ANNUAL REPORT - ZSSK Cargo

Foreword from the chairman of the boardof directors and ceoIn year 2012, companies operatingin the rail freight business had to faceseveral challenges. Transportation andshipping services providers experiencea difficult period. The demandfor these services stagnates as it reflectsthe economic conditions. Notonly of the Slovak but also of the Europeaneconomy. The Slovak statisticsrecorded a year-on-year drop on thetransport market at the level of tenpercent and in the European Unioncountries this decrease was by sixto seven percent.The railway company Železničnáspoločnosť Cargo Slovakia, a.s. alsoreported decline in performance.In 2012 the company transported35.3 million tons of goods. This volumerepresents a year-on-year decline exceedingfive percents. The decrease involumes had a negative impact on revenuesand also on the total economyof the company. In 2012 ZSSK CAR-GO closed economy in the intentionsof the plan. The total business result- a loss amounting to EUR 23.947 millionwas better by EUR 250 thousandthan as it was determined in the businessplan. The operating economic result(EBITDA) was positive and reachedEUR 55 million. The economy of thecompany is influenced by its high indebtedness,which must be resolved.In 2012 ZSSK CARGO settled its liabilitiestowards the state financial loanin the form of repayment of the firstinstalment of the capital and unpaidinterests in the total amount of EUR6

list of used abbreviationsAVVBTSČD CARGOEIREUGPSIASIASBIFRICIFRSISOITMPUMTCRDOCIOHSASPGVPKPPLKRIVSRVATZSSKZSSK CARGOŽSŽSRGeneral Contract of Use for Wagons (GCU)BULK TRANSSHIPMENT SLOVAKIA, a.s.Czech Freight Rail TransporterEffective Interest RateEuropean UnionGlobal Positioning SystemInternational Accounting StandardsInternational Accounting Standards BoardInternational Financial Reporting Interpretations CommitteeInternational Financial Reporting StandardsInternational Organization for StandardizationInformation TechnologiesMotive Power UnitMinistry of Transport, Construction and Regional Development of the SlovakRepublicOther Comprehensive IncomeOccupational Health and Safety Advisory ServicesRegulations on Use of Wagons in International Rail Transport of GoodsPolskie Koleje Państwowe (Polish State Railways)Polskie Linie Kolejowe (Polish Rail Lines Manager)Agreement Governing the Exchange and Use of Wagons between RailwayUndertakingsSlovak RepublicValue Added TaxŽelezničná spoločnosť Slovensko, a.s.Železničná spoločnosť Cargo Slovakia, a.s.Železničná spoločnosť, a.s.Železnice Slovenskej republiky8

milestones of the year 2012• Sale of the part of ZSSK CARGO railwayrepair shops to the Železničnáspoločnosť Slovensko, a.s. as at1. 2. 2012.• Payment of the first principal instalmentand unpaid loan interestsinstalment resulting from the governmentfinancial assistance.• Initiation of the ZSSK CARGO railtransportation abroad. Transportsutilizing own train sets were carriedout using the PKP tracks fromthe ports Swinoujscie and Szczecinto Haniska pri Košiciach.• Since September 2012, GPS systemwas implemented in the first ninemotive power units operating on PKPlines, thus allowing to monitor thelocomotive location also outsidethe territory of Slovakia.• Implementation of transports forthe customers exclusively utilizingforeign infrastructure (the railwaycarrier on the route parts outsidethe territory of Slovakia is handledon a supply basis – e.g. transportsfrom one Polish railway stationto another Polish railway station).• Substantial increase in automotiveexport transports from the Slovakrepublic.• Acquisition of the European traindriving licences.• Putting the Žilina – Teplička marshallingyard into operation withthe ŽSR wagon shunting takeoverwhich resulted in a modernisationof the largest rail freight transportnode in Slovakia.• Constitution of a new form for theUkrainian wagons ownership andthe foundation of the new UkrainianTransport-Logistics Centre (UTLC)which resulted in the conclusionof a new bilateral agreement withthe Ukrainian railways.• Education and training including theverification of professional competenceof the staff at own cost, notthrough the ŽSR institutions.• The technical office services takeover(list of outgoing freight trains, traindocumentation) from the ŽSR in thetwo largest marshalling yards Bratislava– Východ and Košice and theirexecution by the company’s own staff.• Unexpected price increase for shuntingby the ŽSR since 1.6.2012 (dueto the differentiation in the chargesfor individual railway stations) whichnegatively affected the companycost and the volume of the expectedordered services was recalculatedaccordingly.• Restoration of the regular meetings ofthe ZSSK CARGO Steering Committeeto determine the optimum numberof freight wagons and motive powerunits on a quarterly basis with respectto the expected transported volumes.• Complex elaboration of the ZSSKCARGO Mobile Vehicles Stock DevelopmentConcept for the period 2013– 2017 to optimise the railway rollingstock with respect to the expectedbusiness and operational needsof the ZSSK CARGO.• Acquisition of new and the reconstructionof existing freight wagonswhich substantially increased theZSSK CARGO railway rolling stock(29 pcs of Shimmns freight wagons,reconstruction of 175 wagon piecesof the Gbgkks series to Lgs wagons).• Homologation of motive power unitsfor the PLK (9 pcs).• Completion of the installation of theelectrodynamic brakes on motivepower units of the series 131(100 pcs in total).• Radio control installation on motivepower units of the series 131 and 183.• Pilot reconstruction project of 240series motive power units.• Shut-down of the logistics plantVrútky as at 1.11.2012 and thesubsequent acquisition and logisticsmodification in the ZSSK CARGO.9

FREIGHT TRANSPORTIn the year 2012, our company transportedalmost 35.3 million tonnesof goods. This represents a decreaseby 2.2 million tonnes on a year-on-yearbasis (-5.9%).Yet from the beginning of the year,we experienced a negative tendencyin the transported volumes during thefirst two months, which decreasedby almost 1 million tonnes as comparedwith the same period of thepreceding year. The decrease resultedfrom frosty weather, frozen Danuberiver and the implemented changesin the Ukrainian railways businesspolicy. We suffered another significantloss in the autumn due to theproduction decrease in the metallurgicindustry (the EU crisis consequences).The third factor of the transported volumesdrop is related to the activitiesof the private transport companies(the loss was observed in chemistryand intermodal transport branches).On the other hand, we appreciate theincrease in transports of metals andin the automotive segment (categoryof non-specified commodities).An important success of the ZSSKCARGO is represented by the provisionof coal and manganese ore transportsfrom the Polish port Swinoujscie to ourcustomer in Slovakia reaching morethan 0.6 million tonnes of transportedcapacity. Moreover, we realized transportsoutside the territory of Slovakiaamounting to almost 0.1 million tonnesthrough the services of our contractualtransport partners.The comparison of the performance of freight transportations according to segments:In thousand2012 2011 2010 2009 2008 2007 2006 2005 2012/11of tonsImport 14,740 15,364 15,924 13,929 16,790 19,015 18,454 17,825 0.96Transit 8,281 8,785 8,947 7,547 11,996 12,116 13,013 11,330 0.94Export 8,057 8,768 9,325 8,428 10,280 11,639 12,204 11,686 0.92Domestic 4,206 4,566 4,413 3,886 5,459 6,384 6,384 6,904 0.9235,284 37,483 38,610 33,789 44,525 49,154 50,055 47,745 0.94Development of freight transport in 2011 and 2012thou. of tons16,000Actual 2012Actual 201112,0008,0004,0000Import Transit Export Domestic10

The comparison of the performance of freight transportations according to thecommodities:In thousand of tons 2012 2011 2010 2009 2008 2007 2006 2005 2012/11Iron ore 11,924 12,253 12,268 9,717 12,380 13,742 15,235 12,904 0.97Metals 5,906 5,543 5,769 4,554 7,407 8,374 7,757 6,893 1.07Coal 5,516 5,950 6,422 6,498 7,372 8,490 8,297 8,652 0.93Construction materials 2,936 3,223 3,118 2,827 4,609 5,027 5,160 5,121 0.91Petroleum products 2,011 2,195 2,154 2,854 3,340 3,515 3,375 3,483 0.92Wood 1,968 2,308 2,448 1,929 2,248 2,471 2,588 3,517 0.85Chemical products 1,874 2,578 2,730 2,329 3,257 3,598 3,643 3,759 0.73Intermodal transport 1,870 2,243 2,779 1,985 2,280 1,809 1,334 1,179 0.83Unspecified 1,001 768 623 687 1,092 1,328 1,577 949 1.30Foodstuffs 277 421 298 410 540 800 1,090 1,288 0.6635,284 37,483 38,610 33,789 44,525 49,154 50,055 47,745 0.94Classification according to the commoditiesYear 2012FoodstuffsUnspecifiedIntermodal transportChemical productsWoodPetroleum productsIron oreConstruction materialsCoalMetals11

STRUCTURE OF MOTIVE POWER UNITS (MPU)Development of MPUnumber2012 2011 2010 2009 2008Electric locomotives 309 323 324 330 331Diesel locomotives 338 373 372 387 405Diesel coaches 1 1 1 2 2648 697 697 719 738Besides MPU in personal possession mentioned in the table ZSSK CARGO usesalso 12 electric locomotives acquired through financial leasing.Age structure of MPUYears Up to 15 Up to 30 Over 30 TotalElectric locomotives 7 74 228 309Diesel locomotives 49 70 219 338Diesel coaches - 1 - 156 145 447 64812

STRUCTURE OF FREIGHT WAGONS FLEETDevelopment of number of wagons2012 2011 2010 2009 2008Covered wagons 1,952 2,141 2,190 2,327 2,725Open wagons 6,808 6,860 7,125 7,215 7,121Flat wagons 3,076 2,973 2,891 2,952 2,973Other freight wagons 1,473 1,474 1,482 1,522 1,69113,309 13,448 13,688 14,016 14,510Besides above-mentioned wagons in personal possession, ZSSK CARGO rented 1,354 wagons through the financial leasingas at 31. December 2012. Financial leasing was used also in the previous years.Number of wagons according to the international specifications and their age structureYears Up to 5 6-10 11 -15 16-20 21 -25 26-30 Over 30 TotalE - ordinary open high-sided wagon 343 105 138 154 1,713 1,958 1,309 5,720F - special open wagon - - - - - 34 1,054 1,088G - ordinary covered wagon - - - - 142 79 69 290H - special covered wagon - 395 335 59 1 33 474 1,297K - ordinary flat wagon - 15 - - 18 - 213 246L - special flat wagon 200 7 - - 35 - 3 245R - ordinary flat bogie wagon - 300 232 - - 242 949 1,723S - special flat bogie wagon 1 - 340 87 - - 434 862T - wagon with opening roof - - - 56 175 39 95 365U - special wagon - - - - 78 45 91 214Z - tank wagon - - - - - 710 549 1,259544 822 1,045 356 2,162 3,140 5,240 13,30913

CAPITAL INVESTMENTS OF ZSSK CARGO(accounting balance as at 31.12.2012 in EUR)CompanyNumber of equiti e s (p c s) Type Share (%)Value of CapitalInvestmentsIntercontainer - Interfrigo s. c. Brussels, Belgium 385 paper 0.03 7,610.33Bureau Central de Clearing s. c. r. l. Brussela, Belgium 4 paper 2.96 2,974.72BULK TRANSSHIPMENT SLOVAKIA, a.s. 41,964 paper 40 1,530,903.541,541,488.59INTEGRATED MANAGEMENT SYSTEMThe ZSSK CARGO is focused on the controlof the company processes. A satisfactionof both external and internalcustomers with the provided servicesrepresents our primary goal. To fulfil theexpectations of our business partners,the ZSSK CARGO is primarily concentratedon continuous improvementof the provided services and products.The established integrated managementsystem complying with ISO 9001and OHSAS 18001 standards shall helpto fulfil this goal.Through the successful certification,recertification and supervisory audits,the independent certification companyTÜV SÜD Slovakia confirmed that ourintegrated management system is stillbeing improved, well maintained andkept functional.ZSSK CARGO holds certificates:• According to the ISO 9001 standardsfor the following products:• International freight traffic (logistictrains)• Maintenance and repairs of rollingstock• Procurement and purchase,methods and analysis, storageand fleet of vehicles services• East Slovak Transshipment Yards• Ensuring the Professional qualificationand training of the employees• According to OHSAS 18001 standardsfor the following product:• Operation at the EVO Vojany workplace14

HUMAN RESOURCESAs at 31.12. 2012, the company employed6,822 people. As compared withthe year 2011, an employment decreaseby 1,232 people (15%) is indicated. Themain factor influencing the decreaseis related to the transfer of a part of repairworks to the Železničná spoločnosťSlovensko, a.s. with the result of employmenttermination of 973 employeesin the form of rights and duties transfers.The other reasons of employment decreasewere retirements or terminationsof employment agreement.Employees by age• the largest decrease in the number of employees (463 – 37.58%) was found in theage category 40 - 49 years of the total number of employees decrease (1 232).• the largest number of employees (3,088 – 44.09%) was found in the agecategory 50 - 62 years.Age structureAge 2012 2011 2010 2009 2008 2012-1118 - 29 303 378 516 532 640 (75)30 - 39 1,148 1,509 1,852 2,044 2,311 (361)40 - 49 2,351 2,814 3,191 3,356 3,549 (463)50 - 62 3,008 3,341 3,955 3,887 3,935 (333)Over 62 12 12 32 7 13 -6,822 8,054 9,546 9,826 10,448 (1,232)As at 31.12. 2012, the average age of employees was 47.30.Employees by education• the largest decrease in the number of employees was found in the categorysecondary professional education (603 employees – 48.94%) of the totalnumber of employees decrease (1,232).• despite the stated decrease, the ZSSK CARGO continues to employ 3,566employees (52.27%) in this category.Education structureEducation 2012 2011 2010 2009 2008 2012-11Elementary 148 171 235 265 288 (23)Apprentice school 2,426 3,000 3,603 3,814 4,126 (574)Completed tech. vocational 3,566 4,169 4,919 5,046 5,314 (603)University 682 714 789 701 720 (32)6,822 8,054 9,546 9,826 10,448 (1,232)The average wage for the year 2012 was 796.96 EUR which represents an 7.4% increaseas compared with the year 2011 (the average wage increase above the agreedwage increase according to the collective bargaining agreement (2%) resulted fromthe changes in the employment structure – transfer of a part of the repair works).In the field of education, the company acquired a certified product – “professionaltraining of employees” within the integrated quality management system andstarted the professional training and verification of professional skills of its staff.15

RISKSIn the year 2012, ZSSK CARGO has carriedout activities in a business environmentwhich showed substantial changeson a long-term scale. As a result, thecompany’s situation changed accordingly.Any change as well as the regularcompany activities resulted in the riskwhich more or less jeopardized the fulfilmentof the main goals of the company:• The company activities continueto be exposed to the world financialand economic crisis impact whichis directly related to the ongoingrecession in the metallurgic industryand affects the company performanceand economic parameters.• The year 2012 saw a more significantperformance increase at therailway competitors and the railfreight market penetration of foreignnational transport carriers whichalso resulted in the transportedvolumes decrease of ZSSK CARGOon a year-on-year basis, especiallyin the case of block trains andhence, the company transportationrevenues.• With respect to the applicationstate of the Principles of StateTransport Policy of the Slovakrepublic in the field of harmonisationof the business conditions forall mode of transport and supportof ecological transports, transportvolumes were not substantially shiftedfrom road to rail. Moreover, highload in the transports of individualconsignments and the tariff point’sreduction continue to transfer sometransports from rail back to road.• As a result of insufficiently availableinvestment funds, the year2012 saw the lowest investmentbudget since the independent companyZSSK CARGO establishmenton 01. 01. 2005. The level of theproperty recreation did not evencover the regular property reproductionand the further companydevelopment was not guaranteedas required.• Being a public procurement subject,the company attained a partial costsaving in the area of goods, worksand services procurement while substantiallydecreasing flexibility andincreasing the time of procurementimplementation. This negativelyaffected the company competitivestrength in the process of publicprocurements of freight transports.• In the year 2012, the railway operationsuffered from severe winterconditions in January and February2012 as well as from the ŽSR trafficclosure, which negatively affectedthe passenger and rail freight transportefficiency.EXPECTED FUTURE DEVELOPMENTFor the year 2013, the ZSSK CARGOcompany plans to continue increasingefficiency and optimising the processesto attain better economy and decreasethe company overall debt. In the upcomingyear, the company expects to stabilisetransported volumes and gainedtransport revenues which can be negativelyaffected by external factors, especiallyby the persistent economic crisisand advantages of road transport.16

PARTICULAR INFORMATION FOR THE YEAR 2012As a result of the preparation of a strategicinvestor participation in the ZSSKCARGO company, the business andoperational activities as well as investmentand development activities havebeen reduced and the solution of thecompany high indebtedness has beenpostponed.The company spends financial resourcesto eliminate possible negative environmentalimpact of repair works.For the year 2012, the company did notspend any financial resources on researchand development.The company does not have any branchesabroad.After the accounting period closureas at December 31, 2012, no importantcircumstances were found exceptfor the sale of the company estate partin February 2013 which concluded thesale of a part of repair activities to ZSSKas at February 1, 2012.The 2012 book loss amounting 23,947thousand EUR shall be transferred to theprevious years’ unrecovered losses.SELECTED ECONOMIC INDICATORSAccording to the data from the separate financial statementIn thousand of EUR 2012 2011Total assets 678,110 774,488Long-term tangible property 605,716 641,380Assets held for sale 3,629 45,360Equity 119,368 143,315Loans (short-term + long-term) 255,961 272,959Revenues 315,169 371,029Costs (326,014) (354,122)Profit /(loss) out of financial operations (13,057) (17,220)Income tax (45) (18)Economic result (23,947) (331)17

Independent Auditor’s Report and separate financial statements preparedin accordance with international financial reporting standards as adoptedby the European UnionYear ended 31 December 201219

20INDEPENDENT AUDITOR’S REPORT

STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2012In thousands of EUR Note 31 December 2012 31 December 2011RevenuesTransportation and related revenues 3 292,057 320,894Other revenues 4 23,112 50,135315,169 371,029Costs and expensesConsumables and services 5 (171,353) (188,769)Staff costs 6 (94,853) (104,389)Depreciation, amortisation and impairment of property, plantand equipment and intangible assets12, 13(68,748) (59,846)Other operating revenues (expenses), net 7 8,940 (1,118)(326,014) (354,122)Finance costsInterest expense 8 (13,557) (17,071)Other finance revenues (costs), net 9 (216) (170)Interest income 716 21(13,057) (17,220)Income tax 11 (45) (18)Loss for the period (23,947) (331)Other comprehensive income for the period - -Total comprehensive income for the period (23,947) (331)The accounting policies and notes form an integral part of the financial statements.Approved by Ing. Vladimír Ľupták and Ing. Peter Fejfar on behalf of the Board of Directors on 16 April 2013.22

STATEMENT OF FINANCIAL POSITIONAS AT 31 DECEMBER 2012In thousands of EUR Note 31 December 2012 31 December 2011ASSETSNon-current assetsProperty, plant and equipment 13 605,716 641,380Intangible assets 12 14,867 16,815Investment in joint venture 14 1,541 1,541Other non-current assets 10 218 615622,342 660,351Current assetsInventories 15 8,634 13,211Trade and other receivables 16 43,444 55,495Cash and cash equivalents 17 61 7152,139 68,777Assets held for sale 25 3,629 45,36055,768 114,137TOTAL ASSETS 678,110 774,488EQUITY AND LIABILITIESShareholder’s equityShare capital 18 401,646 401,646Other funds 18 1,228 1,228Accumulated losses 18 (283,506) (259,559)Total equity 119,368 143,315Non-current liabilitiesSubordinated debt 19 136,720 146,470Employee benefits 21 14,243 13,590Provisions 22 31,935 30,186Trade and other payables 23 104,466 56,092Finance lease liabilities 24 70,522 75,385Other non-current liabilities 23 162 134358,048 321,857Current liabilitiesSubordinated debt 19 19,500 19,500Interest-bearing loans and borrowings 20 99,741 106,989Employee benefits 21 676 732Provisions 22 4,782 1,361Trade and other payables 23 59,662 154,320Finance lease liabilities 24 16,333 14,602200,694 297,504Liabilities directly associated with assets held for sale 25 - 11,812Total liabilities 558,742 631,173TOTAL EQUITY AND LIABILITIES 678,110 774,488The accounting policies and notes form an integral part of the financial statements.Approved by Ing. Vladimír Ľupták and Ing. Peter Fejfar on behalf of the Board of Directors on 16 April 2013.23

STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2012In thousands of EURSharecapitalLegalreservefundOtherfundsAccumulatedlossesAt 1 January 2011 401,646 - 1,228 (259,228) 143,646Loss for the period - - - (331) (331)Other comprehensive income - - - - -Total comprehensive income - - - (331) (331)At 31 December 2011 401,646 - 1,228 (259,559) 143,315Loss for the period - - - (23,947) (23,947)Other comprehensive income - - - - -Total comprehensive income - - - (23,947) (23,947)At 31 December 2012 401,646 - 1,228 (283,506) 119,368The accounting policies and notes form an integral part of the financial statements.Approved by Ing. Vladimír Ľupták and Ing. Peter Fejfar on behalf of the Board of Directors on 16 April 2013.Total24

STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2012In thousands of EUR Note 31 December 2012 31 December 2011Operating activitiesLoss for the period (23,947) (331)Adjustments for:Non-cash items• Depreciation, amortisation and impairment of property,plant and equipment and intangible assets 12, 13 68,748 59,689• Loss (gain) on sale of property, plant and equipment 7 (4,386) -• Interest expense 8 13,557 23,044• Interest income (716) (21)• Movements in provisions and employee benefits (7,724) (22,171)45,532 60,210Working capital adjustments• Decrease in inventories 5,163 1,021• Decrease in trade and other receivables 13,542 4,818• Increase (decrease) in trade and other payables (52,348) 50,900Net cash flows from operating activities 11,889 116,948Investing activitiesPurchase of property, plant and equipment 12, 13 (31,090) (62,506)Proceeds from sale of property, plant and equipment 60,055 601Net cash flows from (used in) investing activities 28,965 (61,905)Financing activitiesProceeds from loans and borrowings 4,700 2,509,264Repayment of loans and borrowings (42,454) (2,586,017)Repayment of subordinated debt (9,750) -Interest paid (21,416) (20,608)Interest received 716 21Payments of finance lease liabilities (3,166) (17,061)Net cash flows used in financing activities (71,370) (114,401)Net (decrease) increase in cash and cash equivalents (30,516) (59,358)Cash and cash equivalents at 1 January 17 (64,464) (5,106)Cash and cash equivalents at 31 December 17 (94,980) (64,464)The accounting policies and notes form an integral part of the financial statements.Approved by Ing. Vladimír Ľupták and Ing. Peter Fejfar on behalf of the Board of Directors on 16 April 2013.25

NOTES TO FINANCIAL STATEMENTS1. GENERALINFORMATIONInformation on Reporting entityŽelezničná spoločnosť Cargo Slovakia,a.s. (“ZSSK CARGO” or “the Company”),a joint stock company registered in theSlovak Republic, was founded on 1 January2005 as one of two successor companiesto Železničná spoločnosť, a.s.(“ŽS”). ZSSK CARGO was incorporatedwith the Commercial Register of theDistrict Court Bratislava I, Section Sa,Insert No. 3496/B at the date of itsestablishment, IČO 35 914 921, DIČ20 219 200 65.The Slovak Republic is the sole shareholderof the Company through theMinistry of Transport, Constructionand Regional Development of the SlovakRepublic (“MTCRD”) with its registeredoffice on Námestie slobody 6,811 06 Bratislava. The Company doesnot belong to any group for consolidationpurposes. The Company is not an unlimitedliability partner in any othercompany.The Company’s predecessor, ŽS, wasfounded on 1 January 2002 throughthe demerger of Železnice SlovenskejRepubliky (“ŽSR”) and assumed responsibilityfor the provision of freightand passenger rail transport and trafficservices within Slovakia, while ŽSRretained responsibility for the operationof the traffic routes. ŽS was dissolvedwithout liquidation effective 31 December2004 and replaced, followinga second demerger, by two newly establishedsuccessor companies: Železničnáspoločnosť Slovensko, a.s. (“ZSSK”) forpassenger transportation and trafficservices and ZSSK CARGO for freighttransportation and traffic services.Principal activitiesZSSK CARGO’s main business is the provisionof freight transportation and relatedservices. Additionally, the Companyrents properties and provides repair andmaintenance, cleaning and other supportservices to ZSSK and other externalcustomers. The Company is organizedand managed as a single business unitand is viewed as a single operating unitby the Board of Directors for the purposesof resource allocation and assessing performance.The registered office of ZSSK CARGODrieňová 24820 09 BratislavaSlovak RepublicThese separate financial statementsare filed at the Company’s registeredaddress and at the Commercial Registerof the District Court Bratislava I, Záhradnícka10, 812 44 Bratislava.2.1 BASIS OFPREPARATION ANDMEASUREMENTThese separate financial statements wereapproved and authorized for issue by theBoard of Directors on 16 April 2013. TheGeneral Meeting held on 31 July 2012approved the Company’s financial statementsfor the previous accounting period.The financial statements have beenprepared on the historical cost basis.These financial statements constitute thestatutory accounts of ZSSK CARGO, preparedin accordance with Article 17a (6)of Slovak Act No. 431/2002 Coll. on Accountingfor the accounting period from1 January 2012 to 31 December 2012.The financial statements were preparedusing the going concern assumption thatthe Company will continue its operationsfor the foreseeable future. The Companyreported a loss of EUR 23,947 thousandfor the year and total accumulated lossof EUR 283,506 thousand. In 2012, Companyfailed to meet financial covenantsfor one particular loan contract (note 20).In 2012 and 2011, the Company implementedcorrective measures approvedby the Government for the revitalizationof the railway sector. In 2013,the Company plans to continue applyingthese measures to reduce the Company’sdebt and to achieve balanced budget.The financial statements and accompanyingnotes are presented in thousandsof Euro.The Company’s financial year is the sameas the calendar year.Statement of complianceThese financial statements have beenprepared in accordance with InternationalFinancial Reporting Standards as adoptedby the European Union (“IFRS”). IFRScomprise standards and interpretationsapproved by the International AccountingStandards Board (“IASB”) and the InternationalFinancial Reporting InterpretationsCommittee (“IFRIC”).At this time, due to the endorsementprocess of the European Union and the26

nature of the Company’s activities, thereis no difference between the IFRS policiesapplied by the Company and thoseadopted by the European Union.2.2 CHANGES INACCOUNTINGPOLICIES ANDDISCLOSURESThe accounting policies adopted areconsistent with those of the previousfinancial year except as follows:The Company has adopted the followingnew and amended IFRS and IFRICinterpretations as at 1 January 2012, alladopted by the European Union (hereinafteras the ”EU”):• IAS 12 Amendment to IncomeTaxes – Deferred Taxes: Recoveryof Underlying Assets (effective forannual periods beginning on or after1 January 2012);• IFRS 1 Amendment to First-TimeAdoption of International FinancialReporting Standards – Severe Hyperinflationand Removal of Fixed Datesfor First-Time Adopters (effective forannual periods beginning on or after1 July 2011);• IFRS 7 Amendment to FinancialInstruments: Disclosures – EnhancedDerecognition Disclosure Requirements(effective for annual periodsbeginning on or after 1 July 2011).The Company has not early adopted anystandards and interpretations whereadoption is not mandatory at the balancesheet date.When the adoption of the standardor interpretation is deemed to havean impact on the financial statementsor performance of the Company, its impactis described below:Amendment to IAS 12 Income Taxes– Deferred Taxes: Recovery of UnderlyingAssetsThe amendment clarified the determinationof deferred tax on investmentproperty measured at fair value andintroduces a rebuttable presumptionthat deferred tax on investment propertymeasured using the fair valuemodel in IAS 40 should be determinedon the basis that its carrying amountwill be recovered through sale. It includesthe requirement that deferredtax on non-depreciable assets that aremeasured using the revaluation modelin IAS 16 should always be measuredon a sale basis. The adoption of thisamendment did not have a significantimpact on the financial position or theperformance of the Company.Amendment to IFRS 1 First-Time Adoptionof International Financial ReportingStandards – Severe Hyperinflation andRemoval of Fixed Dates for First-TimeAdoptersThe IASB provided guidance on how anentity should resume presenting IFRSfinancial statements when its functionalcurrency ceases to be subject to hyperinflation.The adoption of this amendmentdid not have a significant impact on thefinancial position or the performanceof the Company.Amendment to IFRS 7 Financial Instruments:Disclosures — EnhancedDerecognition Disclosure RequirementsThe amendment requires additional disclosureabout financial assets that havebeen transferred but not derecognisedto enable the user of the Company’sfinancial statements to understandthe relationship with those assetsthat have not been derecognised andtheir associated liabilities. In addition,the amendment requires disclosuresabout the entity’s continuing involvementin derecognised assets to enablethe users to evaluate the nature of, andrisks associated with such an involvement.The adoption of this amendmentdid not have a significant impact on thefinancial position or the performanceof the Company.Standards issued but not yet effectiveStandards issued but not yet effectiveup to the date of issuance of the Company’sfinancial statements are listedbelow:• IAS 1 Amendment to IAS 1 FinancialStatement Presentation – Presentationof Items of Other ComprehensiveIncome (effective for annual periodsbeginning on or after 1 July 2012);• IAS 19 Revised IAS 19 Employeebenefits (effective for annual periodsbeginning on or after 1 January2013);• IAS 27 Revised IAS 27 SeparateFinancial Statements (effective forannual periods beginning on or after1 January 2014);• IAS 28 Revised IAS 28 Investmentsin Associates and Joint Ventures(effective for annual periods beginningon or after 1 January 2014);• IFRS 9 Financial Instruments: Classificationand Measurement (effectivefor annual periods beginningon or after 1 January 2015; thisstandard has not been approvedby the EU yet);• IFRS 10 Consolidated FinancialStatements (effective for annualperiods beginning on or after 1 January2014);• IFRS 11 Joint Arrangements (effectivefor annual periods beginningon or after 1 January 2014); • IFRS 12 Disclosure of Involvementwith Other Entities (effective for27

annual periods beginning on or after1 January 2014);• IFRS 13 Fair Value Measurement(effective for annual periods beginningon or after 1 January 2013);• IFRS 7 Amendments to IFRS 7 Disclosures– Offsetting Financial Assetsand Financial Liabilities (effective forannual periods beginning on or after1 January 2013);• IAS 32 Amendments to IAS 32 OffsettingFinancial Assets and FinancialLiabilities (effective for annualperiods beginning on or after 1 January2014);• IFRS 1 Amendments to IFRS 1 GovernmentLoans (effective for annualperiods beginning on or after 1 January2013, these amendments havenot been approved by the EU yet).• IFRS 10• IFRS 11• IFRS 12 Amendments to IFRS 10,IFRS 11 and IFRS 12 Transitionguidance (effective for annual periodsbeginning on or after 1 January2012, aligned with the effectivedates of IFRS 10, IFRS 11 and IFRS12, these amendments have notbeen approved by the EU yet).• IFRS 10• IFRS 12• IAS 27 Amendments to IFRS 10, IFRS12 and IAS 27 Investment entities(effective for annual periods beginningon or after 1 January 2014, theseamendments have not been approvedby the EU yet). The amendments applyto a particular class of business thatqualify as investment entities.Annual Improvements May 2012The following standards and interpretationswere amended:• IFRS 1 First-time Adoption of InternationalFinancial Reporting Standards• IAS 1 Presentation of Financial Statements• IAS 16 Property Plant and Equipment• IAS 32 Financial Instruments, Presentation• IAS 34 Interim Financial ReportingThese improvements are effective forannual periods beginning on or after1 January 2013. These improvementshave not been approved by the EU yet.The principal effects of these changesare as follows:Amendment to IAS 1 Financial StatementPresentation – Presentationof Items of Other Comprehensive Income(OCI)The amendment to IAS 1 changes thegrouping of items presented in OCI.Items that could be reclassified (or ‘recycled’)to profit or loss at a future pointin time (for example, upon derecognitionor settlement) would be presentedseparately from items that will neverbe reclassified. The Company is consideringan impact of this amendmenton its separate financial statements.Amendments to IAS 19 Employee BenefitsThese amendments eliminate the corridorapproach and calculate financecosts on a net funding basis. Past servicecosts shall be recognised when theplan amendment or curtailment occurs.Prior to the amendment, past servicecosts were recognised as an expenseon a straight-line basis over the averageperiod until the benefits become vested.Revised IAS 27 Separate FinancialStatementsAs a consequence of the new IFRS10 and IFRS 12, what remains of IAS27 is limited to accounting for subsidiaries,jointly controlled entities, and associatesin separate financial statements.The Company is considering an impactof this revision on its separate financialstatements.Revised IAS 28 Investments in Associatesand Joint VenturesAs a consequence of the new IFRS11 and IFRS 12, IAS 28 has been renamedIAS 28 Investments in Associatesand Joint Ventures, and describesthe application of the equity methodto investments in joint ventures in additionto associates. The Company is consideringan impact of this revision on itsseparate financial statements.IFRS 9 Financial Instruments: Classificationand MeasurementIFRS 9 is the first standard issuedas part of a wider project to replaceIAS 39. IFRS 9 retains but simplifies themixed measurement model and establishestwo primary measurement categoriesfor financial assets: amortised costand fair value. The basis of classificationdepends on the entity’s businessmodel and the contractual cash flowcharacteristics of the financial asset.The guidance in IAS 39 on impairmentof financial assets and hedge accountingcontinues to apply. The Companyis considering an impact of this standardon its separate financial statements.IFRS 10 Consolidated Financial StatementsThe objective of IFRS 10 is to establishprinciples for the presentation andpreparation of consolidated financialstatements when an entity controls oneor more other entity. It defines the principleof control, and establishes controls28

as the basis for consolidation and setsout how to apply the principle of controlto identify whether an investor controlsan investee and therefore must consolidatethe investee. The standard stipulatesthe accounting requirements forthe preparation of consolidated financialstatements. The Company is consideringan impact of this standard on its separatefinancial statements.IFRS 11 Joint ArrangementsIFRS 11 is a more realistic reflectionof joint arrangements by focusing on therights and obligations of the arrangementrather than its legal form. Thereare two types of joint arrangement: jointoperations and joint ventures. Joint operationsarise where a joint operatorhas rights to the assets and obligationsrelating to the arrangement and henceaccounts for its interest in assets, liabilities,revenue and expenses. Joint venturesarise where the joint operator hasrights to the net assets of the arrangementand hence equity accounts forits interest. Proportional consolidationof joint ventures is no longer allowed.The Company is considering an impactof this standard on its separate financialstatements.IFRS 12 Disclosure of Involvement withOther EntitiesIFRS 12 includes the disclosure requirementsfor all forms of interests in otherentities, including joint arrangements,associates, special purpose vehiclesand other off balance sheet vehicles.The Company is considering an impactof this standard on its separate financialstatements.IFRS 13 Fair Value MeasurementIFRS 13 establishes a single sourceof guidance under IFRS for all fair valuemeasurements. IFRS 13 does notchange when an entity is required to usefair value, but rather provides guidanceon how to measure fair value under IFRSwhen fair value is required or permitted.The Company is considering an impactof this standard on its separate financialstatements.Amendments to IFRS 7 Disclosures– Offsetting Financial Assets and FinancialLiabilitiesThe amendment to IFRS 7 requires anentity to disclose information aboutrights of offset and related arrangementsfor financial instruments underan enforceable master netting agreementor similar arrangement. The Companyis considering an impact of theseamendments on its separate financialstatements.Amendments to IAS 32 Offsetting FinancialAssets and Financial LiabilitiesThe amendment to IAS 32 are intendedto clarify existing application issues relatingto the offsetting rules and reducelevel of diversity in current practise.The Company is considering an impactof this amendment on its separate financialstatements.Amendments to IFRS 1 GovernmentLoansThese amendments require first-timeadopters to apply the requirementsof IAS 20 Accounting for GovernmentGrants and Disclosure of GovernmentAssistance, prospectively to governmentloans existing at the date of transitionto IFRS. Entities may choose to applythe requirements of IAS 39 and IAS20 to government loans retrospectivelyif the information needed to do so hadbeen obtained at the time of initiallyaccounting for that loan. The exceptionwould give first-time adopters relief fromretrospective measurement of governmentloans with a below-market rateof interest. The Company is consideringan impact of these amendments on itsseparate financial statements.Amendments to IFRS 10, IFRS 11 andIFRS 12 Transition guidanceThe amendments are intended to provideadditional transition relief in IFRS10 , IFRS 11 Joint Arrangements andIFRS 12 Disclosure of Interests in OtherEntities, by “limiting the requirementto provide adjusted comparative informationto only the preceding comparativeperiod”. Also, amendments weremade to IFRS 11 and IFRS 12 to eliminatethe requirement to provide comparativeinformation for periods priorto the immediately preceding period.The Company is considering an impactof these amendments on its separatefinancial statements.It is expected that these changes willhave no significant effect on the Company’sseparate financial statements.2.3 SIGNIFICANTACCOUNTINGJUDGEMENTSAND ESTIMATESCritical judgments in applying accountingpoliciesIn the process of applying accountingpolicies, management has made certainjudgments that have a significant effecton the amounts recognized in thefinancial statements (apart from thoseinvolving estimates, which are dealt withbelow). These are detailed in the respectivenotes, however the most significantjudgments relate to the following:29

Environmental mattersExisting regulations, especially environmentallegislation, do not specify the extentof remediation work required or thetechnology to be applied in resolvingenvironmental damage. Managementuses the work of specialists, its previousexperience and its own interpretationsof the relevant regulations in determiningthe need for environmental provisions.Lease arrangementsThe Company has entered into a numberof lease arrangements by which it gainsthe right to use specific assets, primarilyrailway wagons, for extended periodsof time. The Company has determinedthat under these arrangements it takeson substantially all the risks and rewardsof ownership and so accounts for thesearrangements as finance leases.The Company has entered into otherlease arrangements by which it gainsthe right to use railway wagons that areowned by other transport networks forshort-term periods. The Company hasdetermined that under these arrangementsit does not take on the significantrisks and rewards of ownership andso accounts for these arrangementsas operating leases (these transactionsare disclosed in the financial statementsas “wagon rentals”).Similarly, the Company has entered intolease arrangements by which it leasesrailway wagons to other transport networksand third parties. The Companyhas determined that under these arrangementsit retains the significantrisks and rewards of ownership andso accounts for these arrangementsas operating leases (these transactionsare disclosed in the financial statementsas “wagon rentals”).Sources of estimate uncertaintyThe preparation of financial statementsin conformity with IFRS requires the useof estimates and assumptions that affectthe amounts reported in the financialstatements and the notes thereto.Although these estimates are basedon management’s best knowledgeof current events, actual results maydiffer from these estimates. Theseissues are detailed in the respectivenotes, however, the most significantestimates comprise the following:Legal claimsThe Company is party to a number of legalproceedings arising in the ordinarycourse of business. Management usesthe work of specialists and its previousexperience of similar actions in makingan assessment of the most likely outcomeof these actions and of the needfor legal provisions.Quantification and timing of environmentalliabilitiesManagement makes estimationsas to the future cash outflows associatedwith environmental liabilitiesusing comparative prices, analogiesto previous similar work and otherassumptions. Furthermore, the timingof these cash outflows reflectsmanagement’s current assessmentof priorities, technical capabilitiesand the urgency of such obligations.The estimates made and the assumptionsupon which these estimates aremade are reviewed at each balancesheet date.Impairment of property, plant and equipmentThe Company determines at each reportingdate whether there is an indicationthat items of property, plantand equipment are impaired. Wheresuch indications exist, the Companymakes an estimate as to the recoverableamount of the assets concernedor of the cash-generating unit to whichthe assets are allocated. In determiningvalue in use the Company is requiredto make an estimate of expected futurecash flows and to choose a suitablediscount rate in order to calculate thepresent value of those cash flows,while net selling price is determinedby reference to market developmentsin Slovakia and other central Europeancountries.Actuarial estimates applied for calculationof retirement benefit obligationsThe cost of defined benefit plans is determinedusing actuarial valuations.The actuarial valuation involves makingassumptions about discount rates,future salary increases and mortalityor fluctuation rates. Due to the long-termnature of these plans, such estimatesare subject to significant uncertainty.Depreciable lives and residual valuesof property, plant and equipmentManagement assigns depreciable livesand residual values to items of property,plant and equipment by referenceto the organisation’s latest strategicobjectives. Management determinesat each reporting date whether the assumptionsapplied in making such assignationscontinue to be appropriate.2.4 SUMMARYOF SIGNIFICANTACCOUNTINGPOLICIESFunctional and presentation currencyThese separate financial statements arepresented in euro, which is the Company’sfunctional currency.30

