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Busines reportANNUAL REPORT 2008 DARS d.d. 1

Družba za avtoceste v Republiki Sloveniji DARS d.d.

ANNUAL REPORT

2008 Celje, april 2009

ANNUAL REPORT 2008 DARS d.d. 2

Contents

Letter of the Management Board 4Statement of Compliance with the Corporate Governance Code for Joint Stock Companies 6

INTRODUCTION 13Financial Highlights 13Company Profile 14

General Information 14Activities 14Corporate Governance 14Organisation 15

BUSINESS REPORT 17Mission, Vision, Strategic Goals, and Quality Policy 17

Our Mission 17Our vision 17Strategic goals 17Quality Policy 17

Key Business Events in 2008 18Financial Operations and Financial Risk Management 18Analysis of Business Performance 19Business Activities of the Company 26

Corporate Affairs Division 26Internal Audit Department 26Purchasing Department 26Communications Department 26

Business Division 27Road Planning, Development and Management Department 27International Cooperation Department 27General Affairs Department 27Occupational Health and Safety Department 28

Legal Affairs, Organisation and Human Resources Division 28Legal Affairs Department 28Organisation and Human Resources Department 29

Finance and Marketing Division 30Finance, Accounting and Controlling Department 30Sales and Marketing Department 30

Toll Collection Division 31Motorway Construction and Reconstruction Organisation Division 31

Spatial Planning Department 31Planning and Design Documents Department 32Construction organisation and Supervision Department 33Reconstruction Organisation Department 34Public Procurements Department 35

Motorway Maintenance Division 35Technology and Intelligent Transport Systems (ITS) Maintenance and Development Department 35Telecommunications Project and Telecommunications Department 37Traffic Surveillance and Management Department 37Information Technology (IT) Department 38Motorway Maintenance Department 38


Environmental Management 39Human Resources Management 40

Training 40Human Resources Management in 2008 40

Outlook for the Future 40

ACCOUNTING REPORT 43

STATEMENT OF MANAGEMENT RESPONSIBILITY 101

AUDITOR'S REPORT 103


Letter of the Management Board

Record number of motorway kilometres put into

service and record profit

The 2008 financial year was marked by numerous events that will be recor-ded as milestones in the history of the Motorway Company in the Republic of Slovenia. Almost 91.9 kilometres of new motorways were put into ser-vice, the Company recorded the highest profit in its history, and a vignette tolling system for vehicles with a total allowable weight of up to 3.5 tons was implemented.

With the completion of many new kilometres of motorway in 2008, the Company fulfilled the expectations of users and, in terms of construction speed, even surpassed them in some cases. From June until October inclusive, individual sections of the so-called »Pomur-ka« motorway were put into service, connecting the Hungarian border with the Slovenian coast by a dual carriage motorway. The Dolenjska region received a significant number of new motorway kilometres, and the Šentvid Tunnel was finally given over to traffic just before the tourist season. And unfortunate events can occur during such intensive con-struction works, for example, the falling of plaster in the Šentvid Tunnel. Based not only on this occurrence, but also on an analysis of the reasons for the growing expenses and de-adlocks in construction in the previous year, the Management Board adopted important preventive measures in 2008, aimed at enlarging the role of the contracting authority in the process of motorway construction on one side, and guaranteeing greater respon-sibility on the part of contractors for the quality of executed works on the other side. These measures are now reflected in the currently amended tender requirements, which are aimed at further enhancing competition among bidders and thus reducing prices. In professional circles, we have endeavoured to change the mode of thinking with respect to responsibility for the elimination of defects. In spring, we managed to resolve the problem of sli-ppery concrete carriageways in tunnels that had only been opened for a few years. After strenuous negotiations, an agreement was reached with all parties involved, who agreed to carry out the grooving of carriageways at their own expense and to eliminate the defects. DARS did not have any additional rehabilitation expen-ses in this respect.

The year 2008 was also marked by the introduction of a vignette tolling system for vehicles weighing up to 3.5 tons. Following the adoption of a relevant decision by the Government of the Republic of Slovenia, we managed to carry out all the necessary ac-tivities enabling the timely implementation of the new system in a very short period of time and on a high quality level. These included the printing of vignettes, establishment of a sales network within the country and abroad, training of road supervisors, purchase of required surveillance equipment, changes in the traffic regime and at toll stations, setup of adequate traffic signalisation, adjustment of information support, and the provision of information to domestic and foreign publics. The introduction of the vignette tolling system has primarily brought improvements in motorway traffic fluency, despite the fact that traffic has increased by more than 50% in some sections due to the implementation of this system. A giant step has also been made towards increasing traffic safety, as the system has in particular drawn motor vehicles from regional and local roads back to motorways, which are considerably safer.In the area of maintenance, the total length of motorways and other roads managed at year end was 20% higher than at the beginning of the year. The work of the Motorway Maintenance Division was also marked by growing traffic, with an increased number of required interventions due to traffic accidents and, consequently, a growing need for the re-gular maintenance of carriageways. The Company's ninth motorway maintenance centre began to operate in Murska Sobota. Despite the increased scope of maintenance works, the related expenses in this area did not increase propor-tionally to the new kilometres of motorway, which had a direct impact on the Company's favourable business results. The achievement of our fundamental goals depends primarily on the »internal« regulation and performance of the

Safe driving on the motorway Narodnega heroja Rajka HrastnikElementary SchoolAuthor: Anja Kršlin, 8cMentor: Mira Marinko


Company. 2008 was therefore devo-ted to systematically developing our

organisational culture, and redefining our values, mission and vision. We have

devoted our efforts to becoming a lear-ning organisation with effective and slim

processes. We encouraged team solving of problems and systematic recognition of

opportunities for improvement. The satisfac-tion of employees and users was measured,

and a set of measures for increasing satisfaction was adopted and will be implemented in 2009.

Activities were also initiated for the implementa-tion of a quality management system according to

the ISO 9001 standard. A potential strategy of the Company's further development was prepared, fore-

seeing the gradual transformation of DARS into a hol-ding company with subsidiaries. The final decision will be

made by the Company's owner.

In addition to the achieved goals outlined in the Company's mission, above-average business results were recorded in

the previous year, and are the central focus of this Report. The year 2008 was marked primarily by a 15% increase in re-

venue compared to the previous year, where labour costs and costs of services were lower than the budgeted figures despite

surpassing the 2007 figures by 8% and 21%, respectively. A re-cord number of construction and reconstruction works was com-

pleted, amounting to an impressive EUR 642.6 million. The Com-pany thus concluded the 2008 financial year with a net profit of EUR

11.5 million, which is 9 percent higher than the net profit generated in 2007 and substantially higher than planned. The profit attained in 2008

represents the highest profit in the history of the Company. The Management Board takes this opportunity to thank all those who endeavoured to rationalise our business operations and optimise our business processes throughout the year. For the first time in 2009, the profit will be used to repay the loans raised for the construction of motorways. This is the Company's concrete and measurable contribution towards more sustainable financing of the motorway programme.Although a dynamic business year is behind us, one that has again placed numerous challenges before DARS, the attained results and figures speak for themselves. The many activities that were begun, continued or concluded in 2008 allow us to look toward the future with optimism.

Tomislav Nemec, President of the Management Board

Dr. Žan Jan Oplotnik, Deputy President of the Management Board

Boštjan Rigler, Member of the Board

Aleš Hojs, Member of the Board

Alojz Ratajc, Member of the Board – Workers' Director


Corporate Governance Statement of the Motorway Company in the Republic of Slovenia V In accordance with the provision of paragraph five of Article 70 of the Companies Act and the provisions of the Corporate Go-vernance Code for Joint Stock Companies, the Motorway Company in the Republic of Slovenia, Celje (hereinafter: the Company) hereby presents, as part of the Business Report, the following Corporate Governance Statement of the Motorway Company in the

Republic of Slovenia, Celje.

1. Reference to the Corporate Governance

Code

The Motorway Company in the Republic of Slovenia, Celje hereby

informs its shareholders and the public that it carries out it ope-

rations in line with valid regulations and acts which are applicable

in the Company and also regulate the majority of issues set forth

in the Corporate Governance Code for Joint Stock Companies

(Official Gazette of RS, no. 118/2005 of 17 December 2005, with

amendments, effective as of 5 February 2007).

The Company hereby declares that the Corporate Governance

Code for Joint Stock Companies (hereinafter: the Code) is appli-

cable for the Company and is publicly accessible in the Slovenian

and English languages on the web pages of the Ljubljana Stock

Exchange at the address: http://www.ljse.si/.

2. Deviations of the Company The Company declares that it observes the provisions of the

Code, except for the following deviations or particularities:

The Company declares that it observes the provisions of the

Code, except for the following deviations or particularities:

the key goals of a company should be stated in the company's articles of association, is not observed by the Company. The goals and tasks of the Company are set forth in the Motorway Company in the Republic of Slovenia Act (Official Gazette of RS, no. 57/93, with amendments; hereinafter: MCRSA).

shareholders exercise their rights at general meetings of sha-reholders and each shareholder is entitled to participate in a general meeting, is observed by the Company. The sole share-holder of the Company is the Republic of Slovenia, and a general meeting of the Company is conducted at a session of the Go-vernment of the Republic of Slovenia, which functions in con-formity with the Government of the Republic of Slovenia Act (Official Gazette of RS, no. 4/93, with amendments; hereinafter: GRSA) and the Rules of Procedure of the Government of the Republic of Slovenia (Official Gazette of RS, no. 43/2001, with amendments; hereinafter: RPGRS).

company's management convenes a general meeting and publi-

shes its agenda, is indirectly implemented by the Company. The proposed agenda of a general meeting is delivered by the Com-pany to the competent ministry, which presents the proposal to the Government of the Republic of Slovenia for consideration, in accordance with GRSA and the Rules of Procedure of the Go-vernment of the Republic of Slovenia.

commended that a general meeting be attended by a majority of members of management or supervisory bodies. A general meeting of the Company is a meeting of the Government, and the Government of the Republic of Slovenia may, in line with GRSA and the Rules of Procedure of the Government of the Re-public of Slovenia, call on the management to attend a meeting of the Government, as uninvited persons usually do not attend Government meetings.

2.3.3. of the Code relating to the policy of determining the level of remuneration, compensations and other benefits of manage-ment board members, and believes its own arrangement to be sufficient. Under this arrangement, remunerations to manage-ment board members are regulated by the provisions of indivi-dual contracts concluded between the Company and individual management board members. The employment contract speci-fies the maximum amount of the variable part of remuneration, in line with the criteria defined in the Contract. The Company does not, however, have a special internal rule stipulating the criteria for determining the amount of remunerations, compen-sations and other benefits of management board members, but meaningfully applies the recommendation of the Government of the Republic of Slovenia relating to the remuneration of members of management boards of state-owned companies, and has also acquired the prior consent of the competent mini-ster regarding the amount of remuneration of individual mana-gement board members.

Code relating to share options or comparable financial instru-ments serving as the variable component of earnings are not implemented by the Company, because it does not have a sy-stem or practice of remuneration using share options.

management board member should accept membership in a su-pervisory board only after having informed the president of the supervisory board of the company in which he/she is a manage-ment board member thereof, is not observed by the Company, as there is no prescribed obligation to do so.


duties of the supervisory board are to appoint and supervise the mana-gement board is not observed by the Company in the part relating to the appointment of the management bo-ard, as the Management Board of the Company is appointed by the Gover-nment of the Republic of Slovenia in ac-cordance with the provisions of MCRSA.

stipulating that the supervisory board should use information technology for distributing materials and convening me-etings is not observed by the Company. The Supervisory Board of the Company distributes materials and convenes mee-tings by registered mail with advice of de-livery.

observed by the Company. The Superviso-ry Board of the Company evaluates its work once a year. The evaluation of the perfor-mance of DARS' Supervisory Board includes an evaluation of the composition of the Su-pervisory Board and its operations as a gro-up, along with evaluations of the competen-ces and efficiency of each individual member, an evaluation of the activities of individual committees of the Supervisory Board, an eva-luation of the organisation of work, and measures for improving its effectiveness. The members of the Supervisory Board regu-larly undergo training and attend meetings, and the President of SB encourages them to hold an effective and active position.

Company. Each year the Supervisory Board prepares a written report and presents it to the General Meeting along with the Annual Report.

supervisory board is competent for appointing and recalling management board members, whereby it endeavours to ensu-re the continuity of their work, is observed by the Company, except in the part relating to the appointment and recall of ma-nagement board members, which, under MCRSA, is within the competences of the Government of the Republic of Slovenia and not the Supervisory Board. However, the Supervisory Bo-ard proposes the appointment and recall of Management Board members to the Government of the Republic of Slovenia.

in collecting nominations for the supervisory board, its commit-tee should consider the special, previously determined criteria, which should be specified in the articles of association of the company, is not fully observed by the Company. The Company's articles of association stipulate that the members of the Super-visory Board are required to fulfil the legally prescribed requi-rements, and must also be experts in the areas of economics, technology, commercial law or finance, or have longstanding experience in managerial positions in the economy, but do not define any more detailed criteria such as those specified in item 3.3.6. of the Code.

amount and method of determining individual remunerations of members of the supervisory board are to be determined by resolution of the general meeting or by the articles of asso-ciation is observed by the Company. These are specified in a resolution passed by the Government of the Republic of Slo-venia, as the authority, which defines the maximum amounts of remuneration. This resolution relates to companies that are majority owned by the Republic of Slovenia, which applies for the Company.

that the criteria for assessing the existence of conflicts of inte-rest of members of the supervisory board should be defined in the rules of procedure of the supervisory board, its articles of association, or in the company's special corporate governance code, is not observed by the Company. The Rules of Procedure of the Supervisory Board and the Articles of Association of the Company do not specify the criteria for assessing the existence of conflicts of interest of members of the Supervisory Board.

board are not observed by the Company, as it does not have a one-tier system of management in place, but a two-tier system.

groups or concerns of companies are observed by the Com-pany. In the Company's operations so far, the need for conclu-ding agreements on controlling interests has not yet arisen. If, however, the Management Board or the Supervisory Board assesses that such contracts or agreements need to be conclu-ded in order to ensure transparency, the Company will conclude them.

He’ll be always small in road traffic Selected works of the artistic competition with the award of prizes for elementary school pupils in Slovenia


ditor should be present at the company's general meeting. The Government of the Republic of Slovenia may invite the auditor to attend a meeting of the Government (or general meeting of the Company), in accordance with GRSA and the Rules of Pro-cedure of the Government of the Republic of Slovenia.

company should also provide its public announcements and an-nual report in English, is not fully observed by the Company. The Company does not publish its announcements in English, but subsequently prepares its annual report in English.

nual report and the semi-annual report should be available to shareholders for inspection is observed by the Company. Howe-ver, the Company does not prepare a semi-annual report.

calendar of important announcements has so far not been im-plemented by the Company, because its schedule of business events and other circumstances is so extensive that it may con-sequently have to change its calendar too often.

a company should publish clear information about a propo-sed resolution of the General Meeting on amendments to the company's articles of association or changes in its status, is implemented by the Company, except in the part relating to po-tential investors.

website is observed by the Company almost in its entirety. Ho-wever, the Company has not specified the name of the contact person responsible for investor relations.

3. Main characteristics of the internal control

and risk management systems

Besides the provisions of the Companies Act, which regulates all

commercial companies, the Company is also subject to the provi-

sions of the Motorway Company in the Republic of Slovenia Act,

which, among others, regulates the Company's obligation to keep

separate records of the Company's assets and the assets of the

Republic of Slovenia managed by DARS.

The Company maintains and implements a solid and reliable go-

vernance system, which comprises:

rent and consistent internal relations with respect to responsi-bility;

which the Company is exposed in its operations;

ministrative and accounting procedures (reporting, work proce-dures).

In addition, the Company has organised a special internal audit ser-vice, which carries out reviews, gives proposals, and compiles reports in line with its competences.

4. Information related to takeover legislation

The Republic of Slovenia is the sole (100%) owner of DARS. The

Company does not hold shares in other companies, which, under

the laws regulating takeovers, would represent qualifying intere-

sts.

5. Functioning of the Company's General

Meeting and its key competences; descrip

tion of the rights of shareholders and the

manner of exercising such rights:

The Company has the status of a public limited company functio-

ning as a commercial company under the Companies Act (Official

Gazette of the Republic of Slovenia, no. 42/06, with amendments;

hereinafter: CA-1).

The functioning of the General Assembly and its key competen-

ces, as well as the rights of shareholders and the manner of exer-

cising such rights, are defined in more detail in the Articles of As-

sociation of the Motorway Company in the Republic of Slovenia

(hereinafter: Articles of Association).

The sole founder and shareholder of the Company is the Republic

of Slovenia, which is represented by the Government of the Repu-

blic of Slovenia.

The Republic of Slovenia exercises its shareholder's rights, as

defined in CA-1 and the Articles of Association, at general mee-

tings, which are conducted at sessions of the Government of the

Republic of Slovenia. The Government carries out its business in

accordance with the Government of the Republic of Slovenia Act

(Official Gazette of RS, no. 4/1993, with amendments; hereinaf-

ter: GRSA) and the Rules of Procedure of the Government of the

Republic of Slovenia (Official Gazette of RS, no. 43/2001, with

amendments; hereinafter: Rules of Procedure of the Government

of the Republic of Slovenia).

The powers of the General Meeting under the provision of Article

17 of the Articles of Association include deciding on the following:

the appropriation of accumulated profit, granting of discharge to

members of the Management Board and the Supervisory Board,

the annual report in case it is not approved by the Management

and Supervisory Boards, appointment and recall of members of

the Supervisory Board, amendments to the Articles of Associati-

on, measures for increasing and decreasing share capital, change

in company status, termination of company, appointment of audi-

tors for review of annual report, issues relating to management

of business if so required by the Management Board, consent to

specific types of business transactions if consent is rejected by

the Supervisory Board, remunerations to members of the Supervi-

sory Board and their participation in the profit, and other matters

specified in the Articles of Association or applicable law.


General meetings are convened by

the Management Board of the Com-

pany. General meetings may also

be convened by the Supervisory

Board, particularly when the

Management Board fails to duly

convene a general meeting.

A general meeting is to be

convened in the legally pre-

scribed cases, but at least

once a year, immediately

after receiving the auditor's

report.

6. Compositon

and a ct vities of the

Company's management bodies

Management BoardThe composition and activities of the Management Board are de-

fined in more detail in the Articles of Association of the Motorway

Company in the Republic of Slovenia (hereinafter: Articles of As-

sociation).

As laid down in the Articles of Association, the Management Board

of the Company is comprised of up to five members. A person who

fulfils the requirements specified in Article 255 of CA-1 and Arti-

cle 32 of the Articles of Association may be appointed member of

the Management Board. All members of the Management Board

are appointed by the Government of the Republic of Slovenia for

a period of 5 years. All members of the Management Board are

employees of the Company.

The current Management Board of the Company is comprised of

the following five members: Tomislav Nemec, M.Sc., President,

Dr. Žan Jan Oplotnik, Deputy President, Boštjan Rigler, Member,

Aleš Hojs, Member, and Alojz Ratajc, M.Sc., who was appointed

Workers' Director in accordance with the Worker Participation in

Management Act (Official Gazette of RS, no. 42/07 – UPB1; here-

inafter: WPMA-UPB1).

The Management Board manages the Company in the Company's

best interests, independently and at its own responsibility. The

Management Board is required to carry out its activities with due

care and diligence and protect the Company's business secrets.

For the purpose of implementing its management tasks, the Ma-

nagement Board adopts measures and carries out procedures set

forth in applicable law and the Articles of Association of the Com-

pany.

The Management Board represents and acts on behalf of the Com-

pany. The Company is at all times jointly represented by the Pre-

sident of the Management Board and one member of the Board,

or by the Deputy President of the Management Board and one

member of the Board. The Management Board may

authorise other persons to represent the Com-

pany by means of a generalor special authori-

sation granted within the scope of its powers.

The Management Board adopts resolutions

within the scope of its competences with a

majority vote of all members of the Board.

Each member of the Management Board is

entitled to one vote. In case of a tied vote,

the vote of the President of the Manage-

ment Board is decisive. The Management

Board adopted rules of procedure on its

work.

Supervisory BoardActivities of the Supervisory BoardIn accordance with the Articles of Association of DARS, the Su-

pervisory Board adopts the rules of procedure on its work. The

rules of procedure determine the organisation, method of work,

and decision-making of the Supervisory Board of DARS.

The Supervisory Board of the Company appoints a president and a

deputy president, who are always elected from among the repre-

sentatives of the owner.

The Supervisory Board meets at regular meetings generally held

once monthly, if necessary in the form of a correspondence ses-

sion.

The Supervisory Board constitutes a quorum if, in line with Article

28.2 of the Articles of Association, at least 2/3 of the members

are present at a meeting, including the President or Deputy Pre-

sident of the Supervisory Board or the member authorised by the

President of the Supervisory Board to chair the meeting.

Composition of the Supervisory BoardIn line with Article 25 of the Articles of Association of DARS, the

Supervisory Board of DARS is comprised of nine members. The

General Meeting appoints six members, two of whom are proposed

by the Ministry of Finance and two by the Ministry of Transport.

Three members – representatives of employees are appointed by

the Workers' Council.

As laid down in the Articles of Association of DARS, the Super-

visory Board supervises the management of business operati-

ons conducted by the Company, decides on granting consent to

the Company's business and development plans adopted by the

Management Board, decides on approving the Company's an-

nual report, remunerations to members of the Management Bo-

ard, grants consent to all transactions in a value exceeding EUR

2,500,000, and proposes the appointment and recall of members

of the Management Board to the Government of the Republic of

Slovenia. In line with its rules of procedure, the Supervisory Board


of RS or the Company's General Meeting and, in line with require-

ments, also other acts and documents.

Committees of the Supervisory BoardIn accordance with its Rules of Procedure, the Supervisory Board

may, for the purpose of facilitating its work, appoint from among

its members and/or external experts relevant commissions and

committees, which make meaningful use of the Rules of Procedu-

re of the Supervisory Board in their work.

Committee for Examination of Applications and Preparation of

Proposal for Appointment of Management Board Members

In accordance with the Articles of Association of DARS, the Super-

visory Board proposes the appointment and recall of members of

the Company's Management Board. For this reason, the Supervi-

sory Board appointed a Committee for the Examination of Appli-

cations and the Preparation of a Proposal for the Appointment of

Management Board Members in connection with the tender notice

for the posts of President, Deputy President and two members of

the Management Board.

Finance Council, expert working body of the Supervisory Board of DARSIn accordance with its rules of procedure, the Supervisory Board

of DARS formed a Finance Council as its expert working body. The

Finance Council deals with topics such as: borrowings of DARS

and guarantees, financing of the motorway programme, annual

motorway development and reconstruction plans, stability of the

economic and financial structure of implementation of the Natio-

nal Motorway Construction Programme, report on revenue (inflo-

ws) from toll payments (vignettes), etc.

Expert Contract Award CommitteesThe amendments to the Articles of Association of DARS have inc-

reased the competences of the Supervisory Board regarding the

granting of approvals of all projects with a value exceeding EUR

2,500,000.00. For this reason the Supervisory Board of DARS

appoints an individual member of the Supervisory Board to parti-

cipate in the work of the Expert Contract Award Committee with

respect to a specific project. This method of work allows the Su-

pervisory Board to be fully acquainted with the project's status

prior to deciding on approval.

Audit CommitteeUnder the Companies Act, the Supervisory Board is required to

appoint an audit committee, which to this date has not yet been

appointed.

Organisation of workIn line with its rules of procedure, the Supervisory Board of DARS

appointed from among employees a Secretary of the Supervisory

Board, who is responsible for the work she performs for the Su-

pervisory Board exclusively to the President of the Supervisory

Board. The Secretary of the Supervisory Board coordinates the

work of the Supervisory Board and ensures that the Company's

professional services duly prepare the materials for meetings of

the Supervisory Board, and performs other tasks specified in the

employment contract which relate to the Supervisory Board.

The proposed agenda for a meeting of the Supervisory Board is

prepared by the Secretary of the Supervisory Board, taking into

account the requests of the Supervisory Board for the preparation

of certain materials, as well as of the Management Board for the

examination of specific materials at a Supervisory Board meeting.

Both the President of the Supervisory Board and the President

of the Management Board cooperate in the creation of the final

agenda. On the basis of a thus reconciled agenda, the professional

services of the Company prepare adequate materials for discussi-

on at the next meeting of the Supervisory Board.

The Supervisory Board generally meets at the DARS branch office

in Ljubljana. Whenever a field inspection is required in order to

deal with a certain issue in the field, the Supervisory Board con-

ducts a field meeting.

In accordance with the Corporate Governance Code for Joint

Stock Companies,, which was jointly phrased and adopted by the

Ljubljana Stock Exchange, Inc., Ljubljana, the Association of Su-

pervisory Board Members of Slovenia, and the Managers' Associa-

tion of Slovenia on 18 March 2004, and amended on 14 December

2005 and on 5 February 2007 (item 3.1.10.), the Supervisory Bo-

ard evaluates its work once a year.

Ljubljana, 19 March 2009 Ljubljana, 28 April 2009


Safety of young people and all participants in road traffic Šmarjeta Elementary SchoolAuthor: Nina Kermc, 7. a Mentor: Vida Cizel

ANNUAL REPORT 2008 DARS d.d. 12 Introduction

Safety belt is your friend Toneta Okrogarja (Zagorje ob Savi) Elementary SchoolAuthor: Sara Kovač, 7cMentor: Jadranka Kačič

IntroductionANNUAL REPORT 2008 DARS d.d. 13

1 INTRODUCTION

Financial Highlights

2008 2007

Share capital EUR 212,823 EUR 212,823

Total equity as at 31 December EUR 55,271,541 EUR 49,023,704

Total assets as at 31 December EUR 5,632,732,450 EUR 5,127,370,135

Ownership Fully (100%) owned by the Republic of Slovenia Fully (100%) owned by the Republic of Slovenia

Share ownership structure Fully (100%) owned by the Republic of Slovenia Fully (100%) owned by the Republic of Slovenia

Net profit or loss EUR 11,499,906 EUR 10,504,137

Completed motorway construction and reconstruction works* EUR 639,226,521 EUR 609,510,986

Total length of motorways and other roads opened for traffic:

- motorways (2 by 2 lanes)- first half of 4-lane motorway - enlargement into 2 by 2-lane motorway- expressways (2 by 2 lanes)- other roads - link roads

91,9 km0,0 km0,0 km0,0 km

0,0 km

0,0 km2,4 km2,3 km1,2 km

0,0 km

Total length of motorways managed and maintained at year end

Total length of roads managed and maintained at year end:- motorways and expressways- junctions- connecting roads- link roads - tunnels

628,455 km

527,728 km16,763 km9,829 km

149,616 km20,435 km

525,398 km

438,245 km13,351 km9,297 km

128,592 km17,958 km

Total number of staff at year end 1,209 1,128

* Note: Completed motorway construction and reconstruction works applies to completed works and liabilities from loans and bonds under the provisions of the »Agreement on the performance of tasks relating to motorway construction and reconstruction, financial engineering and related tasks under the National Motorway Construction Programme«.

