ANNUAL REPORT 2010 VPD – Intra-Company Supplies VPV – Intra-Company Revenues Published By: © LESY Slovenskej Republiky, Š

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LESY Slovenskej republiky, š.p. Námestie SNP 8 220100 1 0 975 66 Banská Bystrica

Phone: +421 / 48 / 43 44 111 Fax: +421 / 48 / 43 44 191 E-mail: [email protected] LESYLESY Slovenskej republiky

www.lesy.sk š. p. Banská Bystrica List of Used Abbreviati ons (English translati on of abbreviated expressions)

FSC – Forest Stewardship Council – a scheme of worldwide recognized certi fi cati on to assess management in forests; an effi cient tool to monitor ti mber origin starti ng from ti mber harvesti ng through ti mber processing to the fi nal product HR – hydraulic arm HV – profi t or loss IS – informati on system LC – forest road LDM – Museum of Forestry and Wood Science and Technology LHP – forest management plan LKT – logging wheeled tractor LNCH – forest nature trail LS – forest authority MP SR – Ministry of Agriculture of the Slovak Republic NLC Zvolen – Nati onal Forest Centre Zvolen OLH – authorised forest manager OZ – branch PCV – work of universal interest PČ – silvicultural operati ons PEFC – Programme for the Endorsement of Forest Certi fi cati on Schemes – a leading and largest worldwide forest certi fi cati on programme which observes opinions of internati onal conferences and processes implemented worldwide in respect of sustainable forest management, sets a framework for mutual recogniti on of compati ble certi fi cati on schemes tailored to the types of forests, to individual and specifi c management of forests in the existi ng countries PK – Project Engineering Agency Žilina PN – direct costs PP – fi re-fi ghti ng SDV – centre for wood technology š. p. – state-controlled undertaking ŠL – nati onal forests ŠR – State budget TU Zvolen – Technical University in Zvolen TUOL – sustainable forest management ŤČ – logging operati ons VLM – important forest site ANNUAL REPORT 2010 VPD – intra-company supplies VPV – intra-company revenues Published by: © LESY Slovenskej republiky, š. p., Banská Bystrica, 2010 VS – intra-company consumpti on Prepared by: Ing. Vlasti mil Rezek, Ing. Ján Klinec ZB – torrent regulati on Translati on into English: doc. Ing. Hubert PALUŠ, PhD., PhDr. Slávka Janigová, PhD. ZLF – forest resources development – chapter: Finance, Ministry of Agriculture of the Slovak Republic Graphic design: BRATIA SABOVCI s.r.o., Zvolen DNM – Long-Term Intangible Assets Pre-press and printi ng : BRATIA SABOVCI s.r.o., Zvolen Illustrati on photographs: zamestnanci š. p. LESY SR DHM – Long-Term Property, Plant and Equipment Copies: 200 ks Text subject to no linguisti c revision.

Content

Foreword by Director General ...... 3 Basic informati on, scope of acti viti es and company profi le ...... 5 Company vision and mission ...... 5 Organisati onal structure ...... 6 Company top management ...... 9 Human resources management and educati on of employees ...... 11 Most important events in 2010 ...... 16 Financial and technical indicators of economy ...... 17 Forest land and reprivati sati on ...... 21 Forest producti on ...... 24 Forest protecti on ...... 26 Nature and landscape protecti on ...... 27 Timber trade ...... 29 Forest technique ...... 32 Forest nursery ...... 33 Forest biomass ...... 34 Game management ...... 35 Ecology and environmental policy ...... 36 Investment acti viti es ...... 37 Public relati ons ...... 38 Balance Sheet ...... 40 Profi t and LossAccount ...... 44 Notes to Financial Statements as of December 31, 2010 ...... 46 Report of Movementof non Curent Assets ...... 67 Cash Flow Statement ...... 68 Independent auditor´s report ...... 70 Supplement to the auditor´s report on the verifi cati on of the compliance of the Annual Report with the Financial Statements ...... 72 Progress Report by the Supervisory Board ...... 74 Managemen´s Commentary on the Company´s Financial Positi on and Future Expectati ons ...... 75 Let the main fi eld of our acti vity be planti ng and protecti ng the forests, because according to successes in this fi eld the progressive foresters could befound - these, we would like to stay.

From the principial speech of the ﬁ rst general director of the State forests and goods in Banska Bystrica - Jozef Opletal (1919).

2 Annual Report 2010

Foreword by Director General

Dear trade partners, dear colleagues, dear friends of forests,

Even in 2010, forestry was marked by the diminishing economic crisis, which signifi cantly infl uenced the enti re operati on of the state enterprise LESY of the Slovak Republic. On one hand, it was aff ected from the fi nancial point of view in terms of ti mber prices that in spite of a slight increase did not reach the 2008 level and on the other hand, mainly form the economic and moral point of viewpoint. For the enterprise LESY SR, the last year will remain recorded as the year of the record accidental felling or the year of three changes of top management in a short ti me period. In spite of this negati ve external infl uences the company was fi nancially stabilised. In additi on to meeti ng the monitored economic indicators in 2010 we have laid down the basis for setti ng the plans for 2011 so that we could return the money generated in economic acti viti es preferably back to the forest. Following the valid legislati on we allocated money to the guaranty fund that can be used in the following period for planti ng and further care for young forest stands at windthrown areas. I undertook the management of the enterprise in the half of the last year when the public perceived the company mainly through the causes. Therefore, one of the key tasks, apart from the eliminati on of ineff ecti ve overhead cost, was to increase decision making transparency in managing the company. This fi nally contributed to the increase of effi ciency and improvement of the year end economic results. For example, electronic procurement of goods and services brought a signifi cant savings. More than a quarter of expected cost of certain building investments was saved during the fi rsts tenders in October. This trend conti nued in December by launching the fi rst electronic ti mber aucti on, which pointed our diff erences in price list prices and real prices of ti mber at the market. Renti ng of all wood processing centres and in connecti on with the long-term ti mber delivery contracts was a substanti al decision of the previous top management in spring in the last year. Some the most disadvantageous contracts were changed on the basis of mutual agreement with the trading partners, which enabled the enterprise to avoid potenti al sancti ons. In spite of parti al changes these contracts signifi cantly limited available capaciti es in ti mber trade, which will become evident in the future if felling decreases. An extremely high share of accidental felling is an ongoing problem. In the last year, more than three fi ft hs out of nearly fi ve million cubic meters of harvested ti mber originated form accidental felling, which had a signifi cant infl uence on the average price. Another signifi cant problem is that secondary damages caused by bark insect have prevailed over the damages caused by wind or snow during the latest years. In certain cases, legislati on and objecti ons of environmental organisati ons prevent from eff ecti ve protecti on. Therefore, a long-term objecti ve of the enterprise is to manage forest stands that are less sensiti ve to damages. The state enterprise LESY Slovenskej republiky was established with the aim to manage correctly and sustainably forest property of the state and therefore its acti viti es do not cover only ti mber harvesti ng and accidental felling but also silviculture, to which we steadily put more cost in order to recover all skipped, the governance of small water streams, where we mainly carried our reconstructi ons of damages caused by fl oods and we will concentrate on fl ood-protecti on measures in 2011, as well as the care for other property serving to forestry operati ons – forest roads, buildings…. , which require signifi cant cost. Therefore, in the coming years, we have to cope with the redundant property not to be uselessly charged. I believe that the Annual Report 2010 will bring you a comprehensive overview on the acti viti es in the state enterprise LESY Slovenskej republiky and will convince you that the forests managed by us are in good hand of forestry professionals.

Ing. Igor Viszlai Director General of š. p. LESY SR

3 Annual Report 2010

4 Annual Report 2010

Basic informati on, scope of acti viti es and company proﬁ le

Business name: : LESY Slovenskej republiky, štátny podnik Seat : Námesti e SNP 8, 975 66 Banská Bystrica Legal form : state enterprise Date of establishment : 01. 07. 1999 Identi ﬁ cati on number : 36038351 VAT number : SK 2020087982 Registrati on: registered with the Trade Register of the District Court in Banská Bystrica on 29 October, 1999, Secti on Pš, registrati on number 155/S

The state enterprise LESY Slovenskej republiky, Banská Bystrica conti nues in rich and long-term forestry traditi ons in Slovakia. Based on the Decree of the Ministry of Agriculture the enterprise was established on July 1, 1999 by merging of the 6 former regional state forest enterprises. The main scope of acti viti es of the state enterprise LESY SR Banská Bystrica is to manage forests and other property in the ownership of the Slovak Republic. It provides a balanced fulfi lment of all functi ons of forests and a sustainable use of tangible and intangible products and services provided by the forests. The main objecti ve of the state enterprise LESY SR is to provide sustainable management of forests in the ownership of state and other forest owners so that an increased functi onality and maximal positi ve management eff ects can be achieved. The internati onal acknowledgement of these management acti viti es is the fact that the total forest area pres- ently managed by the Forest enterprises is PEFC or FSC certi fi ed. Thus LESY SR, state enterprise has became a leader in the process of forest certi fi cati on and gained a credible proof of the quality of work of foresters, which is needed for assuring the fulfi lment of forest functi ons for the whole society. From the viewpoint of market positi on, LESY SR managed 1,040,565 ha of forests in 2000. In 2010 this area decreased by 101,948 ha to 938,617 ha. The total forest area of the Slovak Republic is 2,008,257 ha out of which 46.73 % was managed by the state enterprise LESY SR in 2010. A share of LESY SR, š. p. on the relevant ti mber has steadily declined in connecti on with the decreasing area of managed forests. While in 2009 the total ti mber deliveries from ti mber producers in Slovakia were 9.25 m3, out of which LESY SR, š. p. delivered 4,771,160 m3 of ti mber, i.e. 51.58 %, in 2010 LESY SR, š. p. delivered 4,742,282 m3 of ti mber, i.e. less by 28,878 m3 compared to the previous year. Therefore, a slightly lower market share can be also expected.

Company vision and mission Company vision „Our vision is the sustainable development of the state forests, which will provide a balanced fulfi lment of the needs of society and opti mal valuati on of the state forest property.“ Company mission „Through our acti viti es we want to assure sustainable development of forest and to work for the benefi ts of the whole society, while respecti ng the principles of the protecti on of the environment, forestry traditi ons and long-term prosperity of the company.“ Mission of Code of Ethics Code of Ethics is a unifi ed standard of principles and benchmarks of behaviour of the state enterprise LESY SR and its employees; among the employees at internal level and in relati ons to the external environment – business partners, representati ves of the state and public administrati on, non-government organizati ons, stakeholders and all inhabitants of the Slovak Republic. It also states responsibiliti es towards all enti ti es regarding labour and business relati ons. At the present ti me, keeping the ethic rules is important for culti vati on of economy system and it is useful for the whole society.

5 Annual Report 2010

Organisati onal structure and company top management

Company bodies

LESY SR, š.p. had the following bodies in 2010:

¾ Director General • Ing. Igor Viszlai

¾ Supervisory Board • JUDr. Juraj Procházka – chairman • JUDr. Kamil Beresecký • JUDr. Milan Chovanec • Ing. Ján Malko, CSc. • Ing. Ľuboš Németh • Ing. Arpád Kavečanky • Ing. Jozef Spevár • Ing. Franti šek Suchanovský

Organisati onal structure

LESY SR state enterprise consists of the 26 Forest enterprises and 3 specialised enterprises:

N u m b e r Forest enterprises 26 + 3 Forest districts 147 Forest divisions 965 Forest management divisions 24 Timber yards 71 Specialised and other centres 27 Special purpose faciliti es 3

Forest enterprises

¾ Forest enterprises provide operati onal administrati on of the forest and other property aimed mainly at silvicultural acti viti es, forest protecti on and biological works of the whole-society signiﬁ cance, planned ti mber harvesti ng and uti lisati on of other forest products.

Specialised enterprises

¾ Enterprise of Forest Technique is oriented on the internal services mainly in the ﬁ eld of harvesti ng operati ons, ti mber transport and maintenance of forest technique. ¾ Semenoles provides services in the area of forest seed management and producti on of forest and ornamental trees. At the same ti me its mission is to maintain a gene pool of the forests in Slovakia. ¾ Biomass Enterprise provides processing of energy wood in order to produce and sell energy chips within the whole Slovak Republic..

6 Annual Report 2010

Organisati on structure of the LESY SR, š.p. enables a fl exible approach to the modifi cati on of number of organisati onal units at diff erent management levels.

Organisati onal structure of General directorate as of 31. 12. 2010

DIRECTOR GENERAL SECTION OF DIRECTOR GENERAL SUPERVISORY BOARD 001

SECRETARIAT DEFENCE AND PROTECTION DEPARTMENT

CONTROL TECHNICAL SAFETY DEPARTMENT AND FIRE PROTECTION DEPARTMENT DEPARTMENT OF EUROPEAN PROJECTS

ORGANISATIONAL DIRECTOR DEVELOPMENT AND TECHNICAL DIRECTOR ECONOMIC AND TRADE DIRECTOR ORGANISATIONAL SECTION ECONOMIC AND TRADE SECTION 100 DEVELOPMENT AND TECHNICAL SECTIO 300

SECRETARIAT SECRETARIAT SECRETARIAT

LEGISLATIVE DEPARTMNET OF DIRECTION DEPARTMETS OF FOREST OPERATIONS

DEPARTMENT OF PROCURE- HUMAN RESOURCE INVESTMENT MENT OF GOODS AND SERVICES AND INTERNAL MANAGEMENT DEPARTMENT DEPARTMENT ADMINISTRATION

DEPARTMENT OF INFORMA- DEP. OF LAND REGISTRER DEPARTMENT OF FOREST TION AND COMMUNICATION AND REPRIVATISATION POLICY AND CERTIFICATION TECHNOLOGIES

DEP. OF PROPETRY DEPARTMENT OF TRADE ADMINISTRATION AND AND LOGISTIC PROPERTY RELATIONS

CENTRE FOR PUBLIC RELATION, FORESTRY AND WOOD MUSEUM

7 Annual Report 2010

Organisati onal structure of Forest enterprises and specialised enterprises as of 31. 12. 2010

GENERAL DIRECTORATE

ENTERPRISE OF BIOMASS FOREST ENTERPRISE SEMENOLES FOREST TECHNIQUE ENTERPRISE

SECTION OF DIRECTOR SECTION OF DIRECTOR SECTION OF DIRECTOR SECTION OF DIRECTOR 100 100 100 100

SECTION OF FOREST PRODUCTION AND PRODUCTION AND PRODUCTION AND PRODUCTION TECHNIQUE SECTION TECHNIQUE SECTION ECONOMIC SECTION 200 200 200 300

ECONOMIC AND ECONOMIC AND ECONOMIC SECTION TRADE SECTION TRADE SECTION TRADE SECTION 300 400 300 300

TRADE SECTION 400

8 Annual Report 2010

Company top management

Ing. Igor Viszlai – Director General *1962, Brati slava

¾ Statutory body of enterprise appointed by the Minister of Agriculture of the SR, subordinate to the Minister ¾ directly manages three secti on directors and 29 directors of Forest enterprises and through them the enti re economic acti viti es of the enterprise ¾ manages acti viti es regarding the protecti on and defence, work health and safety and ﬁ re protecti on, control and European projects ¾ acts independently in accordance with the valid legislati on and internal guidelines and regulati ons of the Minister of Agriculture of the SR ¾ decides on principal and key issues and delegates part of his respon sibiliti es to the secti on directors and directors and Forest enterprises

Ing. Alojz Riško had worked in this positi on unti l July 16 and Ing. Igor Viszlai was commissioned to manage the enterprise from July 17 unti l October 16.

Mgr. Ján Kostrian – Organisati onal Director *1974, Žiar nad Hronom

¾ 1. statutory deputy of Director general ¾ runs, coordinates and methodically directs organisati onal secti on ¾ administrates all materials regarding internal organisati onal structure, principles and system of management ¾ coordinates and directs acti viti es of human resource management department, creates conditi ons for acti viti es of legal service and is responsible for its eﬃ ciency ¾ directs provision of the state of land tenure and disposal of managed state forest property ¾ cooperates with other secti ons of enterprise, directs Forest enterprises, cooperates with the founder and external bodies

Ing. Ľubomír Veselý had worked in this positi on unti l July 19 and was commissioned to manage the organisati onal secti on from July 20 – July 29 and Mgr. Ján Kosti ar was commissioned to manage the organisati onal secti on from July 30 unti l November 8..

9 Annual Report 2010

Ing. Ján Švančara – Development and Technical Director *1952, Dobrá, okr. Trenčín ¾ 2. statutory deputy of Director general ¾ coordinates and methodically directs forest operati ons and organisati on of management of forest operati ons in enterprise ¾ in accordance with the enterprise development he elaborates development strategies and concepti ons, manages technical development and investment acti viti es ¾ cooperates with the municipal and state administrati on bodies, Nati onal Forest Centre - ÚHUL, forest management plan elaborators and other insti tuti ons

Mgr. Peter Morong had worked in this positi on unti l July 19 and Ing. Ján Švančara was commissioned to manage the development and technical secti on from July 20 unti l November 8..

Ing. Ľuboš Németh – Economic and Trade Director *1962, Vráble ¾ runs, coordinates and methodically directs the areas of economics, fi nances, taxes, prices, allowances, accounti ng, informati on system and the use of informati on technology, internal administrati on ¾ in accordance with the enterprise development he organises elaborati on of enterprise concepti on within the economic secti on ¾ negoti ates with the founder, bank insti tuti ons, relevant tax offi ces with the aim to fulfi l legislati ve requirements as well as to create opti mal conditi ons for the existence and development of the enterprise in economic area ¾ manages areas of ti mber and other commoditi es trade in the state enterprise ¾ manages and provides sales of production of the state enterprise to the key domesti c buyers and foreign buyers ¾ manages marketi ng in the areas of market research, concepti on of trade acti viti es, monitoring of competi tors, price survey, planning, promoti on and adverti sement ¾ methodically manages, directs and controls trade acti viti es of subordinate components

Ing. Vladimír Rigász had worked in the positi on of the Economic and Trade Director unti l July 19 and Ľuboš Németh commissioned to manage the economic and trade secti on from July 20 unti l November 8

10 Annual Report 2010

Human resources and educati on of employees

Human resources

Within the strategic management of human resources LESY SR, š.p. pays an appropriate att enti on to care of employees and their professional and personal development. Through professional management we try to release and develop the inventi ve and working potenti al of employees in order to achieve company’s objecti ves. Personal strategy of the enterprise clearly declares the importance of employees for meeti ng the strategic objecti ves. This is done with the help of company’s culture supported by the Code of Ethics, which was approved in 2005 and is valid for all employees. In the frame of constructi ve collaborati on a collecti ve labour agreement has been signed with the social partner for the period of one year, bringing changes to wages as a compromise between the requirements of the employees and the possibiliti es of the employer. Salaries, possibility of professional growth and the support to social acti viti es are the supporti ng pillars for the sati sfacti on of employees. Under the changing market, environmental and unfavourable economic conditi ons it is inevitable for the state enterprise LESY SR to maintain quality and educated human potenti al, which is able to work eff ecti vely. Considering our possibiliti es we make eff orts to provide appropriate working conditi ons for professional and personal growth of employees including the social benefi ts. Thanks to these acti viti es we are maintaining a positi on of a responsible employer within the Slovak forestry environment in spite of negati ve eff ects of the global fi nancial crisis.