no impairment loss been recognisedfor the asset in prior years. Such reversalis recognised in the statementof comprehensive income. After sucha reversal the depreciation chargeis adjusted in future periods to allocatethe asset’s revised carrying amount,less any residual value, on a systematicbasis over its remaining useful life.InventoriesInventories are measured at the lowerof cost and net realisable value. Costincludes the purchase price of inventoryand expenses related to the acquisitionof inventory (including transportationcosts, insurance and customs duties)and is accounted for using the weightedaverage method. Net realisable valueis the estimated selling price in the ordinarycourse of business, less the estimatedcosts necessary to make thesale. Allowances for old, obsolete andslow-moving items are booked to reducethe carrying value of these items to netrealisable value.Joint ventureSecurities and interests in joint venturesthat are not classified as held for saleare measured at book value (cost lessany accumulated impairment losses).The cost of securities and interestsin joint ventures is the price that waspaid for the shares.Financial assetsInitial recognitionFinancial assets within the scope of IAS39 are classified as financial assetsat fair value through profit or loss,loans and receivables, held-to-maturityinvestments, available-for-sale financialassets, or as derivatives designatedas hedging instruments in an effectivehedge, as appropriate. Financial assetsare designated on initial recognition. Financialassets are recognized initiallyat fair value plus, in case of financial assetsnot classified at fair value throughprofit or loss, directly attributable transactioncosts. The Company’s financialassets comprise cash at bank, pettycash and cash equivalents, trade andother receivables.Subsequent measurementThe subsequent measurement of financialassets depends on their classificationas follows:Financial assets at fair value throughprofit or lossFinancial assets at fair value throughprofit or loss include financial assetsheld for trading and financial assetsdesignated upon initial recognitionat fair value through profit or loss. Financialassets are classified as heldfor trading if they are acquired for thepurpose of selling in the near term. Thiscategory includes derivative financial instrumentsentered into by the Companythat do not meet the hedge accountingcriteria as defined by IAS 39. Derivativesare also classified as held for tradingunless they are designated as effectivehedging instruments. Financial assetsat fair value through profit and loss arecarried in the balance sheet at fair valuewith gains or losses recognized in thestatement of comprehensive income.The Company has not designated anyfinancial assets at fair value throughprofit or loss in the current year.Loans and receivablesLoans and receivables are non-derivativefinancial assets with fixed or determinablepayments that are not quoted in an activemarket. Subsequent to initial measurementloans and receivables are measuredat amortized cost using the effective interestrate method (EIR) less any impairmentlosses. Amortised cost is calculatedby taking into account any discount or premiumon acquisition and fees or coststhat are an integral part of the EIR. Gainsand losses are recognized in the statementof comprehensive income when theloans and receivables are derecognizedor impaired, as well as through the amortizationprocess.Held-to-maturity investmentsHeld-to-maturity investments are nonderivativefinancial assets which carryfixed or determinable payments, havefixed maturities and which the Companyhas the positive intention andability to hold to maturity. After initialmeasurement held-to-maturity investmentsare measured at amortized cost.This cost is computed as the amountinitially recognized minus principal repayments,plus or minus cumulativeamortization using the effective interestrate method of any difference betweenthe initially recognized amountand the maturity amount, less allowancefor impairment. This calculationincludes all fees and points paid or receivedbetween parties to the contractthat are an integral part of the effectiveinterest rate, transaction costsand all other premiums and discounts.Gains and losses are recognized in thestatement of comprehensive incomefor the period when the investmentsare derecognized or impaired, as wellas through the amortization process.As at 31 December 2012 and 2011,no financial assets have been designatedas held-to-maturity investments.Available-for-sale financial assetsAvailable-for-sale financial assets arenon-derivative financial assets that aredesignated as available-for-sale or are not32

classified in any of the three precedingcategories of financial assets. Subsequentto initial measurement, available for salefinancial assets are measured at fair valuewith unrealized gains or losses being recognizedin other comprehensive incomeand presented in the fair value reservein equity. When an investment is disposedof or is determined to be impaired, thecumulative gain or loss previously recognisedin other comprehensive incomeis reclassified to profit or loss.Subsequent to initial recognition availablefor-salefinancial assets are measuredon the basis of existing market conditionsand management intent to holdon to the investment in the foreseeablefuture. In rare circumstances when theseconditions are no longer appropriate, theCompany may choose to reclassify thesefinancial assets to loans and receivablesor held-to-maturity investments when thisis in accordance with the applicable IFRS.As at 31 December 2012 and 2011,no financial assets have been designatedas available-for-sale financial assets.Amortised cost of financialinstrumentsAmortised cost is computed using theeffective interest method less any impairmentloss and principal repaymentor reduction. The calculation takes intoaccount any premium or discount on acquisitionand includes transaction costsand fees that are an integral part of theeffective rate.Financial liabilitiesInitial recognitionFinancial liabilities within the scope of IAS39 are classified as financial liabilitiesat fair value through profit or loss, loansand borrowings, or as derivatives designatedas hedging instruments in an effectivehedge, as appropriate. The Companydetermines the classification of itsfinancial liabilities at initial recognition.Financial liabilities are recognized initiallyat fair value less directly attributabletransaction costs in case of loansand borrowings.The Company’s financial liabilities includetrade and other payables, bankoverdrafts, loans and borrowings.Subsequent measurementThe measurement of financial liabilitiesdepends on their classification as follows:Financial liabilities at fair valuethrough profit or lossFinancial liabilities at fair value throughprofit or loss includes financial liabilitiesheld for trading and financial liabilitiesdesignated upon initial recognitionas at fair value through profit or loss.Financial liabilities are classified as heldfor trading if they are acquired for thepurpose of sale in the near future. Thiscategory includes derivative financialinstruments entered into by the Companythat do not meet criteria of hedgeaccounting as defined by IAS 39. Gainsor losses arising on liabilities held fortrading are recognised in profit or loss.The Company has not designated anyfinancial liabilities at fair value throughprofit or loss.Loans and borrowings & subordinateddebtSubsequent to initial recognition, interestbearing loans and borrowings aremeasured at amortised cost using theeffective interest rate method.Gains and losses are recognised in thestatement of comprehensive incomewhen the liabilities are derecognisedas well as through the amortisationprocess.Trade and other payablesTrade and other payables are recognizedand measured at amortized cost, beingthe original invoice amount. The Companyaccrues for those expenses thathave not been invoiced at the balancesheet date. Penalty interest chargedon overdue payables is accounted forin trade payables.Fair value of financial instrumentsThe fair value of financial instrumentsthat are actively traded in organised financialmarkets is determined by referenceto quoted market bid prices at theclose of business on the balance sheetdate. For financial instruments wherethere is no active market, fair value is determinedusing valuation techniques.Such techniques may include using recentarm’s length market transactions,reference to the current fair value of anotherinstrument that is substantiallythe same, discounted cash flow analysisor other valuation models.Impairment of financial assetsThe Company assesses at each balancesheet date whether there is anyobjective evidence that a financial assetor a group of financial assets is impaired.A financial asset or a group of financialassets is deemed to be impairedif, and only if, there is objective evidenceof impairment as a result of one or moreevents that has occurred after the initialrecognition of the asset (an incurred‘loss event’) and that loss event hasan impact on the estimated future cashflows of the financial asset or the groupof financial assets that can be reliablyestimated. Evidence of impairment mayinclude indications that the debtorsor a group of debtors is experiencingsignificant financial difficulty, defaultor delinquency in interest or principalpayments, the probability that they33

will enter bankruptcy or other financialreorganisation and where observabledata indicate that there is a measurabledecrease in the estimated futurecash flows, such as changes in arrearsor economic conditions that correlatewith defaults.Classification and derecognition of financialinstrumentsFinancial assets and financial liabilitiespresented in the balance sheet includecash and cash equivalents, trade andother accounts receivable and payableand loans and borrowings. The accountingpolicies on recognition and measurementof these items are disclosedin the respective accounting policiesfound in this Note.Financial instruments (including compoundfinancial instruments) are classifiedas assets, liabilities or equityin accordance with the substanceof the contractual agreement. Interest,dividends and gains and losses relatingto a financial instrument classifiedas a liability are reported as expenseor income as incurred. Distributionsto holders of financial instrumentsclassified as equity are charged directlyto equity. In case of compoundfinancial instruments the liability componentis valued first, with the equitycomponent being determined as a residualvalue. Financial instruments areoffset when the Company has a legallyenforceable right to offset and intendsto settle either on a net basis or to realizethe asset and settle the liabilitysimultaneously.The derecognition of a financial assettakes place when the Company no longercontrols the contractual rights thatcomprise the financial asset, whichis normally the case when the instrumentis sold, or all the cash flows attributableto the instrument are passedthrough to an independent third party.A financial liability is derecognized whenthe obligation under the liability is discharged,cancelled or expires.Derivative financial instruments andhedging activitiesThe Company uses derivative financialinstruments such as forwards, optionsand swaps to hedge its risks relatedto foreign currency fluctuations. Suchderivative financial instruments areinitially recognized at fair value on thedate on which a derivative contractis entered into and are subsequentlyremeasured at fair value. Derivativesare carried as assets when the fair valueis positive and as liabilities when the fairvalue is negative. Any gains or lossesarising from changes in the fair valueof derivatives are taken directly to thestatement of comprehensive incomeas finance income or costs.The fair value of forward currencycontracts is calculated by referenceto current forward exchange rates forcontracts with similar maturity profiles.An embedded derivative is separatedfrom the host contract and accountedfor as a derivative if all of the followingconditions are met:• The economic characteristics andthe risks of the embedded derivativeare not closely related to theeconomic characteristics of the hostcontract.• A separate instrument with the sameterms as the embedded derivativewould meet the definition of a derivative.• A hybrid (combined) instrument is notmeasured at fair value with changesin fair value reported in currentperiod net profit.HedgingHedge accounting recognizes the offsettingeffects of changes in the fairvalues of the hedging instrument andthe hedged item in profit/loss for theperiod. For the purpose of hedge accounting,hedges are classified as:• Fair value hedge,• Cash flow hedgeAt the inception of the hedge the Companyformally designates and documentsthe hedging relationship to whichit wishes to apply hedge accountingand the risk management objective andstrategy for undertaking the hedge. Thedocumentation includes identificationof the hedging instrument, the hedgeditem or transaction, the nature of therisk being hedged and the methodby which the Company will assess thehedging instrument’s effectivenessin offsetting the exposure to changesin the hedged item’s fair value or cashflows attributable to the hedged risk.Such hedge is expected to be highly effectivein achieving offsetting of changesin fair value or cash flows attributableto the hedged risk and is assessedon an ongoing basis to determine thatit has been highly effective throughoutthe financial reporting periods for whichit was designated.Hedges which meet the strict criteriafor hedge accounting are accounted foras follows:Fair value hedgeFair value hedge is a hedge of theCompany’s exposure to changes in fairvalue of a recognized asset or liabilityor an unrecognized firm commitment,or an identified portion of such an asset,liability or firm commitment, that is attributableto a particular risk and couldaffect profit/loss for the period.34

The gain or loss from remeasuring thehedging instrument at fair value (fora derivative hedging instrument) or theforeign currency component of its carryingamount measured in accordancewith IAS 21 (for a non-derivative hedginginstrument) is recognized in profit/loss for the period. The gain or losson the hedged item attributable to thehedged risk adjusts the carrying amountof the hedged item and is recognizedin profit/loss for the period. The samemethod is used when the hedged itemis an available-for-sale financial asset.The adjustment to the carrying amountof a hedged financial instrument forwhich the effective interest methodis used is amortized to profit/loss for theperiod over the remaining term to maturityof the financial instrument. Amortizationmay begin as soon as an adjustmentexists and shall begin no laterthan when the hedged item ceases to beadjusted for changes in fair value attributableto the risk being hedged.When an unrecognized firm commitmentis designated as a hedged item, the subsequentcumulative change in the fairvalue of the firm commitment attributableto the hedged risk is recognizedas an asset or liability with a correspondinggain or loss recognized in profit/lossfor the period. The changes in the fairvalue of the hedging instrument are alsorecognized in profit/loss for the period.The Company discontinues fair valuehedge accounting if the hedging instrumentexpires, the hedging instrumentis sold, terminated or exercised, thehedge no longer meets the criteria forhedge accounting or the Company revokesthe designation.Cash flow hedgeCash flow hedge is a hedge of the Company’sexposure to variability in cashflows that is attributable to a particularrisk associated with a recognized assetor liability or a highly probable forecasttransaction and could affect profit/lossfor the period.The portion of the gain or loss on thehedging instrument that is determinedto be an effective hedge is recognizedin other comprehensive income. Theineffective portion of the gain or losson the hedging instrument is recognizedin profit/loss for the period.If a hedge of a forecast transactionsubsequently results in the recognitionof a financial asset or a financialliability, the associated gains or lossesthat were recognized in other comprehensiveincome are reclassified fromother comprehensive income to profit/loss in the same period or periods duringwhich the asset acquired or liabilityassumed affects profit/loss for the period.If a hedge of a forecast transactionsubsequently results in the recognitionof a non-financial asset or a non-financialliability, or a forecast transactionfor non-financial asset or non-financialliability becomes a firm commitment forwhich fair value hedge accounting is applied,the associated gains and lossesthat were recognized in other comprehensiveincome are transferred to theinitial cost or other carrying amountof the non-financial asset or liability.As at 31 December 2012 and 2011,no financial liabilities have been designatedas derivative financial instruments.Cash and cash equivalentsCash and cash equivalents comprisecash at bank and in hand and shorttermdeposits with an original maturityof three months or less and that aresubject to an insignificant risk of changein value.For the purposes of the cash flowstatement, cash and cash equivalentsconsist of cash and cash equivalentsas defined above, net of outstandingbank overdrafts.Employee benefitsThe Company makes contributionsto the State health, retirement benefitand unemployment schemes at thestatutory rates in force during the year,based on gross salary payments. Thecost of these payments is charged to thestatement of comprehensive incomein the same period as the related salarycost. The Company has no obligationto contribute to these schemes beyondthe statutory rates in force.Also, the Company operates unfundedlong-term defined benefit programmescomprising lump-sum post-employment,jubilee and disability benefits. The costof providing these employee benefitsis assessed separately for each programmeusing the projected unit creditmethod, by which the costs incurredin providing such benefits are chargedto the statement of comprehensive incomeso as to spread the cost over theservice lives of the Company’s employees.The benefit obligation is measuredas the present value of the estimatedfuture cash outflows.Actuarial gains and losses arising fromexperience adjustments and changesin actuarial assumptions are chargedor credited to the statement of comprehensiveincome when incurred. Amendmentsto these long-term defined benefitprogrammes are charged or creditedto the statement of comprehensiveincome over the average remainingservice lives of the related employees.Termination paymentsThe employees of the Company areeligible, immediately upon termination35

due to organizational changes, for redundancypayments pursuant to the Slovaklaw and the terms of the CollectiveAgreement between the Company andits employees. The amount of such a liabilityis recorded as a provision in thebalance sheet when the workforce reductionprogram is defined, announcedand the conditions for its implementationare met.ProvisionsA provision is recognized if the Companyhas a present obligation (legalor constructive) as a result of a pastevent and it is probable (i.e. more likelythan not) that an outflow of resourcesembodying economic benefits willbe required to settle the obligation, anda reliable estimate can be made of theamount of the obligation. Provisionsare reviewed at each balance sheetdate and adjusted to reflect the currentbest estimate. The amount of theprovision is the present value of therisk adjusted expenditures expectedto be required to settle the obligation,determined using the estimated riskfree interest rate as discount rate.Where discounting is used, the carryingamount of the provision increasesin each period to reflect the unwindingof the discount by the passage of time.This increase is recognized as interestexpense.Environmental mattersLiabilities for environmental costs arerecognized when environmental cleanupsare probable and the associatedcosts can be reliably estimated. Generally,the timing of these provisions coincideswith the commitment to a formalplan of action or, if earlier, on divestmentor on closure of inactive sites. Theamount recognized is the best estimateof the expenditure required.Legal claimsLiabilities arising from litigation anddisputes, which are calculated by usingavailable information and assumptions,are recognized when an outflow of resourcesembodying economic benefitsis probable and when such outflows canbe reliably measured.LeasesThe determination of whether an arrangementis, or contains, a leaseis based on the substance of the arrangementand requires an assessmentof whether the fulfilment of thearrangement is dependent on the useof a specific asset or assets and the arrangementconveys a right to use theasset.As LesseeFinance leases, which transfer to theCompany substantially all the risks andbenefits incidental to ownership of theleased item, are capitalised at the inceptionof the lease at the fair valueof the leased property or, if lower, at thepresent value of the minimum lease payments.Lease payments are apportionedbetween the finance charges and reductionof the lease liability so as to achievea constant rate of interest on the remainingbalance of the liability. Finance chargesare charged directly against income.Capitalised leased assets are depreciatedover the shorter of the estimateduseful life of the asset and the leaseterm.Operating lease payments are recognisedas an expense in the statementof comprehensive income on a straightlinebasis over the lease term.As LessorLeases where the Company does nottransfer substantially all the risks andbenefits of ownership of the asset areclassified as operating leases. Rentalincome is recognised on a straight-linebasis over the lease term.Revenue recognitionRevenue is recognised to the extentthat it is probable that the economicbenefits will flow to the Company andthe revenue can be reliably measured.Revenue is measured at the fair valueof the consideration received, excludingdiscounts, rebates and sales taxes.Revenue from transport and related servicesand from repair and maintenanceand other such services is recognized inthe period in which the services are provided,net of discounts and deductions.Borrowing costsBorrowing costs directly attributableto the acquisition, construction or productionof a qualifying asset are recognizedas part of the cost of a given asset.Other related expenses are recognizedas an expense in the period in whichthey are incurred.Income taxCurrent income taxCurrent income tax assets and liabilitiesfor the current and prior periodsare measured at the amount expectedto be recovered from or paid to the taxationauthorities. The tax rates and taxlaws used to compute the amount arethose that are enacted or substantivelyenacted at the balance sheet date.Deferred income taxDeferred income tax is provided usingthe liability method on temporarydifferences at the balance sheet date36

etween the tax bases of assets andliabilities and their carrying amounts forfinancial reporting purposes.Deferred tax liabilities are recognisedfor all taxable temporary differences.Deferred income tax assets are recognisedfor all deductible temporary differences,carry-forward of unused taxcredits and unused tax losses to theextent that it is probable that taxableprofit will be available against which thedeductible temporary differences andthe carry-forward of unused tax creditsand unused tax losses can be utilised.The carrying amount of deferred incometax assets is reviewed at each balancesheet date and reduced to the extentthat it is no longer probable that sufficienttaxable profit will be available to allowall or part of the deferred incometax asset to be utilised. Unrecogniseddeferred income tax assets are reassessedat each balance sheet date andare recognised to the extent that it hasbecome probable that future taxableprofit will allow the deferred tax assetto be recovered.Deferred income tax assets and liabilitiesare measured at the tax rates thatare expected to apply to the year whenthe asset is realised or the liability is settled,based on tax rates (and tax laws)that have been enacted or substantivelyenacted at the balance sheet date.Deferred income tax relating to itemsrecognised directly in equity is recogniseddirectly in equity and not in income.37

3. TRANSPORTATION AND RELATED RevenuesIn thousands of EUR 31 December 2012 31 December 2011Inland transport:• Transport of goods 32,001 34,561• Wagon deposition 7,379 11,101• Haulage fees 1,127 788International transport:40,507 46,450• Import 104,216 118,709• Export 113,045 113,670• Transit 16,372 20,715Other transport related revenues:233,633 253,095• Usage of wagons under RIV, PGV and AVV regimes 6,163 7,759• Wagon rentals 5,052 6,535• Cross-border services 3,737 3,892• Other 2,965 3,16317,917 21,349292,057 320,894Transportation and related revenues include amounts invoiced to U.S. Steel Košice of EUR 67,201 thousand (2011: EUR73,233 thousand) and to Budamar Logistics of EUR 66,383 thousand (2011: EUR 69,682 thousand).4. Other revenuesIn thousands of EUR 31 December 2012 31 December 2011Repairs and maintenance 8,573 32,468Operational performance 5,911 9,527Property rentals 4,001 3,978Other 4,627 4,16223,112 50,135Other revenues included revenues charged to ZSSK of EUR 12,583 thousand (2011: EUR 35,431 thousand) for repairand maintenance, operational performance, property rental and other support services.38

5. CONSUMABLES AND SERVICESIn thousands of EUR 31 December 2012 31 December 2011Network fees (44,229) (53,393)Traction electricity (33,338) (35,336)Traction crude oil (18,415) (18,709)Materials (14,596) (25,227)Wagon rentals (13,617) (13,816)IT services and telecommunication charges (9,284) (8,622)Foreign segments (8,589) -Other energy costs (5,535) (8,064)Third party transhipment services (5,368) (4,957)Cross-border services (4,161) (4,342)Rentals (3,575) (3,663)Repair and maintenance (3,368) (2,110)Security services (1,600) (1,824)Travelling and entertainment (1,289) (1,404)Cleaning of cars, property, waste disposal (684) (1,013)Advisory and consultancy fees (558) (2,495)Medical care (484) (450)Training (194) (459)Other (2,469) (2,885)(171,353) (188,769)Consumables and services include amounts charged by ŽSR of EUR 89,950 thousand (2011: EUR 96,677 thousand),primarily relating to the usage of ŽSR’s network (the Company has a one year contract with ŽSR which specifies plannedkilometres and charge rates for different types of transport) and also to the purchase of traction energy (refer to Note 26).39

6. STAFF COSTSIn thousands of EUR 31 December 2012 31 December 2011Wages and salaries (65,093) (74,922)Social security costs (26,967) (33,687)Employee benefits (Note 21; 25) 1,154 (1,918)Termination payments (Note 22) (3,947) 6,138(94,853) (104,389)Employee numbers at 31 December 2012 were 6,822 (2011: 8,054), thereof six were members of management (as membersof the Board of Directors or directors of individual departments). Average employee numbers at 31 December 2012were 7,015 (2011: 8,701). The average salary in 2012 amounted to EUR 796 (2011: EUR 733).7. Other operating revenues (expenses), netIn thousands of EUR 31 December 2012 31 December 2011Provision for environmental matters (Note 22; 25) 9,849 (21)Gains on sale of property, plant, equipment and inventories(Note 25; 26) 5,730 1,251Provision for legal cases and onerous contracts (Note 22) (2,575) 2,746Allowance for doubtful debts (666) (404)Insurance of assets (2,553) (2,574)Other (845) (2,116)8,940 (1,118)8. INTEREST EXPENSEIn thousands of EUR 31 December 2012 31 December 2011Interest on loans and borrowings (2,661) (4,781)Interest on subordinated debt (7,158) (7,841)Interest charges on finance lease liabilities (3,607) (3,537)Unwinding of discount on provisions and employee benefits (131) (912)(13,557) (17,071)40