The values of completed construction and reconstruction works include VAT.

ANNUAL REPORT 2008 DARS d.d. 14 Introduction

Company Profile

General Information

Company name Družba za avtoceste v Republiki Sloveniji d.d.(Motorway Company in the Republic of Slovenia)

Abbreviated name DARS d.d.Registered office Ulica XIV. divizije 4, 3000 CeljePhone 03/426-40-71Fax 03/544-20-01Ljubljana branch office Dunajska 7, 1000 LjubljanaPhone 0/300-99-00Fax 01/300-99-01E-mail [email protected] address www.dars.siIncorporated Disstrict Court of Celje, entry no. 10615800Registration number 5814251VAT Identification number SI92473717Share capital EUR 212,823.00Management Board Tomislav Nemec, M.Sc., President

Dr. Žan Jan Oplotnik, Deputy PresidentBoštjan Rigler, MemberAleš Hojs, MemberAlojz Ratajc, Member – Workers' Director

Activities

The main business activities of DARS are laid down in MCRSA (organisation and management of motorway construction, and the management and maintenance of constructed motorways) and in the Articles of As-sociation of the Company.DARS:

- performs, on behalf and for the account of the Republic of Slovenia, tasks related to spatial planning and motorway positioning, as well as tasks related to the acquisition of land and other real property for the needs of motorway construction;

- performs, in its own name and for the account of the Republic of Slovenia, tasks related to the con-struction and reconstruction of motorways under the National Motorway Construction Programme (NMCP), and to financial engineering of funds earmarked for the construction of motorways and the repayment of loans raised for their construction;

- in its own name and for the account of the Republic of Slovenia, manages and has at its disposal cer-tain items of real property that were acquired for the purpose of motorway construction, but were not fully utilised for such construction or are not required in their entirety for motorway operation and maintenance;

- operates and maintains motorways constructed in its own name and for the account of the Republic of Slovenia. The motorways are the property of the Republic of Slovenia.

Corporate Governance

The managing bodies of the Company are: the General Meeting, the Supervisory Board, and the Manage-ment Board.

The Government of the Republic of Slovenia acts as the General Meeting of DARS, since the Company is fully owned by the Republic of Slovenia.

IntroductionANNUAL REPORT 2008 DARS d.d. 15

The Supervisory Board of DARS is comprised of up to nine members, of whom three are the representatives of employees in the Company.

In 2008 the Supervisory Board was comprised of the following members: Franc Slak as President of the Supervisory Board, Dr. Tomaž Vidic as Deputy President, Robert Sever, Uroš Rožič, M.Sc. (appointed on 22 January 2008), Simon Ošo, Franc Capuder, M.Sc., Vito Meško, Darko Kodrič, Dimitrij Likar (term expired on 10 April 2008), and Matej Jelušič (appointed on 10 April 2008). The term of office of Franc Slak, President of the Supervisory Board, expired on 9 December 2008.

The Management Board of DARS is comprised of up to 5 members. These are: the President of the Mana-gement Board, the Deputy President of the Management Board responsible primarily for finance, financial engineering and marketing, a member of the Board responsible primarily for construction and reconstruc-tion, a member of the Board responsible primarily for maintenance, and the Workers' Director – member of the Board.

In 2008 the Management Board of DARS was comprised of Tomislav Nemec, M.Sc. as President, Dr. Žan Jan Oplotnik as Deputy President, and members Boštjan Rigler, Aleš Hojs, and Alojz Ratajc, M.Sc., as Workers' Director.

Organisation

The organisation of the Company is based on three principal activities: organisation of motorway constructi-on and reconstruction, toll collection and motorway maintenance, and several business functions.

OPERATIONS DIRECTOR

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ANNUAL REPORT 2008 DARS d.d. 16 Business report

Choose safety Vicenzo e Diego de Castro (Piran) Elementary School Author: Lara Pirjevec, 7aMentor: Nada Dollore


2 BUSINESS REPORT

Mission, Vision, Strategic Goals, and Quality Policy

Our Mission

The mission of DARS is to implement national motorway programmes and manage the motorway network by providing quality services to our users.

Our vision

The vision of DARS is to become a leading, business-oriented, successful and market-regulated commercial company for the management of modern infrastructure networks in line with the expectations of users.

Strategic goalsThe strategic goals of DARS are:

- to preserve and develop a leading position in the management and maintenance of motorways in Slovenia;

- to become a reference company in state ownership specialising in the organisation of motorway con-struction and other infrastructure projects;

- to ensure, by rational and economically justified development of the toll collection system, the maximum share of concession funds required for the repayment of loans raised for motorway construction;

- to strengthen the financial engineering of debt management;- to ensure increasingly higher traffic safety and fluency on motorways and expressways managed and

maintained by DARS;- to sustainably develop and improve standards and procedures for the operation and maintenance of

motorways; - to place the users of motorways and their desires and needs, as well as environmental concerns, at

the center of its business operations; - To optimise business processes and, via the governance system, provide a creative working enviro-

nment for the attainment of excellent business results.

Quality Policy

Through the professional and responsible performance of tasks, the Management and staff of the Company will devote their best efforts to fulfilling the requirements and expectations of our clients, employees, owner, the environment, and society. Our business achievements are not left to chance, but are carefully planned, managed and supervised.Our goal is to offer high-quality and integral services. This is being achieved in the following ways:

- making responsible decisions based on facts;- establishing appropriate conditions and relations within and outside the Company;- developing competences and encouraging innovativeness among staff;- consistently complying with legislation and development policies;- striving towards slim, effective and safe processes;- carefully selecting qualified partners;- supporting the development of the profession and acquiring new knowledge, and- committing ourselves to environmental protection and friendly mutual relations.


Key Business Events in 2008- In 2008 the following motorway sections in a total length of 91.9 km were brought into service:

MarchThe Government of RS approved the Plan for the Implementation of a Vignette Tolling System in the Republic of Slovenia, and among others passed a resolution specifying that the payment of road tolls using vignettes shall be applicable for vehicles of classes R1 and R2, effective as of 1st July 2008.DARS concluded a loan agreement with Nova Ljubljanska banka in the amount of EUR 145 million to finance the construction of motorway sections under the National Motorway Construction Pro-gramme.

AprilThe Government of RS adopted the 2008 Annual Motorway Development and Reconstruction Plan.

MayThe National Assembly of RS approved the 2008 Annual Motorway Development and Reconstruc-tion Plan.

JuneThe National Assembly of RS passed the Act on tolls for vehicles with a maximum allowable weight exceeding 3,500 kg (ATollV).

JulyOn 1st July 2008, a vignette tolling system was implemented for vehicles of classes R1 and R2.The Supervisory Board of DARS approved the 2008 Business Plan of DARS.

SeptemberDARS concluded a loan agreement with KfW Frankfurt in the amount of EUR 267.5 million to finance the construction of motorway sections under the National Motorway Construction Programme.

Financial Operations and Financial Risk Management In its operations, the Company pursued the goal of minimising operating and financial risks. On the expense side, operating risks were hedged by security instruments requested from suppliers (primarily first-class guarantees and contractual penalties imposed in cases of delayed completion of works), and on the revenue side by closely following traffic flow forecasts and toll collections, as well as forecasted vignette sales. The demand for motorway utilisation services has a low price elasticity and the responses of users are foresee-able, along with the still acceptable risk of incorrect estimates.The Company carried out its financial operations in cooperation with several international and foreign com-mercial banks, and with practically all Slovenian banks. Such diversification of operations effectively reduces the risk of overdependence on individual institutions and increases operating competitiveness.The Company reduced its financial risks by means of several instruments, including both natural protection and the use of derivative financial instruments. As at 31 December 2008, the Company had 45.8% of its interest rate exposure secured. In 2008 the Company additionally secured EUR 20 million of its debt port-folio against interest rate risks. Currency risks were secured primarily through natural protection, i.e. cash flow management. Such protection is possible because the Company operates in only a limited number of


currencies and carries out the majority of its transactions in the EUR currency.Liquidity risks were reduced by effective liquidity management and the formation of a highly liquid invest-ment portfolio, in line with the investment policy defined by MCRSA.In accordance with the Motorway Company in the Republic of Slovenia Act, the Company's investment policy in 2008 was focused on debt instruments issued by commercial banks. Within the scope of liquidity mana-gement, the Company optimised cash flows through the so-called construction account and the account of DARS.As part of its agency activities under the Agreement on the Performance of Contracts, the Company signed in 2008 two long-term borrowing agreements, one with Nova Ljubljanska banka, d.d. and the other with the German bank KfW.

Analysis of Business PerformanceCompleted Construction and Reconstruction Works on Motorway Sections

In 2008, the completed construction and reconstruction works on motorway sections (excluding agent compen-sation and liabilities from borrowings and bonds) totalled EUR 639,226,521 gross, which is 5 percent below the values forecasted in the Annual Motorway Development and Reconstruction Plan for 2008 (AMDRP). The new motorway sections constructed in 2008 reached a total gross value of EUR 526,115,025.

Planned and completed construction and reconstruction works on motorway sections in 2008

Motorway section Expenses, excl. cost of finance

Planned expenses, excl. cost of finance

IndexCompleted/

scheduledCost of finance Expenses, incl.

cost of finance

Planned expenses, incl. cost of

finance

IndexCompleted/

scheduled

LENART - BELTINCI: Lenart - Spodnja Senarska 9,109,016.78 11,556,000.00 78.82 1,095,815.92 10,204,832.70 13,897,889.00 73.43

BELTINCI - PINCE: Beltinci - Lendava 36,863,294.71 39,145,200.00 94.17 2,057,279.69 38,920,574.40 41,360,697.00 94.10

LENART - BELTINCI: Cogetinci - Vučja vas 21,929,603.50 19,210,500.00 114.15 4,627,719.55 26,557,323.05 25,072,154.00 105.92

HAJDINA - ORMOŽ: Gorišnica - Ormož 179,884.39 4,831,000.00 3.72 0.00 179,884.39 4,831,000.00 3.72

AC PESNICA - SLIVNICA: Zrkovska cesta - Ptujska cesta 17,583,577.46 19,217,478.00 91.50 77,967.97 17,661,545.43 19,217,478.00 91.90

PESNICA - SLIVNICA: Pesnica - Zrkovska cesta 33,601,461.29 35,891,300.00 93.62 0.00 33,601,461.29 35,891,300.00 93.62

BELTINCI - PINCE: Lendava - Pince 27,373,167.56 25,791,000.00 106.13 3,202,979.71 30,576,147.27 28,424,389.00 107.57

AC PESNICA - SLIVNICA: Nova Zrkovska c. od km 0,87 do km 3,8

1,103,183.99 4,081,000.00 27.03 956,890.14 2,060,074.13 4,438,468.00 46.41

LENART - BELTINCI: Spodnja Senarska - Cogetinci 50,306,991.09 41,802,500.00 120.34 2,459,564.60 52,766,555.69 45,091,935.00 117.02

SLIVNICA - GRUŠKOVJE: Slivnica - Draženci 99,471,540.69 69,484,297.00 143.16 4,128,525.89 103,600,066.58 74,063,346.00 139.88

SLIVNICA - GRUŠKOVJE: Draženci - Gruškovje, pododsek MMP Gruškovje - državna meja (dodatni program)

3,684,690.78 2,372,000.00 155.34 0.00 3,684,690.78 2,372,000.00 155.34

SKUPAJ PROJEKT 1 301,206,412.24 273,382,275.00 110.18 18,606,743.47 319,813,155.71 294,660,656.00 108.54

RAZDRTO - VIPAVA: Rebernice 10,448,140.20 19,187,656.00 54.45 6,693,553.72 17,141,693.92 23,435,964.00 73.14

AC KLANEC - ANKARAN: Navezava na Luko Koper I. faza 6,722,767.55 5,832,724.00 115.26 319,485.29 7,042,252.84 7,093,511.00 99.28

AC KOPER - IZOLA 22,922,444.27 24,870,639.00 92.17 3,608,158.74 26,530,603.01 26,394,128.00 100.52

PLOŠČAD BS BERTOKI 0.00 114,667.00 0.00 0.00 0.00 114,667.00 0.00

SKUPAJ PROJEKT 4 40,093,352.02 50,005,686.00 80.18 10,621,197.75 50,714,549.77 57,038,270.00 88.91


ŠENTVID - KOSEZE 49,651,965.89 36,400,000.00 136.41 3,593,425.21 53,245,391.10 40,745,744.00 130.68

BIČ - HRASTJE: Ponikve - Hrastje 16,799,232.20 31,503,000.00 53.33 1,375,442.82 18,174,675.02 32,571,443.00 55.80

ŠMARJE SAP - VIŠNJA GORA: Ploščad za bencinski servis Cikava

63,004.85 272,000.00 23.16 0.00 63,004.85 272,000.00 23.16

PERAČICA - PODTABOR 2,760,006.58 6,715,077.00 41.10 47.00 2,760,053.58 8,389,994.00 32.90

AC VRBA - PERAČICA 22,546,515.45 29,683,121.00 75.96 1,173,088.14 23,719,603.59 31,444,283.00 75.43

AC HRASTJE - KRONOVO: Lešnica - Kronovo 17,287,548.78 17,466,296.00 98.98 1,254,359.98 18,541,908.76 18,852,394.00 98.35

BIČ - HRASTJE: Pluska - Ponikve 37,742,847.04 40,970,000.00 92.12 1,339,835.17 39,082,682.21 42,046,721.00 92.95

PROJECT 6 – TOTAL 146,851,120.79 163,009,494.00 90.09 8,736,198.32 155,587,319.11 174,322,579.00 89.25

TOTAL NEW MOTORWAYS 488,150,885.05 486,397,455.00 100.36 37,964,139.54 526,115,024.59 526,021,505.00 100.02

TOTAL FINISHING WORKS ON MOTORWAYS CONSTRUCTED AFTER 1994

22,228,299.27 22,721,286.00 97.83 2,192,365.32 24,420,664.59 22,730,264.00 107.44

TOTAL FINISHING WORKS ON MOTORWAYS CONSTRUCTED BEFORE 1994

134,673.12 10,172.00 1,323.96 0.00 134,673.12 10,172.00 1,323.96

ELABORATION OF DESIGN AND OTHER DOCUMENTS FOR MOTORWAY SECTIONS AFTER 2008

4,003,636.51 9,700,000.00 41.27 0.00 4,003,636.51 9,700,000.00 41.27

ACQUISITIONS OF LAND AND OTHER REAL PROPERTY FOR MOTORWAY SECTIONS AFTER 2008

189,295.71 2,600,000.00 7.28 0.00 189,295.71 2,600,000.00 7.28

Čeplje roundabout 416,206.82 320,000.00 130.06 0.00 416,206.82 320,000.00 130.06

Šmarje - Dragonja: construction of bypass road past village of Dragonja near the international border crossing Dragonja

1,974,554.84 4,720,000.00 41.83 0.00 1,974,554.84 4,720,000.00 41.83

Construction of motorway link road Naklo 0.00 2,000,000.00 0.00 0.00 0.00 2,000,000.00 0.00

Rehabilitation of state roads 6,000,000.00 6,000,000.00 100.00 0.00 6,000,000.00 6,000,000.00 100.00

Ig Training Centre 0.00 200,000.00 0.00 0.00 0.00 200,000.00 0.00

Abolition of international border crossings in the areas of motorways and expressways

341,486.37 900,000.00 37.94 0.00 341,486.37 900,000.00 37.94

Construction of additional parking areas for heavy-duty vehicles in the 5th European transport corridor

9,655.33 2,900,000.00 0.33 0.00 9,655.33 2,900,000.00 0.33

Implementation of additional sound protection measures in the 5th and 10th European transport corridors

0.00 200,000.00 0.00 0.00 0.00 200,000.00 0.00


Planned expenses,

excl. cost of finance

IndexCompleted/


cost of finance

Planned expenses, incl. cost of finance

IndexCompleted/

scheduled


Traffic Surveillance and Management Centre with Toll Collection Centre Dragomelj

3,501,937.76 3,000,000.00 116.73 0.00 3,501,937.76 3,000,000.00 116.73

Activities within the scope of international projects and EU programmes

1,149,591.91 1,500,000.00 76.64 0.00 1,149,591.91 1,500,000.00 76.64

Quality control and quality approval of works 114,183.83 250,000.00 45.67 0.00 114,183.83 250,000.00 45.67

Review of design and technical documents 1,049,021.17 900,000.00 116.56 0.00 1,049,021.17 900,000.00 116.56

Assurance of health and occupational safety 215,428.53 292,105.00 73.75 0.00 215,428.53 292,105.00 73.75

OTHER ITEMS 14,772,066.56 23,182,105.00 63.72 0.00 14,772,066.56 23,182,105.00 63.72

TOTAL MOTORWAY DEVELOPMENT 529,478,856.22 544,611,018.00 97.22 40,156,504.86 569,635,361.08 584,244,046.00 97.50

DEVELOPMENT OF CONNECTING ROADS WITHIN THE SCOPE OF THE MOTORWAY PROGRAMME

8,389,267.15 11,504,991.00 72.92 0.00 8,389,267.15 11,505,025.00 72.92

MOTORWAY RESURFACING AND REPLACEMENT OF FIXTURES

51,777,973.33 60,720,000.00 85.27 0.00 51,777,973.33 60,720,000.00 85.27

NEW ELECTRONIC TOLL COLLECTION SYSTEM 551,456.20 3,200,000.00 17.23 0.00 551,456.20 3,200,000.00 17.23

TRAFFIC SURVEILLANCE AND MANAGEMENT SYSTEM (ITS) 5,486,747.91 11,304,534.00 48.54 127,639.92 5,614,387.83 11,304,534.00 49.66

VOGRSKO TOLL STATION 2,230.21 0.00 - 0.00 2,230.21 0.00 -

Reconstruction of existing toll stations due to introduction of vignettes

3,255,845.16 0.00 - 0.00 3,255,845.16 0.00 -

TOTAL (excl. of agent compensation) 598,942,376.18 631,340,543.00 94.87 40,284,144.78 639,226,520.96 670,973,605.00 95.27

AGENT COMPENSATION 35,268,243.14 34,660,596.00 101.75 0.00 35,268,243.14 34,660,596.00 101.75

TOTAL MOTORWAY DEVELOPMENT AND RECONSTRUCTION

634,210,619.32 666,001,139.00 95.23 40,284,144.78 674,494,764.10 705,634,201.00 95.59

Liabilities from borrowings (repayment of principal and payment of interest)

134,731,563.57 126,372,994.00 106.61 0.00 134,731,563.57 126,372,994.00 106.61

TOTAL CONSUMPTION 768,942,182.89 792,374,133.00 97.04 40,284,144.78 809,226,327.67 832,007,195.00 97.26

COSTS OF LIQUIDITY LOAN AND OVERDRAFT 27,000,000.00 0.00 - 0.00 27,000,000.00 0.00 -

Note: Amounts include VAT.

Completed motorway construction and reconstruction works refers to completed works and liabilities from borrowings and bonds in accordance with the

provisions of the Agreement on the Performance of Contracts relating to the construction and reconstruction of motorways, financial engineering, and other

related tasks under the National Motorway Construction Programme.

The agent compensation item includes the final settlement of compensation for 2007 in the amount of EUR 607,647.38.


Planned expenses,

excl. cost of finance

IndexCompleted/


cost of finance

Planned expenses, incl. cost of finance

IndexCompleted/

scheduled


Revenue of DARS

2008 Revenue

Type of revenue 2008 v EUR

2007 v EUR

Indeks 2008/2007

Strukturni deleži za leto 2008

Revenue under the Agreement on the Performance of Contracts in line with the National Motorway Construction Programme

27.401.614 26.398.091 104 12

Tolls collected, rentals, motorway closures, extraordinary freight transports and other revenue 212.872.021 184.726.120 115 87

Tolls collected 201.619.791 174.719.492 115 82

Rentals 4.883.678 4.380.392 111 2

Motorway closures and Extraordinary freight transports 1.989.330 1.406.321 141 1

Easements 551.226 162.073 340 0

Lease of optical fibre/telecommunications lines 796.193 427.929 186 0

Other sales revenue 665.328 1.385.599 48 1

Other operating revenue 2.366.476 2.244.314 105 1

Financial revenue 1.467.801 1.381.930 106 1

Other revenue 95.733 85.167 112 0

TOTAL 241.837.168 212.591.308 114 100

In the 2008 financial year, the revenue of DARS amounted to EUR 241,837,168, which is 14 percent above the 2007 figure.

- Revenue under the Agreement on the Performance of Contracts totalled EUR 27,401,614 and increased by 4 percent in comparison with 2007.

In line with the Agreement on the Performance of Contracts, DARS is entitled to an advance payment of compensation in the amount of 5.49% of the value of all works specified in the current Annual Motorway Development and Reconstruction Plan (hereinafter: AMDRP).

- The growth of revenue was largely the result of increased tolls collected, which amounted toEUR 201,619,791 and were 15 percent above the 2007 figure.

- Rental revenue amounted to EUR 4,883,678 and was mostly generated from the lease of areas ad-jacent to motorways to be used for accompanying activities alongside motorways – the performance of catering activities and the erection of petrol service stations (95 percent), and the remainder from the lease of land (compensations for land use) for the erection of base stations and mobile telephone repeaters. Rental revenues increased by 11 percent in comparison with 2007.

- Revenue from motorway closures and extraordinary freight transports amounted to EUR 1,989,330 in 2008, which is 41% above the 2007 figure. Revenue from motorway closures

included closures of individual motorway sections due to reconstruction works or the elimination of defects within the warranty period. Revenue from extraordinary freight transports comprised reve-nue from extraordinary transports on motorways.


- Easement accounted for revenue in the amount of EUR 551,226, which exceeded the 2007 figure by 240 percent. Revenue under this item was generated from the granting of easements allowing interventions in motorway areas and on other land managed by the Company. The high increase in this item is largely owing to four major interventions in motorway areas, which represented 70% of the revenue generated from the granting of easements.

- Revenue from the lease of telecommunications lines was generated in the amount of EUR 796,193, and increased by 86 percent over 2007, when they amounted to EUR 427,929. It should be noted that revenue from the lease of telecommunications lines were recorded in 2007 for the first time in the month of April.

- Other sales revenue in the amount of EUR 665,328 comprised revenue from the sale of electronic tags, revenue from other services in the domestic market, revenue from sale of waste materials, revenue from holiday facilities, revenue from sale of other goods, revenue from snow-ploughing and accident rescue activities, advertising, etc. This revenue decreased by almost 50% in comparison with 2007.

- Other operating revenue in the amount of EUR 2,366,476 comprised revenue from received insu-rance payments for the elimination of damage on motorway sections and facilities, revenue from the reversal of provisions, operating revenue from revaluation – sale of fixed assets, etc. Other operating revenue increased by 5 percent in comparison with 2007.

Financial revenue amounted to EUR 1,467,801, and increased by 6 percent over 2007.

- EUR 1,428,637 or 97 percent of financial revenue represented financial revenue from loans gi-ven to others, generated by depositing short-term surpluses of liquid funds with banks;

- EUR 39,164 of the financial revenue represented financial revenue from operating receivables due from others, and comprised default interest charged and exchange losses/gains.

Other revenue amounted to EUR 95,733 in 2008, and comprised compensation for damages under litiga-tion and contractual penalties, bonuses for surpassed employment quotas for disabled persons, refund of charges for building land use, etc. Other revenue increased by 12 percent over 2007.

Expenses of DARS

2008 Expenses

Type of expense 2008 (EUR)

2007 (EUR) Index 2008/2007 in %)

Labour costs 29,736,245 27,557,899 108 13

Costs of materials and cost of goods sold 10,322,996 9,487,267 109 5

Costs of services 35,450,168 29,264,001 121 16

Concession tax 142,385,612 122,637,200 116 63

Writedowns 8,286,076 8,074,260 103 4

Other operating expenses 803,524 1,834,670 44 0

Financial expenses 41,116 11,701 351 0

Other expenses 26,894 17,471 154 0

TOTAL 227,052,630 198,884,469 114 100


Shares of individual types of expenses in the total expenses of DARS in 2008

The total expenses of DARS in 2008 amounted to EUR 227,052,630 and increased by 14 percent in comparison with 2007.

- Labour costs amounted to EUR 29,736,245 and accounted for 13 percent of the Company's total expenses. Labour costs increased by 8 percent over 2007, primarily due to the increase in the num-ber of employees (opening of new motorway maintenance centre in Murska Sobota in the last quarter of 2008) and the adjustment of salaries in line with the collective agreement.

- Costs of materials amounted to EUR 10,322,996 and accounted for a 5-percent share in the total expenses of the Company. Costs of materials increased by 9% in comparison with 2007, primarily due to the higher consumption of salt and chlorides due to more demanding climatic conditions, hig-her prices of electric power, crude oil and oils, as well as other costs of materials (particularly spare parts for fixed assets, vertical and illuminated traffic signalization, mobile barriers, etc.), which are predominantly the consequence of the increased length of the motorway network and the number of maintained facilities, reconstruction of toll stations due to the implementation of the vignette tolling system (effective 1 July 2008), and the rise in prices of maintenance materials.

- Costs of services excluding concession tax amounted to EUR 35,450,168 and accounted for a 16-percent share in the total expenses. These costs increased by 21 percent over 2007 due to higher costs of maintaining signalization and transport vehicles, higher costs of tunnel maintenance, protec-tion of property (on-duty firefighting team in motorway tunnels), insurance premiums (higher insu-rance coverage for general liability), and engineering costs. The costs relating to the distribution and sale of vignettes had the greatest effect on the increased costs of services, which is the consequence of the implementation of the vignette tolling system.

- In line with the provisions of the Concession Agreement, the Company paid a total of EUR 142,385,612 in concession taxes to the State on the basis of a granted concession for the exclusive right to manage and maintain motorways in the Republic of Slovenia. Concession taxes represented 63% of the total expenses, and exceeded the 2007 figure by 16 percent, primarily due to higher revenue from tolls and other revenue having an impact on the calculation of concession tax.

Writedowns 4%

Labour costs 13%

Costs of materials 5%

Costs of services 16%

Concession tax 63%


- Writedowns amounted to EUR 8,286,076 and were comprised of:EUR 8,178,822,

the amount of EUR 9,774, and

Writedowns increased by 3 percent in comparison with 2007.

