Summary of important information about the operation of SOD, d.d.

Slovenska odškodninska družba, d.d., (hereinafter: SOD, d.d.) is a financial organization for settling obligations to beneficiaries according to the Denationalization Act, the Cooperatives Act and other regulations regulating the denationalization of the assets and settlement of obligations according to the Act Regulating the Issuing of Bonds in Compensation for Confiscated Property pursuant to the Abrogation of the Penalty of Confiscation of Property and Payment of Compensation to the Victims of War and Postwar Aggression Act. The company settles its obligations based on the Return of Investments in the Public Telecommunications Network Act.

To fulfil these activities, the company issues bonds, and manages and disposes of securities and other assets acquired pursuant to the law as well as carries out all other activities necessary to settle all obligations under the aforementioned laws.

The manner of providing assets according to individual fields of law:

Field of law	Method of compensation settlement	Issuer/disbursing agent	Provider of resources
denationalization	SOS2E bonds	issuer of SOD, d.d., bonds	SOD, d.d.
compensation due to the confiscation of property	RS 21 bonds	the Republic of Slovenia issues the bonds SOD, d.d., acts as the disbursing agent	SOD, d.d., provides assets for compensation settlement, which are rendered by the Republic of Slovenia under the concluded contract
compensation for victims of war and postwar aggression	RS 39 bonds or cash	the Republic of Slovenia issues the bonds SOD, d.d., acts as the disbursing agent	SOD, d.d., provides the assets for compensation settlement, which are rendered by the Republic of Slovenia under the concluded contract
return of investments in the public telecommunications network	cash	SOD, d.d., acts as the disbursing agent	SOD, d.d., provides the assets for compensation settlement, which are rendered by the Republic of Slovenia under the concluded contract

Based on the final decisions on denationalization SOD, d.d., shall issue solely SOS2E bonds to the beneficiaries. On 30 June 2011, the obligations of SOD, d.d., towards the SOS2E bondholders, together with accumulated interest, amounted to €541.4 million.

Basic information about the bond by Slovenska odškodninska družba (SOS2E)

Basic characteristics of the SOS2E bond

Characteristics of the bond	SOS2E
Remuneration commencement date	1 July 1996
Maturity date	1 June 2016
Annual interest rate	EUR + 6%
Method of coupon payment	Twice annually: 1 June and 1 December
Denomination value	€51.13

Slovenska odškodninska družba, d.d., has prepared and issued seven series of SOS2E bonds in the total amount of 17,500,000 bonds with a total value of €894,775,000.

Series of bonds:

The first series of bonds was issued in 1994 in physical form and was subsequently substituted for dematerialized bonds on the basis of the regulation governing the issuance of bonds and enforcement of decisions.
2^nd issue: 2,000,000 bonds (in 1996); ticker symbol SOS2
3^rd issue: 3,000,000 bonds (in 2000); ticker symbol SOS2
4^th issue: 2,000,000 bonds (in 2001); ticker symbol SOS2
5^th issue: 3,500,000 bonds (in 2002); ticker symbol SOS2E
6^th issue: 3,500,000 bonds (in 2005); ticker symbol SOS2E
7^th issue: 3,500,000 bonds (in 2007); ticker symbol SOS2E

Up to the fourth issue, the ticker symbol was SOS2.

On 27 July 2002, the Resolution on the fifth (5^th) issuance of bonds of Slovenska odškodninska družba, d.d., entered into force (Official Gazette of the Republic of Slovenia, No. 67/2002, page 7703), and its amortization schedule was amended with the amounts in euros. Therefore, the new ticker symbol of the bonds included the letter E (SOS2E). On the aforementioned date, the bonds of Slovenska odškodninska družba, d.d., were nominated in euros.

Based on the order issued by Slovenska odškodninska družba, d.d. (as the issuer), Klirinško depotna družba, d.d. (Central Securities Clearing Corporation), issued a provision on the entry of a new series of bonds:

Ticker symbol: SOS2E

ISIN: SI 000210055 8

Nominal value of the 5^th series: €178,955,000.00

Nominal value of one bond: €51.13

Trading information for the SOS2E bond for the first half-year of 2011

Trading information
Value on 30 June 2011 in %	104.75
Maximum value within the period in %	106.30
Minimum value within the period in %	102.60
Exchange market turnover in thousands of euros	15,455
Market capitalization in thousands of euros	535,713
Number of transactions	886

SOS2E bonds are listed on the Ljubljana Stock Exchange, under the segment of free bond market.

In 2010, Poslovanje SOD, d.d., was under the influence of the activities on international financial markets, and its operations were marked by activities on the financial markets in Slovenia as well. The Ljubljana Stock Exchange Slovenian Blue Chip Sbitop Index (SBITOP) fell by 16% in 2010. According to our estimation, the value of the SBITOP fell due to the low volume of the Slovenian bond market, a lack of liquidity and relatively small issuers. All this caused a lower demand for stocks from domestic, as well as foreign investors.