9. OTHER FINANCE REVENUES (COSTS), NETIn thousands of EUR 31 December 2012 31 December 2011Foreign exchange losses, net (21) (4)Other revenues (costs) (195) (166)(216) (170)10. OTHER NON-CURRENT ASSETSIn thousands of EUR 31 December 2012 31 December 2011Prepaid expenses 218 615218 61511. INCOME TAXThe reported income tax represents a withholding tax paid abroad in the amount of EUR 45 thousand (2011: EUR 18 thousand).A reconciliation between the reported income tax expense and the theoretical amount that would arise using the standardrates is as follows:In thousands of EUR 31 December 2012 31 December 2011Loss before tax (23,947) (331)Tax charge at statutory tax rate of 19% (4,550) (66)Tax paid abroad (45) (18)Forfeit tax loss carry forwards 5,412 2,269Change in valuation allowance 6,869 (2,211)Non-deductible expenses (7,731) 9Total income tax (45) (18)Deferred tax assets and liabilities at 31 December related to the following (for year ended 31 December 2012 was usedincome tax rate 23% applicable in future accounting period):41

In thousands of EUR 31 December 2012 31 December 2011Deferred tax assetsTax loss carried forward 61,885 54,379Provision for environmental matters 5,487 6,515Provision for employee benefits 3,432 3,096Allowance for trade and other receivables 1,055 1,080Allowance for inventories 313 370Provision for legal cases and onerous contracts 2,050 1,207Termination payments 908 142Other 1,356 2,37876,486 69,185Deferred tax liabilitiesAccelerated depreciation for tax purposes (24,179) (23,628)Other (6) (125)(23,185) (23,753)Valuation allowance (52,301) (45,432)Net deferred tax assets (liabilities) - -A valuation allowance of EUR 52,301thousand (2011: EUR 45,432 thousand)has been recognised for temporary deductibledifferences due to uncertaintyas to the realization of tax benefits in futureyears. The Company will continueto assess the valuation allowance and,to the extent it is determined that suchallowance is no longer required, the taxbenefits of the remaining deferred taxassets will be recognised at that time.The Company’s income tax lossescarried forward arose in the fiscalyears 2007-2012 and amount to EUR269,067 thousand. Under Slovaktax legislation a Company is entitledto carry forward tax losses incurredprior to 31 December 2009 for fiveyears and tax losses incurred thereafterfor seven years. The carry forwardsexpire as follows:In thousands of EUR 31 December 2012 31 December 20112012 - 28,4852013 50,823 50,8232014 140,460 140,4602017 66,533 66,5332018 - -2019 11,251 -Total tax loss carry forwards 269,067 286,30142

12. Intangible assetsIn thousands of EURSoftwareAssets underdevelopmentAcquisition costAt 1 January 2012 27,218 491 27,709Additions 1,138 1,138 2,611Disposals - - -Transfers 1,155 (1,155) -At 31 December 2012 28,373 474 28,847Accumulated amortisationAt 1 January 2012 (10,752) (142) (10,894)Charge for the period (3,086) - (3,086)Disposals -At 31 December 2012 (13,838) (142) (13,980)Net book value at 31 December 2012 14,535 332 14,867TotalIn thousands of EURSoftwareAssets underdevelopmentTotalAcquisition costAt 1 January 2011 25,002 1,181 26,183Additions - 2,611 2,611Disposals (1,085) - (1,085)Transfers 3,301 (3,301) -At 31 December 2011 27,218 491 27,709Accumulated amortisationAt 1 January 2011 (8,821) (142) (8,963)Charge for the period (3,007) - (3,007)Disposals 1,076 - 1,076At 31 December 2011 (10,752) (142) (10,894)Net book value at 31 December 2011 16,466 349 16,81543

13. PROPERTY, PLANT AND EQUIPMENTIn thousands of EURLand andbuildingsMachines,equipment,other assetsAssets underconstructionAcquisition costAt 1 January 2012 92,422 906,894 3,314 1,002,630Additions - - 29,952 29,952Disposals (94) (34,996) (6) (35,096)Transfers – Assets held for sale 223 - - 223Transfers 4 28,788 (28,792) -At 31 December 2012 92,555 900,686 4,468 997,709Accumulated depreciationAt 1 January 2012 (27,182) (333,531) (538) (361,251)Additions (1,864) (61,816) - (63,680)Disposals 61 34,737 - 34,798Transfers – Assets held for sale 143 - - 143Impairment loss (72) (1,935) 4 (2,003)At 31 December 2012 (28,914) (362,545) (534) (391,993)Net book value at 31 December 2012 63,641 538,141 3,934 605,716In thousands of EURLand andbuildingsMachines,equipment,other assetsAssets underconstructionTotalAcquisition costAt 1 January 2011 135,583 864,647 11,849 1,012,080Additions - - 59,906 59,906Disposals (44) (14,550) - (14,594)Transfers – Assets held for sale (46,985) (7,131) (645) (54,761)Transfers 3,868 63,928 (67,796) -At 31 December 2011 92,422 906,894 3,314 1,002,630Accumulated depreciationAt 1 January 2011 (36,680) (290,745) (538) (327,963)Charge for the period (2,929) (62,153) - (65,082)Disposals 14 13,979 - 13,993Transfers – Assets held for sale 5,580 3,822 - 9,401Impairment loss 6,834 1,566 - 8,400At 31 December 2011 (27,182) (333,531) (538) (361,250)Net book value at 31 December 2011 65,240 573,363 2,776 641,380Total44

Land and buildings consists of hallsused in the repair of locomotives andwagons, depots, stores, workshopsand administrative building. Machines,equipment and other assets include locomotivesand wagons, cranes, trucks,cars and other vehicles, tools and equipmentused in repair and maintenance,boilers and other heating equipment andoffice equipment, including computers,printers and other IT equipment.The Company recorded impairmentlosses on assets individually assessedas damaged or not capable for furtheruse. The impairment losses were recordedto reflect the amount of actualdamage.The impairment test required by IAS36 was performed by managementof the Company at the year end.The recoverable amount of an assetis the higher of its fair value less coststo sell and its value in use. The fair valueless cost to sell of an asset was determinedas its selling price adjusted forcosts associated with the sale of theasset. The value in use of the asset wasdetermined by discounted cash flowsmethod. The Company as a whole is consideredas a single cash generating unit.No impairment losses have been identifiedbased on the impairment test whencomparing the recoverable amountsof the assets and carrying values. Therelevant cash flows were estimatedbased on the 2013 business plan updatedto the latest available informationat the balance sheet date and on forecastsof future periods based on best estimatesusing all available information.The future cash flows were estimatedfor the next 15 years which is an averageremaining useful life of the cashgenerating unit‘s assets. The cash flowsinclude unavoidable investment expendituresrequired to maintain the abilityof the cash generating unit to generaterevenues and proceeds from scrap valueat the end of the useful life. Discountrate of 8.71% used in the calculationwas determined based on interest ratesfor incremental financing of fixed assetspurchases by the Company as at the dayof preparation of a financial statementsand was adjusted for factors of time,risk and liquidity.As a result of the procedures describedabove, the Company has increasedan impairment loss by EUR 2,003 thousanddue to a lower usage of assets anda decrease of cash inflows mainly froma transport revenues’ decrease in 2012.Property, plant and equipment includelocomotives acquired by means of financelease with a total acquisitionvalue of EUR 21,217 thousand (netbook value EUR 18,463 thousand),wagons with an aggregate acquisitionvalue of EUR 133,589 thousand (netbook value EUR 113,252 thousand)and computing technology with a totalacquisition value of EUR 2,772 thousand(net book value EUR 1,197 thousand).Property, plant and equipment in theownership of the Company with a totalacquisition value of EUR 17,676 thousand(EUR 17,991 thousand at 31 December2011) and with a net book valueof EUR 14,473 thousand (EUR 14,874thousand at 31 December 2011) is registeredby the State as protected forcultural purposes.Property, plant, equipment and inventoriesare insured against (i) naturaldisaster, (ii) theft and vandalism and(iii) damage of machinery (all risk cover).Risks (i) and (ii) are covered to a maximumof 247,778 EUR thousand (EUR300,841 thousand in 2010) and (iii)to a maximum of EUR 559,993 thousand(EUR 560,145 thousand in 2011).In addition, motor vehicles have thirdparty and accident insurance cover, thecost of which is immaterial.The Company has reclassified certainassets as held for sale (Note 25).45

14. InvestMENT in joint ventureThe Company has a 40% share in BULKTRANSSHIPMENT SLOVAKIA, a. s.(formerly DURBAN a.s.) which is involvedin the transhipment of iron ore in Ciernanad Tisou in the east of Slovakia. Basedon contractual arrangements with theother shareholder, the managementof the Company decided to considerthis investment as a joint venture.Details of the Company’s joint ventures at 31 December 2012 and 2011 are as follows:EquityProfit (loss)In thousands of EUR31 December201231 December201131 December201231 December2011BULK TRANSSHIPMENT SLOVAKIA, a. s. 9,247 7,710 1,599 1,14515. InventorIESIn thousands of EUR At cost 2012At lower of costor net realizablevalue 2012 At cost 2011At lower of costor net realizablevalue 2011Electrical materials 3,738 3,170 6,082 5,329Machine and metal-working materials 3,809 3,066 5,849 4,832Diesel fuel 1,362 1,362 2,164 2,112Chemicals and rubber 629 601 488 488Protective tools 281 281 330 279Other 175 154 244 172Total 9,994 8,634 15,157 13,21146

16. TRADE AND OTHER RECEIVABLESIn thousands of EUR 31 December 2012 31 December 2011Domestic trade receivables 27,134 35,813Foreign trade receivables 12,465 16,486VAT receivables 4,149 3,812Other receivables 4,283 5,066Allowance for impaired trade and other receivables (4,587) (5,682)43,444 55,495At 31 December 2012 overdue receivables amounted to EUR 9,375 thousand (EUR 10,246 thousand at 31 December 2011).Trade receivables are non-interest bearing and are generally due within 30-90 days.For details of related party receivables, refer to Note 26.As at 31 December, the ageing analysis of trade receivables is as follows:Past due but not impairedYearTotalNeither past duenor impaired< 90days90 – 180days180 – 270days270 – 365days> 365days2012 43,444 41,681 1,366 8 19 35 3352011 55,495 53,017 1,456 214 210 221 37747

17. cash and cash equivalentsFor the purposes of the cash flow statement, cash and cash equivalents comprise the following:In thousands of EUR 31 December 2012 31 December 2011Cash at banks and on hand and cash equivalents 61 71Bank overdrafts (95,041) (64,535)(94,980) (64,464)Cash at banks earns interest at floating rates based on daily bank deposit rates.Bank overdrafts as of 31 December are as follows:31 December 2012 31 December 2011In thousands of EUR Overdraft limit Drawn down Overdraft limit Drawn downTatra banka, a.s. 30,870 24,994 29,875 21,430Všeobecná úverová banka, a.s 23,500 21,541 23,500 16,667UniCredit Bank Slovakia a.s. 17,593 15,046 17,593 11,058Volksbank Slovakia, a.s. 20,000 12,219 - -Citibank Europe plc. 13,278 11,276 13,278 7,614Slovenská sporiteľňa, a.s. 20,000 9,963 10,000 1,750Československá obchodná banka, a.s. 5,000 - 8,300 6,016Credit Agricole CIB S.A. - - 16,597 -130,241 95,041 119,142 64,53548

18. SHAREHOLDER’S EQUITYShare capitalShare capital represents the State’s investmentin the Company, held throughMTCRD, made through the contributionof certain assets and liabilities of theCompany’s predecessor, ŽS, and comprises121 registered ordinary shares,each with a nominal value of EUR3,319,391.8874. All of these sharesare issued and fully paid.Legal reserve fundOn the Company’s incorporation, in accordancewith Slovak legislation, a legalreserve fund was established at 10%of the Company’s registered capital,again through an in-kind contribution.Slovak legislation requires that the legalreserve fund be increased by amountsat least equal to 10% of annual net profitup to an amount equal to 20% of theCompany’s registered capital. Underthe Company’s Articles of Association,the legal reserve fund is not availablefor distribution and can only be usedto cover losses or increase registeredcapital.Based on the decision of the sole shareholderof 9 November 2010, the statutoryreserve fund was utilized to coverthe losses of the Company.Other fundsOther funds represent the differencebetween the value of the assets andliabilities contributed by the State on theCompany’s incorporation and throughan additional capital contribution madeon 2 November 2005 and that of theCompany’s registered capital and legalreserve fund, adjusted by an amountof EUR 4,216 thousand to restatean error in the initial valuation of theassets contributed by the State identifiedin 2006.During 2008 the Company receivedan additional capital contribution of EUR12,149 thousand from MTCRD, this beinga previously unpaid part of the initialequity contribution made on the Company’sincorporation. In addition, theCompany was awarded penalty interestof EUR 8,830 thousand to compensatefor the late payment of this contribution.Settlement of loss from previous accountingperiodThe settlement of the 2011 statutoryresult was approved by the Company’sGeneral Meeting on 31 July 2012 andwas booked to accumulated losses.19. SUBORDINATED DEBTSubordinated debt of EUR 165,970thousand represents funding from theMinistry of Finance, approved by theGovernment on 4 March 2009 andreceived on 6 April 2009, to supportthe Company’s operations. Under theterms of the original agreement, the firstprincipal repayment was due in February2011 and the loan has to be repaidin full by February 2019.Under Supplement No. 6 to the subordinateddebt agreement dated 22 August2012 the first repayment was dueand paid in August 2012 and the totalbalance is to be paid by August 2020.The fair value of the subordinated debtis EUR 156,220 thousand as at 31 December2012.The loan bears interest at the rate of 6MEURIBOR + interest margin of 3.2%.Finančná výpomoc je zaťažená úrokovousadzbou 6M EURIBOR + marža 3,20% p.a.49

20. Interest-bearing loans and borRowingsIn thousands of EUR Maturity date 31 December 2012 31 December 2011Long-term loansSecuredExpress Slovakia 21 February 2012 - 1,497Total - 1,497Short-term portion of loans - (1,497)Long-term portion of loans - -Short-term loansSecuredCredit Agricole CIB S.A. 31 December 2012 - 16,597HSBC 31 August 2012 - 20,000Československá obchodná banka, a.s. 28 March 2013 4,700 -UnsecuredČeskoslovenská obchodná banka, a.s. 30 September 2012 - 4,360Short-term loans 4,700 40,957Short-term portion of loans (see above) - 1,497Overdrafts (Note 17) 95,041 64,535Total 99,741 106,989All loans are denominated in EUR, exceptas otherwise noted in the tableabove.All loans presented in the table above,except for the Express Slovakia loan,are secured by promissory notes witha value of EUR 82,381 thousand (EUR87,337 thousand at 31 December2011), and with a nominal value of EUR121,666 thousand (EUR 139,830 thousandas of 31 December 2011).Under the terms of a loan agreementthe Company is required to meet a financialdebt ratio covenant. The covenantis derived from the Company’smanagement accounts. At 31 December2012 the Company did not comply withthe covenant for a loan in the amountof EUR 21,542 thousand (EUR 21,027thousand as of 31 December 2011).The fair value of interest-bearing loansand borrowings amounts to EUR 99,741thousand (EUR 106,989 thousandat 31 December 2011).All interest-bearing loans and borrowingsbear interest at floating rates whichrange from 1.991 to 3.311% (2.933%to 5.096% in 2011).50

21. EMPLOYee BENEFITsIn thousands of EURRetirementbenefitsJubileepaymentsDisabilitybenefitsAt 1 January 2012 10,633 3,505 184 14,322Current service cost 604 193 3 800Interest expense 459 151 9 619Actuarial gains and losses 226 (91) (46) 89Utilization of benefits (423) (381) (36) (838)Transfers - - - -Past service cost (87) 6 10 (72)At 31 December 2012 11,414 3,382 123 14,919Current 31 December 2012 274 371 31 676Non-current 31 December 2012 11,140 3,011 92 14,243At 31 December 2012 11,414 3,382 123 14,919In thousands of EURRetirementbenefitsJubileepaymentsDisabilitybenefitsAt 1 January 2011 10,562 3,578 512 14,652Current service cost 414 129 - 543Interest expense 528 179 26 733Actuarial gains and losses 1,105 514 (244) 1,375Utilization of benefits (517) (431) (61) (1,009)Transfers (1,458) (464) (49) (1,971)At 31 December 2011 10,633 3,505 184 14,322Current 31 December 2011 266 415 51 732Non-current 31 December 2011 10,367 3,090 133 13,590At 31 December 2011 10,633 3,505 184 14,322The principal actuarial assumptions used were as follows: 2012 2011Discount rate (% p.a.) 3.8 5.0Future salary increases (%) 0 2Mortality probability (male) (%) 0.04 – 2.43 0.04 – 2.43Mortality probability (female) (%) 0.02 – 0.91 0.02 – 0.91At 31 December 2011 the Company presented certain of these liabilities as liabilities directly associated with assets heldfor sale (Note 25).TotalTotal51

22. PROVISIONSIn thousands of EUROnerouscontracts Legal Terminations TotalAt 1 January 2012 24,450 - 6,352 745 31,547Additions 25 - 2,695 3,947 6,667Unwinding of discount 1,214 - - - 1,214Reversals (1,231) - (120) - (1,351)Utilization (600) - (15) (745) (1,360)Transfers - - - - -At 31 December 2012 23,858 - 8,912 3,947 36,717Current 31 December 2012 835 - - 3,947 4,782Non-current 31 December 2012 23,023 - 8,912 - 31,935At 31 December 2012 23,858 - 8,912 3,947 36,717In thousands of EUREnvironmentalEnvironmentalOnerouscontracts Legal Terminations TotalAt 1 January 2011 34,700 1,901 15,869 11,319 63,789Additions 40 - 2,990 745 3,775Unwinding of discount 1,703 - - - 1,703Reversals (1,542) (1,901) (5,913) (5,715) (15,071)Utilization (610) - (6,594) (5,604) (12,807)Transfers (9,841) - - - (9,841)At 31 December 2011 24,450 - 6,352 745 31,547Current 31 December 2011 616 - - 745 1,361Non-current 31 December 2011 23,834 - 6,352 - 30,186At 31 December 2011 24,450 - 6,352 745 31,547Environmental mattersIn 2012, the Company updated itsanalysis of potential breaches of environmentalregulations at its varioussites, with the support of an environmentspecialist, Centrum environmentalnychsluzieb, s.r.o. (previously operating underthe name, Life & Waste, s.r.o.). As a resultof this analysis, and based on thefindings of Centrum environmentalnychsluzieb, s.r.o., the Company has estimatedthat costs of EUR 23,858 thousand(EUR 34,290 thousand at 31 December2011 – including liabilities of EUR9,841 thousand classified as directlyassociated with assets held for sale)are required to remedy the significantenvironmental issues relating to water,oil and fuel management identified inthe past.Expenditures will be incurred through2013 and 2014. A discount rate of 3.8%p.a. was used in the calculation.Legal claimsProvisions for legal claims relateto a number of claims, the most significantbeing cases with REFIN B.A., Ltd.in the amount of EUR 5,898 thousandand with I4NEXT, Ltd. in the amountof EUR 2,471 thousand.52

23. trade and other PAYABLES, And Other non-current liabilitiesIn thousands of EUR 31 December 2012 31 December 2011Domestic trade payables 142,450 178,529Foreign trade payables 6,206 6,653Payables due to employees 6,041 6,746Payables due to social institutions 3,347 4,006Other payables 6,084 14,478164,128 210,412At 31 December 2012 overdue trade payables amounted to EUR 4,071 thousand (EUR 20,159 thousand at 31 December2011). For details of related party payables, refer to Note 26.The social fund payable is included in other non-current liabilities. Movements in the social fund during the period are shownin the table below:In thousands of EUR 31 December 2012 31 December 2011At 1 January 134 126Additions 624 710Utilization (597) (702)At 31 December 162 13453