Of this figure,

chambers, contributions for the employment of disabled persons, charges for building site usage. costs related to holiday facilities, and similar), and

The costs of long-term provisions in 2008 comprised:

intenance of motorways in the amount of EUR 56,274, and employee actions arising from employment in the amount of EUR 153,036,

trade union and the Company, are not included in the pension scheme of collective voluntary supplementary pension insurance in the amount of EUR 39,862,

for purchase price refunds upon the possible return of electronic tags in the amount of EUR 203,375 (buyers of electronic tags have the possibility of returning their electronic tags within seven years).

Financial expenses amounted to EUR 41,116 in 2008, and increased by 251 percent in comparison with 2007. 73% of financial expenses or EUR 30,045 were related to the impairment of bonds (BCE9) issued by Banka Celje d.d.. Financial expenses for operating liabilities in the amount of EUR 11,071 comprised exchan-ge losses and default interest expenses.

Other expenses amounted to EUR 26,894 and represented compensations paid on the basis of lawsuits and imposed contractual penalties.

Profit or lossThe total profit or loss of DARS for the period from 1 January to 31 December 2008 amounted to EUR 14,784,538 and increased by 8 percent in comparison with the total profit for 2007.Following the deduction of corporate income tax in the amount of EUR 3,100,500 and deferred taxes in the amount of EUR 184,132, the net profit or loss of the Company for 2008 amounted to EUR 11,499,906, which is 9 percent higher than the net profit or loss for 2007.


Business Activities of the Company

Corporate Affairs Division

Internal Audit DepartmentThe Internal Audit Department has the permanent goal of contributing, through its work, to the optimal operation of the Company. For this purpose, the Annual Plan of Work of the Internal Audit Department for 2008 was prepared on the basis of the strategic plan. The Plan was approved by the Management Board and received the consent of the Supervisory Board of the Company.

Given the fact that the business operations of DARS in 2008 were marked by important events, the changes that followed these events had a significant influence on the performance and completion of tasks outlined by the Internal Audit Department. Therefore, less time was devoted to the concrete verification of exposure and the functioning of internal control systems, and more was devoted to the performance of other activiti-es (consulting and coordination with external auditors).

In 2008, as many as four audits were conducted almost concurrently in the Company by the auditors of the Court of Audit, whose work within DARS was coordinated by the Internal Audit Department. On the basis of audit verification performed in 2008, the auditors of the Court of Audit have already issued an Audit Report on the Management of Vacant Building Land, an Audit Report on the Implementation and Financing of the Motorway Construction Programme, and an Audit Report on the Regularity of Procedures in the Construc-tion of the Šentvid Tunnel. An audit relating to the maintenance of motorways in the period between 2005 and 2007 is still in progress at the time of preparing this report. In 2008 the Internal Audit Department was also instructed to conduct an extraordinary audit concerning the establishment and functioning of internal controls in connection with the »Fire protection in the Šentvid Tunnel« issue. The remainder of its time was devoted primarily to the performance of consulting activities.

Purchasing DepartmentIn 2008 the Purchasing Department carried out the following tasks:

- performance of warehousing and service operations,- conduction of public procurement procedures and- performance of documentary checks.

For the purpose of rationalising procedures and simplifying work, public procurement procedures are now oriented towards the conclusion of long-term contracts, which provide suppliers and/or contractors with greater certainty and thus the possibility of lower prices. In addition, tasks related to optimising the pur-chase of goods as well as active monitoring and supervising of the fulfilment of contractual provisions were performed.

Communications DepartmentThe Communications Department carried out tasks relating to external communications, with special emphasis on communications with the media and motorway users, as well as communications with state and financial institutions and inhabitants near motorway routes and motorway construction sites.

The focus of our activities was communication with users and the media as the consequence of the changed toll collection system, i.e. the introduction of vignettes, and communication in the occasion of giving over as many as 91.9 km of motorway to traffic.

In 2008 the Traffic Information Centre for State Roads enhanced the accessibility of information by obtain-ing a short telephone number (1970) and establishing the so-called RSS protocol, and improved the quality of acquiring and processing information by upgrades of the Kažipot information system.

In the area of internal communications, activities involving the redesign of the intranet were continued alongside regular activities.


Business Division

Road Planning, Development and Management DepartmentA Report on the Implementation of the 2007 Annual Motorway Development and Reconstruction Plan was prepared in line with the Motorway Company in the Republic of Slovenia Act. In the second half of 2008, expert bases were drafted for the 2009 Annual Motorway Development and Reconstruction Plan.

The Division began to prepare expert bases, together with the line ministry, for amendments the resolution on the National Motorway Construction Programme (NMCP), as well as for the reconciliation of the medium-term plan for the construction of motorways.

A report on public road expenses for 2007 was compiled. After the acceptance of software applications, the existing situation in the tabular data bases of road data banks (RDB) were inspected and analysed, and a draft supplementation of missing data and some proposed corrections with respect to the new digital axis were prepared. Sample forms for electronic transfer to RDB were also prepared.

In the area of road management, the Expert System dTIMS_CT for road management on roads operated by DARS was upgraded in 2008. A new series of measurements of the condition of the motorway network were conducted. A report entitled »Evaluation of the condition of carriageways on motorways in 2007« was compiled. All connections and facilities in a length exceeding 5 m were included in the PMS-DARS system, and special measures were implemented on bridging facilities and concrete carriageways in tunnels. Within the scope of reports, an Evaluation of the influences of various budgets for the rehabilitation of carriage-ways in 2008 using PMS-DARS was prepared. Two-, five- and 15-year road rehabilitation plans were drafted. PMS-DARS was upgraded in line with the new findings of experts, in particular by modification of the deteri-oration models given the huge increase in traffic loads. A new catalogue of measures was elaborated for the modified deterioration models. A report entitled »Determination of Rehabilitation Priorities« was prepared and then compared and reconciled with the draft road rehabilitation plan for 2009.

International Cooperation DepartmentFor the purpose of utilising funds from the Cohesion Fund, the Company actively cooperated in 2008 with the competent bodies of the Republic of Slovenia and the European Union in implementing procedures for the utilisation of funds.

Fund utilisation procedures were continued on the project for the construction of the Vrba-Peračica motor-way section, for which the Company received EUR 3.6 million from the Cohesion Fund in 2008. In line with the Operational Programme for the development of environmental and traffic infrastructure, procedures were carried out for the purpose of utilising European cohesion policy funds for four motorway projects included in the scheme of co-financing from the Cohesion Fund in the 2007-2013 programme period. In July 2008, the European Commission issued a decision granting cohesion funds in a total amount of EUR 41.6 million for the Beltinci-Lendava project, on the basis of which DARS received EUR 37.7 million in 2008. DARS utilised in 2008 a total of EUR 41.3 from the Cohesion Fund.

An application for the utilisation of cohesion funds for the Slivnica-Draženci road section was completed in August and delivered to the European Commission. Applications were prepared for the utilisation of cohesi-on funds for the road sections Pluska-Ponikve and Ponikve-Hrastje.

In 2008 DARS received funds from the ESRR structural fund for the preparation of design and technical documents for the third development axis (comparative study of variants for the positioning of a road con-nection from the Slovenian-Austrian border to the A1 Koper-Šentilj motorway). The funds approved for this projected amounted to EUR 581,716 and were fully paid.

A 2007 annual report was compiled for the preparation of spatial documents for the Draženci-Gruškovje motorway section, which is being co-financed with TEN-T funds. In 2008 documents were prepared for the utilisation of European funds, on the basis of which the Company received EUR 288,628.

General Affairs DepartmentIn 2008 the General Affairs Department carried out various activities aimed at making improvements in the areas of archiving, major maintenance and repair of business and holiday facilities, ensuring adequate working areas and equipment upon the introduction of vignettes, setting up a central system for monitoring office equipment needs, and preparing technical requirements for the purchase of office furnishings for existing and new buildings. The Department's activities in the first half of 2008 were generally oriented


towards providing adequate working areas and working equipment needed for the implementation of the vignette tolling system.

The Department prepared and adopted appropriate instructions and provided additional premises for the archiving of documents related to the motorway construction programme. A systematic approach to the regulation of archival business documents relating to motorway maintenance and toll collection was establi-shed and is still in progress at the Company's location in Ljubljana (Grič).

The management of Company cars was rationalized in the areas of technical inspections and vehicle servi-cing.

Occupational Health and Safety DepartmentThe Occupational Health and Safety Department carried out the following tasks:

- in the area of health protection: organised medical examinations, vaccinations against tick-borne meningoencephalitis and influenza, and participated in the preparation of documents for disability committees,

- in the area of education: organised general internal training programmes in the fields of occupational health and safety, as well as fire protection. It also organised internal training programmes for the operation of complex working machines, tools and equipment (e.g. lifting devices, TGM, forklifts, high-pressure pumps, …);

- in the area of fire protection: organised inspections and repairs of fire extinguishers and hydrants at all locations of the Company;

- organised inspections of work equipment at all locations of the Company;- in the area of working environment: carried out winter and summer measurements of microclimate,

noise and illumination in the workplace;- performed activities at construction and reconstruction sites;- prepared rules, instructions for safe work, and technical requirements for public tenders;- conducted preventive inspections at the Company's locations and issued reports on deficiencies in

the areas of occupational health and safety, and fire protection.

Legal Affairs, Organisation and Human Resources Division

Legal Affairs DepartmentIn 2008 the Legal Affairs Department carried out its tasks in line with the Agreement on the Performance of Contracts and the Concession Agreement.

The Legal Affairs Department provided legal advisory services to all departments of DARS in connection with their areas of work, i.e. the regulation of employment relations, including the conduction of civil pro-cedures before labour courts, regulation of obligational relations with contractors, regulation of credit re-lations and other transactions relating to funds provision, regulation of relations with lessees of motorway rest areas, and the regulation of indemnity relations in connection with damaging events on motorways, including the conduction of civil procedures. The Department also carried out the legal review of the com-pliance of resolutions proposed by the Management with applicable legislation and the internal acts of the Company, provided advisory services to other bodies of the Company (Supervisory Board), and participated in the preparation of new legislation and implementing regulations with the Ministry of Transport and other state bodies.

A large portion of the work performed by the Legal Affairs Department in 2008 was related to the acquisi-tion of land required for the construction of motorways and roads foreseen in the Annual Development and Rehabilitation Plan, and the settlement of relations in connection therewith.

The Legal Affairs Department provided for the updating of the Company's legal status acts and related entries in the court register.


Organisation and Human Resources DepartmentIn line with the staff policy, the 2008 human resources plan and its implementation were as follows:

Organisational unitEmployees as at

31 Dec 2007Planned employees as at

31 Dec 2008Employees as at 31 Dec

2008

Management and business functions 161 169 173

Organisation of motorway construction and reconstruction

16 21 16

Motorway maintenance 563 642 629

Toll collection 388 381 391

Total: 1128 1213 1209

Staff Age and Education Structure As at 31 December 2008, the Company had 1209 employees, of whom 305 were females and 904 were males, i.e. 25.23% females and 74.77% males.

Staff Age Structure

Age Numberof employees Share (%) Cumulative number of

employees

21 to 25 years 27 2,23 27

26 to 30 years 113 9,35 140

31 to 35 years 235 19,44 375

36 to 40 years 235 19,44 610

41 to 45 years 202 16,71 812

46 to 50 years 164 13,56 976

51 and over 233 19,27 1209

TOTAL 1209 100,00 1.209

Staff Education Structure and Fluctuations

Education Number of employees Share (%) Arrivals Departures

primary 23 1,90 - 9

vocational 563 46,57 81 9

secondary 423 34,99 28 19

higher 72 5,96 1 2

high school and university (four-year) 113 9,35 17 10

post-graduate 13 1,06 3 2

doctorate 2 0,17 1 -

TOTAL 1209 100,00 131 51


In 2008, the Company recruited 131 employees, of whom 81 have a vocational education, 28 have a secon-dary education, 1 has a higher education, 17 have a high school or university (four-year) education, 3 have a post-graduate degree, and 1 has a Ph.D. degree. In the course of the year, 51 employees left the Company – 8 retired, 4 were permanent redundancies, 31 left the Company at their own request, 3 were dismissed by the employer, 2 were on limited employment contracts, 2 went into disability retirement, and 1 employee did not successfully complete his probation period.

Finance and Marketing Division

Finance, Accounting and Controlling DepartmentThe departments operating in the areas of finance, accounting and controlling carried out their tasks in line with the Agreement on the Performance of Contracts and the Concession Agreement. Special attention was devoted to the acquisition of funds needed to implement the annual motorway development and recon-struction plan, which, by its scope in 2008, was the largest in the history of the Company. For the purpose of financing the construction of motorway sections under the National Motorway Construction Programme in 2008, the Company concluded two loan agreements, one with Nova Ljubljanska banka in a value of EUR 145 million, and the other with KfW Frankfurt in a value of EUR 267.5 million. Despite the financial economic crisis, the borrowing terms did not significantly worsen, which is also the consequence of the Company's active cooperation with more than 30 banks.

As at 31 December 2008, the Company's total borrowings amounted to EUR 2,685,073,796. 54.2% of the-se borrowings were obtained at a variable interest rate, while 45.8% of these borrowings are interest-free borrowings or borrowings at fixed interest rate. DARS actively managed financial risks.

The Department participated in the preparation of principal documents needed for the Company's business operations in 2009, regularly reported to competent ministries, and conducted an active investment policy, in accordance with MCRSA.

Sales and Marketing Department

Strategic Marketing DepartmentAlongside its regular tasks, the Department conducted three major projects in 2008: the redesign of the Company's internet and intranet pages, performance of activities related to the implementation of the ABC system for freight vehicles, and the implementation of the vignette tolling system, which included preparing a promotional plan, defining the shape of the vignette, the contents and types of materials used to designate sales locations, instructions for sellers, as well as the contents and shape of leaflets for informing the public, including their production and distribution.

Sales DepartmentThe Department's key task in 2008 was the implementation of the project involving the introduction of vi-gnettes as a method of toll payment for motorway users of the former first and second toll classes. Activities were focused on:

- the establishment of a sales network in Slovenia and abroad (vignettes are currently available at approximately 1,500 sales locations in Slovenia and neighbouring countries),

- the establishment of a distribution system concurrently with the establishment of a sales network, - upon the termination of toll payments using electronic tags of the ABC system, a centre was establis-

hed for the return of unused credit and carrying value of tags.

The Department also participated in the project for the implementation of an ABC electronic tag system of toll collection for vehicles of the fourth toll-rate category.

Toll Collection User CentreUpon the introduction of vignettes and alongside their existing work, employees assumed the tasks of issuing substitute vignettes as well as accepting and processing applications for the reimbursement of a vignette's value. Applications were installed for the entry and processing of received applications for reimbursement and for the replacement of substitute vignettes, which are linked to the Accounting Department.


Real Property Management DepartmentIn 2008 the Real Property Management Department continued its work in the area of identifying surplus land, procedures for the examination of received applications for the sale of surplus land managed by DARS and informing interested customers, defining possible methods of sale, and establishing any missing records.For the purpose of ensuring conditions for the comprehensive and more effective implementation of tasks relating to real property management, the Department prepared a Strategy of intended use of real property that was purchased for the needs of the motorway programme, but is not being used for the motorway programme.

Insurance DepartmentAt the beginning of 2008, the Department reached an agreement with the insurance company on insurance bases for the insurance of property and property interests. Special mention should be made of the notably improved conditions in the area of fire insurance, and partly also in automobile insurance. Through its reor-ganisation, the Insurance Department has unified its procedures in the performance of all activities related to insurance in the Company, and shortened its time periods for the preparation of claims for damages. For the purpose of unifying procedures and ensuring greater transparency, the procedure of preparing a claim for damages was defined. The Company conducted a public tender for the selection of an insurance com-pany for insuring the property and property interests of DARS for a five-year period.

Telecommunications Marketing DepartmentThe Telecommunications Marketing Department continued to market optical fibres in 2008, which resulted in new leases of optical fibre with the lessees TušTelekom, Tušmobil, and Softnet, as well as leases of additi-onal optical fibre with the existing lessees, Telekom Slovenije, T-2, and Simobil.

Toll Collection Division

Work in the area of toll collection in 2008 was most decisively marked by the complete change in the toll system brought by the introduction of vignettes for motor vehicles in the second half of the year. Preparati-ons for the introduction of vignettes and the very implementation of the vignette system were linked to the establishment of toll supervision and the reorganisation of toll collection.

Activities relating to the purchase of toll supervision vehicles were conducted in accordance with authori-sations granted, which enables the more effective implementation of provisions of the Rules on the signs and procedure used by toll supervisors to stop vehicles in road traffic (Official Gazette of RS, no. 63/2008).On the state level, DARS assumed the coordination of toll supervision under the Public Roads Act (PRA).

After 1 July 2008, the Toll Collection Division also assumed part of the tasks involving the return of ABC tags for motor vehicles and the sale of vignettes at sales locations near border crossings. In June, vignette sales locations were set up at Šentilj and Hrušica, and in August at the border crossings Škofije and Fernetiči.

In 2008, tolls began to be collected from vehicles at the temporary toll station Dolinsko. Toll collection was also begun on the Pomurje motorway leg, at the temporary toll station Dolinsko (in the period from 26 August 2008 to 31 October 2008), and at the newly construction toll station Dragotinci (as of 1 November 2008). The avoidance of toll payment at the temporary toll station Dolinsko was considerably reduced due to effective toll supervision on this motorway section. In September 2008, preparations were in progress for the commencement of toll collection for vehicles of the R4 toll-rate category using the ABC system, which was implemented on 1 October 2008.

Motorway Construction and Reconstruction Organisation Division

Spatial Planning DepartmentWithin the scope of preparing design, spatial and other documents, procedures were in progress in 2008 for 11 national spatial plans, and various phases of these procedures were completed.The following tasks were performed:

- A draft national spatial plan was prepared for the extension of the Šmarje Sap motorway link road into a full motorway link road.


- Three supplemented national spatial plans were prepared, as follows:

nika,

- A proposal of the most suitable variant for the state road between the A1 motorway Šentilj-Koper and the border with Austria (northern part of the third development axis) was prepared on the basis of previous analyses, expert bases, and assessments and mutual comparisons of variant solutions. The proposal was optimised on the basis of comments and proposals provided by environmental departments, local communities, interest groups, and individuals. The Government of RS took note of the optimised proposal of the most suitable variant, and adopted the resolution that the positioning procedure relating to the optimised proposal of the most suitable variant be continued on the sections between the A1 motorway Šentilj-Koper and Dravograd, and that new variant solutions are to be pre-pared and analysed for the section from Otiški vrh to the international border crossing Holmec. The Government of RS also adopted resolutions by which the procedure for the preparation of the natio-nal spatial plan for the northern part of the third development axis is to be divided into four separate procedures for the preparation of national spatial plans for the following A1 Šentilj-Koper sections:

- Public exposures and public discussions were conducted in connection with the supplemented draft national spatial plan for the Brezovica link road on the A1 motorway section between Ljubljana and Vrhnika, and the supplemented draft national spatial plan for the connecting road Jeprca-Stanežiče-Brod

- The positions regarding the comments expressed at the public exposure of the draft national spatial plan for the expansion of the motorway into a 6-lane motorway on the section Koseze-Kozarje.

- A supplemented draft national plan for the expansion of the motorway into a six-lane motorway on the section Koseze-Kozarje was prepared.

- Based on draft national spatial plans, the Government of the Republic of Slovenia adopted two decre-es, as follows:

and

- 68 guidelines and 48 opinions were issued in procedures for the preparation of spatial acts in which DARS has the position of spatial planning holder. 31 design terms and conditions were issued, as well as 59 consents in building permit acquisition procedures in which DARS acts as the consent giver. An additional 28 positions, development requirements, expert bases and guidelines were issued. Altogether 234 replies were prepared in cases where DARS has the role of spatial planning holder or giver of consent in respect of the existing or future buffer zone.

Planning and Design Documents DepartmentThe activities performed in the area of design document preparation included the procurement, review and approval of design documents (geological-geotechnical studies in the design phase, designs for building per-mit approval, designs for tenders, execution designs, various expert bases and studies in the design phase, organisation of design reviews and revisions for building permit approval in line with the Building Constructi-on Act (BCA-1), preparation of tender documents and execution of public tenders for the preparation of such documents, preparation of guidelines for public tenders for research and development studies in the area of construction, and cooperation in the elaboration of technical specifications).

In 2008, designs for the acquisition of building permits were elaborated and approved for the motorway Pluska-Ponikve (connection to Mirna valley and electromechanical equipment in the Leščevje tunnel), mo-torway Ponikve-Hrastje (connection to Mirna peč), motorway Šentvid-Koseze (for phases 2 and 3), motor-way Podtabor-Peračica (for viaducts Lešnica, Ljubno, Peračica and the Ljubno tunnel on the old half of the motorway), expressway Koper-Izola (electromechanical equipment in tunnel), mainroad Gorišnica-Ormož


(amending of designs in line with new legislation), traffic surveillance and management system for northe-astern Slovenia, mainroad Želodnik-Mengeš (Mengeš bypass road), mainroad Mengeš-Žeje (Moste bypass road), Dragonja bypass road, branch of the motorway maintenance centre Ptuj, supply centre Maribor, con-struction of additional parking areas for vehicles in Murska Sobota and Grabonoš, and roundabouts at the link roads in Ivančna Gorica and Škocjan. The Department has begun to elaborate design documents for reconstruction of the Tomačevo roundabout, as well as a traffic/economic study as to whether the construc-tion of hard shoulders on motorways and expressways in Slovenia is justified.

The activities performed in the area of investment document preparation included the procurement, review and approval of investment documents (investment project identification document, preinvestment designs, investment programs, amendments of investment programs, studies of the implementation of planned in-vestments, reports on the implementation of investment projects, and reports on the monitoring of invest-ment effects).

In 2008, investment programs were approved by resolution of the Minister of Transport for the mainroad Želodnik-Mengeš with the Mengeš bypass road, motorway link road Naklo, traffic surveillance and mana-gement system on the motorway sections Razdrto-Vipava and Postojna-Kozina; amended investment pro-grams for the motorways Pluska-Ponikve, Ponikve-Hrastje, and Šentvid-Koseze. The following completed investment programs were submitted for approval: the Čeplje turnabout, Srmin radial road, construction of additional parking areas for vehicles in Murska Sobota and Grabonoš; the investment program for the mainroad Mengeš-Žeje began to be implemented. The following preinvestment designs were submitted for approval: the traffic surveillance and management system on the Ljubljana ring road, the mainroad Ptuj-Markovci, the expressway Jagodje-Lucija, the third development axis – northern part and connecting road Jeprca-Stanežiče-Brod. An additional 8 investment project identification documents and 2 investment im-plementation reports (motorway Šentvid-Koseze and expressway Koper-Izola) were elaborated.

Construction organisation and Supervision DepartmentIn 2008 the following motorway sections were brought into service:

- two by two lane motorway Maribor –Lenart in a length of 7.8 km,- two by two lane motorway Lenart–Spodnja Senarska in a length of 7.2 km,- two by two lane motorway Spodnja Senarska–Cogetinci in a length of 10.0 km,- two by two lane motorway Cogetinci–Vučja vas in a length of 11.6 km,- two by two lane motorway Beltinci–Lendava in a length of 17.4 km,- two by two lane motorway Lendava–Pince in a length of 16.7 km,- two by two lane motorway Šentvid–Koseze in a length of 5.7 km,- two by two lane motorway Vrba–Peračica in a length of 10.0 km,- two by two lane motorway Hrastje–Kronovo, subsection Lešnica–Kronovo, in a total length of 5.5 km.

Construction works were continued on the following sections of motorways and other roads:- a section of the two-lane road Nova Zrkovska cesta from km 1.9 to km 3.8,- western bypass road Maribor, phase IV,- platform for the Bertoki petrol station,- two by two lane motorway Zrkovska cesta – Pesnica link road in a length of 6.3 km,- two by two lane motorway Zrkovska cesta – Ptujska cesta in a length of 4.2 km,- connecting road to the Port of Koper (Bertoki radial road) in a length of 3.4 km,- expressway Razdrto–Vipava: Rebernice in a length of 10.7 km,- two by two lane motorway Slivnica–Draženci in a length of 18.9 km,- expressway Koper–Izola in a length of 5.1 km,- two by two lane motorway Draženci–Gruškovje (from international border crossing Gruškovje to the

border with Croatia) in a length of 0.6 km,- Šentvid–Koseze, phases II and III – connecting tunnel tubes,- Platform for Cikava petrol station,- Peračica–Podtabor – reconstruction of right half of motorway in a length of 2.4 km,- Pluska – Ponikve – Leščevje Tunnel.

In 2008, construction works were begun on two motorway sections:- Motorway Base Maribor,- connecting roads to the Port of Koper (Srmin radial road),- Dragonja bypass road,- two by two lane motorway Pluska–Ponikve in a length of 6.3 km,- two by two land motorway Ponikve–Hrastje in a length of 8.6 km.


Preparatory preconstruction works were conducted on the following sections of motorways, expressways, connecting roads and motorway link roads:

- mainroad Markovci–Gorišnica, - mainroad Gorišnica–Ormož,- bypass road Murska Sobota North and South,- bypass road Grabonoš North and South,- bypass road Lormanje North and South,- bypass road Maribor North and South,- bypass road Dravsko Polje North and South.

Reconstruction Organisation DepartmentWithin the scope of motorway rehabilitation in 2008, intensive reconstruction works were continued on defective motorway sections and bridging facilities, and investments were implemented in the existing mo-torway network.

Owing to the needs identified during seasonal inspections and on the basis of acquired design documents and other unfinished works, and particularly for the purpose of observing higher standards for road struc-ture reinforcements and guardrail installations, the value of conducted road rehabilitation works was higher than planned. The following works were carried out:

- rehabilitation of carriageway on the Gorenjska motorway leg in the area of PE Hrušica: on the motor-way section Austrian border (tunnel)-Hrušica and on the motorway section Lipce-Lesce;

- rehabilitation of carriageway on the Primorska motorway leg in the areas of PE Kozina and PE Po-stojna: on sections and link roads of the expressway Srmin–Bertoki–Škocjan, the motorway Šempeter-Vrtojba, and of the motorway Postojna-Razdrto;

- rehabilitation of carriageway on the Štajerska motorway leg in the areas of PE Vransko, PE Slovenske Konjice and PE Maribor: on sections and link roads of the motorway Arja vas- Šentrupert, motorway Vransko-Trojane, motorway Dramlje-Celje, motorway Celje-Arja vas, expressway Maribor-Tezno, mo-torway Austrian border-Šentilj, motorway Šentilj-Pesnica, motorway Slivnica-Fram, and the motor-way Slovenske Konjice-Dramlje;

- rehabilitation of carriageway in the area of PE Ljubljana: on sections and link roads of the motorway Šmarje Sap-Grosuplje, motorway Grosuplje-Ivančna Gorica, motorway Brnik-Vodice, motorway Vodi-ce-Ljubljana (Šmartno), and on the southern Ljubljana bypass.