Average adjusted number of employees in 2010 Technical and managerial staﬀ 2 443 Workers 1 181 Total 3 624

Physical number of employees in 2010 Technical and managerial staﬀ 2 448 Workers 1 207 Total 3 655

Number of technical and managerial staﬀ as of 31.12.2010 Central oﬃ ces of Forest enterprises 573 Forest districts 1 577 Specialised forest enterprises 119 General directorate and centres 115 Total 2 384

11 Annual Report 2010

Development of total number of employees in š.p. LESY SR

15 000

10 000

5 000

0 2001 2002 2003 2004 2005 2006 2007 manag + workers 2008 2009 2010

manag + workers

Educati on structure oft echnical and managerial staﬀ in 2010

Vocational 1%

University 43%

College 56%

12 Annual Report 2010

Age structure of technical and managerial staﬀ in 2010

over 60 years to 30 years 5% 11%

51-60 years 29% 31-40 years 23%

41-50 years 32%

Gender structure of technical and managerial staﬀ in 2010

Women 17 %

Men 83 %

13 Annual Report 2010

Educati on of employees

The quality of human potenti al represents an important competi ti ve advantage that cannot be achieved without investments in skills and knowledge of people. Insuﬃ cient qualiﬁ cati on and skills of own employees can threaten the future, prosperity and growth of the organisati on. To posses inventi ve working potenti al with professional specialisati on in the improvement of professional skills and to reach permanent changes in skills and atti tudes, which support and increase output of employees, is the philosophy of educati onal process following the strategy of our enterprise.

Educati onal acti viti es

Due to the limited fi nancial sources designated for educati on of the employees, the employer concentrated on the use of fi nancial means from the EU sources – Rural Development Programme of the Slovak Republic 2007 – 2013. Vocati onal educati on - att enti on has been paid to the specialised vocati onal educati on of employees aimed at the performance of selected professions of the personnel of Forest enterprises and forest districts, periodic educati on for holders of forest manager certi fi cates in accordance with the provisions of the Act on Forests, and training in specialised modules of the informati on system IS KRPR – measurement of trees using specimen method - for the target group of foresters, technical staff and forest districts managers. Vocati onal training for the users of WebLES informati on system was carried out covering the areas of managing silviculture acti viti es, harvesti ng and producti on process, palnning and record keeping in forestry acti viti es. A training aimed at uti lisati on of wood material and marketi ng management was also carried out in 2010. Basic managerial educati on – development training program for top management, traders, economists and technicians. The objecti ve of basic managerial – communicati on course for this target group was to increase competi ti veness and adaptability of employees of the state enterprise LESY SR, š.p. Educati on was provided by the Nati onal Forest Centre Zvolen – Insti tute for Forest Consulti ng and Educati on and selected educati onal companies. Language educati on – training program aimed at language skills for beginners and intermediate in English and German was carried out. Apart from above menti oned educati onal acti viti es, LESY SR, š. p. supports the individual improvement of its employees qualifi cati on by the form of external study.

HEALTH AND SAFETY AT WORK

Responsibiliti es of employer towards employees in the area of health and safety at work include mainly care for employees, their working environment, health in connecti on to work, protecti on from the infl uence of unfavourable factors, etc. The relocati on of producti on operati ons to the external environment has signifi cantly decreased the number of employees mainly in risky professions –harvesti ng and other operati ons, which had a signifi cant infl uence on the stati sti c data in the area of accidents development. Compared to 2009, there was a decrease by 5 serious accidents recorded as well as decrease of all registered accidents. None of the accidents recorded by contractors was caused or parti ally caused by LESY SR, š.p.

14 Annual Report 2010

Overview of number of accidents at the workplaces of LESY SR, š.p. in 2010:

Serious Dangerous Total Recorded Registered Serious with fatal incidents consequences Lesy SR, š.p. 62 18 28 14 2 Contractors/* 13 11 2 Self-producti on 1 1 Other 3 /* - reported accidents and accidents foud out by LESY SR, š. p. staﬀ

The cost of care of health and safety of employees and working environment showed more favourable trend in 2010 as illustrated by the following overview:

- improvement of working conditi ons – 418,000 € - recovery stays – 53,917 € - health and medical care – 104,000 € - revisions – 99,506 € - new technologies – 747,000 €

SUSTAINABLE DEVELOPMENT OF FOREST RESOURCES

The strategic objecti ve of the state enterprise LESY SR is to provide sustainable management of forests in the ownership of state and other forest owners so that an increased functi onality and maximal positi ve management eff ects can be achieved while keeping all the principles of sustainable development. The objecti ve of sustainable forest management is not only sustainable ti mber producti on but a broaden understanding of forest value in compliance with the EU forestry strategy and the EU Acti on Plan for Forests. In this sense the concepti on aims and the objecti ves of enterprise policy of sustainable forest management is mainly oriented on: • maintenance and increment of the existi ng forest area and opti misati on of standing volume to the level, which is required with regard to the economic, ecological and social forest functi ons, • improvement of health of forests and reducti on of risks of damages, • sustainability and balance of supply of wood and non-wood forest products, always as a part of environ mental forest functi on, • support to biological diversity of forest ecosystems and maintenance of nati ve forest stands, • support to soil and water protecti on functi ons of forests, • acti ve cooperati on in development of mountain and sub-mountain regions. Assessment of the quality of sustainable forest management against requirements of certi fi cati on schemes is carried out by independent certi fi cati on bodies. Forest enterprises Trenčín and Prešov, managing 80,688 ha of forests, are holders of FSC certi fi cates. The total area of FSC certi fi ed forests in Slovakia is 144,870 ha. The total area of forests managed by the state enterprise LESY SR, i.e. 945,944 ha in all 26 Forest enterprises, is PEFC certi fi ed. PEFC certi fi cati on is based on regional principle, where LESY SR represents the interests of other forest owners who opted for the verifi cati on of quality of sustainable forest management. Based on the results of initi al certi fi cati on audit in 2010 LESY SR, š.p. issued sustainable forestry certi fi cate confi rmati on to 1 new forest owner.

The total area of PEFC certi fi ed forests in the Slovak Republic is 1,262,505 ha represented by 131 forest owners and managers who are holders of 296 confi rmati ons on parti cipati on in forest certi fi cati on.

15 Annual Report 2010

Most important events in 2010

- The members of peti ti on committ ee People for Forests submitt ed to the Prime minister and the Minister January of agriculture of the SR a legislati ve proposal of the act on state enterprise LESY of the Slovak Republic and submitt ed peti ti on sheets with almost 17,000 signatures to the Parliament. - Ceremonial opening of the expositi on in Forestry and wood museum in Zvolen “Wood Studies XI. – February wooden accessories in fl ats” - LESY SR š.p. parti cipated in the Word expositi on on development of game management within the 11th March Internati onal forestry and hunti ng fair Silva regina in Brno - Forest enterprise Levice organised the 15th year of Levické poľovnícke dni - Parti cipati on of state enterprise at the conference “Quo vadis forestry, perspecti ves to the future” April - April 22 – May 1, - the 4th year of the Forestry days took place with the acti ve inputs from individual forest enterprises of LESY SR, š.p. (walks, presentati ons of forestry operati ons, experience learning with forest pedagogues) - Ceremonial opening of the season in Forestry open air museum - First this year’s issue of Lesník – magazine for the employees of LESY SR, š.p. was issued May - Forestry and wood museum organised an informati on seminar with internati onal parti cipati on Wood and its possibiliti es in improving way of life and environment of rural sett lements - An extra Polish-Slovak issue of magazine Lesník REW-BE-LAS with the aim to promote interregional project of Beskydy forest revitalisati on June - For the 6th ti me, Forest enterprise Slovenská Ľupča organised practi cal knowledge contest Naj horár - Forest enterprise Kriváň celebrated the 85. anniversary of its establishment - On July 9, there was a new board of Special forestry site installed at Forest district Kyslinky - On July 10, Day of tree – festi val of all foresters took place in the Forestry open air museum for the 9th ti me July - On July 16, the Minister of agriculture of the SR Zsolt Simon commissioned Ing. Igor Viszlai by the positi on of the Director General of the state enterprise LESY SR. - Zlatý kosák, the best award in the category of animal producti on at the 37th exhibiti on Agrokomplex in Nitra, August was awarded to the Muran Norik horse from horse breeding farm of Forest enterprise Revúca of LESY SR, š.p. - Introducti on of the 26th Special Forestry Site „Rudolf Geschwind” in Krupina September - Launch of the “Children Forestry University” project co-organised also by LESY SR, š.p. - Opening of the 1. internati onal Slovak-Polish forestry educati onal path Udava – Solinka - Meeti ng at the occasion of the 10th anniversary of magazine Lesník, including awarding appreciati on certi fi cates to those who deserved for its creati on and publishing - An expositi on „Jeleňovité sveta“ was opened in the mansion of Forest enterprise Palárikovo - On October 15, the Minister of agriculture of the SR appointed Ing. Igor Viszlai to the positi on of the Direc- October tor General of the state enterprise LESY SR with eff ect from October 17, 2010. - Parti cipati on of the enterprise representati ve on the 5. European congress of forestry pedagogic in Lahti - On October 28, on the occasion of the 60th anniversary of the establishment of tree breeding at Muráň, Forest enterprise Revúca organised a seminar including horse evaluati on - The piety act at the symbolic forestry cemetery to the honour of foresters - On November 25, Technical university in Zvolen organised an internati onal scienti fi c conference November Financovanie LESY – DREVO, where the Director General Ing. I. Viszlai presented his paper - Launch of electronic ti mber aucti ons in the state enterprise LESY SR as a serious and transparent method December of ti mber sale

16 Annual Report 2010

Financial and technical indicators of economy

Selected economic indicators in 2008-2010 LESY SR, š.p. Banská Bystrica

Actual value Annual change No. Indicator Unit. 2008 2009 2010 2009-2008 2010-2009

1. Forest regenerati on ha 8 520 8 131 9 187 -389 +1 056 2. out of which natural regenerati on ha 3 853 4 450 4 986 +597 +536 3. Clearing ha 14 902 3 748 11 074 -11 154 +7 326 4. Direct costs of silviculture operati ons ti s. € 22 364,87 15 234,02 23 691,37 -7 130,85 +8 457,35 5. out of which: creati on of reserve ti s. € 3 740,46 4 176,38 9 400,85 +435,92 +5 224,47 6. clearing down reserve ti s. € 13 624,41 3 740,46 3 801,91 -9 883,95 +61,45 Direct costs of silviculture operati ons 7. ti s. € 32 248,82 14 798,09 18 092,43 -17 450,73 +3 294,34 without the inﬂ uence of reserves 8. Direct costs of harvesti ng operati ons ti s. € 120 047,27 105 377,44 112 931,15 -14 669,83 +7 553,71 Direct costs of harvesti ng operati ons 9. €/m3 25,90 22,58 23,34 -3,32 +0,76 per m3 10. Overhead cost ti s. € 72 436,96 58 870 64 333 -13 566,73 +5 462,73 11. Thinning up to 50 years ha 13 041 11 332 11 803 -1 709 +471 Timber harvesti ng without self 12. m3 4 718 548 4 945 973 4 971 073 +227 425 +25 100 producti on 13. coniferous m3 2 938 138 3 124 835 2 905 456 +186 697 -219 379 14. non-coniferous m3 1 780 410 1 821 138 2 065 617 +40 728 +244 479 15. out of which windthrown ti mber m3 2 933 795 2 915 367 3 007 358 -18 428 +91 991 16. Total ti mber supplies m3 4 438 544 4 771 160 4 742 282 +332 616 -28 878 17. out of which coniferous m3 2 731 675 3 042 629 2 806 042 +310 954 -236 587 18. non- coniferous m3 1 706 869 1 728 531 1 936 240 +21 662 +207 709 19. Total ti mber export m3 101 673 271 034 215 732 +169 361 -55 302 20. out of which coniferous m3 74 822 229 270 145 204 +154 448 -84 066 21. non-coniferous m3 26 851 41 764 70 528 +14 913 +28 764 22. Total ti mber revenues ti s. € 201 914,06 172 555,48 196 117,24 -29 358,58 +23 561,76 Average ti mber price (coniferous + 23. €/m3 45,49 36,17 41,36 -9,33 +5,19 non-coniferous) 24. Average ti mber price - coniferous €/m3 44,86 35,34 42,46 -9,53 +7,12 25. Average ti mber price – non-coniferous €/m3 46,49 37,63 39,75 -8,87 +2,12 26. Shakeholder’s equity ti s. € +7 262,10 +322,07 +1 709,43 -6 940,03 +1 387,36 27. Average number of employees persons 4 559 3 995 3 624 -564 -371 28. out of which workers persons 1 744 1 438 1 181 -306 -257 29. technical and managerial staﬀ persons 2 815 2 558 2 443 -257 -115 30. Labour producti vity from added value € 15 962,19 19 335,64 22 912,53 +3 373,45 +3 576,89

17 Annual Report 2010

Timber harvesti ng, incl. self-producti on and standing ti mber sale

2002 2003 2004 2005 2006 2007 2008 2009 2010 Harvesti ng total (m³) 3 381 239 3 476 117 3 705 365 4 459 457 3 996 269 4 718 548 4 718 548 4 945 973 4 971 073 Accidental felling(m³) 994 274 1 169 778 1 307 455 2 596 809 1 858 370 2 275 048 2 993 795 2 915 367 3 007 358 Coniferous 1 482 111 1 527 639 1 804 137 2 594 377 2 202 276 2 938 140 2 938 138 3 124 836 2 905 456 Non-coniferous 1 899 128 1 948 478 1 901 228 1 865 080 1 793 993 1 780 408 1 780 410 1 821 137 2 065 617

Timberġažba drevharvesa ti ng 6 000 000

5 000 000 8 4 000 000 0 40 0 410 821 137 8 8 065 617 1 2 1 7 1 7 993 865 080 3 3 3 1 9 m 3 000 000 8 2 919 5 367 2 933 795 3 007 358 1 7

12 2 596 809

1 901 228 2 275 048 899 6 1 948 478 1

2 000 000 0 8 1 858 370 6 14 13 6 8 8

7 1 307 455 3 3 124 83 1 9 9

1 169 778 3 2 2 1 000 000 2 905 45

994 274 2 594 377 2 11 2 202 27 8 1 804 13 1 527 639 1 4 0 2002 2003 2004 2005 2006 2007 2008 2009 2010

Coniferousihliþnaté Non-coniferouslistnaté spracovanáAccidental kalamita felling (m³ (m)3)

Timber deliveries m3

2002 2003 2004 2005 2006 2007 2008 2009 2010 Coniferous 1 431 537 1 473 107 1 636 731 2 456 783 1 960 690 2 284 867 2 731 675 3 042 629 2 806 042 Non-coniferous 1 877 051 1 878 138 1 832 493 1 734 011 1 619 020 1 626 910 1 706 869 1 728 531 1 936 240 Export out of total 667 542 348 667 339 566 352 728 163 499 58 255 101 673 271 034 215 732 deliveries (m³) Export out of total 20 1010851265 deliveries (%)

18 Annual Report 2010

TimberDodávk deliveriesy dreva

6 000 000

5 000 000 0 9 6 4 000 000 1 8 1 0 728 531 4 936 24 1 3 3 3 1 1 020 1 706 m3

3 000 000 38 7 9 1 1 1 626 910 8 61 7 9 1 832 49 2 8 5

3 2 000 000 1 1 1 877 05 67 8 7 7 4 042 62 8 806 04

1 000 000 667 542 731 67 3

348 667 339 566 2 1 352 728 2 2 2 456 78

2 101 673 271 034

6 163 499 58 255

473 107 4 2115 732 1 960 690 1 636 731 1 4 0 1 431 537 2002 2003 2004 2005 2006 2007 2008 2009 2010

Coniferousihliþnaté Non-coniferouslistnaté Accidentalexport z celkov fellingých (m dodávok3) (m³)

Timber revenues and average ti mber price

2002 2003 2004 2005 2006 2007 2008 2009 2010 Timber revenues (mil.€) 141,74 138,25 153,72 185,45 173,84 205,60 201,92 172,55 196,12 Ø ti mber price (€) 45,34 43,60 44,31 44,25 48,56 52,56 45,49 36,17 41,36 Ø coniferous timber price (€) 56,03 51,19 48,00 45,48 49,69 54,02 44,86 35,34 42,46 Ø non-coniferous timber price (€) 37,94 38,11 40,99 42,49 47,20 50,51 46,49 37,63 39,75

Tržby za drevo a priemerné speĖaženie dreva Timber revenues and average ti mber price 60 92 9 ,6 2 05 1 , 2 201, 5 5,45 2 96 74 ,7 18 1 , 3 72,5 173,84 ,25 41 1 8 15 1 13

45,3445,34 52,56 443,60 48,5648,56 45,49 444,31, 44,25 36,1736,17 41,3641,36 2 9 1 0 9 8 5 9 1 3 1 69 00 2 , ,5 99 , 6 94 ,7 , ,4 4,0 , , 0 9 7, 5,4 4,86 2,46 56,03 5 8,1 7 7 51 5,34 5 4 48, 4 46,4 4 4 4 39 40 42 3 3 3 3

2002 2003 2004 2005 2006 2007 2008 2009 2010

Tržby Timbery revenues za drevo (mil. €) (mil.€)( ) ØØ coniferousspep Ėaže ti mbernie price ihli (€)þnaté (€)( ØØ non-coniferousspep Ėaženie ti mber listnaté price (€) (€)( ØØ tispe mberĖ priceaž en(€) ie dreva(€)

19 Annual Report 2010

Forest regenerati on

2002 2003 2004 2005 2006 2007 2008 2009 2010 forest regenerati on (ha) 7 782 7 697 7 703 6 962 7 729 7 629 8 520 8 131 9 187 out of which natural (ha) 2 355 2 866 3 307 2 671 3 530 3 367 3 853 4 450 4 986 share of natural regenerati on on total 30% 37% 43% 38% 46% 44% 45% 55% 54% regenerati on

Forest regenerati on 55% 54% 46% 43% 44% 45%4 38% 37%

30% 2 9 3 9 9 187 8 520 8 8 131 7 7 72 7 70 7 62 6 962 7 697 6 3 98 7 5 450 4 8 1 4

367 30 3 3 530 3 3 67 355 2 866 2 2

20022003 20042005 2006 20072008 2009 2010

obForestnova regenera lesati on(h (ha)a) ofz to theho natural priro dregenerazená obti novaon (ha) sharepodie ofl priro naturaldzenej regenera obnovyti on of z the ce lktotalovej recovery obnovy

Labour producti vity from added value

2002 2003 2004 2005 2006 2007 2008 2009 2010 Labour producti vity from added value (€) 8 840 9 711 13 914 15 981 17 634 20 047 15 962 19 336 22 913 Number of employees 11 667 9 462 6 635 5 470 4 678 4 613 4 559 3 995 3 624

11 667 Labour producti vity from added value 4

9 462 1 8 4 91 5 9 17 63 1 8 1 6 6355 13 1 6 71 2 86 9

5 4700 2

4 6788 4 6136 3 4 5599 9 33 3 995955 1 33624 6244 840 0 047 8 15 962 2

20022003 20042005 2006 20072008 2009 2010

Labourproduktivita produc tipráce vity from z pridane added valuej hodnot (€) y (€) Numberpoþet pracovn of employeesíkov

20 Annual Report 2010

Forest land and reprivati sati on

Since the beginning of reprivati sati on process, some 849,187 ha of forest land were returned to the former owners. Out of this number 161,178 ha were returned to private forest owners, 439,366 ha to cooperati ves, 176,721 ha to municipaliti es, 68,331 ha to the church and sensual communiti es and 3,591 ha to other owners. On the basis of agreements, there were 6,865 ha forests physically returned in 2010. Out of the total 849,187 ha of returned forests, LESY SR is renti ng 29,338 ha and 819,849 ha are managed by their own owners.

