level –atleast3yearsofvocationalschool level –primaryschool th level –Master’sandDoctor’sdegree 10 12 14 16 18 20 0 2 4 6 8 18-20 1.6 5% managerial positions reaches46percent. company Sava d.d.,theshareofwomen in 40 yearsold. and 27percentofemployeesarebetween31 than 41years,21percentyounger30 12 63 13 64 14 65 05 56+years 50-55 46-50 41-45 36-40 31-35 26-30 21-25 8.2 22%

11.1 3% 75%

13.3 30%

13.5 24% 25%

15.9 5%

19.0 10% 12.0 1% 5.3 109 ANNUAL REPORT 2006 SUSTAINABLE DEVELOPMENT REPORT Sava Group

Employee structure by division at 31 December 2006

Sava d.d.

REAL ESTATE

RUBBER MANUFACTURING

TOURISM

OTHER OPERATIONS

2% 1% 39% 54% 4%

VOLUNTARY SUPPLEMENTARY PENSION surpassing the planned results. The average INSURANCE percentage of the variable part of salaries grew considerably in comparison with 2005 from 4.1 to 68 per cent of employees were included in the 5.5 per cent. By introducing a new system of voluntary supplementary pension insurance remuneration we plan to increase the variable part by scheme. The average premium paid by an individual up to 10 per cent in 2007. and a company totalled €38.9 (9,323 tolars). Since at the end of the year we launched a campaign to The average salary in the Sava Group totalled access the collective supplementary pension €1,069 (256,177 tolars) gross, or 4.2 per cent more insurance scheme in Terme Ptuj d.d. This scheme will than last year. In all companies employees received include all Sava Group employees in the year 2007. a gross holiday allowance of up to €834.59 (200,000 tolars) gross, while the Christmas bonus SICK LEAVE AND UTILISATION OF was paid in the amount of up to €375.56 (90,000 WORKING HOURS tolars). Awards were paid to mark the service life jubilee or more important achievements by The percentage of sick leave increased in comparison employees, as well as round anniversaries of with the year before. In 2006, total sick leave individual companies. 187 employees were awarded amounted to 4.8 per cent, while in 2005 it amounted for their jubilee at the pre-New Year meeting. Various to only 4.2 per cent. Sick leave of up to 30 days prizes are distributed according to the Rules on totalled 2.5 percentage points, whereas sick leave Remuneration and Awards, which regulates cash exceeding 30 days totalled 2.3 percentage points. incentives in the form of awards for Model Worker In 2006, the utilisation of working hours (the ratio (93 employees), Company Worker (6 employees), between effective and regular working hours) and Sava Worker (6 employees), and two employees amounted to 79.9 per cent. The total number of received the Manager of the Year award. Our most overtime hours (48,589) in all companies attains deserving employees were honoured on the about one per cent of total working hours. occasion of a cultural performance on Sava Day.

REMUNERATING AND MOTIVATING With the 20 Keys project we encourage employees to EMPLOYEES put forward useful suggestions and improvements. ANNUAL REPORT 2006 SUSTAINABLE DEVELOPMENT REPORT We pursue trends by monitoring the indicator The basis for remunerating and promoting Number of Useful Proposals per Employee. The employees was employee performance. Employees majority of companies are preparing to regulate both are promoted on the basis of selective criteria such the area and the procedure of gathering useful as promotion due to a more demanding job, proposals according to the model established in the additional tasks and duties, market adjustments, or Kranj-based companies. after successfully completing a training course. In 2006, approximately the same number of employees Within the scope of the competence centre HR, Law as in 2005 were promoted from their basic salaries. and Organisation, our companies joined various forms Senior and managerial staff as well as key specialists of employee motivation. We encourage them to take received additional annual bonuses for achieving and part in versatile training courses organised as part of

110 was visitedby Ray M.Cassar,therenowned authority for employees intheTourismdivision; congress highlight thecongress covering topicsfromvarious areas.Wewouldliketo We organisedtrainingcourses andworkshops plans thatweintendtoimplement. by thethirdgeneration,resultbeingfivebusiness the all businessesoftheSavaGroup.Thecurriculum leadership trainingcourseforoperativeleadersfrom 320 participants).Aspartof its volumewhencomparedto2005(6,802hourswith which includedover300associates,thusextending companies. In2006,9,262traininghoursweremade with regardtotherequiredexpertiseinGroup model per employee. education amountedto same levelasin2005,whereastheaveragecostof education in2006,whichisatapproximatelythe On averageeachemployeereceived71hoursof work. fostering anentrepreneurialspiritandefficientteam stimulating forlifelonglearning,innovativethinking, operations. Wecreateanenvironmentthatis pursue ourstrategyandthedevelopmentof extent possible.Inthedevelopmentofemployeeswe We thereforeattempttoorganiseitthemaximum the professionalandpersonalgrowthofanindividual. On-the-job trainingisofkeyimportanceforachieving EDUCATION in particularareas. already preparedaplanofimprovementstobemade and toencourageinnovativethinking.Wehave who areabletoprovidefeedbackonemployeework employees. Forthispurposewewilldevelopleaders should beestablishedthatwouldinvolveall main findingswerethataremunerationsystem flexible salaries,thesalarymodelandmotivation.The employees thatwewillimplementinthesystemof where wereceivedopinionsandsuggestionsfrom workshops foremployeesindifferentcompanies, model fortheentireSavaGroup.Weorganisedvarious model andrenewingthesalaryremuneration 2006 weconcentratedoncreatingthemotivation consultations inspecialistareas.Inthefirsthalfof and toparticipateinvariousseminars Sava Academy • to introducea30percentvariablesharein to strictlyimplementauniformremuneration • Our goalby2011is: salaries. policy inallcompanies;and Promising Associates Sava Academy The long-termsystematiceducational , toexchangeknowledgeon-the-job, Tourism andEntrepreneurship is beingcontinuallyadapted programme wascompleted € 191.93 (45,995tolars) Sava Academy we rana education ofallemployees. systematically investinginthedevelopmentand awarded theSavaGroupwithTOP10 For thesecondyearrunning form ofon-the-jobtraining. large partofthecourseswasrunincompanies groups thatcomeindailycontactwithguests.A strengthening guestrelationsfordifferenttarget various workshopsfocusingonfosteringand various areas.ParticularlyinTourismweorganised many otherspecialisedtrainingcoursesfrom courses, communicationandpersonalgrowth well asforeignlanguageandcomputerscience 20 Keys the areaofqualitystandards,occupationalsafety, In companiesweprovidedspecialisedtrainingfor and SocialAffairsforemployeeon-the-jobtraining. European SocialFundandMinistryofLabour,Family Service ofSloveniaandobtainedfundsfromthe applied tobeintheprojectrunbyEmployment learning methods.Certaincompaniesrepeatedly course thatcombinedelectronicandconventional 2006, employeestookpartinaforeignlanguage lead ustoconducttrainingcoursesviatheInternet.In companies, sophisticatedmethodsandcostefficiency Diversity ofoperations,thelocaldistancecertain under theformaleducationalsysteminSlovenia. programme, whichprovidesknowledgenotavailable continued withtherubbermanufacturingschool on thetourismindustry.InRubberManufacturingwe in theSavaGroup. about 400employees –16percentofallemployees In 2006,theSavaDialogue wasconductedwith measures andproposals. further analysisandsupervision oftheagreed interview resultsaresentto theHRdepartmentfor personal developmentwithin theSavaGroup.The been selectedasaguidelineandspecialisationin for thedevelopmentof12competenciesthathave employee discusstheestimates,tasksandterms During theannualinterviewsuperiorand attainable byallemployees. attempt todesignanddevelopaclearfuturevision level ofworkteams.Throughthisprocedurewe breakdown ofstrategicgoalsandactivitiestothe in dailywork.Atthesametimeitprovidesa company moreclearlyaswellidentifyher/hisrole employee tounderstandthelong-termgoalsof every employeeseparately.Theinterviewhelpsthe systematically conductedinterviewofasuperiorwith tools intheSavaGroup.Itisanin-depth, Sava Dialogue SAVA DIALOGUEANNUALINTERVIEW , optimisingentrepreneurialprocesses,as is oneoftheestablishedmanagement Sofos Institute Award for 111 ANNUAL REPORT 2006 SUSTAINABLE DEVELOPMENT REPORT COMMUNICATING WITH EMPLOYEES RATIONALISATION PROGRAMME

Internal communication is, undoubtedly, a connecting Continual improvements are the policy of the element among employees and therefore one of the competence centre HR, Law and Organisation. fundamental values of the Sava Group. Providing Achievements are monitored from the aspect of cost current information is, above all, the commitment and reduction. Savings in companies were mainly responsibility of managers who organise regular implemented through a selective approach to employee assemblies and meetings with workers’ and overtime work by substituting it with a flexible work Trade Union representatives. Worker participation is time organisation, reducing the number of overtime implemented through regular consultations with the hours and work through a student employment Workers’ Council in individual companies. agency. Furthermore, in education we produced savings by organising internal training courses. For Communication with employees is carried out through employing difficult-to-employ associates we received various tools for direct and indirect communication as financial support and a government subsidy, which developed over many years. On Open Days, which are we present as savings too. We saved on expenses due held once a month, employees can directly to the announcement of vacant positions on the communicate with company directors. This kind of electronic portal http://www.zaposlitev.net. In communication is established with the chairman of communication with the Employment Service of the Board of Management of Sava d.d. too. Slovenia and other institutions where we are obliged We also develop, co-ordinate and maintain indirect to submit documentation about employees we make communication. Regular information is provided in use of electronic tools that save time and expense. weekly updated info points, the printed monthly Informator – the Sava newspaper with the longest DISABILITY ISSUES tradition – and more modern tools such as Intranet and Internet. 143 persons with 1st and 2nd category disability are employed by the Sava Group, representing 5.6 per At least twice a year we organise employee cent of all employees. We individually deal with assemblies and several times a year we participate associates who due to their health problems receive in meetings with workers’ representatives, who the status of a disabled worker and seek a proper job meet once a year with the Board of Management of for every one of them within the company, or in our Sava d.d. Employees attend meetings with company company Sava Medical in Storitve d.o.o., which is directors, regular meetings with their superiors and specialised in employing and training disabled 20 Keys meetings. workers. We provide additional training for a new job; in association with the Office for Pension and Presently, the upgrade of the Intranet portal is Disability Insurance we ensure that certain workers underway, which in the first half of 2007 will be are retrained for a new vocation, a possibility that is available for use by employees in Rubber becoming increasingly popular among those of our Manufacturing, and subsequently in the entire Sava employees who are disabled. Group. In the Intranet portal various pieces of information, both useful and interesting, will be In the disability area we endeavour to shorten gathered and announced in various columns in order procedures by implementing special preventive to provide information for all of our employees on a measures such as: timely and quality basis. • making employees aware of a healthy way of living; We collaborated successfully with workers’ • permanent training for safe work to prevent injury; representatives and received numerous ideas from • ergonomic adaptation in the work-place; them. In compliance with legislation we informed the • warning about hazards outside the workplace; and ANNUAL REPORT 2006 SUSTAINABLE DEVELOPMENT REPORT Trade Union and Workers’ Council about business • preventing incidents which could result in achievements and the work calendar proposal, disability, especially by using internal changes in job descriptions and similar matters. communication tools. Moreover, we informed the Trade Union about a renewal in collective agreements. We are also forming a proposal by the employer to be finally settled in collaboration with the Trade Union.

112 27. 3. 27. 2. employees and candidatesforemployment. d.o.o. andcarries outmedicalexaminations of division andthecompanySava MedicalinStoritve doctor forallcompaniesinthe RubberManufacturing specialist inworkmedicinealso actsastheauthorised more easilyaccessibleto ouremployees.The occupational medicine,whichmakesmedicalservices Health Station,andaprivatepracticespecialisingin are twocurativehealthstations,affiliatesoftheKranj In thepremisesofKranj-basedcompaniesthere examinations in2006. per centofemployeesinperiodicandspecifichealth companies. Thereforeweincludedapproximately30 working environmentareimportanttasksinour their medicalconditionandprovidingahealthy their psychologicalandphysicalabilities.Monitoring strive toemploypeopleinjobsthatareadapted environment andinconnectionwiththeirwork.We on thepreventionofillnessbothduetoworking Employee healthcareintheSavaGroupconcentrates EMPLOYEE HEALTHCARE work safety andhealthat Concern foremployee close familymembers. forms ofleisureactivitiesfortheiremployeesand within theboundsoflegislation–organisevarious using ourtouristfacilities.Individualcompanies– We offerSavaGroupemployeesdiscountswhen parenthood andtheobligationstheyhaveatwork. we willfacilitateemployeestobetterco-ordinate introducing apolicythatisfavourabletothefamily, conditions forthedevelopmentofafamilylife;by three yearswewillintroducemeasurestoimprove Family-friendly Company Slovenian companieswejoinedaprojectcalled friendlier workingenvironment.Asoneofthefirst to improveworkingconditionsandprovidea launched a their sparetimecreativelyandactively.Wehave place. Thereforeemployeesareencouragedtospend cannot belinkedonlytotakingcareatthework- Concern foremployeesatisfactionandsuccess hours outside ofworking Concern foremployees Life Cycle project thatinvolvesmeasures in 2006.Inthefollowing were donatedtothelocalcommunityofMavåiåe. the meeting international jury.Worksofartthatwerecreatedat two ofitsmembersreceivedawardsfroman members participatedinanartisticmeetingwhere section hasorganisednumerousexhibitionsandits Loka andtheIvanTavåarLibrary.Thefinearts Loka competitions suchastheprojectcalled Oro they preparedaliterarymeetingcalled cultural societySts. and Sava the anthology Spread Together society jointlyorganisetheinternationalproject Slovenia andabroad.Themembersoftheliterary numerous festivalsandsoloperformancesbothin folk grouppresentedSloveneculturalheritagein musicians, tamburitzaplayersandsingersofthe in generalwithoutstandingresults.Dancers, expression, butalsoenhancesthesocialcommunity creativity notonlysatisfiestheirneedforartistic includes folk,fineartsandphotogroups;their in culturalactivities.The and theirfamilymemberstospendsparetime For morethan30yearswehaveenabledemployees the slogan Health andSafetyatWorkfor youngemployeeswith campaign bytheEuropeanAgency forOccupational Safety safety andhealthatworkcalled Safety carriedoutapreventivecampaigntopromote In theSavaGroupcompaniescompetencecentre substances, andanalysingalltypesofrisk. those associatedwiththeaddictionofpsychoactive preventing socially-relatedrisks,primarilystressand related injuries,performingpreventivemeasures, such asacontinualdecreaseinthefrequencyofwork- we devoteagreatdealofattentiontoparallelgoals the physical,moralandsocialaspects.Furthermore, are tocontinuallyimprovejobsatisfactionincluding The goalsoftheoccupationalhealthandsafetypolicy work capacityduringtheirworkinglife. illnesses, therebyassuringouremployeesoptimum injury, occupationaldiseasesandotherwork-related safety, continualdecreaseinsuchrisks,preventionof as theidentificationofrisksforoccupationalhealthand preventive approachandintroducingmeasuressuch and company,thereforewebasethisgoalonhavinga prerequisite forthesuccessofaparticularindividual Assuring ahealthyandsafeworkingenvironmentis HEALTH ANDSAFETYATWORK . Thememberscollaborateinnumerous organised bytheMuseumSocietyinÆkofja . Atthesametimewejoined thepreventive A SafeStart was published.WiththeMacedonian Simon Jenko–aPoetfromSorækoPolje h rde between The Bridges with writersfromAustria.In2006, Cyril andMethodius . Sava CulturalSociety March –aMonthof the Rivers Drava Preæeren’s from Kranj Colourful 113 ANNUAL REPORT 2006 SUSTAINABLE DEVELOPMENT REPORT 114 ANNUAL REPORT 2006 SUSTAINABLE DEVELOPMENT REPORT In comparisonwith2005thefrequencyofwork-relatedinjuriessick leaveper200,000workinghoursdecreasedin2006by1 In SavaGroupcompaniesthenumberofwork-relatedinjurieswithsickleavedecreasedin2006by5.5percentcomparisonwit employing apreventiveapproachtoidentifying The introductionofsystematicoperationand RELATED INJURIES DECREASE INTHENUMBEROFWORK- sick leavefrom2004to2006 Frequency ofwork-relatedinjurieswith Sava Group from 2004to2006 Work-related injuries Sava Group 1,0 2,5 3,0 3,5 0,5 1,5 2,0 20 40 60 80 0 0 injuries. number, frequencyandseriousnessofwork-related working conditionsresultsinadecreasethe hazardous eventsaswellanimprovementin 2004 2004

2.9 71 2005 2005

2.6 54 -5.5% -12% 2006 2006

2.3 51 no. ofinjuries 2 percent. frequency h 2005. involvingworkers’representativesinsafety • aware ofinformationaboutthesafetysituationby: qualifications forsafework,wemakeassociates work-place, periodictrainingandchecking upon concludingaworkcontractandchangeinthe of theoreticalandpracticaltrainingforsafework In additiontothefundamental,legallydefinedforms to anticipatenewrisks. proper meansofprotectionandtrainthemtobeable working environment.Weequipemployeeswith safety measureswithregardtothespecificsofeach and trainthemforthispurposebyintroducing Consequently, wemakethemawareofworksafety primarily responsibleforhisorherownsafety. We adheretotheprinciplethateveryemployeeis concept ofpreventingspecificrisks. promotion ofjobsatisfactionwhichsurpassesthe and precautionaryapproachorientedtothe supervise them.Inthiswaywedevelopanintegrated prevention istoanticipaterisksandsuccessfully high levelofcultureinriskprevention.Thegoal incorporates allfactorswiththeaimofdevelopinga on havingaprecautionaryapproachthat The policyofoccupationalsafetyandhealthisbased IMPROVING RISKIDENTIFICATION EDUCATION, AWARENESS,ANTICIPATION: teams; Health atWork–theConcernofAllEmployees which in2006wasbasedontheslogan Sava Groupwealsoorganiseasafetyconference, Safety preventive campaignssuchas occupational safetyisfurtheraugmentedbyspecial Employee awarenessabouttheresponsibilityfor were attendedby62percentofallemployees. In 2006,trainingcoursesforuniversallysafework scope ofthepreventivecampaignaswell. contribute proposalsforimprovementswithinthe and professionalservices.Employeesareinvitedto are entitledandobligedtoreportthesupervisor worker jointparticipation.However,allemployees per centofemployeesareinvolvedinregularforms assessment, providinginformationandtraining.2 safety, fireFirstAid,evacuation,risk representatives whoareresponsibleforensuring representatives onmeasuresandappoint safety. Weregularlyconsultwithworkers’ discuss theissuesregardingoccupationalhealthand through theirrepresentativestheycanactively for improvementstotheprofessionalservice,or Employees candirectlycommunicatetheirproposal in thenewspaperofSavaGroup. • a columnentitled • weeklyannouncementsandinstructionsforsafe • in themonthlybulletinInformator;and work onspecialinfoboards; and October –aMonthofFireSafety Sreåko WarnsandGivesAdvice March –aMonthof Safety and . Inthe . 115 ANNUAL REPORT 2006 SUSTAINABLE DEVELOPMENT REPORT 116 ANNUAL REPORT 2006 SUSTAINABLE DEVELOPMENT REPORT The • • operate: represent thebestmodelsinbrancheswherewe the areaofsafetyandspecialstandards,which to pursuinginternationallyvalidgeneralstandardsin Safety. Itsoperationandgoal-settingarecommitted competence centreTechnical,FireandEnvironmental Occupational safetyandhealthisregulatedbythe Environmental Protection. Policy onOccupationalSafetyandHealth Sava-Schäfer d.o.o.andSava-GTIadoptedanew rubber manufacturingcompaniesofSavatechd.o.o., entire SavaGroupintheyear2000.In2006, Health andEnvironmentalProtectionforthe adopted thefirstPolicyonOccupationalSafetyand occupational safetyandhealth.Backin1994Sava for moreefficientmanagementinthefieldof In 1994and1995westartedtousesystematictools introduced inother SavaGroupcompaniestoo. Operations in line withthisstandardhave been Sava-GTI d.o.o.,andTerme Radencid.o.o. companies ofSavatechd.o.o., Sava-Schäferd.o.o., by certificatesinalltherubber manufacturing environment managementsystems areendorsed compliance withthisstandard. Theintroduced In 2000weobtainedthecertificateforoperatingin for environmentalprotection the SavaGroupaswell. gradually beingintroducedinothercompaniesof Sava-GTI d.o.o.andTermeRadencid.o.o.,is companies Savatechd.o.o.,Sava-Schäfer following yearsthecertificatewasobtainedby implementing thesestandardsin2002.Inthe safety. Webegantoco-ordinateoperations an integratedsurveyofoccupationalhealthand prescribes aseriesofregularmeasuresthatenable concentrates primarilyonpreventiveactionand of occupationalhealthandsafety,which Safety AssessmentSeries) OHSAS 18001standard IN THESAVAGROUP SAFETY ANDHEALTH OCCUPATIONAL POLICIES REGARDING STANDARDS AND 28. environmental certificateSISTENISO14001 (Occupational Healthand for systemmanagement The • • • • Daisy) standardrequirements. accreditation onmeeting the EcoLabel(Eco on avoluntarybasis:Thefinal goalistoreceive introducing environmentmanagement systems principles ofsustainable developmentby environment-friendly way,thusimplementingthe project tocompleteandmoderniseitshotelsinan In 2007,theTourismdivisionwillcommencea hotel fittings have beeninvolvedinthisprogrammesince2000. permit tousetheResponsibleCarelogotype.We Sava-Schäfer d.o.o.andSava-GTIobtaineda manufacturing companiesofSavatechd.o.o., industry. In2006aswellalltherubber international voluntaryinitiativebythechemicals The ResponsibleCareprogramme European GolfAssociation in theimplementationofprogramme In 2003,thecompanyGolfinKampBledd.d.joined environmental management Committed toGreenprogramme this standard. Sava’s Tourismdivisionoperateinconformitywith of thisstandardin2005.Allthecompanies We startedtooperateinlinewiththerequirements production HACCP standard Eco Labelstandard The ResponsibleCarelogotype for ensuringsafefoodstuff for environment-friendly “Committed toGreen”. for careful is the SAVATECH D.O.O. SAVA D.D.ANDGROUP opn civmn wr Institution Award Achievement Amongthe50best Savatech d.o.o. Company Institution Award 1 Achievement Sava d.d. Company aadd Rankingamong Sava d.d. aaGopTP1 cnwegmn cnwegmn oGVPlanetandSofos Acknowledgement to TOP10acknowledgement Sava Group IN 2006 AND AWARDS ACKNOWLEDGEMENTS IMPORTANT 29. lvn opne o en aeadandDun&Bradstreet forbeingasafeand Slovene companies h is iems pnjitandthenewspaper mostopenjoint the firstfive with public 1 development 1 category st st st place incommunicating FinanceMagazine BestAnnualReport2006 place insustainable place absolute sought-after business Rating oftheYear The Portalaward education andtraining publisherDnevnikd.d. stock company opn htivssInstitute most inemployee a companythatinvests Acknowledgement / partner Acknowledgement / o LjubljanaStockExchange – for wr RatingcompanyId.o.o. award 117 ANNUAL REPORT 2006 SUSTAINABLE DEVELOPMENT REPORT 118 ANNUAL REPORT 2006 SUSTAINABLE DEVELOPMENT REPORT PANNONIAN SPAS SAVA HOTELIBLED Hotel Park Stuttgart, Germany Stuttgart, Institution Award Achievement Luxembourg 1 preparingcolddishes trade fairExpogast 2006, CulinaryArtatthe culinary Terme 3000d.d. Company preparingahotdish 8persons •Bronze medalfor 23 Institution WorldChampionshipsin Hotel Park Team medalforthe Goldmedalwithcup •Bronzemedalfor Igor Jagodic,Grand Toplice d.o.o. 2bronzemedals member, GrandHotel Award National ChefTeam Igor Jagodic,Slovene contributiontothequality andIndustry Commerce Toplice d.o.o. Achievement andsuccessatthe Chamberof Slovene goldenplaquefora goldenplaqueforquality Acknowledgement and and KampBledd.d. of CampingBled,Golf Acknowledgementand Marjeta Vizoviæek,Head Employees ManageressSectionatthe Institution andIndustry Commerce Acknowledgementto Manageress-friendly TourismMeeting G&P HoteliBledd.o.o. acknowledgements Grand HotelTopliced.o.o. Award Achievement 3 Camping Bled,Golfand Company grJgdc lvn odmdlGl ea o rprn 23 Goldmedalforpreparing medal Gold Igor Jagodic,Slovene rn oe olc ...poetn h eun andProtectionof protectingthegenuine forthePromotion Society CertificateofQualityfor Nationalcertificate Grand HotelTopliced.o.o. G&P HoteliBledd.o.o. em 00dd 3 3 Terme 3000d.d. Terme 3000d.d. 1 Terme Ptujd.o.o. 2 Terme Lendavad.d. Kamp Bledd.d. member, Grand Hotel vegetarian meals for Stuttgart, Germany Stuttgart, Intergastra2006, vegetarianmealsfor innovativedishesand member, GrandHotel National ChefTeam ofcinr nntoa emfairIntergastra2006, fairIntergastra2006, nationalteam nationalteam confectionary in Hotel Topliced.o.o. & oeiBe ...2 easad53 29medalsand G&P HoteliBledd.o.o. iaZpn odmdlwt u emmdlfrte23 Teammedalforthe medalwithcup Gold Tina Zupan, company a company which employs Managers’ Association Managers’ a companywhichemploys thanonethirdof more acknowledgement company Catering Tourism Meeting of of Catering TourismMeeting st rd rd rd st nd place place place lc BestSloveneSwimming place place place women injuniorandsenior in thesmall-sizedhealth and Hospitable My Country–Beautiful in themedium-sized and Hospitable My Country–Beautiful in thelarge-sizedhealth and Hospitable My Country–Beautiful iaia DevelopmentCo-operative andtheGranar gibanica” DelicaciesfromPrekmurje pastry “prekmurska reputation ofthelayered Acknowledgement / management positions natural lakeandriverbaths Acknowledgement / large thermalresortscategory large-sized campsitecategory campsite category resorts category resorts category Acknowledgement / of registeredcampsites, GoodMorning,Slovenia Pool Best SloveneSwimming Hospitable My Country–Beautifuland ol20 apini h broadcast,RadioSlovenia Pool 2006campaigninthe tourism incampsites rd Catering Slovene Chamberof Slovene Catering apin aeoybroadcast,RadioSlovenia campaign, category campaign inthe campaign campaign campaign Slovene TouristBoard Slovene TouristBoard Slovene TouristBoard Slovene TouristBoard Good Morning,Slovenia from MurskaSobota Stuttgart, Germany rd rd rd international fair international trade international trade ebr rnemdlfr tradefairExpogast2006, Stu Luxembourg Bronzemedalfor preparingcolddishes CulinaryArts,culinary preparinghotdishes WorldChampionshipsin Institution Bronze medalfor Terme 3000d.d. member, 2bronzemedals National ChefTeam Award CommerceandIndustry Daniel Kozar,Slovene member, Terme3000d.d. Chamberof Slovene goldenplaquefora Achievement goldenplaqueforthe Acknowledgement and Acknowledgementand Terme Lendavad.d. Franc Huber,Director Employees TouristSocietyofPtuj Acknowledgement on Acknowledgement Terme Ptujd.o.o. Terme Banovci Institution Award Achievement Acknowledgementfor Terme Ptujd.o.o. Company Terme 3000 d.d. National certificate Certificate of Quality for Society forthePromotion Society CertificateofQualityfor Nationalcertificate Terme 3000d.d. ailKzr lvn ivrmdlSle ea o ua 23 Silvermedalforsugar Silvermedal Daniel Kozar,Slovene Terme Radenci d.o.o. Acknowledgement Acknowledgement for Radenci localcommunity Radenci Acknowledgement for Acknowledgement Terme Radencid.o.o. Terme Radenci d.o.o. acknowledgements Meeting Commerce andIndustry Commerce Meeting Terme Ptujd.o.o. acknowledgements Terme Lendavad.o.o. Terme Radencid.o.o. em 00dd 9mdl n 53 39medalsand forthePromotion Society CertificateofQualityfor Terme 3000d.d. Nationalcertificate forthePromotion Society Terme Banovci CertificateofQualityfor Nationalcertificate forthePromotion Society Terme Lendavad.o.o. CertificateofQualityfor Nationalcertificate forthePromotion Society Terme Radencid.o.o. CertificateofQualityfor Nationalcertificate Terme Ptujd.o.o. ainlCe emsupuigIntergastra2006, sculpturing National ChefTeam h aeigTuimtourisminPomurje contributiontosparesort the CateringTourism quality andsuccessat surroundings and best arranged swimming pool Meeting o iiestemitnneadcommissionforevaluating themaintenanceand for tidiness the 120 GoodMorning,Slovenia Pool Best SloveneSwimming iaia DevelopmentCo-operative andtheGranar gibanica” DelicaciesfromPrekmurje andProtectionof pastry “prekmurska reputation ofthelayered protecting thegenuine tidiness ofsurroundings Acknowledgement / Acknowledgement / Tourist SocietyofPtuj iaia DevelopmentCo-operative andtheGranar DevelopmentCo-operative gibanica” DelicaciesfromPrekmurje andProtectionof pastry “prekmurska reputation ofthelayered protecting thegenuine andtheGranar DevelopmentCo-operative gibanica” DelicaciesfromPrekmurje andProtectionof pastry “prekmurska reputation ofthelayered protecting thegenuine andtheGranar DevelopmentCo-operative gibanica” DelicaciesfromPrekmurje andProtectionof pastry “prekmurska reputation ofthelayered protecting thegenuine andtheGranar gibanica” DelicaciesfromPrekmurje andProtectionof pastry “prekmurska reputation ofthelayered protecting thegenuine rd aeigTuimSloveneChamberof Catering Tourism 06cmag broadcast,RadioSlovenia 2006 campaign th anniversary ofthe the tidinessofplacesin from MurskaSobota from MurskaSobota from MurskaSobota local communityofRadenci from MurskaSobota from MurskaSobota rd ttgart, Germany international tradefair 119 ANNUAL REPORT 2006 SUSTAINABLE DEVELOPMENT REPORT In spa and tourist areas, be it during a walk, talk or a meeting, new friendships and business relations are formed. The conference centres in the hotels Park, Golf, Vila Bled and Grand Hotel Toplice in Bled, as well as the modern conference centres in the hotels Livada Prestige in Moravske Toplice, Radin in Terme Radenci, Jeruzalem in Ljutomer and numerous events that we organise for our guests provide opportunities to make memorable acquaintances and entertain.