In 2010, international financial markets were undergoing a slow recovery, which in the European Union and wider was under the pressure of the debt crisis experienced by some EU members. In 2010, the financial markets in Slovenia were showing the recovery of the money market and increased trust in the bond market; however, regardless of the recovery of the foreign bond markets, the bond market in Slovenia recorded a negative growth. Nevertheless, because the Slovenian bond market is the most important market for SOD, d.d., and the concentration of some of the stocks (Krka, d.d., Petrol, d.d., Zavarovalnica Triglav, etc.) is very high throughout its entire portfolio, due to the fall in prices of some stocks in 2010, SOD recorded a capital loss that amounted to approximately €158 million. The capital loss does not cause any difficulties, since SOD, d.d., has liquid financial instruments in place to settle its obligations until the end of 2012.

The balance on 30 June 2011 was €1.3 billion. SOD, d.d., reports all its financial statements in accordance with the International Financial Reporting Standards (hereinafter: IFRS), which were implemented by SOD in 2009. Pursuant to IFRS, the recorded assets of SOD, d.d., is evaluated in a realistic and fair manner.

On 30 June 2011, SOD, d.d., recorded claims towards the Republic of Slovenia in the amount of €328 million. The claims arise from finances which in the past years were provided by SOD, d.d., from its own resources on behalf of the Republic of Slovenia in order to settle obligations based on the Act Regulating the Issuing of Bonds in Compensation for Confiscated Property pursuant to the Abrogation of the Penalty of Confiscation of Property (ZIOOZP), the Payment of Compensation to the Victims of War and Postwar Aggression Act (ZSPOZ) and the Return of Investments in the Public Telecommunications Network Act (ZVVJTO). The aforementioned acts do not fall under the denationalization legislation, based on which SOD, d.d., acquired the assets for the payment of compensations to beneficiaries pursuant to denationalization. Since the Republic of Slovenia is liable to the payment of compensation pursuant to ZSPOZ, ZIOOZP and ZVVJTO, based on the amendments to these three acts SOD, d.d., has raised claims towards the Republic of Slovenia for the loaned assets and current payments.

The balance of the largest investments of Slovenska odškodninska družba, d.d., on 30 June 2011:

Krka, d.d.; ownership share 14.99%; trade value €318.7 million;
Petrol, d.d.; ownership share 19.75%; trade value €92.7 million;
Zavarovalnica Triglav, d.d.; ownership share 27.2%; trade value €89.7 million.

The objectives of Slovenska odškodninska družba, d.d., are as follows:

to provide sufficient assets to settle all statutory and contractual obligations of SOD, d.d.;
to form the debt structure of SOD, d.d, in an optimum manner with the objective to take into consideration all financial risks during the provision of liquidity for settling the obligations of SOD, d.d.;
to carry out asset management pursuant to the long-term and short-term needs of SOD, d.d., concerning the financial means, which must be carried upon consideration of statutory limitations;
to monitor the operation of the companies, whose stock is part of the portfolio of SOD, d.d., and according to the situation on the capital markets provide an optimum policy for managing ownership shares;
to consistently and accurately establish the amount of compensation in the form of bonds that beneficiaries are entitled to based on the Denationalization Act and based on other acts regulating the restitution of the nationalized property;
to enforce final decisions issued within the procedures regulating the denationalization of property in a timely manner;
to issue and enforce the decisions concerning the amount of compensation to all the beneficiaries under the title of compensation to the victims of war and postwar aggression, for which complete information has been acquired from the competent authorities, in a timely manner;
to enforce final decisions regarding the fixation of the compensation amount under the title of compensation due to the abrogation of the penalty of confiscation of property, in a timely manner;
to enforce written settlements and final decisions to the beneficiaries under the title of return of investments in the public telecommunications network, in a timely manner;
to strengthen the function of the management of the financial instruments of SOD, d.d., with the aim of achieving an adequate level of safety, liquidity and yield, and thus establish the company as a successful financial asset manager;
to efficiently manage the property and maximize the value of SOD, d.d., assets;
to manage all types of costs;
to manage all the risks related to the operations in an optimum manner
to develop high-quality operations and operational functions as a long-term operating company, regardless of the fact that SOD, d.d., was founded in the process of denationalization, whose duration depends on legal and court procedures. For the successful and high-quality management of all the processes at SOD, d.d., it is necessary to regularly update various fields of operation.

Based on various acts, SOD, d.d., has acquired new tasks that were not only related to the denationalization process, and this is also anticipated to be the case in the future.

For this purpose, SOD, d.d., is managing its own assets and fulfils its obligations. Due to the constant dilemma related to the strategic character of the investments, the availability of the underlying asset, which is designated solely to carry out the mission of SOD, d.d., is limited. SOD, d.d., independently and successfully manages particularly its short-term and partially medium-term investment portfolio which consists mostly of debt investments.

The majority of assets designated to cover obligations is represented by stocks and shares of companies listed on the Ljubljana Stock Exchange. The value of this type of investment has been falling consistently since 2008, which is beyond the influence of SOD, d.d. Due to a lack of income from the sales of capital investments, SOD, d.d., is refinancing its obligations by taking out bank loans. In 2010 and 2011, SOD, d.d., took out bank loans under exceptionally favourable interest rates with the Republic of Slovenia acting as its guarantor.

Slovenska Odškodninska Družba

Summary of important information about the operation of SOD, d.d.