The volume of completed rehabilitation works was lower than planned. This was primarily due to two uncom-pleted projects: the rehabilitation and enlargement of the Ljubljanica bridge at the Vrhnika link road (land and permits not acquired), and the rehabilitation of the overpass at the Fram link road. The following major works were completed:

- Primorska motorway leg in the area of PE Postojna: rehabilitation of Ravbarkomanda viaduct colu-mns, rehabilitation of Log overpass columns, rehabilitation of underpass on the motorway section Logatec–Unec, rehabilitation of underpass and bridge on the motorway section Postojna–Razdrto;

- Štajerska motorway leg in the areas of PE Vransko, PE Slovenske Konjice, and PE Maribor: rehabilitati-on of Ljubečna and Leskovec underpasses and the Fram overpass, and rehabilitiation of bridge across the Bistrica stream;

- in the area of PE Ljubljana: rehabilitation of the drainage system in the Debeli hrib and Mali vrh tun-nels, and rehabilitation of dilatations at the Dolgi most viaduct,

- measures were implemented for increasing the sliding friction of concrete carriageways in tunnels, resurfacing of asphalt surfaces, and installation of hydroinsulation in buildings.

Within the scope of rehabilitation works on other buildings and investments in roads and facilities, the volu-me of completed works was slightly lower than planned, primarily due to complications in the acquisition of a building permit for construction of the Postojna Motorway Maintenance Centre in Logatec.The following major works were completed:

- rehabilitation of protective barriers and guardrails;- beginning of works on the renovation of the regional centres Dragomelj, Postojna (Kozina), and Slo-

venske Konjice;- reconstruction of small garages at the Motorway Maintenance Centre Slovenske Konjice;- enlargement and unification of control of access to toll collection areas and motorway maintenance

centres.


Within the scope of investments in the equipment of the existing motorway network, the volume of completed works was lower than planned, primarily due to the prohibition of road works in July and August, and consequently the uncompleted entire upgrading of electrical-mechanical equipment in the Pletovarje and Golo rebro tunnels.The following major works were completed:

- renewal and upgrading of the communications network and equipment;- upgrading of safety equipment in tunnels and galleries of the existing motorway network (Karavanke,

Tabor, Pletovarje and Golo rebro tunnels);- illumination of the Malence turnoff;- closure of crossings and height control system;- replacement and modernisation of traffic signalling on existing motorways and by special orders.

Within the scope of rehabilitation works and investments in environmental protection, only 50% of the foreseen works were completed, primarily due to the Company's failure to acquire design documents for construction of the most noise-burdened section, Brezovica-Vrhnika.

The following major works were completed:- construction of sound barriers on the expressway Pesnica–Maribor–Tezno;- construction of sound barriers on the motorway section Šmarje Sap–Grosuplje;- other minor interventions related to anti-noise measures in the motorway network, including finishing

works.

Public Procurements DepartmentIn 2008, the following activities were performed in connection with public procurements:

- Public procurement procedures in a value of EUR 106.95 million were initiated, which is 66.67% of the planned figure and 58.3% less than in 2007;

- 70 public tenders were published on the public procurements portal (www.enarocanje.si);- In the period from 1 January 2008 to 31 December 2008, bidders requested legal protection by filing

14 claims for review of 9 (nine) public tenders. Of the 14 claims for review, the National Review Com-mission granted 2 (two) claims for review, rejected 5 (five) claims for review, and dismissed 2 (two) claims for review. One claim was dismissed on the level of the Management Board, 2 (two) claims were not completed, and 1 (one) claim for review was withdrawn by the bidder;

- 12 major construction contracts in a total value of EUR 122.6 million were signed;- In line with the rules of the Cohesion Fund, several public tender procedures for the motorway secti-

ons Slivnica–Draženci, Pluska–Ponikve, and Ponikve–Hrastje were successfully completed.

Motorway Maintenance Division

Technology and Intelligent Transport Systems (ITS) Maintenance and Development Department Activities relating to the setup of traffic surveillance and management systems (TSMS) were carried out on the road section Razdrto–Vipava. Tender documents were prepared for the setup of this system in the Maribor motorway system and in front of the Karavanke Tunnel. A maintenance contract was concluded for the mainte-nance of TSMS Klanec–Ankaran, and technical requirements were prepared for one-year maintenance of TSMS Klanec–Ankaran and TSMS Vransko–Blagovica. Activities were continued for the setup of TSMS on the Ljubljana West bypass, as well as activities for the construction and functional setup of a new Regional Control Centre Ljubljana. Construction works were begun on the setup of a TSMS in the Maribor motorway system, and the con-struction of the Regional Control Centre Maribor. Tender documents began to be prepared for the relocation of the Traffic Control Centre Slovenske Konjice to the Regional Control Centre Maribor, and the relocation of TCO Postojna to the Regional Control Centre Kozina was successfully concluded.

Activities relating to the elaboration of research development assignments, pilot projects, and brochures on the topic of traffic control and management were concurrently carried out. The international project entitled »PRO-MET« (traffic) was successfully concluded, and activities were continued in other international working groups and programmes in the area of ITS.

Automatic toll stations were set up at the Lukovica and Blagovica locations. The operation of 4 automatic toll stations is supervised from the Kompolje toll station.

Owing to the introduction of vignettes for motor vehicles in 2008, numerous adjustments and relocations of toll


system components were carried out, and software applications at toll stations were upgraded. A simulation of toll stations implementing vignettes for categories R1 and R2 and determining the optimal number of lanes was previously prepared.

New toll systems were set up at the temporary toll station located at the Dolinsko rest area and at the new front toll station Dragotinci on the Pomurje motorway leg.In line with the guidelines of the Ministry of Transport and for the purpose of increasing the throughput of fre-ight vehicles at toll stations, an electronic free-flow toll collection system (ABC system) for vehicles of the R4 toll-rate category was introduced at all toll booths and fast lanes.

Owing to the introduction of the vignette system and the limited possibilities of supervising the use of vignettes, a Concept of electronic supervision of vignettes was prepared.

New weather stations were incorporated in the road weather system at the following locations: Dobe viaduct, Zajčica, Nanos turnoff, Zemono, Ajdovščina, Selo viaduct, Ribnik viaduct, and the Lijak viaduct. In the month of April, a Road Weather Information System (RWIS) was established for the purpose of uniting all road we-ather stations (RWSs) into a unified system providing information via a web application aimed at optimising winter service activities, while the data can also be used in the traffic surveillance and management system. The BOSCHUNG RWS was upgraded from a model connection to an optical network. In the area of regular RWS maintenance, two contracts were concluded with external provided (XNET d.o.o., LASTINSKI d.o.o.) for the BO-SCHUNG and ARTES road weather stations. In autumn, a contract for the setup of four new RWSs (Peračica viaduct, Dobruša viaduct, Karteljevo slope, and Gabrk turnoff) was signed.

In the area of video surveillance, additional cameras were installed at the following locations: Karavanke plat-form, Podmežaklja, Moste, Dobovo, Kronovo exit, Starine rest area, and the Šempas rest area. The photos taken by these cameras will be published on the Company's website. The recording units of the video surveillance system on the Primorska motorway leg were modernised.

In the area of tunnel safety, the Company carried out the tasks of tunnel manager and safety officer pursuant to Directive (2004) 2004/54/EC of the European Parliament and of the Council of 29 April 2004 on minimum safety requirements for tunnels in the Trans-European road network. These tasks included detailed reporting to the competent administrative body, i.e. the Ministry of Transport, on accidents and incidents in tunnels. On the basis of recorded accidents in the Golovec Tunnel, measures aimed at slowing down traffic were implemented. Inadequate tunnel conditions continued to be eliminated on the basis of inspections of the compliance of respec-tive tunnels with the Directive, conducted by the Traffic Inspectorate of the Republic of Slovenia in the period between 28 November 2006 and 6 December 2006 (deadline: December 2010; for the Karavanke Tunnel: April 2019). Within the scope of the preparation and management of tunnel safety documents, the Company con-ducted a public tender for the elaboration of risk analyses for tunnels. The regulation of unmanaged protection and rescue plans was continued. In cooperation with emergency rescue departments, periodical exercises were organised in the Golovec Tunnel, in the Šentvid Tunnel prior to its reopening, in the Trojane Tunnel system, and in the Primorska Tunnel system. For the needs of conducting complex rehabilitation work in the Golo Rebro and Pletovarje tunnels, a special risk analysis and a protection and rescue plan for the duration of rehabilitation works in the tunnels were elaborated; the safety measures specified in both documents were implemented. Special activities were carried out prior to the reopening of the Šentvid Tunnel, including the supplementation of tunnel safety documents and the preparation of a safety officer's opinion on tunnel safety for the purpose of obtaining an operating permit from the Ministry of Transport.

In the area of motorway rehabilitation works within the scope of the Annual Development and Rehabilitation Plan (ADRP) for 2008, the sales from rehabilitation works on electromechanical equipment amounted to EUR 10,011,672.84 or 71%. The highest contribution to the sales gave the works completed in the Pletovarje and Golo Rebro tunnels (EUR 5.69 million), works completed in the Tabor Tunnel (EUR 1 million), upgrading of illumi-nation in the Karavanke Tunnel (EUR 1 million), setup of video surveillance of open route (EUR 0.4 million), im-plementation of TCO Postojna in the RCC Kozina (EUR 0.4 million), elaboration of risk analyses for tunnels (EUR 0.33 million), construction of RWSs and modernisation of RWS connections (EUR 0.32 million), replacement of CO and visibility meters and upgrade of hardware and software for the Golovec Tunnel (EUR 0.17 million), rehabilitation of emergency call system on the Ljubljana bypass (EUR 0.1 million), and other completed works (EUR 0.6 million).

With respect to the implementation of a new toll system, the Department actively participated in the expert group formed at the beginning of 2008 by the Ministry of Transport in line with the second action plan for the implementation of an electronic free-flow toll collection system with conditions for interoperability in the EU


(Resolution of the Government of RS adopted on 19 July 2007). This group prepared conceptual solutions for the new toll system and, on the basis thereof, also tender and investment documents for the implementation of the electronic free-flow toll collection system for vehicles with a maximum allowable weight exceeding 3500 kg

Telecommunications Project and Telecommunications Department The Company continued to market optical fibres, and signed new contracts with the operators T-2, TušTele-kom, Tušmobil, IT-TEL, Telekom Slovenije, and Simobil for a period of 3 to 15 years.

The business plan for the marketing of capacities and colocations was sent to the Ministry of Transport, the Ministry of the Economy, and the Ministry of Finance for the purpose of adjustment. Further guidelines for the development of telecommunications were presented. The Department is currently purchasing equi-pment needed for wavelength multiplexing, which will serve as a basis for the further marketing of telecom-munication services and providing support to processes in the Company.

Commutation equipment was upgraded for the purpose of increasing and modernising the commutation capacities used to provide the Company's telephone communications and the functioning of the Traffic Information Centre (TIC).

For the needs of its own processes and marketing activities, the Company leased the required optical links (fibres) to those locations where it does not yet have its own optical fibres, i.e. the Motorway Maintenance Centre Hrušica, Pesnica toll station, and the Motorway Maintenance Centre Novo Mesto. Communication links were also established to ensure the undisturbed operation of new toll stations (Dolinsko and Dragotinci) on the basis of an IP Platform, which enables low-cost transmissions and convergence services. The Com-pany thus continued the gradual transition to the integration of communication services via the IP platform.With the aim of slowing down the speed on motorways in the Republic of Slovenia, the Company purchased and installed, in cooperation with the Ministry of Internal Affairs, equipment for measuring speed in front of road closures and other traffic surveillance equipment.

Within the scope of regular maintenance of telecommunication hubs, the Department prepared a technical plan and a maintenance plan. Relevant contractual relations were also settled with external maintenan-ce personnel in order to ensure the maintenance of commuter centres and telecommunication network transmission systems. The necessary rehabilitation and protection works were carried out in the event of interruptions in the optical network, and ITS systems were connected to the optical network to ensure un-disturbed communications.

Traffic Surveillance and Management DepartmentThe key tasks defined in the Concession Agreement as well as in maintenance and operation projects were carried out. The work was adapted to the needs of regular maintenance and reconstruction works on elec-tromechanical equipment.

The Department controls and regulates traffic, organises and performs maintenance works on electrome-chanical equipment and systems defined as road equipment under the Public Roads Act, which includes rehabilitation works on road equipment and participation in the construction of road equipment on new motorway sections and facilities.

Technical and administrative changes were introduced in certain electricity tap-off points in order to ensure the most favourable tariff group in the calculation of network charge.The Department carried out the supervision and traffic regulation of the Ljubelj Tunnel (ordered by DRSC). General repairs and parametering of SICK equipment in tunnels were performed by the Company's own staff.

The functions of the control centre in Postojna were transferred to the Traffic Surveillance and Management Centre at Kozina. Employees adapted to the new organisational structure. Activities were initiated for the transfer of functions of the control centre in Slovenske Konjice to the Traffic Surveillance and Management Centre in Maribor. This project is scheduled for completion in the second half of 2009.The preparation of documents for the regulation of mutual relations (transfer of EE to SODO) in connection with constructed electric power facilities on motorways is in the final phase.

The Department's expert staff participated in reconstruction works in line with the Annual Motorway Deve-lopment and Rehabilitation Plan, in the preparation of research projects for reconstruction works, in reviews of project documents, and at operational meetings for new construction projects.


Information Technology (IT) DepartmentThe renewal of the Company's entire computer infrastructure was continued, and its hardware and software were harmonised. Some specific applications were purchased for individual users. A number of activities were focused on raising the reliability and availability of certain critical systems.

Some segments of the Microsoft Business Solutions Navision business-financial information system were upgraded in order to increase operating efficiency and facilitate links with subsystems used by other depart-ments. The Department continued to consolidate the application for the calculation of salaries and other earnings. The system was upgraded with additional reports and certain changes allowing users greater flexibility in their operations and search for desired data. A module for vignette operations was implemen-ted, which supports the purchase, sale, warehousing and distribution of vignettes. Emphasis was laid on acceptance, tracing, issue of substitute vignettes, return of proportional part of the value of a vignette, own distribution, and distribution to concessionaires. A module for the return of credit from the previous ABC system was also created. Preparations were continued for transfer to a more recent database version and its placement into a state of high availability, which is expected to be completed in 2008.In other information systems providing support to business operations, emphasis was primarily laid on the upgrading of processes and applications for warehousing and inventory accounting, where a study was conducted on the adequacy of the current solution, and the need for optimising content and information solutions was established. The dars.si portal was redesigned, including the public procurements portal. An applicative solution was developed for providing support in the management of toll supervision and vignet-te sales procedures. Intensive activities were under way in the segment of the working time registration system, where the functionalities were upgraded for the preparation and transfer of data to the salary calculation system.

In the system segment, the Department continued to consolidate and virtualises its server equipment. High availability was established for critical server systems such as the firewall, guide, redundant setup of double BGP cables, and the transfer of the data server to new computer hardware. The safe copy creation system was optimised, documents and procedures were prepared for rehabilitation in the event of a system outage, a data server was set up for internet applicative solutions, and the replication of virtual disks among disk fields was established.

Motorway Operation The Company's tasks relating to motorway operation in 2008 were the same as in previous years and were based on public authorisations granted by law and the Concession Agreement.

In 2008 the Company cooperated with the branches of the Administration of RS for Civil Protection and Disaster Relief in the preparation of regional safety and rescue plans in case of major traffic accidents on motorways in the Prekmurje, Gorenjska, Ljubljana, and eastern Štajerska regions.

The Company participated in the preparation of guidelines for spatial arrangements, and issued design requirements for the preparation of design documents and approvals of construction works in motorway buffer zones. In 2008 it prepared as many as 1079 opinions on the execution of freight transports of excep-tional dimensions or weight. 143 motorway closure consents and 12 consents to motorway signalization installations due to motorway works were issued.

The Company participated in final inspections and road acceptance procedures upon the completion of mo-torway construction and rehabilitation works.

After the opening of the Prekmurje motorway, considerable interest was shown in the installation of tourist and other informative signalisation in the motorway buffer zone. A special meeting was organised for this purpose with the representatives of the Slovenian Tourist Organisation (STO), local communities and the interested public, at which the method and conditions of installation were presented. The permits for the installation of tourist signalization were followed by even more reminders to remove illegally erected adver-tising billboards in the buffer zone, particularly on the Gorenjska motorway.

The introduction of vignettes and toll supervision has also brought new tasks for maintenance personnel. In addition to closures aimed at protecting worksites, closures also need to be set up for the purposes of toll supervision in certain exposed areas. There is an increasing number of coordinated campaigns be-ing conducted, according to EU instructions, with the police, inspection services and customs authoriti-es, which require the complete closure of a carriageway in one direction and the redirection of traffic to rest areas.


Environmental Management

Environmental Protection

NoiseIn 2008, noise barriers were erected simultaneously with the construction of new motorway sections. On the basis of noise measurements conducted in previous years, noise barriers were primarily erected along older motorway sections, i.e. at locations where noise measurements revealed the need for the erection of such noise protection. In 2008, noise barriers were erected in the area of the Cikava link road. Investment technical documents for the erection of noise barriers on the Brezovica-Vrhnika section of the Primorska motorway were concurrently prepared.

In 2008, DARS presented to the Ministry of Environment and Spatial Planning a strategic map of noise in the network of significant roads with more than 6 million transports a year in 2006, which are managed by the Company. On the basis of these strategic maps, the Ministry of the Environment and Spatial Planning will be able to prepare an Operational plan for solving noise burdens.

Protection of WatersIn 2008 the Company carried out all regular maintenance works on facilities (reservoirs) providing protecti-on against negative impacts on the environment (ground, ground water). Activities such as mowing, cleaning of bulky wastes, rehabilitation of damaged parts of buildings and equipment, and other works were carried out on all facilities. Within the scope of maintenance works, the cleaning of seven reservoirs was conducted in the areas of the Motorway Maintenance Centre Ljubljana, MMC Postojna and MMC Kozina. The cleaning of reservoirs included the removal of sludgy, mud-covered waste materials and the cleaning of coalescent oil containment devices. In 2008 a major accident causing potential damage with hazardous substances occurred on the Ivanje Selo viaduct, but thanks to the timely and effective implementation of measures, no major consequences occurred.

WastesWithin the scope of maintenance works, large quantities of wastes are collected at individual maintenan-ce centres, which can be divided into hazardous and nonhazardous wastes. In the spirit of environmental protection, waste management is prescribed by several regulations which DARS as a producer of wastes is required to consistently observe. Wastes were collected and sorted according to type at several locations. The collected wastes were then delivered to authorised waste collectors or processors. Among the hazar-dous wastes collected in 2008, the largest quantities were from the group of waste oils, polluted sludge from devices for the separation of water and oil, and lead batteries. The largest quantities of nonhazardous wastes collected can be classified under waste iron (waste guardrails), wastes from desanding, septic tank sludge, and mixed municipal wastes. An annual report on waste management was compiled in 2008 for the collected wastes.

Gas EmissionsVentilation systems are installed in tunnels, while automatic control of these systems enables the monito-ring of gas emissions. Automatic control regulates the presence of carbon monoxide and visibility. The gas emissions in 2008 were not critical.

Environmental Impacts of Road GrittingIn order to prevent slippery roads and ensure good road conditions in winter, roads are gritted in winter using various gritting materials. These materials minimally affect the ground, the quality of surface and ground water, flora, fauna, humans, facilities (road lanes, bridges, viaducts and buildings), as well as vehicles. Studies conducted in the past have shown that road salting has a small impact on ground water, as the salt is diluted by a factor of 100 to 500.

The consumption of gritting materials in 2008 was substantially higher than in the previous year. This was due to unfavourable weather conditions.


Human Resources ManagementTrainingEmployee training in 2008 was primarily focused on the following areas: change in the method of toll collec-tion, monitoring of new technologies and other skills providing employees with a greater ability to adapt to changes. In line with obligations, training programs on the topic of current novelties and amendments to the legislation of individual areas of work were organised. The Company financially supported those employees who decided, to the benefit of the Company, to participate in various study programmes, and concluded with them a Training Agreement (five Agreements on Part-time Study were concluded). In the past year, the Company recognized a growing need among its employees to take part in the lifelong learning process.

Human Resources Management in 2008The human resources management activities conducted in DARS in 2008 were focused primarily on the development of competent, adequately qualified and trained staff. By means of additional education and training programmes, a broader process of developing the necessary skills of employees was conducted in accordance with the business goals of the Company as individual areas of work.

Human resources management encompassed the following sets:

- provision of new staff members for the purpose of implementing undisturbed work processes,- provision and fulfilment of legally prescribed criteria and provisions, as well as the fulfilment of all

fields relating to the areas of health, disability and social protection for all employees,- regular provision of all necessary data on employees for the purpose of adequately making payments

related to work and in line with the internal acts of the Company,- provision of required number of students employed through student service organizations, for undis-

turbed work primarily in the Area for the implementation of toll collection.

Outlook for the FutureThe fundamental activities of DARS stem from two contractual relations, i.e.: the Agreement on the Perfor-mance of Contracts for the performance of tasks relating to the construction and rehabilitation of motor-ways in the Republic of Slovenia, and the Concession Agreement for the management and maintenance of motorways in the Republic of Slovenia. Within this framework, the Company follows the set goals of owners on one side, and the fulfilment of environmental expectations on the other side. Such a position prevents an otherwise typical commercial company from seriously reflecting on fundamental development issues and strategic orientations, and at the same time obstructs the pursuance of current goals, which in the existing situation appears as an increased operating risk alongside the simultaneous incapacity of the Management to manage the incurred risks and pursue the fundamental goals of the Company, i.e. to preserve and enrich/increase the value of its invested property. The roots of the described anomaly lie in the fact that the Com-pany is still fully (100%) owned by the State, and at the same time carries out the service of concession grantor and agent.

Irrespective of the ownership structure, the next limiting factor is the organisational structure of the Com-pany. The Company operates as a uniform company (DARS), which organizationally includes all »vital« areas of its operation. Due to the unclassical elements of the Company (dispersion of operations), there is a high degree of nonhomogeneity of basic/business/production factors, which consequently prevents effective management and operations. Comparable practices abroad suggest a business structure with subsidiaries that are controlled by the controlling company through shares, which are proportional to the significance of the service/product of the subsidiary for the Company. In practice, subsidiaries in comparable business operations are independent entities which, by their content, are comparable to some of the current sectors in the Company. Such entities (subsidiaries) usually appear in the market and thus contribute to the greater efficiency of business operations on the one side, and open an additional development potential for the entire business group on the other side.

With the aim of verifying all possible moduses for improving the existing model of relations between the State and DARS d.d., as well as optimising and rationalizing business operations, the contractual relation with the State will be re-examined and revised, as the economic and legal analyses performed so far have


revealed that the agreed relations in the performance of both contracts are not optimal nor the most cost-effective. Certain changes in these relations are conditioned by the implemented legislation on tolls for frei-ght vehicles and the electronic toll system for freight vehicles, and in particular the Public Roads Act, which has introduced the vignette tolling system for motor vehicles. Additional market opportunities will need to be sought through the development of new services.

The goal of development is to become a leading, business-open, successful and market-regulated commer-cial company for the management of modern infrastructural networks in accordance with the expectations of users.

Implementation of the Motorway Construction ProgramThe mission of DARS is to implement the national motorway programmes and manage the motorway net-work by providing high-quality services to its users. DARS will thus continue to provide high-quality financial engineering, as well as to ensure the high-quality, regular monitoring of financial position of the motorway project to the owner and contracting authority.

Motorway Management and MaintenanceThe maintenance and management of motorways will become increasingly more important in future as the motorway network continues to expand. Once individual sections of the motorway network are completed, interconnected and linked to the European motorway system, the Company will be capable of providing integral services to motorway users.

As the motorway network expands, the scope of regular maintenance of the motorway network will incre-ase as well. Improved productivity can only be ensured by technological development and the optimisation of business processes. In order to optimise driving conditions within the network, we shall have to find the right balance between the need to keep roads clear, particularly in winter, costs and, last but not least, environmental protection.

A special challenge awaiting us in future is the development of the toll collection system. With its experience in the management of the existing toll system, the Company can provide valuable support in the develo-pment of the new toll collection system.

Development of New ServicesFor the purpose of generating additional revenues, the Company shall, alongside its basic activities, develop complementary services. Consonantly with its currently predominant activities defined in the Concession Agreement and in the Agreement on the Performance of Contracts, these services will enable the further development of the Company.

ANNUAL REPORT 2008 DARS d.d. 42 Accounting report

VirtualizationPesnica Elementary SchoolAuthor: Katarina Frajzman, 8bMentor: Jelka Kos Novak

Accounting reportANNUAL REPORT 2008 DARS d.d. 43

3 ACCOUNTING REPORT

General explanatory notes to the financial statements

The objective of financial statements is to provide information about the financial position, performance and changes in the financial position of an entity that will be useful to a wide range of users in making economic decisions. Financial statements prepared for this purpose are to meet the common needs of most users, therefore they do not provide all the information they may need to make economic decision. For these rea-sons and to ensure more complete informing, financial statements must contain notes and supplementary schedules and other information providing readers with additional data and information needed for decisi-on-making.

Pursuant to the Motorway Company in the Republic of Slovenia Act (ZDARS – UPB-1, Official Gazette of RS, no. 20/2004; hereinafter: ZDARS), DARS has had the status of a public limited company functioning as a regular commercial company under the Companies Act (earlier public enterprise) as of 1 January 2004. Its sole founder and shareholder is the Republic of Slovenia, which is represented by the Government of the Republic of Slovenia.

Pursuant to the amended ZDARS, DARS and the Republic of Slovenia, represented by the Government of the Republic of Slovenia, concluded two contracts:

- the Agreement on the Performance of Contracts relating to motorway construction and reconstruc-tion, financial engineering and related tasks under the National Motorway Construction Programme, signed on 29 April 2004 (hereinafter: Agreement on the Performance of Contracts)

- the Concession Agreement on motorway operation and maintenance in the Republic of Slovenia, signed on 29 April 2004 (hereinafter: Concession Agreement).