As of 31.12.2010 LESY SR, š.p. managed totally 938,617 ha of forests, out of which 704,669 ha on the basis of governance, 29,338 ha were rented and 204,610 ha were managed on the basis of the Law on the land.

Out of the total area of non-state and not returned forests (204,610 ha) some 38,780 requests covering the area of 89,739 ha were considered. Due to diff erent objecti ve reasons (small ownership proporti ons, area of unknown owners over 50 % in the common area, insuffi cient documentati on, unmarked boundaries, unwillingness of owners to create an associati on) it was not possible to return physically this land. The area of 89,739 ha of forest land includes also the area of 13,892 ha of forests not physically returned but rented on the basis of contracts concluded by our organisati on. 114,301 ha in the ownership of non-state enti ti es, who did not required land returning, comprise unknown owners or those who are registered in the Cadastre register, however, it is not possible to determine real owners as the area of forests cannot be specifi ed due to ongoing inheritance procedures or incorrect residence numbers etc. Out of the area of governed land (704,669 ha) the Slovak Republic owns 673,659 ha, some 20,438 ha is disputable and some 10,572 ha are rented to other organisati ons (TU Zvolen, Forestry College Banská Šti avnica, Forestry College Prešov, Municipality of Dobšiná).

Actual state as of 31.12.2010 Expected I. Overview of managed forest land state r. number of as of area (ha) enti ti es 31.12. 2011 a b 123 Total forest area r. 1 = r. (2+7) 1 x 938617 921538 SR ownership - total r. 2 = r. (3+6) 2 x 704669 690436 a) state r. 3 = (4+5) 3 x 684231 672307 managed 4 x 673659 661728 out of which out of which rented 5 x 10572 10579 b) disputable 6 x 20438 18129 Non-state - total r. 7 = r. (8+9+15) 7 40812 233948 231102 rented from non-state enti ti es with returned 8 1463 29338 30335 forests

in the ownership of non-state forests with 9 39349 90309 93223 request for returning- total r. 7 = r. (8 to 12)

out of a) private 10 38330 76821 77647 Which out of b) collecti ve ownership 11 497 9221 10993 Which c) municipal 12 112 1110 1657 d) church 13 362 2669 2438 e) other 14 28 488 488 in ownership of non-state forests that has not 15 x 114301 107544 requested land returning

21 Annual Report 2010

Overview of returned and rented forests in ha since the beginning of reprivati sati on process ti ll 31.12.2010

1. Organisati on: Lesy SR, š.p. Banská Bystrica Private owners Associati ons Returned Returned Out of which Out of which Not Not returned Total Individu- Rented returned Total Individu- Rented ally man- by state ally man- by state aged forests aged forests 172 590 161 178 153 216 7 962 17 235 439 366 421 721 17 645

Municipaliti es Church and sensual associati ons Returned Returned Out of which Out of which Not Not returned Total Individu- Rented returned Total Individu- Rented ally man- by state ally man- by state aged forests aged forests 1 692 176 721 174 146 2 575 4 248 68 331 67 180 1 151

Other owners Total Returned Returned Managed by Total forest Out of which Out of which State forests state forests Not Not area 22+25+26 returned Total Individu- Rented returned Total Individu- Rented ally man- by state ally man- by state aged forests aged forests 8 845 3 591 3 586 5 204 610 849 187 819 849 29 338 704 669 938 617 1 758 466

Overview of management of forest land as of 31.12.2010

Type of use governance rent Law on the land Area of managed agreement forest land in ha ownership let to other according to according to disputable of the SR enti ti es from other From § 5 § 22 enti ti es SLF 12345678 938 617 673 659 20 438 10 572 29 338 0 31 513 173 097 704 669 204 610

22 Annual Report 2010

Applicati ons for returning forest land

Total since the begin- I. Indicator Unit ning of reprivati sa- r. ti on process abc1 Applicati ons for returning ownership and usage rights to number 1 99 105 forest land ha 2 939 496 number 3 93 501 out of which private forest owners ha 4 264 421 Positi vely considered number 5 59756 - physically returned forest land ( r. 1 and 2) ha 6 849187 private forest owners r.7≥ r.(9+11) number 7 55 306 r. 8≥ r.(10 +12) ha 8 161 178

applicati ons according number 9 3 126 § 6 a § 9 of the law No. 229/91 out of ha 10 55 747 which ( z r.7 a 8) number 11 23 v tom applicati ons according § 3of the law No. 503 žiadosti ha 12 525 (z r. 5 a 6) number 13 3 393 collecti ve ownership ha 14 439 366 number 15 416 municipaliti esí ha 16 176 721 number 17 600 church ha 18 68 331 number 19 41 other owners ha 20 3 591 Positi vely considered – physically not returned forest land number 21 38 780 managed by state forestry administrati on on contractual basis ( r. 1 and 2) ha 22 89 739 number 23 98536 Applicati ons positi vely considered – total ha 24 938926 Applicati ons negati vely considered – number 25 569 physically not returned forest land ha 26 570

23 Annual Report 2010

Forest producti on

Forest producti on and benefi ts derived from forest stands have been studied for a long ti me and so far they have not become a completely assessed value of forests. During the enti re history of mankind, forests have served not only as a shelter but as a conti nuously renewable source of all functi ons, starti ng from the producti on of wood and oxygen to the fulfi lment of other human needs (recreati on, rest, relax, as well as hunti ng, tourism, etc.). Sustainable fulfi lment of all forest functi ons is the basic requirement for forest management. A long ti me ago man has already realised that unlimited and uncoordinated exploitati on claims, connected mainly to the producti on functi on of forests, can be accepted only to a certain extent. Diff erent principles, regulati ons and legislati on have gradually been created to guarantee the fulfi lment of human needs to the extent, which would not be at the expense of sustainable fulfi lment of all forest functi ons. Timber harvesti ng is the most discussed and many ti mes negati vely considered producti on functi on of the forests. Everything in nature as well as in the forests once originates and, aft er a certain ti me, terminates to create space for new life, new forest. This process cannot be returned. Man has only two possibiliti es how to behave in relati on to the forest. First one, very simple one, is to leave forest as it is and allow natural powers and self regulati ve ability of nature not to use producti on functi on and thus not to manage the forests. Other possibility is to carry out wisely, and on the basis of proved and legislati vely covered principles of sustainability, management acti viti es in a way that raw wood material is uti lised before its natural destructi on, while other whole-society functi ons of forests are conti nuously fulfi lled. Forestry with more than 300 years history, experiences, results as well as the state of the forests, guarantees that uti lisati on of all forest functi ons is correctly set. It is the matt er of the whole society how it is able to assess the professional acti viti es of foresters and devote resources to maintain and improve forests in Slovakia. The state enterprise LESY SR has given and sti ll gives the guarantee for sustainable forest management in the sense of valid legislati on and the respect for the principles of nature protecti on acknowledged in the EU countries.

Silviculture

In the previous year, silviculture operati ons cost 18,092 thousand €, which was more by 3,294 € compared to the year ago. This resulted in increase of the scope of most of the operati ons that could be carried out in an extent needed for ensuring favourable qualitati ve development of young forest stands. Even if all task in cleaning harvested sites were not fulfi lled, a suffi cient area was prepared to carry our regenerati on. At the same ti me, the scheduled tasks in forest protecti on were not met as a result of suppressed development of bark insect due to unfavourable weather conditi ons, so that the intensity of protecti on measures could be reduced. The enterprise applied various rati onalisati on measures that lowered the average cost mainly in forest regenerati on and clearings. As a result of more eff ecti ve use of shelterwood system and its modest forms, natural regenerati on reached 54% and started to dominate. Arti fi cial regenerati on, even though it is used mainly at large scale windthrown areas, showed a declining trend in number of repeated planti ng (4% on total regenerati on). The use of container plants is also increasing. The possibiliti es to prolong the period for forest regenerati on started to be used more consistently, which created preconditi ons for the increase of natural regenerati on even on windthrown areas.

Acti vity unit 2006 2007 2008 2009 2010 Balanced unstocked area ha 7406 8052 9772 10102 12524 Total forest regenerati on ha 7729 7619 8520 8131 9187 out of which arti ﬁ cial ha 4199 4263 4667 3681 4201 natural regenerati on ha 3530 3356 3853 4450 4986

In accordance with the enterprise concepti on for nature close forest management there have been acti viti es carried out aiming at its practi cal applicati on within LESY SR, š.p. There were 46 additi onal localiti es pronounced to be Pro Silva sites. So far there has already been 200 sites established on the area of 45,500 ha. Their management is carried out in compliance with the special projects.

24 Annual Report 2010

Harvesti ng operati ons

The annual harvesti ng plan was built on the basis of balanced tasks following the provisions of forest management plans and adopted to the prior processing of accidental felling in Slovakia. The scheduled harvested volume was 4,034 thousand m3, however this was exceeded by 23.23% to 4,971 thousand m3 in 2010. Provisions of the state forest administrati on aff ected the fulfi lment of planned values by disturbing ti me schedule of tending and regenerati on felling in relati ons with accidental felling as well as unsolved property rights in the category of state not yet returned forests. The annual harvesti ng plan was met to 102.24%, when the plan of coniferous felling was over fulfi lled by 80,322 m3 and non-coniferous felling by 28,368 m3. The coniferous felling was over fulfi lled due to the immediate harvesti ng of damaged spruce forests. Felling increased by 0.5% compared to 2009.

Diﬀ erence Reality in Diﬀ erence real. - plan previous year real. – No. Indicator Unit Plan Reality previous year

ab c23456 1. Total felling m3 4 862 383 4 971 073 108 690 4 945 972 25 101 2. Out of which coniferous m3 2 825 134 2 905 456 80 322 3 124 835 -219 379 3. non-coniferous m3 2 037 249 2 065 617 28 368 1 821 137 244 480 4. Total thinning ha 23 955 20 737 -3 218 21 982 -1 245 5. Thinning up to 50 years ha 11 838 11 803 -35 11 332 471 6. Timber extracti on m3 4 750 968 4 834 135 83 167 4 663 505 170 630 7. Timber transport m3 3 924 590 3 813 043 -111 547 3 755 368 57 675

25 Annual Report 2010

Forest protecti on

The effi ciency of measures adopted during the previous years in the fi eld of forest protecti on parti ally determinates the increase in protecti on for the coming periods. Timing, complexity and opti mal use of generally proven rules in eliminati on of forest pests are the basic preconditi ons for successful handling of the problems regarding the removal of windthrown ti mber. An invasion of bark insect is an accompanying feature of each unprocessed or late processed and untreated calamity in spruce forest stands. Even if originated from a negligible forest damage, unlimited gradati on of insect can att ack and damage signifi cant areas of spruce stands and in a short ti me period (1 to 2 vegetati on periods) this issue cannot be solved by using the traditi onal ways of forest protecti on. The development trends of individual pests can be seen from annual summaries. The most important obser- vati on is that the volume of bark beetle damaged wood has exceeded the spontaneous calamity and dominated in the total volume of processed calamity during the last years. Thus the well known fact can be proved, that any hesitati on in processing spontaneous calamity, regardless the reason of its origin, is followed by the gradati on of bark pests in such an extent that cannot be handled by common practi ces.

Monitoring of traps provides a signiﬁ cantly documented overview of the development of bark beetles during the monitored period. Because of a decreasing number of trapping since 2009 it can be presumed that if protecti on measures are used constantly it is possible to keep bark insect outbreak under control.

IT - Ips typographus PC - Pityogenes chalcographus

26 Annual Report 2010

Nature and landscape protecti on

In Slovakia, nature and landscape protecti on is mainly determined by protected areas. The category of protected areas in Slovakia includes:

1. Protected areas integrated in the nati onal network a) large-scale protected areas (nati onal parks, protected landscape areas)

Overview of nati onal parks and their area within LESY SR, š. p. B. Bystrica Name of NP Area in ha NP Malá Fatra 2 718 NP Muránska planina 15 050 NP Nízke Tatry 39 955 NP Poloniny 1 246 NP Slovenský kras 10 667 NP Slovenský raj 10 927 NP Veľká Fatra 24 815 TANAP 1 Total LSR, š.p. 161 853

Overview of protected landscape areas and their area within LESY SR, š. p. B. Bystrica Name of PLA Area in ha CHKO Biele Karpaty 16 405 CHKO Cerová vrchovina 6 220 CHKO Dunajské luhy 4 113 CHKO Horná Orava 18 261 CHKO Kysuce 20 010 CHKO Latorica 1 373 CHKO Malé Karpaty 42 486 CHKO Poľana 14 948 CHKO Ponitrie 26 025 CHKO Strážovské vrchy 8 777 CHKO Šti avnické vrchy 27 955 CHKO Vihorlat 7 491 CHKO Východné Karpaty 7 963 CHKO Záhorie 9 692 Total LSR, š.p. B.B. 211 720 b) small-scale protected areas (nati onal nature reserves, nature reserves, nati onal nature monuments, nature monuments, protected sites)

2. Protected areas integrated into the Network of protected sites (Natura 2000)

Independently from the nati onal network of protected areas, the Slovak Republic as a EU member state develops a coherent European ecological network of protected areas NATURA 2000.

27 Annual Report 2010

a) protected bird habitats One of the commitments of the SR following from the EU accession is the obligati on to implement Council Directi ve 79/409/EEC of 2 April 1979 on the conservati on of wild birds to the Slovak legislati ve standards. On November 30, 2009, this Directi ve was replaced by the Directi ve 2009/147/EC of the European parliament and the Council on the conservati on of wild birds. Based on this, a new category of “protected bird habitats” shall be created in Slovakia. The nati onal list of the proposed protected bird habitats (PBH) was adopted by the decision of the Slovak Government No. 636/2003 on July 9, 2003. There were 38 protected bird habitats. Two habitats - Boheľovské rybníky and Trnavské rybníky were excluded from the list by the decision of the Slovak Governments No. 345/2010 of May 25, 2010. On the contrary, EC added to the decision 5 new habitats: Levočské vrchy, Chočské vrchy, Čergov, Slovenský raj and Špačince-Nižná. The total area of the proposed bird habitats in the SR listed in the nati onal list is 1,373,553 ha, which represents 28% of the area of the Slovak republic. Forest land of LESY SR, š.p. is placed in 36 proposed protected bird habitats of the nati onal list. There are re- maining 4 proposed protected bird habitats to be proposed by December, 31, 2011. b) sites of Community importance The nati onal list of the proposed habitats of European interests was adopted by the decision of the Slovak Government No. 239/2004 on March 17, 2004. By the Commission Decision 2008/26/EC of November 13, 2007 on the list of sites of Community importance for the Pannonian biogeographical region and the Commission Decision 2008/218/EC of January 25, 2008 the ﬁ rst updated list of sites of Community importance for the Alpine biogeographical region was adopted. These Decisions list 381 SCI on the territory if the Slovak Republic with the total area of 573,690 ha. These should be proclaimed as protected areas within the nati onal network of the SR. However, this obligati on does not relate to 170 SCI, which are 100 % overlapped with the existi ng protected areas. In term of the area, there is overall 88 % overlap of SCI with the nati onal network of protected areas. There are 240 proposed SCI with the area of 228,907 ha in the forest land of LSR , š. p. B. Bystrica. None of those, which are placed oﬀ the nati onal network of protected areas have not been assigned to this network so far.

3. Apart from the nati onal and European network of protected areas there are other protected sites such as biospheric reservati ons, Ramsar localiti es and localiti es listed as UNESCO World Heritage sites.

a) biospheric reservati ons There are 4 biospheric reservati ons in the forest land in the SR (Poľana, Slovenský kras, Tatry, Východné Kar- paty) with the total area of 35,440 ha.

b) Ramsar localiti es There are 12 Ramsar localiti es in the forest land of the LSR, š.p. B. Bystrica (Aluvium Moravy, Alúvium Rudavy, Alúvium Tisy, Domica, Dunajské luhy, Caves of Demänovská dolina, Latorica, Mokrade Oravskej kotliny, Mokrade Turca, Poiplie, Rieka Orava and its inﬂ ows, Šúr) with the total area of 7,519 ha.

c) World Heritage UNESCO Primeval beech forests of the Carpathian listed as UNESCO World Heritage are placed on the forest land of LSR, š.p. B. Bystrica

28 Annual Report 2010

Timber trade

Timber sales signifi cantly infl uence revenues of the state enterprise. In 2010, the total ti mber deliveries were 4,894,812 m³. Out of the total deliveries some 4,742,282 m3 represented direct deliveries, 16,262 m3 own consumpti on, and 136,267 m3 internal deliveries. A signifi cant part of internal deliveries were represented by deliveries for the Biomass Enterprise (116,735 m3) and Enterprise of Wood Processing (19,532 m3). Timber sale revenues were 196,117 thousand € and thus fulfi lled to 103.96 %. In 2010 the average price of ti mber was 41.36 €/m3 (fulfi lled to 101.96 %). Total ti mber deliveries decreased by 28,878 m3 and ti mber sale revenues increased by 23 562 thousand € compared to 2009. The average ti mber price increased by 5.19 €/m3 compared to 2009. Favourable results in the development of the average ti mber price in this period were achieved mainly due to a steady increase in coniferous logs and pulpwood prices (slight stabilisati on at coniferous ti mber market) and by the increase in yield of higher quality assortments with higher selling price.

Comparison of yield of coniferous logs on total coniferous deliveries Coniferous logs year % Reality 2010 65,08 Reality 2009 56,91

Once again, the situati on in deliveries of non-coniferous ti mber was more complicated because of a lack of interest in beech logs of III. A and III. B quality classes as well as the overall stagnati on in non-coniferous ti mber sale and constant pressure on prices. A drop in average price of non-coniferous ti mber was to a certain extent eliminated by the increase in yield of logs assortments and higher price gained from the aucti on sale of high quality assortments.

Comparison of yield of non-coniferous logs on total non-coniferous deliveries Non-coniferous logs year % Reality 2010 45,11 Reality 2009 37,21

A share of import on total deliveries was 4.41%, thus representi ng 215,732 m3.

For the coming period, we are planning 3,956,517 m3 of ti mber to be delivered. The average price should reach 50.97 €/m3 for coniferous and 40.90 €/m3 for non-coniferous ti mber. In 2011 it will be necessary to retain the planned average price as the risk in ti mber sale persist not only at the European market but also world markets.