24. COMMITMENTS AND CONTINGENCIESFinance lease commitmentsAt 31 December 2012 the Companyhas finance lease commitments relatingto the acquisition of 1,354 wagons,12 powered vehicles and hardwareequipment (1,274 wagons and 8 poweredvehicles and hardware equipmentat 31 December 2011). All leases areon a fixed repayment basis with floatinginterest rates derived from EURIBOR,except for leasing from AAE. Futureminimum lease payments under financeleases, together with the present valueof net minimum lease payments areas follows:In thousands of EUR 31 December 2012 31 December 2011Minimumlease paymentsPresent valueof paymentsMinimumlease paymentsPresent valueof paymentsWithin one year 18,856 16,333 17,996 14,602After one year but not more than five years 66,693 61,292 69,361 62,143More than five years 9,422 9,230 13,961 13,242Total minimum lease payments 94,971 86,855 101,318 89,987Less: future finance charges (8,116) - (11,331) -Present value of minimum lease payments 86,855 - 89,987 -Investing commitmentsThe Company’s investment expenditure for the period from 1 January 2013 to 31 December 2013(1 January 2012 to 31 December 2012) is as follows:In thousands of EUR 31 December 2012 31 December 2011Land and buildings 46 585Machines, equipment and other assets 437 23,587Intangible assets 73 -556 24,172Expenditures of EUR 556 thousand(EUR 24,172 thousand at 31 December2011) are committed under contractualarrangements.Contingent liabilitiesČD CARGO, a.s. filed a lawsuit againstthe Company claiming an amountof EUR 1,475 thousand (including interest)in respect of unpaid VAT relatedto the Company’s usage of their wagonsfor international transportation duringthe period from 24 May 2007 to 3 May2008. A payment order for the amountclaimed was issued on 14 May 2009by the District Court Bratislava II anddelivered to the Company on 30 June2009. The Company appealed this paymentorder in the period stipulated bylaw and the court rescinded the order.Under Slovak legislation, trade practicesof neighbouring countries and internationalagreements, the usage of wagonsfor international transportation is notdeemed to be a rental arrangementand is, therefore, exempt from VAT.Consequently, supported by their legaladvisors, management has concludedthat the probability of ČD CARGO, a.s.succeeding in this legal action againstthe Company is remote and thereforeno provision has been recorded in thesefinancial statements.54

25. ASSETS CLASSIFIED AS HELD FOR SALE AND LIABILITIES DIRECTLY ASSOCIATEDWITH ASSETS HELD FOR SALEIn thousands of EURLand andbuildingsMachines,equipment,other assetsAssets underconstructionTotalAt 1 January 2012 41,405 3,309 645 45,359Disposals (37,553) (3,309) (645) (41,507)Transfers (223) (223)At 31 December 2012 3,629 - - 3,629In thousands of EUR Employee benefits Provisions TotalAt 1 January 2012 9,841 1,971 11,812Disposals (9,841) (1,950) (11,791)Utilization - (21) (21)At 31 December 2012 - - -In thousands of EURLand andbuildingsMachines,equipment,other assetsAssets underconstructionAssets held for sale as at 31 December2011 41,405 3,309 645 45,360TotalIn thousands of EUREmployeebenefits Provisions TotalLiabilities directly associated with assetsheld for sale as at 31 December 2011 9,841 1,971 11,812Assets held for sale as at 31 December2011 were sold for EUR 54,524 thousandto a related party on 1 February2012. Assets held for sale were representedby land, buildings, machinery,equipment and assets under construction.Liabilities associated with assetsheld for sale represented a provision forsite restoration in respect of contaminatedland and for employee benefits.Assets held for sale as at 31 December2012 included land completingof the sale of the assets from 2012.The land was sold to a related party forEUR 4,299 thousand in February 2013.55

26. RELATED PARTY DISCLOSURESRelated parties of the Company comprise all companies under common ownership (meaning under the control of the State),the Company’s joint venture and the Board of Directors.The following tables provide the total amount of transactions which have been entered into with related parties for theyears ended 31 December 2012 and 2011:In thousands of EUR 31 December 2012Related partySalesto relatedpartiesPurchasesfrom relatedpartiesAmountsowed by relatedpartiesAmountsowed to relatedpartiesŽSR 1,573 89,950 450 109,603ZSSK 71,462 5,508 2,445 846Ministerstvo financií SR - 7,158 - 156,220Slovenský plynárenský priemysel - 410 - (1)BTS (joint venture) 927 5,743 197 1,492Other related parties 464 971 19 8In thousands of EUR 31 December 2011Related partySalesto relatedpartiesPurchasesfrom relatedpartiesAmountsowed by relatedpartiesAmountsowed to relatedpartiesŽSR 1,720 96,677 1,002 113,905ZSSK 57,450 1,049 12,206 278Ministerstvo financií SR - 7,841 - 165,970Slovenský plynárenský priemysel - 2,872 - 95BTS (joint venture) 278 5,374 86 1,314Other related parties 80 739 3 7156

The Company’s major contractual relationshipswith ŽSR and ZSSK are forfixed one year periods and are subjectto an annual renewal process.Purchases from ŽSR include primarilynetwork fees and traction electricity.Sales to ŽSR comprise transport services,while sales to ZSSK include gainson sale of property, plant, equipment,the repair of passenger wagons andtrack vehicles and the sale of diesel oil.Statutory and supervisory bodiesMembers of the Company’s statutoryand supervisory bodies as registeredin the Commercial Register at the DistrictCourt Bratislava I at 31 December2011 are as follows:Board of Directors:Ing. Vladimír Ľupták, chairman(since 26 April 2012)Ing. Jaroslav Daniška(since 26 April 2012)Ing. Peter Fejfar(since 26 April 2012)Ing. Pavol Ďuriník, PhD., chairman(to 25 April 2012)Ing. Mgr. Martin Štochmaľ,PhD.(to 25 April 2012)Ing. Jozef Virba(to 25 April 2012)Supervisory Board:Ing. Martin Čatloš, chairman(since 11 September 2012)Ing. Radovan Majerský, PhD.(since 11 September 2012)Bc. Anton Andel(since 2 February 2010)Ján Baláž(since 2 February 2010)Ing. Radovan Majerský, PhD.(since 11 September 2012)Ing. Pavol Gábor(since 11 September 2012)Ing. Štefan Hlinka(since 11 September 2012)Ing. Karol Jasenovský, chairman(to 10 September 2012)JUDr. Ivo Nesrovnal(to 10 September 2012)Michal Bróska(to 10 September 2012)Ing. Ľudovít Kulcsár(to 10 September 2012)Emoluments of the members of theBoard of Directors and SupervisoryBoardThe Board of Directors’ total remunerationapproximated EUR 25 thousand(EUR 28 thousand in 2011). The totalremuneration of members of the SupervisoryBoard amounted to EUR 22 thousand(EUR 28 thousand in 2011).Loans grantedNo loans have been granted to key managementand members of the Boardof Directors and Supervisory Board.57

In thousands of EUR 31 December 2012 31 December 2011Long-term debt, net of current portion (excluding subordinateddebt and finance lease obligations)- -Short-term debt, including current portion of long-term debt(excluding finance lease obligations)99,741 106,989Debt 99,741 106,989Equity 119,369 143,315Debt to equity ratio (%) 84% 75%28. EVENTS AFTER THE BALANCED SHEET DATENo events occurred subsequent to 31 December 2011 that might have a material effect on the fair presentation of thematters disclosed in these financial statements. The Company sold land classified as held for sale to a related partyin February 2013.Approved by Ing. Vladimír Ľupták and Ing. Peter Fejfar on behalf of the Board of Directors on 16 April 2013.60

Independent auditor’s report and consolidated financial statements preparedin accordance with International financial reporting standards as adoptedby the European UnionYear ended 31 December 201261

62APPENDIX TO THE AUDITOR´S REPORT

Consolidated statement of comprehensiveincome for the year ended 31 December 2012In thousands of EUR Note 31 December 2012 31 December 2011RevenuesTransportation and related revenues 3 292,057 320,894Other revenues 4 23,112 50,135315,169 371,029Costs and expensesConsumables and services 5 (171,353) (188,769)Staff costs 6 (94,853) (104,389)Depreciation, amortisation and impairment of property,plant and equipment and intangible assets12, 13(68,748) (59,846)Other operating revenues (expenses), net 7 8,940 (1,118)(326,014) (354,122)Finance costsInterest expense 8 (13,557) (17,071)Other finance revenues (costs), net 9 (216) (170)Interest income 716 21Share of the profit of the joint venture 14 615 428(12,442) (16,792)Income tax 11 (45) (18)Loss for the period (23,332) 96Other comprehensive income for the period - -Total comprehensive income for the period (23,332) 96The accounting policies and notes form an integral part of the financial statements.Approved by Ing. Vladimír Ľupták and Ing. Peter Fejfar on behalf of the Board of Directors on 16 April 2013.64

Consolidated statement of financial positionas at 31 December 2012In thousands of EUR Note 31 December 2012 31 December 2011ASSETSNon-current assetsProperty, plant and equipment 13 605,716 641,380Intangible assets 12 14,867 16,815Investment in joint venture 14 3,699 3,084Other non-current assets 10 218 615624,500 661,894Current assetsInventories 15 8,634 13,211Trade and other receivables 16 43,444 55,495Cash and cash equivalents 17 61 7152,139 68,777Assets held for sale 25 3,629 45,36055,768 114,137TOTAL ASSETS 680,268 776,031EQUITY AND LIABILITIESShareholder’s equityShare capital 18 401,646 401,646Other funds 18 1,228 1,228Accumulated losses 18 (281,348) (258,016)Total equity 121,526 144,858Non-current liabilitiesSubordinated debt 19 136,720 146,470Employee benefits 21 14,243 13,590Provisions 22 31,935 30,186Trade and other payables 23 104,466 56,092Finance lease liabilities 24 70,522 75,385Other non-current liabilities 23 162 134358,048 321,857Current liabilitiesSubordinated debt 19 19,500 19,500Interest-bearing loans and borrowings 20 99,741 106,989Employee benefits 21 676 732Provisions 22 4,782 1,361Trade and other payables 23 59,662 154,320Finance lease liabilities 24 16,333 14,602200,694 297,504Liabilities directly associated with assets classified as held for sale 25 - 11,812Total liabilities 558,742 631,173TOTAL EQUITY AND LIABILITIES 680,268 776,031The accounting policies and notes form an integral part of the financial statements.Approved by Ing. Vladimír Ľupták and Ing. Peter Fejfar on behalf of the Board of Directors on 16 April 2013.65

Consolidated statement of changes in equityfor the year ended 31 December 2012In thousands of EURSharecapitalLegalreservefundOtherfundsAccumulatedlossesAt 1 January 2011 401,646 - 1,228 (258,113) 144,761Loss for the period - - - 96 96Other comprehensive income - - - - -Total comprehensive income - - - 96 96At 31 December 2011 401,646 - 1,228 (258,016) 144,858Loss for the period - - - (23,332) (23,332)Other comprehensive income - - - - -Total comprehensive income - - - (23,332) (23,332)At 31 December 2012 401,646 - 1,228 (281,348) 121,526The accounting policies and notes form an integral part of the financial statements.Approved by Ing. Vladimír Ľupták and Ing. Peter Fejfar on behalf of the Board of Directors on 16 April 2013.Total66

Consolidated statement of cash flowsfor the year ended 31 December 2012In thousands of EUR Note 31 December 2012 31 December 2011Operating activitiesLoss for the period (23,332) 96Adjustments for:Non-cash items• Depreciation, amortisation and impairment of property, plantand equipment and intangible assets 12, 13 68,748 59,689• Loss (gain) on sale of property, plant and equipment 7 (4,386) -• Interest expense 8 13,557 23,044• Interest income (716) (21)• Share of the profit of the joint venture 14 (615) (428)• Movements in provisions and employee benefits (7,724) (22,171)45,532 60,209Working capital adjustments• Decrease in inventories 5,163 1,021• Decrease in trade and other receivables 13,542 4,818• Increase (decrease) in trade and other payables (52,348) 50,900Net cash flows from operating activities 11,889 117,376Investing activitiesPurchase of property, plant and equipment 12, 13 (31,090) (62,506)Proceeds from sale of property, plant and equipment 60,055 601Net cash flows from (used in) investing activities 28,965 (61,905)Financing activitiesProceeds from loans and borrowings 4,700 2,509,264Repayment of loans and borrowings (42,454) (2,586,017)Repayment of subordinated debt (9,750) -Interest paid (21,416) (20,608)Interest received 716 21Payments of finance lease liabilities (3,166) (17,061)Net cash flows used in financing activities (71,370) (114,401)Net (decrease) increase in cash and cash equivalents (30,516) (59,358)Cash and cash equivalents at 1 January 17 (64,464) (5,106)Cash and cash equivalents at 31 December 17 (94,980) (64,464)The accounting policies and notes form an integral part of the financial statements.Approved by Ing. Vladimír Ľupták and Ing. Peter Fejfar on behalf of the Board of Directors on 16 April 2013.67

Notes to the consolidated financial statements1. GeneralINFORMATIONInformation on Reporting entityŽelezničná spoločnosť Cargo Slovakia,a.s. (“ZSSK CARGO” or “the Company”),a joint stock company registered in theSlovak Republic, was founded on 1 January2005 as one of two successor companiesto Železničná spoločnosť, a.s.(“ŽS”). ZSSK CARGO was incorporatedwith the Commercial Register of theDistrict Court Bratislava I, Section Sa,Insert No. 3496/B at the date of itsestablishment, IČO 35 914 921, DIČ20 219 200 65.The Slovak Republic is the sole shareholderof the Company through theMinistry of Transport, Construction andRegional Development of the SlovakRepublic (“MTCRD”) with its registeredoffice on Námestie slobody 6, 811 06Bratislava. The Company does not belongto any group for consolidation purposes.The Company is not an unlimitedliability partner in any other company.The Company’s predecessor, ŽS, wasfounded on 1 January 2002 throughthe demerger of Železnice SlovenskejRepubliky (“ŽSR”) and assumed responsibilityfor the provision of freightand passenger rail transport and trafficservices within Slovakia, while ŽSRretained responsibility for the operationof the traffic routes. ŽS was dissolvedwithout liquidation effective31 December 2004 and replaced,following a second demerger, by twonewly established successor companies:Železničná spoločnosť Slovensko,a.s. (“ZSSK”) for passenger transportationand traffic services and ZSSKCARGO for freight transportation andtraffic services.Principal activitiesZSSK CARGO’s main business is theprovision of freight transportationand related services. Additionally, theCompany rents properties and providesrepair and maintenance, cleaning andother support services to ZSSK andother external customers. The Companyis organized and managed as a singlebusiness unit and is viewed as a singleoperating unit by the Board of Directorsfor the purposes of resource allocationand assessing performance.The registered office of ZSSK CARGODrieňová 24820 09 BratislavaSlovak RepublicThe group includes company and jointventure company.These consolidated financial statementsare filed at the Company’s registeredaddress and at the Commercial Registerof the District Court Bratislava I, Záhradnícka10, 812 44 Bratislava.2.1 basis ofpreparation ANDMEASUREMENTThese consolidated financial statementswere approved and authorizedfor issue by the Board of Directorson 16 April 2013. The General Meetingheld on 31 July 2012 approved theCompany’s financial statements for theprevious accounting period.The consolidated financial statementshave been prepared on the historicalcost basis. These consolidated financialstatements constitute the statutory accountsof ZSSK CARGO, prepared in accordancewith Article 22 (1) of SlovakAct No. 431/2002 Coll. on Accountingfor the accounting period from 1 January2012 to 31 December 2012. Jointventure company is consolidated usingEquity method.The consolidated financial statementswere prepared using the going concernassumption that the Group will continueits operations for the foreseeable future.The Group reported a loss of EUR23,332 thousand for the year and totalaccumulated loss of EUR 281,348 thousand.In 2012, Group failed to meetfinancial covenants for one particularloan contract (note 20).In 2012 and 2011, the Group implementedcorrective measures approvedby the Government for the revitalizationof the railway sector. In 2013,the Group plans to continue applyingthese measures to reduce the Group’sdebt and to achieve balanced budget.The consolidated financial statementsand accompanying notes are presentedin thousands of Euro.The Group’s financial year is the sameas the calendar year.Statement of complianceThese consolidated financial statementshave been prepared in accordance with68

International Financial Reporting Standardsas adopted by the European Union(“IFRS”). IFRS comprise standards andinterpretations approved by the InternationalAccounting Standards Board(“IASB”) and the International FinancialReporting Interpretations Committee(“IFRIC”).At this time, due to the endorsementprocess of the European Union and thenature of the Group’s activities, thereis no difference between the IFRS policiesapplied by the Group and thoseadopted by the European Union.2.2 Changes inaccountingpolicies anddisclosuresThe accounting policies adopted areconsistent with those of the previousfinancial year except as follows:The Group has adopted the followingnew and amended IFRS and IFRIC interpretationsas at 1 January 2012, alladopted by the European Union (hereinafteras the ”EU”):• IAS 12 Amendment to IncomeTaxes – Deferred Taxes: Recoveryof Underlying Assets (effective forannual periods beginning on or after1 January 2012);• IFRS 1 Amendment to First-TimeAdoption of International FinancialReporting Standards – Severe Hyperinflationand Removal of Fixed Datesfor First-Time Adopters (effective forannual periods beginning on or after1 July 2011);• IFRS 7 Amendment to FinancialInstruments: Disclosures– Enhanced Derecognition DisclosureRequirements (effective forannual periods beginning on or after1 July 2011).The Group has not early adopted anystandards and interpretations whereadoption is not mandatory at the balancesheet date.When the adoption of the standardor interpretation is deemed to havean impact on the financial statementsor performance of the Group, its impactis described below:Amendment to IAS 12 Income Taxes– Deferred Taxes: Recovery of UnderlyingAssetsThe amendment clarified the determinationof deferred tax on investmentproperty measured at fair value andintroduces a rebuttable presumptionthat deferred tax on investment propertymeasured using the fair valuemodel in IAS 40 should be determinedon the basis that its carrying amountwill be recovered through sale. It includesthe requirement that deferredtax on non-depreciable assets that aremeasured using the revaluation modelin IAS 16 should always be measuredon a sale basis. The adoption of thisamendment did not have a significantimpact on the financial position or theperformance of the Group.Amendment to IFRS 1 First-Time Adoptionof International Financial ReportingStandards – Severe Hyperinflation andRemoval of Fixed Dates for First-TimeAdoptersThe IASB provided guidance on howan entity should resume presenting IFRSfinancial statements when its functionalcurrency ceases to be subject to hyperinflation.The adoption of this amendmentdid not have a significant impact on thefinancial position or the performanceof the Group.Amendment to IFRS 7 Financial Instruments:Disclosures — EnhancedDerecognition Disclosure RequirementsThe amendment requires additional disclosureabout financial assets that havebeen transferred but not derecognisedto enable the user of the Group’s financialstatements to understand the relationshipwith those assets that have notbeen derecognised and their associatedliabilities. In addition, the amendmentrequires disclosures about the entity’scontinuing involvement in derecognisedassets to enable the users to evaluatethe nature of, and risks associated withsuch an involvement. The adoptionof this amendment did not have a significantimpact on the financial positionor the performance of the Group.Standards issued but not yet effectiveStandards issued but not yet effectiveup to the date of issuance of the Group’sfinancial statements are listed below:• IAS 1 Amendment to IAS 1 FinancialStatement Presentation – Presentationof Items of Other ComprehensiveIncome (effective for annualperiods beginning on or after 1 July2012);• IAS 19 Revised IAS 19 Employeebenefits (effective for annual periodsbeginning on or after 1 January2013);• IAS 27 Revised IAS 27 SeparateFinancial Statements (effective forannual periods beginning on or after1 January 2014);• IAS 28 Revised IAS 28 Investmentsin Associates and Joint Ventures(effective for annual periods beginningon or after 1 January 2014); • IFRS 9 Financial Instruments: Classificationand Measurement (effectivefor annual periods beginningon or after 1 January 2015; this69