Agreement on the Performance of Contracts The Agreement on the Performance of Contracts regulates the relationship between the Republic of Slo-venia and DARS in the performance of tasks under the contracts concluded with the Republic of Slovenia. These tasks are set out in Annexes I, II and III to the Agreement, as follows:

Annex I – tasks performed by DARS on behalf and for the account of the Republic of Slovenia, namely:

struction;

Annex II – tasks performed by DARS on its own behalf and for the account of the Republic of Slovenia, namely:

reconstruction,

Annex III – tasks performed by DARS either on its own behalf and for the account of the Republic of Slovenia, or on behalf and for the account of the Republic of Slovenia, namely:

construction, but not used entirely for motorway construction or not required for motorway ope-ration and maintenance.

The Company also performs, on its own behalf and for the account of the Republic of Slovenia, tasks re-lated to motorway construction and reconstruction under the National Motorway Construction Program-me (hereinafter: NPIAC), and manages funds earmarked for motorway construction and the repayment of


borrowings for their construction (including the borrowings and the issue of debt securities for the purpose of financing motorway construction and reconstruction).

For the performance of tasks under the Agreement on the Performance of Contracts concluded with the Republic of Slovenia, DARS is entitled to a compensation in an amount equal to 5.49 % of the value of works set out in the current Annual Motorway Development and Rehabilitation Plan (hereinafter: LPROAC). Advan-ce payments of compensation are made monthly with the prior authorisation of the Ministry of Transport for the transfer of funds from the account designated for the financing of motorway construction to the transaction account of DARS. Final settlement is made on the basis of the value of works actually carried out and reported annually to the National Assembly.

Concession AgreementThe Concession Agreement regulates mutual relations in connection with the concession for motorway operation and maintenance, as well as the payment of concession tax. Motorway operation and maintenance comprises:

- motorway operation,- regular maintenance of motorways and facilities on motorways, and - toll collection.

A concession for regular motorway maintenance and operation is granted for all motorways maintained and operated by DARS at the time of signing the Concession Agreement, as well as for all motorways or motor-way sections yet to be constructed under NPIAC in the Republic of Slovenia. The concessionaire (DARS d.d.) performs the Concession Agreement on its own behalf and for its own ac-count, and pays the concession grantor (the State) a concession tax defined under the Agreement as the difference between tolls collected and other revenues on the one side, and recognised expenses arising from concession activities, taking into account the normal return on equity, on the other side. Recognised expenses are determined on the basis of:

- the number of vehicles passing through toll stations,- in percentage of the annual revenues from tolls collected, - the number of kilometres of motorways operated by the Company, and- the opportunity cost of capital (interest rate).

On 20 February 2009, Annex No. 1 to the Concession Agreement was concluded between the Republic of Slovenia and DARS, which additionally regulates:

- accounting of additional expenses related to performance of obligations in connection with the provi-sion of road tunnel safety against concession tax as of 1 January 2009,

- the method of determining the number of car passages for which vignette toll system was introduced as of 1 July 2008, which has impact on the accounting of a portion of costs of tolling,

- the method of providing additional funds for the payment of matured liabilities arising from borrowin-gs for motorway construction (transfer of a portion of the concessionaire's net profit, which exceeds the amount of the allowed return on equity of DARS, to concession tax – applicable for the financial years 2008 and 2009).

Payments of concession tax are made monthly with the prior authorisation of the Ministry of Transport for the transfer of funds from the account of DARS to the transaction account designated for the financing of motorway construction, where they shall be used for servicing borrowings for motorway construction. The estimate of the statement of account of concession tax for the previous period is to be submitted by the concessionaire not later than 15 March of the current year based on the estimate of all revenue under Item 5.1 of the Concession Agreement and allowed expenses under Item 5.3 of the respective Concession Agre-ement. Final settlement is made on the basis of actual revenues and allowed expenses not later than 8 days after receipt of the auditor’s opinion on the annual report of DARS for the respective year.

In performing the Concession Agreement, DARS is entitled to use any state-owned facilities required for toll collection and motorway maintenance. The Concession Agreement stipulates that any equipment and devices under the concession are to be constructed or purchased on behalf of the State, provided they are intended for motorways whose construction is in progress at the time of signing the Concession Agreement, or was scheduled to begin in 2004. The ownership of equipment and devices mentioned in the previous sentence shall subsequently be transferred from the State as co-assignor to the concessionaire. Such physi-cal assets comprise mobile equipment and devices required for toll collection and motorway maintenance, the ETC and IT systems, the driver information system, and signalisation. Other concession equipment and


devices shall subsequently be provided by the concessionaire DARS as a commercial company from its own operating revenues. Upon expiry of the Concession Agreement, the State shall purchase the previously men-tioned equipment and devices at the market prices determined by an independent appraiser.

Accounting policies

The financial statements of DARS, together with notes and disclosures of the most important categories, have been prepared in accordance with the Companies Act and the accounting and reporting requirements of the 2006 Slovene Accounting Standards (hereinafter: SAS 2006), provided they are not contrary to other regulations, ZDARS, or the Accounting Act.

The financial statements and notes thereto give a true and fair view of the Company’s operations. The fun-damental accounting assumptions that have been taken into account are accrual basis and going concern. The principal qualitative characteristics of financial statements and thus of the entire accounting are under-standability, relevance, reliability and comparability.

The financial statements have been prepared observing the principles of prudence, substance over form, and materiality, as well as the true and fair presentation of assets and liabilities of the Company.

Pursuant to ZDARS, the Company is required to keep separate accounts for activities pursued on behalf of the State. For this purpose the Company keeps separate accounts of state-owned assets and liabilities under management, and company-owned assets and liabilities. The Act also requires the Company to pre-pare consolidated financial statements for external users, while, for internal reporting purposes, separate financial statements are compiled for stated-owned assets and liabilities under management, and for com-pany-owned assets and liabilities.

The financial statements for state-owned assets and liabilities under management must be in compliance not only with the Companies Act and Slovene Accounting Standards, but also with ZDARS and the Accoun-ting Act.

Borrowings and debt securities issued by the Company on its own behalf and for the account of the State for the financing of motorway construction and reconstruction are – pursuant to ZDARS and the Agreement on the Performance of Contracts – included in the Balance Sheet showing state-owned assets and liabilities, as they are in fact investments in state-owned assets. Liabilities arising in connection with such borrowings and debt securities are also guaranteed by the Republic of Slovenia.

The applied accounting policies are first explained for the Company’s assets, and then separately for state-owned assets.

Foreign currency-denominated items have been translated into euros using the middle exchange rate of the Bank of Slovenia applicable on the last day of the accounting period.The financial statements are compiled in euros.


Valuation methods applied to the company-owned balance sheet items

Intangible assets

Intangible assets comprise investments in acquired industrial property rights (licenses, software).Intangible assets are initially recognised at cost, which comprises their purchase price and any costs incur-red in preparing them for their intended use.

Intangible assets are not revalued due to an increase in value.

Intangible assets are presented in the balance sheet as a collective item at their carrying amount, which is the amount at which an asset is recognised after deducting any accumulated amortisation from its cost.

Property, plant and equipment

Property, plant and equipment comprise land, buildings, equipment, and tangible assets being constructed or manufactured, and are presented in the balance sheet as a collective item, by type of assets, at their carrying amount, which is the amount at which an asset is recognised after deducting any accumulated de-preciation from its cost. Assets that can no longer be used because they are defective, obsolete, or similar, are permanently withdrawn from use.

An item of property, plant and equipment is, on initial recognition, measured at cost. This comprises its pur-chase price, import duties and non-refundable purchase taxes, as well as any directly attributable costs of bringing them into working condition.

Subsequent expenses associated with property, plant and equipment increase their cost, if they increase the future economic benefits generated by such assets in excess of the originally assessed ones. Subsequent expenses that result in an extension of the useful life of an item of property, plant and equipment reduce its accumulated depreciation.

Repair and maintenance costs incurred to restore or maintain the future economic benefits expected from the originally assessed standard of performance of an existing item of property, plant and equipment are recognised as expenses when incurred.

The difference between the net proceeds on disposal and the carrying amount of an item of property, plant and equipment disposed of shall be recognised as operating revenues from revaluation if the first exceeds the latter, or as operating expenses from revaluation if the latter exceeds the first. In 2008, company-owned property, plant and equipment were not revalued.


Depreciation / Amortisation

The carrying amount of property, plant and equipment and intangible assets is reduced by the amount of depreciation / amortisation. The depreciation of property, plant and equipment and the amortisation of intangible assets are calculated based on their cost.

The depreciation of an item of property, plant and equipment begins on the first day of the following month after it has been made available for use. The amortisation of an item of intangible assets begins when the asset is available for use.

Amortisation / depreciation is calculated for each asset separately, using the straight line method. Land is not depreciated. Intangible assets and property, plant and equipment are amortised / depreciated at the following rates set by the Management Board:

AssetRate of amortisation /

depreciation up to1 Jan 2007

Rate of amortisation / depreciation as of

1 Jan 2007

Software 50% 50%

Buildings 5% 3%

Equipment (office furnishings, workshop equipment, maintenance equipment, office supplies, etc.)

25% 20%

ETC system equipment and devices 25% 20%

Computers and computer equipment 50% 50%

Personal cars 12,5% 20%

Machinery 25% 20%

Low-value assets 25% 20%

The depreciation / amortisation rates specified in Resolution no. 64/27 of 22 March 2005 as adopted by the Management Board shall be applicable for the property, plant and equipment and intangible assets that began to be depreciated / amortised prior to the effective date of ZDDPO-2 until they are fully amortised / depreciated.

The annual amortisation / depreciation charge is expensed.

Property, plant and equipment and intangible assets shall be depreciated / amortised until an asset is fully depreciated / amortised, even if the asset is no longer in use or is withdrawn from use.

Long-term investments

Long-term investments are held by the Company to earn returns and thus increase its financial re-venue. Long-term investments are initially recognised at cost, i.e. the amount of money invested.

In accordance with ZDARS, the Company is required to invest any surplus cash in state securities or its own securities, debt securities, or deposits with first-class banks domiciled in the Republic of Slovenia.


Deferred tax assets

Deferred tax assets are the amounts of income tax recoverable in future periods. Deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available, against which the deductible temporary difference can be utilised.Insignificant deferred tax assets are not recognised.

Inventories

An inventory unit of materials is initially recognised at cost, which comprises its purchase price, import duties and other directly attributable costs of acquisition. The purchase price is reduced by any discounts received.

On initial recognition, the value of components in the unit price and the total unit price derive from the histo-rical cost. Subsequently, if the latest purchase prices in the accounting period differ from unit prices and/or unit costs of same-class items of inventory, the moving average price method is used.

Short-term investments

In accordance with ZDARS, the Company is required to invest any surplus cash in state securities or own securities, debt securities or deposits with first-class banks domiciled in the Republic of Slovenia.Short-term investments are initially recognised at cost, i.e. the amount of money invested.

Foreign currency-denominated short-term investments are translated into national currency on the date they are incurred using the applicable middle exchange rate of the Bank of Slovenia.

Short-term trade receivables

Short-term operating receivables comprise short-term trade receivables due from domestic and foreign customers, trade receivables from operations on foreign account, interest receivable on short-term sight deposits and investments, advances receivable, input VAT receivable, and other receivables.

Short-term operating receivables are initially recognised at amounts indicated in relevant documents, provi-ded their collection can be assumed. Foreign currency-denominated receivables are translated into national currency on the date they are incurred using the middle exchange rate of the Bank of Slovenia.

At the balance sheet date, receivables are reassessed on the basis of objective evidence of their collecta-bility. For doubtful and disputable receivables, allowances are set up or receivables are fully written off. Allowances are charged against operating expenses from revaluation in the full amount of such receivables.

Cash

This item comprises cash in hand, cash in banks, cash in transit, and call deposits. Cash in transit comprises cash that is being transferred from the Company to the bank, but will not be credited to the Company’s account within the same day.

Domestic and foreign currency denominated cash is presented separately. The first is stated at nominal value, whilst the latter is translated into national currency using the middle exchange rate of the Bank of Slovenia applicable on the date of receipt.

Equity

Equity is the Company’s liability to owners which falls due if the Company ceases to operate. Equity consists of called-up capital, capital surplus, revenue reserves, and unappropriated net profit for the period.Capital surplus comprises the value of real assets transferred by the Republic of Slovenia to the Company upon its transformation for the purpose of motorway operation and maintenance, and the general capital revaluation adjustment, which was transferred to capital surplus on 1 January 2006. Legal reserves are set up in accordance with the Companies Act and must amount to at least 10 per cent of the Company’s share capital.


Other revenue reserves comprise non-nominal capital and are increased annually through the appropriation of net profit.

Equity components and changes in equity are disclosed in the Statement of Changes in Equity.

Provisions and long-term accrued costs and deferred revenue

Provisions are formed by an entity for its present obligations that arise from obligating past events and are expected to be settled in a period that cannot be defined with certainty, but a reliable estimate can be made of the amount of obligations. Long-term provisions are set up for accrued costs or expenses and are decreased by the amounts of costs or expenses for which they were formed in accordance with the plan. Long-term accrued costs and deferred revenue comprise deferred revenue expected to cover estimated expenses in a period of more than one year.

In accordance with SAS 2006, the Company set up long-term provisions for retirement benefits and jubilee benefits based on actuarial calculations. These were made as at 31 December 2008 for each and every employee, taking into account the costs of retirement benefits under their employment contracts, as well as the costs of all jubilee benefits that an employee would receive for his/her period of service until retirement. In 2006, the Company joined a pension scheme for collective supplementary pension insurance. In accor-dance with an agreement concluded with trade unions, all the Company’s employees were entitled to join this scheme, except those being of retirement age on 31 December 2006, i.e. 50 years (women) and 55 years (men). The employer shall pay to these employees a lump sum equal to the interest-free premiums it would have to pay on their behalf had they been included in the pension scheme. For this purpose, the Company also set up long-term provisions.

Long-term provisions for long-term accrued costs are also set up with regard to the possible unfavourable outcome of lawsuits related to motorway operation and maintenance, as well as labour lawsuits.

In 2005, 2006 and 2007, the Company set up long-term provisions for long-term accrued costs related to employment relationships that would arise upon the introduction of the new satellite toll system. Such a toll system, under which motorway users pay a toll based on the number of kilometres driven, is – pursuant to a decision adopted by the Government at its 51st session of 22 November 2001 – the ultimate vision and objective of the Slovene motorway system. In accordance with the original programme, provisions should be set up in four successive years (2005 – 2008), each year in the amount equal to one quarter of the esti-mated amount required for this period. As a consequence of the introduction of the vignette toll system for personal vehicles as of 1 July 2008, ninety-two employees employed in the area of tolling were reallocated to new jobs in the area of road supervision. In accordance with the original programme, provisions for redun-dancies following the introduction of the vignette toll system had been set up. The Company has assessed that the provisions already set up are sufficient with regard to the action plan of the Government of the Republic of Slovenia related to the introduction of the satellite toll system and that the creation of additional provisions in 2008 (the last quarter) is not needed. The amount of provisions set up as at 31 December 2008 is sufficient for redundancies in the area of tolling.

Long-term provisions have also been set up in the amount co-financed by users of the ETC (electronic toll collection) system. These provisions relate to warranties granted on the sale of electronic tags since 2004. At the end of each accounting period, long-term provisions are restated to the present value of expenditure required to settle the liability. The warranty granted on a ETC system tag is 1 (one) year from the date of its acceptance. Its useful life is 7 years. If an electronic tag is purchased, used and then returned undamaged within its useful life, the user is entitled to the refund of the proportionate share of the co-financed amount taking into account the undepreciated amount of the electronic tag. The annual depreciation rate is 14.29 %. The claim of refund of a proportionate share of the co-financed amount taking into account the undepre-ciated amount of the electronic tag, and the return of the unused net credit actually paid are possible only on the basis of a written claim with the obligatory statement of the identification number (ID) and the return of the electronic tag and receipt of purchase (or payment of the co-financed amount). As of 1 July 2008 the ETC system for personal vehicles has no longer been in use and has been replaced by the vignette toll system. The depreciation of the ETC system tags has been discontinued as of 30 June 2008.

As of 1 October 2008, the ETC system tag has been used only for vehicles of the fourth toll class. Up to 31 December 2003, long-term provisions were set up in the balance sheet of state-owned assets and liabilities under management.


Long-term accrued costs and deferred revenue include long-term deferred revenue that will cover anti-cipated expenses in a period longer than one year. Long-term deferred revenue also includes earmarked donations for the acquisition of fixed assets. The donations are earmarked to cover depreciation charges of fixed assets thus acquired and are utilised by transfer to operating revenue.

Short-term operating liabilities

Short-term operating liabilities comprise short-term trade payables relating to motorway operation and maintenance, payables to employees, and payables to the State for taxes and contributions.Short-term operating liabilities are initially recognised at amounts indicated in relevant documents, provided that creditors require their settlement. Foreign currency-denominated liabilities are translated into national currency at the date they are incurred using the applicable middle exchange rate of the Bank of Slovenia.

Short-term accrued and deferred items

Deferred costs and accrued revenue are amounts incurred, but not yet charged against an entity's activities and they do not yet affect its profit or loss. Deferred costs and accrued revenue comprise deferred costs of commission to vignette sales agents and deferred costs of vignette printing, which are recognised in the amount equal to the proportionate share of each allowed amount of revenue from the sold vignettes. Short-term accrued costs and deferred revenue comprise accrued costs and short-term deferred revenue. Accrued costs are costs that affect the Company’s profit or loss for the period, but are not expected to be paid until the next accounting period. They are accrued on the basis of liabilities recognised in advance. In 2008, short-term accrued costs and deferred revenue were mainly set up on the basis of accrued costs of services. Short-term deferred revenue arises when services to be rendered in the future have already been invoiced or even paid. The Company’s short-term deferred revenue comprises revenue from tolls collected in the form of top-ups on electronic toll media (ETC and DARS tags) invoiced and paid in 2008 but not used in the same year. These will be recognised as deferred revenue until they have actually been used by road users.Short-term deferred revenue also included revenue from vignettes charged in 2008, which will be valid in 2009, and from half-yearly vignettes, which will be partly or entirely valid in 2009 (a half-yearly vignette is valid six months from the date of purchase, and an annual vignette from 1 December 2008 until 31 January 2010). Short-term accrued costs and deferred revenue also included a portion of compensation under the Agreement on the Performance of Contracts for 2008, which was invoiced and paid but the service had not been rendered. The works actually implemented in 2008 under LP ROAC amounted to 94.87 % (without the compensation for the performance of contracts and the costs of servicing of borrowings).

Mutual relations between the Company and the State

The Balance Sheet showing company-owned assets and liabilities also comprises receivables due from the State in respect of the use of company-owned assets to finance state-owned assets under management. The Balance Sheet showing state-owned assets under management also comprises liabilities of the same amount due by the State to the Company. The Balance Sheet showing company-owned assets and liabilities also comprises liabilities to the State asso-ciated with the use of state-owned assets under management to finance company-owned assets. The Balan-ce Sheet showing state-owned assets and liabilities under management comprises the State’s receivables of the same amount due from the Company. The Consolidated Balance Sheet does not include these transactions, as they are offset against one other.

Revenue

Revenue is recognised if increases in economic benefits during the accounting period are associated with increases in assets or decreases in liabilities, and if they can be reliably measured. Revenue is recognised provided it can be reasonably assumed that it will eventually result in cash receipts. Revenue is classified into operating revenue, financial revenue, and other revenue.


Net sales comprise:- tolls collected,

- rentals paid by various service providers to use motorway service areas,

- revenue from motorway closures and extraordinary freight transports,

- revenue from easement for the installation of facilities and devices of public importance alongside motorways,

- revenue from telecommunications,

- revenue under the Agreement on the Performance of Contracts. The Company is entitled to a com-pensation for the performance of works under this Agreement, which is expressed as a percentage of the value of all works set out in the current LP ROAC. Payment of compensation is made, subject to prior approval of the Minister of Transport, from the transaction account designated for the financing of motorway construction. Advance payments of compensation are made on the basis of the value of works under LP ROAC, and the final settlement is done on the basis of the value of works actually carried out under LP ROAC and reported to the National Assembly on a yearly basis. Based on an analysis of the Company’s actual costs incurred in 2003 and the estimated costs of engineers in 2004, the compensation for the years 2004, 2005, 2006, 2007 and 2008 was determined at 5.49 % of the value of motorway construction and reconstruction works.

The contracting parties shall revise the above-mentioned percentage every two years. If the costs actually incurred by the Company exceed those recognised under the Agreement on the Performance of Contracts by more than 5 % with respect to the tasks to be performed by the Company thereunder, each contracting party may request that the amount of compensation be changed, but only for the subsequent year. In March 2006, the Government of the Republic of Slovenia set up an expert group with the task of reviewing the actually substantiated costs under the Agreement on the Performance of Contracts and the actually sub-stantiated expenses related to the calculation of concession tax under the Concession Agreement.

The compensation can be increased or decreased by 10 % to reflect any cost savings or overruns against the approved costs of the investment programme. The incentive, however, may not exceed 1 % of the investment value approved by the Minister of Transport, and applies only to projects approved after the Agreement on the Performance of Contracts was signed. The initial compensation is determined on the ba-sis of actual historical data, but can be subsequently adjusted in case of justified changes in expenses. Such adjustments can not have a retroactive effect, which means that each contracting party shall assume its own share of risk for the current financial year;

- other operating revenue.

Financial revenue comprises interest revenue and foreign exchange gains. Financial revenue is recognised, unless there is justified doubt as to its amount and collectability. Interest revenue is recognised on a time proportion basis taking account of the outstanding principal amount and the applicable interest rate.Other revenue comprises unusual items increasing profit or loss for the period (damages received, remune-ration for the employment of disabled persons above the quota,..).

Expenses

Expenses are recognised if decreases in economic benefits during the accounting period are associated with decreases in assets or increases in liabilities, and if they can be reliably measured. Expenses shall be classi-fied into operating expenses, financial expenses and other expenses.The Company’s operating expenses comprise expenses associated with motorway operation and mainte-nance under the Concession Agreement. They comprise:

- costs of materials and cost of goods sold,

- costs of services, which include:

between DARS and the Republic of Slovenia in the area of motorway operation and maintenance. The concessionaire (DARS d.d.) executes the Concession Agreement on its own behalf and for its own account, for which it pays the concession grantor (the Republic of Slovenia) a concession tax


expressed as the difference between tolls collected and other revenue generated by the Company on the one hand, and expenses incurred in executing the Concession Agreement, taking into acco-unt a normal return on equity, on the other hand. The recognised expenses are determined on the basis of the number of vehicles entering and leaving the motorway or passing through tall booths, in percentage of the annual revenue from tolls collected, and the number of kilometres of motor-ways operated by the Company. Concession tax is paid by the Company monthly to the transaction account designated for the financing of construction and reconstruction under the Agreement on the Performance of Contracts. Final settlement of the annual amount of concession tax is made on the basis of revenue and recognised expenses not later than 8 days after receipt of the Auditor’s Report on the financial statements of the Company for the respective year;

the Agreement on the Performance of Contracts and the Concession Agreement, these costs are borne by the Company, for which it is entitled to a compensation under the Agreement on the Performance of Contracts;

- labour costs;- amortisation / depreciation expenses (for respective disclosures, see notes to intangible assets and

property, plant and equipment); and- other operating expenses.

Financial expenses comprise interest expenses, foreign exchange losses, and impairment losses. They are recognised when accrued, regardless of related payments.Other expenses comprise unusual items that decrease the profit or loss for the period.

Income tax

Income tax is calculated in accordance with the Income Tax Act. The tax base is the total profit increased by non-deductible expenses and decreased by statutory tax relief. Tax is payable on the base at a rate of 22 %.

Cash flow statement

The Cash Flow Statement has been prepared using the indirect method on the basis of data from the Balance Sheets as at 31 December 2008 and 31 December 2007, the Income Statement for 2008, and additional information required for adjustment of inflows and outflows.The Cash Flow Statement comprises cash flows from operating, investing and financing activities.


Valuation methods applied to the valuation of state-owned balance sheet items under management by dars

Property, plant and equipment under management

Opredmetena osnovna sredstva so izkazana v bilanci stanja zbirno, po posameznih vrstah teh sredstev, z neodpisano vrednostjo kot razliko med nabavno vrednostjo in popravkom vrednosti. Osnovna sredstva, ki jih podjetje ne more uporabljati, ker so poškodovana ali zastarana, se izločijo trajno iz uporabe.Postavka opredmetenih osnovnih sredstev v upravljanju vključuje:

Property, plant and equipment are presented in the Balance Sheet as a collective item, by type of assets, at their carrying amount, which is the amount at which an asset is recognised after deducting any accumulated depreciation from its cost. Assets that can no longer be used because they are defective, obsolete, or similar, are permanently withdrawn from use.Property, plant and equipment under management are classified into:

1. Land:- land of motorway maintenance centres that has been partly eliminated;

2. Buildings, comprising capitalised motorways or motorways taken into use:a) Substructure, comprising:

- land acquired, - construction works carried out on the substructure, - costs of archaeological excavations, - costs of design documents,- costs of financing motorway construction, - costs of supervising motorway construction, etc.;

b) Surface structure, comprising: - construction works carried out on the surface structure or roadway,- safety fences and sound barriers,- vertical and horizontal signalisation,- traffic management system, emergency call system and telecommunications system;

c) Facilities, comprising: - viaducts and bridges,- overpasses and underpasses, - tunnels with equipment;

d) Buildings on motorways, comprising: - motorway maintenance centres, - toll collection stations, including booths and roofing, - other buildings (transformer substations);

e) Facilities operated by others and comprising: - separately capitalised items of property, plant and equipment for infrastructure buildings and faci-

lities which, under applicable law, cannot be operated by DARS and will therefore be transferred to authorised operators, such as:

etc.) on roads other than motorways (state, municipal, local roads, etc) and railways carried out by the Company for the purpose of motorway construction or reconstruction;

3. Other motorway equipment, comprising:- ongoing investments in the equipment of motorway maintenance centres,- state-owned equipment to be permanently withdrawn from use because it is defective, obsolete, or

similar;


4. Property, plant and equipment under construction comprise motorways, facilities and motorway maintenan-ce centres under construction.

The cost of motorways constructed or under construction comprises the following:

- the revalued cost and accumulated depreciation of motorways transferred by the Republic of Slove-nia to the Company for management upon its establishment in 1994; and

- the costs, at invoice value, required to bring new motorways, facilities and maintenance centres as well as motorways under construction into service: costs related to elaboration of design documents, land acquisition, valuation of compensation to third persons for land acquired, change of land use, costs of an engineer (until the end of 2003), costs related to the Agreement for the Performance of Contracts (the agency services provided), and financing (interest on borrowings drawn down until the completion of construction works, bank charges on borrowings) incurred until final acceptance by the investor, as well as other construction-related costs (archaeological excavations, audits, quality controls, etc.).