BRINGING NEW DIMENSIONS TO LIFE

120 SOCIALISING - relaxed bonding BRINGING NEW DIMENSIONS TO LIFE SOCIALISING

122 30. 1. higher everyyearandin2007tooweintendto Our assistancetothesocialcommunityhasbeen integrated inindividuallocalcommunities.Whenit and donationsthecompaniesofSavaGroupare importance. Inlinewithourpolicyofsponsorships of thesocialcommunitytobeoutstanding At theSavaGroupweconsideruniversaldevelopment donations Sponsorships and Funds forsponsorshipsanddonations Sava Group SOCIAL COMMUNITY DEVELOPING THE 30. 100 200 300 400 500 600 0 strengthen sponsorshipsanddonations. donations, or9.5percentmorethanin2005. euros (124milliontolars)forsponsorshipsand In 2006,theSavaGroupearmarkedover518,000 concentrate onprovidingassistancetoyoungpeople. societies, institutesandorganisations company Savad.d.Weespeciallyassistnon-profit they areunitedundertheauspicesofholding comes tolargernationalandinternationalprojects, 2004 2005 2006 € in thousand s 123 ANNUAL REPORT 2006 SUSTAINABLE DEVELOPMENT REPORT Sava Group

Sponsorships and donations in 2006

Sport

Culture

Profession / Education

Environment

Humanitarian aid

67% 13% 9% 4% 7%

SPORT Growing Book project, which in 2006 reached its culmination with a festive presentation and a visiting We foster long-term partnership relations with the exhibition in the national library in Munich. athletes whom we sponsor. We pursue their We enabled the friends of Sava to view a ballet- development and look forward to their success. For 40 theatre spectacle Impressing the Tsar in Cankarjev years a substantial share of sponsorship funds has Dom and as sponsors we invited people to the been earmarked for the Sava Cycling Club, one of the Preæeren Theatre to enjoy the Week of Slovene largest and most successful clubs in Slovenia. The Drama. We sponsored the staging of the opera The club management focuses especially on the Barber of Seville as part of the Carniola Festival education of young cyclists who last year were trained programme. by Valter Bonåa, a legend in Slovene cycling sport who We traditionally support this cultural event with a ended his professional career with a victory in the humanitarian goal entitled Let a Tiny Cherry Blossom Kranj Grand Prix in a Sava jersey. Spread a Trace of a Good Thought. We also supported We also sponsor Triglav Ski Jump Club and in 2006 the event in memory of the battle of Draœgoæe, events also events such as the FIS Summer Grand Prix Kranj to mark the 90th anniversary of the Russian chapel in 2006, Nordic Junior World Championships and the Vræiå, Slovene pan-European movement and the start World Cup finals in ski–jumping in Planica. of building the folk music school in Begunje. Together with the companies of Sava Hoteli Bled we Some time ago Sava Hoteli Bled committed itself to sponsored Bled Rowing Club; its members, with Iztok providing permanent support for the Dana Renåelj Åop and Luka Æpik at the fore, won medals in all ballet school in Bled. international championships. In the beginning of 2007 Terme Ptuj d.o.o. co-founded Terme 3000 d.d. supports the development of grass the consortium Kurent whose aim is to preserve the hockey in Moravske Toplice as well as Klima Petek old custom of Kurentovanje and enhance the quality Handball Club and Olimpija Basketball Club. Terme of events for all visitors. Radenci d.o.o. sponsored Rog Cycling Club. Terme Ptuj d.o.o. organised the first national championships in PROFESSIONAL DEVELOPMENT toboggan rides and for a long time they have supported Ptuj Ballooning Club, which in 2006 As we are aware of the required mutual connection ANNUAL REPORT 2006 SUSTAINABLE DEVELOPMENT REPORT organised the 10th International Ballooning Festival in between the economy and science, we supported Ptuj. projects such as the International Symposium on Cavernose Sinus and International Symposium on Cerebral Paralysis. We also sponsored the Forum of CULTURE Gorenjsko 2006 and the congress of the International Association of Manageresses (FCEM) in We at the Sava Group take care to preserve our Bled and Ljubljana. We support the activity of the cultural heritage. In co-operation with the Museum of Managers’ Association, Slovene Economists’ Gorenjsko we sponsored the birth-place home of Dr. Association, International Institute for Near-East and France Preæeren in Vrba. We are also one of the Balkan Studies IFIMES, Safety Engineers’ Association, founding members and traditional supporters of the and Work and Safety magazine, and assisted in

124 30. 2. of quality. organisations, andassociations forthedevelopment professional andeconomic associations,branch and, atthesametime,takeanactiveroleindiverse specialised consultations,seminarsandcongresses organisations. Inthiswaytheycancollaboratein various socialandregionalorlocalassociations Most employeesintheSavaGroupaffiliatesbelongto social community employees inthe Integration of shelter intheSafeHouseofGorenjskobypurchasing student families.Wealsohelpedwomenwhotook Through the Institute. which isaimedatraisingfundsfortheOncology Kapitalska Druœbad.d.entitled their relatives.Weassistedintheprojectrunby tradition; thisfoundationhelpsdrugaddictsand funds fortheVinkoDrakslerFoundation,isalreadya collaboration intheMayor’sRace,whereweraised Bosnia andHerzegovinaintheireducation.Our project this timeinDarfur.WealsoassistedUNICEFwiththe in eliminatingtheconsequencesofhumandisasters, numerous donationprojects.Werepeatedlyhelped people hasencouragedustoprovideassistancefor Our senseofresponsibilitytowardssociallydeprived AID INDISTRESS students forsuccessfulprojects. equipment toeducationalinstitutionsandawarding their localcommunitybydonatingcomputer All companiesoftheSavaGroupwereintegratedin national chefteam. further trainingandprogressofchefstheSlovene Murska Sobota,whileSavaHoteliBledenables business peopleintheSchoolofEconomics Terme 3000d.d.allocatedfundstoeducatefuture and theSloveneChemicalAssociation. the FacultyofChemistryandTechnologyinMaribor Slovenia, whereasSavatechd.o.o.furthersupports Chamber ofArchitecturalandSpatialPlanning Sava IPd.o.o.isoneofthesponsorsSlovene primary schoolsandeducationalsocieties. implementing variousprogrammesinnumerous Look atMe Young Mums to helpparentlesschildrenfrom project wehelpedyoung A GoodThought , and enhancethestandardofliving. Radovljica tofacilitateprogrammeimplementation donated fundstotheMatevœLangushomein families inSlovenia.ThecompanySavatechd.o.o. to purchasefoodpackagesforsociallydeprived organised acharityeventwherefundsweredonated Together withtheSlovenechefteamcompanies funds tobuildanewchildren’splaygroundinBled. course, thecompaniesofSavaHoteliBledraised President’s CupingolfwhichwasheldatBled In thetraditionalfriendshiptournamentfor Distress foundation are oneofthefoundingmembers we forgettohelpthehomeless;consequently, presents totheirchildrenatChristmas.Neitherdid a newcartoprovideurgenthelpin-the-fieldandgave its activityhaverootsinSava’s tradition. local communityandastimulating contributionto quality oflife.Bothlong-termco-operationwiththe broader socialenvironmentandimprovementinthe contributing greatlytothedevelopmentof community wheretheyworkandlive,thereby employees arestronglyintegratedinthelocal Through voluntaryworkandtheirknowledge performing regionaldevelopmentprojects. development andactiveparticipationinplanning on theissuesandopportunitiesforlocalcommunity municipalities providesuswithdetailedinformation Our integrationinthebodiesoflocalcommunitiesand the Scouts’AssociationandMunicipalityofKranj. education campaign environment. InAprilweorganisedthecleaningand manage sensitiveeco-systemsinourmicro- have providedassistancetohunters’familieswho Association ofBiomassSocieties.Severaltimeswe nature forfuturegenerationsincludingthe We supporttheactivitiesofallwhowishtopreserve ADMINISTRATORS SUPPORT FORENVIRONMENT . Let’s CleanKranj together with Hope in 125 ANNUAL REPORT 2006 SUSTAINABLE DEVELOPMENT REPORT 126 ANNUAL REPORT 2006 SUSTAINABLE DEVELOPMENT REPORT 31. 1. thetrainingofemployees. • substitutionofhazardoussubstanceswithless • thepreventionofenvironmentalpollution; • separatecollectionandrecyclingofwasteto • theeconomicuseofenergy,rawmaterialsand • Our prioritygoalsinenvironmentalprotectionare: environmental influences. striving foracontinualdecreaseinharmful international environmentalstandardsandthus environmental legislation,actinginlinewith continually adaptingouroperationstomeet responsibility toprotecttheenvironment,weare of theenvironment.Asweareawareour in 1994Savaundertookacommitmenttotakecare By adoptingthefirstenvironmentalpolicywayback protection Environmental hazardous ones;and decrease thequantityofwastefordisposal; natural resources; AND FIRESAFETY THE ENVIRONMENT PROTECTING 31. working environment. assures safeandinjury-free friendly businesssystemwhich employee- andenvironment- The SavaGroupisbothan health areprovided. offer jobswheresafetyand environmental impactsand undertaken todecrease protection. Activitiesare fire safetyandenvironmental occupational safetyandhealth, legislation intheareaof We ensurecompliancewith environment. selection ofsuppliersandintegrationinthesocial employees andbusinesspartners,aresponsible encourage anenvironmentalawarenessamong A partofoursocialresponsibilityisalsoto noise. • useofhazardoussubstances;and • occupiedbystoredwaste; space • airpollution; • waterpollution; • drinkingwaterconsumption; • energy consumption; • on amonthlybasis: The followingenvironmentalindicatorsaremeasured companies andatthelevelofentireSavaGroup. operations ontheenvironmentinindividual introduce measurestodecreasetheimpactofour We regularlymonitorenvironmentalindicatorsand ENVIRONMENTAL INDICATORS 31. 2. • natural gasconsumption decreasedby7.8per natural • consumption decreasedby15.6percent; steam • fueloilconsumption decreasedby20.9percent; • source areasfollows: The consumptionindicatorsbytypeofenergy 2005. Owingtocontinualinvestmentsand 135.61 GWhintotal,or5.8percentlessthan In 2006weconsumedenergyintheamountof management Efficient energy in theperiod2004-2006 Energy consumption Sava Group Share inconsumedenergysources2006 Sava Group cent; Propane-butane Heating oil Natural gas Steam Electricity 125 135 140 120 130 145 150 39% propane-butanegasconsumptionincreasedby • electricityconsumptionincreasedby6.9percent; • the growthinvolumeofproductionorservices. sources, thegrowthinconsumptionislowerthan measures toincreaseefficiencyintheuseofenergy butane gas. electricity, naturalgas,heatingoilandpropane- The mainenergysourcesintheSavaGroupare ENERGY SOURCES 46.8 percent. and 2004

127.80 28% 2005 25% 143.98 7% 2006

135.61 1% energy inGWh 127 ANNUAL REPORT 2006 SUSTAINABLE DEVELOPMENT REPORT Sava Group

Consumption of individual 160 GWh

types of energy sources 140 143.00 during 2004 and 2006 135.61 120 127.81

100 2004 80 2005 60 2006 53.00 49.57 44.20 40 43.70 38.80 37.29 34.41 34.48 28.79 20 15.24 11.79 9.30 1.50 1.28 1.02 0.0155 0.0146 0 0.0164 heating electricity steam propane- natural total consumption oil butane gas gas per hour

ENERGY-RELATED REVIEW d.o.o. and Sava-Schäfer d.o.o. by 8.4 per cent, G&P Hoteli Bled d.o.o. by 43.3 per cent, Grand Hotel In 2006 we : Toplice d.o.o. by 7.5 per cent, Terme Radenci d.o.o. by • prepared a study of the entire supply in Bled hotels 10 per cent, Terme Banovci by 9.1 per cent, Hotel with heat energy on the basis of co-generation: Jeruzalem by 7.1 per cent and Terme Ptuj d.o.o. by 4.1 • renovated the supply system of hotel Park in the per cent. company G&P Hoteli Bled d.o.o. by obtaining heat energy using a heat pump and by introducing a high Heating oil level of waste heat regeneration; With regard to the same period in 2005 the specific • examined comprehensive solutions for energy- consumption of fuel oil decreased in the companies related improvements in Terme Radenci d.o.o.; G&P Hoteli Bled d.o.o. by 50.4 per cent, Grand Hotel • replaced windows to partly improve the heat Toplice d.o.o. by 15 per cent and Terme Radenci insulation in Grand Hotel Toplice d.o.o.; d.o.o. (Terme Banovci) by 95.6 per cent. • invested in a remote controlled heating system with biomass in Årnomelj; DECREASE IN DRINKING WATER • improved a heat station and rebuilt an energy CONSUMPTION intersection in the company Savatech d.o.o.; • performed an energy-related examination in the We regularly monitor the pollution level of industrial companies of Rubber Manufacturing (Savatech water effluent from our manufacturing facilities. A d.o.o., Sava-Schäfer d.o.o.) and in the parent decrease in polluting the environment with effluent company Sava d.d. we also prepared a plan of is achieved by returning water into industrial measures to rationalise energy consumption. processes, with closed cooling lines and the efficient operation of built-in purification apparatus. We MORE IMPORTANT ACHIEVEMENTS IN regularly measure effluent, the total amount of DECREASE OF ENERGY SOURCES which decreased by 25.6 per cent in 2006. CONSUMPTION We continued the project of drinking water Natural gas consumption by: • employing methodical detection of drinking water

ANNUAL REPORT 2006 SUSTAINABLE DEVELOPMENT REPORT In comparison with 2005 the specific consumption of natural gas decreased in the companies Savatech leakage in water pipelines and eliminating faults d.o.o. and Sava-Schäfer d.o.o. by 27.2 per cent, at the same time; Grand Hotel Toplice d.o.o. by 4.8 per cent, Terme • regularly monitoring water consumption; and Radenci d.o.o. by 27.4 per cent and Terme Ptuj by 22 • ensuring the efficient use of water. per cent. In comparison with the year 2005 drinking water Electricity consumption in the companies of the Sava Group In comparison with 2005 the specific consumption of decreased by 6.2 per cent in 2006. electricity decreased in the companies Savatech

128 companies oftheTourismdivision theconsumption Due totheenhancement ofcapacityinthe have anyspecialeffectonthewatercourseofriver cent. Theconsumedquantityofriverwaterdoesnot consumption of d.o.o. andSava-Schäferin2006the After buildingtheclosedcoolingsysteminSavatech Jeruzalem by25.4,TermePtujd.o.o.4.8,and Radenci d.d.by11.4,TermeBanovci48.1,Hotel 10.5 percent,G&PHoteliBledd.o.o.by52,Terme in othercompanies:GrandHotelTopliced.o.o.by The consumptionofdrinkingwaterwasalsoreduced implementation ofourenvironmentalprotectionpolicy. which isthegreatestachievementinsystematic drinking waterwasreducedevenby60.5percent, In Kranj-basedcompaniesthespecificconsumptionof 2004 and2006 Sava-Schäfer d.o.o.during companies Savatechd.o.o.and Consumption ofriverwaterinthe Sava Group from 2004to2006 Drinking waterconsumption Sava Group river water was reducedby21.8per 100,000 300,000 400,000 700,000 560,000 570,000 580,000 590,000 600,000 610,000 620,000 630,000 200,000 500,000 600,000 0 of geothermalwaterincreased by6.7percent. per centincreaseonthe2005figure. river waterconsumption,whichin2006achieveda10 increase inwaterrecirculationowingtoareductionof Sava, fromwhereitispumped.However,therean Kamp Bledd.o.o.too,theincreasebeing2.8percent. consumption wasestablishedinthecompanyGolf building ofanewhotel.Anincreaseindrinkingwater increased by2.4percent,whichresultedfromthe volume in2006.AlsoTerme3000d.d.consumption increased by42.1percentduetoariseinproduction In thecompanySava-GTId.o.o.consumption Terme Lendavad.d.by17.5percent. 2004 2004

506,351 607,048 2005 2005

480,351 613,898 -21,8% -6.2% 2006 2006

375,841 575,930 quantity m quantity m 3 3 129 ANNUAL REPORT 2006 SUSTAINABLE DEVELOPMENT REPORT LOWER EMISSIONS LESS WASTE AND HAZARDOUS SUBSTANCES In line with the Kyoto Protocol we are committed to lowering greenhouse gas emissions. Our endeavours In the companies of Rubber Manufacturing we for a more rational use of energy and change in the ensure safe and professional waste disposal. Years type of energy source are reflected in a decrease in ago Savatech d.o.o. introduced separate waste carbon dioxide emissions. collection according to type and property. Organisations authorised for waste treatment In comparison with 2005 total CO2 emissions in the handle our waste; they either landfill rubber waste Sava Group in 2006 decreased by 2.6 per cent, which and non-hazardous industrial waste, or recycle is due to the lower use of heating oil and natural gas. wooden, metal, paper and plastic waste, while hazardous substances and their packaging are The regular operation of waste treatment apparatus incinerated or recycled. for the thermal incineration of air polluted with organic solvents in the company Savatech d.o.o., the Print In 2006 the specific consumption of landfilled programme, has greatly contributed to a decrease in rubber waste decreased by 16.4 per cent and air pollution. The quantity of emitted solvents was sewage waste by 6.6 per cent. reduced by 4.8 per cent and the specific emission of solvents decreased by 18.3 per cent.

Sava Group

Specific quantity of landfilled rubber 52.0 specific quantity (kg/metric tonnes of product) waste in Labore-based facilities 50.0 49.5

48.0 48.0

46.0

44.0

42.0 41.1 40.0

38.0

36.0 average 2004 average 2005 average 2006

The specific quantity of landfilled waste was Radenci d.o.o. 54.4, Terme Ptuj d.o.o. 7.2, Grand Hotel decreased in the companies Grand Hotel Toplice Toplice d.o.o. 12.2, Golf and G&P Hoteli Bled d.o.o. 23.1 d.o.o. by 40.7 per cent, G&P Hoteli Bled d.o.o. by and Golf in Kamp Bled d.d. 16.8 per cent. 44.8, Terme Banovci by 52.1, Hotel Jeruzalem by We are systematically decreasing the specific 67.7 and Terme Ptuj d.o.o. by 10.9 per cent. consumption of hazardous substances. The greatest progress was due to improvements in the The specific quantity of landfilled waste increased in technology of rubber profile production in Rubber the companies Sava-GTI d.o.o. by 16.7 per cent due Manufacturing, where the specific use of LCM nitrite- to increased production capacity, Terme 3000 d.o.o. and nitrate-based salt was reduced by 8.1 per cent.

ANNUAL REPORT 2006 SUSTAINABLE DEVELOPMENT REPORT by 31.4 per cent due to building a new hotel, Golf in Kamp Bled d.d. by 68.7 and Terme Lendava d.d. by NOISE 12.2 per cent. The noise level in the Kranj-based rubber We are especially attentive to waste which is re-used manufacturing companies during the day and at night as a secondary raw material. Rubber waste is partly was considerably decreased through the following used for further processing and partly as waste with a technical measures: high calorific value in the incineration process. Out of • a noise barrier in front of the solvent pumping the total quantity of waste the following quantities station next to the Print programme building of the were recycled: in Savatech d.o.o. and Sava-Schäfer company Savatech d.o.o.; d.o.o. 15 per cent, Terme 3000 d.d. 34.2, Terme

130 prescribed limits. during thedayandatnightdonotexceed The monitoringresultsrevealthatnoiselevels a silencerontheventilationsystemoutletin • preserved bycorrectmowing. catalogue includes236indigenous specieswhichare register wesetup67nestboxes, whereastheflowers number fromzeroto10percent. Basedonthebirds which aremowedonceayear, andincreasedtheir meadows overgrownwithindigenoushighgrass, divided intofourcategories.Wealsodesigned various habitattypesinthegolfcoursewhichwere protected asafree-interventionzone.Thereare41 seven areascalledbiotopesorhabitats,whichare According totheprescribedtypologywedesigned and preparedaproposalfortheirpreservation. and Flora At theendof2003 legalities ofhabitatsforthegolfcoursemanagement. serves asthebasisforconsideringnatural reptiles, dragonfliesandfungithatgrowthere,which course areaandperformedmonitoringofmammals, nesting ofbirdsaswellvegetationinthegolf Bled GolfCourse made astudyentitled In theentireareawecataloguedalltreesand is listed. special significanceattheKing’sClubHouse,whereit region. Thepreservationofourculturalheritageis attention totheculturalheritageofGorenjsko and featuresofthegolfcoursewealwayspay landscape andvegetation.Whenbuildingthefacilities species. Whilemowingweconsidernaturalformsof course, anddonotintroduceforeignanimalplant can befoundgrowinginthesurroundingsofgolf We plantdifferenttypesoffruittreesandbushesthat standing farmingintheneighbouringvillages. environment thathasbeendesignedbylong- golf courseisnamelyintegratedinthenatural reduce thenegativeimpactonenvironment.The environment. Wethereforedoourbesttocontinually d.d. visitorsareindirectcontactwiththenatural On thegolfcourseofcompanyGolfinKampBled ENVIRONMENT IN SYMBIOSISWITHTHENATURAL a noisebarrierinfrontoftheapparatusforfiltering • a noisebarrierbythecoolingtoweradjacentto • Velo programmeofthecompanySavatechd.o.o. d.o.o. plant;and air pollutedwithgrindsfromtheSava-Schäfer Savatech d.o.o.; Elastomer programmebuildingofthecompany catalogued habitattypesinthegolfcourse . Furthermore,wecataloguedthe Centre forCataloguingFauna Horticultural Arrangementof protection inthecomingyear. also presentedtheirplansforenvironmental protection andoccupationalhealthsafety.They innovations andimprovementsinenvironmental reducing environmentalinfluencesaswell participants familiarwiththeachievementsin Goodyear-EPE d.o.o.andSavaTiresmadethe Representatives ofthecompaniesSavatechd.o.o., December 2006wasattendedby45residents. factories inLabore.Themeetingthebeginningof regularly withtheneighboursofKranj-based Since 1998wehavebeenorganisingmeetings parameters donotexceedtheprescribedlimits. introduced, evenwhentheenvironmental decreasing anegativeenvironmentalimpact analysed andmeasuresforeliminatingor residents toimprovetheenvironment.Initiativesare are opentoadoptinginitiativesfromneighbouring reduction innegativeenvironmentalinfluences,we In ourendeavourstoachieveasustainable MEETING THENEIGHBOURS Meeting theneighbours 131 ANNUAL REPORT 2006 SUSTAINABLE DEVELOPMENT REPORT 132 ANNUAL REPORT 2006 SUSTAINABLE DEVELOPMENT REPORT 31. 3. 31. 4. the significanceofpreventivemeasures. Fire Safety traditional preventivecampaign also learntextractsfromtheFireSafetyOrder.In and proceduresforinterveningincaseofafire.They environment, firesafetymeasures,andinstructions hazards offirebreakoutsintheirspecificworking during whichemployeeswerere-educatedonthe practical trainingwasgiveninindividualcompanies, campaigns inthefieldoffiresafety,theoreticaland regularly assessed.Aspartofthepreventive companies theefficiencyofinterventiongroupsis preventive operations.Inrubbermanufacturing for introducingthenecessaryimprovementsin intervening inextraordinaryeventsisabenchmark extraordinary events.Examiningthequalificationsfor the wayeverybodyinvolvedactsinsuch extraordinary eventsdependontheirdurationand operations, hazardsstillexist.Theconsequencesof Despite continualimprovementsinpreventive been entirelyeliminated. technical reasonsforfirebreakoutshavealready therefore nogreatmaterialdamagewascaused.The fires wereextinguishedbyemployeeson-site, In theSavaGrouptherewerefour0-levelfires.Initial 2006, thenumberoffiresdecreasedby33percent. occupational healthandsafety,firesafety.In operation intheareaofenvironmentalprotection, significantly –nodoubttheresultofsystematic Recently thenumberoffireshasdecreased Fire safety quality ofwork andlife.Consequently,we shall and safetyaretheprimaryelements inensuringthe We areawareofthefactthat occupationalhealth the qualityofcateringservices. The satisfactionofourguests willbeincreasedby hotel surroundingsandLake Bledofexhaustfumes. endeavour tobuildaroadby-passrelievethe on preservingthediversityofanimalspecies.Wewill permit. InTourism’sgolfcoursewewillfurtherfocus oriented toobtaininganintegralenvironmental In thecompanySavatechd.o.o.operationswillbe improvements inenvironmentalprotection. state-of-the-art methodsandstandardsgoverning requirements andenhancedbytheintroductionof demonstrated furtherbymeetinglegal Responsibility towardstheenvironmentwillbe in thefuture Environmental safety we madeouremployeesfurtherawareof October –AMonthof in caseofafirehazardorintervenetheinitialstage Training employeesinthecompanySava-GTId.o.o.onhowtoreact environment. the SavaGroupthatwouldaffectnatural were noenvironmentalaccidentsinthecompaniesof hazards. In2006tootheseeffortsborefruit–there are aguaranteeforreducingenvironmentalaccident aware ofthesignificanceenvironmentalprotection environmental protectionandmakingallassociates A preventiveandsystematicapproachto ACCIDENTS 2006 –AYEARWITHNOENVIRONMENTAL best heritageforfuturegenerations. will respecttheprinciplethatnaturepreservedis In planningandmonitoringourfutureoperationswe increase intheageofourassociates. solutions inspecificjobs,takingintoaccountthe work. Specialattentionwillbedevotedtoergonomic among allfactorsessentialforhealthandsafetyat the cultureofriskpreventionandco-operation appearance ofnewrisksatwork.Wewillstrengthen consideration changesinthenatureofworkand ensuring satisfactionatwork,whiletakinginto continue tointroduceanintegratedapproach Todecrease thefrequencyofinjurywithsick- • Todecreasetheconsumptionofnatural • Todecreasetheconsumptionofenergysources • Goals by2011 leave by5per centannually. resources by2percentannually. by 2percentannually. FINANCIAL REPORT 32. FINANCIAL STATEMENTS OF THE SAVA GROUP WITH NOTES IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS

32. 1. Audited consolidated financial statements of the Sava Group in accordance with International Financial Reporting Standards

Consolidated Income Statement for the year 2006 SIT in thousands Note 2006 2005 Net sales revenues from goods sold and services rendered 40,566,027 58,461,843 Change in inventories of products and work in progress -1,163,654 967,030 Other operating revenues 9 1,291,258 2,016,853 Operating revenues 40,693,631 61,445,726 Cost of goods, materials and services -22,761,461 -41,678,587 Labour costs 10 -11,514,998 -13,280,230 Depreciation and amortisation -3,301,219 -3,597,950 Other write-offs 11 -165,107 -376,338 Other operating expenses 12 -1,953,529 -521,204 Operating expenses -39,696,314 -59,454,309 Operating income 997,317 1,991,417 Financial income 5,967,318 5,854,543 Financial expenses -2,248,333 -2,070,087 Net financing income 13 3,718,985 3,784,456 ANNUAL REPORT 2006 FINANCIAL REPORT Share in income of associates 14 5,016,036 4,692,039 Pre-tax profit 9,732,338 10,467,912 Tax 15 -1,565,927 -1,252,339 Net profit for the year 8,166,411 9,215,573 Net profit for the year attributable to: Equity holders of the parent 8,145,895 9,162,673 Minority interest 20,516 52,900 Net profit for the period 8,166,411 9,215,573 Basic earnings per share (SIT) 4,065.43 4,572.88

134 Consolidated BalanceSheetasat31December2006 oa iblte 8057661,849,375 58,005,766 338,133 156,006,301 161,657,683 213,127 41,688,012 33,632,151 32 10,707,024 20,161,363 6,870,268 24,373,615 1,784,701 31 17,418 2,546,346 30,642,855 30 26,548,756 24,500 29 94,156,926 1,143,753 1,824,309 2,054,562 103,651,917 757,794 26 1,593,887 2,422,408 -53,787 27 28 14,480,373 Total equityand liabilities 27,952,373 -53,787 17,786,474 8,382,996 31,962,668 Total liabilities 6,560,951 29 11,236,230 Current operatingliabilities 9,578,372 Accrued expenses 30,100,770 Current operatingliabilities 20,069,870 30,100,770 Current interest-bearingborrowings 20,069,870 Non-current liabilities 156,006,301 161,657,683 Deferred taxliabilities 25,729,860 Non-current operatingliabilities 93,013,173 21,194,649 574,234 102,894,123 Non-current interest-bearingborrowings 18,623 Deferred governmentgrants 6,616,538 2,568,857 Non-current provisions 24 682,021 38,330 10,543,373 Total equity 7,668,691 Minority interest 25 22 Total equityattributabletoholdersoftheparent 12,024,773 Retained earnings 130,276,441 6,189,069 140,463,034 Treasury shares 2,704,451 23 Fair valuereserve 2,086,989 Reserves 284,010 3,322,896 21 Share premium 33,430,277 29,033,709 189,719 6,269,693 Issued capital 30,818,344 42,239,635 EQUITY ANDLIABILITIES 20 18 17 19 Total assets Current assets 61,501,098 Cash andcashequivalent 58,858,654 Current loans 16 Current taxreceivable Trade andotherreceivables Inventories Non-current assets Non-current receivables Non-current equitysecurities Investments inassociates Investment property Intangible assets Property, plantandequipment ASSETS oe3/220 31/12/2005 31/12/2006 Note SIT inthousands 135 ANNUAL REPORT 2006 FINANCIAL REPORT 136 ANNUAL REPORT 2006 FINANCIAL REPORT Consolidated StatementofCashFlowsfortheyear2006 adicm a 15589-1,312,192 1,590,090 -1,595,869 3,199,202 77,221 2,902,282 62,307 1,301,270 4,795,071 367,846 29,670 632,347 1,252,339 -88,940 -544,786 1,565,926 -344,370 704,003 1,606,774 -2,261,976 -146,649 1,463,187 -203,327 1,647,557 -112,062 0 Net cashfromoperations -3,417,342 Paid incometax -492,590 Acquired cashinoperations 56,847 -549,525 Change ingovernmentgrants 285,362 -4,692,039 Change inprovisions 0 102,583 Change innon-currentoperatingliabilities -5,016,036 Change incurrentoperatingliabilitiesandaccruedcosts Change ininventories 4,501,885 Change incurrentreceivables 1,243,727 -4,792,718 5,042,463 Change innon-currentreceivables -4,980,482 0 7,171 Income fromoperationspriortochangeinoperatingequityandprovisions 21,156 Tax liability 51,431 476,294 0 Interest revenues -91,297 1,133 Interest expenses 71,401 1,942 -309,743 Eliminating negativegoodwillduetosaleofcompanies -1,050,978 Loss duetosaleofsubsidiaries -323,636 -342,914 99,459 96,372 Other dividendsreceived Share inprofitofassociates 9,215,573 54,769 205,397 Loss insaleofsecurities 8,166,410 Profit insaleofnon-currentsecurities Proceeds fromsaleofcurrentfinancialinvestments 42,382 3,402,112 Loss atdisposalofproperty,plantandequipment 105,742 Proceeds fromsaleofproperty,plantandequipment 3,041,053 Revenues fromeliminationofnegativegoodwill Impairment offinancialinvestments Write-offs ininvestmentproperty Write-offs inintangibleassets Write-offs andimpairmentsofproperty,plantequipment Depreciation ofinvestmentproperty Depreciation ofintangibleassets Depreciation ofproperty,plantandequipment Adjustments for: Profit beforetaxation CASH FLOWSFROMOPERATINGACTIVITIES 062005 2006 SIT inthousands aditrs 16757-1,462,950 2,568,857 0 -1,647,557 682,021 713,168 -101,105 2,568,857 7,485,143 0 7,196,297 -97,013 1,855,689 -11,568,636 0 -1,242,294 -109,999,414 -1,785,731 246,090 16,425,408 -1,282,366 113,177,945 339,526 -1,686,722 -4,235,903 Cash andcashequivalentsatyearend 7,117,350 146,650 Cash andcashequivalentsinsoldcompanies 492,590 10,937,502 Cash andcashequivalentsatyearbegin 549,525 Net increaseordecreaseincashandequivalents Net cashflowfromfinancingactivities -7,219,544 0 1,361,350 Paid interest -12,181,230 Expenses fordividendsofGroupshareholders 2,250,329 Expenses forgrantedcurrentloans 0 468,050 Proceeds fromgrantedcurrentloans -29,988,633 -133,920 Expenses forgrantednon-currentloans 19,866,088 10,056,744 Proceeds fromgrantednon-currentloans 0 18,520,292 -10,523,530 11,910 -293,685 -11,858,738 Other increaseinequity -8,052,455 -328,929 Increase insharecapital CASH FLOWINFINANCINGACTIVITIES 5,245,973 Net cashflowfrominvestmentactivities 17,538 -85,400 Received interests -1,491,865 403,209 Other dividendsreceived 0 -1,213,350 -71,305 Received dividendsofassociates 280,575 Proceeds fromsaleofnon-currentsecurities Purchase ofequitysecuritiesavailableforsale Expenses forgrantedloans Proceeds fromrepaidloans -9,018,105 Proceeds fromsaleofassociates 2,523,162 -9,289,539 Purchase ofassociates 415,170 Proceeds fromsaleofsubsidiaries Purchase ofsubsidiaries Proceeds fromsaleofinvestmentproperties Purchase ofinvestmentproperties Proceeds fromsaleofintangibleassets Purchase ofintangibleassets Proceeds fromsaleofproperty,plantandequipment Purchase ofproperty,plantandequipment CASH FLOWININVESTINGACTIVITIES 062005 2006 SIT inthousands 137 ANNUAL REPORT 2006 FINANCIAL REPORT 138 ANNUAL REPORT 2006 FINANCIAL REPORT Consolidated StatementofChangesinEquityfortheyear2006 Profit allocation Profit allocation for sale securities available Revaluation of for sale securities available Revaluation of neetbsdrs 947003,1 39,417 0 -2,869,822 0 39,417 5,847,826 0 0 -2,869,822 0 0 5,847,826 0 0 0 0 39,417 0 0 -2,869,822 0 0 -2,853,234 5,847,826 0 0 0 Balance at31/12/2006 0 Others of 0 -1,516,987 0 0 interest duetosale 0 0 Increase inminority purchaseinterest dueto -2,128,424 2,853,234 Decrease inminority 0 0 -1,516,987 interest-based risk 0 0 0 hedging against companiesIncrease for securities -2,128,424 0 0 to saleof 0 0 Decrease due to fairvalue 0 0 -1,516,987 Dividend payout 0 to reserves -2,144,140 -2,128,424 0 Profit 2006 0 0 Balance at31/12/2005 Others purchase 0 0 0 interest dueto Decrease inminority of 2,144,140 Acquired bypurchase 0 interest 0 with minority Selling companies securities 0 to saleof Decrease due newto fairvalue of 0000000 Dividend payout to reserves Profit 2005 sharesBalance at31/12/2004 companies of 0000000 stakes 000000000 0000000 sudSaevleTesr eandMjrt Minority RetainedMajority Treasury value Share Issued aia rmu eevsrsresae annsitrs neetTotal interest interest earnings shares reserve Reserves premium capital 009803,0,7 1262095832-3773,6,6 0,9,2 5,9 103,651,917 757,794 102,894,123 31,962,668 -53,787 9,578,372 11,236,230 30,100,770 20,069,870 94,156,926 1,143,753 93,013,173 27,952,373 -53,787 6,560,951 8,382,996 30,100,770 20,069,870 90,553,312 1,815,107 88,738,205 22,176,134 -53,787 10,206,362 6,238,856 30,100,770 20,069,870 00000002,4972,49700000-1,000008,0000000 000000000 00000-1,000009, Fair SIT inthousands 4,9 ,4,9 0568,166,411 20,516 8,145,895 145,895 9,215,573 52,900 9,162,673 162,673 8,6 122360-1,282,366 0 -1,282,366 282,366 -1,242,294 0 -1,242,294 242,294 6255-652,565 -652,565 -627,241 -627,241 4,9 243,593 243,593 9,1 -97,013 -97,013 26 subsidiaries – daughter companies, and 3 joint 32. 2. Composition of the ventures. The financial statements of all these companies are included in the consolidated financial Sava Group statements of the Sava Group. In all companies the capital and voting rights are in accord. On 31 December 2006 the Sava Group consisted of 30 companies, namely the parent company Sava d.d.,