29 Annual Report 2010 last year reality er er ﬀ + - di -sub sum2 reality 0,00 0,000,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 plan reality 40,54 41,69 41,6927,04 1,15 28,10 34,04 28,22 1,06 28,24 real real 2009 2010- last year reality reality reality in th. € th. € plan in real real 2009 2010- last year 261 034 -260 757 0 21 8 677 -8 656 0,00 76,00 76,00 76,00 33,24 reality er er -218 232 385 81 64 25 39 97 103,50 103,50 6,25 109,12 -529 180 331 -143 909 415 396 2 036 -1 640 11,23 10,87 10,87 -0,36 11,29 ﬀ + - di 3 m reality 3 m plan 742 042 1 816 147 74 105 1 367 919 448 228 84 265 89 264 64 847 24 418 48,37 49,15 49,21 0,78 47,41 600 777 568 154623 -32 811 911 -243 756 15 690 15 126129 370 17 850 162 423 -2 725 33 053 26,12 86 233 26,62 26,71 76 191 0,51 5 863 21,99 7 378 3 481 3 897 45,32 45,42 45,43 0,10 40,36 last year in th.€ revenues 1 271 3 649 2 596 8261 271 2 660 839 64 013 3 649 2 813 359 2 716 872 -152 520 2 806 042 107 832 89 170 113 588 3 042 629 -236 586 98 596 112 273 14 992 119 157 41,52 107 518 42,69 11 639 42,75 41,32 1,16 42,46 35,05 42,53 1,14 35,34 real th.€ year year prev. reven. 3 m last year 147 820 147 820 3 m reality reality 3 m plan mber prices mber -518 1 665 12 869 12 633 165 138 82 526 66 908618 -15 90 215 -23 307 1 367 1 195 1 448 -253 16,56 17,87 17,90 1,30 16,05 -124 75 294 70 153 70 522 828 755 0 7 502 7 502 12 104 -4 603 0 72 128 -56 0,00 9,56 9,56 9,56 10,56 ti real real 2009 2010- last on v (m3) deliveries Internal (m3) deliveries Direct (thousand €) Revenues price (€/m3) Average year ti reality 3 m reality Own consump 3 m plan 6 063 12 645 3 415 9 230 82 304 88 791 dom.dom. 3 410 8 849 317 0 8 532 5 345 0 4 798 52 038 0 251 0 2 462 1 0 0 0 835 617 dom.dom. 30 60 0 25 0 35 0 0 0 0 0 3 0 0 0 0 1 798 277 277 1 980 182 1 840 140 49 56 52 4 exp.dom.dom. 193 1 307dom. 0 2 430 0 79 2 278 1 228 2 796 0 0 0 971 12 625 0 26 0 293 0 2 528 0 409 -2 119 0 1 541 0 -1 132 12 137 102 -12 137 17 0 52 0 -35 408 -408 0,00 0,00 0,00 0,00 33,59 dom. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 exp.dom. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0,00 0,00 0,00 0,00 0,00 dom. 6 130 dom. 0 5 345 5 334 63 015 258 2 722 0 0 0 exp.dom. 0 0 0 0 0 0 0 36 950 36 421 0 7 253 7 253 26 871 -19 618 0 325 1 111 -786 0,00 44,77 44,77 44,77 41,35 dom. 144 68 76 0 0 0 0 0 dom. 6 063 12 645 3 415 9 230 82 304 88 791 mber exp. 0 68 280 73 825 5 545 92 749 -18 924 2 000 2 147 2 475 -329 29,29 29,08 29,07 -0,21 26,69 ti Assortment IV. classIV. exp. 0 1 829 1 743 -86 2 943 -1 199 73 68 83 -15 40,00 38,92 38,92 -1,08 28,15 Venner logs Venner I. and II. classSawlogs exp. 0 0 202 202 29 173 0 20 3 17 0,00 99,41 99,41 99,41 100,58 III. classPoles exp. 0 49 916 61 274 11 358 91 800 -30 527 2 368 3 000 4 812 -1 812 47,43 48,96 49,01 1,52 52,41 Mining wood Chipwood Thin poles IV. classIV. Pulpwood and ungraded Fuel wood exp.Stumpage 0 0 0 0 0 0 0 0 0 0 0,00 0,00 0,00 0,00 0,00 House boteExport fuel wood trunks Raw exp. exp. 0 0 0 0 0 0 0 0 21 953 907 953 886 1 487 2 742 -534 -1 835 0 0 19 9 21 31 -3 -21 0,00 8,05 19,84 10,16 19,88 19,84 10,16 2,11 14,44 11,14 Chips Energy wood Energy Internal deliveries for deliveries Internal sawmills CONIFEROUS TIMBER CONIFEROUS Deliveries, revenues and average coniferous coniferous and average revenues Deliveries, TOTAL CONIFEROUS "TOTAL DOMEST+EXPORT" exp. 0 0 0 0 0 0 0 0 0 120 046 145 204 25 158 229 270 -84 066 4 441 5 568 8 922 -3 354 36,99 38,35 38,37 1,35 38,91

30 Annual Report 2010 0,00 0,00 0,00 0,00 9,67 0,00 last year 45,61 59,04 58,03 34,80 31,95 37,80 34,84 37,48 27,52 36,37 21,97 37,06 60,50 37,63 35,80 42,24 36,17 reality 146,34 171,77 er. er. ﬀ + - 9,32 1,05 0,00 0,00 0,63 0,00 0,00 0,00 6,57 0,00 2,80 0,26 0,68 3,09 0,79 -1,03 -0,46 -7,00 -0,15 -0,09 -0,14 -0,06 10,15 37,87 27,06 di 0,00 0,00 0,00 0,00 0,00 0,00 7,23 6,57 0,00 45,02 59,05 68,15 32,99 38,60 35,69 37,88 27,06 38,90 55,00 39,49 41,17 43,80 41,29 - sub- sum2 reality 128,33 169,18 0,00 0,00 0,00 0,00 0,00 0,00 7,23 6,57 0,00 45,30 59,05 68,15 33,28 38,60 35,67 37,87 27,06 39,17 55,00 39,75 41,24 43,79 41,36 eality 127,87 169,18 0,00 7,00 0,00 0,00 0,00 0,00 0,00 0,00 7,38 0,00 0,00 45,75 58,00 58,00 33,43 38,69 35,04 39,23 52,20 39,49 40,56 40,70 40,56 plan r 128,90 159,86 real real 2009 2010- last year reality 670 161 107 25 563 reality in th. € 196 117555 172 23 562 179 186 in th.€ plan 188 641 425 182 real real 2009 2010- last year reality 00 0 er ﬀ + - di 00 0 00 0 00 000 -300 0 00 0 00 24 -24 20 0 000 0 00 0 00 00 0 00 265 0 1 00 -265 -1 0 0 7 -7 17 -383 275 -258 23 1 16 -15 279 279 1 967 -1 688388 388 0 1 275 8 -887 72 0 -64 3 28 -25 3 6 1664 048 -769 1 500 4 028 3 462 2 138 586 894 407 788 685 590 595 199 90 4 855 4 855 5 740 -8852 062 0 -1 158 184 23 412 -21 349 215 24 -31 15 226 -211 m 30 712 19 613 22 942 7 770 644 1 81335 768 1 354 10 69482 994 459 15 096 -7 294 20 672 99 161 970 -16 167 1 381164 3 2 960 571 3 455 810 -494 70 528 31 807 41 764 28 764021 2 3 879 2 527 1 352 reality 855 336 22 128 614 022 241 314123 38 38 743 28 004 10 739 918 468 -42 293 942 602 -24 134117 32 30 564 30 120 444 215 732 56 965 271 034 -55 302462 6 9 447 11 449 -2 002 1 865 712865 1 -29 400 1 686 767 178 945240936 1 347 74 2 407 73 081 1 728 531 62 511550526 4 207 709 10 571 34 612368 76 4 500 126 76 960 26 282742 4 65 038 11 923 91 577 4 771 160 -28 878 0 0 0 0 0 0 0 0 400 300 3 6 935 2 548 3 220 m 11 099 25 074 90 288 38 721 plan 833 208 960 761 158 767 1 895 112 1 933 833 4 491 938 4 650 705 in

last th.€ year 4 291 4 291 revenues 190 190 real th.€ year year prev. reven. 3 last year m year 3 m reality 00000 004602 00000 00000 001100 00000 00000 00000 004902 00000 00000 mber prices mber 3 501 894 810 24 20 ti m plan 47 722 46 582 32 90448 223 894 47 476 619 33 77148 223 919 47 476 642 33 771 919 642 130 527130 136 267 181 591527130 2 136 267 181 591 2 0 real real 2009 2010- last on (m3) deliveries Internal (m3) deliveries Direct (thousand €) Revenues price (€/m3) Average year ti reality 3 m reality Own consump 3 m 4 539 3 617 3 875 -258 plan 10 602 16 262 7 290 8 972 exp.exp.exp.exp. 0 exp. 0 exp. 0 0 0 exp. 0 0exp. 0 0 0 0 0 0 exp. 0 dom.dom. 131dom. 184 0 239dom. 100 -55 0 dom. 178 20 147dom. 190 31 4 288dom. 0 2 954dom. 202 190 dom. 2 752 dom. 110dom. 43dom. 0 67 dom. 4 539 2 3 617 3 244 0 3 875 -3 243 -258 0 dom. 10 602 0 16 262 7 290 8 972 ment ti Sor Deliveries, revenues and average non-coniferous non-coniferous and average revenues Deliveries, mber Venner logs Venner I. and II. class Sawlogs III. class Mining wood class IV. Thin poles class IV. Pulpwood and ungraded ti Fuel wood House bote Export fuel wood trunks Raw Chips Stumpage wood Energy deliver- Internal sawmills ies for NON-CONIFER- OUS TIMBER TOTAL NON- TOTAL CONIFEROUS DOM.+EXP. AND CONIF. NON-CONIF. TIMER TOTAL TOTAL

31 Annual Report 2010

Forest technique

Enterprise of Forest Technique (OZ LT) Banská Bystrica as a specialised enterprise of LESY SR, š.p. provides a part of acti viti es in forestry operati ons - harvesti ng, ti mber extracti ng and manipulati on, ti mber transport, maintenance of forest roads, maintenance and contracted certi fi ed service, building and machine investment acti viti es. In 2010 the enterprise used own harvesters to process 51,566 m3 of ti mber, cable cranes transported 77,608 m3 and lorries transported 1.67 mil. m3 of ti mber. In 2010, the operati ons of OZLT in road maintenance, investment acti viti es and engineering producti on exceeded 3.67 mil. EUR. OZLT provided these works by the three regional centres (Banská Bystrica, Bánovce nad Bebravou, Vranou nad Topľou) almost at all Forest enterprises and mainly in the areas with a concentrati on of state forests that enables opti mal use of own machinery. The centre for mechanical engineering in Banská Bystrica provided an appropriate background for maintenance and repair. The years 2009 and parti ally 2010 were aff ected by the crisis in forestry-wood chain, which was refl ected in minimum investments mainly in the area of forestry operati ons. Investments were directed only to the diagnosti c technique for the contracted certi fi ed service and, in the end of the year 2010, cable cranes LARIX 3T – 650 and LARIX LAMAKO were purchased. Thus the total number of the 16 existi ng cable cranes was renewed by two pieces. Furthermore, in 2010 there were three progressive technologies of harvester nodes working - JOHN-DEERE 1270D, 1070D and 770D forwarders and three forest wheel tractors ŠLKT- 82C equipped by hydraulic cranes, ti mber bolsters and supplemented by harvesti ng heads NAARVA GRIP, which are used mainly for pruning around forest roads and extracti ng roads where raw material is mainly used for chipping to energy chips. In spite of the year characterised by diminishing crisis it can be stated that OZLT keeps a trend to sustain and furthermore increase a share of progressive and environmental friendly technologies in the certi fi ed forests of the state enterprise, to guarantee safety capaciti es in forestry operati ons with the emphasis on the assurance of a certain price stability towards external the contractors of services.

32 Annual Report 2010

Forest nursery

In 2010 Forest enterprise Semenoles managed 195 ha of producti on areas in 12 nursery centres (Jochy, Šajdíkove Humence, Trsti ce, Hladomer, Oravská Priehrada, Drakšiar, Kmeťová, Brod, Kraje, Čermošná, Šariš, Sobranecké Kúpele). The nursery centre Dubiny was closed down on January 1, 2010. In 2010, these nursery centres set up the producti on of 79.887 mil. forest plants, which is approximately by 3.2 mil. pcs less compared to the previous year. Out of this number the coniferous free root plants represented 50.612 mil. pcs, broadleaved free root plants 29.206 mil. pcs and container plants represented 3.067 mil. pcs (4%). Floods at the break of May and June destroyed 3,462 mil. pcs of plants at cost of 190,155 € and the sanitati on of ﬂ ood damages in nursery centre Šariš required investments of 95 thousand €. Forest enterprise Semenoles sold 24,348 mil. pcs of forest plants , out of which the forest enterprises of LESY SR, š.p. con- sumed 15.191 mil. pcs (63%) and 9.157 mil. pcs (37%) were sold to other organisati ons. Beech was the most sold tree species (6.854 mil. pcs) followed by spruce (4.809 mil. pcs). A share of sold container plants (2,667 pcs.) on the total sale was 11.4%.

Seed management Forest enterprise Semenoles provides seed collecti on, processing and storage for the needs of the state enterprise LESY SR, š.p. as well as for non-state organisati ons and creates reserves for bypassing inferti le periods. In 2010 there was 82,153 kg of seeds collected (out of which 27 tons of beech, 17 tons of oak, 9 tons of spruce and 15 tons of ﬁ r). Crop of spruce was zero in autumn 2010. As of 31.12.2010 there was a seed stock of 19,734 kg (spruce 73 kg, ﬁ r 1,736 kg, pine 217 kg, larch 544 kg, beech 9,617 kg, oak 5,311 kg, other species 2,027 kg).

Tree breeding and gene pool maintenance Forest enterprise Semenoles managed 114 ha of seed orchards. The perspecti ve seed collecti on orchards were culti vated by mowing, mulching and forming. In 2010 there was 7,255 kg of seed material collected from seed orchards. There were 1,120 plants engraft ed (elm, Wild service tree, cherry...) at the nursery centre Jochy to supplement or establish new seed orchards. There was a new seed orchard of Field elm established at the Forest enterprise Považská Bystrica (site Strelenka). Flood destroyed 135 planted and grown out Filed elm graft ings which were actually recognised as seed orchard by the nati onal Forestry Centre. In the gene pool Forest enterprise stores 23 secti ons of seeds originati ng from the stands of Norway spruce, pine, ﬁ r and larch.

33 Annual Report 2010

Forest biomass

The year 2010 was the sixth year of the existence of a specialised producti on of forest biomass by a separated organisati onal unit - the Biomass enterprise. In 2010, there was 159,690 tons of energy wood chipped, which represented an increase by 36,675 tons compared to 2009. Forest chip trade recorded an increase from 5,679 thousand € to 8,277 thousand €. The acti viti es aimed at processing of energy wood from thinning, regenerati on felling, and mainly from windthrown harvests with the aim to use the producti on potenti al of forest land through the increase of average producti on per hectare and cutti ng cost for branches cleaning and protecti on of forest stands were extended by processing of ti mber manipulati on waste at ti mber yards. The Biomass enterprise signiﬁ cantly contributes through its acti viti es mainly to the creati on and maintenance of rural jobs and contributes to the achievement of SR obligati ons in the area of producti on of energy from sustainable resources. It seems that the strategic decision to diversify trade opportuniti es of LESY SR, š.p. was right and perspecti ve.

34 Annual Report 2010

Game management

Game management in connecti on with tourisms is one of the main acti viti es provided by the state enterprise LESY SR. Game management represents a separate producti on and economic cycle.

During the reported period the state enterprise managed 835 thousand ha of hunti ng grounds (19.02% of the total hunti ng area in Slovakia). Hunti ng rights were performed in 79 acknowledged hunti ng grounds with the total area 344,755 ha (annual decrease by 2 hunti ng grounds and increase by 20,755 ha in hunti ng area). Hunti ng rights were rented at the area of 565 thousand ha, which represents 68% of hunti ng land administrated by LESY SR, š.p.

Hunti ng plan for the hunti ng season 2010 was met to 83% for red deer, 74% for fallow deer, 83% for mouﬂ on, 64% for roe deer and 92% for wild boar. Overall fulﬁ lment of the planned hoofed game hunti ng was 82%. As for rare species, six bear hunti ng licences were awarded to LESY SR, š.p. out of which four bears were shot within the regulatory shooti ng and 6 alpine chamois were shot out of 7 planned pieces during the reported period.

Comparison of number of fee hunti ng of trophy game in 2009 and 2010

Game 2009 2010 Diﬀ erence (2010 – 2009) Red deer 268 329 + 61 Fallow deer 94 101 + 7 Mouﬂ on 95 94 - 1 Roe deer 179 181 + 2 Wild boar 1 183 1 673 + 490

There was an increase in fee hunti ng for almost all main game species recorded during the hunti ng season 2010 mainly due to the hunti ng of younger age classes in the hunti ng grounds that sold hunti ng. In the reported period there was 2,191 fee-paying guests, which represents an annual decrease by 62 guests.

There was 210 tons of venison produced in self-operated hunti ng grounds of the LESY SR, š.p. in 2010. There was 114 tons of venison supplied to the own processing facility at Forest enterprise Topoľčianky either from own producti on or from external sources. This represents an annual increase in supplies of venison by 41 tons.

Basic economic indicators of LESY SR, š. p. under the operati on „Game management“ in 2010:

- Incomes 2 063 680 € (annual increase by 112 220 €) - Total revenues 2 761 270 € (annual increase by 256 400 €) - Direct cost 2 177 320 € (annual decline by – 44 360 €) - Proﬁ t from direct cost 583 950 € (annual increase by 300 750 €)

35 Annual Report 2010

Ecology and environmental policy

The implementati on of environmental approach in enterprise acti viti es can be demonstrated by performed acti viti es in the given year. In order to protect the environment with the emphasis on the water and air protecti on, LESY SR, š.p. has per- manently coped with the contaminated appliances containing PCB - polychlorinated biphenyls and polychlorinated terphenyls. The main part of the appliances was created by older types of transformers and condensers. Their ecological disposal and decontaminati on was provided through authorised persons. Meeti ng the objecti ve of permanent reducti on of negati ve eﬀ ects of producti on acti viti es and appliances on the environment can be proved through the trend of their modernisati on at individual sites of the state enterprise. A subsequent approval of the emergency plans by water management authority and training of personnel to implement them in cases of ecological disasters proves compliance with the valid legislati on. It is a permanent eﬀ ort of all employees to help changing municipal waste to raw material. During the last year there was 15.5 t of waste paper, 7.5 t of glass and 6.5 t of plasti cs separated and disposed for recycling. Wood residues, saw dust, bark, residues of wooded parti cles combined with deposits on producti on sites are preferably becoming raw material for the producti on of soil substrates and energeti c use.

The menti oned acti viti es prove the compliance of the environmental policy of LESY SR, š.p. Banská Bystrica with the environmental policy of the EU based on the objecti ves:

- maintain, protect and improve the quality of the environment - carefully and wisely treat the natural resources

and they document the eﬀ ort of the state enterprise to rati onal approach to care for the environment.

36 Annual Report 2010

Investment acti viti es

1. Total investment (thousand €)

Year 2009 2010 Indicator Value % Value % Total investment 2 930,57 100,0 10 685,59 100,0 out of which tangible 2 786,59 95,1 9 880,54 92,5 intangible 143,98 4,9 805,05 7,5

2. Financial sources (thousand €)

Year 2009 2010 Indicator Value % Value % Total sources 2 930,57 100,0 10 685,59 100,0 out of which own 2 930,57 100,0 10 685,59 100,0 from state budget 0,0 0,0 other (Eur. funds) 0,0 0,0

3. Structure of procured tangible and intangible current property in 2009 (thousand €)

Indicator Value % % Total investments 10 685,59 100,0 out of which 4 928,59 46,1 100,0 constructi on out of which con- 4 581,18 93,0 structi on works project works 187,59 3,8 other investments 159,82 3,2 machinery and 5 757,00 53,9 current property

In 2010 the accessibility of forest stands was the priority of the enterprise in the area of constructi on investments (3,135.25 thousand €, 49.4 %). There was 1,059.78 thousand € (7 projects, out of which 3 completed) used for the constructi on and reconstructi on of forest roads. There were 2.9 km of new forest roads built in order to increase the density of forest roads (2 completed projects). The improvement of quality of forest roads (reconstructi on) cost 2,075.47 thousand €.