The above-mentioned cost also comprises the revaluation of cost carried out by use of the cost of living index up to the end of 2001.

The depreciation of property, plant and equipment under management is carried out on an item-by-item ba-sis and begins on the first day of the month following the month in which the asset was first made available for use. Property, plant and equipment under management start being used on the day when a motorway is opened for traffic, even if there are still defects to be corrected.

The Company applies the straight-line method of depreciation. The basis for depreciation is the full cost of property, plant and equipment under management. The basis for depreciation also includes capitalised subsequent investments that increase the future economic benefits of property, plant and equipment under management. Subsequent expenses related to existing motorways that result in an extension of their useful life (major repairs - reconstruction of roadways, facilities) reduce their accumulated depreciation.

The legal basis for depreciation of state-owned assets under management by the Company is the Accoun-ting Act (Official Gazette of RS, no. 23/1999) and, on the basis thereof, the adopted “Rules on the method and rates of depreciation applying to intangible assets and property, plant and equipment” (Official Gazette of RS, no. 45/2005 and 138/2006).

Pursuant to the above mentioned rules, the Company used the following depreciation rates in 2008:

Item of property, plant and equipment Depreciation rate

Motorway parts:

Surface structure 3%

Substructure -

Facilities (tunnels, viaducts, bridges) 3%

Facilities operated by others -

Buildings 3%

Software, all-terrain vehicles and vans, other room equipment 20%

Computer hardware 50%

Other computer equipment 25%

Other machines, connections and workshop equipment 15%

Trucks 14%

Personal vehicles 12.5%

Office furniture, trailers and other road vehicles 12%


Property, plant and equipment transferred to authorised operators are not depreciated (assets will be trans-ferred at their cost and the authorised operators will decide how to revalue and depreciate them). The depreciation expense related to property, plant and equipment under management is charged against long-term liabilities to the State, as this expense is not included in the price for motorway usage and the State does not provide any special funds for this purpose.

Property, plant and equipment under management were not revalued in 2008.

Short-term investments in other entities

In line with ZDARS, the Company is required to invest any surplus cash in government or own securities, debt securities, or deposits with first-class banks domiciled in the Republic of Slovenia.

Short-term investments denominated in foreign currency are translated into the national currency (euro) using the middle exchange rate of the Bank of Slovenia ruling at the balance sheet date. Any exchange rate differences arising from translation increase or decrease the Company’s long-term liabilities to the State.

Short-term operating receivables

Short-term operating receivables comprise short-term trade receivables, short-term input VAT receivable, short-term European funds receivable, and short-term interest receivable on sight and other deposits.

Short-term operating receivables are initially recognised at amounts indicated in relevant documents, pro-vided their collection can be assumed. Interest is calculated in accordance with the relevant contract as at the due date of a short-term receivable and as at the balance sheet date. There are no foreign currency-denominated receivables included in short-term operating receivables recorded under state-owned assets managed by the Company.

Cash

The item comprises bank balances denominated in national and foreign currencies. The latter are translated into national currency using the middle exchange rate of the Bank of Slovenia ruling at the balance sheet date. Exchange rate differences arising from translation increase or decrease the Company’s long-term liabilities to the State.

Mutual relations between the State and the Company

The Balance Sheet showing state-owned assets under management of the Company also comprises the State’s receivables due from the Company associated with the use of state-owned assets under manage-ment to finance company-owned assets. The Balance Sheet showing company-owned assets and liabilities comprises the Company’s liabilities to the State in the same amount.

The Balance Sheet showing state-owned assets under management also comprises liabilities to the Com-pany associated with the use of company-owned assets to finance state-owned assets under management. The Balance Sheet showing company-owned assets and liabilities comprises the Company’s receivables due from the State in the same amount.

The Consolidated Balance Sheet does not include the above-mentioned transactions as they are offset aga-inst one other.


Long-term accrued costs and deferred revenues set up in the previous periods are reduced by the amo-unts used in accordance with the plan and purpose for which they were set up.

Until 1 January 2004, long-term accrued costs and deferred revenue were set up for state-owned as-sets under management in the amount equal to the share co-financed by the users of ETC tags. These are long-term provisions for guarantees given for ETC tags or for liabilities to reimburse the non-depre-ciated portion of purchase money for such tags in the event that they are returned by users (the Com-pany has given users a period of 7 years to return the tags). These long-term provisions are initially re-cognised in the amount paid by users, which only partly covers the full cost of an ETC tag. At the end


of each accounting period, long-term provisions are restated to reflect the present value of expen-ditures expected to be required to settle liabilities. In previous periods, reversed long-term provisi-ons were used to purchase new ETC tags, and simultaneously increased the Company’s liabilities to the State arising from the portion of tolls earmarked for investments in property, plant and equipment.

As of 1 January 2004, ETC tags are no longer purchased with state-owned assets under management, but instead with company-owned assets, which is why the related provisions have been included in the Balance Sheet showing company-owned assets. The reversal of long-term provisions set up in previous periods re-presents an additional source of funds to finance motorway construction.

Long-term financial liabilities to banks arising from borrowings to acquire

property, plant and equipment under management

Long-term financial liabilities to banks arising from borrowings to acquire property, plant and equipment comprise long-term domestic and foreign borrowings to finance motorway construction.Long-term financial liabilities maturing in a period of less than one year after the balance sheet date are recorded under short-term financial liabilities.

Long-term financial liabilities are initially recognised at the amounts indicated in relevant documents evi-dencing the receipt of cash. Foreign currency-denominated liabilities are translated into national currency on the date they are incurred using the middle exchange rate of the Bank of Slovenia.

At the end of an accounting period, long-term financial liabilities arising from foreign borrowings are tran-slated into national currency using the middle exchange rate of the Bank of Slovenia ruling at the balance sheet date. The revaluation of long-term financial liabilities decreases the Company’s long-term liability to the State.

Interest paid on long-term borrowings to finance motorway construction increases the cost of relevant motorway sections for as long as they are under construction. Once they are opened for traffic, the inte-rest paid on borrowings decreases the Company’s liabilities by the amount of interest paid.

Pursuant to ZDARS and the Agreement on the Performance of Contracts, the Company borrows to finance motorway construction and reconstruction on its own behalf and for the account of the State. Liabilities arising from these borrowings are secured by the guarantee of the Republic of Slovenia.

Long-term financial liabilities from bonds issued to finance the acquisiti-

on of property, plant and equipment under management

Long-term financial liabilities from bonds are initially recognised at amounts indicated in relevant docu-ments evidencing the receipt of cash.

Interest paid on bonds issued to finance motorway construction increases the cost of relevant motorway sections for as long as they are under construction. Once they are opened to traffic, the interest paid dec-reases the liabilities by the amount of interest paid.

Pursuant to ZDARS and the Agreement on the Performance of Contracts, the Company issues bonds to finance motorway construction and reconstruction on its own behalf and for the account of the State.

Liabilities arising in connection with these bonds are secured by the State’s guarantee.

Long-term operating liabilities arising from state-owned assets under

management

These liabilities comprise the following:

- the value of constructed motorways and motorways under construction transferred by the State to the Company for management upon its establishment;

- the effects of revaluation of capitalised constructed motorways and motorways under construction carried out in 1994-2001 by use of the cost of living index;

- funds earmarked for motorway construction and reconstruction (interest-bearing until 31 March 2002) obtained pursuant to the Act on the Allocation of Funds for the Construction of Roads Deter-


mined in the National Motorway Construction Programme (Official Gazette of RS, nos. 57/98 and 18/02);

- collected tolls which, pursuant to the current LP ROAC and the budget, were up to 31 December 2003 earmarked for motorway construction, reconstruction of roadways, facilities and equipment (major repairs and maintenance), repayment of principal of and interest on investment borrowings, as well as for the acquisition of property, plant and equipment (motorway maintenance equipment);

- insurance benefits received until 31 December 2002 as a compensation for damages on motorways;

- interest received on investments and interest on sight deposits in the account designated for motor-way construction;

- the effects of a subsequent revaluation of constructed motorways and motorways under construc-tion transferred by the State to the Company for management upon the Company’s establishment (subsequent revaluation carried out in 2001);

- concession tax, which is, pursuant to ZDARS, determined in the Concession Agreement as a long-term source for the repayment of principal of and interest on borrowings for motorway construction and reconstruction;

- the paid-in surplus related to bonds issued;

- funds received from the Cohesion Fund for motorway construction;

- value of land obtained free of charge for motorway construction;

- funds obtained from the European Fund for Regional Development – technical assistance,

- financial support from the European Union for the TEN-T project, and

- European Union funds for the TEMPO international programme.

Long-term operating liabilities arising from state-owned assets under management are decreased by the

following:

- the amount of revaluation of long-term domestic and foreign borrowings;

- the amount of revaluation of balances in foreign currency denominated accounts and certificates;

- the amount of writedowns related to assets under management, given that this expense is not inclu-ded in the price of motorway usage and that no funds are provided by the State to cover it;

- the value of property, plant and equipment transferred free of charge to authorized operators;

- interest paid on borrowings and bonds issued for the acquisition of property, plant and equipment under management; and

- the amount of subsequent accumulated depreciation for constructed motorways and motorways under construction transferred by the State to the Company for management upon the Company’s establishment (subsequent revaluation carried out in 2001).

Long-term operating liabilities arising from municipality-owned assets

under management

These liabilities are recorded in the amount of co-financing of motorway construction by local communities and public utilities.

Short-term financial liabilities to banks

Short-term financial liabilities to banks arising from borrowings for the acquisition of property, plant and equipment under management comprise the short-term portion of long-term financial liabilities maturing in the following year.

Other short-term financial liabilities to banks comprise interest accrued by 31 December 2008 on borro-wings and bonds issued to finance motorway construction and reconstruction.


Short-term trade payables

Short-term trade payables comprise trade payables to domestic and foreign contractors of construction works, as well as purchase price and compensation payable to third persons for land acquired.Short-term trade payables are initially recognised at amounts indicated in relevant documents, provided that creditors demand their settlement.


Financial statements of dars d.d.

The Company has prepared the following financial statements for tax and statistical purposes:- Consolidated Balance Sheet,

- Income Statement of DARS,

- Consolidated Cash Flow Statement,

- Statement of Changes in Equity,

- Statement of Accumulated Profit and Proposed Appropriation

Pursuant to the Motorway Company of the Republic of Slovenia Act (ZDARS) and the Accountancy Act, the Company has to subdivide the balance sheet for the needs of the internal users into:

- a balance sheet showing assets and liabilities owned by DARS, and

- a balance sheet showing assets and liabilities of the Republic of Slovenia under the management of DARS

The company-owned assets comprise assets, receivables, investments, and cash required by the Company for motorway operation and maintenance.

The state-owned assets under management of the Company comprise the following property, plant and equipment under management: motorways constructed or under construction, receivables, investments, and cash required by the Company for construction. The owner of these assets, the Republic of Slovenia, transferred the assets to the Company for management, but without transferring the right of ownership. The Company does not prepare the income statement for the state-owned assets under management of the Company, because any “revenue” generated under the Agreement on the Performance of Contracts represents an additional source of funding for motorway construction, and any “expenses” incurred under the respective agreement increase the cost of motorways.


Consolidated Balance Sheet as at 31 December 2008

in EUR (without cents) 31 Dec 2008 31 Dec 2007

ASSETS 5.632.732.450 5.127.370.135

A. LONG-TERM ASSETS 5.550.559.523 5.038.613.218

I. Intangible assets and long-term deferred costs and accrued revenue 1.095.091 354.472

1. Concessions, patents, licences, trademarks and similar rights 1.095.091 354.472

II. Property, plant and equipment 5.548.030.935 5.036.611.072

1. Land and buildings 4.862.302.738 3.820.366.135

a) Land 772.592 772.592

b) Buildings 4.861.530.146 3.819.593.543

3. Other plant and equipment 22.456.108 17.094.399

4. Property, plant and equipment being acquired 663.272.089 1.199.150.538

a) Property, plant and equipment in the course of construction 663.272.089 1.199.150.538

IV. Long-term investments 644.596 674.641

1. Long-term investments, excluding loans 644.596 674.641

c) Other shares and interests 964 964

d) Other long-term investments 643.632 673.677

VI. Deferred tax assets 788.901 973.033

B. CURRENT ASSETS 79.379.507 87.494.442

II. Inventories 1.986.975 1.893.165

1. Material 1.986.975 1.893.165

III. Short-term investments 20.904.768 47.038.209

1. Short-term investments, excluding loans 20.904.768 47.038.209

c) Other short-term investments 20.904.768 47.038.209

IV. Short-term operating receivables 51.804.908 33.483.829

2. Short-term trade receivables 9.850.885 6.968.818

3. Short-term operating receivables due from others 41.954.023 26.515.011

V. Cash 4.682.856 5.079.239

C. SHORT-TERM DEFERRED COSTS AND ACCRUED REVENUE 2.793.420 1.262.475

OFF BALANCE SHEET ITEMS 381.528.851 397.346.760



LIABILITIES 5.632.732.450 5.127.370.135

A. EQUITY 55.271.541 49.023.704

I. Called-up capital 212.823 212.823

1. Share capital 212.823 212.823

II. Capital surplus (share premium) 26.428.057 26.428.057

III. Revenue reserves 17.130.755 17.130.755

1. Legal reserves 21.282 21.282

5. Other revenue reserves 17.109.473 17.109.473

VI. Net profit or loss for the period 11.499.906 5.252.069

B. PROVISIONS AND LONG-TERM ACCRUED COSTS AND DEFERRED REVENUE 5.479.162 5.738.414

1. Provisions for pensions and similar liabilities 1.773.213 1.778.730

2. Other provisions 3.040.436 3.773.735

3. Long-term accrued costs and deferred revenue 665.513 185.949

C. LONG-TERM LIABILITIES 5.330.745.646 4.847.996.919

I. Long-term financial liabilities 2.622.819.894 2.198.663.420

2. Long-term financial liabilities to banks 2.462.454.346 2.038.297.872

3. Long-term financial liabilities from bonds 160.365.548 160.365.548

II. Long-term operating liabilities 2.707.925.752 2.649.333.499

6. Long-term liabilities for state-owned assets under management 2.681.610.833 2.626.780.055

7. Long-term liabilities for municipality-owned assets under management 24.150.061 20.748.712

8. Long-term liabilities for other assets under management 2.164.858 1.804.732

D. SHORT-TERM LIABILITIES 209.697.240 215.659.170

II. Short-term financial liabilities 80.996.484 77.216.776

2. Short-term financial liabilities to banks 80.996.484 77.216.776

III. Short-term operating liabilities 128.700.756 138.442.394

2. Short-term trade payables 121.369.487 132.573.558

4. Short-term advances payable 580 16.059

5. Other short-term operating liabilities 7.330.689 5.852.777

E. SHORT-TERM ACCRUED COSTS AND DEFERED 31.358.861 8.951.928



Income Statement of DARS for the period from 1 January to 31 December 2008

in EUR (without cents) 2008 2007

1. Net sales 237.907.159 208.879.897

Revenue from tolls 201.619.791 174.719.492

Revenue from rentals 4.883.678 4.380.392

Revenue from road closure and overweight load transports 1.989.330 1.406.321

Revenue from easements 551.226 162.073

Revenue under agency agreement 27.401.614 26.398.091

Other sales revenue 1.461.520 1.813.528

4. Other operating revenue 2.366.476 2.244.314

5. Costs of goods, materials and services -188.158.776 -161.388.468

Cost of goods and materials sold, and cost of materials used -10.322.996 -9.487.267

Costs of services -35.450.167 -29.264.001

Costs of charges under the Concessions Agreement -142.385.612 -122.637.200

6. Labour costs -29.736.245 -27.557.899

a) Payroll costs -21.612.521 -19.186.004

b) Costs of social and pensions insurance -4.290.526 -3.793.581

c) Other labour costs -3.833.198 -4.578.314

7. Writedowns -8.286.076 -8.074.260

Depreciation and amortisation expense -8.178.822 -8.002.348

Operating expenses for revaluation of intangible assets and property, plant and equipment -9.774 -12.752

Operating expenses for revaluation of current operating assets -97.480 -59.160

8. Other operating expenses -803.524 -1.834.670

10. Financial revenue from loans 1.428.637 1.367.283

b) Financial revenue from loans to others 1.428.637 1.367.283

11. Financial revenue from operating receivables 39.164 14.647

b) Financial revenue from operating receivables due from others 39.164 14.647

12. Financial expenses for impairment and writedown of investments -30.045 0

14. Financial expenses for operating liabilities -11.071 -11.701

Financial expenses for trade payables -1.370 -3.032

Financial expenses for other operating liabilities -9.701 -8.669

15. Other revenue 95.733 85.168

16. Other expenses -26.894 -17.471

17. Income tax -3.100.500 -3.141.155

18. Deferred taxes -184.132 -61.548

19. Net profit or loss for the period 11.499.906 10.504.137


Consolidated Cash Flow Statement for the period from 1 January to 31 December 2008


A. Cash flows from operating activities

a) Items of income statement

POperating revenue (except from revaluation) and financial revenue from operating receivables 241.765.542 212.559.422

Operating expenses excluding amortisation / depreciation (except from revaluation) and financial expenses from operating liabilities -218.833.990 -190.869.368

Income taxes and other taxes not included in operating expenses -4.132.640 -3.202.703

b) Changes in net operating assets under balance sheet items (including accruals

and deferrals, provisions and deferred tax liabilities)

Opening less closing operating receivables -19.800.805 11.892.036

Opening less closing deferred costs and accrued revenues -1.530.945 -222.265

Opening less closing deferred tax assets 0 61.548

Opening less closing inventories -93.810 -48.597

Closing less opening operating liabilities 46.207.096 -22.926.160

Closing less opening accrued costs and deferred revenue, and provisions 22.327.681 1.786.924

c) Net cash from operating activities (a + b) 65.908.129 9.030.838

B. Cash flows from investing activities

a) Cash receipts from investing activities

Interest and dividends received from investing activities 1.472.169 -2.177.366

Cash receipts from disposal of property, plant and equipment 224.106 26.560

Cash receipts from disposal of long-term investments 0

Cash receipts from disposal of short-term investments 781.958.031 673.542.723

b) Cash payments from investing activities

Cash payment to acquire intangible assets -1.400.307 -368.466

Cash payment to acquire property, plant and equipment -519.101.250 -475.183.604

Cash payments to acquire short-term investments -755.824.590 -707.145.380

c) Net cash from investing activities (a + b) -492.671.841 -511.305.534

C. Cash flows from financing activities

a) Cash receipts from financing activities

Cash proceeds from increase in long-term financial liabilities 486.331.788 546.780.633

Cash proceeds from increase in short-term financial liabilities 78.926.274 198.081.310

b) Cash payments from financing activities

Interest paid on financing activities 3.784.937 3.353.167

Cash repayments of short-term financial liabilities -137.423.601 -253.310.902

Dividends and other profit shares paid -5.252.069 -1.775.978

c) Net cash from financing activities (a + b) 426.367.329 493.128.230

D. Closing balance of cash 4.682.856 5.079.239

x) Net increase/decrease in cash (sum total of net cash Ac, Bc and Cc) -396.383 -9.146.466

y) Opening balance of cash 5.079.239 14.225.705


Statement of Changes in Equity in the period from 1 January to 31 December 2008

in EUR (without cents)

I.Called-up

capital II.Capital surplus

III.Revenue reserves

V.Retained earnings

VI.Net profit or loss for the

period

Total equityl

1.Share capital

1.Legal

reserves

4. Other

revenue reserves

1.Net profit

for the period

A. 1 Balance at 31 December 2007 212.823 26.428.057 21.282 17.109.473 5.252.069 49.023.704

a) Changes due to transition to euro

A. 2 Balance at 1 January 2008 212.823 26.428.057 21.282 17.109.473 5.252.069 0 49.023.704

B. Transfer to equity

d) Net profit or loss for the period 2008

11.499.906 11.499.906

C. Transfer within equity

b) Reallocation of net profit for 2008 under the resolution of

the Management Board and with the consent of the SB

D. Transfer from equity

a) Dividend payout for 2007 -5.252.069 -5.252.069

E. Balance at 31 December 2008 212.823 26.428.057 21.282 17.109.473 0 11.499.906 55.271.541

ACCUMULATED PROFIT at 31 December 2008

11.499.906 11.499.906


Statement of Changes in Equity in the period from 1 January to 31 December 2007


I.Called-up

capital II.Capital surplus

III.Revenue reserves

V.Retained earnings

VI.Net profit or loss for the

periodTotal equityl

1.Share capital

1.Legal

reserves

4. Other

revenue reserves

1.Net profit

for the period

A. 1 Balance at 31 December 2006 212.819 26.428.057 21.282 11.857.409 0 1.775.978 40.295.545

a) Changes due to transition to euro 4 -4 0

A. 2 Balance at 1 January 2007 212.823 26.428.057 21.282 11.857.405 1.775.978 0 40.295.545

B. Transfer to equity

d) Net profit or loss for the period 2007

10.504.137 10.504.137

C. Transfer within equity

b) Reallocation of net profit for 2008 under the resolution

5.252.068 -5.252.068 0

of the MB and with the consent of the SB

D. Transfer from equity

a) Dividend payout for 2006 -1.775.978 -1.775.978

E. Balance at 31 December 2007 212.823 26.428.057 21.282 17.109.473 0 5.252.069 49.023.704

ACCUMULATED PROFIT at31 December 2007

5.252.069 5.252.069


Statement of Accumulated Profit and Proposed Appropriation


A. NET PROFIT FOR THE PERIOD 2008 11.499.906 10.504.137

Č. NET LOSS BROUGHT FORWARD 0 0

F. INCREASE IN REVENUE RESERVES 0 5.252.068

4. Increase in other revenue reserves 0 5.252.068

G. ACCUMULATED PROFIT at 31 December 2008 11.499.906 5.252.069


Notes to the financial statements

Notes to the Balance Sheet of DARS

Balance Sheet of DARS as at 31 December 2008


ASSETS 116.087.440 78.735.447

A. LONG-TERM ASSETS 25.311.901 20.080.986

I. Intangible assets and long-term deferred costs and accrued revenue 1.095.091 354.472

1. Concessions, patents, licences, trademarks and similar rights 1.095.091 354.472

II. Property, plant and equipment 22.783.313 18.078.839

1. Land and buildings 1.575.764 1.471.946

a) Land 29.923 29.923

b) Buildings 1.545.841 1.442.022


4. Property, plant and equipment being acquired 135.976 1.030.107

a) Property, plant and equipment in the course of construction 135.976 1.030.107

IV. Long-term investments 644.596 674.641

1. Long-term investments, excluding loans 644.596 674.641

c) Other shares and interests 964 964

d) Other long-term investments 643.632 673.677

VI. Deferred tax assets 788.901 973.033

B. CURRENT ASSETS 50.553.493 54.419.700

II. Inventories 1.986.975 1.893.165

1. Material 1.986.975 1.893.165

III. Short-term investments 20.904.768 40.738.209

1. Short-term investments, excluding loans 20.904.768 40.738.209

c) Other short-term investments 20.904.768 40.738.209


2. Short-term trade receivables 7.751.642 5.996.933

3. Short-term operating receivables due from others 15.290.130 832.983

4. Short-term operating receivables under the agency contract

V. Cash 4.619.978 4.958.410

C. SHORT-TERM DEFERRED COSTS AND ACCRUED REVENUE 2.506.547 1.262.475

D. RECEIVABLES FROM THE USE OF COMPANY-OWNED ASSETS TO FINANCE STATE-OWNED ASSETS UNDER MANAGEMENT

37.715.499 2.972.287




LIABILITIES 116.087.440 78.735.447

A. EQUITY 55.271.541 49.023.704

I. Called-up capital 212.823 212.823

1. Share capital 212.823 212.823

II. Capital surplus (share premium) 26.428.057 26.428.057

III. Revenue reserves 17.130.755 17.130.755

1. Legal reserves 21.282 21.282

5. Other revenue reserves 17.109.473 17.109.473

V. Retained earnings 0 0

VI. Net profit or loss for the period 11.499.906 5.252.069

B. PROVISIONS AND LONG-TERM ACCRUED COSTS AND DEFERRED REVENUE 5.479.162 5.641.273

1. Provisions for pensions and similar liabilities 1.773.213 1.778.730

2. Other provisions 3.040.436 3.676.594

3. Long-term accrued costs and deferred revenue 665.513 185.949

Č. SHORT-TERM LIABILITIES 23.799.039 15.119.500

II. Short-term financial liabilities 0 0

4. Other short-term financial liabilities 0 0


2. Short-term trade payables 16.469.133 9.250.664

4. Short-term advances payable 580 16.059

5. Other short-term operating liabilities 7.329.326 5.852.777

D. SHORT-TERM ACCRUED COSTS AND DEFERRED REVENUE 31.537.698 8.950.970

E. LIABILITIES ARISING FROM THE USE OF STATE-OWNED ASSETS UNDER MANAGEMENT TO FINANCE COMPANY-OWNED ASSETS

0 0



Intangible assets

Intangible assets comprise computer software. Movement in intangible assets in 2008:

in EUR (without cents)Intangible assets – computer

softwareIntangible assets under con-

struction Total

Cost

Balance at 31 December 2007 1.823.732 0 1.823.732

Additions 0 1.400.307 1.400.307

Capitalisation 1.400.307 -1.400.307 0

Transfer between items -679 0 -679

Disposals (disposal, writedown) 0 0 0


Accumulated amortisation


Transfer between items -679 0 -679

Amortisation expense 659.688 0 659.688

Disposals (disposal, writedown) 0 0 0


Carrying amount

Balance at 31 December 2007 354.472 0 354.472


Major additions to intangible assets in 2008:

- upgrade of software for toll collection system (ETC) in the amount of EUR 851,843,- acquisition and upgrade of information support for informing and monitoring the traffic, KAŽIPOT II,

in the amount of EUR 196,876,- upgrade of the DARS Project Information System in the amount of EUR 147,516,- acquisition of software for the setup of the MULTARADAR C system in the amount of EUR 63,885,- acquisition of software for the video supervision system in the amount of EUR 2,663,- upgrade of the Navision MBS license in the amount of EUR 26,372,- upgrade of the processor license for Oracle Standard in the amount of EUR 21,280,- acquisition of the HP EVA license for DMWD connection in the amount of EUR 7,057,- upgrade of the user license for Oracle IAS in the amount of EUR 6,400 EUR, and- acquisition of computer control system for fuel consumption SYSTEMCARD in the amount of EUR

1,234.

As at 31 December 2008, no item of intangible assets was pledged as security for liabilities.