standard has not been approvedby the EU yet);• IFRS 10 Consolidated FinancialStatements (effective for annualperiods beginning on or after 1 January2014);• IFRS 11 Joint Arrangements (effectivefor annual periods beginningon or after 1 January 2014);• IFRS 12 Disclosure of Involvementwith Other Entities (effective forannual periods beginning on or after1 January 2014);• IFRS 13 Fair Value Measurement(effective for annual periods beginningon or after 1 January 2013);• IFRS 7 Amendments to IFRS 7 Disclosures– Offsetting Financial Assetsand Financial Liabilities (effective forannual periods beginning on or after1 January 2013);• IAS 32 Amendments to IAS 32 OffsettingFinancial Assets and FinancialLiabilities (effective for annualperiods beginning on or after 1 January2014);• IFRS 1 Amendments to IFRS 1 GovernmentLoans (effective for annualperiods beginning on or after 1 January2013, these amendments havenot been approved by the EU yet).• IFRS 10• IFRS 11• IFRS 12 Amendments to IFRS10, IFRS 11 and IFRS 12 Transitionguidance (effective for annual periodsbeginning on or after 1 January2012, aligned with the effectivedates of IFRS 10, IFRS 11 and IFRS12, these amendments have notbeen approved by the EU yet).• IFRS 10• IFRS 12• IAS 27 Amendments to IFRS 10, IFRS12 and IAS 27 Investment entities(effective for annual periodsbeginning on or after 1 January2014, these amendments havenot been approved by the EU yet).The amendments apply to a particularclass of business that qualifyas investment entities.Annual Improvements May 2012The following standards and interpretationswere amended:• IFRS 1 First-time Adoption of InternationalFinancial Reporting Standards• IAS 1 Presentation of Financial Statements• IAS 16 Property Plant and Equipment• IAS 32 Financial Instruments, Presentation• IAS 34 Interim Financial ReportingThese improvements are effective forannual periods beginning on or after1 January 2013. These improvementshave not been approved by the EU yet.The principal effects of these changesare as follows:Amendment to IAS 1 Financial StatementPresentation – Presentation ofItems of Other Comprehensive Income(OCI)The amendment to IAS 1 changes thegrouping of items presented in OCI.Items that could be reclassified (or ‘recycled’)to profit or loss at a future pointin time (for example, upon derecognitionor settlement) would be presentedseparately from items that will neverbe reclassified. The Group is consideringan impact of this amendment on itsseparate financial statements.Amendments to IAS 19 EmployeeBenefitsThese amendments eliminate the corridorapproach and calculate financecosts on a net funding basis. Past servicecosts shall be recognised when theplan amendment or curtailment occurs.Prior to the amendment, past servicecosts were recognised as an expenseon a straight-line basis over the averageperiod until the benefits become vested.Revised IAS 27 Separate FinancialStatementsAs a consequence of the new IFRS10 and IFRS 12, what remains of IAS27 is limited to accounting for subsidiaries,jointly controlled entities, andassociates in separate financial statements.The Group is considering an impactof this revision on its consolidatedfinancial statements.Revised IAS 28 Investments in Associatesand Joint VenturesAs a consequence of the new IFRS11 and IFRS 12, IAS 28 has been renamedIAS 28 Investments in Associatesand Joint Ventures, and describesthe application of the equity methodto investments in joint ventures in additionto associates. The Group is consideringan impact of this revision on itsconsolidated financial statements.IFRS 9 Financial Instruments: Classificationand MeasurementIIFRS 9 is the first standard issuedas part of a wider project to replaceIAS 39. IFRS 9 retains but simplifies themixed measurement model and establishestwo primary measurement categoriesfor financial assets: amortised costand fair value. The basis of classificationdepends on the entity’s businessmodel and the contractual cash flowcharacteristics of the financial asset.The guidance in IAS 39 on impairmentof financial assets and hedge account-70

ing continues to apply. The Group is consideringan impact of this standard on itsconsolidated financial statements.IFRS 10 Consolidated Financial StatementsThe objective of IFRS 10 is to establishprinciples for the presentation andpreparation of consolidated financialstatements when an entity controls oneor more other entity. It defines the principleof control, and establishes controlsas the basis for consolidation and setsout how to apply the principle of controlto identify whether an investor controlsan investee and therefore must consolidatethe investee. The standard stipulatesthe accounting requirements forthe preparation of consolidated financialstatements. The Group is consideringan impact of this standard on its consolidatedfinancial statements.IFRS 11 Joint ArrangementsIFRS 11 is a more realistic reflectionof joint arrangements by focusing on therights and obligations of the arrangementrather than its legal form. Thereare two types of joint arrangement: jointoperations and joint ventures. Joint operationsarise where a joint operatorhas rights to the assets and obligationsrelating to the arrangement and henceaccounts for its interest in assets, liabilities,revenue and expenses. Jointventures arise where the joint operatorhas rights to the net assets of the arrangementand hence equity accountsfor its interest. Proportional consolidationof joint ventures is no longer allowed.The Group is considering an impactof this standard on its consolidatedfinancial statements.IFRS 12 Disclosure of Involvement withOther EntitiesIFRS 12 includes the disclosure requirementsfor all forms of interests in otherentities, including joint arrangements,associates, special purpose vehiclesand other off balance sheet vehicles.The Group is considering an impactof this standard on its consolidatedfinancial statements.71

IFRS 13 Fair Value MeasurementIFRS 13 establishes a single sourceof guidance under IFRS for all fairvalue measurements. IFRS 13 doesnot change when an entity is requiredto use fair value, but rather providesguidance on how to measure fair valueunder IFRS when fair value is requiredor permitted. The Group is consideringan impact of this standard on its consolidatedfinancial statements.Amendments to IFRS 7 Disclosures– Offsetting Financial Assets and FinancialLiabilitiesThe amendment to IFRS 7 requires anentity to disclose information aboutrights of offset and related arrangementsfor financial instruments underan enforceable master netting agreementor similar arrangement. TheGroup is considering an impact of theseamendments on its consolidated financialstatements.Amendments to IAS 32 Offsetting FinancialAssets and Financial LiabilitiesThe amendment to IAS 32 are intendedto clarify existing application issues relatingto the offsetting rules and reducelevel of diversity in current practise. TheGroup is considering an impact of thisamendment on its consolidated financialstatements.Amendments to IFRS 1 GovernmentLoansThese amendments require first-timeadopters to apply the requirementsof IAS 20 Accounting for GovernmentGrants and Disclosure of GovernmentAssistance, prospectively to governmentloans existing at the date of transitionto IFRS. Entities may choose to applythe requirements of IAS 39 and IAS20 to government loans retrospectivelyif the information needed to do so hadbeen obtained at the time of initiallyaccounting for that loan. The exceptionwould give first-time adopters relief fromretrospective measurement of governmentloans with a below-market rateof interest. The Group is consideringan impact of these amendments on itsconsolidated financial statements.Amendments to IFRS 10, IFRS 11 andIFRS 12 Transition guidanceThe amendments are intended to provideadditional transition relief in IFRS10 , IFRS 11 Joint Arrangements andIFRS 12 Disclosure of Interests in OtherEntities, by “limiting the requirementto provide adjusted comparative informationto only the preceding comparativeperiod”. Also, amendments weremade to IFRS 11 and IFRS 12 to eliminatethe requirement to provide comparativeinformation for periods priorto the immediately preceding period. TheGroup is considering an impact of theseamendments on its consolidated financialstatements.It is expected that these changes willhave no significant effect on the Group’sconsolidated financial statements.2.3 significantaccountingjudgementSand estimatesCritical judgments in applying accountingpoliciesIn the process of applying accountingpolicies, management has made certainjudgments that have a significant effecton the amounts recognized in thefinancial statements (apart from thoseinvolving estimates, which are dealt withbelow). These are detailed in the respectivenotes, however the most significantjudgments relate to the following:Environmental mattersExisting regulations, especially environmentallegislation, do not specify the extentof remediation work required or thetechnology to be applied in resolvingenvironmental damage. Managementuses the work of specialists, its previousexperience and its own interpretationsof the relevant regulations in determiningthe need for environmental provisions.Lease arrangementsThe Group has entered into a numberof lease arrangements by which it gainsthe right to use specific assets, primarilyrailway wagons, for extended periodsof time. The Group has determinedthat under these arrangements it takeson substantially all the risks and rewardsof ownership and so accounts for thesearrangements as finance leases.The Group has entered into other leasearrangements by which it gains the rightto use railway wagons that are ownedby other transport networks for shorttermperiods. The Group has determinedthat under these arrangements it doesnot take on the significant risks and rewardsof ownership and so accounts forthese arrangements as operating leases(these transactions are disclosed in thefinancial statements as “wagon rentals”).Similarly, the Group has entered intolease arrangements by which it leasesrailway wagons to other transport networksand third parties. The Group hasdetermined that under these arrangementsit retains the significant risks andrewards of ownership and so accounts forthese arrangements as operating leases(these transactions are disclosed in thefinancial statements as “wagon rentals”).72

Sources of estimate uncertaintyThe preparation of financial statementsin conformity with IFRS requires the useof estimates and assumptions that affectthe amounts reported in the financialstatements and the notes thereto.Although these estimates are basedon management’s best knowledgeof current events, actual results maydiffer from these estimates. Theseissues are detailed in the respectivenotes, however, the most significantestimates comprise the following:Legal claimsThe Group is party to a number of legalproceedings arising in the ordinarycourse of business. Management usesthe work of specialists and its previousexperience of similar actions in makingan assessment of the most likely outcomeof these actions and of the needfor legal provisions.Quantification and timing ofenvironmental liabilitiesManagement makes estimations as tothe future cash outflows associated withenvironmental liabilities using comparativeprices, analogies to previous similarwork and other assumptions. Furthermore,the timing of these cash outflowsreflects management’s current assessmentof priorities, technical capabilitiesand the urgency of such obligations. Theestimates made and the assumptionsupon which these estimates are madeare reviewed at each balance sheet date.Impairment of property, plant and equipmentThe Group determines at each reportingdate whether there is an indication thatitems of property, plant and equipmentare impaired. Where such indications exist,the Group makes an estimate as tothe recoverable amount of the assetsconcerned or of the cash-generating unitto which the assets are allocated. In determiningvalue in use the Group is requiredto make an estimate of expectedfuture cash flows and to choose a suitablediscount rate in order to calculate thepresent value of those cash flows, whilenet selling price is determined by referenceto market developments in Slovakiaand other central European countries.Actuarial estimates applied for calculationof retirement benefit obligationsThe cost of defined benefit plans is determinedusing actuarial valuations.The actuarial valuation involves makingassumptions about discount rates,future salary increases and mortalityor fluctuation rates. Due to the long-termnature of these plans, such estimatesare subject to significant uncertainty.Depreciable lives and residual valuesof property, plant and equipmentManagement assigns depreciable livesand residual values to items of property,plant and equipment by referenceto the organisation’s latest strategicobjectives. Management determinesat each reporting date whether the assumptionsapplied in making such assignationscontinue to be appropriate.2.4 SUMMARYOF SIGNIFICANTACCOUNTINGPOLICIESFunctional and presentation currencyThese consolidated financial statementsof the Group are presented in euro,which is the Group’s functional currency.Foreign currency transactions aretranslated into EUR using the referenceforeign exchange rate pertainingin the day preceding the transaction,as determined and published by theEuropean Central Bank or the NationalBank of Slovakia. Monetary assets andliabilities denominated in foreign currenciesare retranslated at the functionalcurrency rate of exchange ruling at thebalance sheet date. All differences arerecognized in profit or loss. Non-monetaryitems that are measured basedon historical cost in a foreign currencyare translated using the exchange ratesas at the date of the initial transaction.Property, plant and equipmentProperty, plant and equipment is measuredat cost, excluding the costs of dayto-dayservicing, less accumulated depreciationand accumulated impairmentlosses. When parts of an item of property,plant and equipment need to be regularlyreplaced, they are accounted foras separate items (major components)of property, plant and equipment witha specific useful life and depreciation.Also, general overhaul repairs are measuredat cost, if measurement criteriaare met.Ongoing repairs, maintenance and minorrenewals are expensed as incurred. Depreciationis calculated on a straight-linebasis over the useful life of an asset(8-50 years for buildings, 3-40 years formachines, equipment and other assets).Land is not depreciated.An item of property, plant and equipmentis derecognised upon disposalor when no future economic benefitsare expected from its use or disposal.Any gain or loss arising on derecognitionof the asset (calculated as the differencebetween the net disposal proceedsand the carrying amount of the asset)is recognized in profit or loss in the yearthe asset is derecognised.When items of property, plant and equipmentmeets the criteria to be classifiedas held for sale, they are measured73

at the lower of their carrying amount andfair value less costs to sell. The Groupmeasures an item of property, plant andequipment that ceases to be classifiedas held for sale at the lower of:a) its carrying amount before the assetwas classified as held for sale,adjusted for any depreciation andamortisation that would have beenrecognised had the asset not beenclassified as held for sale, andb) its recoverable amount at the date ofthe subsequent decision not to sell.The residual values, useful lives and depreciationmethods of property, plantand equipment are reviewed and adjusted,if appropriate, at each financialyear end.Intangible assetsIntangible assets are measured at cost,less accumulated amortisation and anyaccumulated impairment losses.Amortisation is calculated on a straightlinebasis over the useful life of the assets(3-8 years).Intangible assets are derecognisedupon disposal or when no future economicbenefits are expected from theiruse or disposal. Any gain or loss arisingon derecognition of an asset (calculatedas the difference between the net disposalproceeds and the carrying amountof the asset) is recognized in profit andloss in the year the asset is derecognised.The residual values, useful livesand amortisation methods of intangibleassets are reviewed and adjusted, if appropriate,at each financial year end.Impairment of non-financial assetsThe Group assesses at each reportingdate whether there is an indication thatan asset may be impaired. If any such indicationexists, the Group makes an estimateof the asset’s recoverable amount.An asset’s recoverable amount is thehigher of an asset’s or cash-generatingunit’s fair value less costs to sell andits value in use and is determined foran individual asset, unless the assetdoes not generate cash inflows that arelargely independent of those from otherassets or groups of assets.Where the carrying amount of an assetexceeds its recoverable amount, the assetis considered impaired and is writtendown to its recoverable amount.In assessing value in use, the estimatedfuture cash flows are discounted to theirpresent value using a pre-tax discountrate that reflects current market assessmentsof the time value of money andthe risks specific to the asset.Impairment losses are recognised in thestatement of comprehensive incomewithin depreciation, amortisation andimpairment of property, plant and equipmentand intangible assets.An assessment is made at each reportingdate as to whether there is any indicationthat previously recognised impairmentlosses may no longer exist or mayhave decreased. If such indicationexists, the Group makes an estimateof recoverable amount. A previouslyrecognised impairment loss is reversedonly if there has been a change in theestimates used to determine the asset’srecoverable amount since the last impairmentloss was recognised. If thatis the case the carrying amount of theasset is increased to its recoverableamount. That increased amount cannotexceed the carrying amount that wouldhave been determined, net of depreciation,had no impairment loss been recognisedfor the asset in prior years. Suchreversal is recognised in the statementof comprehensive income. After sucha reversal the depreciation charge is adjustedin future periods to allocate theasset’s revised carrying amount, lessany residual value, on a systematic basisover its remaining useful life.InventoriesInventories are measured at the lowerof cost and net realisable value. Costincludes the purchase price of inventoryand expenses related to the acquisitionof inventory (including transportationcosts, insurance and customs duties)and is accounted for using the weightedaverage method. Net realisable valueis the estimated selling price in the ordinarycourse of business, less the estimatedcosts necessary to make thesale. Allowances for old, obsolete andslow-moving items are booked to reducethe carrying value of these items to netrealisable value.Joint ventureSecurities and interests in joint venturesthat are not classified as held for saleare measured at book value (cost lessany accumulated impairment losses).The cost of securities and interestsin joint ventures is the price that waspaid for the shares.Financial assetsInitial recognitionFinancial assets within the scope of IAS39 are classified as financial assetsat fair value through profit or loss,loans and receivables, held-to-maturityinvestments, available-for-sale financialassets, or as derivatives designatedas hedging instruments in an effectivehedge, as appropriate. Financial assetsare designated on initial recognition.Financial assets are recognizedinitially at fair value plus, in the case74

of financial assets not classified at fairvalue through profit or loss, directly attributabletransaction costs. The Group’sfinancial assets comprise cash at bankand petty cash and cash equivalents,trade and other receivables.Subsequent measurementThe subsequent measurement of financialassets depends on their classificationas follows:Financial assets at fair value throughprofit or lossFinancial assets at fair value throughprofit or loss include financial assetsheld for trading and financial assetsdesignated upon initial recognitionat fair value through profit or loss. Financialassets are classified as heldfor trading if they are acquired for thepurpose of selling in the near term. Thiscategory includes derivative financialinstruments entered into by the Groupthat do not meet the hedge accountingcriteria as defined by IAS 39. Derivativesare also classified as held for tradingunless they are designated as effectivehedging instruments. Financial assetsat fair value through profit and loss arecarried in the balance sheet at fair valuewith gains or losses recognized in thestatement of comprehensive income.The Group has not designated any financialassets at fair value through profitor loss in the current year.Loans and receivablesLoans and receivables are non-derivativefinancial assets with fixed or determinablepayments that are not quotedin an active market. Subsequent to initialmeasurement loans and receivables aremeasured at amortized cost using theeffective interest rate method (EIR) lessany impairment losses. Amortised costis calculated by taking into account anydiscount or premium on acquisition andfees or costs that are an integral partof the EIR. Gains and losses are recognizedin the statement of comprehensiveincome when the loans and receivablesare derecognized or impaired, as wellas through the amortization process.Held-to-maturity investmentsHeld-to-maturity investments are nonderivativefinancial assets which carryfixed or determinable payments, havefixed maturities and which the Group hasthe positive intention and ability to holdto maturity. After initial measurementheld-to-maturity investments are measuredat amortized cost. This cost is computedas the amount initially recognizedminus principal repayments, plus or minuscumulative amortization using theeffective interest rate method of any differencebetween the initially recognizedamount and the maturity amount, lessallowance for impairment. This calculationincludes all fees and points paidor received between parties to the contractthat are an integral part of the effectiveinterest rate, transaction costsand all other premiums and discounts.Gains and losses are recognized in thestatement of comprehensive incomefor the period when the investmentsare derecognized or impaired, as wellas through the amortization process.As at 31 December 2012 and 2011,no financial assets have been designatedas held-to-maturity investments.Available-for-sale financial assetsAvailable-for-sale financial assets arenon-derivative financial assets that aredesignated as available-for-sale or arenot classified in any of the three precedingcategories of financial assets.Subsequent to initial measurement,available for sale financial assets aremeasured at fair value with unrealizedgains or losses being recognized in othercomprehensive income and presentedin the fair value reserve in equity. Whenan investment is disposed of or is determinedto be impaired, the cumulativegain or loss previously recognizedin other comprehensive income is reclassifiedto profit or loss.Subsequent to initial recognitionavailable-for-sale financial assets aremeasured on the basis of existing marketconditions and management intentto hold on to the investment in the foreseeablefuture. In rare circumstanceswhen these conditions are no longer appropriate,the Group may choose to reclassifythese financial assets to loansand receivables or held-to-maturity investmentswhen this is in accordancewith the applicable IFRS.As at 31 December 2012 and 2011,no financial assets have been designatedas vailable-for-sale financial assets.Amortised cost of financial instrumentsAmortised cost is computed using theeffective interest method less any impairmentloss and principal repaymentor reduction. The calculation takes intoaccount any premium or discount on acquisitionand includes transaction costsand fees that are an integral part of theeffective rate.Financial liabilitiesInitial recognitionFinancial liabilities within the scopeof IAS 39 are classified as financialliabilities at fair value through profitor loss, loans and borrowings, or asderivatives designated as hedging instrumentsin an effective hedge, as appropriate.The Group determines theclassification of its financial liabilitiesat initial recognition.75