In 2010, a purchase of transport and mechanisati on machines for ti mber manipulati on and transport (2,186.3 thousand €, 38%), personal and technological transport (1,113.7 thousand €, 19.3%), maintenance, repairs and other acti viti es (939.1 thousand €, 16.3%), IT and oﬃ ce technologies (219.3 thousand €, 3.8 %) and soft ware (805.1 thousand €, 14 %) were the prioriti es in machinery and current property investments

Depreciati ons as own source of ﬁ nancing renewal of investment property in 2010 were as follows:

Depreciati on – reality in 2009: nema tu byt 2010: ...... 14 997,89 thousand € Real volume of investments from own sources: ...... 10 685,59 thousand €

37 Annual Report 2010

Public relati ons

Realisati on of public relati ons acti viti es conti nued in the sense of the approved communicati on project of LESY SR – Forests for all for the period 2008-2010, which deﬁ nes the basic objecti ve to develop conti nuously, systemati - cally and in a concepti on way relati ons of the public to forestry and forests with the emphasis on the work with young generati on as its positi ve relati on to the forest is a sign of healthy and functi oning society.

The most important tools of public relati ons in 2010

1. Forestry pedagogy as an important program of learning-by-experience aimed at children and youth, 2. Special forestry sites linked to the Slovak forestry history and culture (there were 2 sites introduced) 3. Forestry educati onal paths (there were 2 new internati onal Slovak-Polish paths opened) 4. Forestry open museum in Vydrovská dolina near Čierny Balog as a unique open museum visited by 57,600 visitors 5. Forestry and wood museum in Zvolen introducing and presenti ng the past and the present of forestry in Slovakia through its tangible evidence 6. Enterprise magazine Lesník – creates space for presentati on of acti viti es of the enterprise and addressing not only professional public

The most important events the public realised in 2010:

• Hunti ng days in Levice – XV. year • Forestry days 2010 – acti viti es and events of foresters for the broad public connected with planti ng the Trees of knowledge and establishment of “mini arboretums” in kinder gardens, primary and secondary schools • Day of tree – 9th year of the most visited event in the Forestry open museum • Christmas tree as a present - Christmas trees for children in foster homes in Slovakia

Forestry and Wood Museum

The Centre for public relati on and Forestry and Wood Museum create and realise public relati on acti viti es within the state enterprise LEST SR. During the year 24 exhibiti ons and 43 cultural, educati on and specialised programs and acti viti es were organised. There were 42 arti cles published in internal and professional press and 27 promoti onal outputs provided by the museum staﬀ for the media. Museum cooperated in opening of two special forestry sites - Rudolf Geschwind in Krupine and Forest district. An informati on seminar with internati onal parti cipati on Wood and its possibiliti es in improving way of life and environment of rural sett lements was organised, additi onal years of the nati onal competi ti ons Wood studies and Green objecti ve were carried out and a cultural acti vity on the occasion of the 10th anniversary of Lesník magazine and book presentati on of F. Bizub – Alojz Štróbl, creator of animal sculptures and hunters was prepared. Forestry pedagogic is an acti vity sought by school children and carried out in the museum.

38 Annual Report 2010

39 Annual Report 2010

Balance sheet

Assets č.r. Gross Correcti on Net Previous years

Total assets line 2+31+61 1 1 089 014 827 259 799 173 829 215 654 1 484 726 399 Non-current assets line 3+12+22 2 1 002 084 104 243 302 827 758 781 277 1 434 622 701 Long-term intangibles line 4 through 11 3 9 964 157 5 736 140 4 228 017 4 667 682 Incorporati on costs (011) -(074,091) 4 0 Capitalized costs of development (012) -(072, 091) 5 25 211 25 211 0 166 Soft ware (013) - (073,091) 6 6 509 664 4 544 235 1 965 429 2 716 879 Valuable rights (014) - (074,091) 7 195 180 195 180 0 41 132 Goodwil (015) - (075, 091) 8 0 Other long-term intangibles (019,01x) 9 2 979 058 971 514 2 007 544 1 891 010 -(079,07,091) Long-term intangibles, acquired (041) - 093 10 255 044 255 044 18 495 Advance for long-term intangibles, paid (051)-095 11 0 Long-term tangibles, total (line13 through 21) 12 991 963 467 237 410 207 754 553 260 1 429 955 019 Lands (031) - 092.. 13 519 113 517 519 113 517 1 187 973 816 Constructi ons (021) - (081,092) 14 363 478 951 157 703 766 205 775 185 211 794 240 Separate tangibles and assemblies (022) - 15 103 309 485 78 782 273 24 527 212 26 572 279 (082,092..) Silvicultural units (025) - (085,092.) 16 30 831 19 814 11 017 12 229 Livestock and draught animals (026) - 17 224 741 158 440 66 301 70 498 (086,092) Other long-term tangibles (029,02.,032.) - 18 406 567 406 567 406 567 (089,08x,092) Long-term tangibles, acquired (042) - 094 19 5 384 733 745 914 4 638 819 3 100 391 Advance for long-term tangibles, paid (052) - 095 20 14 642 14 642 24 999 Provisions for assets acquired (+/-097)+/-098 21 0 Long-term fi nancial assets, total (line 23 22 156 480 156 480 0 0 through 30) Stock and ownership interests 061 23 0 Stock and ownership interests 062 24 139 153 139 153 0 Other long-term stock and ownership interests 25 17 327 17 327 0 063,065 Borrowings in accounti ng enti ty 26 0 Other long-term fi nancial assets 067,069,06x 27 0 Loans payable within max. of 1 year 28 0 Long-term fi n. assets, acquired 043 29 0 Advance for long-term fi n. assets, paid. 30 0 Current assets (line32+40+47+55) 31 86 429 817 16 496 346 69 933 471 49 397 682

40 Annual Report 2010

Inventory, total (line 33 through 39) 32 17 429 584 1 088 750 16 340 834 17 166 023 Material 112,119,11X 33 1 158 827 4 014 1 154 813 858 406 Work-in-process and semiproducts 34 7 852 127 431 597 7 420 530 7 918 064 121,122,12X Custom-made producti on (12x-192. 35 0 Produce 123 36 7 554 229 242 801 7 311 428 7 799 089 Livestock 124 37 757 320 410 338 346 982 475 740 Merchandise 132 38 28 114 28 114 16 232 Advance for inventory, paid 314 39 78 967 78 967 98 492 Long-term receivables, total (line 41 through 46) 40 23 499 0 23 499 0 Trade receivables 311 thr ough315 41 0 Receivables from control. person 42 0 Other receivables under consolidati on 43 0 Receivables from company members 44 0 Other receivables 335,33X,371thr 378 45 23 499 23 499 Deferred tax receivable 481 46 0 Short-term receivables, total line 48 through 54 47 46 269 351 15 407 596 30 861 755 24 447 905 Trade receivables 311thr ough315 48 43 421 619 15 407 596 28 014 023 22 130 108 Receivables from control. person 49 0 Other receivables under consolidati on 50 0 Receivables from company members 51 0 Social security 336 52 0 Tax assets 341 through 345 53 2 708 912 2 708 912 2 104 279 Other receivables 335,33X,371 thr 378 54 138 820 138 820 213 518 Financial accounts, total (l.56 thr 60) 55 22 707 383 0 22 707 383 7 783 754 Cash 211,213 56 107 062 107 062 122 374 Accounts with banks 221,+/-261 57 22 600 321 22 600 321 7 661 380 Accounts with banks ti ed for over 1 year 221 58 0 Short-term ﬁ n. assets 251,253,256,257 59 0 Short-term ﬁ n. assets, acquired 259 60 0 Accruals and deferrals 61 500 906 0 500 906 706 016 Accrued costs, long-term 381,382 62 250 387 250 387 Accrued costs, short-term 381,382 63 217 762 217 762 650 290 Deferred income, long-term 385 64 0 Deferred income, short-term 385 65 32 757 32 757 55 726

41 Annual Report 2010

Balance sheet

Assets č.r. Gross Previous years

Stockholder´s equity and liabiliti es, total 66 829 215 654 1 484 726 399 l.67+88+119 Stockholder´s equity line 68+73+80+84+87 67 747 017 454 1 415 563 285 Registered capital line 69 through 72 68 740 969 732 1 410 740 181 Registered capital 411 69 1 410 740 181 1 438 221 470 Equity shares and interests 70 Change in registered capital 419 71 -669 770 449 -27 481 289 Receivables from equity subscripti ons (+/-353) 72 Capital funds line 74 through 79) 73 353 161 353 161 Capital surplus 412 74 Other capital funds 413 75 353 161 353 161 Statutory reserve fund 417,418 76 Gains or losses from revaluati on 414 77 Gains or losses from capital stock 415 78 Gains or losses from revaluati on. 416 79 Funds from proﬁ t, total line 81 through 83 80 2 052 914 2 311 261 Statutory reserve fund 421 81 1 108 653 1 092 080 Indivisible fund 422 82 State and other funds 423,427,42X 83 944 261 1 219 181 Business results from previous years line 85+86 84 1 932 217 1 836 605 Retained earnings from previous years 428 85 3 152 499 3 004 686 Accumulated loss from previous years 429 86 -1 220 282 -1 168 081 Business results for accounti ng period 87 1 709 430 322 077 Liabiliti es line 89+94+105+115+116 88 50 374 565 39 365 841 Reserves, total line 90 through 93 89 23 093 454 13 944 455 Long-term statutory reserves 451 90 9 775 328 Short-term statutory reserves 323,451 91 3 155 730 9 662 894 Other long-term reserves 459 92 4 577 965 2 668 954 Other short-term reserves 323,32x,459 93 5 584 431 1 612 607 Long-term liabiliti es line 95 through 104 94 8 267 506 7 469 504 Long-term trade payables 479 95 Long-term non-invoiced deliveries 476 96 Long-term payables to the control. person 471 97 Other long-term payables under consolidati on 471 98 Long-term advance received 475 99 Long-term notes payable 478 100 Bonds issued 473 101

42 Annual Report 2010

Payables to social security fund 472 102 566 716 570 755 Other long-term liabiliti es 103 474,479,372,373,377 Deferred tax liability. 481 104 7 700 790 6 898 749 Short-term liabiliti es, total l.106 thr 114 105 19 013 605 17 951 882 Trade payables 321thr 325,475,478,479 106 13 745 404 11 066 757 Non-invoiced deliveries 326,476 107 215 910 480 829 Payables to the control. person 361,471 108 Other payables under consolidati on 109 361,471,47X Payables to company members 364 thr 110 68,398,478,479 Payables to employees 331,333 111 2 725 071 3 111 849 Payables to social security 336,479 112 1 571 506 1 612 400 Tax liability and subsidies 341 thr 347,34X 113 546 117 1 450 679 Tax liability and subsidies 114 209 597 229 368 372až379,474,479,47X Short-term loans (241,249,24x,473,/-255 115 0 Bank credits, long-term 461 116 0 Current bank credits 221,231,232,23X,461 117 Short-term loans 241,249,24X,473 118 Accruals and deferrals, total 119 31 823 635 29 797 273 Accrued expenses, long-term 383 120 Accrued expenses, short-term 383 121 22 431 29 125 Deferred revenues, long-term 384 122 Deferred revenues, short-term 384 123 31 801 204 29 768 148

43 Annual Report 2010

Proﬁ t and Loss Account

Text č.r. Current acc. period Previous period in €

Revenues from goods (604) 1 131 345 74 267 Costs to acquire goods sold (504) 2 77 876 39 970 Margin line 01- line 02 3 53 469 34 297 Producti on 4 215 801 782 193 523 452 Revenues from own produce and services sold (601,602) 5 215 292 665 195 658 787 Change in in-house inventories (61) 6 -1 113 953 -3 710 762 Capitalizati on (accounti ng class 62) 7 1 623 070 1 575 427 Consumpti on of producti on lines 9+10 8 132 831 199 116 306 123 Consumpti on of material, uti liti es and other unstored 9 18 272 792 15 487 403 supplies (501,502,503) Services (accounti ng class 51) 10 114 558 407 100 818 720 Added value line 3+line4 – line 8 11 83 024 052 77 251 626 Personnel expenses, total (line13 through 16) 12 59 277 959 55 191 661 Wages and salaries (521,522) 13 40 911 599 38 051 632 Remunerati on o fmembers of company bodies and 14 27 200 24 311 associati on (523) Social security expenses (524, 525, 526) 15 14 499 780 13 735 877 Social security expenses (527, 528) 16 3 839 380 3 379 841 Taxes and fees (accounti ng class 53) 17 5 906 736 5 984 883 Write-off s of long-term intangibles and tangibles (551,553) 18 15 048 086 15 795 788 Revenues from long-term assets and material sold (641, 642) 19 6 084 789 8 154 638 Net book value of long-term assets and material sold 20 2 569 482 2 531 115 (541,542) Additi on to and accounti ng for provisions for receivables 21 1 266 101 4 443 986 +/- 547 Other revenues from economic acti vity 22 7 904 464 3 148 883 (644,645,646,648,655,657) Other costs of economic acti vity (543, až 546, 548,549,555 ,557) 23 10 363 359 3 330 170 Transfer of revenues from economic acti vity (-) (697) 24 Transfer of costs of economic acti vity (-) (597) 25 Business results of economic acti vity 26 2 581 582 1 277 544 Revenues from stock and ownership interests sold (661) 27 Stock and ownership interests sold (561) 28 Revenues from long-term fi nancial assets line30+line 29 2 628 0 31+line 32 Revenues from stock and ownership interests in control. 30 person (665) Revenues from other long-term stock and ownership 31 2 628 interests (665) Revenues from other long-term fi nancial assets (665) 32

44 Annual Report 2010

Revenues from short-term fi nancial assets (666) 33 Costs of short-term fi nancial assets (566) 34 Revenues from revaluati on of stock derivati ves (664, 667) 35 Costs of revaluati on of stock derivati ves (564, 567) 36 Additi on to and accounti ng for provisions for fi nancial 37 assets +/- 565 Interests received (662) 38 55 698 2 130 Interests paid (562) 39 21 226 105 Exchange-rate gains (663) 40 1 133 -12 688 Exchange-rate losses (563) 41 4 303 8 647 Other revenues from fi nancial acti viti es (668) 42 443 Other cost of fi nancial acti viti es (568, 569) 43 47 971 51 262 Transfer of fi nancial revenues (-) (698) 44 Transfer of fi nancial expenses (-) (598) 45 Business results of fi nancial acti viti es 46 7 607 -296 572 Business results of ordinary acti viti es before tax line 26 +line 46 47 2 589 189 980 972 Tax on income from ordinary acti viti es line 49 + line 50 48 749 840 732 422 - due (591, 595) 49 - deferred (+/- 592) 50 749 840 732 422 Business results of ordinary acti viti es aft er tax line 47-line 48 51 1 839 349 248 550 Extraordinary revenues (accounti ng class 68) 52 440 99 526 Extraordinary expenses (accounti ng class 58) 53 130 359 26 003 Business results of extraordinary acti viti es before tax line 54 -129 919 73 523 52- line 53 Tax on income from extraordinary acti viti es line 56 + line 57 55 - due (593) 56 - deferred (+/-594) 57 Business results of extraordinary acti viti es aft er tax line 58 -129 919 73 523 54-line55 Business results for accounti ng period before tax line 59 2 459 270 1 054 495 47+line 54 Transfer of interests in business results to company 60 members (+/- 596) Business results for accounti ng period aft er tax line 51+line 61 1 709 430 322 073 58-line 60 Intra-plant expenses Intra-plant revenues Intra-company expenses Intra-company revenues

Proﬁ t or loss, total 1 709 430 322 073

45 Annual Report 2010

Notes to Financial Statements as of December 31, 2010

A. BASIC INFORMATION

1. Commercial Name and Registered Oﬃ ce of the Company:

LESY Slovenskej republiky, š.p. Námesti e SNP č.8, 975 66 Banská Bystrica LESY Slovenskej republiky, š.p. (hereinaft er referred to as “Company“) was founded on July 1, 1999 and incorporated on Oc- tober 29, 1999 (entered in the Companies Register of the District Court of Banská Bystrica, Secti on: Pš, Insert No.: 155/S).

2. Corporate Core Business as Entered in the Companies Register:

- Administrati on of forest property and other property owned by the Slovak Republic. - Establishment, regenerati on, silviculture, tending and protecti on of forest growth in compliance with the Forest Management Plan pursuing the public and community functi ons. - Timber harvesti ng in forest growth in compliance with measures of state administrati on, skidding, handling and transportati on. - Sale of green ti mber and other commoditi es of forest producti on and sideline operati ons.

3. Unlimited Liability

The Company is a company member with unlimited liability in no other accounti ng enti ti es.

4. Average Employees Count

In 2010, the Company had 3 624 employees, on average, including 4 top oﬃ cials.

5. Legal Ground for Preparati on of the Financial Statements

The Financial Statements of the Company as of December 31, 2010 are drawn up as regular ﬁ nancial statements pursuant to Secti on 17(6) of Act No. 431/2002 Coll. of the Nati onal Council of the Slovak Republic on Accountancy (hereinaft er referred to as “Accountancy Act“) for the accounti ng period January 1, 2010 – December 31, 2010.

6. Date of approval of the Financial Statements for the Previous Accounti ng Period

On April 1, 2010, the Supervisory Board approved the Company’s Financial Statements for the previous accounti ng period.

B. COMPANY BODIES

1. Company Bodies

Director General Ing. Igor Viszlai 1st Deputy Director General Mgr. Ján Kostrian 2nd Deputy Director General Ing. Ján Švančara

46 Annual Report 2010

Supervisory Board Chairman JUDr. Juraj Procházka Member JUDr. Kamil Beresecký Member Ing. Ján Beňa Member Ing. Jozef Herud Member Ing. Dušan Krajniak Member Ing. Ján Malko Member Doc. Ing. Ján Ilavský Member JUDr. Milan Chovanec Member Ing. Franti šek Suchanovský

2. Informati on of the Company’s Incorporator

The Company is a state-controlled enterprise founded upon a decision of the Ministry of Agriculture of the Slovak Republic.

C. CONSOLIDATED ENTIT

The Company is not included in the Consolidated Financial Statements.

D. METHODS OF ACCOUNTING AND GENERAL ACCOUNTING PRINCIPLES a) Basis of Preparati on of the Financial Statements Preparati on of the Financial Statements was eff ected on the assumpti on that the Company conti nues to exist. The accounti ng enti ty consistently applied the methods of accounti ng and general accounti ng principles. In course of 2010, there were no changes in the accounti ng principles and methods of accounti ng applied in the accounti ng enti ty. b) Long-Term Intangibles and Long-Term Tangibles The valuati on of the long-term assets acquired against payment is made at the acquisiti on cost comprising the cost of acquisiti on and the acquisiti on by-costs (customs duty, transport, assembly operati ons, insurance, etc.). Since January 1, 2003 neither interests on third-party resources nor exchange-rate diff erence realized have been part of the acquisiti on cost. The valuati on of the long-term assets generated by own acti viti es of the enterprise is made at the (total) costs incurred. (Total) costs incurred denote all direct costs expended on the manufacturing or other acti viti es, and all indirect costs relati ng to the manufacturing or other acti viti es. The valuati on of the long-term assets acquired without payment is made at reproducti on acquisiti on cost denoti ng the price at which the assets would be acquired at the ti me of the accounti ng for those assets. Costs of research are not capitalized but are recognized under the costs of the accounti ng period in which they were incurred. Costs of development are recognized under the period in which they were incurred; yet such costs of development which are incurred in relati on to the product or process which is clearly defi ned, enjoys provable technical feasibility and marketability, in respect of which the Company possesses suffi cient resources to complete, sell or internally use the outcomes of the projects, are capitalized at the amount which is likely to be recovered from the future economic benefi ts. Capitalized costs of development write off for maximum 5 years, parti cularly under the accounti ng periods when the sale of the product or use of the processes concerned are expected. Where the value of such costs is lowered,

47 Annual Report 2010

the write-off is eff ected at such a sum which is likely to be recovered from the future economic benefi ts. Long-term intangibles write off according to the amorti sati on plan made upon the anti cipated lifeti me of the assets concerned. The amorti sati on begins on the fi rst day of the month following the putti ng of the assets to use. Low-value long-term intangibles whose acquisiti on cost (or total costs incurred) amounts to EUR 2400.00 or less (before February 28, 2009: EUR 1660.00 and less) write off by a single applicati on when put to use.