List of companies that besides the parent company Sava d.d. are included in the Sava Group, with a comparison of ownership stakes as at 31 December 2006 and 31 December 2005 v 000 SIT Change in % stake % stake % stake 31/12/2006 31/12/2005 in 2006 RUBBER MANUFACTURING division SAVATECH d.o.o., Kranj 100.00% 100.00% 0.00% SAVA-GTI d.o.o., Kranj 100.00% 100.00% 0.00% SAVA ROL d.o.o., Zagreb 76.00% 76.00% 0.00% SAVA-SCHÄFER d.o.o., Kranj 50.00% 50.00% 0.00% - FOREIGN TRADE NETWORK SAVA TRADE GmbH, Munich, Germany 100.00% 100.00% 0.00% SAVA TRADE sp.z.o.o., Warsaw, Poland 100.00% 100.00% 0.00% SAVA TRADE spol.s.o.o., Prague, Czech Republic 100.00% 100.00% 0.00% SAVA TRADE d.o.o., Split, Croatia 70.00% 70.00% 0.00% SAVATECH TRADE Ltd., London, Great Britain 100.00% 100.00% 0.00% SAVATECH CORP. Port Orange, Florida 95.00% 95.00% 0.00% TRADE division* SAVA TRADE d.d., Ljubljana 0.00% 96.40% -96.40% - MG Market d.o.o., Ljubljana (owned by Sava Trade d.d.) 0.00% 74.50% -74.50% - Chemo Zagreb d.o.o., Zagreb (owned by Sava Trade d.d.) 0.00% 100.00% -100.00% - Chemo Split d.o.o., Split (owned by Sava Trade d.d.) 0.00% 100.00% -100.00% - Tuzla Kem d.j.l., Tuzla (owned by Sava Trade d.d.) 0.00% 100.00% -100.00% - Chemo Niæ d.o.o., Niæ (owned by Sava Trade d.d.) 0.00% 65.00% -65.00% TOURISM division GOLF IN KAMP d.d., Bled 100.00% 91.58% 8.42% GRAND HOTEL TOPLICE BLED d.o.o., Bled 99.68% 99.36% 0.32%

G&P HOTELI BLED d.o.o., Bled 95.77% 95.10% 0.67% FINANCIAL REPORT TERME 3000 d.d., Moravske Toplice 97.61% 97.07% 0.54% - Terme Lendava, d.d. (owned by Terme 3000 d.d.) 93.02% 93.02% 0.00% - Terme Radenci, d.o.o., Radenci (owned by Terme 3000 d.d.) 100.00% 100.00% 0.00% TERME PTUJ d.o.o., Ptuj 100.00% 72.00% 28.00% REAL ESTATE division SAVA IP d.o.o., Ljubljana 100.00% 100.00% 0.00% - IP Nova d.o.o., Ljubljana (owned by SAVA IP d.o.o.) 100.00% 100.00% 0.00% - IP NOVA A d.o.o., Ljubljana (owned by SAVA IP d.o.o.) 100.00% 100.00% 0.00% - SAVA IPN d.o.o., Ljubljana (owned by SAVA IP d.o.o.) 100.00% 100.00% 0.00% - PC AG d.o.o., Velenje (owned by Sava IP d.o.o.) 50.00% 50.00% 0.00% - SAVA IMG d.o.o., Poreå (owned by Sava IP d.o.o.) 50.00% 50.00% 0.00% ANNUAL REPORT 2006 SAVA NOVA d.o.o., Zagreb 100.00% 100.00% 0.00% OTHER OPERATIONS TEOL d.d., Ljubljana 0.00% 98.73% -98.73% SAVA MEDICAL IN STORITVE d.o.o., Kranj 100.00% 100.00% 0.00% ENERGETIKA SAVA d.o.o., Kranj 100.00% 100.00% 0.00% ENERGETIKA ÅRNOMELJ d.o.o., Kranj 100.00% 0.00% 100.00% GEA SOL International d.o.o., Kranj ** 100.00% 100.00% 0.00% BIOOL d.o.o., Kranj ** 100.00% 100.00% 0.00%

* In 2006 the company Sava Trade d.d. was sold; consequently the entire Trade division was excluded. ** The company has been suspended.

139 CHANGES IN THE COMPOSITION OF THE INCREASE IN THE CAPITAL OF SUBSIDIARIES SAVA GROUP In 2006 the holding company Sava d.d. increased its • TRADE capital in the following subsidiaries: In 2006 Sava’s Trade division was strategically • In the company Savatech d.o.o. an investment in restructured. Activities included the sale of the entire kind in the amount of 946,371,000 tolars stake in the company Sava Trade d.d, acquisition of an (3,949,000 euros); important stake in the company Merkur d.d., and an • In the company Sava-GTI d.o.o. an investment in increase in capital of the company Merkur d.d. In this kind in the amount of 142,811,000 tolars way Sava d.d. restructured from an active manager of (596,000 euros); the Trade division to an important shareholder in the • In the company Grand Hotel Toplice Bled d.o.o. an business system Merkur. investment in kind in the amount of 191,714,000 tolars (800,000 euros). • TOURISM Through additional purchases the stakes were ASSOCIATED COMPANIES IN THE SAVA GROUP increased in the companies Golf in Kamp Bled d.d., Bled by 8.42 percentage points; Grand Hotel Toplice According to the set strategy the holding company d.o.o. by 0.32 percentage points, G&P Hoteli Bled Sava d.d. continued to purchase shares in Gorenjska d.o.o. by 0.67 percentage points and Terme 3000 Banka d.d., Kranj. On 31 December 2006 its d.d., Moravske Toplice by 0.54 percentage points. ownership stake amounted to 41.35 per cent and was In the first half of this year a 28 per cent share was 0.22 percentage points higher than at the end of purchased from minority owners in the company 2005. The common share of ownership of the Sava Terme Ptuj d.o.o., and a 72 per cent share of Group companies in Gorenjska Banka d.d. amounted ownership was transferred from the company Terme to 41.51 per cent at the end of 2006. 3000 d.d. to the parent company Sava d.d. The Owing to the strategic restructuring of the Trade division we company Terme Ptuj d.o.o. is now 100 per cent acquired a 20.03 per cent share in the company Merkur d.d. owned by Sava d.d. In 2006, the entire stake in the company Golf Istra d.o.o. was sold, and a 27 per cent share in the • OTHER OPERATIONS company JOB d.o.o. was purchased. In 2006, Sava d.d. The entire stake in the company Teol d.d., Ljubljana increased its capital in the company Limb d.o.o. in was sold, thereby finally withdrawing from the active the amount of 71,100,000 tolars (297,000 euros). management of the Chemicals division. The company Energetika Årnomelj d.o.o. was formed, which is under 100 per cent ownership of Sava d.d.

Changes in the ownership of associated companies v 000 SIT Change in % ownership % ownership % ownership 31/12/2006 31/12/2005 in 2006 SAVA d.d., druœba za upravljanje in financiranje, Kranj - as a parent company - Gorenjska Banka d.d., Kranj 41.35% 41.13% 0.22% - Limb d.o.o., Ptuj 37.50% 37.50% 0.00% - Job d.o.o., Maribor 27.00% 0.00% 27.00% - Merkur-Trgovina in Storitve d.d., Naklo 20.03% 0.00% 20.03% ANNUAL REPORT 2006 FINANCIAL REPORT GOLF IN KAMP BLED d.d., Bled - as a parent company - Gorenjska Banka d.d., Kranj 0.16% 0.16% 0.00% - Golf Istra d.o.o., Koper 0.00% 20.00% -20.00% TERME LENDAVA d.d. - as a parent company - Turizem Lendava d.o.o. 33.00% 33.00% 0.00%

REPRESENTATIVE OFFICES IN THE SAVA GROUP

As part of the Sava Group the company Savatech d.o.o., Kranj has representative offices, these being in Moscow and Trieste.

140 32. 3. described underItem4. The methodsusedinthefairvaluemeasurementare these assets. transition toIFRSisconsideredthefairvalueof Cost ofproperty,plantandequipmentontheday stated attheirfairvalue. instruments classifiedasavailableforsalethatare explained furtherinthereport,andfinancial and equipmentwhosedefinitionofvaluesis on thehistoricalcostbasisexceptproperty,plant these estimates. income andexpenses.Actual resultsmaydifferfrom and reportedamountsof assets andliabilities, assumptions thataffectthe applicationofpolicies management tomakejudgments, estimatesand The preparationsoffinancial statementsrequires d) Applicationofestimatesandassumptions Slovene tolars,roundedtothenearestthousand. company. Allfinancialinformationispresentedin December hadbeenthefunctionalcurrencyof presented inSlovenetolars,whichuntil31 The consolidatedfinancialstatementsare c) Functionalandpresentationcurrency b) Basisofmeasurement financial statementson27March2007. The BoardofManagementapprovedtheissue Reporting Standards(IFRSs)asadoptedbytheEU. prepared inaccordancewithInternationalFinancial The consolidatedfinancialstatementshavebeen a) Statementofcompliance 2. Basisofpreparation and theGroup’sinterestinassociatedcompanies. company Savad.d.,itssubsidiaries,jointventures refer totheSavaGroup,whichincludesparent Sava Groupfortheyearendedon31December2006 Slovenia. Theconsolidatedfinancialstatementsofthe Sava d.d.isacompanydomiciledintheRepublicof 1. Thereportingcompany Reporting Standards International Financial accordance with Sava Groupin statements ofthe Notes tothefinancial The consolidatedfinancialstatementsareprepared Item 33–assessingfinancialinstruments Items 27and34–provisionscontingentliabilities Item 27–measuringliabilitiesforcertainearnings Item 21–accountingbusinessthatincludesleasing described inthefollowingitems: effect ontheamountsinfinancialstatements,are accounting policiesandwhichhavethestrongest prepared intheprocessofimplementing and criticaljudgments,whichthemanagement The dataaboutimportantestimatesofuncertainties revision affects. estimate isrevisedandforallfutureperiodswhichthe estimates arerecognisedintheperiodwhich reviewed onanongoingbasis.Revisionstoaccounting The estimatesandunderlyingassumptionsare Joint ventures control ceases. date thatcontrolcommencesuntilthe in theconsolidatedfinancialstatementsfrom The financialstatementsofsubsidiariesareincluded rights areinaccord. activities. Inallsubsidiariesthecapitalandvoting of anentitysoastoobtainbenefitsfromits power togovernthefinancialandoperatingpolicies Control existswhentheparentcompanyhas Subsidiaries areentitiescontrolledbySavad.d. Subsidiaries are carriedoutfortheneedsofconsolidation. accordance withSAS,whereasadjustmentstoIFRSs prepare individualfinancialstatementsin the Group.Theparentcompanyandsubsidiaries attributable profitisaddedinthefinancialresultof accounting methodisconsidered,i.e.the the caseofassociatedcompanies,equity included inproportiontotheownershipstakeand, statements ofthejointventurecompaniesare statements ofsubsidiaries,whereasthefinancial statements oftheGroupincludefinancial 5 associatedcompanies.Theconsolidatedfinancial d.d., 26subsidiaries,3jointlycontrolledentitiesand The SavaGroupincludestheparentcompany a) Basisofconsolidation in theenclosedconsolidatedfinancialstatements. applied theaccountingpoliciesforallperiodsshown The companiesintheSavaGrouphaveconsistently 3. Significantaccountingpolicies partner’s proportionate shareoftheentity’s assets, partner. Theconsolidatedfinancial statementsincludethe agreement betweentheGroup andthecontractual Group hasjointcontrol,established bycontractual Joint venturesarethoseentities overwhoseactivitiesthe 141 ANNUAL REPORT 2006 FINANCIAL REPORT liabilities, revenues and expenses with items of a similar Non-monetary assets and liabilities denominated in nature on a line by line basis, from the date that joint foreign currencies that are stated at fair value are control commences until the date that joint control ceases. translated to the Slovene tolar at the mean exchange rate of the Bank of Slovenia ruling at the date the fair Associates value was determined. Associates are those entities in which the Sava Group has significant influence, but not control, over the Foreign exchange gains/losses arising from the financial and operating policies. The consolidated retranslation are recognised in the income statement, financial statements include the Sava Group’s share of which is not the case with gains/losses arising from the total recognised gains and losses of associates on the calculation of capital instruments available for an equity accounting basis, from the date that sale, or non-financial liability determined to hedge significant influence commences until the date that against risk. significant influence ceases. When the Group’s share of losses exceeds its interest in an associate, the Group’s Foreign operations carrying amount is reduced to nil and recognition of The assets and liabilities of foreign operations are further losses is discontinued except to the extent that translated to Slovene tolars at the mean exchange rate the Group has incurred legal or constructive obligations of the Bank of Slovenia ruling at the balance sheet or made payments on behalf of an associate. date. The revenues and expenses of foreign operations The capital and voting rights in associates are in are translated to tolar at rates ruling at the dates of accord except with Gorenjska Banka where the transactions. Foreign exchange gains/losses arising articles of association in 2005 limited voting rights on retranslation are recognised directly in a separate of a shareholder to a maximum of 33 per cent. In component of equity. 2006 the change in the articles of association of Gorenjska Banka d.d. eliminated this restriction. c) Financial instruments

Transaction eliminated on consolidation Non-derivative financial instruments Intragroup balances and any unrealised gains and Non-derivative financial instruments include losses or income and expenses arising from investments in equity and debtor’s securities, transactions within the Sava Group are eliminated in operating and other receivables, cash and cash preparing the consolidated financial statements. equivalents, received and granted loans, operating Unrealised gains arising from transactions with and other liabilities. associates are eliminated to the extent of the Group’s Non-derivative financial instruments are initially interest in the entity. Unrealised losses are eliminated recognised at fair value increased by costs which in the same way as unrealised gains, but only to the directly relate to the transaction. extent that there is no evidence of impairment. Non-derivative financial instruments are recognised if the group becomes a party to the contractual provisions b) Foreign currency of the instrument. The recognition of financial assets is eliminated when contractual rights of the group towards Foreign currency transactions the cash flows expire or the financial instrument is Transactions in foreign currencies are translated to the transferred to another party including risks and benefits. functional currency at the mean exchange rate of the Purchases and sales carried out in an ordinary way are Bank of Slovenia ruling at the date of the transaction. accounted for on the day when the group obliges itself to Monetary assets and liabilities denominated in foreign purchase or sell an asset. The recognition of financial currencies at the balance sheet date are translated to the liabilities is eliminated when the contractual liabilities of functional currency at the mean exchange rate of the the group are expired, terminated or interrupted. Bank of Slovenia ruling at that date. Foreign exchange gains/losses present differences between the repayment Cash

ANNUAL REPORT 2006 FINANCIAL REPORT value in functional currency at the beginning of the period Cash and cash equivalents include cash on hand, on adjusted by the amount of effective interest and transaction accounts and call deposits. Overdrafts payments during the period and the repayment value in on transaction accounts subject to settlement on foreign currency calculated at the mean exchange rate at call and being a component of managing monetary the period end. The foreign exchange gains/losses arising assets in the Group, are included under cash and on translation are recognised in the income statement. cash equivalents in the cash flow statement.

Non-monetary assets and liabilities denominated in Financial assets available for sale foreign currencies that are stated at fair value are Investments in the group in securities are classified translated to Slovene tolars at the mean exchange rate under financial assets available for sale. Securities of the Bank of Slovenia ruling at the transaction date. available for sale are ownership securities of

142 companies listed on the stock exchange, as well as recognised in equity is transferred to the income companies that are not listed. statement for the period, in which the asset that is After being initially recognised these investments hedged against risk influences the profit. are valued at fair value, while a change in the fair value is recognised indirectly in equity. When the Hedging against risks recognition of investments is carried out, the related With derivative financial instruments which hedge profit or loss is transferred to the operating profit. monetary assets and liabilities in a foreign currency, Loss due to impairment is recognised in the hedging against risk is not performed. Changes in operating profit for the financial year. the fair value of derivative financial instruments are Investments in shares and stakes of the companies recognised in the income statement as part of are stated at fair values. The change in fair values is foreign exchange gains and losses. recognised directly in equity. After eliminating the recognition of these investments, the profit or loss as Share capital previously recognised in equity should be recognised Ordinary shares in the net profit/loss for the financial year. Additional costs that can be attributed directly to the The fair value of securities available for sale, which are issue of ordinary shares and share options are listed on the stock exchange, equals the announced shown as a reduction in equity. uniform price of these shares at the balance sheet day. The fair value of shares and stakes of listed Repurchase of treasury shares companies is estimated on the basis of the most Repurchase of treasury shares is shown as a recent known transactions. deductible equity item.

Others Dividends Other non-derivative financial instruments are Dividends are recognised under liabilities and are measured according to their repayment value by shown when a business event appears. applying the method of effective interest, reduced by the amount of losses due to impairment. d) Property, plant and equipment

Derivative financial instruments Recognition and measurement The Group does not hold or issue derivative financial Items of property, plant and equipment are stated at instruments for trading purposes. cost less accumulated depreciation and impairment The Group uses derivative financial instruments to losses. hedge its exposure to interest rates. Value at cost includes costs that are directly Derivative financial instruments are recognised attributed to the purchase of an asset. The cost of self- initially at cost; costs related to a transaction are constructed assets includes cost of materials, direct recognised in profit or loss upon its appearance. After labour costs and other costs directly attributed to its initial recognition derivative financial instruments are putting into intended use, and costs of dismantling FINANCIAL REPORT measured at fair value, while related changes are and removing property, plant and equipment and dealt with as described further in the report. restoring the site at which they are located.

Cash flow hedging Certain items of property, plant and equipment with Changes in fair value of a derivative financial different useful lives are accounted for as separate instrument determined to hedge its exposure to risk property, plant and equipment. are recognised directly in equity, provided that hedging was successful. If hedging is unsuccessful, Reclassification under investment property changes in fair value are shown in profit or loss. Property that is being constructed or developed for

future use as investment property is dealt with as ANNUAL REPORT 2006 When a hedging instrument does not meet the property and shown at cost until the date of its criteria for designation of the hedge relationship, or completion, at which time it is reclassified as it expires or is sold, terminated or exercised, the investment property. hedge relationship ceases to exist. The cumulative gain or loss remains in equity and is recognised If an owner-occupied property changes to an when the forecasted transaction occurs. investment property, this property is measured at its When a non-financial asset is subject to hedge, the fair value and is reclassified as investment property. amount recognised in equity is transferred under The gain which appears in the repeated measurement the carrying amount of the asset following its is recognised directly in equity, while the loss is recognition. In other cases, the amount being recognised directly in the income statement.

143 Subsequent costs Depreciation The group recognises in the carrying amount of an Depreciation is charged to the income statement on item of property, plant and equipment the cost of a straight-line basis over the estimated useful lives replacing part of such an item when that cost is of each part of an item of property, plant and incurred if it is probable that the future economic equipment. Land is not depreciated. The suitability benefits embodied with the item will flow to the of the method and useful lives are reviewed on the Group and the cost of the item can be measured day of reporting. reliably. All other costs are recognised in the income statement as an expense as incurred.

Estimated useful lives in the current and comparable period are as follows: v mio SIT Manufacturing buildings 25-80 years Hotels, commercial buildings, warehouses 20-71 years Office buildings 25-40 years Manufacturing equipment in rubber manufacturing 4-20 years Hotel furnishings 5-20 years Equipment in stores 4-10 years Computer equipment 2-5 years Other equipment 6-20 years

e) Intangible assets the prospect of gaining new scientific or technical knowledge and understanding, is recognised in the Goodwill (negative goodwill) income statement as an expense is incurred.

Goodwill (negative goodwill) represents amounts Other intangible assets arising on acquisition of subsidiaries, associated Other intangible assets that are acquired by the companies and joint ventures. Group and whose useful lives are limited are stated at cost less accumulated amortisation and Acquisitions impairment losses. Goodwill represents the difference between the cost of the acquisition and stake of the group in the net Subsequent expenditure fair value of assets, liabilities and contingent Subsequent expenditure on intangible assets is liabilities of an acquired company. If the difference is capitalised only when it increases the future negative (negative goodwill) it is recognised directly economic benefits embodied in the specific asset to in the income statement. In associated companies which it relates. All other expenditure is expensed as the value of goodwill is included in the carrying incurred. amount of the investment in the associate. Amortisation Acquisition of minority shares Amortisation is accounted on a straight-line basis Goodwill (negative goodwill) which arises in the over the estimated useful lives of intangible assets. ANNUAL REPORT 2006 FINANCIAL REPORT acquisition of minority stakes in subsidiaries Intangible assets are amortised from the date they represents the difference between the acquisition are available for use. The estimated useful lives for costs of an additional investment and the carrying software and other patents and licence are five years. amount of purchased assets on the day of exchange. f) Investment property Subsequent measurement Investment properties are properties which are held Goodwill is stated at cost less any accumulated either to earn rental income or for capital impairment losses. appreciation or for both. For evaluating investment properties the cost model is applied. When it should Research and development be decided whether an asset is an investment Expenditure on research activities, undertaken with property or property, plant and equipment, the asset

144 is an investment property if more than 20 per cent of collectively with regard to their common its entire value is used as an investment property. characteristic in risk exposure. Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives The Group states all impairment losses in the income of each part of an item of property, plant and statement for the period. The possible loss in equipment. Land is not depreciated. connection with financial assets available for sale The useful lives for investment property are the recognised directly in equity is transferred in profit same as for property, plant and equipment. or loss. g) Inventories Non-financial assets Inventories are stated at the lower of cost and net The Group examines the remaining carrying amount of realisable value. Net realisable value is the non-financial assets of the Group except for estimated selling price in the ordinary course of investment property, inventories and deferred tax business, less the estimated costs of completion receivables in order to ascertain whether they are and selling expenses. impaired. The cost of other inventories includes expenditure If they are impaired, the recoverable value of the asset incurred in acquiring the inventories and bringing them is estimated. The estimate of goodwill and intangible to their existing location and condition. In the case of assets with an indefinite useful life not yet available manufactured inventories and work in progress, cost for sale is carried every time to date. includes an appropriate share of overheads based on normal operating capacity. The use of inventories is Impairment of assets or cash-generating items is stated at weighted average prices. recognised when its carrying amount exceeds its recoverable value. A cash-generating unit is the h) Construction work in progress smallest group of assets which generates financial Construction work in progress is stated at gross inflows that to a great extent do not depend on uncharged value to be paid by a customer for financial inflows from other assets or groups of contracting work to date. The value of construction assets. Impairment is stated in the income work in progress is stated at cost plus profit to date statement. Loss recognised in a cash-generating less a provision for foreseeable losses and less unit arising from an impairment is classified so as to progress billings. Cost includes all expenditure related first reduce the carrying amount of the goodwill directly to specific projects and allocation of fixed and allocated to the cash-generating unit, and then on variable overheads incurred in the Group’s contract other assets of the unit (group of units) in proportion activities based on normal operating capacity. to the carrying amount of each item in the group.

Construction work in progress is represented as a The recoverable amount of an asset or a part of operating receivables in the balance sheet. If cash-generating unit is the greater of their fair payments by a customer exceed the recognised values in use or fair value less selling costs. In profit, the difference is stated as deferred revenue in assessing value in use, the estimated future cash FINANCIAL REPORT the balance sheet. flows are discounted to their present value using a pre-tax discount rate that reflects current market i) Impairment of assets assessments of the time value of money and the risks specific to the asset. Financial assets Financial assets is impaired when impartial j) Operating and other receivables evidence exists, which shows that the expected future cash flows from this asset is decreased as a Other operating and other receivables result of one or several events. Operating and other receivables are stated at its

historical value less impairment loss. ANNUAL REPORT 2006 Impairment loss related to financial assets stated at payment value is calculated as the difference between k) Employee earnings the net value of an asset and the future expected cash Liabilities for short-term employee earnings are flows, discounted at an originally valid interest rate. measured without discounting and stated under Impairment loss related to a financial asset intended expenses as work in connection with definite for sale is charged at its present fair value. short-term earnings is done.

With an important financial asset an impairment l) Provisions estimate is performed individually. The impairment A provision is recognised when the Group has a estimate of other financial assets is carried out present legal or constructive obligation as a result of

145 a past event, and it is probable that an outflow of assumed all significant risk and rewards of economic benefits will be required to settle the ownership and there exists a certainty regarding the obligation. Provisions are determined by recovery of the consideration due, associated costs discounting the expected future cash flows at a pre- or the possible return of goods or products and when tax rate that reflects current market assessments of the Group ceases to make further decisions about the time value of money and, where appropriate, the sold products. risks specific to the liability. Transfer of risks and rewards depends on individual provisions of the sale contract. When selling goods a m) Warranties transfer is performed when the goods arrive in a A provision for warranties is recognised when the customer’s warehouse, and in certain international underlying products or services are sold. The consignments a transfer is performed when the provision is based on historical warranty data and goods are loaded on a truck. considering all possible outcomes with regard to their probability. Revenue from services rendered Revenue from services rendered is recognised in the n) Onerous contracts income statement with regard to the stage of A provision for onerous contracts is recognised when completion to date. The stage of completion is the expected benefits to be derived by the Group are assessed by surveys of work performed. Revenue lower than the unavoidable cost of meeting its from services in the Tourism division is recognised obligation under the contract. Provisions are as a service is rendered. When revenue from a measured at the lower of current value of the tourist arrangement relates to two accounting expected costs for terminating the contract or the periods they are deferred with regard to the number expected costs for continuing the contractual of days in each individual accounting period. relationship. Before the Group forms a provision, it recognises possible losses from the asset value Revenue from construction contracts impairment related to the contract. As soon as the outcome of a construction contract can be estimated reliably, contract revenue and o) Provisions for retirement amounts and expense are recognised in the income statement in employee jubilee benefits proportion to the stage of the contract completion. As stipulated by the legislation, collective Contract revenue includes the initial amount agreement and internal regulations the Group is determined upon the contract conclusion and committed to pay employee jubilee benefits and possible changes in the volume of work under amounts upon their retirement, for which long-term contract, requirements and performance bonuses provisions are formed. No other liabilities due to when it is probable they will result in revenue and pensions exist. can be measured reliably. The stage of completion is assessed in surveys of Provisions are formed in the amount of benefit that work performed. When the outcome of a employees have earned in return for their service in construction contract cannot be measured reliably, the current and prior periods, discounted at the contract revenue is recognised only in the part of balance sheet date. On 31/12/2005 a calculation incurred contract costs, for which it is probable to be was made for every employee considering expenses paid. Expected losses arising from the contract are for pay upon retirement and all expected jubilee recognised as incurred. benefits until retirement. The chosen discount interest rate is 2.75% annually and represents the Rental income yield of long-term government bonds; the Rental income from investment property is calculation is performed by a qualified actuary using recognised in the income statement on a straight- the projected unit method. The Group recalculated line basis over the term of the lease.

ANNUAL REPORT 2006 FINANCIAL REPORT provisions on 31/12/2006 considering a change in the number of employees. In case of greater Government grants changes a qualified actuary will repeatedly review Initially government grants are recognised in the suitability of the provision amount. financial statements as deferred revenue when there is a reasonable assurance that it will be p) Revenue received and that the Group will comply with the Revenue from goods sold conditions attaching to it. Revenue from goods sold is recognised at fair value Grants that compensate the Group for expenses of received payment or receivable less paybacks incurred are recognised as revenue in the income and discounts, rebates for further sale and quantity statement on a systematic basis in the same discounts. Revenue is shown when the buyer has periods in which the expenses are incurred. Grants

146 that compensate the Group for the cost of an asset s) Net earnings per share are strictly recognised in the income statement as Share capital of the Group is divided into ordinary other operating income on a systematic basis over shares, therefore the Group states the basic earnings the useful life of the asset. of the share. The basic earnings of the share is calculated so as to divide profit or loss attributable to q) Financing income and financing costs ordinary shareholders with the weighted number of ordinary shares in the business year. Net financing income comprises interest revenues, dividend income, appropriation of financial assets t) Segment reporting available for sale, foreign exchange gains and gains arising from instruments for hedging against risk A segment is a distinguishable component of the which are recognised in the income statement. Group that is engaged either in providing products or Interest revenues are recognised as they arise by services (business segment), or in providing using the effective interest rate method. Dividend products or services within a particular economic income is recognised in the income statement when environment (geographical segment), which is the shareholder’s right for payment is exercised. subject to risks and rewards that are different from those of other segments. The Group’s segment Net financing costs comprise interest payable on reporting is based on business segments. borrowings calculated, foreign exchange loss, impairment losses in the value of financial assets u) New standards and explanations not yet effective and losses arising from hedging against risk, which are recognised in the income statement. The Numerous new standards, amendments to expense of lease payments is recognised in the standards and explanations for the year ending on income statement using the effective interest rate 31 December 2006 have not yet been effective and method. have not been applied in preparing the financial statements of the Sava Group for the year 2006: r) Income tax • IFRS 7 – Financial Instruments: Disclosures and Amendment to IAS 1 – Presentation of Financial Income tax on the profit or loss for the year Statements: Capital Disclosures. The Standard will comprises current and deferred tax. Income tax is require increased disclosure in respect of the recognised in the income statement except to the significance of the Group's financial instruments extent that it relates to items recognised directly in for the financial position of the Group, its business equity, in which case it is recognised in equity. as well as qualitative and quantitative disclosures about the nature and amount of individual types of Current tax is the expected tax payable on the risk. IFRS 7 and the amended IAS 1 that the Group taxable income for the year, using tax rates enacted will have to consider in the preparation of financial or substantially enacted at the balance sheet date, statements for 2007 will require additional and any adjustment to tax payable in respect of disclosures about financial instruments and FINANCIAL REPORT previous years. Group’s share capital. • IFRIC 7 – Applying the Restatement Approach Deferred tax is provided using the balance sheet under IAS 29 – Financial Reporting in liability method, providing for temporary differences Hyperinflationary Economies. The interpretation between the carrying amounts of assets and liabilities contains guidelines on how an entity would for financial reporting purposes and the amounts used restate its financial statements pursuant to IAS 29 for taxation purposes. The amount of deferred tax in the first year it identifies the existence of provided is based on the expected manner of hyperinflation, and particularly in accounting realisation or settlement of the carrying amount of deferred taxes. We do not expect that IFRIC 7, assets and liabilities, using tax rates enacted or which will be used in the preparation of the ANNUAL REPORT 2006 substantively enacted at the balance sheet date. financial statements for 2007, will affect the consolidated financial statements. A deferred tax asset is recognised only to the extent • IFRIC 8 – Scope of IFRS 2 Share-based Payment. that it is probable that future taxable profits will be The interpretation applies to share-based available against which the asset can be utilised. payment transactions where part of the total Deferred tax assets are reduced to the extent that it goods or services cannot be precisely is no longer probable that the related tax benefit will determined. The Group will start to use IFRIC 8 in be realised. 2007 with a retrograde effect. The Group does not carry out any share-based payments.