Financial liabilities are recognized initiallyat fair value less directly attributabletransaction costs in case of loansand borrowings.The Group’s financial liabilities includetrade and other payables, bank overdrafts,loans and borrowings.Subsequent measurementThe measurement of financial liabilitiesdepends on their classification as follows:Financial liabilities at fair value throughprofit or lossFinancial liabilities at fair value throughprofit or loss includes financial liabilitiesheld for trading and financial liabilitiesdesignated upon initial recognition as atfair value through profit or loss.Financial liabilities are classified as heldfor trading if they are acquired for thepurpose of sale in the near future. Thiscategory includes derivative financialinstruments entered into by the Companythat do not meet criteria of hedgeaccounting as defined by IAS 39. Gainsor losses arising on liabilities held fortrading are recognised in profit or loss.The Group has not designated any financialliabilities at fair value throughprofit or loss.Loans and borrowings & subordinateddebtSubsequent to initial recognition, interestbearing loans and borrowings aremeasured at amortised cost using theeffective interest rate method.Gains and losses are recognised in thestatement of comprehensive incomewhen the liabilities are derecognisedas well as through the amortisationprocess.Trade and other payablesTrade and other payables are recognizedand measured at amortized cost, beingthe original invoice amount. The Groupaccrues for those expenses that havenot been invoiced at the balance sheetdate. Penalty interest charged on overduepayables is accounted for in tradepayables.Fair value of financial instrumentsThe fair value of financial instrumentsthat are actively traded in organised financialmarkets is determined by referenceto quoted market bid prices at theclose of business on the balance sheetdate. For financial instruments wherethere is no active market, fair value is determinedusing valuation techniques.Such techniques may include using recentarm’s length market transactions,reference to the current fair value of anotherinstrument that is substantiallythe same, discounted cash flow analysisor other valuation models.Impairment of financial assetsThe Group assesses at each balancesheet date whether there is any objectiveevidence that a financial assetor a group of financial assets is impaired.A financial asset or a groupof financial assets is deemed tobe impaired if, and only if, there is objectiveevidence of impairment as aresult of one or more events that hasoccurred after the initial recognitionof the asset (an incurred ‘loss event’)and that loss event has an impact onthe estimated future cash flows of thefinancial asset or the group of financialassets that can be reliably estimated.Evidence of impairment mayinclude indications that the debtorsor a group of debtors is experiencingsignificant financial difficulty, defaultor delinquency in interest or principalpayments, the probability that theywill enter bankruptcy or other financialreorganisation and where observabledata indicate that there is a measurabledecrease in the estimated futurecash flows, such as changes in arrearsor economic conditions that correlatewith defaults.Classification and derecognition of financialinstrumentsFinancial assets and financial liabilitiespresented in the balance sheet includecash and cash equivalents, trade andother accounts receivable and payableand loans and borrowings. The accountingpolicies on recognition and measurementof these items are disclosedin the respective accounting policiesfound in this Note.Financial instruments (including compoundfinancial instruments) areclassified as assets, liabilities or equityin accordance with the substanceof the contractual agreement. Interest,dividends and gains and losses relatingto a financial instrument classifiedas a liability are reported as expenseor income as incurred. Distributionsto holders of financial instruments classifiedas equity are charged directlyto equity. In case of compound financialinstruments the liability componentis valued first, with the equity componentbeing determined as a residualvalue. Financial instruments are offsetwhen the Group has a legally enforceableright to offset and intends to settleeither on a net basis or to realize theasset and settle the liability simultaneously.The derecognition of a financial assettakes place when the Group no longercontrols the contractual rights thatcomprise the financial asset, whichis normally the case when the instrumentis sold, or all the cash flows at-76

tributable to the instrument are passedthrough to an independent third party.A financial liability is derecognized whenthe obligation under the liability is discharged,cancelled or expires.Derivative financial instruments andhedging activitiesThe Group uses derivative financial instrumentssuch as forwards, options andswaps to hedge its risks related to foreigncurrency fluctuations. Such derivativefinancial instruments are initially recognizedat fair value on the date on whicha derivative contract is entered into andare subsequently remeasured at fairvalue. Derivatives are carried as assetswhen the fair value is positive and as liabilitieswhen the fair value is negative.Any gains or losses arising from changesin the fair value of derivatives are takendirectly to the statement of comprehensiveincome as finance income or costs.The fair value of forward currencycontracts is calculated by referenceto current forward exchange rates forcontracts with similar maturity profiles.An embedded derivative is separatedfrom the host contract and accountedfor as a derivative if all of the followingconditions are met:• The economic characteristics andthe risks of the embedded derivativeare not closely related to theeconomic characteristics of the hostcontract.• A separate instrument with thesame terms as the embeddedderivative would meet the definitionof a derivative.• A hybrid (combined) instrument is notmeasured at fair value with changesin fair value reported in currentperiod net profit.HedgingHedge accounting recognizes the offsettingeffects of changes in the fairvalues of the hedging instrument andthe hedged item in profit/loss for theperiod. For the purpose of hedge accounting,hedges are classified as:• Fair value hedge,• Cash flow hedgeAt the inception of the hedge the Groupformally designates and documents thehedging relationship to which it wishesto apply hedge accounting and the riskmanagement objective and strategy forundertaking the hedge. The documentationincludes identification of thehedging instrument, the hedged itemor transaction, the nature of the riskbeing hedged and the method by whichthe Group will assess the hedging instrument’seffectiveness in offsettingthe exposure to changes in thehedged item’s fair value or cash flowsattributable to the hedged risk. Suchhedge is expected to be highly effectivein achieving offsetting of changesin fair value or cash flows attributableto the hedged risk and is assessedon an ongoing basis to determine thatit has been highly effective throughoutthe financial reporting periods for whichit was designated.Hedges which meet the strict criteriafor hedge accounting are accounted foras follows:Fair value hedgeFair value hedge is a hedge of theGroup’s exposure to changes in fairvalue of a recognized asset or liabilityor an unrecognized firm commitment,or an identified portion of such an asset,liability or firm commitment, thatis attributable to a particular risk andcould affect profit/loss for the period.The gain or loss from remeasuring thehedging instrument at fair value (fora derivative hedging instrument) or theforeign currency component of its carryingamount measured in accordancewith IAS 21 (for a non-derivative hedginginstrument) is recognized in profit/lossfor the period. The gain or loss on thehedged item attributable to the hedgedrisk adjusts the carrying amount of thehedged item and is recognized in profit/loss for the period. The same method isused when the hedged item is an available-for-salefinancial asset.The adjustment to the carrying amountof a hedged financial instrument forwhich the effective interest methodis used is amortized to profit/loss for theperiod over the remaining term to maturityof the financial instrument. Amortizationmay begin as soon as an adjustmentexists and shall begin no laterthan when the hedged item ceasesto be adjusted for changes in fair valueattributable to the risk being hedged.When an unrecognized firm commitmentis designated as a hedged item, the subsequentcumulative change in the fairvalue of the firm commitment attributableto the hedged risk is recognizedas an asset or liability with a correspondinggain or loss recognized in profit/lossfor the period. The changes in the fairvalue of the hedging instrument are alsorecognized in profit/loss for the period.The Group discontinues fair value hedgeaccounting if the hedging instrument expires,the hedging instrument is sold, terminatedor exercised, the hedge no longermeets the criteria for hedge accountingor the Group revokes the designation.Cash flow hedgeCash flow hedge is a hedge of theGroup’s exposure to variability in cashflows that is attributable to a particular77

isk associated with a recognized assetor liability or a highly probable forecasttransaction and could affect profit/lossfor the period.The portion of the gain or loss on thehedging instrument that is determinedto be an effective hedge is recognizedin other comprehensive income. Theineffective portion of the gain or losson the hedging instrument is recognizedin profit/loss for the period.If a hedge of a forecast transactionsubsequently results in the recognitionof a financial asset or a financialliability, the associated gains or lossesthat were recognized in other comprehensiveincome are reclassified fromother comprehensive income to profit/lossin the same period or periodsduring which the asset acquired orliability assumed affects profit/lossfor the period. If a hedge of a forecasttransaction subsequently results in therecognition of a non-financial asset ora non-financial liability, or a forecasttransaction for non-financial asset ornon-financial liability becomes a firmcommitment for which fair value hedgeaccounting is applied, the associatedgains and losses that were recognizedin other comprehensive income aretransferred to the initial cost or othercarrying amount of the non-financialasset or liability.As at 31 December 2012 and 2011,no financial liabilities have been designatedas derivative financial instruments.Cash and cash equivalentsCash and cash equivalents comprisecash at bank and in hand and shorttermdeposits with an original maturityof three months or less and that aresubject to an insignificant risk of changein value.For the purposes of the cash flowstatement, cash and cash equivalentsconsist of cash and cash equivalentsas defined above, net of outstandingbank overdrafts.Employee benefitsThe Group makes contributions tothe State health, retirement benefitand unemployment schemes at thestatutory rates in force during the year,based on gross salary payments. Thecost of these payments is charged tothe statement of comprehensive incomein the same period as the relatedsalary cost. The Group has no obligationto contribute to these schemesbeyond the statutory rates in force.Also, the Group operates unfundedlong-term defined benefit programmescomprising lump-sum post-employment,jubilee and disability benefits.The cost of providing these employeebenefits is assessed separatelyfor each programme using the projectedunit credit method, by whichthe costs incurred in providing suchbenefits are charged to the statementof comprehensive income so asto spread the cost over the servicelives of the Group’s employees. Thebenefit obligation is measured as thepresent value of the estimated futurecash outflows.Actuarial gains and losses arising fromexperience adjustments and changesin actuarial assumptions are chargedor credited to the statement of comprehensiveincome when incurred.Amendments to these long-term definedbenefit programmes are chargedor credited to the statement of comprehensiveincome over the averageremaining service lives of the relatedemployees.Termination paymentsThe employees of the Group are eligible,immediately upon terminationdue to organizational changes, for redundancypayments pursuant to theSlovak law and the terms of the CollectiveAgreement between the Groupand its employees. The amount of sucha liability is recorded as a provisionin the balance sheet when the workforcereduction program is defined,announced and the conditions for itsimplementation are met.ProvisionsA provision is recognized if the Grouphas a present obligation (legal or constructive)as a result of a past event andit is probable (i.e. more likely than not)that an outflow of resources embodyingeconomic benefits will be requiredto settle the obligation, and a reliableestimate can be made of the amountof the obligation. Provisions are reviewedat each balance sheet date and adjustedto reflect the current best estimate. Theamount of the provision is the presentvalue of the risk adjusted expendituresexpected to be required to settle the obligation,determined using the estimatedrisk free interest rate as discount rate.Where discounting is used, the carryingamount of the provision increasesin each period to reflect the unwindingof the discount by the passage of time.This increase is recognized as interestexpense.Environmental mattersLiabilities for environmental costs arerecognized when environmental cleanupsare probable and the associatedcosts can be reliably estimated. Generally,the timing of these provisions coincideswith the commitment to a formalplan of action or, if earlier, on divestmentor on closure of inactive sites. The78

amount recognized is the best estimateof the expenditure required.Legal claimsLiabilities arising from litigation anddisputes, which are calculated by usingavailable information and assumptions,are recognized when an outflow of resourcesembodying economic benefitsis probable and when such outflows canbe reliably measured.LeasesThe determination of whether an arrangementis, or contains, a leaseis based on the substance of the arrangementand requires an assessmentof whether the fulfilment of thearrangement is dependent on theuse of a specific asset or assets andthe arrangement conveys a right to usethe asset.As LesseeFinance leases, which transfer to theGroup substantially all the risks andbenefits incidental to ownership of theleased item, are capitalised at the inceptionof the lease at the fair valueof the leased property or, if lower, at thepresent value of the minimum leasepayments. Lease payments are apportionedbetween the finance chargesand reduction of the lease liability so asto achieve a constant rate of intereston the remaining balance of the liability.Finance charges are charged directlyagainst income.Capitalised leased assets are depreciatedover the shorter of the estimateduseful life of the asset and the leaseterm.Operating lease payments are recognisedas an expense in the statementof comprehensive income on a straightlinebasis over the lease term.As LessorLeases where the Group does nottransfer substantially all the risks andbenefits of ownership of the asset areclassified as operating leases. Rentalincome is recognised on a straight-linebasis over the lease term.Revenue recognitionRevenue is recognised to the extentthat it is probable that the economicbenefits will flow to the Group and therevenue can be reliably measured.Revenue is measured at the fair valueof the consideration received, excludingdiscounts, rebates and sales taxes.Revenue from transport and related servicesand from repair and maintenanceand other such services is recognizedin the period in which the services areprovided, net of discounts and deductions.Borrowing costsBorrowing costs directly attributableto the acquisition, construction or productionof a qualifying asset are recognizedas part of the cost of a given asset.Other related expenses are recognizedas an expense in the period in whichthey are incurred.Income taxCurrent income taxCurrent income tax assets and liabilitiesfor the current and prior periodsare measured at the amount expectedto be recovered from or paid to the taxationauthorities. The tax rates and taxlaws used to compute the amount arethose that are enacted or substantivelyenacted at the balance sheet date.Deferred income taxDeferred income tax is provided usingthe liability method on temporarydifferences at the balance sheet datebetween the tax bases of assets andliabilities and their carrying amounts forfinancial reporting purposes.Deferred tax liabilities are recognisedfor all taxable temporary differences.Deferred income tax assets are recognisedfor all deductible temporary differences,carry-forward of unused taxcredits and unused tax losses to theextent that it is probable that taxableprofit will be available against which thedeductible temporary differences andthe carry-forward of unused tax creditsand unused tax losses can be utilised.The carrying amount of deferred incometax assets is reviewed at each balancesheet date and reduced to the extentthat it is no longer probable that sufficienttaxable profit will be available to allowall or part of the deferred incometax asset to be utilised. Unrecogniseddeferred income tax assets are reassessedat each balance sheet date andare recognised to the extent that it hasbecome probable that future taxableprofit will allow the deferred tax assetto be recovered.Deferred income tax assets and liabilitiesare measured at the tax rates thatare expected to apply to the year whenthe asset is realised or the liability is settled,based on tax rates (and tax laws)that have been enacted or substantivelyenacted at the balance sheet date.Deferred income tax relating to itemsrecognised directly in equity is recogniseddirectly in equity and not in income.79

3. TRANSPORTation AND RELATED RevenuesIn thousands of EUR 31 December 2012 31 December 2011Inland transport:• Transport of goods 32,001 34,561• Wagon deposition 7,379 11,101• Haulage fees 1,127 788International transport:40,507 46,450• Import 104,216 118,709• Export 113,045 113,670• Transit 16,372 20,715Other transport related revenues:233,633 253,095• Usage of wagons under RIV, PGV and AVV regimes 6,163 7,759• Wagon rentals 5,052 6,535• Cross-border services 3,737 3,892• Other 2,965 3,16317,917 21,349292,057 320,894Transportation and related revenues include amounts invoiced to U.S. Steel Košice of EUR 67,201 thousand (2011: EUR73,233 thousand) and to Budamar Logistics of EUR 66,383 thousand (2011: EUR 69,682 thousand).4. Other revenuesIn thousands of EUR 31 December 2012 31 December 2011Repairs and maintenance 8,573 32,468Operational performance 5,911 9,527Property rentals 4,001 3,978Other 4,627 4,16223,112 50,135Other revenues included revenues charged to ZSSK of EUR 12,583 thousand (2011: EUR 35,431 thousand) for repairand maintenance, operational performance, property rental and other support services.80

5. Consumables and servicesIn thousands of EUR 31 December 2012 31 December 2011Network fees (44,229) (53,393)Traction electricity (33,338) (35,336)Traction crude oil (18,415) (18,709)Materials (14,596) (25,227)Wagon rentals (13,617) (13,816)IT services and telecommunication charges (9,284) (8,622)Foreign segments (8,589) -Other energy costs (5,535) (8,064)Third party transhipment services (5,368) (4,957)Cross-border services (4,161) (4,342)Rentals (3,575) (3,663)Repair and maintenance (3,368) (2,110)Security services (1,600) (1,824)Travelling and entertainment (1,289) (1,404)Cleaning of cars, property, waste disposal (684) (1,013)Advisory and consultancy fees (558) (2,495)Medical care (484) (450)Training (194) (459)Other (2,469) (2,885)(171,353) (188,769)Consumables and services include amounts charged by ŽSR of EUR 89,950 thousand (2011: EUR 96,677 thousand), primarilyrelating to the usage of ŽSR’s network (the Group has a one year contract with ŽSR which specifies planned kilometresand charge rates for different types of transport) and also to the purchase of traction energy (refer to Note 26).6. Staff CostsIn thousands of EUR 31 December 2012 31 December 2011Wages and salaries (65,093) (74,922)Social security costs (26,967) (33,687)Employee benefits (Note 21; 25) 1,154 (1,918)Termination payments (Note 22) (3,947) 6,138(94,853) (104,389)Employee numbers at 31 December 2012 were 6,822 (2011: 8,054), thereof six were members of management (as membersof the Board of Directors or directors of individual departments). Average employee numbers at 31 December 2012 were7,015 (2011: 8,701). The average salary in 2012 amounted to EUR 796 (2011: EUR 733).81

7. Other operating revenues (expenses), netIn thousands of EUR 31 December 2012 31 December 2011Provision for environmental matters (Note 22; 25) 9,849 (21)Gains on sale of property, plant, equipment and inventories5,730 1,251(Note 25; 26)Provision for legal cases and onerous contracts (Note 22) (2,575) 2,746Allowance for doubtful debts (666) (404)Insurance of assets (2,553) (2,574)Other (845) (2,116)8,940 (1,118)8. INTEREST EXPENSEIn thousands of EUR 31 December 2012 31 December 2011Interest on loans and borrowings (2,661) (4,781)Interest on subordinated debt (7,158) (7,841)Interest charges on finance leases liabilities (3,607) (3,537)Unwinding of discount on provisions and employee benefits (131) (912)(13,557) (17,071)9. OTHER FINANCE Revenues (COSTS), netIn thousands of EUR 31 December 2012 31 December 2011Foreign exchange losses, net (21) (4)Other revenues (costs) (195) (166)(216) (170)10. OTHER NON-CURRENT ASSETSIn thousands of EUR 31 December 2012 31 December 2011Prepaid expenses 218 615218 61582

11. INCOME TAXThe reported income tax represented a withholding tax paid abroad in the amount of EUR 45 thousand (2011: EUR 18 thousand).A reconciliation between the reported income tax expense and the theoretical amount that would arise using thestandard rates is as follows:In thousands of EUR 31 December 2012 31 December 2011Loss before tax (23,332) 96Tax charge at statutory tax rate of 19% (4,433) 19Tax paid abroad (45) (18)Forfeit tax loss carry forwards 5,412 2,269Change in valuation allowance 6,752 (2,297)Non-deductible expenses (7,731) 9Total income tax (45) (18)Deferred tax assets and liabilities at 31 December related to the following (for year ended 31 December 2012 was usedincome tax rate 23% applicable in future accounting period):In thousands of EUR 31 December 2012 31 December 2011Deferred tax assetsTax loss carried forward 61,885 54,397Provision for environmental matters 5,487 6,515Provision for employee benefits 3,432 3,096Allowance for trade and other receivables 1,055 1,080Allowance for inventories 313 370Provision for legal cases and onerous contracts 2,050 1,207Termination payments 908 142Other 1,356 2,37876,486 69,185Deferred tax liabilitiesAccelerated depreciation for tax purposes (24,179) (23,628)Deferred tax on revaluation of joint venture (496) (298)Other (6) (125)(24,681) (24,051)Valuation allowance (51,804) (45,134)Net deferred tax assets (liabilities) - -83

A valuation allowance of EUR 51,804thousand (2011: EUR 45,134 thousand)has been recognised for temporary deductibledifferences due to uncertaintyas to the realization of tax benefitsin future years. The Group will continueto assess the valuation allowance and,to the extent it is determined that suchallowance is no longer required, the taxbenefits of the remaining deferred taxassets will be recognised at that time.The Group’s income tax losses carriedforward arose in the fiscal years 2007-2012 and amount to EUR 269,067thousand. Under Slovak tax legislationa Group is entitled to carry forward taxlosses incurred prior to 31 December2009 for five years and tax losses incurredthereafter for seven years. Thecarry forwards expire as follows:In thousands of EUR 31 December 2012 31 December 20112012 - 28,4852013 50,823 50,8232014 140,460 140,4602017 66,533 66,5332018 - -2019 11,251 -Total tax loss carry forwards 269,067 286,30184

12. Intangible assetsIn thousands of EURSoftwareAssets underdevelopmentAcquisition costAt 1 January 2012 27,218 491 27,709Additions 1,138 1,138Disposals - - -Transfers 1,155 (1,155) -At 31 December 2012 28,373 474 28,847Accumulated amortisationAt 1 January 2012 (10,752) (142) (10,894)Charge for the period (3,086) - (3,086)Disposals -At 31 December 2012 (13,838) (142) (13,980)Net book value at 31 December 2012 14,535 332 14,867TotalIn thousands of EURSoftwareAssets underdevelopmentTotalAcquisition costAt 1 January 2011 25,002 1,181 26,183Additions - 2,611 2,611Disposals (1,085) - (1,085)Transfers 3,301 (3,301) -At 31 December 2011 27,218 491 27,709Accumulated amortisationAt 1 January 2011 (8,821) (142) (8,963)Charge for the period (3,007) - (3,007)Disposals 1,076 - 1,076At 31 December 2011 (10,752) (142) (10,894)Net book value at 31 December 2011 16,466 349 16,81585

13. PROPERTY, PLANT AND EQUIPMENTIn thousands of EURLand andbuildingsMachines,equipment,other assetsAssets underconstructionAcquisition costAt 1 January 2012 92,422 906,894 3,314 1,002,630Additions - - 29,952 29,952Disposals (94) (34,996) (6) (35,096)Transfers – Assets held for sale 223 - - 223Transfers 4 28,788 (28,792) -At 31 December 2012 92,555 900,686 4,468 997,709Accumulated depreciationAt 1 January 2012 (27,182) (333,531) (538) (361,251)Additions (1,864) (61,816) - (63,680)Disposals 61 34,737 - 34,798Transfers – Assets held for sale 143 - - 143Impairment loss (72) (1,935) 4 (2,003)At 31 December 2012 (28,914) (362,545) (534) (391,993)Net book value at 31 December 2012 63,641 538,141 3,934 605,716TotalIn thousands of EURLand andbuildingsMachines,equipment,other assetsAssets underconstructionTotalAcquisition costAt 1 January 2011 135,583 864,647 11,849 1,012,080Additions - - 59,906 59,906Disposals (44) (14,550) - (14,594)Transfers – Assets held for sale (46,985) (7,131) (645) (54,761)Transfers 3,868 63,928 (67,796) -At 31 December 2011 92,422 906,894 3,314 1,002,630Accumulated depreciationAt 1 January 2011 (36,680) (290,745) (538) (327,963)Charge for the period (2,929) (62,153) - (65,082)Disposals 14 13,979 - 13,993Transfers – Assets held for sale 5,580 3,822 - 9,401Impairment loss 6,834 1,566 - 8,400At 31 December 2011 (27,182) (333,531) (538) (361,250)Net book value at 31 December 2011 65,240 573,363 2,776 641,38086