The anti cipated lifeti me, method of amorti sati on and amorti sati on rates are shown in the following table: Anti cipated lifeti me, Method of Annual amorti zati on in years amorti zati on rate, in % Incorporati on costs 5 R 20 Capitalized costs of development 5 R 20 Soft ware 5-7 R 20

Incorporati on expenses are no longer included in the long-term intangibles as from March 1, 2010.

Long-term tangibles write off according to the depreciati on plan made upon the anti cipated lifeti me and course of wear and tear of the assets concerned. Depreciati on begins on the fi rst day of the month following the putti ng of the assets to use. Depreciati on of the SAP soft ware takes 7 years. Low-value long-term tangibles whose acquisiti on cost (or total costs incurred) amounts to EUR 1700.00 and less (before February 28, 2009: EUR 996.00 and less) write off by a single applicati on when put to use. The anti cipated lifeti me, method of depreciati on and depreciati on rate are shown in the following table.

Anti cipated lifeti me, Method of nnual depreciati on in years depreciati on rate, in % Constructi on 6 - 30 even 1,4 - 18,3 Property, plant and equipment 4 - 12 even 4,3 - 28,6 Rolling stock 4 - 12 even 4,3 - 28,6 Low-value long-term tangibles 1 a viac even 100

In the event of temporary reducti on of the uti lity value of long-term assets as ascertained at the inventory check, which appears substanti ally lower than the asset valuati on reported in the accounti ng records aft er deducti on for adjustments, a deferred provision is made to add to the amount of the uti lity value of the assets ascertained. c) Stock and Ownership Interests The valuati on of stock and ownership interests when acquired is made at acquisiti on costs, i.e. including the acquisiti on by-costs (before December 31, 2002: at the cost of acquisiti on, i.e. exclusive of the acquisiti on by-costs).

As at the date on which the Financial Statements are prepared the valuati on of stock and ownership interests is made at acquisiti on costs reduced by deferred provisions made for conti ngent temporary reducti on of the values of the interests. d) Inventories The valuati on of the inventories acquired against payment is made at acquisiti on costs comprising the costs of acquisiti on and the acquisiti on by-costs (customs duty, transport, insurance, commissions, etc.). Interests on the third-party resources are not part of the acquisiti on cost. The Company uses the A method when accounti ng for inventories, and the method of the weighted arithmeti c mean of acquisiti on costs with respect to the receipt into stock. The valuati on of the issue from stock is made at the costs used for the valuati on of inventories in stock.

48 Annual Report 2010

Acquisiti on on-costs are reversed under the expenses as follows: Gains or losses from valuati on = actual consumpti on x % gains or losses from valuati on, while % gains or losses from valuati on is determined as a rati o of the costs related to the acquisiti on of the material inventories to the total volume of the inventories acquired.

The valuati on of inventories resulted from own acti viti es of the enterprise is made at (total) costs incurred. (Total) costs incurred denote direct costs (direct material, direct wages and other direct costs) and part of the indirect costs immediately related to the inventories resulted from own acti viti es of the enterprise (manufacturing overheads – overheads of forest management authoriti es). Manufacturing overheads are included in the (total) costs incurred depending on the stage of the work-in-process concerned.

In the case of temporary reducti on in the inventory uti lity value, a deferred provision is made for such inventories, namely to amount to the diﬀ erence between the accounti ng valuati on and the net realizati on value thereof.

Valuati on of forest plants

The valuati on of the forest plant inventories is made at (total) costs incurred, on an individual basis, according to the speciﬁ c wood species and age. Opti mal age of plants good for planti ng is 4 years. In respect of the plant inventories over 4 years, a risk of waste at the planti ng occurs, which is allowed for by making a deferred provision for the plants older than 4 years.

(Total) costs incurred denote the direct costs necessary to produce forest plants (direct material, direct wages and other direct costs) and a part of the indirect costs immediately related to the producti on of forest plants (manufacturing overheads – overheads of forest management authoriti es). (Total) costs incurred do not include the costs of the forest plant collecti on. e) Accounts receivable The valuati on of receivables at their originati on is made at their nominal values; valuati on of assigned receivables and receivables for equity subscripti ons is made at the acquisiti on cost, i.e. including the acquisiti on by-costs (before December 31, 2002: at the cost of acquisiti on, i.e. exclusive of acquisiti on by-costs). A deferred provision is made for doubtf ul and irrecoverable receivables pursuant to the Directi ve on creati on of deferred provisions and reserves.

Where the term of maturity of a receivable is more than one year, a deferred provision is made for 100 % of the nominal value of such a receivable. f) Accrued Costs and Deferred Income Acrrued costs and deferred income are reported at the amounts required to observe the policy of subject-matt er and ti me relevance to the accounti ng period. g) Reserves Reserves are liabiliti es representi ng an existi ng obligati on which originated from previous events and is likely to reduce future economic beneﬁ ts; the exact amount of such a liability is not known. Reserves are created in order to cover business risk or loss. The valuati on of reserves is made at esti mated amounts required to discharge the existi ng obligati on as of the date of the Financial Statements. Additi on to reserve for silviculture is based on the Annual Silvicultural Project endorsed by the authorised forest manager pursuant to the Act No. 326/2005 Coll. on forest management and state administrati on of forest management. Additi on to reserve is based on the actual volume of felling ti mber compared to a year balance which derives from the Forrest Management Plan. Additi on to reserve is made in the case of exceeding the annual balance of felling ti mber, i.e. as multi plicati on of: - actually extracted volume of felling ti mber which exceeds the year balance calculated as equivalent of deforested area to be necessarily forested and weed-prevented, and

49 Annual Report 2010

- actual mean costs of a common period for forestati on and weed-preventi on of one hectare of deforested area.

Additi on to reserve for silviculture is made the fi rst year for all the acti viti es, and the amount is reduced by forestati on costs for the following fi ve years. Reserves for reti rement benefi ts and employee’s anniversaries are created pursuant to the Act No. 311/2001 Coll., as amended, and under the obligati on assumed under the Collecti ve Agreement, as from 2001 onwards, sti pulat- ing that all the current employees shall be paid reti rement benefi ts and increased reti rement benefi ts which are granted upon the fi rst terminati on of employment aft er they have become eligible to receive old-age pension, early old-age pension or disability pension, or a remunerati on of merit for work done upon the expiry of 25 years of work from the commencement of their fi rst employment, at the 50th birthday and at the fi rst terminati on of employment aft er becoming eligible for the old-age pension, early old-age pension or disability pension. The remunerati on applied to the staff employed as at December 31, 2010. The wage-earning pensioners were under considerati on for the reti rement benefi ts at the ti me of their reti rement only if they att ained the age of reti rement aft er the date of commencement of their employment. Under the Collecti ve Agreement they are enti tled to reti rement benefi ts amounti ng to the average monthly earnings at the terminati on of employment on considering the average earnings received at the ti me of terminati on of employment. The remunerati ons granted at the old-age reti rement and at the life or work anniversaries did not apply to the employees who sati sfi ed the requirements for the occurrence of the enti tlement to a specifi c benefi t by the end of 2010. Reserves for reti rement benefi ts and anniversaries are calculated by an actuary. h) Liabiliti es The valuati on of liabiliti es at their originati on is made at nominal values. The valuati on of liabiliti es at their assumpti on is made at acquisiti on costs. When the inventory check fi nds that the amount of liabiliti es diff ers from the one reported in the accounti ng records, the liabiliti es are reported in the accounti ng records and in the Financial Statements at the valuati on as recognized. i) Deferred Income Tax Deferred income tax refers to: a) temporary diff erences between the book value of assets and book value of liabiliti es reported in the balance sheet, on one hand, and their tax base, on the other hand, b) resources to redeem a tax loss in the future reading that a tax loss may be deducted from the tax basis in the future, c) opti on to defer the unused tax deducti ons and other tax benefi ts to the future years. Before December 31, 2002, deferred tax only referred to temporary diff erences between the book write-off s and tax write-off s. Deferred tax liability and deferred tax receivable were as at January 1, 2003 recalculated using new procedures of accounti ng. Such a part of the deferred tax which resulted from the use of the new procedures was reported under 428 Retained Earnings From Previous Years Account or under 429 Accumulated Loss From Previous Years Account. j) Accrued Expenses and Deferred Revenues Accrued expenses and deferred revenues are reported at the amounts required to observe the policy of subject- matt er and ti me relevance to the accounti ng period. k) Foreign Currency Assets and liabiliti es given in foreign currencies are converted into the Slovak currency using the conversion rate announced by the European Central Bank (in some cases by the Nati onal Bank of Slovakia) which is in force on the date of the accounti ng transacti on, and in the Financial Statements on the date of the Financial Statements. The incurred exchange-rate diff erences are reported with eff ect on the business results (before December 31, 2002: unrealized exchange-rate gains were reported with no eff ect on the business results and unrealized exchange-rate losses were reported under fi nancial costs aft er additi on to reserves under the exchange-rate losses).

50 Annual Report 2010

l) Revenues Revenues from the Company’s own outputs and merchandise do not include a value added tax. The revenues are reduced by discounts and deducti ons (trade discounts, bonus, cash discounts, credit notes, etc.). Revenues are reported as at the date of deliverables (goods or services). Revenues are divided by individual outputs (commoditi es). Substanti al part of revenues is made up of revenues from ti mber put to sale as products. This also includes lumber, leases, and wood-chips. Timber sells by the quality classes for the hardwood and soft wood mass. Revenues from the Company’s own outputs (ti mber logging) at the lands of unknown owners are reported under the accruals and deferrals as deferred revenues. Unless the unknown owner asserts his/her rights, in a three-year- ti me, these items are reported under revenues since the rights become statute-barred. Where the unknown owner asserts his/her rights and proves his/her ti tle to the forest land, the Company must return the land concerned or provide a substi tute therefore, and also must make compensati on for the removals.

Subsidies m) Revenues from the state budget subsidies intended for the acquisiti on of long-term assets and technical evaluati on are reported during the write-off ti me for so acquired long-term assets and so observing the subject-matt er and ti me relevance to the reporti ng of write-off s under the operati ng costs. n) Revenues from the state budget subsidies intended for economic acti vity are reported so as to observe the subject-matt er and ti me relevance to the repording of the costs spent on the specifi c purpose for which the subsidies for economic acti vity were granted.

E. ASSETS SIDE OF THE BALANCE SHEET

1. Long-term intangibles and long-term tangibles

The breakdown of movements of long-term intangibles and long-term tangibles from January 1, 2010 to December 31, 2010 is given in the enclosed table. The long-term tangibles were not encumbered with any security interests established in favour of creditors. The property is insured against damage caused by theft , natural disaster (and other events), the policy value amounts to EUR 348,349. The Company also keeps records and uses such real property where the ti tle has not been yet entered in the Land Register. The total value of the unsett led real property amounts to EUR 124 386 099.00. The Company keeps no accounti ng records for forest growth. Their value as assessed by the expert insti tuti on of the Nati onal Forest Insti tute Zvolen, which was set up by the Decree of the Government of the Czechoslovak Re- public No. 2 of February 22, 1956, amounted as at December 31, 2010 to EUR 3,490,006,757.00. The book value of forest growth was recorded in the sub-balance accounts for the ﬁ rst ti me.

2. Long-term Financial Assets

The breakdown of movements of long-term fi nancial assets from January 1, 2010 to December 31, 2010 is shown in the balance sheet. The balance and movements in fi nancial assets are given here at the acquisiti on costs. In course of the year 2010 there was no change in the volume of fi nancial investment.

3. Inventories

The following table shows the development of a deferred provision during the accounti ng period:

51 Annual Report 2010

Reducti on Write-back As of Dec.31, 2009 Creati on As of Dec. 31, 2010 (additi on) (disposal) (reversal) € € € € € Material and 2 516 3 174 1 676 4 014 merchandise Work-in-process 134 060 431 597 134 060 431 597 Livestock 270 124 410 338 270 124 410 338 Finished goods (ti mber) 341 883 444 968 544 050 242 801 TOTAL 748 583 1 290 077 949 910 1 088 750

Reducti on of uti lity value of inventories was allowed for by creati ng a deferred provision. The uti lity value of inventories was mainly reduced as a result of the reduced acquisiti on costs of material as compared to its present book value and the reduced sale price, i.e. as a diﬀ erence between their valuati on in the accounti ng records and the realisati on value.

The Company provided no security interest in inventories to any third parti es.

4. Accounts Receivable

The following table shows development of a deferred provision during the accounti ng period:

As of Dec. 31, Creati on Reducti on Write-back As of Dec. 31, 2009 (additi on) (disposal) (reversal) 2010 € € € € € Trade receivables 14 747 138 1 563 363 902 905 15 407 596 Other accounts receivable 0 0 0 0 0 TOTAL 14 137 138 1 563 363 902 905 15 407 596

The age structure of receivables is shown in the following table:

At Dec. 31, At Dec. 31, 2009 2010 € € Receivables unmatured 21 910 376 29 167 918 Receivables overdue 17 284 666 17 016 374 TOTAL 39 195 042 46 184 292

The Company provided no security interest in inventories to any third parti es.

5. Financial Accounts

Financial accounts report cash in hand, accounts with banks and securiti es. The Company can dispose of the bank accounts with the bank VÚB, a.s..

6. Current Financial Assets The Company owns no current ﬁ nancial assets.

52 Annual Report 2010

7. Accruals and Deferrals

Individual accrued and deferred items are listed in the following table:

As of Dec. 31, 2009 As of Dec. 31, 2010 € € Accrued costs: 650 290 468 149 - statutory insurance 28 640 135 126 - licences 56 849 20 434 - SEZ, SPP, Telephone 8 566 67 578 - NLC,SOFTWARE – services 47 756 51 644 - enclosure, game-preserve 416 640 188 149 - other 5 749 4 225 - toll-road fee 86 090 993 Deferred income: 55 727 32 757 Premium commission 50 570 32 757 - other 5 157 5 157 TOTAL 706 017 500 906

F. LIABILITIES SIDE OF THE BALANCE SHEE

1. Stockholders´ Equity

As of Dec. 31, . As of Dec. 31, 2009 Distributi on of Other HV in Transfer 2010 € proﬁ t from 2009 2010 € Registered capital 1 410 740 180 -669 770 448 740 969 732 Registered capital 1 438 221 470 -27 481 289 1 410 740 181 Change in registered capital -27 481 290 -642 289 159 -669 770 449 Capital funds 353 161 353 161 Other capital funds 353 161 353 161 Gains of losses from investments Funds from proﬁ t 2 311 261 257 073 -515 420 2 052 914 Statutory reserve fund 1 092 080 16 573 1 108 653 Statutory funds and other funds 1 219 181 240 500 -515 420 944 261 Business results from previous 1 836 605 0 95 611 1 932 216 years – retained earnings Retained earnings from previous 3 004 686 0 +147 812 3 152 498 years Accumulated losses from -1 168 081 -52 201 -1 220 282 previous years Income tax 6 738 366 -6 738 366 0 Business results of current 322 073 -322 073 1 709 431 1 709 431 accounti ng period TOTAL 1 422 301 646 -6 803 366 -670 190 257 1 709 431 747 017 454

53 Annual Report 2010

Changes in the registered capital during 2010 include the following:

Reducti on: Sale of residenti al units ...... 120 731 Revaluati on of lands beyond inventory check ..... 192 597 Resti tuti ons ...... 500 215 Inventory check variances in lands ...... 0 Release of forest roads ...... 949 456 Delimitati on of lands and constructi ons ...... 67 095 Revaluati on of forest lands ...... 673 222 264

As of January 1, 2010, the Company performed a uniform valuati on of forest lands at reproducti on acquisiti on cost according to the conditi on eff ecti ve as of January 1, 2010. This uniform valuati on of forest lands removed the impact of use of incorrect procedures in the past which were manifested in overvaluati on. This uniform valuati on was eff ected on the ground of the Decision of the Ministry of Finance of the Slovak Republic No. MF/020728/2009-74 of August 24, 2009, according to which there were processed grounds for correct identi fi cati on of forest land for the purpose of their uniform valuati on at reproducti on acquisiti on cost as per the conditi on as of January 1, 2010. The valuati on was eff ected in compliance with the Regulati on of the Ministry of Justi ce of the Slovak Republic No. 494/2004 on determinati on of general value of enterprises. The applicati on of revaluati on of forest lands in compliance with the Regulati on cited above resulted in the drop of the book value of the forest lands of the Company in a total value of EUR 673 222 264.36, due to which the balance sheet of the Company reported a drop of value of assets and registered (ordinary) capital of the Company by the same value, and concurrently an increase of the value of the forest lands reported in the sub-balance sheet accounts of the Company the sum of EUR 614 691 928.00.

Total Increase: Lands beyond inventory check ...... 264 798 Delimitati on of lands and constructi ons ...... 2 168 570 Forest growth ...... 0 Inventory check variances in lands ...... 2 750 785

Total: ...... 5 884 153

Total diﬀ erence refers to the reducti on of assets by EUR 669 770 449.00. a) Distributi on of proﬁ t made in 2009 amounti ng to EUR 322 073.00 was reported as follows:

Allocati on to: Reserve fund ...... 16 573 € Social security fund ...... 65 000 € Representati on fund ...... 100 000 € Employee fund ...... 40 500 € Development fund ...... 59 016 €

Total: ...... 322 073 €

54 Annual Report 2010

b) Accounti ng proﬁ t of 2010 amounti ng to 322 073 € is proposed to be distributed as follows:

To be allocated to: Reserve fund ...... 90 000 € Social security fund ...... 100 000 € Representati on fund ...... 200 000 € Employee fund ...... 100 000 € Development fund ...... 350 000 € Extraordinary expenses fund ...... 350 000 € Fund of rewards ...... 25 000 € Retained proﬁ t ...... 494 430 €

2. Reserves a) The breakdown of reserves is given in the following table:

As of Dec. 31, Additi on Reversal Reducti on As of Dec. 31, 2009 2010 € € € € € Statutory reserves Reserves for silviculture 4 176 384 9 400 850 3 801 906 9 775 328

Long-term reserves 2 668 954 1 946 104 37 093 4 577 965 Reserves for reti rement beneﬁ ts 2 407 604 896 498 3 304 102 Passive lawsuits 260 549 1 049 606 36 292 1 273 863 Reserves, other 801 0 0 801 0

Short-term reserves

Non-invoiced deliveries 495 801 307 579 229 687 573 693 Severance pay 76 496 323 357 76 496 323 357 Holiday 1 035 182 1 153 823 1 044 582 1 144 423 Bonus and remunerati on, admin staﬀ 2 509 173 2 419 178 2 545 466 2 382 885 Insurance 1 346 611 1 346 359 1 351 367 1 341 603 Special pay 0 0 0 0 Annual ﬁ nancial statements 99 743 96 011 0 99 743 96 011 Reserves, other 399 030 2 344 356 430 788 2 312 598 Credit notes 24 035 0 22 472 1 563 Remunerati on of members of Superv. Board 1 807 0 0 1 807 0 Passive lawsuits 1 111 239 847 211 264 028 Short-term reserves, total 7 099 117 7 990 663 0 6 649 619 8 440 161

RESERVES, TOTAL 13 944 455 19 337 617 0 10 488 618 22 793 454

55 Annual Report 2010

b) Additi on to reserves for silviculture is based on the annual silvicultural project endorsed by the authorised forest manager pursuant to the Act No. 326/2005 Coll. on forest management and state administrati on of forest management. Additi on to reserves is criti cally determined by the actual amount of removals as compared to the annual balance which is based on the forest management plan. A reserve is added when the annual balance of removals is exceeded, equalling a multi plicati on of the following: - actual ti mber volume logged which is in excessof the annual balance, calculated as the cut-over area equivalent which is required to be planted with trees and nursed and - average actual costs of the current period spent on the forestati on and nursingof a single hectare of the cut-over area. Additi on to reserves was necessitated by preparati on and implementati on of special protecti ve and defensive- measures providing for defence of the forest growth against bark beetles and wood destroying pests, especially at the sites of calamity branches. c) Provision for reti rement beneﬁ ts Pursuant to the Collecti ve Agreement and the Labour Code the Company keeps records of payables toward employees on account of their reti rement. Reti rement beneﬁ ts are calculated using the principles of insurance mathemati cs and the discount rate of 4.5% and the annual pay rise index of 2.5%.