147 • IFRIC 9 – Reassessment of Embedded Derivatives. Where appropriate, the valuation reflects the type of The interpretation clarifies that the treatment of tenants actually in occupation or responsible for an embedded derivative should be separated from meeting lease commitments or likely to be in the host contract only if the contract has changed. occupation after letting vacant accommodation and We do not expect that IFRIC 9, which the Group has the market’s general perception of their credit- to apply in 2007, will affect the consolidated worthiness, the allocation of maintenance and financial statements. insurance responsibilities between lessor and • IFRIC 10 – Interim Financial Reporting and lessee and the remaining economic life of the Impairments. It prohibits the elimination of losses property. It has been assumed that whenever rent arising from an impairment that was recognised in reviews or lease renewals are pending with the previous interim period in respect of goodwill, anticipated reversionary increases, all notices and investment in equity instruments or financial where appropriate counter notices have been served assets carried at cost. The Group will have to apply validly and within the appropriate time. IFRIC 10 in the business year 2007 in stating the goodwill, investments in equity instruments and Inventories financial assets carried at cost beforehand as of The fair value of inventories in business mergers is the date when it first started to apply criteria for stated at its estimated selling price in the ordinary measurements in line with IAS 36 and IAS 39 (i.e. course of business, less the estimated costs of 1 January 2004). The adoption of IFRIC 10 will not completion and selling expenses and extra gain in affect the Group. respect of the quantity of work invested in completion of business and selling of inventories. 4. Fair value determination Investments in equity and debts securities In view of the accounting policies applied in the The fair value of financial instruments classified as Group and notes, it is required to determine the fair held for trading and available for sale is their quoted value of both financial and non-financial assets and bid price at the balance sheet date. The fair value of liabilities. The Group determined fair values of shares and stakes which are not listed is estimated on individual groups of assets for measuring and the basis of recent transactions or their financial reporting purposes in accordance with the methods statements. If for a certain financial investment an described below. Where additional explanations in option contract has been made, the fair value is respect of assumptions for the determination of fair ascertained considering the price in the option values are required, these are mentioned in notes to contract. individual items of assets or liabilities of the Group. Operating and other receivables Investment property The fair value of operating and other receivables, An external, independent valuation company, having except construction work in progress whose appropriate recognised professional qualifications maturity is longer than one year, is calculated as the and recent experience in the location and category current value of future cash flows discounted at the of property being valued and which has not been market interest rate to date. recently acquired, values the Group’s portfolio at least every 5 years. The fair value is based on Derivative instruments market value being the estimated amount for which The fair value of interest rate swaps is based on the a property could be exchanged on the date of offer by financial institutions. The suitability of these valuation between a willing buyer and a willing seller offers is determined by using the method of in an arm’s length transaction after proper discounted future net cash flows considering the marketing wherein the parties had each acted maturity of an individual transaction and using knowledgeably, prudently and without compulsion. market interest rates for similar instruments on the

ANNUAL REPORT 2006 FINANCIAL REPORT If current prices in the active market cannot be valuation date. determined, the value of investment property is prepared by considering the aggregate value of the Non-derivative financial instruments expected cash flows from rents receivables. A yield For the purpose of reporting the fair value is which reflects the specific risks is applied in the calculated considering the current value of future calculation of property value on the basis of payments of the principal and interest discounted at discounted net cash flows at the annual level. the market interest rate on the day of reporting.

148 5. Segment reporting GEOGRAPHICAL SEGMENTS

The Sava Group reports by business and In stating information by geographical segment, the geographical segment. The basic reporting form, income of individual segments are shown in regions which arises from the business segments, is where customers operate. The assets of the founded on the internal organisational structure and segment are stated in respect of their geographical management of the Group. position.

The prices of transfers among segments are 6. Information by business segment measured on a pure business basis. Segment information is presented in respect of the Financial results, assets and liabilities by segment Group’s business segments that are included in the include items that can be attributed directly to the Sava Group’s division. segment, which is provided by the suitable legal in formal organisational structure of the Group. The operation by a particular division is presented in the business part of the Annual Report. BUSINESS SEGMENTS

The Sava Group includes the following business segments: •Rubber Manufacturing division with the Foreign Trade Network •Tourism division •Real Estate division •Investment Finance division •Other Operations

Information by business segment for the year 2006 SIT in thousands RUBBER MANUFAC- TURING WITH Excluding FOREIGN TRADE REAL OTHER INVESTMENT Group FINANCIAL REPORT NETWORK TOURISM ESTATE OPERATIONS FINANCE operations Total Net sales revenues from goods sold 26,916,527 0 4,504,251 0 0 -4,322,956 27,097,822 Net sales revenues from services rendered 772,590 13,540,967 45,123 782,916 664,677 -3,870,309 11,935,964 Net revenue from rents 0 146,363 176,817 9,442 1,117,914 -614,911 835,625 Net sales revenues from merchandise sold 527,069 165,641 0 3,906 0 0 696,616 Change in inventories -114,974 0 -1,048,695 15 0 0 -1,163,654 Other operating revenues 118,703 146,834 70,265 75,876 218,887 660,693 1,291,258 Operating revenues total 28,219,915 13,999,805 3,747,761 872,155 2,001,478 -8,147,483 40,693,631 ANNUAL REPORT 2006 Net profit for the year 702,761 447,399 184,484 46,093 5,706,469 1,079,205 8,166,411 Assets 13,880,047 47,461,762 10,287,245 1,971,490 109,505,364 -21,448,225 161,657,683 Liabilities 6,970,104 21,355,889 8,258,691 1,102,427 30,823,511 -10,504,856 58,005,766 Purchase of property, plant and equipment 1,016,817 6,173,176 5,304 390,878 1,302,993 0 8,889,168 Depreciation 808,143 1,739,810 134,660 74,128 544,478 0 3,301,219

Stakes in net profit or loss in the associated companies entirely refer to the Investment Finance division and are shown under Item 14.

149 150 ANNUAL REPORT 2006 FINANCIAL REPORT Net salesrevenues Change in the totalassetsofGroup(in2005:99.1%). companies inSloveniarepresents97.7percentof the carryingamountofassetsrelatingto The assetsarenotsegmentedduetothefactthat Consolidated salesrevenuesbygeographicalsegments Information bygeographicalsegment Information bybusinesssegmentfortheyear2005 054,0,5 ,4,2 ,0,6 58,461,843 8,008,369 40,566,027 9,949,221 4,770,164 16,736,051 40,504,253 19,059,812 967,030 9,018,105 0 0 0 2,747,213 2,016,853 9,215,573 479 61,849,375 444,385 2005 3,775,074 -12,223,677 31,686,614 2006 4,497,567 0 414,567 156,006,301 134,116 -45,744,814 -150,358 158,599 119,500,693 66,328 1,338 9,544,872 174,329 4,904,831 17,974,619 736,267 12,203,081 101,101 8,202,423 107,912 169,270 43,441,505 382,038 14,639,445 0 20,235,044 9,343 532,116 289,004 645,161 -4,782,659 6,148,370 0 -63,895 527,969 11,254,902 1,096,538 Depreciation 0 94,228 plant andequipment 342,828 Purchase ofproperty, 0 76,092 Liabilities Assets -51,153 for theyear 23,139,474 3,315,939 281,916 Net profit 0 Operating revenue revenue Other operating inventories 0 from merchandisesold 1,289,750 Net revenuefromrents 20,412,014 from servicesrendered Net salesrevenues from goodssold Net salesrevenues FOREIGN TRADE TURING WITH ,8,8 23,436,879 0 1,582,187 MANUFAC NETWORK 8,6 2901205,6 ,0,0 2888312,928,869 -2,808,863 1,905,903 54,462 0 12,990,102 0 0 787,265 RUBBER ,3 2982162000278,864 0 0 0 221,652 52,978 4,234 0 0 - HMCL RD ORS ESTATE TOURISM TRADE CHEMICALS 4,3 73123591829817061,1 6,5 3,597,950 0 660,651 14,714 177,086 1,892,918 283,539 27,311 541,731 ,3,2 399021,3,8 ,4,2 58023040-,4,3 61,445,726 -7,147,137 2,320,470 55,800 4,443,128 13,332,084 23,969,082 1,332,825 lvnaE te Total Other EU Slovenia whereas therewerenosalesin2005. companies SavaTraded.d.andTeolweresold, ownership stakeswerecarriedout.In2006the In 2005and2006additionalacquisitionsof Acquisitionsand saleofstakesin 7. subsidiaries ELOHRINVESTMENT OTHER REAL 0000025, OPERATIONS Excluding SIT inthousands SIT inthousands IAC prtosTotal operations FINANCE Group 019,066 *Data fromtheaudited financialstatementsofthecompanies asat31/12/2005. Disclosures ofassetsandliabilitiesindisposedcompanies* Disposal ofstakesinthecompanies Other:includestheindirectlyincreasedstakesincompaniescontrolledthroughsubsidiaryPanonskeTermeduetoaddit * Acquisitions in2005and2006 eldd 6,3 8,2 8,3 ,6 349,868 8,261 287,032 484,026 161,135 5,859,227 1,270,212 7,164,307 8,751,417 5,542,329 Teol d.d. Group SavaTrade 2006 Company 0 Teol d.d. Skupina SavaTrade 2006 Company Total Other* Terme Ptujd.o.o. TERME 3000d.d.,MoravskeToplice G&P HoteliBledd.o.o., Grand HotelTopliceBledd.o.o., GOLF INKAMPd.d.Bled 2006 Total Other Sava Traded.d. Teol d.d. TERME 3000d.d.,MoravskeToplice G&P HoteliBledd.o.o., Grand HotelTopliceBledd.o.o., GOLF INKAMPd.d.Bled 2005 purchase ofastakeinthesubsidiaryTerme3000d.d. 01/01/2006 1/01/2006 ipsleut nDsoe ato fordisposed partof Disposed equityon Disposal Further purchases Further purchases Further purchases Further purchases Further purchases Further purchases Further purchases Further purchases Further purchases Further purchases Further purchases Further purchases Further purchases custo custo curdPurchased Acquired acquisition Acquisition date disposal date aedt tk qiysaegoodwill stake equity stake date date ,6,0 68%6900450273-1,857,291 5,082,773 6,940,064 96.87% 7,164,307 Long-term 8,3 87%23371320-120,187 163,200 283,387 98.73% 287,032 Company sesast qiylaiiisliabilities liabilities Equity assets assets 0120404%4,1 861-13,862 28,651 42,513 0.42% 10,122,084 qiyo Payment equity on Company ,9,9 .4 3943,5 -19,712 -25,364 34,252 14,883 -18,461 53,964 40,247 99,430 0.54% 0.67% 117,891 -57,598 9,993,295 8.42% 6,007,008 43,398 -204 1,400,134 100,996 -246,316 79 219,723 1.41% 466,039 7,162,809 283 7.70% 0.02% 6,052,451 1,413,963 ,4,4 80%36691000-196,639 180,000 376,639 28.00% 1,345,141 4,6 .2 6 6 -104 364 468 -4,018 0.32% 0 873 146,264 4,018 1,834 1.40% 961 287,032 0.48% 200,201 Short-term tk qiysaeBalance stake equity stake ipsdPayment Disposed 0,2 9,8 -309,743 293,685 603,428 5,6 2,2 -323,636 328,929 652,565 1,8 11,381 0 -11,381 3360-63,356 0 63,356 Long-term for acquired SIT inthousands SIT inthousands SIT inthousands Short-term ional Negative 151 ANNUAL REPORT 2006 FINANCIAL REPORT 8. Joint ventures Sava IMG d.o.o., Poreå. In consolidating we have applied the proportionate consolidation method and Three companies are included in the Sava Group, in we present below the appropriate portion of assets, which the parent company has a 50 per cent stake: liabilities, revenues and expenses. Sava Schäfer d.o.o., Kranj, PC AG d.o.o. Velenje and

SIT in thousands 2006 2005 Income stetement Net sales revenues from goods sold and services rendered 383,306 408,996 Other operating revenue -2,987 -1,076 Cost of goods, materials and services -221,894 -236,240 Labour costs -102,760 -110,370 Other operating expenses -15,112 -14,325 Tax -9,816 -10,085 Net profit for the year 30,737 36,900 Balance sheet Property, plant and equipment 114,062 88,692 Non-current receivables 2,586 742 Inventories 19,925 21,875 Operating and other receivables 69,177 70,554 Interest-bearing borrowings 21,498 -36,615 Cash and cash equivalents 2,140 1,393 Assets 229,388 146,641 Equity 155,961 133,914 Provisions 11,243 11,021 Non-current loans 0 0 Non-current operating liabilities 0 862 Current loans 11,023 5,806 Current operating liabilities 51,161 -4,962 Equity and liabilities 229,388 146,641

9. Other operating revenues

ANNUAL REPORT 2006 FINANCIAL REPORT SIT in thousands 2006 2005 Reversal of provisions not used 181,655 186,701 Revenue from government incentives 37,417 59,521 Net proceeds from sale of property, plant and equipment 434,211 1,050,978 Realised negative goodwill in purchase of subsidiaries 323,636 309,743 Other 314,339 409,910 Total 1,291,258 2,016,853

152 10. Labour costs SIT in thousands 2006 2005 Wages and salaries 8,246,400 9,379,542 Social security expenses 1,450,873 1,673,150 Other labour costs 1,817,725 2,227,538 Total 11,514,998 13,280,230

Other labour costs include paid employee holiday accounted on the basis of a change in the number of allowance, other compensations in accordance with employees in the Group. 2,499 employees were the collective agreement (meals and commuting to employed in 2006 on average, while in 2005 the and from work) and provisions for severance pay employee number totalled 3,062. and employee jubilee benefits as additionally

11. Impairment losses and write-offs SIT in thousands 2006 2005 Impairment of property, plant and equipment -36,084 0 Write-offs of property, plant and equipment -70,791 -42,382 Write-offs of investment property 0 -7,171 Write-offs of intangible assets -1,942 -51,431 Inventories -15,148 -98,282 Receivables -41,142 -177,072

Total -165,107 -376,338 FINANCIAL REPORT

12. Other operating expenses SIT in thousands 2006 2005 Forming long-term provisions -181,088 0 Elimination of negative goodwill* -1,454,857 0

Other operating expenses -317,584 -521,204 ANNUAL REPORT 2006 Total -1,953,529 -521,204

*In the past goodwill was recognised in other operating revenues.

Other operating expenses do not represent a structure and mainly refer to contributions that do significant share in the operating expenses not depend on the profit.

153 154 ANNUAL REPORT 2006 FINANCIAL REPORT refers toGorenjskaBankad.d.,Kranj,andMerkurd.d. Income fromshareofprofitinassociatesmainly 14. Shareinprofitofassociates 13. Netfinancingincome was agreedin2006;thecomparisondatafor The methodologyofmonitoringtheR&Dcosts Other informationaboutexpenses addvdns00 1,361,350 2,250,329 0 0 0 0 4,692,039 5,016,036 612,289 193,064 6,547 0 3,330,689 1,361,350 2,765,707 2,057,265 4,692,039 6,547 0 4,397,200 419,225 -31,917 - attributedprofit inaccordancewiththeequity method - paiddividends 3,330,689 -38,622 Associated companiestotal 3,784,456 2,339,935 - attributedprofitinaccordance withtheequitymethod 3,718,985 - paiddividends -2,070,087 Other associatedcompanies -2,248,333 114,085 - attributedprofitinaccordancewiththeequitymethod -41,842 - paiddividends 126,969 Merkur d.d. -1,463,187 -102,808 - attributedprofitinaccordancewiththeequitymethod -476,294 -1,647,557 - paiddividends 5,854,543 344,370 -56,847 -71,401 Gorenjska Bankad.d. 110,780 5,967,318 146,650 -387,945 163,692 492,590 549,525 Net financingincome 4,792,718 Total financingexpenses Others 106,966 4,980,482 4,252 24,956 Net lossondisposaloffinancialinvestments 218,081 Foreign exchangelosses 31,193 0 Impairment ofequitysecurities Interest expenses Total financingincome Others Foreign exchangegains 774,334 Interest income 832,310 Dividends andsharesinincome 131,922 Net gainondisposalofequitysecurities 249,274 - revenuenon-generating - rent-generating Direct operatingexpensesforinvestmentproperty Restructuring costs Research anddevelopmentcosts in thesameperiodlastyear. share ofprofitinassociatesis7percenthigherthan which becameassociatedin2006.Incomefrom 2005 wasadaptedcorrespondingly. 062005 2006 2005 2006 062005 2006 SIT inthousands SIT inthousands SIT inthousands 15. Income tax expenses

Income tax expense recognised in the income statement SIT in thousands 2006 2005 Assessed tax in the current year - for the current year -1,595,869 -1,312,485 - adjustment for previous years 0 0 Total -1,595,869 -1,312,485 DEFERRED TAX - recently arisen and withdrawn temporary differences 29,942 60,146 - effect by applied tax losses 0 0 Total 29,942 60,146 Tax to the debit of the income statement -1,565,927 -1,252,339

16. Property, plant and equipment

Movement of property, plant and equipment in the Sava Group in 2006 SIT in thousands Plant PPE and Other under Land Buildings machinery equipment construction Advances Total COST Balance at 31/12/2005 9,850,303 64,360,566 15,856,888 8,216,438 5,571,505 19,457 103,875,157 Acquisitions 40,060 3,055,112 2,058,031 141,326 3,865,454 129,557 9,289,539 Capitalisation 0 2,890,768 356,173 557,174 -4,079,281 0 -275,166 Transfers -1,939,520 -2,217,360 1,721,541 -3,518,510 -2,133,022 -30,296 -8,117,167 Disposals -453 0 -93,335 -6,878 -14,887 -72,623 -188,176 Decrease due to disposal of companies -1,179,734 -3,629,164 -384,844 -2,076,577 0 0 -7,270,319 Write-offs -4,289 -171,220 -254,106 -204,598 0 0 -634,213 FINANCIAL REPORT Impairments 0 0 -66,740 -125 0 0 -66,865 Balance at 31/12/2006 6,766,367 64,288,702 19,193,608 3,108,250 3,209,769 46,095 96,612,790 ACCUMULATED DEPRECIATION Balance at 31/12/2005 0 -28,128,842 -8,484,872 -5,760,345 0 0 -42,374,059 Acquisitions 0 275,166 0000275,166 Transfers 0 2,095,913 755,278 1,229,860 -166 0 4,080,885 Disposals 0 31,896 -1,748,608 1,831,500 0 0 114,788

Decrease due to disposal of companies 0 1,007,966 338,017 1,248,818 0 0 2,594,801 ANNUAL REPORT 2006 Write-offs 0 156,407 207,493 200,655 0 0 564,555 Impairments 0 0 30,687 94 0 0 30,781 Depreciation 0 -1,217,847 -1,543,170 -280,036 0 0 -3,041,053 Balance at 31/12/2006 0 -25,779,341 -10,445,175 -1,529,454 -166 0 -37,754,136 CARRYING AMOUNT Balance at 31/12/2005 9,850,303 36,231,724 7,372,016 2,456,093 5,571,505 19,457 61,501,098 Balance at 31/12/2006 6,766,367 38,509,361 8,748,433 1,578,796 3,209,603 46,095 58,858,654

155 Movement of property, plant and equipment in the Sava Group in 2005 SIT in thousands Plant PPE and Other under Land Buildings machinery equipment construction Total COST Balance at 31/12/2004 8,873,501 63,734,711 13,776,487 9,627,815 2,499,172 98,511,686 Acquisitions 1,079,266 0 0 0 7,938,839 9,018,105 Capitalisation 299,902 2,159,674 2,149,575 237,898 -4,847,049 0 Transfers 0 0 19,277 -19,277 0 0 Disposals -402,366 -1,532,914 -78,324 -1,584,974 0 -3,598,578 Write-offs 0 -905 -10,127 -45,024 0 -56,056 Balance at 31/12/2005 9,850,303 64,360,566 15,856,888 8,216,438 5,590,962 103,875,157 ACCUMULATED DEPRECIATION Balance at 31/12/2004 0 27,111,886 7,971,568 6,007,405 0 41,090,859 Disposals 0 -563,459 -731,068 -810,711 0 -2,105,238 Write-offs 0 -2,591 -4,177 -6,906 0 -13,674 Depreciation 0 1,583,006 1,248,549 570,557 0 3,402,112 Balance at 31/12/2005 0 28,128,842 8,484,872 5,760,345 0 42,374,059 CARRYING AMOUNT Balance at 31/12/2004 8,873,501 36,622,825 5,804,919 3,620,410 2,499,172 57,420,827 Balance at 31/12/2005 9,850,303 36,231,724 7,372,016 2,456,093 5,590,962 61,501,098

Survey of mortgage values SIT in thousands Carrying amount of mortgaged assets at Company 31/12/2006 Value of mortgages on real estate Sava d.d. 964,596 287,568 Sava IP d.o.o. 3,396,129 3,374,633 Terme 3000 d.d. 12,949,549 6,200,662 Terme Radenci d.o.o. 14,662,178 4,328,870 Terme Ptuj d.o.o. 1,163,311 950,144 Terme Lendava d.d. 1,993,590 102,830 Golf in Kamp Bled d.d. 57,367 18,277 ANNUAL REPORT 2006 FINANCIAL REPORT 35,186,720 15,262,984

In the company G&P Hoteli Bled d.o.o. a mortgage is completed in 2007 since the loans were repaid. The entered in the amount of 944,059,000 tolars, but total amount of mortgages for the Sava Group does the procedure for cancelling the mortgage was not include the mentioned mortgage.

156 17. Intangible assets

Movement of intangible assets in the Sava Group in 2006 and 2005 SIT in thousands 2006 2005 COST VALUE At year begin 667,185 740,378 Additions 71,305 114,029 Decreases -44,955 -115,458 Company disposals -316,777 0 Write-offs -505 -71,764 At year end 376,253 667,188 ACCUMULATED DEPRECIATION At year begin -383,175 -390,162 Decreases 0 86,113 Company disposals 216,423 0 Transfers 36,424 0 Write-offs -1,437 20,333 Amortisation -54,769 -99,459 At year end -186,534 -383,175 CARRYING AMOUNT 189,719 284,010

In the income statement the amortisation of depreciation and amortisation. intangible assets is included in the item FINANCIAL REPORT ANNUAL REPORT 2006

157 18. Investment property

Investment property is mainly real estate under operating lease.

Movement of investment property in the Sava Group in 2006 SIT in thousands Land - Buildings - investment investment property property Total COST VALUE Balance at 31/12/2005 148,757 3,653,340 3,802,097 Acquisitions 363,490 849,860 1,213,350 Transfers from other assets 2,343,955 2,116,047 4,460,002 Decrease due to sale of companies -126,674 -183,867 -310,541 Disposals -58,871 -262,304 -321,175 Balance at 31/12/2006 2,670,657 6,173,076 8,843,733 ACCUMULATED DEPRECIATION Balance at 31/12/2005 0 -479,201 -479,201 Transfers from other assets 0 -2,026,395 -2,026,395 Decrease due to sale of companies 0 5,056 5,056 Disposals 0 131,897 131,897 Depreciation 0 -205,397 -205,397 Balance at 31/12/2006 0 -2,574,040 -2,574,040 CARRYING AMOUNT Balance at 31/12/2005 148,757 3,174,139 3,322,896 Balance at 31/12/2006 2,670,657 3,599,036 6,269,693

Movement of investment property in the Sava Group in 2005 SIT in thousands Land - Buildings - investment investment property property Total COST VALUE Balance at 31/12/2004 209,257 2,566,714 2,775,971 Acquisitions 0 1,491,865 1,491,865 Disposals -60,500 -405,239 -465,739 Balance at 31/12/2005 148,757 3,653,340 3,802,097 ACCUMULATED DEPRECIATION Balance at 31/12/2004 0 -438,188 -438,188

ANNUAL REPORT 2006 FINANCIAL REPORT Disposals 0 55,359 55,359 Depreciation 0 -96,372 -96,372 Balance at 31/12/2005 0 -479,201 -479,201 CARRYING AMOUNT Balance at 31/12/2004 209,257 2,128,526 2,337,783 Balance at 31/12/2005 148,757 3,174,139 3,322,896

The fair value of investment property does not differ constructed recently, and there have not been any considerably from the carrying amount as the major significant changes in the real estate market since part of real estate under operating lease has been then.

158 Important financialdataabouttheassociateMerkur d.d.,Naklo: Important financialdataabouttheassociateGorenjskaBankad.d.,Kranj: Movement ofinvestmentsinassociateswasasfollows: The SavaGroup'scompanieshavetheirstakesinthefollowingassociates: 19. Investmentsinassociates rft306822,780,961 3,056,862 44,152,966 153,819,695 50,953,848 191,362,180 138,578,043 178,011,129 94,425,077 11,407,826 127,057,281 10,593,108 32,676,917 63,201,859 27,732,004 82,183,606 320,155,994 357,589,487 256,954,135 275,405,881 Profit -87,963 Revenues 0 -71,100 Equity 0 Liabilities andprovisions Assets 71,100 -1,361,350 -2,250,329 -11,910 4,692,039 133,920 5,016,036 10,452,129 Profit 25,657,063 29,033,709 Revenues Equity Liabilities andprovisions Assets 572 0 11,338 End ofyearbalance 0 700 0 0 Impairment 0 Increase incapital 0 Paid dividends 700 75,397 25.00 Attributable profits 20.00 37.50 Disposals 0 10,595,430 33.00 Acquisitions 0 0 0 Initial balance 37.50 33.00 27.00 29,021,099 20.03 31,568,108 41.13 Total Turizem Lendavad.o.o., 41.51 Teodora d.o.o.,Ljubljana Golf Istrad.o.o.,Koper Limb d.o.o.,Ptuj JOB d.o.o.,Maribor Merkur d.d.,Naklo Gorenjska Bankad.d.,Kranj tk n%Saei au Value Value Stakein% Stake in% 0620 062005 2006 2005 2006 2296529,033,709 42,239,635 2296529,033,709 42,239,635 062005 2006 062005 2006 2005 2006 SIT inthousands SIT inthousands SIT inthousands SIT inthousands 159 ANNUAL REPORT 2006 FINANCIAL REPORT OTHER EXPLANATIONS IN RESPECT OF 5,937,871,000 tolars, which are stated under off- THE ASSOCIATED COMPANIES balance sheet items of Sava d.d.

In the consolidated financial statements of the Sava 20. Non-current securities available for Group the investment in our associate Merkur d.d. is sale valued in line with the equity accounting method as set out in IFRSs. The share of the company Merkur d.d. In the Sava Group non-current securities are all is listed on the Ljubljana Stock Exchange. The fair classified as available for sale. They represent a value of the investment accounted for in line with financial potential that in the future will be invested the definition under Item 4 – Fair value determination in accordance with the Group's business strategy. amounts to 11,539,851,000 tolars. The major part of equity securities are shares of the In connection with associates the Sava Group has companies that are listed on the Ljubljana or other made the contracts with a possibility of selling in the stock exchanges. More than 99 per cent of them are amount of 11,539,851,000 tolars, and the contracts located in the holding company Sava d.d. with a possibility of purchasing in the amount of

Types of non-current securities SIT in thousands 2006 2005 Shares of listed companies 29,749,308 30,801,240 Shares and stakes of unlisted companies 1,069,036 2,629,037 Total 30,818,344 33,430,277

Movement of non-current securities: SIT in thousands 2006 2005 Balance at 01/01 33,430,277 32,141,290 Acquisitions 8,052,455 11,858,738 Change to fair value 7,452,952 -4,860,547 Disposals -18,117,340 -5,348,832 Impairment 0 -360,372 Balance at 31/12 30,818,344 33,430,277

Within the non-current securities available for sale amount of 1,966,239,000 tolars refer to shares and the Sava Group made the contracts with a possibility stakes. In the Group the holding company Sava d.d. of selling in the amount of 1,585,020,000 tolars. has made such contracts; they are shown under off- The contracts with a possibility of purchasing in the balance sheet items.

21. Non-current receivables SIT in thousands 2006 2005 Receivables due to financial leasing 1,890,692 2,172,467 Granted non-current loans 29,269 297,890 Other non-current financial receivables 50,601 30,940 Other non-current operating receivables 116,427 203,154 ANNUAL REPORT 2006 FINANCIAL REPORT Total 2,086,989 2,704,451

The contract about the financial leasing of realised whereas in the same period last year they unfurnished offices for the needs of government totalled 38,428,000 tolars. The expected future bodies was concluded for a period of 15 years. The financial revenue arising from financial leasing contract interest rate amounts to 4.296 per cent in calculated at an effective interest rate totals the first half of the year, while in the second half it 598,650,000 tolars. was 5.528 per cent. The contract interest rate is subject to annual adjustment. The discounted lowest amount of rent for financial leasing where a 4.294 per cent discount rate was In 2006, financial revenues arising from financial used, amounts to 1,928,619,000 tolars; the fair leasing in the amount of 84,265,000 tolars were value of the receivables is 1,307,710,000 tolars.

160 Analyses of maturity in non-current receivables SIT in thousands Financial leasing Other Total - From 1 to 5 years 82,487 196,297 278,784 - More than 5 years 1,808,205 0 1,808,205 Total 1,890,692 196,297 2,086,989

Movement of non-current receivables SIT in thousands 2006 2005 Balance at 01/01 2,704,451 442,475 Recently formed receivables 126,476 0 Newly formed receivables 17,595 2,431,082 Repayments -761,533 -169,106 Balance at 31/12 2,086,989 2,704,451

22. Inventories SIT in thousands 2006 2005 Materials 1,367,402 1,155,531 Work and projects in progress 4,477,277 3,769,533 Finished goods and merchandise 1,806,415 5,603,405 Advances for inventories 17,597 14,904 Total 7,668,691 10,543,373

A significant decrease in inventories in 2006 is due formed a provision in inventories in the amount of to the sale of the Trade division and the company 15,148,000 tolars, while in 2005 it totalled FINANCIAL REPORT Teol d.d. In 2006 the companies of the Sava Group 98,282,000 tolars.