Property, plant and equipment

Movement in property, plant and equipment in 2008:

in EUR (without cents) Land Buildings Equipment

and low-value assets

Equipment permanently

out of use

PPE under construction

Total

Cost

Balance at 31 December 2007 29.923 2.149.443 71.951.584 2.001.910 1.030.107 77.162.968

Additions in 2008 0 0 0 0 10.472.172 10.472.172

Transfer of assets required for the perfor-mance of activities under the Concession Agreement from the register of state-owned assets under management to the register of company-owned assets

0 125.486 1.645.680 0 0 1.771.166

Capitalisation 0 64.000 11.224.616 0 -11.366.302 -77.686

Transfer between items 0 0 -512.445 513.124 0 679

Disposals in 2008 (disposal, writedown) 0 0 -60.949 -1.356.035 -1.416.984

Balance at 31 December 2008 29.923 2.338.929 84.248.486 1.158.999 135.976 87.912.313

Accumulated depreciation

Balance at 31 December 2007 0 707.421 56.411.227 1.965.481 0 59.084.129

Major repairs, extension of useful life 0 -17.856 -59.831 0 0 -77.687

Transfer of assets required for the perfor-mance of activities under the Concession Agreement from the register of state-owned assets under management to the register of company-owned assets

0 0 0 0 0 0

Transfer between items 0 0 -475.664 476.343 0 679

Depreciation expense in 2008 0 103.523 7.403.448,19 12.163 0 7.519.134

Disposals in 2008 (disposal, writedown) 0 0 -60.661 -1.336.594 0 -1.397.255

Balance at 31 December 2008 0 793.088 63.218.519 1.117.393 0 65.129.000

Carrying amount

Balance at 31 December 2007 29.923 1.442.022 15.540.357 36.430 1.030.107 18.078.839

Balance at 31 Decemer 2008 29.923 1.545.841 21.029.967 41.606 135.976 22.783.313

Major additions to property, plant and equipment in 2008:

- acquisition of working, cargo and trailer vehicles amounting to EUR 5,637,925,- acquisition of personal and combined vehicles amounting to EUR 255,365,- acquisition of working machines, devices and attachments amounting to EUR 2,707,796,- acquisition of computer equipment amounting to EUR 310,453,- upgrade of the ETC (Electronic Toll Collection) system amounting to EUR 853,832,- acquisition or refurbishing of assets required for motorway operation and maintenance amounting to

EUR 1,078,303,- acquisition of office furniture and other office equipment amounting to EUR 14,737,541, and- acquisition of video supervision cameras amounting to EUR 70,397.


As at 31 December 2008, no item of property, plant and equipment was pledged as security for liabilities. Pursuant to the Concession Agreement, any equipment and devices required for its implementation shall be constructed or acquired for the account of the State within the scope of motorway construction for those motorway sections whose construction was in progress at the time of the signing of the Concession Agreement, or started to be constructed in 2004. The title to the respective equipment and devices shall be transferred by the concedent to the concessionaire. Pursuant to the Concession Agreement and the Motorway Company of the Republic of Slovenia Act (ZDARS), the Company’s Management Board adopted a resolution on the transfer, in 2008, of equipment and devices from the register of state-owned property, plant and equipment under management of the Company to the register of company-owned property, plant and equipment with the purpose of enabling the Company to perform the activities under the Concession Agreement. The assets thus transferred were recorded at the carrying amount of EUR 1,645,680. As the re-sult of this transfer, the Company’s liabilities arising from state-owned assets under management increased accordingly. When the Government of the Republic of Slovenia adopts a resolution on the transfer of assets to the Company, the Company’s liabilities to the State arising from the assets will decrease accordingly. On the other hand, capital surplus will increase. In case of a transfer against payment, liabilities will be settled by transfer of cash.

The transferred non-financial assets comprise equipment and devices required for motorway maintenance. The transfer of assets from the register of state-owned assets to the register of company-owned assets at the carrying amount of EUR 125,486 refers to a salt silo.

At the annual inventory taking of property, plant and equipment, an inventory deficit was found, of which the cost amounted to EUR 60,949 and the carrying amount to EUR 288.

Long-term investments

Movement in long-term investments in 2008:

in EUR (without cents)Other shares and interests

Other long-term invest-

mentsTotal

Gross amount

Balance at 31 December 2007 964 673.677 674.641

Increase

Decrease 30.045 30.045

Balance at 31 December 2008 964 643.632 644.596

Net amount at 31 December 2007 964 673.677 674.641

Net amount at 31 December 2008 964 643.632 644.596

Other long-term investments comprise the bonds BC09 issued by Banka Celje in the amount of EUR 643,632, with the coupon interest rate of 3.90 % and the maturity of five years (the final maturity of bon-ds is 15 April 2010).


Deferred tax assets

Deferred tax assets arise from provisions for retirement benefits and jubilee bonuses for employees, provisi-ons for contingent claims, provisions for severance pays and purchase of insurance period for redundancies following the change of the toll collection system, and provisions for potential return of ETC tags.

Movement in deferred tax assets in 2008:

in EUR (withoug cents)

Stanje na dan 1.1.2008 973.033

Sprememba za rezervacije za odpravnine in jubilejne nagrade -15.214

Sprememba za rezervacije za tehnološke viške 0

Sprememba za rezervacije za tožbene zahtevke -37.159

Sprememba za rezervacije za elektronske tablice -131.759

Stanje na dan 31.12.2008 788.901

InventoriesInventories comprise inventories of materials, spare parts, low-value assets and packaging. Inventories inc-reased by 5 % over the previous year’s figure at 31 December 2007. Inventories of materials represent the major share in the structure of inventories, whereas inventories of spreading materials account for 34 % and inventories of vignettes for 21 % of the total inventories of materials.

in EUR (without cents) 31 Dec 2008 in % 31 Dec 2007 Index

Materials 1,620,117 81 1,359,361 119

Spare parts 130,076 7 165,507 79

Low-value assets and packaging 236,782 12 368,297 64

Total 1,986,975 100 1,893,165 105

The sale of half-yearly vignettes for personal vehicles and motorcycles for 2008 was terminated on 31 December 2008. As at 31 December 2008, inventories of unsold vignettes for 2008 were written off and charged against operating expenses for revaluation in the amount of EUR 80,739.60, in accordance with SAS 4.41.

At the annual inventory taking of vignettes, an inventory deficit was found in the amount of EUR 27.As at 31 December 2008, no item of inventories was pledged as security for liabilities. The carrying amount of inventories does not exceed their cost at 31 December 2008. The inventories of the Company represent current inventories.

Short-term investments in other entities

Short-term investments in other entities comprise:- short-term deposits with banks amounting to EUR 20,350,000, with the average maturity of 7 days

and the average weighted interest rate of 2.54 %, and - a short-term over-night deposit with a bank amounting to EUR 554,768, with the interest rate of

2.25 %.




Short-term trade receivables: 7.751.642 5.996.933

- toll receivable 6.215.862 5.165.110

- receivables from the use of motorway service areas 624.155 349.737

- receivables from road closure 667.874 256.463

- other short-term trade receivables 243.751 225.623

Short-term operating receivables due from other: 15.290.130 832.983

- advances receivable for operating current assets 2.145 6.103

- receivables from operations for foreign account 14.328.966 0

- receivables from financial revenue 36.339 111.824

- input VAT receivable 644.106 549.914

- other receivables due from state institutions 40.519 79.805

-other short-term receivables 238.055 85.337

Total 23,041,772 6,829,916

The majority (62 %) of short-term operating receivables includes receivables due from domestic commissi-on agents and foreign sales agents, and the remaining short-term operating receivables (27 %) include other trade receivables related to tolls.

Short-term receivables due from state institutions include refunds receivable from the Health Insurance In-stitute of Slovenia, and short-term receivables from financial revenue include interest receivable on deposits and contract penalties.

Following the proposal of the commission in charge of inventory taking of receivables and liabilities, uncol-lectible trade receivables in the amount of EUR 14,604 and toll deficit receivable from employees in the amount of EUR 1,259 were written off as at 31 December 2008. Breakdown of short-term trade receivables by maturity:

in EUR (without cents) not yet dueoverdue up to

60 daysoverdue in

excess of 60 Total

Short-term trade receivables 6,245,129 1,224,173 282,340 7,751,642

As at 31 December 2008, no item of short-term operating receivables was pledged as security for liabilities. Short-term operating receivables of the Company are not secured and represent the Company's current receivables.

Allowances for receivables have not been set up.


Cash


Cash in bank 371.765 23.691

Call deposits 3.800.000 3.850.000

Cash in hand 514 295

Cash in toll booths 318.336 196.860

Cash in transit 129.363 887.564

Total 4.619.978 4.958.410

Cash in transit includes collected tolls not yet put in the Company’s transaction account. Upon the annual inventory taking of cash in transit from collected tolls as at 30 November 2008, the Com-pany reconciled the balance in the books with the actual balance in the amount of EUR 48,749.

Deferred costs and accrued revenue

Deferred costs and accrued revenue amounting to EUR 2,506,547 EUR comprise short-term deferred costs that will be charged against profit or loss in the future accounting periods. Short-term deferred costs include:

- short-term deferred costs of commission fee to sales agents based on the value of vignettes sold in the amount of EUR 1,177,893,

- short-term deferred costs of printing vignettes in the amount of EUR 76,288,- short-term deferred costs of lease of Microsoft licensed software in the amount of EUR 209,328, - short-term deferred costs of ETC tags not yet sold in the amount of EUR 996,222.

Receivables from the use of company-owned assets to finance state-

owned assets under management

Under the assets in the Balance Sheet of the Company, receivables due from the State in the amount of EUR 37,715,499 are recorded relating to the use of company-owned assets to finance state-owned assets under management. Under state-owned assets under management in the Balance Sheet, the State’s liabilities to the Company are recorded in the same amount. Receivables comprise:

- 2009 concession tax transferred in advance and receivable in the amount of EUR 35,698,254,- 2008 remuneration receivable under the Agreement on the Performance of Contracts in the amount

of EUR 2,888,383.

Off balance sheet items

Off balance sheet items comprise contingent receivables due from municipalities in the amount of EUR 1,828,704 and arising from unjustifiably invoiced and collected charges for the use of building sites, inclu-ding default interest. Following the initiative of the Company, the Constitutional Court annulled, with its decision U-I-361-/2002-11 (Official Gazette of the Republic of Slovenia, 37/2004) some of the ordinances issued by municipalities as well as the decisions of the Tax Administration of the Republic of Slovenia.

Off balance sheet items also comprise contingent cash or receivables in the amount of EUR 3,091,020 arising from encashment of performance guarantees received in respect of motorway operation and main-tenance.


Equity

The movement in equity is shown in the Statement of Changes in Equity for the period from 1 January 2008 to 31 December 2008 under Note 3.4. Described in the relevant note are also the reasons for any change in the items of equity. The equity is, in its total amount, a part of the Company’s net worth.

The equity reflects the Company’s financing from own resources and represents the Company’s liability to its owners. It is determined by both the amounts invested by owners and the amounts generated in the course of operation of the Company.

The share capital of the Company is defined in the Articles of Association and registered in the court regi-ster. It represents the contribution of the Republic of Slovenia as its sole shareholder. The share capital of the Company amounts to EUR 212,823 and is divided into 5,100 non par value shares. As at 31 December 2008, the book value of a share amounted to EUR 10,837.56 and was higher by 12.74 % compared to the book value as at 31 December 2007. It has been calculated as a ratio between the total amount of equity and the number of shares.

The initial shares give the holders thereof full right to participate in the management of the Company, the right to a profit share (dividend), and the right to a respective part of the remainder of assets upon liquida-tion or bankruptcy of the Company. Based on the resolution of the General Meeting on the issue of shares, subsequently issued shares may be bearer or registered shares, ordinary or preference shares. In case of a change in equity, the share of votes held by the founder of the Company in the General Meeting shall not fall under 51%.

In accordance with the resolution adopted by the General Meeting of the Company, the equity decreased in 2008 by the amount of dividend payout totalling EUR 5,252,069.Net profit or loss for the period amounted to EUR 11,499,906.


Movement in provisions and long-term accrued costs and deferred revenue in 2008:

in EUR (without cents)Balance at 1 Jan

2008

Use in 2008

Reversal in 2008

Additional creation in

2008

Balance at 31 Dec

2008

Claims related to motorway operation and maintenance 809.205 0 188.802 56.274 676.677

Claims related to employment 171.286 15.007 123.153 153.036 186.162

Redundancies due to a change in the toll system 884.358 0 0 0 884.358

Provisions for retirement benefits 1.206.408 53.271 1.379 0 1.151.758

Provisions for jubilee bonuses 519.996 39.755 0 58.656 538.897

Provisions for supplementary pension insurance 52.327 9.630 0 39.862 82.559

Depreciation of holiday facilities and apartments 185.949 10.587 0 67.000 242.362

Return of ETC tags 1.811.744 556.973 164.908 203.375 1.293.238

Long-term accruals and deferrals – lease of optic fibres 423.151 423.151

Total 5.641.273 685.223 478.242 1.001.354 5.479.162

Provisions and long-term accrued costs and deferred revenue were made as follows:- Provisions were made for long-term accrued costs of contingent loss arising from claims in associati-

on with motorway operation and maintenance in the amount of EUR 676,677 and claims by employe-es under labour disputes in the amount of EUR 186,162;


- In the years 2005-2007, provisions were made for long-term accrued costs of purchase of insurance years for employees engaged in toll collection and of severance pay for redundancies following the transition to the new satellite toll system, which is expected to be in the years 2009–2010. In accor-dance with the original programme, provisions should be have been set up in four successive years (2005-2008). In accordance with the original programme, provisions should be set up in four succes-sive years (2005 – 2008), each year in the amount equal to one quarter of the estimated amount required for this period. As a consequence of the introduction of the vignette toll system for personal vehicles as of 1 July 2008, ninety-two employees employed in toll collection were reallocated to new jobs in the area of road supervision. In accordance with the original programme, provisions for redundancies following the introduction of the vignette toll system had been set up. The Company has assessed that the provisions already set up are sufficient with regard to the action plan of the Gover-nment of the Republic of Slovenia related to the introduction of the satellite toll system and that the creation of additional provisions in 2008 (the last quarter) is not needed. The amount of provisions set up as at 31 December 2008 is sufficient for redundancies in the area of tolling.

- Based on the actuarial calculation, provisions for retirement benefits and jubilee bonuses were made

as at 31 December 2008 in the amount of EUR 58,656.

- As at 31 December 2008, provisions were made in the amount of EUR 39,862 for retirement benefits paid to those employees not included in the pension scheme of collective supplementary pension insurance under the agreement concluded between trade unions and the Company.

- In previous periods, long-term accrued costs and deferred revenue were created from donations in the amount equal to the cost of holiday facilities and apartments to cover depreciation expense for holiday facilities, including furniture, and apartments over the entire useful life. In 2008, these provi-sions were reduced by depreciation expense in the amount of EUR 10,587. Additional provisions were set up for the acquisition of a holiday facility and furniture in the amount of EUR 67,000.

- Provisions were set up for contingent liabilities arising from the return of purchase money upon the possible return of ETC tags in the amount of EUR 1,293,238 (the buyers of ETC tags are entitled to return ETC tags within seven years from the date of purchase).

- Long-term accrued costs and deferred revenue include long-term deferred revenue from the advance payment of lease of optical fibres by the user in the amount of EUR 423,151.


in EUR (without cents) 31.12.2008

Trade payables 16.469.133

Advances payable 580

Payables to employees 2.074.998

Payables to the state 5.136.450

- income tax payable 221.108

- VAT payable 4.081.379

- employer’s taxes and contributions payable 322.703

- other payables to the state 511.261

Payables to others 117.878

Total 23.799.039

Short-term operating liabilities increased by 57 % over the previous year’s figure. The major share (69 %) of these liabilities includes trade payables, which relate to current trade payables related to motorway ope-ration and maintenance. The majority (99%) of trade payables is not overdue. Payables to employees include payables for wages, salaries, continued pay and refund of work-related expenses for December 2008 paid out in January 2009.


Short-term accrued costs and deferred revenue

in EUR (without cents) 31.12.2008

Short-term accrued costs 148.179

Short-term deferred revenue 31.389.519

Total 31.537.698

Short-term accrued costs or expenses comprise accrued costs of the audit of the 2008 financial statements in the amount EUR 33,425, and of the actuarial calculation of provisions for retirement benefits and jubilee bonuses in the amount of EUR 1,520.

Short-term deferred revenue comprises:

- revenue from prepaid annual vignettes for 2009 and half-yearly vignettes, which will be partly or en-tirely valid in 2009, in the total amount of EUR 23,737,079 (a half-yearly vignette is valid six months from the date of purchase, and an annual vignette from 1 December 2008 until 31 January 2010);

- revenue from prepaid tolls tags (DARS tags, ETC tags) that were charged and paid but not used in 2008, in the amount of EUR 6,134,622. Revenue will be deferred for as long as the users of services use the tags.

- revenue from compensation under the Agreement on the Performance of Contracts for 2008 in the amount of EUR 1,482,216. Advance payment of compensation under the Agreement of the Perfor-mance of Contracts is made monthly in an amount equal to 5.49 % of the value of all works set out in the current Annual Motorway Development and Rehabilitation Plan (LP ROAC). Final settlement of compensation is made on the basis of the value of works actually carried out and reported annually to the National Assembly. The works actually implemented in 2008 amounted to 94.87 % (without the compensation for the performance of contracts and the costs of servicing of borrowings). Because a portion of works under the Agreement on the Performance of Contracts has already been charged and paid but not yet carried out, short-term deferred revenue was made in the respective amount.

- other short-term deferred revenue in the amount of EUR 35,602.


Notes to the Balance Sheet of state-owned assets and liabilities under management of DARS

Balance Sheet of state-owned assets and liabilities under management of DARS as at 31 December 2008

v EUR (brez centov) 31.12.2008 31.12.2007

ASSETS 5.554.360.509 5.051.606.975

A. LONG-TERM ASSETS 5.525.247.622 5.018.532.233

II. Property, plant and equipment 5.525.247.622 5.018.532.233

1. Land and buildings 4.860.726.974 3.818.894.190

a) Land 742.669 742.669

b) Buildings 4.859.984.305 3.818.151.521


4. Property, plant and equipment being acquired 663.136.113 1.198.120.431

a) Property, plant and equipment under construction 663.136.113 1.198.120.431

B. CURRENT ASSETS 28.826.014 33.074.742

III. Short-term investments 0 6.300.000

1. Short-term investments, excluding loans 0 6.300.000

c) Other short-term investments 0 6.300.000


2. Short-term trade receivables 2.099.243 971.886

3. Short-term operating receivables due from others 26.663.893 25.682.027

V. Cash 62.878 120.829

C. SHORT-TERM DEFERRED COSTS AND ACCRUED REVENUE 286.873 0

D. RECEIVABLES FROM THE USE OF STATE-OWNED ASSETS UNDER MANAGEMENT TO FINANCE COMPANY- OWNED ASSETS

0 0




LIABILITIES 5.554.360.509 5.051.606.975

B. PROVISIONS AND LONG-TERM ACCRUED COSTS AND DEFERRED REVENUE 0 97.141

2. Other provisions 0 97.141

C. LONG-TERM LIABILITIES 5.330.745.646 4.847.996.920

I. Long-term financial liabilities 2.622.819.894 2.198.663.420

2. Long-term financial liabilities to banks 2.462.454.346 2.038.297.872

3. Long-term financial liabilities from bonds 160.365.548 160.365.548

II. Long-term operating liabilities 2.707.925.752 2.649.333.500

6. Long-term liabilities for state-owned assets under management 2.681.610.833 2.626.780.055

7. Long-term liabilities for municipality-owned assets under management 24.150.061 20.748.712

8. Long-term liabilities for other assets under management 2.164.858 1.804.732

D. CURRENT LIABILITIES 185.898.201 200.539.670

II. Short-term financial liabilities 80.996.484 77.216.776

2. Short-term financial liabilities to banks 80.996.484 77.216.776

4. Other short-term financial liabilities 0 0


2. Short-term trade liabilities 104.900.354 123.322.894

5. Other short-term operating liabilities 1.363 0

E. SHORT-TERM ACCRUED COSTS AND DEFERRED REVENUE 1.163 958

F. LIABILITIES FOR THE USE OF COMPANY-OWNED ASSETS TO FUND STATE-OWNED ASSETS UNDER MANAGEMENT

37.715.499 2.972.287



Property, plant and equipment and intangible assets under management

Movement of state-owned property, plant and equipment and intangible assets under management

LandMotorways (surface

structure, substructure, facilities)

Cost

Balance at 31 December 2007 742.669 4.196.159.225

Transfer of assets required for the performance of activities under the Concession Agreement from the register of state-owned assets under management to the register of company-owned

Additions

Capitalisation and transfer between asset items 960.704.799

Transfer between cost and accumulated depreciation / amortisation 4.374

Transfer to other operators

Disposals in 2008 (disposal, writedown)


Accumulated depreciation / amortisation

Balance at 31 December 2007 969.254.871

Transfer of assets required for the performance of activities under the Concession Agree-

ment from the register of state-owned assets under management to the register of company-

owned assets

Depreciation / amortisation expense in 2008 79.659.587

Reconciliation of 2007 depreciation /amortisation -12.765.257

Major repairs -11.971.671

Transfer between asset items

Disposals in 2008 (disposal, writedown)

Balance at 31 December 2008 1.024.177.530

Carrying amount



Note: Movement in property, plant and equipment and intangible state-owned assets under management is discussed in detail in note 2.4 Analysis of operations (Implementation of construction and reconstruction of motorway sections).


BuildingsPPE operated by

othersMotorways under

constructionOther motorway equi-

pmentPPE permanently out

of useTotal

62.309.468 546.357.959 1.198.120.431 1.384.535 1.129.742 6.006.204.029

-1.771.166 -1.771.166

582.308.816 1.601.273 583.910.089

10.383.344 131.435.364 -1.117.293.134 169.893 -14.599.734

4.374

-4.200.563 -1.036.164 -5.236.727

72.692.812 673.592.760 663.136.113 1.384.535 93.578 6.568.510.865

17.420.260 996.665 987.671.796

1.921.974 328 81.581.889

-307.852 -13.073.109

-42.247 -12.013.918

-903.415 -903.415

18.992.135 93.578 1.043.263.243

44.889.208 546.357.959 1.198.120.431 1.384.535 133.077 5.018.532.233

53.700.677 673.592.760 663.136.113 1.384.535 0 5.525.247.622





- other short-term investments 0 6.300.000

Total 0 6.300.000



Short-term trade receivables 2.099.243 971.886

Short-term operating receivables due from others 26.663.893 25.682.027

- interest receivable 112.087 44.369

- European funds receivable 1.427.255

- input VAT receivable 26.548.149 20.496.282

- other receivables 3.657 3.714.121

Total 28.763.136 26.653.913

Breakdown of short-term trade receivables by maturity:

in EUR (without cents) not yet dueoverdue up to 60

daysoverdue in excess of

60 daysTotal

Short-term trade receivables

1.043.581 876.942 178.720 2.099.243

Cash

in EUR (without cents) 31.12.2008 31.12.2007

Cash in bank accounts, except foreign currency 62.878 117.984

Foreign currency in bank accounts 0 2.845

Total 62.878 120.829

Cash earmarked for motorway construction and reconstruction is kept in a separate transaction account.

Off balance sheet items

Off balance sheet items in the sub-balance sheet of assets under management comprise:

- contingent cash or receivables from encashment of performance guarantees or warranties or other securities received from contractors. As at 31 December 2008, contingent cash amounted to EUR 294,639,832;

- contingent liabilities arising from the claims related to motorway construction and set up on the basis of the Company’s lawyer’s letter in the amount of EUR 71,471,275; and

- contingent receivables or liabilities arising from the hedge of interest rate risks associated with bor-rowings for motorway construction and reconstruction in the amount of EUR 10,498,020.

Three deals were concluded with UniCredit Banka Slovenija in 2007 to provide hedging of interest rate risk on borrowings for motorway construction and reconstruction, and an additional deal was concluded in 2008. In accordance with the policy of active risk management in the financial area, the Company decided to reduce exposure to interest rate movements in the market. As at 31 December 2008, the share of exposure to floating interest rate represented 54 % of the value of the debt portfolio, the share of exposure to fixed interest rate represented 44 % of the debt portfolio, and the remaining 2% referred to an interest-free borrowing.


a) Hedging of interest rate risk – EUR 30 millionA deal was concluded in 2007 for hedging interest rate risk in the amount of EUR 30,000,000 with a 3-year maturity. The deal was concluded to partly hedge the two borrowings from Banka Koper and UniCredit Ban-ka Slovenija. The borrowings were hedged for a period of 3 years with a fixed interest rate linked to the CHF currency and the option of conversion to CHF upon maturity of the deal.

b) Hedging of interest rate risk – EUR 40 millionA deal was concluded in 2007 for hedging interest rate risk in the amount of EUR 40,000,000 with a 3-year maturity. The deal was concluded to partly hedge the borrowings from UniCredit Banka Slovenija. The bor-rowing was hedged for a period of 3 years with a fixed interest rate and the option of extension by a further 7 years.

c) Hedging of interest rate risk – EUR 50 millionA deal was concluded in 2007 for hedging interest rate risk in the amount of EUR 50,000,000 with a 2-year maturity. The deal was concluded to partly hedge the borrowings from Nova Ljubljanska banka. The borro-wing was hedged for a period of 2 years with a fixed interest rate and the option of extension by a further 3 years.

d) Hedging of interest rate risk – EUR 20 millionA deal was concluded in 2008 for hedging interest rate risk in the amount of EUR 20,000,000 with a 3-year maturity. The deal was concluded to partly hedge the borrowings from KfW. The borrowings were hedged for a period of 3 years with a fixed interest rate. The applied interest rates and interest calculation methods are contractually defined and considered con-fidential.

Long-term financial liabilities arising from bank borrowings for acquisition

of property, plant and equipment under management

In accordance with the Motorway Company in the Republic of Slovenia Act (ZDARS) and the Agreement on the Performance of Contracts, the Company borrows funds in its own name and for the account of the State for the purpose of financing motorway construction and reconstruction.

The applied interest rates and interest calculation methods are contractually defined and considered con-fidential.

Long-term financial liabilities refer in their total amount to motorway construction and reconstruction.

in EUR (without cents) 31.12.2008 Struktura % 31.12.2007 Indeks

Long-term borrowings from domestic banks 971.978.747 39 839.075.672 116

Long-term borrowings from foreign banks 1.447.628.937 59 1.160.207.326 125

Long-term borrowings from foreign entities 42.846.662 2 39.014.874 110

Total 2.462.454.346 100 2.038.297.872 121

The borrowings are secured by the guarantee of the Republic of Slovenia issued under relevant contracts concluded between the State and lenders.