Employees become eligible for:

- reti rement benefi ts – upon the fi rst terminati on of employment aft er they have become eligible to receive the old-age pension or disability pension in the amount equal to their average monthly earnings - increased reti rement benefi ts – providing they terminate the employment by agreement within 3 months aft er they become eligible to receive an old-age pension depending on durati on of their employment with the employer for: - more than 5 through 15 years - more than 15 through 30 years - more than 30 years.

Anti cipated year of the reserve use Short-term reserves will be used during the following year. The use of long-term reserves is esti mated by the weighted mean to last unti l 2025.

3. Payables

The structure of payables (except for bank loans) according to the residual maturity period is listed in the following table:

As of December 31, As of December 31, 2009 2010

€ € Payables unmatured 17 746 263 27 101 874 Payables overdue 215 620 213 884 SHORT-TERM PAYABLES, TOTAL 17 961 883 27 315 758 Payables of residual payable period under 1 year 0 0 Payables of residual payable period 1 - 5 years – social security fund 570 755 566 716 LONG-TERM PAYABLES, TOTAL 570 755 566 716

56 Annual Report 2010

4. Deferred Tax Liability

The calculati on of deferred tax liability is shown in the following table:

Deferred income tax receivables As of 12/31/2009 As of 31/12/2010 Non-redeemed loss 1 635 386 2 161 976 Deferred provisions 3 133 878 3 303 377 Reserves, liabiliti es due 1 529 720 2 148 052 Assets - - 6 298 984 7 613 405 Deferred income tax liabiliti es Assets - 13 096 524 - 15 222 767 Receivables – interests due - 101 210 - 91 428 Reserves - - - 13 197 734 - 15 314 195 Result of deferred income tax - 6 898 750 - 7 700 790

DEFERRED TAX RECEIVABLES TOTAL AS OF DECEMBER 31,2010: 1 314 421 €

Change of deferred income tax receivable:

€ As of December 31, 2009 6 298 984 As of December 31, 2010 7 613 405 Change 1 314 421

DEFERRED TAX LIABILITY TOTALS AS OF DECEMBER 31, 2010: 2 166 461 €

Change of deferred tax liability:

€ As of December 31, 2009 - 13 197 734 As of December 31, 2010 -15 314 195 Change -2 166 461

2009 2010 Deferred tax liability as of January 1 - 6 377 741 - 6 898 750 Gains (+) / costs (-) of deferred tax - 732 420 - 749 840 Accounti ng of retained economic result – - 52 200 Deferred tax liability/receivable as of December 31 - 6 898 750 - 7 700 790

57 Annual Report 2010

INFORMATION ON INCOME TAXES

Economic result prior taxati on 2 459 270 €

Items increasing economic result 12 274 361 €

Items decreasing economic result 17 747 925 €

Tax base - 3 014 294 €

Redeemed loss (year 2007, 2008) 0 €

Income tax due 0 €

Advances paid 0 €

Interest tax deduced 10 535 €

Tax overpayment 10 535 €

Transfer of theoreti cal income tax to reported income tax::

2010 2009 TEUR TEUR % TEUR TEUR % Economic result prior Economic result prior 2 459 270 100,00 % 1 054 494 100,00 % taxati on taxati on of which theoreti cal tax of 19% 467 261 19,00 % of which theoreti cal tax of 19% 200 354 19,00 % Costs not recognized by tax Costs not recognized by 12 274 361 2 332 129 94,83 % 17 961 563 3 412 697 323,63 % laws/ items increasing tax basis tax laws Gains not subject to tax/items -17 747 925 -3 372 106 -137,12 % Gains not subject to tax -9 793 541 -1 860 773 -176,46 % decreasing tax basis -3 014 294 -572 716 -23,29 % 9 222 516 1 752 278 166,17 % Redeemed loss 0 0 Redeemed loss -9 222 516 -1 752 278 Tax due (as reported in Tax 0 -23,29 % Tax due 0 166,17 % Return) Deferred tax (592 account) 749 840 30,49 % Deferred tax 732 420 69,46 % Total tax reported (Proﬁ t 749 840 7,20 % Total tax reported 732 420 235,63 % and Loss Statement)

58 Annual Report 2010

5. Social Security Fund

Additi ons to and drawings from the Social Security Fund during the accounti ng period are listed in the following table:

December 31, 2009 December 31, 2010 € € As of January 1 634 489 570 755 Additi ons debiti ng the costs 492 997 459 390 Additi ons from earnings 99 582 65 000 Other additi ons 50 21 886 Drawing 656 363 550 315 As of December 31 570 755 566 716

6. Bank loans

The Company did not have any loans in 2010.

7. Accruals and deferrals

The structure of accruals and deferrals is shown in the following table:

December 31, 2009 December 31, 2010 € Accrued expenses: 29 125 22 431 Deferred revenues: 29 768 148 31 801 204 - Investment subsidies 12 849 467 12 586 471 - Revenues from non-nati onal unreleased forests 5 656 860 6 865 298 - Deferred revenues, easement 29 768 149 527 979 - Others 20 499 13 596 - Newly determined assets to write oﬀ 27 287 46 465 - Deferred revenues 11 117 060 11 761 395 29 797 273 31 823 635

59 Annual Report 2010

G. REVENUES

1. Revenues from Own Outputs and Merchandise

Revenues from own outputs and merchandise by individual segments, i.e. by types of products and services and by main territories are listed in the following table:

Value of revenues Type of revenues Year 2010 Year 2009 Timber 172 555 481 196 117 244

Other revenues from ti mber producti on 6 731 214 8 414 924

Forest seed management and nursery 1 312 214 1 596 029

Hunti ng 1 857 536 2 064 298

Low-value forest producti on 88 092 48 785

Sale of building material 19 802 9 753

Wood processing sideline operati ons 4 337 750 832 918

Mechanical engineering operati ons 57 477 7 825

Other sideline operati ons 283 348 265 250

Vegetable producti on 116 225 47 777

Livestock producti on 98 310 74 565

Services and operati ons for third parti es 6 532 427 4 323 571

Design operati ons 31 566 0

Other revenues from commercial acti viti es 259 230 279 828

Housing management 1 088 068 917 842

Leisure ameniti es 218 431 211 283

Accommodati on for hunti ng 213 998 185 951

Computer equipment 1 108 0

Other revenues from non-producti ve 22 166 21 579 acti viti es

Revenue from surface water consumpti on 8 792 4 589

TOTAL 195 733 055 215 424 011

60 Annual Report 2010

Main territories

€ Slovakia 183 942 613 205 233 319 Austria 4 533 915 4 265 282 Czech Republic 4 376 818 4 152 886 Cyprus 315 412 0 Greece 172 245 0 Italy 279 662 20 923 Germany 54 984 Hungary 479 810 259 920 Poland 1 632 580 2 234 781 Others 1 436 696 Total 195 733 055 215 424 011

2. Change in Inventories of Own Producti on

Change in inventories of own producti on in the proﬁ t and loss account accounts for EUR -3,710,762. The following table shows the change deriving from the items of the balance sheet::

As of Change December 31, December 31, December 31, Inventories reported in gross values, 2009 2010 2008 2009 2010 i.e. before provisions € € € € € Work-in-process 7 545 177 8 052 124 7 852 127 372 810 -199 997 Finished goods 12 764 655 8 140 972 7 554 228 -4 623 683 -586 744 Livestock 787 426 745 864 757 320 -41 562 11 456 TOTAL 21 231 395 16 938 960 16 163 675 -4 292 435 -775 285

As of Change

December 31, December 31, December 31, 2009 2010 Inventories reported in net values 2008 2009 2010 € € € € €

Work-in-process 7 542 168 7 918 064 7 420 530 372 896 -497 534 Finished goods 11 884 201 7 799 089 7 311 427 -4 085 112 -487 662 Livestock 474 286 475 740 346 982 1 454 -128 758 TOTAL 19 900 655 16 192 893 15 078 939 -3 710 762 -1 113 954

61 Annual Report 2010

3. Capitalizati on

The breakdown of capitalizati on is given in the following table:

2009 2010 € € Long-term tangibles generated by own acti viti es of enterprise 1 380 176 1 199 870 Inventories acquired by own transport 77 959 72 419 Other capitalizati on 117 292 350 781 TOTAL 1 575 427 1 623 070

4. Other revenues from economic acti viti es

The breakdown of other important revenues of the economic acti vity is given in the following table:

2009 2010 € € Revenues from subsidies received 871 458 744 183 Newly determined assets – write-off s 0 4 961 Revenues from Euro funds 504 634 2 931 253 Subsidy write-off s against revenues 268 850 262 995 Revenues for shortages and losses 206 187 310 267 Factoring 568 494 0 Revenues from writt en-off debt 150 296 318 858 Fines and penalti es 188 790 Compensati on for forest clearance 29 306 12 435 Compensati on for air pollutants and restraints of operati ons 153 597 205 267 Compensati on for sale of forest growth and profi t from exchange 2 599 520 Others 396 061 325 934 TOTAL 3 148 883 7 904 463

62 Annual Report 2010

5. Financial revenues

The breakdown of ﬁ nancial revenues is given in the following table:

2009 2010 € € Interest received 2 130 55 697 Revenues from other long-term assets 0 0 Reversal of reserves for ﬁ nancial acti viti es (exchange-rate losses) 0 0 Other revenues from ﬁ nancial acti viti es 0 0 Exchange-rate gains -12 688 1 133 Realized exchange-rate gains 0 Unrealized exchange-rate gains TOTAL -10 558 56 830

6. Extra revenues

The structure of extra revenues is given in the following table:

2009 2010

€ € Indemniﬁ cati on from insurance agency 99 526 440 TOTALS 99 526 440

H. COSTS

1. Costs of services rendered

The breakdown of costs of the services rendered is given in the following table:

2009 2010 € € Transport charges 12 586 533 14 286 150 Incl. ti mber hauling 11 006 180 11 546 998 Skidding 12 686 466 13 455 382 Euro funds 4 083 556 3 407 585 Rent 3 306 486 3 356 644 Services of communicati ons 682 087 772 414 Costs of soft ware 99 743 28 957

63 Annual Report 2010

Services related to property sett lement 178 178 1 133 988 Other services 62 265 208 67 928 674 Incl. silviculture 13 899 900 11 232 278 Timber harvesti ng 12 596 833 13 941 215 Total ti mber producti on 35 678 385 36 844 324 Costs per Branches 1 341 566 1 213 154 Incl. soft ware 1 156 658 1 009 802 Others 184 908 203 352 Reserve for non-invoic. 99 368 130 340 Reserve for statement of ﬁ nance 99 743 95 989 Relaxati on convalescent stays 120 232 111 717 Legal services 391 474 368 197 Costs of goods sold 74 267 77 876 Repairs and maintenance 2 526 887 7 794 089 Incl. additi ons for repairs 2 011 012 Travelling expenses 295 031 339 241 Others 21 866 77 912 TOTAL 100 858 691 114 636 282

2. Other costs of economic acti vity

The breakdown of other important costs of economic acti vity is given in the following table:

2009 2010 € € Fines and penalti es 50 692 346 513 Debt write-oﬀ 572 527 330 612 Property insurance 903 492 847 641 Shortages and losses 985 592 75 004 Indemniﬁ cati on 10 034 3 995 Other 245 995 330 675 Creati on of reserves for silviculture 4 176 384 9 400 850 Creati on of other reserves 125 911 228 940 Reversal of reserves for silviculture -3 740 457 -3 801 906 Compensati on for purchase of forest growth in exchange contracts 2 601 035 TOTAL 3 330 170 10 363 357

64 Annual Report 2010

3. Financial Costs

The breakdown of ﬁ nancial costs is given in the following table:

2009 2010 € € Interest paid 226 105 21 Bank charges 46 249 47 802 Other 5 013 169 Exchange-rate losses 8 647 4 303 TOTAL 286 014 52 295

4. Extra Costs

The breakdown of extra costs is reported in the following table:

2008 2009 € € Natural disaster 26 003 130 359 TOTAL 26 003 130 359

I. INCOME TAXES

€ Business results before tax (earnings) 2 459 270 Due tax for 2010 0 Deferred tax for 2010 - costs 749 840 Total tax recognised (liability) 802 041

Diﬀ erence between the increased deferred tax liability amounti ng to 802 041 € and the costs entered on the account 592 001 amounti ng to 749 840 € is 52 201 €, which is entered on the account 429 001 as an increase of the accumulated loss from previous years. Accounti ng for the deferred tax against account 429 001 resulted from the completed tax control for the year 2002 and 2008 and from the reducti on of the amount of non-redeemed tax loss.

The tax return for 2010 disclosed a tax basis amounti ng to 3 014 294 €. The balance of non-redeemed loss of 2007 is 8 364 822 €. On the account 341-001 the Company recognized a receivable amounti ng to 10 535 €, which is a withholding tax on bank interests. The income revenue authority will refund this amount as tax overpaid for 2010. Non-redeemed tax loss amounts to 11 378 822 €.

65 Annual Report 2010

J. OTHER ASSETS AND LIABILITIES

1. Other conti ngent liabiliti es

The Company has no liabiliti es other than those covered by the routi ne accounti ng and reported in the balance sheet.

Whereas many sub-branches of the Slovak tax law have not been verifi ed enough in practi ce, there is an uncertainty about their applicati on by tax authoriti es. The extent of such uncertainty cannot be quanti fi ed, and the uncertainty shall only disappear aft er all leading cases or offi cial interpretati ons of competent authoriti es become available. The Management of LESY SR, š.p. is aware of no circumstances leading to future occurrence of any considerable costs.

The lands lacking sett lement under law are of the total net book value of 124 386 099 € and may be subject to resti tuti on proceedings.

Torrent regulati on of the total net book value of SKK 128 million will be delimitated by the organizati ons of the state- controlled enterprise of Povodie, š.p. as decided by the Ministry of Agriculture of the Slovak Republic in 1996.

The Company has no liabiliti es other than those covered by the routi ne accounti ng and reported in the balance sheet.

K. INCOME AND BENEFITS OF MEMBERS OF THE COMPANY´S STATUTORY, SUPERVISORY AND OTHER BODIES

The gross income of members of statutory bodies of the Company earned for their acti viti es for the Company in the accounti ng year concerned amounted to 158 686 €. The Supervisory Board’s income amounted to 29 007 € in 2010.

L. ECONOMIC RELATIONS AND RELATED PERSONS OF THE COMPANY

The Company is a state-controlled enterprise and does not report any related persons.

N. FACTS AFTER AND BEFORE THE DATE OF FINANCIAL STATEMENTS

Aft er December 31, 2010 no such events occurred as to have signiﬁ cant inﬂ uence on true representati on of the facts which consti tute an object of accounti ng and would have failed to be entered in the accounti ng records.

66 Annual Report 2010

Report of Movement of non CurentAssets 434 622 700 758 781 276 243 302 826 1 ons Transfers 31.12.2010 31.12.2009 31.12.2010 ti 885 685 0 686 10 ons Reduc ti 236 518 825 17 669 002 084 102 ons Transfers 31.12.2010 31.12.2009 Addi ti on price provisions Adjustments/Deferred Carryingamount ti 699 022 545 0 1 Acquisi ons Reduc ti 965 122 ow as of December 31. 2010 ﬂ 00000 0 00000000000 00000 0 00000000000 0 00000000000 €€€€€ € €€€€€€€€€€€ 69 508 0 52 181 0 17 327 69 508 0 52 181 0 17 327 0 0 24 998 33 678 44 034 0 14 642 0 0 0 0 0 24 998 14 642 31 813 018 495 6 602 805 048 0 568 499 25 211 0 31 647 255 044 166 0 6 602 0 0 25 211 0 166 0 0 0 18 495 255 044 139 153 0 0 0 139 153 139 153 0 0 0 139 153 0 0 208 661 0 52 181 0 156 480 208 661 0 52 181 0 156 480 0 0 9 223 987 1 373 547 633 377 0 9 964 157 4 556 3053 831 965 1 244 713 10 337 492 64 878 8 784 724 0 0 5 384 733 5 736 140 731 574 4 667 682 4 228 017 14 340 0 0 745 914 3 100 392 4 638 820 2 588 408 390 650 0 0 2 979 058 697 398 274 116 0 0 971 514 1 891 010 2 007 544 103 707 506 4 802 677 5 200 697 0 103 309 486 77 135 228 6 883 994 5 236 948 0 78 782 274 26 572 279 24 527 213 1 661 708 878 28 591 575 698 336 987 0 991 963 466 231 753 860 16 424 973 10 768 626 0 237 410 207 1 429 955 018 754 553 259 1 671 141 525 29 ty ti nancial ﬁ on 365 442 610 3 234 749 5 198 409 0 363 478 951 153 648 371 9 510 429 5 455 034 0 157 703 766 211 794 240 205 775 185 ti al control control al on of long- ti ti es and es ti ware 6 390 090 177 849 58 276 0 6 509 664 3 673 211 929 299 58 276 0 4 544 234 2 716 879 1 965 430 vated vated ti ft Other long-term Other long-term securi interests Long-term Silvicultural setsSilvicultural Livestock Other long-term tangibles 35 810Acquisi tangibles term 285 605 0 10 800 4 979 71 665 0 0 30 830 224 740 23 581 215 107 1 211 14 999 71 665 4 979 0 0 158 441 19 813 70 498 12 228 66 299 11 017 Lands of artWorks Construc movables Separate of movables and sets 1 187 973 816 406 567 10 172 180 679 032 479 0 0 519 113 517 paid for Advances tangibles long-term 0 Long-term total tangibles, 0 0 0 406 567 0 0 0 0 0 0 1 187 973 816 519 113 517 0 0 406 567 406 567 Long-term Long-term total intangible, and Stock interests ownership en in controlled and owership Stock in interests with company substan assets Non-current development costs development So rightsValuable Other long-term intangibles long- Purchased 195 180 intangibles term paid forAdvances intangibles long-term 0 0 0 195 180 154 048 41 132 0 0 195 180 total assets, 41 132 0 Establishment costsEstablishment Ac 0 0 0 0 0 0 0 0 0 0 0 0 Statement of non-current assets assets of non-current Statement Name 31.12.2009 Addi

67 Annual Report 2010

Cash fl ow Cash fl ows by using the modifi ed direct method for 2010 (in thousand €)