23. Current operating and other receivables SIT in thousands 2006 2005 Trade receivables 4,571,731 6,960,772 Receivables temporary not charged 349,713 216,774

Receivables due from associates 35,557 10,082 ANNUAL REPORT 2006 Advances paid 9,424 2,118,334 Receivables for VAT and other taxes 685,267 708,874 Other receivables 537,377 2,009,937 Total 6,189,069 12,024,773

In 2006 the companies of the Sava Group formed a amounted to 177,072,000 tolars. The value of provision in trade receivables totalling 41,142,000 interest rate swaps totalled 39,417,000 tolars. tolars. In 2005 the provision in trade receivables

161 24. Current loans SIT in thousands 2006 2005 Originated loans 4,829,819 313,236 Current portion of non-current loans 1,786,719 260,998 Total 6,616,538 574,234

25. Cash and cash equivalents SIT in thousands 2006 2005 Cash in hand and on accounts 673,752 742,577 Current deposits 8,269 1,826,280 Total 682,021 2,568,857

26. Equity and reserves • Oher reserves totalling 9,461,456,000 tolars, which were formed according to the resolution by Issued capital and share premium the Board of Management. The Board of Number of traded shares Management pursuant to Slovene legislation The approved share capital that was totally paid has a legitimate option to allocate one half of the amounts to 20,069,870,000.00 tolars. It is divided profit for the current year as determined according into 2,006,987 shares with a nominal value of to Slovene Accounting Standards into other 10,000 tolars each. The shareholders are entitled to revenue reserves. In 2006 the Board of a dividend in accordance with the resolution as Management allocated 2,853,234,000 tolars adopted by the Shareholders' Meeting. (2005: 2,144,140,000 tolars) to other revenue The ownership structure and its changes are reserves. described in the chapter The Sava share and ownership structure. Reserves for treasury shares The balance and movement of equity is clear from On 31 December 2006 the company had 3,289 the statement in changes of equity. treasury shares, which represents 0.16 per cent of the total number of issued shares. The cost of shares Share premium amounted to 53,787,000 tolars. This amount The share premium amounts to 30,100,770,000 reduces the total equity. No changes appeared in tolars. It originates from: 2006. • equity reserves that were formed on the basis of the privatisation regulations in the amount of Fair value reserve 12,178,885,000 tolars; Fair value reserve amounts to 9,578,372,000 tolars. • revaluating issued capital by price indices, which The amount of 9,538,955,000 tolars includes according to Slovene Accounting Standards was revaluation effects of securities available for sale to carried out until the end of 2001, in the amount of a fair value less deferred tax liability in relation to 12,773,885,000 tolars; and these effects. The amount of 39,417,000 tolars ANNUAL REPORT 2006 FINANCIAL REPORT • the additionally paid in capital in 2004 that represents the ascertained fair value of derivative amounted to 5,148,000,000 tolars. financial instruments – interest rate swaps.

Reserves Retained earnings Reserves amounted to 11,236,230,000 tolars and Retained earnings amount to 31,962,674,000 tolars include: and include retained earnings from previous years • Legal reserves totalling 1,720,987,000 tolars. and the remaining net profit for the year which was • Reserves for treasury shares in the amount of not allocated to other revenue reserves. 53,787,000 tolars in accordance with the Companies Act.

162 Dividends SIT in thousands 2006 2005 Dividend per ordinary share in the year (in SIT) 640 620 Total dividends to the debit of retained earnings (SIT in thousands) 1,282,366 1,242,294

Net earnings per share transferable. The company has no bonds available to Share capital is divided into 2,006,987 ordinary be converted in shares. shares that all have voting rights and are freely

Weighted number of ordinary shares: Number of shares 2006 2005 No. of shares on 1 January 2,006,987 2,006,987 Less treasury shares -3,289 -3,289 Weighted average number of ordinary shares 2,003,698 2,003,698

Net earnings attributable to ordinary shares amounts to: SIT in thousands 2006 2005 Net profit for the year (SIT in thousands) 8,145,895 9,162,673 Weighed average number of ordinary shares 2,003,698 2,003,698 Basic net earnings per share (in SIT) 4,065,43 4,572,88

The appropriation of profit is only possible within the individual financial statements compiled in amount determined in accordance with Slovene accordance with Slovene Accounting Standards. On legislation. The legislation regulates that a parent 31 December 2006 the profit amounted to company may distribute the profit as determined in 7,782,785,000 tolars. FINANCIAL REPORT

SIT in thousands 2006 2005 Retained earnings of the Sava Group according to IFRSs 31,962,668 27,952,373 Retained earnings of the company Sava d.d. according to SAS 7,782,785 7,131,916 Difference not distributable 24,179,883 20,820,457 ANNUAL REPORT 2006

Reserves that are determined in accordance with Minority interest, total equity of subsidiaries, net IFRSs are not available for distribution. The profit/loss of subsidiaries exception is other revenue reserves as presented in In 2006, minority interest decreased by 650,646,000 accordance with Slovene Accounting Standards, tolars due to the additional purchase of stakes in which may be allocated to a distribution with the subsidiaries and increased by 243,593,000 tolars approval of the Board of Management. On 31 due to the sale of companies. The amount of 578,000 December 2006 this reserve amounted to tolars was due to other changes. The increase in 9,461,456,000 tolars. minority interest by 20,516,000 tolars is represented by profits attributable to minority interest.

163 Minority interest relates to the following companies: SIT In thousands Minority Capital attributable Profit attributable interest to minority interest to minority interest 2006 2005 2006 2005 2006 2005 Sava Rol d.o.o., Zagreb 24.00% 24.00% 10,415 9,469 1,493 591 Teol d.d., Ljubljana 0.00% 1.30% 0 2,920 0 -811 Sava Trade d.d., Ljubljana 0.00% 3.60% 0 298,854 0 18,837 MG Market d.o.o. Ljubljana 0.00% 28.20% 0 -545,367 0 -16 Savatrade Inc., Port Orange, Florida 5.00% 5.00% 1,193 979 329 249 Sava Trade d.o.o., Split 30.00% 30.00% 2,431 0 1,189 0 Golf in Kamp d.d. Bled 0.00% 8.40% 0 117,759 0 2,676 Grand Hotel Toplice Bled d.o.o., Bled 0.32% 0.60% 990 698 -89 -241 G&P Hoteli Bled d.o.o., Bled 4.23% 4.90% 263,603 291,894 9,621 9,125 Terme 3000 d.d., Moravske Toplice 2.39% 2.90% 242,620 292,565 3,330 8,792 Terme Lendava d.d. 9.20% 9.07% 108,117 109,370 6,644 9,301 Terme Ptuj d.o.o. 0.00% 30.10% 0 405,146 0 19,741 Terme Radenci d.o.o., Radenci 2.39% 2.90% 128,425 159,465 -2,001 -15,344 Total 757,794 1,143,753 20,516 52,900

27. Provisions SIT in thousands 2005 Increase Decrease 2006 Provisions for liabilities to employees 1,546,396 37,304 -252,354 1,331,346 Provisions for law suits and other claims 203,613 143,784 -108,164 239,233 Warranties 53,837 0 -53,837 0 Others 20,463 5,593 -2,748 23,308 Total 1,824,309 186,681 -417,103 1,593,887

Provisions for liabilities to employees include denationalisation procedure. In the current year the liabilities for retirement pay and employee jubilee company in the Rubber Manufacturing division

ANNUAL REPORT 2006 FINANCIAL REPORT benefits in the amount as determined by the actuary formed provisions for a law suit for a damage that calculation. The decrease in long-term provisions for had been allegedly caused in the amount of 15 per severance pay is mainly due to the sale of the cent of the total sued amount. The company companies Sava Trade d.d. and Teol d.d. estimates that it is not liable for damage, however, it Provisions for law suits are formed after consulting formed this provision on the assumption that lawyers who estimated the outcome of law suits circumstances could arise due to which the court filed and other claims that relate to the would partly comply with the plaintiff.

164 28. Government grants SIT in thousands 2005 Increase Decrease 2006 Provisions due to relief in social security payment 451,102 94,243 -65,387 479,958 Funds by the EU and other funds 1,603,460 414,836 -75,846 1,942,450 Total 2,054,562 509,079 -141,233 2,422,408

Provisions due to relief in payment of social security Grants obtained in the Pannonian Spas companies contributions are formed in accordance with the Law from the structural funds were utilised for the on Employment Rehabilitation and Disabled Persons renovation of tourist facilities such as the building of Employment. They are used for covering various a 5* hotel in Moravske Toplice, renovation of Hotel expenses as set out in the mentioned law, in Radin in Radenci, construction of apartments in particular to cover depreciation in plant, property Lendava and a swimming pool complex in Ptuj. and equipment in the disablement company.

29. Interest-bearing borrowings information about the company's exposure to interest and exchange rate risk is contained in Item 33 – The explanation below provides information as to the Financial instruments. terms and conditions for granted loans. More

SIT in thousands 2006 2005 NON-CURRENT BORROWINGS Borrowings with domestic banks 17,143,072 12,757,339 Borrowings with foreign banks 22,766 1,242,740 Borrowings with others 620,636 480,294 Total non-current borrowings 17,786,474 14,480,373 CURRENT BORROWINGS Current portion in non-current borrowings with banks 3,289,215 3,759,652 FINANCIAL REPORT Current borrowings with domestic banks 21,894,717 26,763,103 Current borrowings with others 1,364,824 120,100 Total current borrowings 26,548,756 30,642,855 Total borrowings 44,335,230 45,123,228 ANNUAL REPORT 2006

165 166 ANNUAL REPORT 2006 FINANCIAL REPORT Classifying borrowingsinrespectofafixedorvariable interestrate: Maturity ofnon-currentborrowings: Terms andconditionsforhiringborrowings urn orwns597052,1,2 26,548,756 20,611,721 5,937,035 17,786,474 15,973,794 1,812,680 2,057,908 4,582,188 6,144,984 6,277,481 9,551,412 3,652,874 Total Current borrowings notinsured Non-current borrowings / 2007 2.9-4 / Total More than5years Between 2and5years Between 1and2years / billofexchange 2007 Type ofinsurance Others Borrowings byforeignbank 2010-2025 lastinstalment 3MEURIBOR+0.35 6MEURIBOR+0.6 Interestratein% billofexchange 2007-2008 Borrowings byassociate 3MEURIBOR+1-1.1 Current borrowings bill ofexchange, Others Type ofinsurance Borrowings byforeignbank 2007-2013 lastinstalment 3MEURIBOR+0.75; Interest ratein% Borrowings byassociate Non-current borrowings Borrowings by domestic bank 1M 1M Borrowings bydomesticbank Borrowings by domestic bank 1M 1M Borrowings bydomesticbank MCFLBR05-.9 set-offasseton 3M CHFLIBOR+0.55-0.59 MERBR05-.5pledge, mortgage, 3M EURIBOR+0.59-0.65 6M EURIBOR+0.65-1.2 receivables, letter receivables, pledge,mortgage, 6M EURIBOR+0.65-1.2 3M EURIBOR+0.5-1.15 MERBR0609letterofcomfort, 6M EURIBOR+0.6-0.9 UIO+.507 0722 billofexchange, surety, 2007-2020 EURIBOR+0.65-0.74 UIO+.507 07bill ofexchange,surety, 2007 EURIBOR+0.55-0.76 6M CHFLIBOR+0.65 MERBR07;mortgage, 6M EURIBOR+0.70; 2 UIO+ ofcomfort,guarantee, 12M EURIBOR+1 O+.-.5 set-off TOM+0.2-2.55 O+.8letterofcomfort TOM+2.38 3.9-4.4 .-. transactionaccount 3.8-4.2 4-6.15 ,4,1 6555544,335,230 36,585,515 7,749,715 neetinterest interest Maturity of Maturity of ie Variable Fixed aert Total rate rate 7764414,480,373 17,786,474 bill ofexchange,mortgage 062005 2006 SIT inthousands SIT inthousands v 000SIT 30. Deferred tax liability

Deferred tax liability relates to the following items: SIT in thousands 2006 2005 Liabilities of foreign subsidiaries – revaluation of securities to fair value 2,846,277 2,186,984 Receivables – forming long-term provisions -260,906 -381,888 Receivables – others -57,905 -39,275 Liabilities – subsidiaries abroad 18,880 18,880 Total 2,546,346 1,784,701

Movement of deferred tax liability was as follows SIT in thousands 2006 2005 Balance at 01/01 1,784,701 3,058,867 Increase in liability in foreign subsidiaries 0 1,117 Increase of deferred tax receivables arising from provisions and others 102,352 -60,146 Change in liability due to revaluation of securities to fair value 659,293 -1,215,137 Balance at 31/12 2,546,346 1,784,701

31. Current operating liabilities SIT in thousands 2006 2005 FINANCIAL REPORT Trade payables 3,852,034 7,150,394 Liabilities for received advances 412,507 547,443 VAT and other taxes 1,000,360 1,218,190 Employee payables 918,397 969,433 Other operating liabilities 686,970 821,564 Total 6,870,268 10,707,024 ANNUAL REPORT 2006

32. Accrued expenses SIT in thousands 2006 2005 Accrued expenses 213,127 338,138

167 33. Financial instruments receivables and the volume of due receivables. The companies from Rubber Manufacturing have their FINANCIAL RISKS receivables insured with SID – Prva Kreditna Zavarovalnica d.d. Ljubljana. Owing to the nature of These are managed centrally in the holding part of business in the Tourism division credit-based risks the competence centre Business finance. At the are lower and relate to bigger customers. Group level we have determined a standardised approach of all companies with banks and a uniform Sensitivity analysis of financial risks interest policy within the Group and others. Sensitivity to interest rate change Foreign currency-based risk In financial risk we are highly exposed to a change in The structure of inflows and outflows by individual the interest rate, and since almost three-quarters of currency is almost levelled, therefore such risk is indebtedness is based on the inter-bank interest practically non-existent. In the future when 99 per rate EURIBOR its influence is the highest. Each tenth cent of transactions will be performed in the of a change in this interest rate at an unchanged domestic currency, – the euro – this risk will be even level of indebtedness as at 31/12/2006 would result lower. in increased interest by almost 135,000 euros (32 million tolars). Interest-based risk. This has the most important effect on operations since the majority of loans with Sensitivity to exchange rate change banks are hired at a variable interest rate (EURIBOR; Due to a high balance between inflows and outflows LIBOR; TOM). Most loans at a fixed interest rate are by currency we are not sensitive to changes in the current loans. In the structure of the increased foreign exchange rate, and in the future the average interest rate a variable part increases, while exposure will be even lower since the payment a fixed part decreases. The fixed part of the interest turnover, as current trends show, will in 99 per cent rate fell from 34 per cent at the end of 2005 to 16 per be realised in the domestic currency. cent at the end of 2006. The major influence as regards indebtedness in the Sava Group represents Sensitivity to higher indebtedness the increase in the EURIBOR rate, for which financial In case the Sava Group contracts additional debts of analysts have announced further growth in 2007. 1 million euros (239.6 million tolars), the interest Since operations are increasingly affected by the with regard to the present average interest rate as interest rate increase, we started to apply interest valid in the Sava Group at 31/12/2006 would swaps in the beginning of this year, which is already increase by 42,000 euros (10 million tolars). showing positive financial effects. Managing interest-based risk in Sava d.d. by using Solvency-based risk. We have established a interest swaps standardised financial policy, planning cash flows and continually improving these processes. With Interest rate swap refers to the portfolio of long-term daily cash pooling within the Sava Group we avoid loans in the amount of 10 million euros. The interest unnecessary contracting of debts outside of the rate for hired long-term loans amounts to 4.2 per Group. The success of financial management is cent. We protect the variable interest rate, i.e. 3- being reduced by tax legislation which prescribes month EURIBOR. the interest rate between related parties. We enjoy a The successful part of managing interest-based risk high rating with all banks operating in Slovenia, and amounts to 39,417,000 tolars and is shown in the are therefore able to obtain funds in the bank consolidated financial statements of the Sava Group market. under short-term receivables and fair value reserves as on equity component. The value was calculated

ANNUAL REPORT 2006 FINANCIAL REPORT Credit-based risk. This is reduced by using a according to the discounted future cash flows model. standardised policy of pursuing the credit ability of our customers and other business partners. The Interest-based risk is successfully managed when it result is a continual decrease in tied-up assets in fluctuates between 80 and 125 per cent.

168 Fair value of financial instruments SIT in thousands 2006 2006 2005 2005 Book Fair Book Fair value value value value Securities available for sale 30,818,344 30,818,344 33,430,277 33,430,277 Non-current receivables – financial leasing 1,890,692 1,307,710 2,172,467 2,172,467 Other current receivables 196,297 196,297 531,984 531,984 Short-term receivables 6,187,982 6,187,982 12,075,122 12,075,122 Derivative financial instruments – interest rate swap 39,417 39,417 0 0 Granted loans 6,616,538 6,616,538 574,234 574,234 Cash and cash equivalents 682,021 682,021 2,568,857 2,568,857 Non-current loans at a fixed interest rate 1,812,680 1,819,934 0 0 Non-current loans at a variable interest rate 15,973,794 15,973,794 14,480,373 14,480,373 Non-current operating liabilities 24,500 24,500 17,418 17,418 Current loans 26,548,756 26,548,756 30,642,855 30,642,855 Current operating liabilities 6,870,268 6,870,268 10,707,024 10,707,024

ESTIMATING FAIR VALUES 35. Related parties

Securities available for sale Related parties include subsidiaries and associates, The fair value of available-for-sale securities that are members of supervisory boards, board of listed equals the bid market price on the balance management of the parent company and sheet date. The fair value of shares and stakes of subsidiaries in the Group and their closer family unlisted companies is estimated on the basis of the members. last known transactions. Relations with subsidiaries Interest-bearing loans and borrowings Business relations among the companies of the

The fair value is estimated as a discounted value of Sava Group relate to the purchase and sale of raw FINANCIAL REPORT expected cash flows from the principal and materials, finished products and merchandise. interests, whereby the effective interest rate equals Services provided within the Sava Group companies the contracting interest rate which fluctuates and are mainly rents for real estate and equipment, the mainly changes every three months (3-month use of the brand name and services by competence Euribor). centres.

Current receivables and liabilities Transactions among related parties are performed For receivables and liabilities with a remaining life of on an arm's length basis. less than one year, the notional amount is deemed to reflect the fair value. For loans which associates borrowed from banks and are presented in the consolidated financial ANNUAL REPORT 2006 34. Contingencies statements under liabilities to banks guarantees were issued by the parent company. The guarantees At 31 December 2006 the Sava Group presents no at 31/12/2006 totalled 2,834,599,000 tolars. contingencies. All known liabilities are included in Issued guarantees are considered contracts of the consolidated financial statements. insurance according to IFRS 4.

169 170 ANNUAL REPORT 2006 FINANCIAL REPORT *For thecompanieswitha50percent controlthetotalequityandprofit/lossarepresented. Equity ofsubsidiariesasat31/12/2006andnetprofit/lossintheyear2006: IO ... rn ,5 215 8,959 61,109 46,093 -37,797 -3,089 1,832 59,214 869,062 -55,183 75,677 25,655 62,451 837,777 30 183,979 125,314 -1,041 2,031,570 17 683 80,637 1,939,534 5,350 17 BIOOL d.o.o.,Kranj 428 1,425,778 GEA SOLInternationald.o.o.,Kranj 2,121 ENERGETIKA ÅRNOMELJd.o.o.,Kranj 2,121 ENERGETIKA SAVAd.o.o.,Kranj 447,399 19,310 SAVA MEDICALINSTORITVEd.o.o.,Kranj 227,449 26,105,873 OTHER OPERATIONS 139,328 -27,859 SAVA NOVAd.o.o.,Zagreb 6,231,742 39,375 10,151,460 - SAVAIMGd.o.o.,Poreå(ownedbySavaIP,d.o.o.)* 309,502 - PCAGd.o.o.,Velenje(ownedbySavaIP,d.o.o.)* 1,439,163 -83,719 - SAVAIPNd.o.o.,Ljubljana(ownedbyIP,d.o.o.) 72,188 3,967 6,570 - IPNOVAAd.o.o.,Ljubljana(ownedbySAVAIP,d.o.o.) 5,373,449 - IPNovad.o.o.,Ljubljana(ownedbySAVAIP,d.o.o.) 1,174,779 8,107 SAVA IPd.o.o.,Ljubljana 23,852 8,489 449 REAL ESTATE 6,222 TERME PTUJd.o.o.,Ptuj 54,970 62,486 22,467 22,521 - TermeRadencid.o.o.,(ownedby3000d.d.) 121,792 21,128 - TermeLendavad.d.,(ownedby3000d.d.) 43,394 94,722 305,889 194,957 386,373 446,538 TERME 3000d.d.,MoravskeToplice G&P HOTELIBLEDd.o.o.,Bled 5,962,000 637,038 GRAND HOTELTOPLICEd.o.o.,Bled GOLF INKAMPBLEDd.d.,Bled 6,697,656 TOURISM SAVATECH CORP.PortOrange,Florida,USA SAVATECH TRADELtd.,London,UnitedKingdom SAVA TRADEd.o.o.,Split,Croatia SAVA TRADEspol.s.o.o.,Prague,CzechRepublic SAVA TRADEsp.z.o.o.,Warsaw,Poland SAVA TRADEGmbH,Munich,Germany SAVA-SCHÄFER d.o.o.,Kranj* SAVA ROLd.o.o.,Zagreb SAVA-GTI d.o.o.,Kranj SAVATECH d.o.o.,Kranj RUBBER MANUFACTURING OEG RD EWR 6,3 96,966 365,233 - FOREIGNTRADENETWORK 11/06in 2006 31/12/2006 Company Net profit/ qiyloss equity SIT inthousands Relations with associates guarantees are issued which as at 31/12/2006 amount to 229,246,000 tolars. Issued guarantees are For loans of associates obtained with banks considered contracts of insurance according to IFRS 4.

Gorenjska Banka, d.d., Kranj v 000 SIT Sava share ownership 2006 2005 No. of Sava d.d. shares owned by Gorenjska Banka 52,500 52,500 Stake of Gorenjska Banka in Sava 2.62% 2.62%

The companies in the Sava Group raise loans with conditions for these transactions equal those and make deposits at Gorenjska Banka. Terms and effective for other companies with a similar rating.

SIT in thousands Survey of transactions with Gorenjska Banka d.d. 2006 2005 Balance of raised borrowings at 01/01 5,057,440 5,043,095 Hiring new borrowings 3,934,528 3,672,250 Repayment of borrowings -3,597,973 -3,657,905 Balance of raised borrowings at 31/12 5,393,995 5,057,440 Balance of paid deposits at 31/12 278,925 100,313

Borrowings hired with Gorenjska Banka d.d. bear Other associates interest at various interest rates: 3-month The balance of a current loan granted to the EURIBOR+0.75%, 6-month EURIBOR+0.6-0.7%, 6- company Limb d.o.o. amounts to 47,900,000 tolars month LIBOR+0.65%, TOM+2.38%, and at a fixed on 31/12/2006. interest rate from 3.9 to 4.2%. For foreign currency deposits with Gorenjska Banka Relations to natural persons d.d. the interest rate was fixed at 2.1%. FINANCIAL REPORT Related natural persons own 3,891 shares in the Merkur d.d., Naklo parent company Sava d.d., which represents No transactions were carried out as of the day of 0.1346 per cent of ownership. acquiring more than a 20 per cent share in the company Merkur d.d.

Ownership of the Sava share at 31/12/2006 v 000 SIT ANNUAL REPORT 2006 Stake in No. of shares capital Board of Management of Sava d.d. members 2,563 0.1280% Closer family members of Sava d.d. Board members 176 0.0001% Sava d.d. Supervisory Board members 122 0.0060% Managers in subsidiaries 500 0.0002% Supervisory Board members in subsidiaries 530 0.0003% Total 3,891 0.1346%

171 Gross income* in 2006 SIT in thousands 2006 2005 Board members and members of management in Group companies 623,288 697,606 Other employees with managerial contracts in Group companies 1,268,159 1,433,443 Supervisory Board members in Group companies 66,798 89.376

*Gross income includes salaries, bonuses and other proceeds.

Company receivables due from related natural persons: SIT in thousands 2006 2005 Board members and members of management in Group companies 3,055 2,972 Other employees with managerial contracts in Group companies 22,667 16,149 Supervisory Board members in Group companies 0 0

Receivables relate to granted housing loans to 1,259,217 shares of the company Abanka Vipa d.d. employees. Loans were granted at the effective in line with contractual provisions, or 22.89 per market interest rate on the day of loan approval. cent of the bank’s total equity. Sava d.d. already There are no liabilities of companies to related obtained approval from the Bank of Slovenia for natural persons. acquiring a qualified stake, which indirectly or directly achieves a 33 per cent share of voting rights or share in the capital of Abanka Vipa d.d. 36. Events after the balance sheet date After transactions are performed, Sava d.d. will own 1,282,966 shares of Abanka Vipa d.d. in total, The events that appeared after the balance sheet or 23.33 per cent of the bank’s total capital. date and are important for the company are as follows: Among the events there were none which would • On 22 March 2007 contracts came into effect on the require any revisions in the consolidated financial basis of which Sava d.d. will be able to acquire statements. ANNUAL REPORT 2006 FINANCIAL REPORT

172 32. 4. The Board of Management is responsible for the proper Statement by the managing of its accounting procedures, and Board of Management establishing, functioning and maintaining internal controlling in relation to the preparation and fair for the Sava Group presentation of the financial statements, which do not contain any material mis-statements originating from The Board of Management confirms the consolidated fraud or error, as well as for adopting suitable financial statements of the Sava Group for the year measures to secure assets and other funds. The Board ended 31 December 2006. of Management confirms herewith that the financial statements and the notes have been produced based The Board of Management confirms that appropriate on the assumption that the company will proceed with accounting policies have been applied on a consistent its operation within the Sava Group and in accordance basis, and the consolidated report gives a true and with current legislation and International Financial fair view of the financial position of the Sava Group and Reporting Standards. the results of its operations for the year 2006.

Vinko Peråiå Janez Bohoriå Member of the Board Chairman of the Board

Emil Vizoviæek Member of the Board FINANCIAL REPORT

27 March 2007 ANNUAL REPORT 2006

173 32. 5. Independent Auditor’s Report for the Sava Group ANNUAL REPORT 2006 FINANCIAL REPORT

174 33. 1. Individual BalanceSheetitemsareexplainedinthebreakdownandnotestofinancialstatements The BalanceSheethasbeenpreparedinaccordancewiththeCompaniesActandSAS24 AUDITED BALANCESHEETOFTHECOMPANYSAVAD.D.ASAT31DECEMBER2006 Standards Sava d.d.inaccordancewithSloveneAccounting Audited financialstatementsofthecompany III. 137 72,258,042 93,340,240 98,897,735 II. I. FIXEDASSETS A. ASSETS STANDARDS SLOVENE ACCOUNTING IN ACCORDANCEWITH SAVA D.D.WITHNOTES OF THECOMPANY FINANCIAL STATEMENTS 33. b) Advancesfortangible a) Tangiblefixedassetsunder )Ln ,9,1 - 46 4,490,714 0 97 129,551 49 129,551 9,789,482 0 60,087 1,190,777 97 2,440,043 1,153,717 2,440,043 1,195,770 14,280,196 95 1,190,777 1,153,717 4. Tangiblefixedassets 73,507 3. Otherequipment 2. Plantandmachinery 73,507 b) Buildings a) Land 69,509 1. Landandbuildings 1. Long-termindustrialpropertyrights DEFERRED COSTSANDACCRUEDREVENUES INTANGIBLE FIXEDASSETSANDLONG-TERM INVESTMENT PROPERTY TANGIBLE FIXEDASSETS ie ses519500- 0 0 541,915 181 140 1,312,504 1,312,504 1,312,504 1,312,504 2,380,707 1,838,792 fixed assets construction andmanufacture under construction 11/060/120 11/0501-2006 31/12/2005 01/01/2006 31/12/2006 425111,8,1 109 0 13,089,419 14,215,181 ,9,8 ,7,7 8122494 18,162,294 5,072,875 4,790,281 9597,0 35795 73,507 73,507 69,509 SIT inthousands 12-2006/ Index 175 ANNUAL REPORT 2006 FINANCIAL REPORT 176 ANNUAL REPORT 2006 FINANCIAL REPORT .CS 117255255438 2,545 106 2,545 105,609,583 103,019,294 11,147 109,505,364 - 86 ASSETS TOTAL 0 C. CASH 593,392 V. 0 593,392 508,968 0 - OPERATINGRECEIVABLES IV.SHORT-TERM 109 111 33,350,703 3,347 9,678,216 32,754,766 10,596,823 9,082,279 76 55,770 10,076,708 59,143 FINANCIAL INVESTMENTS III.SHORT-TERM 221,716 INVENTORIES II. 221,716 ASSETS(GROUPSFORDISPOSAL) I. CURRENTASSETS B. 167,539 TAXRECEIVABLES VI.DEFERRED LONG-TERMOPERATINGRECEIVABLES V. 106 53,797,178 74,826,953 79,596,082 FINANCIALINVESTMENTS IV.LONG-TERM ASSETS N CRE EEUS1,0 3 3 >999 838 838 10,806 - 173 - 0 AND ACCRUEDREVENUES SHORT-TERM DEFERREDCOSTS 285 5,710,179 5,710,179 0 23,672,487 3. 1,846,828 0 9,874,156 6 2. 1,846,828 5,258,726 0 12,000 3,372,100 b) Short-termloanstootherentities 3,372,100 a) 190,552 2. Short-termloans c) Othershort-termfinancialinvestments b) Othersharesandstakes 66 76 52 - 2,848 221,716 1,483,229 FOR SALE 221,716 1,483,229 2,848 53.787 92 772,505 167,539 0 1,887 3. Long-termreceivablestootherentities 907,312 166 c) 33,327,731 0 30,774,574 b) Long-termloanstootherentities 23,794,413 a) 15,896,592 2. Long-termloans 26,333,470 d) Otherlong-termfinancialinvestments c) Othersharesandstakes 21, b) Sharesandstakesinassociates Shares andstakesinGroupcompanies a) 1. Short-termoperatingliabilities 1. Short-termfinancialinvestments 1. Long-termfinancialinvestments hr-emtaercials15981,8 936804 19,386 19,386 155,938 Short-term tradereceivables Short-term operatingreceivables ogtr nadcle-pcptl000- 0 0 0 Long-term unpaidcalled-upcapital to otherentities xetlas 883577,4,2 23399107 52,313,949 73,343,724 78,823,577 except loans oGopcmais 6,6 9,2 9,2 84 192,726 192,726 161,068 6 27,044,587 3,372,100 to Groupcompanies 202,552 except loans Short-term loanstoGroupcompanies Long-term loanstoGroupcompanies 11/060/120 11/0501-2006 31/12/2005 01/01/2006 31/12/2006 ,1,3 ,6,5 ,6,5 119 3,863,351 3,863,351 4,615,430 7,1 ,8,8 ,8,8 52 1,480,381 1,480,381 770,618 9,6 8,8 8,8 50 381,280 381,280 191,962 1,3 419412,5,3 90 27,558,437 24,119,401 715,533 SIT inthousands 12-2006/ Index scheme according toSAS2006. the dataisnotrecalculated accordingtoSAS2006but logicallyreclassifiedunderitems of assetsandliabilitiesinthevali At transitiontoSAS2006thecomparison dataat31/12/2005isshownaccordingtoSAS2001followingItem15 oftheintroductio the introductiontoSAS2006. At transitiontoSAS2006thecompany adjustedandrecalculatedcomparisonbalancesheetdataat01/01/2006 inaccordancewith .SHORT-TERMACCRUED COSTS E. OA IBLTE 0,0,6 0,1,9 0,0,8 106 105,609,583 103,019,294 109,505,364 - 102 TOTAL LIABILITIES 130 1,817,734 0 86 1,817,734 85 0 1,856,225 27,331,393 0 168 25,513,659 SHORT-TERMOPERATING LIABILITIES 27,331,393 III. 25,513,659 2,187,000 23,447,247 211 21,591,022 2,848,422 1,956,006 0 4,143,006 1,956,006 SHORT-TERMFINANCIALLIABILITIES II. 6,976,147 1,956,006 I. SHORT-TERMLIABILITIES D. 4,127,725 DEFERREDTAXLIABILITIES III. LONG-TERMOPERATINGLIABILITIES II. LONG-TERMFINANCIALLIABILITIES I. 145 LONG-TERMLIABILITIES C. 10,578,321 6,560,932 134 9,545,985 100 110 VI. 8,382,996 100 RETAINEDNETPROFITORLOSS V. 30,100,770 76,263,873 8,329,209 SURPLUSFROMREVALUATION 30,100,770 71,276,891 IV. 11,182,443 20,069,870 30,100,770 78,681,853 20,069,870 20,069,870 REVENUERESERVES III. CAPITALRESERVES II. CALLED-UPCAPITAL I. CAPITAL A. LIABILITIES .PROVISIONSANDLONG-TERMACCRUED B. 3. Treasurysharesandownbusiness N EERDRVNE 3,8 6 6 >999 162 162 92 119 132,683 876,816 140,525 876,816 140,525 807,843 167,845 79 AND DEFERREDREVENUES 5. Other short-termoperatingliabilities 1,468,264 4. Short-termoperatingliabilities 98 2. Short-termtradepayables 1,468,264 1,161,298 58,149 4. Other short-termfinancialliabilities - 2. 58,149 100 57,189 LIABILITIES INCLUDEDINGROUPSFORDISPOSAL 0 121 58,149 2. 0 267,842 4,987,776 143 4,071,970 267,434 3. 4,929,550 2. Otherprovisions 100 0 6,608,222 6,608,222 1. Provisionsforpensionsandsimilar COSTS ANDDEFERREDREVENUES 9,461,456 1,720,987 100 NET PROFITORLOSSFORTHEFINANCIALYEAR 1,720,987 FROM PREVIOUSPERIODS 1,720,987 20,069,870 20,069,870 5. Otherrevenuereserves 20,069,870 4. Statutoryreserves 2. Reservesfortreasuryshares 1. Legalreserves 1. Sharecapital 1. Short-termoperatingliabilities 1. Short-termfinancialliabilities oGopcmais803980338033110 800,393 800,393 880,329 to Groupcompanies hr-emfnnillaiiist ak 877942,0,9 0582691 20,508,296 20,508,296 18,717,984 Short-term financialliabilitiestobanks ogtr iaca iblte obns417751960619606211 1,956,006 1,956,006 4,127,725 Long-term financialliabilitiestobanks Long-term accruedcostsanddeferredrevenues hrs(saddcil tm 5,8 5,8 100 100 0 53,787 -53,787 53,787 -53,787 53,787 shares (asadeductibleitem) and ownbusinessstakes rsn rmavne 0 - 0 0 208 48 3,537,099 3,537,099 arising fromadvances 100 1,711,740 0 209,693 to Groupcompanies 208,660 liabilities 11/060/120 11/0501-2006 31/12/2005 01/01/2006 31/12/2006 ,5,3 ,4,4 ,4,4 133 2,144,140 2,144,140 2,853,235 ,8 - 0 0 1,585 0 - 000 SIT inthousands d balancesheet 12-2006/ n toSAS2006; Item 15of Index 177 ANNUAL REPORT 2006 FINANCIAL REPORT AUDITED INCOME STATEMENT OF THE COMPANY SAVA D.D. FOR THE PERIOD JANUARY - DECEMBER 2006

The Income Statement has been prepared in Individual income statement items are explained in accordance with the Companies Act and SAS 25 – the breakdown and notes to the financial Variant I. statements.