Long-term portion of the principal amount of bank borrowings by lender:

Lender 31 Dec 2008 in EUR (without cents) Konzorcij slovenskih bank 392.247.738

Hypo Alpe Adria Bank 60.866.378

Bank Austria Creditanstalt 100.864.630

Banka Koper 28.000.000

NLB I,II 390.000.000

Evropska investicijska banka 1.030.853.867

Kreditanstalt für Wiederaufbau I,II 191.775.071

Depfa Bank 225.000.000

Avtovie Venete S.p.A. 42.846.662

Total 2.462.454.346


a) Borrowings from the Consortium of Slovene BanksThe Company obtained seven borrowings from domestic banks in the period 1996 - 2004. Long-term liabilities to the Bank Consortium and the period of repayment:

Type of borrowings Repayment period in EUR (without cents)

I from 2002 to 2016 114,935,867

II from 2004 to 2019 42,501,225

III from 2007 to 2019 67,991,337

IV from 2008 to 2020 33,752,797

V from 2007 to 2020 38,708,551

VI from 2009 to 2021 32,960,051

VII from 2012 to 2024 61,397,911

Total 392,247,738

b) Borrowings from Hypo Alpe Adria BankThe Company obtained three borrowings from Hypo Alpe Adria Bank in the years 2003, 2004 and 2005. Long-term liabilities to Hypo Alpe Adria Bank and the period of repayment:


I from 2011 to 2023 24,991,257

II from 2012 to 2024 15,010,491

III from 2014 to 2023 20,864,630

Total 60,866,378

c) Borrowings from Unicredit Banka SlovenijaVIn 2005 and 2006, two borrowings were obtained from UniCredit Banka Slovenija. They were utilised in their total amount in these two years. The borrowings obtained in 2006 were used for refinancing or advan-ce repayment of borrowings from Kreditanstalt für Wiederaufbau.Long-term liabilities to UniCredit Banka Slovenija and the period of repayment:


I from 2011 to 2023 20,864,630

II from 2007 to 2021 80,000,000

Total 100,864,630

d) Borrowings from Banka KoperIn 2007 and 2008, borrowings were obtained from NLB, which were used in their total amount for financing of motorway construction. Long-term liabilities to NLB and the period of repayment:


I from 2007 to 2021 28,000,000

Total 28,000,000

e) Borrowings from NLBIn 2007 and 2008, borrowings were obtained from NLB, which were used in their total amount for financing of motorway construction. Long-term liabilities to NLB and the period of repayment:


I from 2012 to 2027 245,000,000

II from 2015 to 2027 145,000,000

Total 390,000,000


f) Borrowings from the European Bank for Reconstruction and Development (EBRD)The borrowings from the European Bank for Reconstruction and Development were repaid in 2008 in the amount of EUR 1,957,705. The final maturity of borrowings is in 2009.

g) Borrowings from the European Investment Bank (EIB) The borrowings from the European Investment Bank were repaid in 2008 in the amount of EUR 42,994,000 and liabilities were increased due to new utilisations in the amount of EUR 169,500,000. The final maturities of these borrowings are in the period from 2014 to 2029.Long-term liabilities to the European Investment Bank and the period of repayment:


A, B, C from 2000 to 2014, 2015, 2016 36,187,200

II from 2003 to 2018 73,666,667

III from 2004 to 2019 110,833,333

IV from 2005 to 2019 106,666,667

V from 2007 to 2027 105,000,000

VI from 2012 to 2029 110,000,000

VII from 2014 to 2037 250,000,000

VIII from 2015 to 2033 238,500,000

Total 1,030,853,867

h) Borrowings from Kreditanstalt für Wiederaufbau (KfW)The borrowings from Kreditanstalt für Wiederaufbau (KfW I) were repaid in 2008 in the amount of EUR 5,283,350. At year-end 2008, new borrowings were obtained from Kreditanstalt für Wiederaufbau in the amount of EUR 267.5 million (KfW II) and were utilised in 2008 in the amount of EUR 168 million. Long-term liabilities to Kreditanstalt für Wiederaufbau and the period of repayment:


I from 2005 to 2014 23,775,071

II from 2013 to 2029 168,000,000

Total 191,775,071

i) Borrowings from Depfa Bank (DEPFA)In 2006, borrowings were obtained from Depfa Bank in the total amount of EUR 225,000,000.Long-term liabilities to Depfa Bank and the period of repayment:


I from 2014 to 2024 75,000,000

II from 2013 to 2021 150,000,000

Total 225,000,000

j) Borrowings from Autovie Venete (AVV)The Company obtained borrowings from Autovie Venete on the basis of a Memorandum of Understanding between the Government of the Republic of Slovenia and the Government of the Italian Republic on the Con-struction of Motorway Structures required for connection of the Slovenian and Italian motorway networks. In 2008, liabilities arising from borrowings from Autovie Venete increased due to new utilisations in the amount of EUR 3,831,788. The first repayment of the principal amount is due two years after the opening of the Vipava – Razdrto motorway section.


Long-term liabilities from bonds

a) DARS bonds of 1st issue (DRS1)

In 2004, the bonds of first issue, designated DRS1, were issued in the aggregate nominal amount of EUR 56,042,397. The principal is due in its total amount in 2024. The bonds are traded on the free market of the Ljubljana Stock Exchange.

b) DARS bonds of 2nd issue (DRS2)

In 2005, the bonds of second issue, designated DRS2, were issued in the aggregate nominal amount of EUR 61,759,306. The principal is due in its total amount in 2025. The bonds are traded on the free market of the Ljubljana Stock Exchange.

c) DARS bonds of 3rd issue (DRS3)

In 2005, the bonds of third issue, designated DRS3, were issued in the aggregate nominal amount of EUR 42,563,846. The principal is due in its total amount in 2020. The bonds are traded on the free market of the Ljubljana Stock Exchange.In accordance with the Motorway Company in the Republic of Slovenia Act (ZDARS) and the Agreement on the Performance of Contracts, the Company borrows funds in its own name and for the account of the State for the purpose of financing motorway construction and reconstruction. The liabilities arising from the issued bonds are secured by a guarantee of the Republic of Slovenia.


Long-term operating liabilities arising from state-owned assets

under management


1. Liabilities arising from the transfer of motorways to assets under management 705.744.630 777.928.689

2. Liabilities arising from collected earmarked funds for motorway construction 1.317.220.434 1.301.687.434

3. Liabilities arising from tolls collected prior to 1 January 2004 and earmarked for motorway construction, repayment of principal and interest on borrowings

255.444.918 255.444.917

4. Liabilities arising from interest received on deposits and sight funds in transaction accounts

4.219.028 4.075.289

5. Liabilities arising from insurance benefits for damages on motorways prior to 1 January 2003

820.316 820.316

6. Liabilities arising from funds received under the Concession Agreement 302.800.435 232.889.746

7. Liabilities arising from paid-in surplus upon the issue of bonds 4.372.809 4.372.809

8. Liabilities arising from assets under management acquired upon the merger with PVAC

3.617.029 3.749.779

9. Liabilities arising from non-repayable funds granted by the Cohesion Fund 82.546.576 41.262.612

10. Liabilities arising from the EU funds for the TEMPO international project 2.579.121 1.839.950

11. Liabilities arising from the funds of the European Regional Development Fund 775.622 431.258

12. Liabilities arising from the EU financial support for TEN-T 1.469.915 2.277.256

Total 2.681.610.833 2.626.780.055

Long-term liabilities arising from the transfer of motorways to assets under management are stated at revalued initial cost of motorways transferred to assets under management of the Company upon its incor-poration, less revalued accumulated depreciation of capitalised motorways plus the effect of revaluation by the use of the cost of living index (in the years from 1994 to 2001). The changes in 2008 include:

- the decrease by depreciation expense for assets under management in the amount of EUR 68,508,781,

- the effect of revaluation of foreign long-term borrowings, foreign currency balances in transaction accounts, and foreign currency denominated investments in the amount of EUR 101,722,

- the reversal of provisions for sold ETC tags in the amount of EUR 97,141,

- the post-conversion reconciliation in the amount of EUR 7, and

- the transfer of infrastructure (EE facilities, lines and devices) to municipalities in the amount of EUR 3,670,690.

Long-term liabilities arising from collected earmarked funds for motorway construction increased in 2008 by EUR 15,533,000.

Long-term liabilities arising from funds received under the Concession Agreement amounted in 2008 to EUR 142,385,612, less payment of interest on borrowings and issued bonds in the amount of EUR 72,474,923. In 2008, the Company received long-term funds for motorway construction from the EU Cohesion Fund in the amount of EUR 41,283,964, funds from the EU for the TEMPO international project in the amount of EUR 739,171, funds from the European Regional Development Fund in the amount of EUR 344,364, and financial support from the EU for the TEN-T project in the amount of EUR 331,287.


Long-term operating liabilities arising from municipality-owned assets

under management

Long-term operating liabilities arising from municipality-owned assets under management are recorded at the amount co-financed by local communities and public utilities for motorway construction and amounted to EUR 24,150,061 as at 31 December 2008.

Long-term operating liabilities arising from other assets under manage-

ment

Long-term operating liabilities arising from other assets under management increased in 2008 due to the sale of land acquired for motorway construction but not entirely used for its construction or not entirely ne-eded for operation and maintenance of motorways, invoiced easement on land, invoiced rentals and waste material, encashed guarantees, and other items.

Short-term financial liabilities arising from borrowings for the acquisition

of property, plant and equipment under management

Short-term financial liabilities arising from borrowings for the acquisition of property, plant and equipment under management comprise a portion of principal of long-term borrowings due for repayment in 2008.

Lender31 Dec 2008

in EUR (without cents)31 Dec 2007


European Bank for Reconstruction and Development 1.905.086 1.801.038

European Investment Bank I 5.994.000 5.994.000

European Investment Bank II 8.666.667 8.666.667

European Investment Bank III 11.666.667 11.666.667

European Investment Bank IV 10.666.667 10.666.667

European Investment Bank V 6.000.000 6.000.000

Kreditanstalt für Wiederaufbau I 5.283.350 5.283.350

Bank Consortium I 1.206.387 1.206.387

Bank Consortium II 448.169 448.169

Bank Consortium III 700.942 700.942

Bank Consortium IV 344.416 344.416

Bank Consortium V 397.011 397.011

Unicredit Banka Slovenija II 6.666.667 6.666.667

Banka Koper 2.333.333 2.333.333

Total principal 62.279.361 62.175.314

As at 31 December 2008, short-term financial liabilities arising from borrowings from EBRD amounted to USD 2,651,308.44 USD. The borrowings from EBRD were denominated in USD and translated into the national currency euro at the middle exchange rate of the Bank of Slovenia ruling at the balance sheet date (1 EUR = 1.3917 USD).

1

1


Short-term interest payable as at 31 December 2008 include interest payable on bank borrowings and bonds issued for the acquisition of property, plant and equipment.


Interest payable on long-term borrowings 15,285,971 11,629,810

Interest payable on bonds 3,431,152 3,411,653

Total 18,717,123 15,041,463



Trade payables 102,308,869 121,244,612

Compensation payable 2,103,503 1,891,968

Other payables 489,345 46,433

Payables for goods and services not yet invoiced 0 139,881

Total 104,901,717 123,322,894

Short-term trade payables include trade payables relating to motorway construction works carried out and invoiced by domestic and foreign suppliers, compensation payable for land acquired, and other payables. 93 % of trade payables are not yet due for payment.

Short-term trade payables also include payables for funds (collateral) retained as a performance guarantee in case the contractors fail to present relevant bank guarantees or other financial securities. The funds re-tained under the contracts concluded with contractors belong to contractors and are paid to them upon the fulfilment of contractual obligations and the submission of relevant documents by contractors.

As at 31 December 2008, payables for retained funds amounted to EUR 7,484,051 or 7.1 percent of the total trade payables. Trade payables at 31 December 2008:

in EUR (without cents) 31 Dec 2008 in %

SCT d.d. 39.868.488 38

PRIMORJE d.d. 11.516.789 11

CESTNO PODJETJE MARIBOR d.d. 8.605.426 8

CM CELJE d.d. 5.529.784 5

TENZOR d.o.o. 3.097.049 3

CPK d.d. 3.090.547 3

CESTNO PODJETJE LJUBLJANA d.d. 3.071.700 3

EPROJEKT d.o.o. 2.366.282 2

VEGRAD d.d. 2.159.048 2

KRAŠKI ZIDAR d.d. 2.148.060 2

Other suppliers 23.447.181 22

Total 104.900.354 100


Liabilities from the use of company-owned assets to finance state-owned

assets under management

In the balance sheet of state-owned assets under management of the Company, the State’s liabilities to the Company arising from the use of company-owned assets to finance state-owned assets are recorded in the amount of EUR 37,715,499. In the balance sheet of company-owned assets, the Company’s receivables from the State are recorded in the same amount. The State’s liabilities comprise:

- 2009 concession tax transferred in advance, payable in the amount of EUR 35,698,254,- 2008 remuneration payable under the Agreement on the Performance of Contracts in the amount of

EUR 2,888,383


Additional disclosures in the income statement of DARS

Net sales

in EUR (without cents) 2008 2007 in % Index 2008/2007Revenue from tolls 201.619.791 174.719.492 85 115

Revenue from rentals 4.883.678 4.380.392 2 111

Revenue from road closure and overweight load transports

1.989.330 1.406.321 1 141

Revenue from easements 551.226 162.073 0 340

Revenue under agency agreement 27.401.614 26.398.091 12 104

Other sales revenue 1.461.520 1.813.528 1 81

Total 237.907.159 208.879.897 100 114

Revenue from tolls amounted to EUR 201,619,791 or 85% of the total sales in 2008. They were up 15% over the previous year’s figure.

Revenue from tolls was followed by revenue under the Agreement on the Performance of Contracts, which accounted for 12% of net sales and was up by 4 % compared to 2007. To implement an order under the Agreement on the Performance of Contracts, the Company is entitled to remuneration from the State in an amount equal to 5.49% of the value of motorway construction and reconstruction works defined in the current Annual Motorway Development and Reconstruction Plan (AMDRP). Monthly advance payments are effected on the basis of the value of works under the AMDRP. The final statement of account is prepared on the basis of realised works as stated in the annual report on implementation of the AMDRP presented to the National Assembly. The remuneration stipulated in the Agreement on the Performance of Contracts increa-ses or decreases in line with the contractual provisions on cost-related incentives and cost-related penalties. In line with the contractual provisions, the relevant sales revenue is charged to the Ministry of Transport and the payment is effected by transferring the funds from the transaction account for motorway construction to the transaction account of the Company.

Revenue from rentals (for the lease of motorway service areas and base stations) is generated by the lease of land alongside motorways for the provision of catering services and the erection of petrol service stati-ons. Revenue from rentals increased by 11% compared to 2007. The prices are set subject to public tenders. Sales revenue also includes revenue from road closures and overweight load transports in the amount of EUR 1,989,330, and revenue from easements in the amount of EUR 551,226.

Other sales revenue in the amount of EUR 1,461,520 includes revenue from the sale of ETC tags, revenue from telecommunications, revenue from towing, snow ploughing and clearing road accidents, revenue from rentals for holiday facilities and apartments, revenue from the sale of waste material, and other sales reve-nue.

Net sales were earned entirely in the domestic market.

Other operating revenueOther operating revenue in the amount of EUR 2,366,476 comprises revenue from received insurance be-nefits for damages on motorways and motorway facilities, revenue from reversal of provisions, and revenue from disposal of property, plant and equipment.


Costs and operating expenses

Costs of operation and maintenance of motorways:

in EUR (without cents) 2008 in %

Cost of goods sold 35.398 0

Costs of materials 10.287.598 5

Costs of services 177.835.780 78

Labour costs 29.736.245 13

Depreciation and amortisation expense 8.178.822 4

Operating expenses for revaluation of intangible assets and property, plant and equipment

9.774 0

Operating expenses for revaluation of current operating assets

97.480 0

Other operating expenses 803.524 0

Total 226.984.621 100

Breakdown of costs by functional group:

in EUR (without cents) 2008

Costs of motorway maintenance and supervisor engineer 134.904.028

Selling costs 56.007.139

General and administrative costs 36.073.454

Total 226.984.621

Costs of goods, materials and services

in EUR (without cents) 2008 in %Costs of goods sold 35.398 100

Costs of materials: 10.287.598 100

- Costs of materials 4.129.599 40

- Costs of energy 3.652.724 36

- Costs of spare parts 394.666 4

- Low-value assets writeoff 1.709.293 17

- Other costs of materials 401.316 4

Costs of services: 177.835.779 100

- Costs of supervising engineer 18.046.706 10

- Costs of maintenance of property, plant and equipment

3.956.428 2

- Rentals 1.064.479 1

- Costs of payment transactions 2.310.852 1

- Costs of charges under the Concession Agreement 142.385.612 80

- Other costs of services 10.071.702 6

Total 188.158.776

The costs of materials amounted to 5% of the total operating expenses and increased by 8 % compared to 2007. The major items in the costs of materials are the costs of salt (12 %) and the costs of electricity (19 %).

The costs of services amounted to 78 % of the total operating expenses. The major item in the costs of ser-vices is the costs of charges under the Concession Agreement (80 %) paid to the State on the basis of the concession granted to the Company. In exchange for the exclusive right to manage and maintain motorways


in the Republic of Slovenia, the Company pays to the State a concession tax on the basis of monthly state-ments of account. At year end, a final statement of account is prepared on the basis of the annual statement of account of concession taxes. The cost of taxes under the Concession Agreement increased by 16 % over the previous year. Other costs of services increased by 21 % compared to 2007.

The costs of supervising engineer amounted to 10 % of the total costs of services and included the costs of engineer services in the motorway construction, reconstruction and maintenance.

Labour costsLabour costs amounted to 13 % of the total operating expenses and increased by 8 % compared to 2007. Labour costs included the costs of supplementary pension insurance premiums in the amount of EUR 738,407.

As at 31 December 2008, the Company had 1,209 employees. The average staff count in 2008 was 1,120 (based on the number of working hours).

In 2008, wages and salaries were paid in line with the General Collective Agreement for the Industry Sector, Implementation of the Incomes Policy Agreement for the Period 2002 – 2004 Act (Official Gazette of the Republic of Slovenia, 59/02), and the Company’s Collective Agreement in effect as of 1 January 2007.The average salary in the Company in 2008 (in EUR):

Average gross salary Year 2008

DARS d.d. 1,602

Republic of Slovenia 1,391

In 2008, the total gross remuneration of the members of the Management Board amounted to EUR 704,372. Disclosed below is the remuneration of the Management Board members in 2008:

Type of remuneration in EUR (without cents)

Rajko Siročič

Ratajc AlojzTomislav

NemecDoc. dr. an

Jan OplotnikAbdon Peklaj

Aleš HojsBoštjan

Rigler

President of MB until

25 Oct 2007

President of MB since

26 Oct 2007

Deputy President of

MB

MB member until

25 Oct 2007

MB member

MB member since

26 Oct 2007

Gross managementsalary 0 108.659 148.321 94.748 0 122.630 115.992

Vacation bonus 0 850 850 708 0 850 850

Incentive bonus for 2007 14.508 3.284 2.607 2.228 13.419 14.869 2.490

Fringe benefits 0 3.663 11.617 10.807 0 9.055 5.106

Refund of expenses 0 789 7.325 5.001 0 735 814

Supplementary pension insurance premium 0 0 726 0 871 0

Total 14.508 117.245 170.720 114.218 13.419 149.010 125.252

The gross emoluments of employees employed under employment contracts not subject to the Collective Agreement amounted to EUR 1,471,710 in 2008.


The remunerations of members of the Supervisory Board in 2008:

in EUR (without cents) Gross emoluments

Slak Franc 12.945

Vidic Tomaž 10.505

Ošo Simon 10.340

Sever Robert 8.690

Capuder Franc 9.240

Rožič Uroš 8.800

Meško Vito 10.340

Kodrič Darko 10.340

Likar Dimitrij 2.750

Jelušič Matej 6.490

Total: 90.440

The claims of employees under labour disputes contested by the Company are disclosed in the note to long-term provisions.

Writedowns


Amortisation of intangible assets 659.688

Depreciation of property, plant and equipment 7.519.134

Operating expenses for revaluation of intangible assets and property, plant and equipment 9.774

Operating expenses for revaluation of operating current assets 97.480

Total 8.286.076

Operating expenses for revaluation of operating current assets refer to allowances for trade receivables and revaluation of inventories of vignettes for 2008, whose sale was concluded as of 31 December 2008.

Other operating expenses Other operating expenses include costs of creation of long-term provisions in the amount of EUR 511,203. In 2008, the costs of creation of long-term provisions comprised:

- provisions for long-term accrued costs of contingent losses arising from claims in association with motorway operation and maintenance in the amount of EUR 56,274 and claims by employees under labour disputes in the amount of EUR 153,036;

- provisions for jubilee bonuses in the amount of EUR 58,656;- provisions in the amount of EUR 39,862 for retirement benefits to employees not included in the

pension scheme of collective supplementary pension insurance under the agreement between trade unions and the Company;

- long-term accrued costs and deferred revenue for settlement of contingent liabilities arising from the return of purchase money upon a possible return of ETC tags in the amount of EUR 203,375 (the buyers of ETC tags are entitled to return ETC tags within seven years from the date of purchase).


Financial revenue

Financial revenue from loans to others in the amount of EUR 1,428,637 includes revenue from short-term surplus liquid funds deposited with banks as euro deposits and investments in securities, and revenue from revaluation of investments as held for sale. Other financial revenue in the amount of EUR 39,164 comprises financial revenue from operating receivables including default interest revenue and foreign exchange gains.

Financial expenses

Financial expenses for revaluation due to impairment of investments (1,600 bonds of the issuer Banka Celje d.d. - BCE9) amount to EUR 30,045. As at 31 December 2008, the denomination index from the list of quotations was 96.40.Financial expenses for operating liabilities in the amount of EUR 11,071 comprise expenses arising from foreign exchange losses and default interest expenses.

Other revenue

Other revenue in the amount of EUR 95,733 includes indemnities received under court judgements, invoiced contract penalties, return of compensation for the use of building plot, and bonuses for exceeding the quota of disabled employees.

Other expenses

Other expenses in the amount of EUR 26,894 include indemnities paid under court judgements.

Income tax

Income tax is levied under the Corporate Income Tax Act (ZDDPO-2). The base for tax assessment is the total profit increased by non-deductible expenses and reduced by statutory tax relief. The resulting tax base istaxed at the rate of 22%.


1 Revenue 241.837.168

2 Expenses 227.052.630

3 Total profit (1-2) 14.784.538

4 Decrease in revenue 412.662

5 Increase in revenue 0

6 Decrease in expenses – non-deductible expenses 1.488.162

7 Increase in deductible expenses 578.443

8 Deductible revenue less deductible expenses (1-2-4+5+6-7) 15.281.595

9 Tax base (8) 15.281.595

10 Change in tax base due to a change in accounting policies 93.026

11 Increase in tax base by the amount of tax relief used 8.994

12 Tax relief for investments 30.000

13 Tax relief for employment of disabled persons 309.304

14 Tax relief for implementation of practical part of professional training 860

15 Tax relief for supplementary pension insurance 738.407

16 Tax relief for grants 25.810

17 Taxable base (9-10+11-12-13-14-15-16) 14.093.182

18 Income tax - 22% 3.100.500


The net profit or loss for the period is equal to the amount of total profit determined in the income statement reduced by income tax liability for the accounting period and increased by deferred taxes. The net profit or loss for the period was 1.09-times higher than in the previous year.


Operating profit 13.289.014

Profit from financing 1.426.685

Profit form extraordinary activities 68.839

TOTAL PROFIT 14.784.538

Income tax 3.100.500

Deferred taxes 184.132

Net profit or loss for the period 11.499.906

Net profit for the period restated by the use of the cost of living index

in EUR (without cents) Growth in% Equity amountEffect of restate-

mentDecreased profit or loss for the period

Equity restatement by the use of the cost of living index

2,10% 52.147.623 1.095.100 10.404.806

Events after the balance sheet date

On 20 February 2009, Annex No. 1 to the Concession Agreement was concluded between the Republic of Slovenia and DARS, which additionally regulates:

- accounting of additional expenses related to performance of obligations in connection with the provi-sion of road tunnel safety against concession tax as of 1 January 2009,

- the method of determining the number of car passages for which vignette toll system was introduced as of 1 July 2008, which has impact on the accounting of a portion of costs of tolling,

- the method of providing additional funds for the payment of matured liabilities arising from borrowin-gs for motorway construction (transfer of a portion of the concessionaire's net profit, which exceeds the amount of the allowed return on equity of DARS, to concession tax – applicable for the financial years 2008 and 2009).

A notice of retirement from office was presented by the following members of the Supervisory Board:

- Mr Vidic on 20 March 2009,

- Mr Sever on 6 April 2009, and

- Mr Capuder on 7 April 2009. By the date of this Annual Report, the eneral Meeting had not yet decided on their retirement from office.

On 23 April 2009, the Government of the Republic of Slovenia approved the 2009 Annual Motorway Deve-lopment and Reconstruction Plan.


31 Dec 31 Dec

1. FINANCING STATE RATIOS

Equity financing ratio in %Equity

Liabilities

Long-term financing ratio in %Equity + provisions + long-term liabilities

Liabilities

Short-term financing ratio in %Short-term liabilities (including short-term accrued expenses and deferred revenue)

Liabilities

2. INVESTMENT RATIOS

Fixed assets investment ratio in %Fixed assets (at carrying amount)

Assets

Long-term investment ratio in %Fixed assets + long-term investments + long-term operating receivables

Assets

3. HORIZONTAL FINANCIAL STRUCTURE RATIOS

Quick ratio in %Liquid assets + short-term receivables

Short-term liabilities

Current ratio in %Current assets

Current liabilities

4. EFFICIENCY RATIOS

Operating efficiency ratio in %Operating revenue

Operating expenses

Operating profit rate in %Operating profit

Operating revenue

Net profit margin in %Net profit

Revenue

5. PROFITABILITY RATIOS

Net return on equityNet profit for the period

Average equity (without net profit for the period)

0,98

95,72

4,28

98,52

98,53

23,42

34,06

105,85

5,53

4,76

0,28

0,96

95,62

4,38

98,24

98,25

17,17

39,52

106,17

5,81

4,94

0,28

Performance ratios


Audit of the 2008 annual report

The contractually stipulated amount of the audit of the 2008 Annual Report of DARS comes up to EUR 40,110.17 inclusive of VAT. The audit was carried out by the audit company KPMG Slovenija, d.o.o., Ljubljana.

Celje, 29. april 2009


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