Accounti ng period Ind. Item name č.r. current previous A. Cash fl ows from core business acti viti es (CBA) x x x A.1. Costs of CBA 1 -200 349,83 -181 113,64 A.2. Cost adjustment of CBA expenses 2 1 944,13 -24 531,78 A.3. Costs of CBA adjusted 3 -198 405,70 -205 645,42 A.4. Revenues from CBA 4 219 830,59 194 974,35 A.5. Adjustment of sales and revenues against CBA 5 -4 985,81 10 644,14 CBA sales and revenues adjusted against A.6. 6 214 844,78 205 618,49 incomes Other income except for specifi c alternati ve A.7. 7 51,20 237,29 items Other expenses except for specifi c alternati ve A.8. 8 -19,77 -166,80 items A* Cash fl ows from operati ons 9 16 470,51 43,56 A.9. Specifi c items 10 -1 035,23 -156,96 A** Cash fl ows before alternati ve items 11 15 435,28 -113,40 A.10. Alternati ve disclosed items 12 3,51 18,00 A.11. Other items aff ecti ng cash fl ows from CBA 13 0,00 0,00 A*** Cash fl ow from CBA, net 14 15 438,79 -95,40 B. Cash fl ows from investi ng acti viti es (IA) x x x B.1. Expense in acquisiti on of fi xed assets 15 -10 339,63 -7 347,06 B.2. Income on sale of fi xed assets 16 5 968,68 9 515,17 Cash fl ows from lease of assembly of B.3. 17 3 794,67 4 662,22 movables and immovables Cash fl ows from credits and lendings to related B.4. 18 0,00 0,00 persons B.5. Specifi c items 19 0,00 0,00 B.6. Alternati ve items disclosed 20 0,00 0,00 B.7. Other items aff ecti ng cash fl ows from IA 21 0,00 0,00 B*** Cash fl ow from investi ng acti viti es, net 22 -576,28 6 830,33 C*** Cash fl ow aft er fi nancing of investment, net 23 14 862,51 6 734,93 D Cash fl ows from fi nancial acti viti es (FA) x x x Change in long-term accounts payable, incl. D.1. 24 0,00 0,00 credits D.2. Cash fl ows resulti ng from stockholder´s equity 25 0,00 0,00 D.3. Specifi c items 26 0,00 0,00 D.4. Alternati ve items disclosed 27 55,68 12,02 D.5. Other items aff ecti ng cash fl ows from FA 28 0,00 0,00 D*** Cach fl ow from FA, net 29 55,68 12,02

68 Annual Report 2010

Result exchange-rate diﬀ erence quanti ﬁ ed as E 30 5,44 4,04 of Dec. 31 E.1. Exchange-rate loss (account 563 AÚ) (-) 31 4,31 -8,65 E.2. Exchange-rate gains (account 663 AÚ) (+) 32 1,13 12,69 Change in cash and cash equivalents F 33 14 923,63 6 750,99 (total A***+B***+D***+E) = (H-G) Cash and cash equivalents, beginning of G. 34 7 783,75 1 032,76 accounti ng period ( as of January 1) Balance of cash and cash equivalents, end of H. accounti ng period (as of March 31) (G-A***- 35 22 707,38 7 783,75 B***-D***-E)

69 Annual Report 2010

Report of independent auditor

PARTNERAUDIT – audit-counselling-accountancy-IPRS

REPORT OF INDEPENDENT AUDITOR

For the Incorporator of the State Enterprise of LESY Slovenskej republiky, Banská Bystrica

We have performed an audit of the Financial Statements, enclosed herewith, of the state-controlled enterprise of LESY Slovenskej republiky, Banská Bystrica (hereinafter referred to as “Company“), which contain the Balance Sheet prepared as of December 31, 2010, Proﬁ t and Loss Statement for the year ended as of December 31, 2010 and Notes which contain an outline of signiﬁ cant accounting principles and accounting methods and further explanatory information.

Responsibility of the Company Management for the Financial Statements The Company Management is responsible for the preparation of the Financial Statements which provide a true and correct account in compliance with the Accountancy Act No. 431/2002 Coll., as amended, and for internal audits which the Company ﬁ nds necessary for the purpose of preparing the Financial Statements which do not contain signiﬁ cant incorrect representations whether resulting form fraud or mistake.

Responsibility of the Auditor Our responsibility is to express our opinion in respect of these Financial Statements on the ground of our audit. We have performed the audit in accordance with the International Auditor Standards. According to these Standards, we have to observe ethical requirements, to plan and perform the audit so that we may become reasonably sure that the Financial Statements are free of any signiﬁ cant incorrect representations.

The audit also includes procedures pursued in order to obtain auditor´s evidence of amounts and data reported in the Financial Statements. The procedures selected depend on the auditor´s judgement, including their assessment of risk of signiﬁ cant incorrectness in the Financial Statements whether resulting from fraud or mistake. In assessing this risk the auditor takes into consideration internal audits relevant for the preparation of the Financial Statements in the accounting entity which provides a true and correct account so that they may propose auditing procedures suitable under the particular circumstances rather than express opinion in respect of the efﬁ ciency of internal controls of the accounting entity. The audit further includes an assessment of suitability of the accounting principles and methods employed, and reasonability of accounting estimates made by the Company Management as well as evaluation of an overall presentation of the Financial Statements.

We believe that the auditor´s evidence which we have obtained provide sufﬁ cient and suitable basis to express our opinion.

Basis of Contingent Opinion In course of the audit there have occurred the following restriction of the extent of auditor´s work in the area of long-term tangible assets: - In accordance with the Forests Act, the Forest Management Plans are reviewed on a yearly basis for 10% of forest lands managed by the Company where this revision includes specifi cation of the area of the lands as well as their valuation in the land registration system of “Pozemkár”. The total area of lands recorded in the land registration system of “Pozemkár” is, in some cases, different from their area recorded in the Land Registry, and it is currently impossible to decide which of them is correct. As of December 31, 2010, on account of such specifi cation, the Company increased the value of its forest lands which was refl ected in the increase of the amount of its registered (registered) capital by EUR 21 782 748.00 In the light of numerous proceedings pending which were initiated by the Slovak government aiming at fi nal specifi cation of the area of land lots within the Slovak Republic (e.g. Register of Re-newed Registration of Land Lots – ROEP, land register accommodations, decision of administrative bodies on the correction of mistakes in the Land Registry, and the like), the Company is currently unable to submit all the documents supporting the overall change ofo the eaeaad area and the e value aueo of respective especeados land lots. In total, oa, their e land ados lots with aoaaeaoa total area of

70 Annual Report 2010

177 837 ha in a total value of EUR 124 386 099.00 which are not recorded in the Title Deed as of December 31, 2010, as land lots of “C” Register of the Cadastral Map. The value of such land lots cannot be currently specifi ed exactly and for this reason the value as well as equity of the Company cannot be correctly reported. - The Company did not enter the buildings in a value of EUR 249 346.00 in the Title Deed as of December 31, 2010. Buildings and lands lots totalling an area of 14 634.51 hectares and an area value of EUR 27 069 094.00 are recorded as disputable property as of December 31, 2010. Proceedings, cadastral proceedings or administrative proceedings are pending in respect of the said buildings and land lots. The Company is currently unable to calculate the value of the land lots which are intended to be recovered by their original owners (via restitutions). The facts above may infl uence the amount of the assets and liabilities, and registered (ordinary) capital reported, which, however, may not be quantifi ed.

Contingent Opinion In our opinion, subject to the effect of the facts mentioned in the section Basis of Contingent Opinion, the Financial Statements provides a true and correct account, in all signiﬁ cant respects, of the ﬁ nancial position of the state-controlled enterprise of LESY Slovenskej republiky as of December 31, 2010, and its economic result for the year ended as of December 31, 2010 in accordance with the Accountancy Act.

Without any further impact on our opinion above we should like to point out the following facts: - in the past the Company´s accounting employed an incorrect procedure in applying price regulations which resulted in overvaluation of the forest land lots. In order to remove this problem the Ministry of Finance of the Slovak Republic issued the Decision No. MF/020728/2009-74 of August 24, 2009 according to which there were processed grounds for exact identiﬁ cation of forest land lots for the purpose of their uniform valuation by reproduction acquisition cost according to the condition as of January 1, 2010. The valuation was performed in accordance with the Regulation of the Ministry of Justice of the Slovak Republic No. 492/2004 on the determination of general value of companies. As a result of the application of the re-valuation of forest land lots in accordance with the said Regulation, the accounting value of the Company´s forest lands dropped in a total amount of EUR 673 222 264.36 which resulted in a drop of value of the Company assets and registered (ordinary) capital by the said amount.

On the ground of this new valuation, the accounting value of the forest growth reported in the sub- balance sheet record of the Company as of January 1, 2010, was increased by EUR 614 691 928.00.

Done at Bratislava, March 16, 2011 Stamp reading: Ofﬁ ce of Supervision of the Performance of Auditing, Partner Audit, s.r.o., License No. UDVA, 283 Stamp reading: Slovak Chamber of Auditors, Ing. Iveta Demčáková, SKAU License No. 892

PARTNER AUDIT, s.r.o Illegible signature Bajkalská 12188/5A Ing. Iveta Demčáková, CA 831 04 Bratislava Auditor in charge of the audit License UDVA No. 283 SKAU License No. 892

71 Annual Report 2010

Supplement to the auditor´s report

SUPPLEMENT TO THE AUDITOR´S REPORT on the veriﬁ cation of the compliance of the Annual Report with the Financial Statements within the meaning of the Act No. 540/2007 Z.z. /Coll./ (Section 23 subsection 5)

Addressed to the Client: Incorporator of the state-controlled enterprise of LESY Slovenskej republiky, Banská Bystrica

1. We have veriﬁ ed the Financial Statements of the state-controlled enterprise of LESY Slovenskej republiky (hereinafter referred to as “Company“) as of December 31, 2010, in respect of which we issued the Auditor´s Report on March 16, 2011, in which we expressed our contingent opinion as well as pointed out the following facts:

Basis of Contingent Opinion In course of the audit there have occurred the following restrictions of the extent of auditor´s work in the area of long-term tangible assets: - In accordance with the Forests Act, the Forest Management Plans are reviewed on a yearly basis for 10% of forest lands managed by the Company where this revision includes specifi cation of the area of the lands as well as their evaluation in the land registration system of “Pozemkár”. The total area of lands recorded in the land registration system of “Pozemkár” is, in some cases, different from their area recorded in the Land Registry, and it is currently impossible to decide which of them is correct. As of December 31, 2010, on account of such specifi cation, the Company increased the value of its forest lands which was refl ected in the increase of the amount of its registered (ordinary) capital by EUR 21 782 748.00 In the light of numerous proceedings pending which were initiated by the Slovak government aiming at fi nal specifi cation of the area of land lots within the Slovak Republic (e.g. Register of Re-newed Registration of Land Lots – ROEP, land register accommodations, decisions of administrative bodies on the correction of mistakes in the Land Registry, and the like), the Company is currently unable to submit all the documents supporting the overall change of the area and the value of respective land lots. In total, this concerns the land lots with a total area of 177 837 ha in a total value of EUR 124 386 099.00 which are not recorded in the Title Deed as of December 31, 2010 as land lots of “C” Register of the Cadastral Map. The value of such land lots cannot be currently specifi ed exactly and for this reason the value as well as equity of the Company cannot be correctly reported. - The Company did not enter the buildings in a value of EUR 249 346.00 in the Title Deed as of December 31, 2010. Buildings and lands lots totalling an area of 14 634.51 ha totalling to EUR 27 069 094.00 are recorded as disputable property as of December 31, 2010. Court, cadastral or administrative proceedings are pending in respect of the said buildings and land lots. The Company is currently unable to calculate an exact value of the land lots which are intended to be recovered by their original owners (via restitutions). The facts above may infl uence the amount of the assets and liabilities, and registered (ordinary) capital reported, which, however, may not be quantifi ed.

Contingent Opinion In our opinion, subject to the effect of the facts mentioned in the section Basis of Contingent Opinion, the Financial Statements provide a true and correct account, in all signiﬁ cant respects, of the ﬁ nancial position of the state-controlled enterprise of LESY Slovenskej republiky as of December 31, 2010, and its economic result for the year ended as of December 31, 2010 in accordance with the Accountancy Act.

Without any further impact on our opinion above, we should like to point out the following facts: - in the past the Company´s accounting had employed an incorrect procedure in applying price regulations which resulted in an overvaluation of the forest land lots. In order to remove this problem the Ministry of Finance of the Slovak Republic issued the Decision No. MF/020728/2009- 74 of August 24, 2009 according to which there were processed grounds for exact identiﬁ cation of forest land lots for the purpose of their uniform evaluation by reproduction acquisition cost according to the condition as of January 1, 2010. The evaluation was performed in accordance with the Regulation of the Ministry of Justice of the Slovak Republic No. 492/2004 on the determination of the general value of companies. As a result of the application of the re- evaluation of forest land lots in accordance with the said Regulation, the accounting value

72 Annual Report 2010

of the Company´s forest lands dropped in a total amount of EUR 673 222 264.36 which resulted in a drop of the value of the Company´s assets and registered (ordinary) capital by the said amount. On the ground of this new evaluation, the accounting value of the forest growth reported in the sub-balance sheet record of the Company as of January 1, 2010, was increased by EUR 614 691 928.00.

2. We have also veriﬁ ed the compliance of the Annual Report with the Financial Statements quoted above. The Company Management is responsible for the correct preparation of the Financial Statements. Our responsibility is to express our opinion, on the ground of the veriﬁ cation, on the compliance of the Annual Report with the Financial Statements.

We have performed the verifi cation in accordance with the International Auditor Standards. These Standards require that the auditor should plan and perform the verifi cation so that they may become reasonably sure that the information reported in the Annual Report and the facts which are subject to being reported in the Financial Statements are in compliance with the Financial Statements concerned, in all signifi cant respects. The information reported at pages 40-69 in the Annual Report have been compared with the information reported in the Financial Statements as of December 31, 2010. We have not verifi ed any data and information other than those obtained from the Financial Statements and book-keeping registers. We believe that the verifi cation performed provides suffi cient and suitable grounds to express our auditor´s opinion.

It is our opinion that the relevant accounting information reported in the Annual Report of the state- controlled enterprise of LESY Slovenskej republiky, Banská Bystrica, provide a true and correct account, in all signiﬁ cant respects, of the Financial Statements as of December 31, 2010, and are in compliance with the Accountancy Act No. 431/2002 Z.z. /Coll./, as amended.

Done at Bratislava, May 12, 2011 Stamp reading: Ofﬁ ce of Supervision of the Performance of Auditing, Partner Audit, s.r.o., License No. UDVA, 283 Stamp reading: Slovak Chamber of Auditors, Ing. Iveta Demčáková, SKAU License No. 892

PARTNER AUDIT, s.r.o Illegible signature Bajkalská 5A/12188 Ing. Iveta Demčáková, CA 831 04 Bratislava Auditor in charge of the audit License UDVA No. 283 SKAU License No. 892

73 Annual Report 2010

Report on the Acti viti es of the Supervisoryvisory Board

Dear colleagues,

In 2010 the Supervisory Board of LESY SR š.p. Banská Bystrica underwent a replacement of its elected as well as appointed Members. In June three elected Members who represented the employer in the Supervisory Board were replaced, and as from October 26 another four Members of the Supervisory Board were removed by the Minister of Agriculture. As from January 1, 2011 the Supervisory Board had the following compositi on: Ing. Michal Slašťan, Chair- man, Ing. Jozef Spevár, Vice-Chairman, Ing. Franti šek Suchanovský, Secretary, and the following Members: Ing. Róbert Repiský, Ing. Ľuboš Németh and Ing. Arpád Kavečanky.

The Supervisory Board evaluates the economic year 2010 as successful. Lesy SR š.p. ended the year with a positi ve economic result, which testi ﬁ es of good management and control work of the whole collecti ve.

The economic result achieved was inﬂ uenced most by increased mean sales of ti mber which reached the value of 41,36 €/m3 in 2010 which is a 5,19 €/m3 increase in a year-over-year comparison. The economic result is inﬂ uenced in a positi ve way also by non-exhausti on of planned silvicultural costs, although they were higher by 3 295 thousand €, as against the previous year, which totalled to 18 093 thousand €.

The Supervisory Board positi vely evaluates the Company’s approach to decreasing liabiliti es among which payables dropped by 599 657 € in a year-over-year comparison. It should be pointed out that the payment discipline of customers has generally improved, subject to some excepti ons.

Dear colleagues, despite of a short period of my offi ce of Chairman of the Supervisory Board I undertake to take my best eff orts to ensure that the Supervisory Board should effi ciently sett le problems arising in Lesy SR š.p. in its favour, since the forest property of Slovakia is one of the most signifi cant natural resources of our country. I should like to thank all the Members of the Supervisory Board for their work and I hope to create together most effi cient team aiming at promoti ng Lesy SR š.p.. Finally, let me wish all of us who sincerely support further advancement of Lesy SR, š.p. good health, lots of personal success and enjoyment of the work done.

Ing. Michal Slašťan Chairman of Supervisory Board Annual Report 2010

Management’sManagem Commentary on the Company’s FinancialFinanc Positi on and Future Expectati ons

The year 2010 was the year of conti nuous revival in the forest, wood-processing and paper and pulp industries, fi nancial consolidati on of the Company as well as a top-record harvesti ng and processing of calamity ti mber. Average sales of ti mber increased by 5.19 €/ m³ compared to the year 2009, which along with the increased extracti on by 25 101 m³ resulted in a year-over-year increase in the revenues by 23.56 million €. On the other hand, however, ti mber supply dropped by 65 230 m³ and the price of ti mber is far from having reached its pre-crisis level. In the past year the Company of LESY SR conti nued implementi ng saving measures. Although the operati onal costs increased in a year-over-year perspecti ve, this fi gure is distorted due to a four-month reducti on of working ti me to four days a week in 2009. Compared to 2008, the total operati onal costs dropped by 14.4 % and direct costs of felling per m³ dropped by 9.9%. A gradual increase of ti mber price along with savings and considerably high felling allowed to increase silviculture costs to 18.09 million € and to create a signifi cant fi nancial reserve of 9.4 million € for silviculture in future years. The factor which substanti ally contributed to improving the economic stabilizati on of LESY SR, š.p. was gradual harmonizati on of its price policy with the ti mber market, improving ti mber triage discipline, as well as focus on the so- luti on of mature liabiliti es. Further improvement of fi nancial situati on was facilitated by the savings resulti ng from the introducti on of electronic procurement of certain goods and services. In 2011 LESY SR will have to handle a signifi cant drop of ti mber harvesti ng to approximately 4.1 million m³ of ti mber. Conditi ons aimed at handling such a drop of sales revenues started to be arranged for by the Company Management already at the end of the year. One of the major measures in this respect was an introducti on of electronic ti mber aucti ons which, according to fi rst results, will bring about not only higher sales revenues in volumes on off er as early as beginning of fi rst quarter 2011, but they will also allow making the prices of ti mber supplied to customers on the ground of long-terms contracts more realisti c. Saving measures are intended to go on aimed at decreasing operati onal costs of the Company. LESY SR will gradually undergo re-structuring whose result will not only include changes of organizati on structure of branch enterprises, but also a drop in their number. The Company, however, defi nitely does not intend to save investments into development and forest silvicuture. Invest- ments into silviculture acti viti es in 2011 are planned in a volume of 21.097 million € which represents a year-over-year increase by 3.004 million €. This opens a space for implementati on of parti cular acti viti es corresponding to the forest’s needs. The Company Management aims at a gradual development of the Company and eliminati on of consequences of the crisis, effi cient administrati on of the property entrusted to it by the state and ensuring sustainable forest management.

75 Annual Report 2010

76 List of Used Abbreviati ons (English translati on of abbreviated expressions)

LESY Slovenskej republiky, š.p. Námestie SNP 8 220100 1 0 975 66 Banská Bystrica

Phone: +421 / 48 / 43 44 111 Fax: +421 / 48 / 43 44 191 E-mail: [email protected] LESYLESY Slovenskej republiky