SIT in thousands Jan-Dec Jan-Dec Index 2006 2005 2006/2005 1. NET SALES REVENUES 1,782,591 1,905,903 94 a) Revenues in the domestic market 1,781,841 1,905,158 94 To Group companies 1,379,972 1,729,094 80 To associates 30,780 16,921 182 To others 371,089 159,143 233 b) Revenues in the foreign market 750 745 101 To Group companies 750 745 101 To associates 0 0 - To others 0 0 - 2. CHANGE IN THE VALUE OF INVENTORIES OF PRODUCTS AND WORK IN PROGRESS 0 0 - 3. CAPITALISED OWN PRODUCTS AND SERVICES 0 0 - 4. OTHER OPERATING REVENUES (with operating revenues from revaluation adjustment) 218,887 414,495 53 5. COSTS OF MERCHANDISE, MATERIALS AND SERVICES -846,354 -811,269 104 a) Cost of merchandise and materials sold and cost of materials used -51,370 -54,241 95 b) Cost of services -794,984 -757,028 105 6. LABOUR COSTS -871,125 -793,854 110 a) Salaries and wages -658,282 -589,630 112 b) Social security costs (pension insurance costs shown separately) -117,816 -105,564 112 Social security costs -49,704 -43,831 113 Pension insurance costs -68,112 -61,733 110 c) Other labour costs -95,027 -98,660 96 7. AMORTISATION AND DEPRECIATION EXPENSES, WRITE-OFFS -591,120 -701,948 84 a) Amortisation -544,478 -660,651 82 ANNUAL REPORT 2006 FINANCIAL REPORT b) Operating expenses from revaluation of intangible and tangible fixed assets -46,061 -15,658 - c) Operating expenses from revaluation of current assets -581 -25,639 - 8. OTHER OPERATING EXPENSES -45,582 -42,477 107

178 SIT in thousands Jan-Dec Jan-Dec Index 2006 2005 2006/2005 9. FINANCIAL REVENUES FROM SHARES 8,137,852 6,374,597 128 a) Financial revenues from shares in Group companies 0 10.568 - b) Financial revenues from shares in associates 2,242,559 1,361,350 165 c) Financial revenues from shares in other companies 5,894,006 5,001,804 118 d) Financial revenues from other investments 1,287 875 147 10. FINANCIAL REVENUES FROM GRANTED LOANS 411,954 334,036 123 a) Financial revenues from loans granted to Group companies 304,707 296,110 103 b) Financial revenues from loans granted to other entities 107,247 37,926 283 11. FINANCIAL REVENUES FROM OPERATING RECEIVABLES 20,796 11,794 176 a) Financial revenues from operating receivables due from Group companies 15 434 - b) Financial revenues from operating receivables due from other entities 20,781 11,360 183 12. FINANCIAL EXPENSES FROM IMPAIRMENT AND WRITE-OFFS IN FINANCIAL INVESTMENTS -293,870 -708,842 41 13. FINANCIAL EXPENSES FROM FINANCIAL LIABILITIES -943,743 -778,673 121 a) Financial expenses from borrowings obtained from Group companies -50,388 -73,844 68 b) Financial expenses from borrowings obtained from banks -893,355 -699,350 128 c) Financial expenses from issued bonds 0 0 - FINANCIAL REPORT d) Financial expenses from other financial liabilities 0 -5.479 0 14. FINANCIAL EXPENSES FROM OPERATING LIABILITIES -15,813 -4,264 371 a) Financial expenses from operating liabilities due to Group companies 0 -231 - b) Financial expenses from trade payables and bill payables 0 -74 - c) Financial expenses from other operating liabilities -15,813 -3,959 399 15. OTHER REVENUES 11,984 678 - ANNUAL REPORT 2006 16. OTHER EXPENSES -9,242 -5,545 167 17. TAX ON PROFIT -1,259,515 -909,698 138 18. DEFERRED TAXES -1,231 3,347 - 19. NET PROFIT FOR THE FINANCIAL YEAR 5,706,469 4,288,280 133

At transition to SAS 2006 the comparison data for the data is not recalculated according to SAS 2006 the year 2006 is shown according to SAS 2001 but logically reclassified in the valid income following Item 15 of the introduction to SAS 2006; statement scheme according to SAS 2006.

179 AUDITED CASH FLOW STATEMENT OF THE 31/12/2005 (for the past period 31/12/2005 and COMPANY SAVA D.D. FOR THE PERIOD 31/12/2004) and other required data. JANUARY - DECEMBER 2006 The Cash Flow Statement excludes inflows and outflows that are not connected with revenues and The audited Cash Flow Statement has been prepared expenses. The more important changes not included in accordance with SAS 26 – Variant II. It considers the in the Cash Flow Statement relate to an increase in data from the Income Statement for the period capital through an investment in kind in the amount January-December 2006 (for the past period 2005), of 1,280,896,000 tolars. the Balance Sheet data at 31/12/2006 and SIT in thousands Jan-Dec Jan-Dec 2006 2005 A. CASH FLOWS FROM OPERATING ACTIVITIES a) Net profit for the financial year 5,706,469 4,288,280 - pre-tax profit 6,967,215 5,194,631 - profit tax and other taxes -1,260,746 -906,351 b) Adjustments for: -6,862,357 -4,866,920 - depreciation 544,478 660,651 - operating revenues from revaluation -140,703 -322,693 - operating expenses from revaluation 46,061 15,658 - financial revenues excluding financial revenues from operating receivables -8,549,806 -6,708,051 - financial expenses excluding financial expenses from operating liabilities 1,237,613 1,487,515 c) Change in net current assets (and accruals, deferrals, provisions and deferred tax receivables and liabilities) of balance sheet items 909,785 799,087 - opening minus closing operating receivables 86,142 114,978 - opening minus closing deferred costs and accrued revenues -9,968 -627 - opening minus closing deferred tax receivables -3,373 -3,347 - opening minus closing assets (groups for disposal) for sale 0 0 - opening minus closing inventories 0 0 - closing minus opening operating liabilities 43,449 747,643 - closing minus opening accrued costs and deferred revenues and provisions 132,113 -59,560 - closing minus opening tax liabilities 661,422 0 d) Net cash from operating activities -246,103 220,447 B. CASH FLOWS FROM INVESTING ACTIVITIES a) Inflows from investing activities 54,518,040 23,009,411 - revenues from received interests and shares in profit 3,190,861 2,093,171

ANNUAL REPORT 2006 FINANCIAL REPORT - revenues from disposal of intangible fixed assets 0 0 - revenues from disposal of tangible fixed assets 639 1,467 - revenues from disposal of investment property 221,983 787,452 - revenues from disposal of long-term financial investments 23,686,064 13,809,052 - revenues from disposal of short-term financial investments 27,418,493 6,318,269

180 the year2005islogicallyreclassifiedinvalid At transitiontoSAS2006thecomparisondatafor )Ntices ncs n aheuvlns862-1,377 3,922 8,602 2,545 6,134,172 2,545 3,570,181 11,147 -56,807,097 -101,912,019 Cashandcashequivalentsatbeginningofperiod y) Netincreaseincashandequivalents x) CASHANDEQUIVALENTSATENDOFPERIOD D. 62,941,269 Netcashusedinfinancingactivities 105,482,200 c) -6,355,996 -3,315,476 Outflowsfromfinancingactivities b) -29,365,407 -57,833,516 Inflowsfromfinancingactivities a) CASHFLOWSFROMFINANCINGACTIVITIES C. Netcashfromusedininvestingactivities c) Outflowsfrominvestingactivities b) xessfrrtr fcptl00 0 0 -779,804 0 -1,237,300 -930,518 -1,667,904 -53,122,089 -1,257,750 -99,299,596 -424,155 - expensesforpaymentofdividendsandothersharesinprofit 1,998,454 - expensesforrepaymentofshort-termfinancialliabilities 60,942,815 101,169,635 - expensesforrepaymentoflong-termfinancialliabilities 4,312,565 - expensesforreturnofcapital - expensesforinterestsrelatedtofinancing - revenuesfromincreaseinshort-termfinancialliabilities -2,085,181 -999 -661,197 - revenuesfromincreaseinlong-termfinancialliabilities -996,569 -9,743,462 - revenuesfrompaid-incapital -1,773,848 -34,710,853 -16,874,568 -22,107 -20,330,139 - expensesforpurchaseofshort-termfinancialinvestments - expensesforpurchaseoflong-termfinancialinvestments - expensesforpurchaseofinvestmentproperties - expensesforpurchaseoftangiblefixedassets - expensesforpurchaseofintangiblefixedassets cash flowstatementschemeaccordingtoSAS2006. a-e Jan-Dec Jan-Dec 062005 2006 SIT inthousands 181 ANNUAL REPORT 2006 FINANCIAL REPORT AUDITED STATEMENT OF CHANGES IN EQUITY OF THE COMPANY SAVA D.D. FOR THE PERIOD FROM 31 DECEMBER 2005 TO 31 DECEMBER 2006

The Statement of Changes in Equity has been of the Statement of Changes in Equity are explained in prepared in accordance with SAS 27. Individual items the breakdown and notes to the financial statements.

SIT in thousands Retained net profit or Net profit loss from or loss for Called-up Capital Revaluation previous the financial capital reserves Revenue reserves reserves periods year I II III IV V VI Reserves Own shares for own and Retained Uncalled shares business net profit Net profit capital (as and stakes (as from for the Share deductible Capital Legal business deductible Statutory Other Revaluation previous financial Capital capital item) reserves reserves stakes item) reserves reserves reserves periods year total I/1 I/2 II III/1 III/2 III/3 III/4 III/5 IV V/1 VI/1 A. BALANCE AT 31/12/2005 20,069,870 0 30,100,770 1,720,987 53,787 0 0 6,608,222 10,578,321 4,987,776 2,144,140 76,263,873 Adjustments to opening balance – new SAS 0 0000-53,787 0 0 -4,017,389 -915,806 0 -4,986,982 A. INITIAL BALANCE 01/01/2006 20,069,870 0 30,100,770 1,720,987 53,787 -53,787 0 6,608,222 6,560,932 4,071,970 2,144,140 71,276,891 B. Transfer to equity 000000005,854,875 0 5,706,469 11,561,344 d)Entry of net profit or loss for the financial year 0 0000000005,706,469 5,706,469 f) Other increases in capital 0 00000005,854,875 0 0 5,854,875 C. Transfer within equity 00000002,853,234 0 2,144,140 -4,997,374 0 a) Allocation of net profit for the financial year according to the Board of Management and Supervisory Board resolution 0 0000002,853,234 0 0 -2,853,234 0 f) Other allocations within capital elements 0 000000002,144,140 -2,144,140 0 D. Transfer from equity 00000000-2,869,822 -1,286,560 0 -4,156,382 a) Dividends paid 0 00000000-1,282,366 0 -1,282,366 d)Other transfers from equity 00000000-2,869,822 -4,194 0 -2,874,016 E. BALANCE AT 31/12/2006 20,069,870 0 30,100,770 1,720,987 53,787 -53,787 0 9,461,456 9,545,985 4,929,550 2,853,235 78,681,853

At transition to SAS 2006 the company carried out balance sheet data at 01/01/2006 in accordance with adjustments and recalculations of items in comparison Item 15 of the introduction to SAS 2006. ANNUAL REPORT 2006 FINANCIAL REPORT

182 AUDITED STATEMENT OF CHANGES IN EQUITY OF THE COMPANY SAVA D.D. FOR THE PERIOD FROM 31 DECEMBER 2004 TO 31 DECEMBER 2005 SIT in thousands Retained net profit Net profit or loss from or loss for Called-up Capital Revaluation previous the financial capital reserves Revenue reserves reserves periods year I II III IV V VI Reserves Own shares for own and Retained Uncalled shares business net profit Net profit capital (as and stakes (as from for the Share deductible Capital Legal business deductible Statutory Other Revaluation previous financial Capital capital item) reserves reserves stakes item) reserves reserves reserves periods year total I/1 I/2 II III/1 III/2 III/3 III/4 III/5 IV V/1 VI/1 A. BALANCE AT 31/12/2004 20,069,870 0 30,100,770 1,720,987 53,787 0 0 4,464,082 5,315,519 4,691,785 1,538,285 67,955,085 B. Transfer to equity 0 0 0 0 00005,946,934 0 4,288,280 10,235,214 d)Entry of net profit or loss for the financial year 0 0 000000004,288,280 4,288,280 e) Entry of equity revaluation 0 0 0 0 00005,946,934 0 0 5,946,934 C. Transfer within equity 0 0 000002,144,140 0 1,538,285 -3,682,425 0 a) Allocation of net profit for the financial year according to the Board of Management and Supervisory Board resolution 0 0 000002,144,140 0 0 -2,144,140 0 e) Paying (accounting) dividends in form of shares 0 0 0000000000 f) Other allocations within capital elements 0 0 00000001,538,285 -1,538,285 0 D. Transfer from equity 0 0 0 0 0000-684,132 -1,242,294 0 -1,926,426 a) Dividends paid 0 0 0000000-1,242,294 0 -1,242,294 d)Other transfers from equity 00000000-684,132 0 0 -684,132 D.BALANCE AT 31/12/2005 20,069,870 0 30,100,770 1,720,987 53,787 0 0 6,608,222 10,578,321 4,987,776 2,144,140 76,263,873 FINANCIAL REPORT The comparison data for the year 2005 shown according but logically reclassified in the valid statement of to SAS 2001 is not recalculated according to SAS 2006 changes in equity scheme according to SAS 2006

CALCULATION OF ACCUMULATED PROFIT OR LOSS SIT in thousands Calculation of accumulated profit or loss 31/12/2006 01/01/2006 31/12/2005 20. NET PROFIT OR LOSS FOR THE FINANCIAL YEAR 5,706,469 4,288,280 4,288,280

21. Retained net profit / retained loss 4,933,744 4.987,776 4.987,776 ANNUAL REPORT 2006 22. Adjustment of retained net profit in accordance with revised SAS and ZDDPO-2 -4,194 -915,806 0 23. Decrease (reversal) of capital reserves 0 0 0 24. Decrease (reversal) of revenue reserves separate by individual type 0 0 0 25. Increase (additional allocation) for revenue reserves separate by individual type -2,853,234 -2,144,140 -2,144,140 26. ACCUMULATED PROFIT (ACCUMULATED LOSS) 7,782,785 6,216,110 7,131,916

183 33. 2. Notes to the financial statements of Sava d.d. in accordance with Slovene Accounting Standards

33.2.1. Accounting policy of Slovenia as valid on the last day of the accounting period. INTRODUCTORY EXPLANATIONS INTANGIBLE LONG-TERM FIXED ASSETS AND DEFERRED COSTS AND ACCRUED The company states at least the accounting policies REVENUES for the assets and liabilities whose value exceeds 10 per cent of the asset value and liabilities Intangible fixed assets are measured at cost and respectively on the balance sheet day. have their useful lives defined.

The company discloses the individual asset and An intangible fixed asset is initially recognised at cost. liability at least when it exceeds 10 per cent of the balance sheet total. The company discloses lower Cost also includes import and non-refundable amounts only when it estimates they are of purchasing taxes. Cost does not include the significance for a fair presentation of operations. interests accrued by the appearance of an intangible long-term asset. BASIS FOR DRAWING THE FINANCIAL STATEMENTS TANGIBLE FIXED ASSETS

The financial statements are drawn in Slovene tolars Tangible fixed assets are measured at cost. The rounded to one thousand units. remaining value of a tangible fixed asset is not assessed. The financial statements of the joint stock company Sava were drawn in conformity with Slovene At initial recognition a tangible fixed asset is valued Accounting Standards 2006, which had been issued at cost. The cost includes its purchase expense, by the Slovene Institute of Auditors. These standards import and non-refundable purchasing taxes and were used for the first time, therefore we explained expenses which can be attributed directly to its the features of this transition in Item 1.3 – placement in service for the intended use, especially Explanations in connection with a transition to the expenses for its transport and installation and revised Slovene Accounting Standards. estimated cost of its dismantling, removal and restoration. Costs do not increase the interests on Except for changes being a consequence of the loans for acquiring a tangible fixed asset until it is revised Slovene Accounting Standards there were no put in service for use. other changes in the company’s financial policy in 2006. Donations and government grants for the acquisition of tangible fixed assets do not reduce its SEGMENT REPORTING cost value, but are transferred under long-term deferred revenues and used in accordance with the Sava d.d. has not defined either business or accounted depreciation. geographical segments. ANNUAL REPORT 2006 FINANCIAL REPORT The difference between the net sales value and the EXCHANGE RATE AND CONVERSION book value of a disposed fixed asset is transferred METHOD IN DOMESTIC CURRENCY under operating revenues from revaluation, if the former is higher than the latter, and under operating All of the items shown in the accounts books and expenses from revaluation, if the latter is higher expressed in foreign currency are converted to the than the former, respectively. tolar value at the medium exchange rate of the Bank

184 SUBSEQUENT EXPENDITURES IN individual investment property. The methods for CONNECTION WITH TANGIBLE FIXED charging depreciation equal those used for tangible ASSETS fixed assets of the same type.

Subsequent expenditures in connection with a For the needs of disclosure the fair value of tangible fixed asset increase its cost value if the investment properties is ascertained. The fair values future economic benefits embodied in the assets are are based on market values, being the estimated higher than originally estimated. amount for which a property could be exchanged on the date of valuation between a willing buyer and a Repairs of or maintaining tangible fixed assets are willing seller in an arm’s length transaction after intended for renewing or preserving the future proper marketing wherein the parties had each economic benefits expected on the basis of the acted knowledgeably, prudently and without originally estimated level of asset efficiency. They compulsion. are recognised as expenses as incurred. Rental income from investment property is INVESTMENT PROPERTY recognised in the income consistently during the rental period. Investment properties are properties which are held either to earn rental income or for capital In cases when a decision should be made as to appreciation or both. Investment properties are not whether a property is an investment property or a intended for the manufacture of products, supply of tangible fixed asset, the property is classified as goods, providing services or for office purposes like investment property when more than 20 per cent of tangible fixed assets. Investment properties are also the property is used as investment property. not intended for short-term sale. DEPRECIATION When an investment property becomes owner- occupied, it is reclassified as property, fixtures and The value of a tangible fixed asset, intangible fixed fittings. asset and investment property that is not written off is decreased through depreciation. We use the Investment properties are stated at the cost value method of depreciation on a straight-line basis. Land model. According to the cost value model the is not depreciated. investment property is depreciated and impaired when its book value exceeds its fair value. The intangible fixed asset, tangible fixed asset and investment property start to be depreciated on the Depreciation is charged according to a straight-line first day of the next month when it is available for basis model considering the useful life of an use. FINANCIAL REPORT

The depreciation rates are based on the useful lives of the assets and amount to: v 000 SIT 2006 - in % 2005 - in % Intangible long-term fixed assets 10.0 20.0 Buildings 2.5-4.0 2.5-4.0 Plant and machinery 5.0-33.3 5.0-33.3 ANNUAL REPORT 2006 Other equipment 10.0-25.0 10.0-25.0

185 IMPAIRMENT IN INTANGIBLE ASSETS, and stakes of companies which are not listed is TANGIBLE FIXED ASSETS AND assessed on the basis of their recent transactions or INVESTMENT PROPERTY financial statements. If for a certain financial investment an option contract is made, the fair value When the book value surpasses the recoverable is ascertained on the basis of the price as defined in amount, the assets are impaired and the impairment the option contract. loss is recognised in the income statement. A decrease in the value of a depreciable asset due to The fair value of securities available for sale is impairment is not depreciation cost but operating assessed at least every three months. The gain from expense from revaluation in connection with the change in the fair value is recognised in equity as depreciable assets. a revaluation reserve, and the loss as a negative revaluation reserve. Once a year the company checks if there is a sign that any of the asset groups will be impaired. If such If a decrease in the fair value of a financial a sign is determined, the company should estimate instrument available for sale was recognised the recoverable value of the asset. directly as a negative revaluation reserve and there exists impartial evidence that the asset is long-term The company revaluates the assets due to impairment impaired, the impairment is recognised in the immediately or at least when the book value exceeds income statement as a financial expense. the recoverable amount by more than 20 per cent. RECEIVABLES FINANCIAL INVESTMENTS At their initial recognition the receivables of all types In the balance sheet financial investments are are shown in the amounts that arise from the stated as long- and short-term financial corresponding documents on condition that they investments. Long-term financial investments are will be paid. The original receivables can later be those which are in possession for more than one increased, or irrespective of payment or any other year, and are not held for trading. settlement, decreased by every amount, which is proven by an agreement. Financial investment in capital, proprietary securities of other companies or debtor’s securities The advances in the balance sheet are shown in of other companies or the state are initially relation with things they refer to. recognised at the cost of purchase, which equals either the paid sum of money or its equivalents, or Receivables, which are assumed not be settled the fair value of other substitutions for a purchase within the due term and in the total amount, invested by the investor on the exchange day respectively, are considered doubtful and, if a court increased by costs that can be attributed directly to procedure has already begun, disputable. the investment. The revaluation adjustments in receivables are In the financial statements long-term financial formed as follows: investment subsidiaries and associates are valued • a 100 per cent adjustment in all sued receivables at cost. The investment thus remains unchanged, and receivables filed in a bankruptcy proceeding irrespective of the performance of subsidiaries or and obligatory enforcement proceeding; and associates, and is annually increased by that share • a 100 per cent adjustment for receivables which of the net profit of subsidiaries or associates according to the best professional judgement are belonging to companies. The transferred shares in doubtful and there is a reasonable doubt about the profit increase financial revenue. If there is impartial outcome of a possible law suit due to customer ANNUAL REPORT 2006 FINANCIAL REPORT evidence that the asset is long-term impaired, the insolvency. impairment is recognised in the income statement as a financial expense. CASH AND CASH EQUIVALENTS

With regard to the purpose of their acquisition the Cash and cash equivalents comprise cash balances investments in debtor and proprietary securities are on transaction accounts and call deposits. dealt with as available for sale. These financial instruments are recognised or not recognised on the Cash is initially recognised in the amounts arising transaction day. The fair value of listed securities from the corresponding documents. Cash in foreign available for sale equals the bid price of these shares currency is translated to a domestic currency at the on the balance sheet date. The fair value of shares exchange rate on the day of receipt.

186 The revaluation adjustment of cash in foreign about their appearance, which prove the receipt of currency is carried out on the balance sheet date. It cash or redemption of any operating liability. appears only in case of cash expressed in a foreign currency. On conversion the middle exchange rate of Long-term liabilities are further increased by the Bank of Slovenia is used. The revaluation imputed interests or decreased by repaid amounts adjustment of cash is shown as regular financial and any other settlements, agreed upon with a revenues and expenses, respectively. creditor. The book value of long-term liabilities equals their original value decreased by repayment CAPITAL of the principal and transfers under short-term liabilities until the need for a revaluation adjustment The total capital comprises called-up capital, capital of long-term debts appears. reserves, revenue reserves, surplus from revaluation, retained net profit or loss from previous periods, and The book value of short-term liabilities equals their net profit/loss for the financial year. original value adjusted by their increases or decreases as agreed upon with the creditors until Share capital is managed in the domestic currency. the need for their revaluation adjustment appears.

LONG-TERM PROVISIONS Short-term and long-term liabilities of all kinds are initially shown with the amounts which arise from Long-term provisions are formed from long-term the corresponding documents on condition that the accrued costs or expenses and are earmarked for creditors request their repayment. The liabilities are covering contingent liabilities arising from lawsuits, later increased with imputed yields (interests, other liabilities for jubilee benefits and severance pay on compensations), about which an agreement is made the basis of an actuary calculation. with the creditor. Liabilities are decreased by repaid amounts and any other settlements in agreement In accordance with the legal regulations, collective with the creditor. agreement and internal book of rules the company is obliged to pay employee jubilee benefits and When measuring long-term liabilities the company retirement amounts, for which it forms long-term follows the policy that the interest rate being agreed provisions. There are no other retirement liabilities. upon does not considerably differ from the effective interest rate if the difference is not more than one Provisions are formed in the amount of the future percentage point. estimated payments for retirement amounts and jubilee benefits discounted on the balance sheet HEDGING AGAINST EXPOSURE TO date. The calculation was made on 31 December INTEREST-BASED RISK 2005 for every employee and it considered the cost of retirement amount and cost of all expected jubilee In hedging against exposure to interest-based risk it is benefits until retirement. The chosen discount about interest swaps of a group of financial loans which FINANCIAL REPORT interest rate amounts to 2.75% annually and are recognised as items in the balance sheet and in represents a yield from long-term government bonds. formal documents determined as hedged items. Formal The calculation was made by an authorised actuary documents determine the method of examining the using the projected method unit. The recalculation of success of hedging and the calculation of the fair value provisions on 31 December 2006 took into account a of a derivative financial instrument in line with the hedge change in the employee number. In case of greater accounting method. At the end of 2006 financial changes the authorised actuary will repeatedly revise instruments for interest rate swaps were introduced the suitability of the provision amount. despite the present positive net value (in comparison with a change in the hedged item within the limits that The company checks once a year the suitability of successfully hedge against interest-based risk), ANNUAL REPORT 2006 the already formed provisions and the need for therefore, their fair values are shown as a positive item forming new ones. in capital and do not debit current operations. LIABILITIES SHORT-TERM ACCRUALS AND DEFERRALS

Liabilities are either financial or operating, short- Deferred costs and accrued revenues include short- term or long-term. term deferred costs.

All liabilities are initially recognised with the Short-term accrued costs and deferred revenues amounts arising from the corresponding documents include short-term deferred revenue.

187 RECOGNITION OF REVENUES Other revenues Other revenues consist of extraordinary items. They Revenues are recognised if the enhancement of appear in actually incurred amounts. economic benefits in the accounting period is connected with an increase in an asset or decrease in RECOGNITION OF EXPENSES a liability and such an increase could be reliably measured. Expenses are recognised if a decrease in economic Revenues are recognised when it is legitimate to benefits in the accounting period is connected with a expect they will result in earnings if these were not decrease in assets or an increase in liabilities and already implemented at their appearance. this decrease could be reliably measured.

Operating revenues Operating expenses Revenues from provided services, with the Operating expenses are recognised when the exception of provided services that result in material is used and service provided, respectively, financial revenues, are measured at the selling in the period, to which they relate. prices of finished services or at the selling prices of Operating expenses from revaluation arise in services in progress with respect to the level of their connection with tangible fixed assets, intangible completion. fixed assets and current assets due to their Revenues from received subsidies or endowments impairment. are measured in amounts that are approved for this purpose. Financial expenses Operating revenues from revaluation arise upon the Financial expenses are expenses for financing and disposal of tangible fixed assets, intangible fixed investment activities. Financial expenses are assets and investment property as surpluses of recognised after balancing, irrespective of their selling value over their carrying amount. payments that are related to them. Financial expenses from revaluation arise in Financial revenues connection with financial investments due to their Financial revenues are revenues from investment impairment. activities. They arise in relation to long-term and short- term financial investments and also receivables. Other expenses Financial revenues are recognised upon accounting Other expenses include extraordinary items that are irrespective of the proceeds if their size, maturity shown in actually arisen amounts. and redemption are not doubted. Interests are charged in proportion to the period CASH FLOW STATEMENT expired and with regard to the not yet redeemed share of the principal and the valid interest rate. The Cash Flow Statement has been prepared using Dividends and shares in profit achieved in the data from the Income Statement for the period subsidiaries, associates and other companies are January - December 2006, the Balance Sheet data taken into account when the company gets the right as at 31 December 2006 and 1 January 2006 and for payment. other necessary data. Financial revenues from revaluation arise upon the disposal of long-term and short-term financial investments. ANNUAL REPORT 2006 FINANCIAL REPORT

188 33.2.2. Breakdown and notes to the financial statements

33.2.2.1. Balance sheet

INTANGIBLE FIXED ASSETS AND include the purchased licences for the MySAP.com, DEFERRED COSTS AND ACCRUED Data protector and Lotus Notes software applications. REVENUES The value of newly purchased licences in 2006 totalled 22,107,000 tolars. In 2006 the depreciation Intangible fixed assets totalling 69,509,000 tolars in the amount of 26,105,000 tolars was charged.

Survey of intangible fixed assets SIT in thousands Property rights Investments in acquired industrial property and Cost value other rights Total Balance at 31/12/2005 125,355 125,355 Adjustment to opening balance – new SAS 0 0 Balance at 01/01/2006 125,355 125,355 Increases, purchases 22,107 22,107 Increases due to acquisitions 0 0 Transfers 0 0 Decreases 0 0 Decreases due to sale of companies 0 0 Write-offs 0 0 Impairments 0 0 Balance at 31/12/2006 147,462 147,462 ACCUMULATED DEPRECIATION Balance at 31/12/2005 -51,848 -51,848 Adjustment to opening balance – new SAS 0 0 FINANCIAL REPORT Balance at 01/01/2006 -51,848 -51,848 Increases, purchases 0 0 Increases due to acquisitions 0 0 Decreases 0 0 Decreases due to sale of companies 0 0 Transfers 0 0 Write-offs 0 0

Impairments 0 0 ANNUAL REPORT 2006 Depreciation -26,105 -26,105 Balance at 31/12/2006 -77,953 -77,953 CARRYING AMOUNT Balance at 31/12/2005 73,507 73,507 Adjustments 0 0 Balance at 01/01/2006 73,507 73,507 Balance at 31/12/2006 69,509 69,509

189 TANGIBLE FIXED ASSETS their completion are likely to be classified as investment property; 63,469,000 tolars were earmarked for Tangible fixed assets totalling 4,790,281,000 tolars computer equipment and 35,544,000 tolars for other present 4.4 per cent of the balance sheet total. In equipment. An advance payment of 541,915,000 tolars comparison with the beginning of 2006 fixed assets was made for the building of real estate in Kranj. are 6 per cent lower. • In 2006 the depreciation of tangible fixed assets was charged in the amount of 243,773,000 tolars; The following significant changes in tangible fixed • An increase in capital in the company Savatech assets appeared in 2006: d.o.o. was carried out in form of an investment in kind totalling 946,371,000 tolars, in the company • 1,231,933,000 tolars were allocated for investments, of Sava-GTI d.o.o. totalling 142,811,000 tolars and in which 1,132,920,000 tolars were earmarked for the the company Grand Hotel Toplice d.o.o. in the purchase and building of strategic property, which upon amount of 191,714,000 tolars. Movement of tangible fixed assets SIT in thousands Tangible Advances fixed for Plant assets tangible and Other under fixed Cost value Land Buildings machinery equipment construction assets Total Balance at 31/12/2005 4,490,714 16,899,907 8,189,916 382,158 1,312,504 0 31,275,199 Adjustment to opening balance – new SAS -4,490,714 -15,020,420 0000-19,511,134 Balance at 01/01/2006 0 1,879,487 8,189,916 382,158 1,312,504 0 11,764,065 Increases, purchases 0 0 81,847 968 1,149,118 541,915 1,773,848 Capitalisation 0000000 Increases due to acquisitions 0000000 Transfers 0 0 73,092 0 -622,830 0 -549,738 Decreases 0 0 -3,026,737 -179,565 0 0 -3,206,302 Decreases due to sale of companies 0000000 Write-offs 0 0 -34,546 0 0 0 -34,546 Impairments 0 0 -59,064 0 0 0 -59,064 Balance at 31/12/2006 0 1,879,487 5,224,508 203,561 1,838,792 541,915 9,688,263 ACCUMULATED DEPRECIATION Balance at 31/12/2005 0 -7,110,425 -5,749,873 -252,607 0 0 -13,112,905 Adjustment to opening balance – new SAS 0 6,421,715 00006,421,715 Balance at 01/01/2006 0 -688,710 -5,749,873 -252,607 0 0 -6,691,190 Increases, purchases 0000000 Increases due to acquisitions 0000000 Transfers 0000000 Decreases 0 0 1,859,977 125,040 0 0 1,985,017 Decreases due to sale of companies 0000000

ANNUAL REPORT 2006 FINANCIAL REPORT Write-offs 0 0 26,906 0 0 0 26,906 Impairments 0 0 25,058 0 0 0 25,058 Depreciation 0 -37,060 -190,806 -15,907 0 0 -243,773 Balance at 31/12/2006 0 -725,770 -4,028,738 -143,474 0 0 -4,897,982 CARRYING AMOUNT Balance at 31/12/2005 4,490,714 9,789,482 2,440,043 129,551 1,312,504 0 18,162,294 Adjustments -4,490,714 -8,598,705 0000-13,089,419 Balance at 01/01/2006 0 1,190,777 2,440,043 129,551 1,312,504 0 5,072,875 Balance at 31/12/2006 0 1,153,717 1,195,770 60,087 1,838,792 541,915 4,790,281

190 INVESTMENT PROPERTY

Investment property in the amount of The following significant changes in investment 14,215,181,000 tolars represents 13 per cent of the property appeared in 2006: balance sheet total and compared to the situation in • 996,569,000 tolars were earmarked for the beginning of 2006 it is 9 per cent higher. In line investments in existing investment property; with the company business policy certain • In 2006 the depreciation of investment property investments in subsidiaries were financed by the was charged in the amount of 274,600,000 tolars. joint stock company Sava and also included in the • In 2006 investment property was sold whose book company’s assets. For a loan hired with Bank Austria value totals 145,946,000 tolars. Creditanstalt for refurbishing the hotel a mortgage was placed on the building of Grand Hotel Toplice. On The carrying amount of investment property shows 31 December 2006 the loan not paid totals the fair value of investment property. 287,568,000 tolars.

Movement of investment property SIT in thousands Land - Buildings - investment investment Cost value property property Total Balance at 01/01/2006 4,490,714 15,020,420 19,511,134 Increases, purchases 363,490 633,079 996,569 Transfer from other or to other assets after opening 404,436 145,302 549,738 Increases due to acquisitions 0 0 0 Decreases due to sale -58,871 -197,719 -256,590 Decreases due to sale of companies 0 0 0 Write-offs -4,289 -146,514 -150,803 Impairments 0 0 0 Balance at 31/12/2006 5,195,480 15,454,568 20,650,048 ACCUMULATED DEPRECIATION Balance at 01/01/2006 0 -6,421,715 -6,421,715

Increases, purchases 0 0 0 FINANCIAL REPORT Transfer from other or to other assets after opening 0 0 0 Increases due to acquisitions 0 0 0 Decreases due to sale 0 114,934 114,934 Decreases due to sale of companies 0 0 0 Write-offs 0 146,514 146,514 Impairments 0 0 0 Depreciation 0 -274,600 -274,600 ANNUAL REPORT 2006 Balance at 31/12/2006 0 -6,434,867 -6,434,867 CARRYING AMOUNT Balance at 01/01/2006 4,490,714 8,598,705 13,089,419 Balance at 31/12/2006 5,195,480 9,019,701 14,215,181

191 LONG-TERM FINANCIAL INVESTMENTS is shown in the amount of 16,088,415,000 tolars, and the investment in Merkur d.d., Naklo in the Long-term financial investments totalling amount of 10,176,205,000 tolars. In connection 79,596,082,000 tolars present 72.7 per cent of the with the associated companies the company has balance sheet total and are 6 per cent higher than at concluded the contracts with a possibility of selling the beginning of 2006. in the amount of 11,539,851,000 tolars, and the contracts with a possibility of purchasing in the Shares and stakes in the Sava Group companies amount of 5,937,871,000 tolars, which are shown in totalling 21,715,533,000 tolars were 10 per cent the off-balance assets of the company. Other shares lower when compared to the beginning of 2006. and stakes in the amount of 30,774,574,000 tolars Significant changes in the shares of companies in are 8 per cent lower than in the beginning of the the Sava Group were as follows: year. Other shares and stakes include listed and • A 28 per cent share of minority owners in the unlisted securities in the amount of 27,324,171,000 company Terme Ptuj d.o.o. was purchased, while tolars and other long-term stakes totalling a 72 per cent ownership share was transferred 3,450,403,000 tolars. On 31 December 2006 from the company Terme 3000 d.d. to the parent securities were valued at fair value, the effect of company Sava d.d. The value of the transaction revaluation in 2006 amounts to 7,444,464,000 amounted to 980,000,000 tolars. tolars. In securities available for sale the securities • A 100 per cent share in the company Energetika of NFD1 d.d., Dom Holding d.d. and Petrol d.d., Ârnomelj d.o.o. from Kranj was purchased totalling Ljubljana have a 62 per cent share. The value of 78,766,000 tolars. shares of Nacionalna Finanåna Druœba 1 total • Shares in the following companies were increased: 13,951,056,000 tolars. Golf in Kamp Bled d.d. by 8.42 per cent; Terme 3000 d.d. Moravske Toplice by 0.54 per cent, G&P For other shares and stakes the company has made Hoteli Bled d.d. by 0.67 per cent and Grand Hotel the contracts with a possibility of selling in the Toplice Bled d.o.o. by 0.32 per cent. amount of 1,585,020,000 tolars and the contracts • Capital in the companies: Savatech d.o.o., Kranj with a possibility of purchasing in the amount of was increased in the amount of 946,371,000 1,966,239,000 tolars. tolars, Sava-GTI d.o.o., Kranj in the amount of 142,811,000 tolars and Grand Hotel Toplice Bled Long-term loans to the companies in the Sava Group d.o.o. in the amount of 191,714,000 tolars. totalling 770,618,000 tolars were 48 per cent lower • A 96.87 per cent share was sold in the company than in the beginning of the year due to a transfer of Sava Trade d.d., Ljubljana and a 98.98 per cent a long-term loan to the company Sava Nova d.o.o., share in the company Teol d.d., Ljubljana. Zagreb under short-term loans since it will be repaid in 2007. Shares and stakes in associates totalling 26,333,470,000 are mainly a 41.35 per cent Other long-term loan receivables in the amount of shareholding in Gorenjska Banka d.d., Kranj and a 1,887,000 tolars are long-term loans to third 20.30 per cent shareholding in the company Merkur business partners. d.d., Naklo. The investment in Gorenjska Banka d.d. ANNUAL REPORT 2006 FINANCIAL REPORT

192 Survey oflong-termoperatingreceivables loans totheemployeesforpurchaseofflats.These Long-term operatingreceivablesrefertolong-term tolars are24percentlowerthanlastyear. Long-term operatingreceivablestotalling167,539,000 LONG-TERM OPERATINGRECEIVABLES Movement oflong-termfinancialinvestments el omdrcials0 -54,177 167,539 221,716 -390,916 21,083,562 0 0 79,596,082 0 772,505 Balance oflong-term operatingreceivables at31/12/2006 0 0 Repayment ofreceivables 74,826,953 -71,100 1,483,229 -937,804 Newly formedreceivables 0 0 0 0 53,743,391 0 617,988 Balance oflong-termoperating receivablesat01/01/2006 1,483,229 1,887 0 0 0 0 0 2,848 770,618 0 0 0 -332,151 78,823,577 0 2,848 0 0 1,480,381 0 0 73,343,724 21,083,562 0 -390,916 -605,653 -907,312 0 7,444,887 0 1,480,381 0 423 0 52,260,162 33,327,731 0 0 30,774,574 907,312 -7,897,821 0 26,333,470 0 -3,439,036 -23,579,814 21,715,533 -89 0 33,327,731 0 0 15,896,592 0 24,119,401 -248,716 0 0 0 0 0 -142,200 0 23,794,413 -937,804 0 -71,100 27,558,437 0 0 0 0 Balance at31/12/2006 0 0 617,988 79,986,998 0 -89 772,505 0 Balance at01/01/2006 0 423 0 Adjustments 0 0 -866,704 -332,151 0 0 0 21,611,035 Balance at31/12/2005 -71,100 -106,007 7,444,464 0 542,809 617,988 0 CARRYING AMOUNT 0 1,887 0 0 -605,653 0 -71,100 -23,579,725 Balance at31/12/2006 -1,253,867 0 106,007 -1,253,867 770,618 0 Revaluation 0 0 -866,704 7,444,464 -71,100 79,214,493 10 0 0 Decrease 0 0 75,764,757 -155,044 -18,668,064 1,483,229 0 Increase duetoacquisitions 0 0 -882 21,689,215 54,075,542 542,799 Purchase, increase 0 1,483,229 31,023,290 0 155,044 26,475,670 0 21,068,226 Balance at01/01/2006 21,715,533 -1,252,985 -4,911,661 0 0 2,848 0 Adjustments openingbalnace-newSAS 0 Balance at31/12/2005 1,480,381 2,848 18,219,796 74,281,528 0 340,637 ACCUMULATED DEPRECIATION 0 0 1,480,381 0 2,507,793 Balance at31/12/2006 52,592,313 1,013,319 Revaluation adjustments 0 -10,167,341 34,194,435 10,167,341 15,967,692 Transfers 0 0 24,119,401 Decrease 23,865,513 Increase duetoacquisitions 27,713,481 21,689,215 -1,013,319 Purchase, increase 34,194,435 -7,897,821 Balance at01/01/2006 -3,594,080 Adjustment toopeningbalance-newSAS Balance at31/12/2005 GROSS VALUE ru tksi hrsadfnnilecp opne ogtr aia ogtr financial long-term capital long-term companies except financial sharesand stakesin Group hrsad te oa og ogtr ogtr Total Long-term Long-term Totallong- Other Shares and opne soitsstakes associates companies tkso Sae n te long-term Other Sharesand stakes of ogtr iaca netetecp on Long-termloans Long-term financialinvestmentexceptloans investments receivables willmatureinthefollowingfiveyears. from TOM+2%toTOM+3%.Long-termoperating The interestrateforgrantedhousingflatsamountsto loans wereinsuredbyacreditor’smortgageonflats. term fin.inv. loans in on oOhrcle oa long-term Total called Other loans to the Group on o adi loans notpaidin loans SIT inthousands SIT inthousands investments 0000 0000 0000 193 ANNUAL REPORT 2006 FINANCIAL REPORT DEFERRED TAX RECEIVABLES

Receivables for deferred taxes to the state were formed receivable value adjustments and formed provisions for in the amount of 59,143,000 tolars, and include formed employee retirement amounts and jubilee benefits.

Movement of deferred tax receivables SIT in thousands

Balance of deferred tax receivables at 31/12/2005 3,347 Adjustments to opening balance – new SAS 52,423 Balance of deferred tax receivables at 01/01/2006 55,770 Change in deferred tax receivables due to altered tax bracket -4,194 Change in receivables from revaluation of securities to fair value 8,798 Change in receivables for provisions for retirement amounts -237 Other changes -994 Balance of deferred tax receivables at 31/12/2006 59,143

SHORT-TERM FINANCIAL INVESTMENTS Short-term operating receivables due from Group companies totalling 161,068,000 tolars are charged Short-term financial investments in the amount of rentals and other services in the Sava Group; short- 10,076,708,000 tolars present 9.2 per cent of the term receivables due from entities outside of the balance sheet total. Group in the amount of 155,938,000 tolars are also charged rentals and other services; short-term Short-term financial investments except loans receivables due from other entities in the amount of totalling 202,552,000 tolars are mainly advances 191,962,000 tolars are mainly receivables from for the purchase of securities. buyers of securities and receivables arising from VAT, which are due from the state. Short-term loans in the amount of 9,874,156,000 tolars are short-term loans to the companies in the In 2006 the value adjustment balance in trade Group and total 4,615,430,000 tolars. 66 per cent of receivables decreased by 16,925,000 tolars due to bank deposits are short-term loans to others in the payments by buyers in the amount of 7,110,000 amount of 5,258,726,000 tolars. tolars and cancellation of uncollectible receivables in business books in the amount of 9,815,000 SHORT-TERM OPERATING RECEIVABLES tolars. The value adjustment in trade receivables at 31 December 2006 amounts to 127,940,000 tolars. Short-term operating receivables totalling 508,968,000 tolars are 14 per cent lower than last Short-term operating receivables are not insured. year, particularly due to a decrease in receivables from buyers of securities and a decrease in receivables arising from VAT, which are due from the state. ANNUAL REPORT 2006 FINANCIAL REPORT Survey of short-term operating receivables by maturity SIT in thousands 31/12/2006 Total Due Not due IV) Short-term operating receivables 508,968 18,660 490,308 1. Short-term operating receivables due from Group companies 161,068 8,570 152,498 2. Short-term trade receivables 155,938 10,090 145,848 3. Short-term operating liabilities to other entities 191,962 0 191,962

194 CAPITAL • According to the resolution of the Shareholders’ Meeting the sum of 1,282,366,000 tolars was The capital in the amount of 78,681,853,000 tolars earmarked for dividends. is 10 per cent higher than in the beginning of 2006. • The surplus from revaluation decreased by In the structure of liabilities the capital has a 71.9 2,869,822,000 tolars on account of selling per cent share. securities and increased by 5,815,458,000 tolars In 2006 the following changes were carried out that due to revaluation of securities to fair value and by influenced the capital: 39,417,000 tolars due to interest rate swaps. • Net profit for the financial year of 5,706,469,000 • Own shares amount to 53,787,000 tolars and with tolars was created; regard to last year they remain unchanged. The • In 2006 other revenue reserves were increased in balance of treasury shares at 31 December 2006 accordance with the proposal by the Board of totals 3,289 shares whose nominal value amounts Management and the proposal by the Supervisory to 32,890,000 tolars. Board by 50 per cent of the net profit in the amount of 2,853,234,000 tolars;

Under item capital reserves the following amounts are stated: SIT in thousands 2006 2005 Share premium 5,148,000 5,148,000 Other capital reserves 11,631,004 11,631,004 Payment exceeding net value – repurchased treasury shares 547,881 547,881 Transfer from general equity revaluation adjustments 12,773,885 12,773,885 CAPITAL RESERVES total 30,100,770 30,100,770

DIVIDENDS v 000 SIT 2006 2005 Dividend per ordinary share in the year (SIT) 640 620 Total amount of dividends to the debit of retained earnings (SIT in thousands) 1,282,366 1,242,294 FINANCIAL REPORT The share capital is divided into 2,006,987 ordinary shares which all have voting rights and are freely transferable.

Weighted average number of ordinary shares v 000 SIT 2006 2005 No. of shares on 1 January 2,006,987 2,006,987 Reduced by treasury shares -3,289 -3,289

Weighted average number of ordinary shares 2,003,698 2,003,698 ANNUAL REPORT 2006

Net profit attributable to ordinary share amounts v 000 SIT 2006 2005 Net profit for the financial year (SIT in thousands) 5,706,469 4,288,280 Weighted average number of ordinary shares 2,003,698 2,003,698 Basic net earnings per share (in SIT) 2,847.97 2,140.18

195 PROVISIONS, LONG-TERM ACCRUED COSTS procedures, and 3,810,000 tolars due to payment of AND DEFERRED REVENUES retirement amounts and jubilee benefits. At the end of 2006 the required provisions per In the beginning of 2006 provisions for retirement employee were only recalculated in respect of a new amounts and jubilee benefits in the amount of employee number so that the company at 31 209,693,000 tolars were formed. In 2006 long-term December 2006 stated an amount of 267,434,000 provisions in the amount of 960,000 tolars were tolars in provisions and long-term accrued costs and reversed due to favourable outcomes in certain court deferred revenues.

Movement of provisions and long-term accrued costs and deferred revenues SIT in thousands Provisions Long-term for pensions Other accrued costs and jubilee provisions - and deffered benefits law suits revenues Total Balance of long-term provisions at 31/12/2005 0 58,149 0 58,149 Adjustments to opening balance – new SAS 209,693 0 0 209,693 Balance of long-term provisions at 01/01/2006 209,693 58,149 0 267,842 Newly formed provisions 2,777 0 3,112 5,889 Drawing of provisions -3,810 -960 -1,527 -6,297 Balance of long-term provisions at 31/12/2006 208,660 57,189 1,585 267,434

LONG-TERM LIABILITIES obtained long-term loans are a 3-month EURIBOR from 0.55 to 0.70 per cent. The loans are insured At 31 December 2006 the company states long-term with blank bills of exchange. liabilities of 4,127,725,000 tolars, or 3.8 per cent of The total amount of insured long-term loans the finance sources structure. amounts to 4,127,725,000 tolars.

Long-term financial liabilities to banks in the The maturity of long-term financial liabilities is as amount of 4,127,725,000 tolars are 111 per cent follows: higher than last year. • 2008 1,220,863,000 tolars Long-term loans are hired with Bank Austria • 2009 1,220,863,000 tolars Creditanstalt and BAWAG bank. All hired loans are • 2010 921,433,000 tolars nominated in euro currency. Interest rate for • 2011 764,566,000 tolars

Movement of long-term financial liabilities SIT in thousands

ANNUAL REPORT 2006 FINANCIAL REPORT Balance of loans at 01/01/2006 1,956,006 Hiring new loans in 2006 4,313,983 Repayment of loans in 2006 -424,148 Transfer under a short-term part -1,718,116 Balance of loans at 31/12/2006 4,127,725

Deferred tax liability in the amount of assessing financial investments at fair value. 2,848,422,000 tolars is formed in connection with

196 Movement of deferred tax liabilities SIT in thousands

Balance of liabilities at 31/12/2005 0 Adjustments to opening balance sheet – new SAS 2,187,000 Balance of deferred tax liabilities at 01/01/2006 2,187,000 Change in liability from revaluation of securities to fair value 661,422 Balance of liabilities at 31/12/2006 2,848,422

SHORT-TERM LIABILITIES Only loans, which from long-term financial liabilities are included under the stated item as their short- Short-term liabilities totalling 23,447,247,000 tolars term part, are nominated in foreign currency. The are 14 per cent lower than last year. In the structure of short-term part of the loan hired with Bank Austria finance sources they represent a 21.4 per cent share. Creditanstalt is insured by placing a mortgage on the building of Grand Hotel Toplice Bled. Short-term financial liabilities to companies in the All short-term financial liabilities to banks have not Sava Group totalling 1,711,740,000 tolars are 52 per yet matured and are insured with bills of exchange. cent lower than last year. Financial liabilities result from managing financial sources in the Sava Group. 90 per cent of other short-term financial liabilities totalling 1,161,298,000 tolars represent loans Short-term financial liabilities are shown to the obtained from legal entities outside of the Sava Group. following companies in the Sava Group: • Sava IP d.o.o. in the amount of 749,094,000 tolars; Short-term operating liabilities in the amount of • Sava Medical in Storitve d.o.o. in the amount of 880,329,000 tolars and short-term trade payables 466,052,000 tolars; in the amount of 167,845,000 tolars have not • G&P Hoteli Bled d.o.o. in the amount of matured yet. 150,932,000 tolars; • Savatech d.o.o. in the amount of 127,326,000 Other short-term operating liabilities in the amount tolars; of 807,843,000 tolars are liabilities to the state, • IP Nova d.o.o. in the amount of 79,404,000 tolars; liabilities from wages and salaries and other • Terme Lendava d.d. in the amount of 37,975,000 liabilities. tolars; • Grand Hotel Toplice d.o.o. in the amount of SHORT-TERM ACCRUED COSTS AND FINANCIAL REPORT 45,525,000 tolars; and DEFERRED REVENUES • other subsidiaries in the Sava Group in the amount of 55,432,000 tolars. Short-term accrued costs and deferred revenues in the amount of 132,683,000 tolars include deferred All of the mentioned short-term financial liabilities sales revenues from investment property and are debts to the companies in the Sava Group in accrued interest of foreign currency loans. Slovenia; they have not matured yet and are not insured. The interest rate for obtained long-term OFF-BALANCE ASSETS / LIABILITIES loans from the companies in the Sava Group amounts to 2.9 per cent. 92 per cent of issued guarantees refer to the loans ANNUAL REPORT 2006 received by subsidiaries in the Sava Group, and 8 per Short-term financial liabilities to banks in the cent to sureties and guarantees to the companies amount of 18,717,984,000 tolars are 9 per cent outside of the Sava Group. The amount of the loan lower than in the same period last year. All short- from Bank Austria Creditanstalt is shown under the term loans are hired with banks in Slovenia, the item mortgages. interest rate being one-month EURIBOR+0.55%, a The contracts with a possibility of purchasing in the 3 month EURIBOR+0.55-0.60% and a 6-month amount of 7,904,110,000 tolars refer to shares and EURIBOR +0.60%, while the nominal interest rate stakes in associates and other shares and stakes. fluctuates between 3.8 to 4 per cent.

197 SIT in thousands Structure Structure Index 31/12/2006 2006 31/12/2005 2005 2006/2005 Excluded farmland after opening balance 42,098 0.3% 42,098 0.5% 100 Assets excluded acc. to order due to nationalisation 82,333 0.6% 82,333 1.0% 100 Issued guarantees – subsidiaries 2,834,599 20.5% 3,865,826 49.0% 73 Issued guarantees – associates 229,246 1.7% 260,680 3.3% 88 Issued guarantees – other companies 0 0.0% 2,943,482 37.3% - Other company guarantees 38,692 0.3% 20,359 0.3% 190 Interest rate swaps 2,396,380 17.3% 0 0.0% - Contracts with a possibility of purchasing 7,904,110 57.2% 0 0.0% - Mortgages on the Grand Hotel Toplice building 287,568 2.1% 670,812 8.5% 43 TOTAL 13,815,026 100.0% 7,885,590 100.0% 175

Fair value of financial instruments SIT in thousands 31/12/2006 01/01/2006 Cost Fair Cost Fair value value value value Securities available for sale 30,774,574 30,774,574 33,327,731 33,327,731 Long-term receivables 167,539 167,539 221,716 221,716 Short-term receivables 508,968 508,968 593,392 593,392 Approved loans 10,646,661 10,646,661 7,193,408 7,193,408 Cash and cash equivalents 11,147 11,147 2,545 2,545 Long-term loans 4,127,725 4,127,725 1,956,006 1,956,006 Short-term loans 21,591,022 21,591,022 25,513,659 25,513,659 Short-term operating liabilities 1,856,225 1,856,225 1,817,734 1,817,734

ESTIMATING FAIR VALUES interests, whereby the effective interest rate equals the contracting interest rate, which fluctuates. Securities available for sale The fair value of available-for-sale securities that are Short-term receivables and liabilities

ANNUAL REPORT 2006 FINANCIAL REPORT listed equals the bid market price on the balance For receivables and liabilities with a remaining life of sheet date. The fair value of shares and stakes of less than one year, the notional amount is deemed unlisted companies is estimated on the basis of last to reflect the fair value. known transactions or its operations. The fair value is checked at least every three months. CONTINGENCIES

Interest-bearing loans and borrowings At 31 December 2006 the company Sava presented The fair value is estimated as a discounted value of no contingencies. All known liabilities are included in expected cash flows from the principal and the financial statements.

198 33.2.2.2 Income statement OTHER OPERATING REVENUES (WITH OPERATING REVENUES FROM REVALUATION) NET SALES REVENUES Other operating revenues with operating revenues Since 2002 the net sales revenues of Sava d.d. from revaluation totalling 218,887,000 tolars mainly present inter-company sales within the Sava mainly arise – in 64 per cent – from the sale of real Group. In 2006 the joint stock company Sava estates. The rest of operating revenues includes realised net sales revenues in the amount of revenues due from the payback of interest 1,782,591,000 tolars, which is 6 per cent less than according to the court decision in connection with in the same period last year. The main reason for settling receivables that were already written-off. lower sales figures is a discontinuation in charging rent for equipment to the company Savatech d.o.o., COSTS ACCORDING TO FUNCTIONAL GROUP Sava-GTI d.o.o. and Grand Hotel Toplice d.o.o. due to an increase in capital in kind in the beginning of All costs in the amount of 2,354,181,000 tolars refer 2006. Sales revenues are created from leasing out to overheads. fixed assets and equipment and providing other services mainly for subsidiaries in the Sava Group COSTS OF GOODS, MATERIAL AND SERVICES and to a lesser extent to companies outside of the Group. Cost of goods, materials and services in the amount of 846,354,000 tolars are 4 per cent higher than in the same period last year.

Survey of cost of goods, materials and services by type of cost SIT in thousands 31/12/2006 31/12/2005 Cost of merchandise and materials sold 0 0 Cost of raw materials and consumables used 51,369 54,240 Cost of transportation 15,813 16,673 Cost of maintenance services 121,805 101,503 Cost of rentals 46,930 36,675 Cost of refunds to employees 6,389 4,923 Cost of payment transactions, bank services and insurance premiums 25,299 25,012 FINANCIAL REPORT Cost of intellectual and personal services 197,148 232,413 Cost of fairs, advertising and office allowances 130,842 98,514 Cost of other services 250,759 241,316 TOTAL 846,354 811,269

LABOUR COSTS AMORTISATION AND DEPRECIATION

EXPENSES, WRITE-OFFS ANNUAL REPORT 2006 Labour cost totalling 871,125,000 tolars are 10 per cent higher than in the same period last year and are Amortisation and depreciation expenses, write-offs related to a change in the employee number. total 591,120,000 tolars and are 16 per cent lower The company shows the premiums charged for than last year, particularly due to depreciation that additional pension insurance in the amount of was accounted in a lower sum as a consequence of 8,728,000 tolars under labour costs. an increase in capital in three companies in the Sava Group though an investment in kind.

199 Amortisation and depreciation expenses, write-offs FINANCIAL EXPENSES FROM IMPAIRMENT comprise the following items: AND WRITE-OFFS OF FINANCIAL • depreciation of intangible long-term assets – INVESTMENTS 26,105,000 tolars; • depreciation of tangible fixed assets – Financial expenses from impairment and write-offs 243,773,000 tolars; of financial investments in the amount of • depreciation of investment property – 293,870,000 tolars mainly present a loss from the 274,600,000 tolars; sale of financial investments in the amount of • financial expenses from revaluation at elimination 222,770,000 tolars and impairment in financial of fixed assets and investment property from use investment totalling 71,100,000 tolars. – 12,055,000 tolars; and • financial expenses from revaluation at FINANCIAL EXPENSES FROM FINANCIAL impairment of fixed assets – 34,006,000 tolars. LIABILITIES Expenses from revaluation of current assets in the Financial expenses from financial liabilities totalling amount of 581,000 tolars relate to formed 943,743,000 tolars are 21 per cent higher than in adjustments in trade receivables. the same period last year.

OTHER OPERATING EXPENSES Financial expenses from loans obtained from Group companies in the amount of 50,388,000 tolars are Other operating expenses totalling 45,582,000 interest expenses for loans obtained from Group tolars mainly represent paid contributions for urban companies. real estate as well as the housing and compensation fund. Financial expenses from loans obtained from banks in the amount of 893,355,000 tolars are charged FINANCIAL REVENUES FROM SHARES interest and exchange rate gains/losses for obtained bank loans. Financial revenues from shares totalling 8,137,852,000 tolars are 28 per cent higher than in FINANCIAL EXPENSES FROM OPERATING the same period last year. LIABILITIES Financial revenues from shares in associates Financial expenses from operating liabilities in the totalling 2,242,559,000 tolars include received amount of 15,813,000 tolars includes mainly dividends from Gorenjska Banka d.d. and Merkur d.d. exchange rate losses. Financial revenues from shares in other companies in the amount of 5,894,006,000 tolars are revenues OTHER REVENUES AND OTHER EXPENSES from the sale of securities and received dividends. Other revenues in the amount of 11,984,000 tolars FINANCIAL REVENUES FROM INTEREST- is a compensation in connection with the purchase of materials and sale of foreign currency funds. BEARING BORROWINGS AND LOANS Other revenues totalling 9,242,000 tolars are revenues in connection with a sale of foreign Financial revenues from interest-bearing borrowings currency funds and approved discounts for the approved to Group companies in the amount of premature payment of housing loans. 304,707,000 tolars and financial revenues from loans to other entities in the amount of 107,247,000 tolars TAX ON PROFIT are 23 per cent higher than last year and mainly ANNUAL REPORT 2006 FINANCIAL REPORT include charged interest from approved loans, In 2006 the tax liability of the joint stock company interest from short-term deposits, foreign exchange Sava totals 1,259,515,000 tolars and represents the gains and revenues from charged guarantees. effective tax rate of 18.1 per cent. The effective tax FINANCIAL REVENUES FROM OPERATING rate is 3 per cent higher than last year. RECEIVABLES Expenses which are not tax-deductible include revaluation of assets, newly formed long-term Financial revenues from operating receivables in the provisions and other costs not recognised in amount of 20,796,000 tolars are 76 per cent higher accordance with the Act on Corporate Income Tax. than last year and include charged interest and foreign exchange gains/losses to customers.

200 elimination of already taxed long-term provisions. Untaxed revenue includes dividends from Gorenjska Exercised tax reliefs in 2006 relate to investments in Banka d.d. where we have a 41.35 per cent shareholding, intangible and tangible fixed assets, employed payback of interest after a successfully completed law disabled persons, the pension scheme and donations. suit, payment of prematurely impaired receivables and

Survey of tax on profit calculation SIT in thousands Comparison between actual and 2006 2005 calculated tax rate Rate % Amount Rate % Amount Pre-tax profit 6,967,215 5,194,631 Tax on profit applying the official rate 25 1,741,804 25 1,298,658 Effect by tax rates in other countries (+)(-) 0 0 Amounts having negative impact on tax base 231,076 426,804 - amount from revenue increase to the level of tax-deductible revenue 0 0 - amount from expense decrease to the level of tax-deductible expense 206,209 426,804 - amount of expenses for which tax was deducted 0 0 - possible other amounts having impact on tax rate increase 24,867 0 Effect of increase in tax rate on special profits 0 0 Amounts having positive effect on tax base(+)(-) 2,124,003 1,380,712 - amount from revenue decrease to the level of tax-deductible revenues 2,122,555 1,380,712 - amount from expense increase to the level of tax-deductible expenses 1,448 0

- possible other amounts impacting FINANCIAL REPORT tax rate decrease (e.g. amount of revenues for which tax was already deducted) 0 0 Tax reliefs - applied, having effect on tax liability decrease 36,229 601,930 - remaining, to be utilised in the following years 00 Tax loss

- applied, having effect on tax ANNUAL REPORT 2006 liability decrease 0 0 - remaining, to be utilised in the following years 00 Adjustments for previous years 0 0 TAX ASSESSED FOR THE CURRENT YEAR 18.08 1,259,515 17.51 909,698 DEFERRED TAX 1,231 -3,347 TAX IN THE INCOME STATEMENT 18.10 1,260,746 17.45 906,351

201 Survey of receivables and liabilities for deferred taxes SIT in thousands Receivables Liabilities Net Balance of deferred tax receivables and liabilities at 31/12/2005 3,347 0 3,347 Adjustments to opening balance – new SAS 52,423 2,187,000 -2,134,577 Balance of deferred tax receivables and liabilities at 01/01/2006 55,770 2,187,000 -2,131,230 Change related to changed tax rate -4,194 0 -4,194 Long-term financial investments 8,798 661,422 -652,624 Operating receivables -994 0 -994 Long-term provisions -237 0 -237 Others 0 0 0 Balance of deferred tax receivables and liabilities at 31/12/2006 59,143 2,848,422 -2,789,279

NET PROFIT OR LOSS generated, which is 33 per cent more than in the same period last year, or 45 per cent more than planned. The pre-tax profit for the financial year totalled 6,967,215,000 tolars in 2006 and is 34 per cent SHARES IN PROFIT higher than in the same period last year or 55 per cent higher than planned. The Shareholders’ Meeting has not approved any shares in the profit to those who are not In 2006 a net profit of 5,706,469,000 tolars was shareholders.

Net profit after converting capital into euros and cost of living SIT in thousands Calculated Decrease Capital % growth effect in profit CAPITAL/ calculation in euros 68,707,965 0.00% 0 5,706,469 CAPITAL/calculation from cost of living growth* 68,707,965 2.80% 1,923,823 3,782,646

*cost of living

RELATED PARTIES Business among related parties are performed under the same conditions as valid in an ordinary Related parties include subsidiaries and associates, arm’s length transaction. members of the Supervisory Board and Board of The capital of subsidiaries at 31 December 2006 Management and their closer family members. and net profit of subsidiaries for 2006 are shown under Item 35 – in Chapter 32.3. Notes to the RELATIONS WITH SUBSIDIARIES Financial Statements of the Sava Group. ANNUAL REPORT 2006 FINANCIAL REPORT

Business relations between Sava d.d. and its RELATIONS WITH ASSOCIATES subsidiaries relate to: • provided services which include rent of property Gorenjska Bankd d.d. and Merkur d.d. are the most and equipment, use of brand name and services important associates of the company Sava d.d. provided by competence centres of knowledge; and GORENJSKA BANKA D.D. • financial operations in connection with managing Sava d.d. raises loans and makes deposits at interest-bearing borrowings and loans. Gorenjska Banka. Terms and conditions for these transactions equal those effective for other companies with a similar rating.

202 Ownership of the Sava share SIT in thousands 2006 2005 No. of Sava d.d. shares owned by Gorenjska Banka d.d. 52,500 52,500 Stake of Gorenjska Banka d.d. in Sava d.d. 2.62% 2.62%

Survey of transactions with Gorenjska Banka d.d. SIT in thousands 2006 2005 Balance of raised borrowings at 01/01 2,981,419 3,480,000 Hiring new borrowings 0 0 Repayment of borrowings 0 -498,581 Revaluation of foreign currency borrowings 331 0 Balance of raised borrowings at 31/12 2,981,750 2,981,419 Balance of paid deposits at 31/12 0 0

MERKUR D.D. RELATIONS TO NATURAL PERSONS

No transactions were carried out as of the day of Related natural persons own 2,861 Sava shares, acquiring more than a 20 per cent share in the which represents 0.262 per cent of ownership. company Merkur d.d.

v 000 SIT 31/12/2006 31/12/2005 No. of shares Stake in capital No. of shares Stake in capital Board of Management of Sava d.d. members 2,563 0.1280% 2,563 0.1280%

Close family members of Sava d.d. FINANCIAL REPORT Board members 176 0.0001% 176 0.0001% Sava d.d. Supervisory Board members 122 0.0060% 122 0.0060%

DATA ABOUT GROUP OF PERSONS This income includes gross salaries, gross bonuses and other revenues. In 2006 the total gross income of the members of the Board of Management of Sava d.d. amounted to Sava d.d. showed receivables to employees with

228,345,000 tolars. This sum consists of gross managerial contracts in the amount of 1,486,000 ANNUAL REPORT 2006 salaries, gross bonuses and other income. tolars. The interest rate for loans amounts to TOM In 2006 the total net income of the Board members +3% and the last instalment will fall due in 2010. amounted to 95,882,000 tolars, which is 42 per cent of gross income. In 2006 the Supervisory Board members received a gross income totalling 62,985,000 tolars, of which 27 employees with managerial contracts received paid bonuses have major share, the remaining sum gross income totalling 330,281,000 tolars in 2006. being the attendance fee.

203 Survey of income by the Board of Management SIT in thousands Gross Total Total Gross Gross other gross net Name and surname salary bonuses income income income Janez Bohoriå Chairman of the Board 48,419 28,509 2,700 79,628 33,330 Emil Vizoviæek Member of the Board 44,839 26,413 3,648 74,900 31,483 Vinko Peråiå Member of the Board 44,977 26,413 2,427 73,817 31,069 TOTAL 138,235 81,335 8,775 228,345 95,882

Other income includes holiday allowances, other work-related earnings and bonuses.

AUDITING THE ANNUAL REPORT performed by the auditing company KPMG Slovenija d.o.o., Ljubljana. The cost of tax consultation totals The contractual amount for auditing the Annual 497,000 tolars, the service being provided by the Report of the joint stock company and the Sava company KPMG Poslovno Svetovanje d.o.o., Group amounts to 9,586,000 tolars. The audit was Ljubljana.

BASIC BUSINESS INDICATORS v 000 SIT 31/12/2006 01/01/2006 31/12/2005 Participation rate of equity - in % 71.9 69.2 72.2 equity /liabilities Participation rate of long-term financing - in % 78.5 73.5 74.1 total equity + long-term liabilities (incl. provisions and deferred taxes) + long-term accruals and deferrals / liabilities Operating fixed assets rate - in % 17.4 17.6 17.2 Fixed assets + investment property / assets Long-term investment rate - in % 90.3 90.6 68.4 Total fixed assets + accruals and deferrals + investment property + long-term financial investments + long-term operating receivables / assets Equity of fixed operating assets ratio 4.1 3.9 4.2 Equity/ fixed assets + investment property Acid test ratio 0.0 0.0 0.0 Liquid assets / short-term liabilities Quick ratio 0.5 0.4 1.2 Total liquid assets + short-term receivables and short-term financial investments / short-term liabilities

ANNUAL REPORT 2006 FINANCIAL REPORT Current ratio 0.5 0.4 1.2 Short-term assets / short-term liabilities Operating efficiency ratio* 2.9 - 2.4 Operating revenues / operating expenses Net return on equity ratio 7.9 - 6.5 Net profit for financial year /average equity less net operating results for the year Dividends to share capital ratio 6.4 - 6.2 Total dividends paid in financial year /average share capital * Included are revenues and expenses from operations and financing.

204 RETURN ON CAPITAL • In accordance with Item 15 of the Introduction to SAS 2006 we carried out the following recalculations The return on capital of Sava d.d., calculated as the and rearrangements on 1 January 2006: ratio between pre-tax profit for the financial year - We established the value of investment and the average balance of equity, totals 9.7 per property which on 01/01/2006 amounted to cent in 2006, which is 1.8 percentage points more 13,089,419,000 tolars and reduced tangible than last year. fixed assets by the same amount. - Securities in the amount of 23,672,486,000 The return on capital of Sava d.d., calculated as the tolars were defined as available for sale, ratio between net profit for the financial year and the rearranged from short-term to long-term assets average balance of equity, totals 7.9 per cent in and valued at fair value. The effect of evaluating 2006, which is 1.4 percentage points more than last securities at fair value on the day of transition year. amounts to 8,747,932,000 tolars. As a counter- item it is shown as revaluation reserve in the The average balance of equity for 2006 is being amount of 6,560,932,000 tolars and deferred tax calculated from the equity balance at 01/01/2006 liability of 2,187,000,000 tolars. and the equity balance at 31/12/2006 without - Long-term financial investments in subsidiaries considering net profit for the financial year. were dealt with at cost, therefore they were reduced by 3,439,036,000 tolars. The mentioned amount represents the past valuation of 33. 3. investments in subsidiaries according to the Explanations in equity accounting method for the period from connection with the 01/01/2002 to 31/12/2005. The counter-item of decreasing long-term financial investments in transition to the subsidiaries is a decrease in revaluation reserve in the amount of 2,680,500,000 tolars and revised Slovene decrease in retained net profit in the amount of 758,536,000 tolars. Accounting Standards - Long-term financial investments in associates were dealt with at cost, therefore they were This year the financial statements were prepared reduced by 7,897,821,000 tolars. The mentioned according to Slovene Accounting Standards 2006 for amount represents the past evaluation of the first time. In accordance with Item 15 in the investments in associates according to the equity Introduction to SAS 2006 the company carried out accounting method for the period from adjustments and recalculations of comparison data 01/01/2002 to 31/12/2005. The counter-item for in the financial statements drawn in 2005 on the a decrease in long-term financial investments in basis of SAS 2001. associates is completely shown under a decrease in revaluation reserve. FINANCIAL REPORT 33.3.1. Balance Sheet - Own stakes in the amount of 53,787,000 tolars were dealt with as a deductible capital item. The Balance Sheet presents the comparison data for - We additionally formed long-term provisions for 2005 in two columns: retirement amounts and jubilee benefits in the • According to SAS 2001 at 31/12/2005 and is not amount of 209,693,000 tolars on the basis of an recalculated according to SAS 2006, but logically actuary calculation. The counter-item of forming classified in the valid balance sheet scheme. The long-term provisions for severance pay and following reclassifications among individual items jubilee benefits is a decrease in retained net profit of assets and liabilities were made: in the amount of 157,270,000 tolars and forming - General equity revaluation adjustments in the a receivable for deferred tax in the amount of ANNUAL REPORT 2006 amount of 12,773,885,000 tolars was entered 52,423,000 tolars. under capital reserves. - The total decrease in retained net profit in the - Specific equity revaluation adjustments for long- amount of 915,806,000 tolars is due to balancing term financial investments of 10,578,321,000 long-term financial investments in subsidiaries tolars was entered under revaluation reserve. in the amount of 758,536,000 tolars and forming long-term provisions for severance pay and jubilee benefits in the amount of 157,270,000 tolars.

205 Survey of changes in the Balance Sheet with regard to the revised SAS 2006 SIT in thousands 31/12/2005 / 01/01/2006 Transfers Other events Tangible fixed assets -13,089,419 0 Investment property 13,089,419 0 Long-term financial investments 23,672,486 8,747,932 Long-term financial investments in subsidiaries 0 -3,439,036 Long-term financial investments in associates 0 -7,897,821 Short-term financial investments -23,672,486 0 Own stakes -53,787 0 Deferred tax receivable 0 52,423 ASSETS total -53,787 -2,536,502 Capital reserve 12,773,885 0 Treasury shares within revenue reserves -53,787 0 Revaluation reserve 0 6,560,932 Equity revaluation adjustments -12,773,885 -10,578,321 Retained net profit/loss 0 -915,806 Long-term provisions 0 209,693 Deferred tax liability 0 2,187,000 LIABILITIES total -53,787 -2,536,502

33.3.2 Income Statement 33.3.4 Statement of Changes in Equity

The comparison data for 2005 in the Income In the Statement of Changes in Equity and the data Statement is stated at SAS 2001 and not at 31/12/2006, the amount of recalculation in recalculated according to SAS 2006. accordance with Item 15 of the introduction to SAS A logical reclassification of comparison data in the 2006 and the data on the initial balance at valid Income Statement scheme was carried out 01/01/2006 are shown. The explanations of only within financial revenues and expenses, which, amounts in connection with the transition follow however, did not change the income statement for under Item 33.3.1. Balance Sheet. 2005. 33.3.3 Cash Flow Statement

Upon transition to SAS 2006 and in accordance with

ANNUAL REPORT 2006 FINANCIAL REPORT Item 15 of the introduction the comparison data for 2005 was logically reclassified in the valid scheme of the Cash Flow Statement according to SAS 2006.

206 33. 4. 27 March2007 and costefficiency,thattheannualreportgivesa were elaboratedaccordingtotheprincipleofprudence accounting guidelinesandtheestimates statements itconsistentlyappliedthecorresponding The Boardconfirmsthatwhendrawingupthefinancial December 2006. the companySavad.d.foryearthatendedon31 The Boardagreeswiththefinancialstatementsof Sava d.d. for thecompany Board ofManagement Statement bythe Member oftheBoard Member oftheBoard Emil Vizoviæek Vinko Peråiå Accounting Standards. accordance withcurrentlegislationandSlovene company willproceedwithitsoperationandin produced basedontheassumptionthat financial statementsandthenoteshavebeen Board ofManagementconfirmsherewiththatthe measures tosecureassetsandotherfunds.The from afraudorerror,andforadoptingsuitable not containanymaterialmis-statementsoriginating presentation ofthefinancialstatements,whichdo controlling inrelationtothepreparationandfair establishing, functioningandmaintaininginternal proper managingofitsaccountingprocedures,and The BoardofManagementisresponsibleforthe business performanceintheyear2006. true andfairviewofthecompany’sassetsits Chairman oftheBoard Janez Bohoriå 207 ANNUAL REPORT 2006 FINANCIAL REPORT 208 ANNUAL REPORT 2006 FINANCIAL REPORT 33. 5. Sava d.d. Independent Auditor’sReportforthecompany STATEMENT ON CONFORMITY WITH THE CORPORATE GOVERNANCE CODE FOR SLOVENIA

Sava d.d. has developed a system of corporate Ljubljana, Association of Supervisory Board governance that ensures transparency in managing Members, and the Manager’s Association in March company and the Sava Group, achieves and 2004 with the aim of specifying more precisely the surpasses the expectations of shareholders and standards of corporate governance for public other stakeholder groups and protects their commercial enterprises in Slovenia. interests. The final goal of Sava d.d. and each of its subsidised companies is sustainable development, The Board of Management of the joint stock thus bringing long-term success. company Sava and the Supervisory Board of Sava d.d. issued the previous Statement on Conformity The Board of Management of Sava d.d. has with the Corporate Governance Code for Slovenia on established and maintained a strong ethical climate 31 March 2006 and announced it on 21 April 2006. with the aim of conducting its business in Hence it follows from the announcement of this accordance with the highest standards of personal statement, which is available also on Sava d.d. web and corporate behaviour. The Board of Management site (www.sava.si) that the then announced of Sava d.d. has likewise designed an efficient deviations and explanations have remained to be system of internal supervision that maintains a valid in the year 2006 too, including the beginning of suitable level of protection both with regard to the year 2007 - until the issue of this Statement. honesty and the accuracy of information concerning STATEMENT ON CONFORMITY WITH THE CODE its business. By appointing the Reporting team, the Herewith the Board of Management and the Board of Management of Sava d.d. has established Supervisory Board of the joint stock company Sava an additional mechanism for introducing best d.d. declare that the joint stock company Sava d.d. practice and supervision over reporting to ensure respects the provisions of the previous variant of the that it is on time, comprehensive, relevant and Code of 14 December 2005, as well the changed and accurate while respecting the principle of equality in amended Code of 5 February 2007 in full except in informing all shareholders. cases where it deviates from it, for which the following explanations are given: Information on the key development achievements of the past year at the level of conformity with the Item 1.1.1.: The basic goal of the joint stock ANNUAL REPORT 2006 best practice in the area of corporate governance are company which performs lucrative activity is to detailed in Chapter 9. The Corporate Governance maximise the value of the company. This and other System in the 2006 Annual Report of the Sava Group goals, which company pursues in performance of its and the company Sava d.d. activity shall be written down in the company’s articles of association. We made a commitment to the Corporate Governance Code for Slovenia (hereinafter referred For the time being Sava d.d. has not separately set to as the Code) by adopting the Statement on out the company goals in its Articles of Association, Conformity with the Code after its first version had however at the Shareholders’ Meeting in 2007 the been designed by the Ljubljana Stock Exchange d.d., proposal for a change in Articles of Association will

209 be dealt with to include the definition of company’s Item 7.1.5: The company must change the auditing goals. company and auditor respectively at least once every five years. Item 2.3.2: The method of determining the level of Auditing of the financial statements of Sava d.d. has pay, remuneration and other benefits for members been performed by KPMG, a select firm of auditors, of the Board of Management must first be for more than five years, but in this period the prescribed and respect the criteria such as: composition of the team of auditors and a - the range of tasks of an individual member of the responsible auditor – partner auditing the Sava Board Annual Report have changed. - the performance of an individual member of the Board All other obligatory provisions of the Corporate - the size of the company and its financial position Governance Code of 5 February 2007, which were - complexity of company managing with regard to published in full on the website of the Ljubljana its business and organisational structure Stock Exchange (www.ljse.si), are observed by Sava - general economic circumstances in which the d.d. to the full extent. The vision and goal of Sava d.d. company operates and its subsidiaries in the field of corporate - the success of the company's business performance governance is conformity with all good practices, - meeting the strategic annual plans which are determined by the Code and the most - awards to members of the board in subsidiaries progressive Slovene and international practice. - recommendations for awarding endorsed by professional organisations The statement on observing the Corporate Governance Code on the part of the Board of However, we believe that Sava d.d. does observe the Management of Sava d.d. refers to the Code of 5 provisions, but the wording of the items is February 2007 and comprises the period of the inaccurate as it indicates that the company must business year 2006 an considers the situation until adopt special regulations in connection with the the date of the annual report, which is 27 March method of determining pay levels, remunerations 2007. There appeared no new deviations with regard and other benefits for members of the Board of to the code variant of 14 Decemer 2005. In Management. We further maintain that the present accordance with the rules we shall regularly publish arrangement according to which the issue is a statement on conformity with the Corporate regulated with criteria specified in advance in Governance Code or its future variants in future individual contracts between the company and annual reports. individual members of the Board of Management meets the requirement.

Kranj, 27 March 2007 Board of Management and Supervisory Board of Sava d.d. ANNUAL REPORT 2006 STATEMENT ON CONFORMITY WITH THE CODE

210 The Sava Group Sava d. d. - Holding

BOARD OF MANAGEMENT PROCURATORS

Janez Bohoriå, Chairman Iva Œagar, MA tel: +386 4 206 52 15, fax: +386 4 206 64 46 tel: +386 4 206 63 46, fax: +386 4 206 64 46 : [email protected] : [email protected]

Emil Vizoviæek, Member Miran Hude tel: +386 4 206 52 10, fax: +386 4 206 64 46 tel: +386 4 206 59 46, fax: +386 4 206 64 06 : [email protected] : [email protected]

Vinko Peråiå, Member tel: +386 4 206 53 25, fax: +386 4 206 64 46 : [email protected]

Competence centres of knowledge

CORPORATE COMMUNICATIONS INTERNAL AUDIT Lidija Bregar, Director Duæa Haloœan Sedej, MA, Director tel: +386 4 206 58 19, fax: +386 4 206 64 01 tel: +386 4 206 53 26, fax: +386 4 206 64 46 : [email protected] : [email protected] STRATEGIC FINANCE HR, LAW & ORGANISATION Miha Dolinar, Director Tatjana Lozar, Director tel: +386 4 206 59 88, fax: +386 4 206 64 46 tel: +386 4 206 56 16, fax: +386 4 206 64 60

: [email protected] : [email protected] CONTACT PERSONS BUSINESS FINANCE STRATEGIC INFORMATICS Iva Œagar, MA, Procurator Georg Pollak, Director tel: +386 4 206 63 46, fax: +386 4 206 64 46 tel: +386 4 206 53 07, fax: +386 4 206 64 46 : [email protected] : [email protected] STRATEGIC ACCOUNTING, STRATEGIC PURCHASING PLANNING & ANALYSIS Marko Ætebe, Director Mojca Globoånik, Director tel: +386 4 206 63 73, fax: +386 4 206 64 22 tel: +386 4 206 56 01, fax: +386 4 206 64 46 : [email protected] ANNUAL REPORT 2006 : [email protected] COST CONTROL AND RISK MANAGEMENT OPERATIONAL EXCELLENCE Vlasta Mekiæ, Director Emil Vizoviæek, Board Member tel: +386 4 206 51 36, fax: +386 4 206 64 46 tel: +386 4 206 52 10, fax: +386 4 206 64 46 : [email protected] :[email protected]

211 QUALITY SYSTEMS EU PROJECTS Joœe Vodiåar, MA, Director Zvonko Beliå, Director tel: +386 4 206 52 85, fax: +386 4 206 64 36 tel: +386 4 206 5298, fax: +386 4 206 64 04 : [email protected] : [email protected] SAFETY STRATEGIC CONTROLLING Janez Fabijan, Director Antonija Pirc, MA, Director tel: +386 4 206 53 78, fax: +386 4 206 64 42 tel: +386 4 206 52 00, fax: +386 4 206 64 46 : [email protected] : [email protected]

Divisions RUBBER MANUFACTURING Foreign Trade Network

SAVATECH d. o. o., Kranj SAVA TRADE G.m.b.H., Munich, Germany Duæan Kveder, Director Zlatko Smrdel, Director tel: +386 4 206 52 74, fax: +386 4 206 64 60 tel: +49 89 544 14 30, fax: +49 89 532 89 51 : [email protected] : [email protected]

Vesna Åadeœ, Director SAVA TRADE s.r.o., Prague, Czech Republic tel: +386 4 206 51 79, fax: +386 4 206 64 60 Milan Vik, Director : [email protected] tel: +420 22 494 19 66, +420 22 494 25 67, fax: +420 22 494 25 59 Mira Rjavec, Worker Director : [email protected] tel: +386 4 206 53 77, fax: +386 4 206 64 60 : [email protected] SAVA TRADE Sp. z o. o., Warsaw, Poland Ryszard Zawadzki, Director SAVA-GTI d. o. o., Ptuj tel: +48 22 721 13 61, fax: +48 22 721 13 62 Anton Rogina, Director : ryszard.zawadzki @savatrade.com.pl tel: +386 2 787 93 30, fax: +386 2 787 93 40 :[email protected] SAVATECH TRADE Ltd., London, United Kingdom Boætjan Podjed, Director SAVA-SCHÄFER d. o. o., Kranj tel: +44 020 8288 35 08, fax: +44 020 8688 00 55 Gregor Aœman, Director : bostjan.podjed@ savatech.f9.co.uk tel: +386 4 206 61 31, fax: +386 4 206 64 05 : [email protected] SAVATECH Corp., Port Orange, Florida, USA Tony Æimunac, Director SAVA ROL d. o. o., Zagreb tel: +1 386 760 07 06, fax: +1 386 760 87 54 Darko Vodanovic´, Director : [email protected] tel and fax: +385 1 366 74 89

ANNUAL REPORT 2006 CONTACT PERSONS : [email protected] Representative Office Trieste, Italy Niko Golemac, Manager tel: +39 040 2528 140, fax: +39 040 252 90 63 : [email protected] : [email protected]

Representative Office Moscow, Russia Uroæ Burger tel: +7 495 775 38 46, fax: +7 495 981 63 03 : [email protected]

212 TOURISM

Sava Hotels Bled Pannonian Spas

Andrej Æprajc, MA, Director Tourism TERME 3000 d. d., Moravske Toplice tel: +386 4 537 77 12, fax: +386 4 537 77 22 Duæan Bencik, General Manager : [email protected] tel: +386 2 512 23 00, fax: +386 2 548 16 07 : [email protected] GOLF IN KAMP Bled d. d., Bled Andrej Æprajc, M.A., Director Terme Lendava d. d., Lendava tel: +386 4 537 77 12, fax: +386 4 537 77 22 Franc Huber, Director : [email protected] tel: +386 2 577 44 40, fax: +386 4 577 44 18 : [email protected] Camping Bled Marjeta Vizoviæek, Manager Terme Ptuj d. o. o., Ptuj tel: +386 4 575 20 01, fax: +386 4 575 20 02 Andrej Klasinc, Director : [email protected] tel: +386 2 749 45 10, fax: +386 2 749 45 20 : [email protected] GRAND HOTEL TOPLICE d. o. o., Bled Andrej Æprajc, M.A., Director Terme Radenci d. o. o., Radenci tel: +386 4 537 77 12, fax: +386 4 537 77 22 Milan Karoli, Business Commissioner : [email protected] tel: +386 2 520 27 00, fax: +386 2 520 27 47 : [email protected] Hotel Vila Bled Emil Æink, Manager Terme Banovci, Verœej tel: +386 4 579 15 00, fax: +386 4 574 13 20 Lea Hofman, Manager : [email protected] tel: +386 2 513 14 00, fax: +386 2 587 17 03 : [email protected] G&P HOTELI BLED d. o. o., Bled Lidija Dokl, Director Hotel Jeruzalem, Ljutomer tel: +386 4 575 10 00, fax: +386 4 575 10 49 Branko Smodiæ, Manager : [email protected] tel: +386 2 584 16 60 , fax: +386 2 584 16 66 : [email protected] Hotel Golf : [email protected] Fedja Pobegajlo, Director tel: +386 4 579 17 14, fax: +386 4 579 17 00

: [email protected] CONTACT PERSONS

Hotel Park Ema Pogaåar, Director tel: +386 4 579 30 00, faks: +386 4 574 15 05 : [email protected]

REAL ESTATE ANNUAL REPORT 2006 SAVA IP d. o. o.. Ljubljana SAVA NOVA d. o. o., Zagreb Joœe Kavåiå, Director Joœe Kavåiå, Director tel: +386 1 430 41 50, fax: +386 1 231 31 70 tel: +385 1 666 10 05, fax: +385 1 668 10 13 : [email protected] : [email protected]

IP NOVA d. o. o., Ljubljana Gorazd Rous, Director tel: +386 1 430 41 50, fax: +386 1 231 31 70 : [email protected]

213 OTHER OPERATIONS ENERGETIKA SAVA d. o. o., Kranj Stanko Cvenkel, Director SAVA MEDICAL IN STORITVE d. o. o., Kranj tel: +386 4 206 57 77, fax: +386 4 206 64 04 Maksimiljan Fijaåko, Director : [email protected] tel: +386 4 206 53 97, fax: +386 4 206 64 42 : [email protected] Energetika Årnomelj d.o.o., Kranj Stanko Cvenkel, Director tel: +386 4 206 57 77, fax: +386 4 206 64 04 : [email protected] ANNUAL REPORT 2006 CONTACT PERSONS

214 R Index GRI R2 ,7 opeecmlac ihlw n euain 36,87-88,92, 93,94,99,103, compliance withlawsandregulations Complete PR 2,4,7,9 Reference GRI G3 .4-41 Saeodradcmuiyeggmn 14-15,3236,45,49,59,8788, Stakeholderandcommunityengagement 19,20-21, 32,39,92,93-94, 4.14 -4.17 Commitmentstoexternalinitiativesandco-operation 4.11 -4.13 N1 5Boiest 95,116,131 13,116,128-131 Emissions,Effluents,andWaste EN 16-25 Biodiversity EN 11-15 A1 2Tann n dcto 95,100-103,111,117,126, 132 76-77,99,101,109112,118 Diversityandequalopportunities LA 13-14 Trainingandeducation LA 10-12 . .3Mne n eotsoe12-13,2731,3536,53, 62-68, 20-23,3236,37,43,5560, Bodies,structure,governanceandmanagement 4.1 -4.10 Mannerandreportscope 3.1 -3.13 N8 0Wtr13,126,128,129 Water EN 8,10 . . rsnain tutr,kydt n wesi 6,7,12-13,1415,4950,6979, Presentation, structure,keydataandownership 2.1 -2.9 R4-5Nndsrmnto tepoig ih oeecs 99,102,111-112,115 99 Non-existenceofchildandforcedcompulsorylabour HR 6-7 Non-discriminationatemploying,righttoexercise HR 4-5 N3-7Eeg 13,76-77,126,127,128,132 126,130 Energy EN 3-7 Materials EN 1-2 C1-2Eooi au eeae,epoe opnain 12,38,43-45,6285,100103, Economicvaluegenerated,employeecompensation, EC 1-2 A6-9Ocptoa elhadsft 13,100-103,110,112, 113,115, 102,110,112,115 Occupationalhealthandsafety LA 6-9 /managementrelations Labour LA 4-5 O1 omnt n atcpto npbi oiydvlpet14 - Communityandparticipation inpublicpolicydevelopment SO 1,5 N2 rdcsadsrie 14-15,3839,76,87,88,92, Productsandservices EN 26 A mlyet13,60,68,86,107-110,112 Employment LA 1 R9Rsetn ihso nieospol 59,99,131 Respectingrightsofindigenouspeople HR 9 .0IpratAkoldeet n wrs14-15,36,100103,117119 ImportantAcknowledgementsandAwards 2.10 R5 usigcsoe aifcin38,59-60,69,71,88,93 Pursuing customersatisfaction PR 5 C6Prhsn oiyadlclsples 89-91 15,61,95-96,111,112,165 Purchasingpolicyandlocalsuppliers EC 6 Financialassistancereceivedfromgovernment EC 4 . e mat,rssadopruiiso utiaiiy32-36,3739,99,100103, 16-19,5560,99,102 Keyimpacts,risksandopportunitiesofsustainability 1.2 AbouttherelevanceofsustainabilitytoSavaand 1.1 ihascain n ntttos 95-96,89,100103,113,115, with associationsandinstitutions marketing communications) 117 -119,126,132 (customer healthandsafety, product andservicelabelling, Indicator Pages tutr ftecmay139-140 structure ofthecompany Social PerformanceIndicators Environmental PerformanceIndicators Labor Practices&DecentWorkIndicators Human RightsIndicators Economic PerformanceIndicators Governance StructuresandManagementSystems,CommitmentsEngagements Report Parameters Organisational Profile Strategy andAnalysis General Product andServiceResponsibility ytm n oiy87-88,89,92,93,95,97 systems andpolicy its strategy freedom ofassociationandcollectivebargaining oain n te omnt netet110-111,123125,134207 donations andothercommunityinvestment 116, 117-119,123125,130 116, 132 215 69 -79,8085,134174,175208, 168 107 -115,116,123125,126132, 117 -119,123125,131,131 -132 95 -96,99,100103,111113, 116, 117 -119,123125,126132 93 -94,9596,99,100103,116, 89 -91,93,99132 15, 19-21,8788,8991,92,93, 215 ANNUAL REPORT 2006 GRI INDEX 216 ANNUAL REPORT 2006 www.sava.si May 2007 Archive Andrej Muravec Fulvio Grisoni Ivan Draækiå Tomo Brejc Photography ÂukGraf Print Kreattiva Advertising,d.o.o. AD &Design Mark A.Valentine English proofreading Lea Meœek English translation Studio Kernel Sava, d.d. Text Vesna Muravec Sava, d.d. Editor Sava, d.d. Concept Sava, d.d. Publisher Annual Report2006 Sava, d.d.