Land and buildings consists of hallsused in the repair of locomotives andwagons, depots, stores, workshopsand administrative building. Machines,equipment and other assets include locomotivesand wagons, cranes, trucks,cars and other vehicles, tools and equipmentused in repair and maintenance,boilers and other heating equipment andoffice equipment, including computers,printers and other IT equipment.The Group recorded impairment losseson assets individually assessed as damagedor not capable for further use. Theimpairment losses were recorded to reflectthe amount of actual damage.The impairment test required by IAS36 was performed by managementof the Group at the year end. The recoverableamount of an asset is the higherof its fair value less costs to sell and itsvalue in use. The fair value less costto sell of an asset was determined as itsselling price adjusted for costs associatedwith the sale of the asset. The valuein use of the asset was determinedby discounted cash flows method. TheGroup as a whole is considered as a singlecash generating unit.No impairment losses have been identifiedbased on the impairment test whencomparing the recoverable amountsof the assets and carrying values. Therelevant cash flows were estimatedbased on the 2013 business plan updatedto the latest available information atthe balance sheet date and on forecastsof future periods based on best estimatesusing all available information. The futurecash flows were estimated for the next15 years which is an average remaininguseful life of the cash generating unit‘sassets. The cash flows include unavoidableinvestment expenditures required tomaintain the ability of the cash generatingunit to generate revenues and proceedsfrom scrap value at the end of the usefullife. Discount rate of 8.71% used in thecalculation was determined based on interestrates for incremental financingof fixed assets purchases by the Groupas at the day of preparation of a financialstatements and was adjusted for factorsof time, risk and liquidity.As a result of the procedures describedabove, the Group has increased an impairmentloss by EUR 2,003 thousanddue to a lower usage of assets anda decrease of cash inflows mainly froma transport revenues’ decrease in 2012.Property, plant and equipment includelocomotives acquired by means of financelease with a total acquisitionvalue of EUR 21,217 thousand (netbook value EUR 18,463 thousand),wagons with an aggregate acquisitionvalue of EUR 133,589 thousand (netbook value EUR 113,252 thousand)and computing technology with a totalacquisition value of EUR 2,772 thousand(net book value EUR 1,197 thousand).Property, plant and equipment in theownership of the Group with a total acquisitionvalue of EUR 17,676 thousand(EUR 17,991 thousand at 31 December2011) and with a net book value of EUR14,473 thousand (EUR 14,874 thousandat 31 December 2011) is registeredby the State as protected for culturalpurposes.Property, plant, equipment and inventoriesare insured against (i) naturaldisaster, (ii) theft and vandalism and(iii) damage of machinery (all risk cover).Risks (i) and (ii) are covered to a maximumof 247,778 EUR thousand (EUR300,841 thousand in 2010) and (iii)to a maximum of EUR 559,993 thousand(EUR 560,145 thousand in 2011).In addition, motor vehicles have thirdparty and accident insurance cover, thecost of which is immaterial.The Group has reclassified certain assetsas held for sale (Note 25).87

14. InvestMENTS ACCOUNTED FOR USING EQUITY METHODThe Group has a 40% share in BULKTRANSSHIPMENT SLOVAKIA, a.s. (formerlyDURBAN a.s.), which is involvedin the transhipment of iron ore in Ciernanad Tisou in the east of Slovakia. Basedon contractual arrangements with theother shareholder , the managementof the Group decided to consider thisinvestment as joint venture.The Group’s share of the assets andliabilities as at 31 December 2012 and2011 and income and expenses for theyears then ended of the jointly controlledentity are as follows:In thousands of EUR 31 December 2012 31 December 2011Current assets 1,424 1,239Non-current assets 5,324 5,289Total assets 6,748 6,528Current liabilities 834 710Non-current liabilities 2,215 2,734Total liabilities 3,049 3,444Net assets 3,699 3,084In thousands of EUR 31 December 2012 31 December 2011Revenues 2,542 2,569Cost of sales (840) (715)Other expenses (net) (943) (1,326)Profit before income tax 759 528Income tax expense (144) (100)Net profit (loss) 615 42888

15. InventorIESIn thousands of EURAt cost2012At lower of costor net realizablevalue 2012At cost2011At lower of costor net realizablevalue 2011Electrical materials 3,738 3,170 6,082 5,329Machine and metal-working materials 3,809 3,066 5,849 4,832Diesel fuel 1,362 1,362 2,164 2,112Chemicals and rubber 629 601 488 488Protective tools 281 281 330 279Other 175 154 244 172Total 9,994 8,634 15,157 13,21116. TRADE AND OTHER RECEIVABLESIn thousands of EUR 31 December 2012 31 December 2011Domestic trade receivables 27,134 35,813Foreign trade receivables 12,465 16,486VAT receivables 4,149 3,812Other receivables 4,283 5,066Allowance for impaired trade and other receivables (4,587) (5,682)43,444 55,495At 31 December 2012 overdue receivables amounted to EUR 9,375 thousand (EUR 10,246 thousand at 31 December 2011).Trade receivables are non-interest bearing and are generally due within 30-90 days.For details of related party receivables, refer to Note 26.As at 31 December, the ageing analysis of trade receivables is as follows:Past due but not impairedYearTotalNeither past duenor impaired< 90days90 – 180days180 – 270days270 – 365days> 365days2012 43,444 41,681 1,366 8 19 35 3352011 55,495 53,017 1,456 214 210 221 37789

17. cash and cash equivalentsFor the purposes of the cash flow statement, cash and cash equivalents comprise the following:In thousands of EUR 31 December 2012 31 December 2011Cash at banks and on hand and cash equivalents 61 71Bank overdrafts (95,041) (64,535)(94,980) (64,464)Cash at banks earns interest at floating rates based on daily bank deposit rates.Bank overdrafts as of 31 December are as follows:31 December 2012 31 December 2011In thousands of EUROverdraft limit Drawn down Overdraft limit Drawn downTatra banka, a.s. 30,870 24,994 29,875 21,430Všeobecná úverová banka, a.s 23,500 21,541 23,500 16,667UniCredit Bank Slovakia a.s. 17,593 15,046 17,593 11,058Volksbank Slovakia, a.s. 20,000 12,219 - -Citibank Europe plc. 13,278 11,276 13,278 7,614Slovenská sporiteľňa, a.s. 20,000 9,963 10,000 1,750Československá obchodná banka, a.s. 5,000 - 8,300 6,016Credit Agricole CIB S.A. - - 16,597 -130,241 95,041 119,142 64,53590

18. SHAREHOLDER’S EQUITYShare capitalShare capital represents the State’s investmentin the Company, held throughMTCRD, made through the contributionof certain assets and liabilities of theCompany’s predecessor, ŽS, and comprises121 registered ordinary shares,each with a nominal value of EUR3,319,391.8874. All of these sharesare issued and fully paid.Legal reserve fundOn the Company’s incorporation, in accordancewith Slovak legislation, a legalreserve fund was established at 10% ofthe Company’s registered capital, againthrough an in-kind contribution. Slovaklegislation requires that the legal reservefund be increased by amounts at leastequal to 10% of annual net profit up to anamount equal to 20% of the Company’sregistered capital. Under the Company’sArticles of Association, the legal reservefund is not available for distribution andcan only be used to cover losses or increaseregistered capital.Based on the decision of the sole shareholderof 9 November 2010, the statutoryreserve fund was utilized to coverthe losses of the Company.Other fundsOther funds represent the differencebetween the value of the assets andliabilities contributed by the State on theCompany’s incorporation and throughan additional capital contribution madeon 2 November 2005 and that of theCompany’s registered capital and legalreserve fund, adjusted by an amountof EUR 4,216 thousand to restatean error in the initial valuation of theassets contributed by the State identifiedin 2006.During 2008 the Company receivedan additional capital contribution of EUR12,149 thousand from MTCRD, this beinga previously unpaid part of the initialequity contribution made on the Company’sincorporation. In addition, theCompany was awarded penalty interestof EUR 8,830 thousand to compensatefor the late payment of this contribution.Settlement of loss from previousaccounting periodThe settlement of the 2011 statutoryresult was approved by the Company’sGeneral Meeting on 31 July 2012 andwas booked to accumulated losses.19. SUBORDINATED DEBTSubordinated debt of EUR 165,970thousand represents funding from theMinistry of Finance, approved by theGovernment on 4 March 2009 andreceived on 6 April 2009, to supportthe Company’s operations. Under theterms of the original agreement, the firstprincipal repayment was due in February2011 and the loan has to be repaidin full by February 2019.Under Supplement No. 6 to the subordinateddebt agreement dated 22 August2012 the first repayment was dueand paid in August 2012 and the totalbalance is to be paid by August 2020.The fair value of the subordinated debtis EUR 156,220 thousand as at 31 December2012.The loan bears interest at the rate of 6MEURIBOR + interest margin of 3.2%.91

20. Interest-bearing loans and borRowingsIn thousands of EUR Maturity date 31 December 2012 31 December 2011Long-term loansSecuredExpress Slovakia 21 February 2012 - 1,497Total - 1,497Short-term portion of loans - (1,497)Long-term portion of loans - -Short-term loansSecuredCredit Agricole CIB S.A. 31 December 2012 - 16,597HSBC 31 August 2012 - 20,000Československá obchodná banka, a.s. 28 March 2013 4,700 -UnsecuredČeskoslovenská obchodná banka, a.s. 30 September 2012 - 4,360Short-term loans 4,700 40,957Short-term portion of loans (see above) - 1,497Overdrafts (Note 17) 95,041 64,535Total 99,741 106,989All loans are denominated in EUR, exceptas otherwise noted in the tableabove.All loans presented in the table above,except for the Express Slovakia loan,are secured by promissory notes witha value of EUR 82,381 thousand (EUR87,337 thousand at 31 December2011), and with a nominal value of EUR121,666 thousand (EUR 139,830 thousandas of 31 December 2011).Under the terms of a loan agreementthe Group is required to meet a financialdebt ratio covenant. The covenantis derived from the Group’s managementaccounts. At 31 December 2012 theGroup did not comply with the covenantfor a loan in the amount of EUR21,542 thousand (EUR 21,027 thousandas of 31 December 2011).The fair value of interest-bearingloans and borrowings amounts to EUR99,741 thousand (EUR 106,989 thousandat 31 December 2011).All interest-bearing loans and borrowingsbear interest at floating rates whichrange from 1.991 to 3.311% (2.933%to 5.096% in 2011).92

21. EMPLOYee BENEFITsIn thousands of EURRetirementbenefitsJubileepaymentsDisabilitybenefitsAt 1 January 2012 10,633 3,505 184 14,322Current service cost 604 193 3 800Interest expense 459 151 9 619Actuarial gains and losses 226 (91) (46) 89Utilization of benefits (423) (381) (36) (838)Transfers - - - -Past service cost (87) 6 10 (72)At 31 December 2012 11,414 3,382 123 14,919Current 31 December 2012 274 371 31 676Non-current 31 December 2012 11,140 3,011 92 14,243At 31 December 2012 11,414 3,382 123 14,919TotalIn thousands of EURRetirementbenefitsJubileepaymentsDisabilitybenefitsAt 1 January 2011 10,562 3,578 512 14,652Current service cost 414 129 - 543Interest expense 528 179 26 733Actuarial gains and losses 1,105 514 (244) 1,375Utilization of benefits (517) (431) (61) (1,009)Transfers (1,458) (464) (49) (1,971)At 31 December 2011 10,633 3,505 184 14,322Current 31 December 2011 266 415 51 732Non-current 31 December 2011 10,367 3,090 133 13,590At 31 December 2011 10,633 3,505 184 14,322TotalThe principal actuarial assumptions used were as follows: 2012 2011Discount rate (% p.a.) 3.8 5.0Future salary increases (%) 0 2Mortality probability (male) (%) 0.04 – 2.43 0.04 – 2.43Mortality probability (female) (%) 0.02 – 0.91 0.02 – 0.91At 31 December 2011 the Group presented certain of these liabilities as liabilities directly associated with assets heldfor sale (Note 25).93

22. provisionsIn thousands of EUROnerouscontracts Legal Terminations TotalAt 1 January 2012 24,450 - 6,352 745 31,547Additions 25 - 2,695 3,947 6,667Unwinding of discount 1,214 - - - 1,214Reversals (1,231) - (120) - (1,351)Utilization (600) - (15) (745) (1,360)Transfers - - - - -At 31 December 2012 23,858 - 8,912 3,947 36,717Current 31 December 2012 835 - - 3,947 4,782Non-current 31 December 2012 23,023 - 8,912 - 31,935At 31 December 2012 23,858 - 8,912 3,947 36,717In thousands of EUREnvironmentalEnvironmentalOnerous contractsLegal Terminations TotalAt 1 January 2011 34,700 1,901 15,869 11,319 63,789Additions 40 - 2,990 745 3,775Unwinding of discount 1,703 - - - 1,703Reversals (1,542) (1,901) (5,913) (5,715) (15,071)Utilization (610) - (6,594) (5,604) (12,807)Transfers (9,841) - - - (9,841)At 31 December 2011 24,450 - 6,352 745 31,547Current 31 December 2011 616 - - 745 1,361Non-current 31 December 2011 23,834 - 6,352 - 30,186At 31 December 2011 24,450 - 6,352 745 31,547Environmental mattersIn 2012, the Group updated its analysisof potential breaches of environmentalregulations at its various sites, with thesupport of an environment specialist,Centrum environmentalnych sluzieb, s.r.o.(previously operating under the name, Life& Waste, s.r.o.). As a result of this analysis,and based on the findings of Centrumenvironmentalnych sluzieb, s.r.o., theGroup has estimated that costs of EUR23,858 thousand (EUR 34,290 thousandat 31 December 2011 – including liabilitiesof EUR 9,841 thousand classifiedas directly associated with assets held forsale) are equired to remedy the significantenvironmental issues relating to water,oil and fuel management identified in thepast.Expenditures will be incurred through2013 and 2014. A discount rate of 3.8%p.a. was used in the calculation.Legal claimsProvisions for legal claims relateto a number of claims, the most significantbeing cases with REFIN B.A., Ltd.in the amount of EUR 5,898 thousandand with I4NEXT, Ltd. in the amountof EUR 2,471 thousand.94

23. trade and other PAYABLES, And Other non-current liabilitiesIn thousands of EUR 31 December 2012 31 December 2011Domestic trade payables 142,450 178,529Foreign trade payables 6,206 6,653Payables due to employees 6,041 6,746Payables due to social institutions 3,347 4,006Other payables 6,084 14,478164,128 210,412At 31 December 2012 overdue trade payables amounted to EUR 4,071 thousand (EUR 20,159 thousand at 31 December2011). For details of related party payables, refer to Note 26.The social fund payable is included in other non-current liabilities. Movements in the social fund during the period areshown in the table below:In thousands of EUR 31 December 2012 31 December 2011At 1 January 134 126Additions 624 710Utilization (597) (702)At 31 December 162 13495

24. COMMITMENTS AND CONTINGENCIESFinance lease commitmentsAt 31 December 2012 the Group hasfinance lease commitments relatingto the acquisition of 1,354 wagons,12 powered vehicles and hardwareequipment (1,274 wagons and 8 poweredvehicles and hardware equipmentat 31 December 2011). All leases areon a fixed repayment basis with floatinginterest rates derived fromEURIBOR,except for leasing from AAE. Futureminimum lease payments under financeleases, together with the present valueof net minimum lease payments areas follows:In thousands of EUR 31 December 2012 31 December 2011Minimumlease paymentsPresent valueof paymentsMinimumlease paymentsPresent valueof paymentsWithin one year 18,856 16,333 17,996 14,602After one year but not more than five years 66,693 61,292 69,361 62,143More than five years 9,422 9,230 13,961 13,242Total minimum lease payments 94,971 86,855 101,318 89,987Less: future finance charges (8,116) - (11,331) -Present value of minimum lease payments 86,855 - 89,987 -Investing commitmentsThe Group’s investment expenditure for the period from 1 January 2013 to 31 December 2013 (1 January 2012 to 31 December2012) is as follows:In thousands of EUR 31 December 2012 31 December 2011Land and buildings 46 585Machines, equipment and other assets 437 23,587Intangible assets 73 -556 24,172Expenditures of EUR 556 thousand(EUR 24,172 thousand at 31 December2011) are committed under contractualarrangements.Contingent liabilitiesČD CARGO, a.s. filed a lawsuit againstthe Group claiming an amount of EUR1,475 thousand (including interest)in respect of unpaid VAT related to theGroup’s usage of their wagons for internationaltransportation during theperiod from 24 May 2007 to 3 May2008. A payment order for the amountclaimed was issued on 14 May 2009by the District Court Bratislava II anddelivered to the Group on 30 June 2009.The Group appealed this payment orderin the period stipulated by law and thecourt rescinded the order. Under Slovaklegislation, trade practices of neighbouringcountries and international agreements,the usage of wagons for internationaltransportation is not deemed to bea rental arrangement and is, therefore,exempt from VAT. Consequently, supportedby their legal advisors, managementhas concluded that the probabilityof ČD CARGO, a.s. succeeding in thislegal action against the Group is remoteand therefore no provision has been recordedin these financial statements.96

25. Assets classified as held for sale and liabilities directlyassociated with assets held for saleIn thousands of EURLand andbuildingsMachines,equipment,other assetsAssets underconstructionAt 1 January 2012 41,405 3,309 645 45,359Disposals (37,553) (3,309) (645) (41,507)Transfers (223) (223)At 31 December 2012 3,629 - - 3,629TotalIn thousands of EUR Employee benefits Provisions TotalAt 1 January 2012 9,841 1,971 11,812Disposals (9,841) (1,950) (11,791)Utilization - (21) (21)At 31 December 2012 - - -In thousands of EURLand andbuildingsMachines,equipment,other assetsAssets underconstructionAssets held for sale as at 31 December2011 41,405 3,309 645 45,360TotalIn thousands of EUREmployeebenefits Provisions TotalLiabilities directly associated with assetsheld for sale as at 31 December 2011 9,841 1,971 11,812Assets held for sale as at 31 December2011 were sold for EUR 54,524 thousandwas sold to a related partyon 1 February 2012. Assets held forsale were represented by land, buildings,machinery, equipment and assets underconstruction. Liabilities associatedwith assets held for sale representeda provision for site restoration in respectof contaminated land and for employeebenefits.Assets held for sale as at 31 December2012 included land completingof the sale of the assets from 2012.The land was sold to a related party forEUR 4,299 thousand in February 2013.97

26. RELATED PARTY DISCLOSURESRelated parties of the Group comprise all companies under common ownership (meaning under the control of the State),the Group’s joint venture and the Board of Directors.The following tables provide the total amount of transactions which have been entered into with related parties for theyears ended 31 December 2012 and 2011:In thousands of EUR 31 December 2012Related partySales torelated partiesPurchases fromrelated partiesAmounts owed byrelated partiesAmounts owed torelated partiesŽSR 1,573 89,950 450 109,603ZSSK 71,462 5,508 2,445 846Ministerstvo financií SR - 7,158 - 156,220Slovenský plynárenský priemysel - 410 - (1)BTS (joint venture) 927 5,743 197 1,492Other related parties 464 971 19 8In thousands of EUR 31 December 2011Related partySales torelated partiesPurchases fromrelated partiesAmounts owed byrelated partiesAmounts owed torelated partiesŽSR 1,720 96,677 1,002 113,905ZSSK 57,450 1,049 12,206 278Ministerstvo financií SR - 7,841 - 165,970Slovenský plynárenský priemysel - 2,872 - 95BTS (joint venture) 278 5,374 86 1,314Other related parties 80 739 3 71The Group’s major contractual relationshipswith ŽSR and ZSSK are forfixed one year periods and are subjectto an annual renewal process.Purchases from ŽSR include primarilynetwork fees and traction electricity.Sales to ŽSR comprise transport services,while sales to ZSSK include gainson sale of property, plant, equipment,the repair of passenger wagons andtrack vehicles and the sale of diesel oil.98

Statutory and supervisory bodiesMembers of the Group’s statutory andsupervisory bodies as registered in theCommercial Register at the DistrictCourt Bratislava I at 31 December 2011are as follows:Board of Directors:Ing. Vladimír Ľupták, chairman(since 26 April 2012)Ing. Jaroslav Daniška(since 26 April 2012)Ing. Peter Fejfar(since 26 April 2012)Ing. Pavol Ďuriník, PhD., chairman(to 25 April 2012)Ing. Mgr. Martin Štochmaľ,PhD.(to 25 April 2012)Ing. Jozef Virba(to 25 April 2012)Supervisory Board:Ing. Martin Čatloš, chairman(since 11 September 2012)Ing. Radovan Majerský, PhD.(since 11 September 2012)Bc. Anton Andel(since 2 February 2010)Ján Baláž(since 2 February 2010)Ing. Radovan Majerský, PhD.(since 11 September 2012)Ing. Pavol Gábor(since 11 September 2012)Ing. Štefan Hlinka(since 11 September 2012)Ing. Karol Jasenovský, chairman(to 10 September 2012)JUDr. Ivo Nesrovnal(to 10 September 2012)Michal Bróska(to 10 September 2012)Ing. Ľudovít Kulcsár(to 10 September 2012)Emoluments of the members of theBoard of Directors and SupervisoryBoardThe Board of Directors’ total remunerationapproximated EUR 25 thousand(EUR 28 thousand in 2011). The totalremuneration of members of the SupervisoryBoard amounted to EUR 22 thousand(EUR 28 thousand in 2011).Loans grantedNo loans have been granted to key managementand members of the Boardof Directors and Supervisory Board.99

27. Financial risk managementThe Group’s principal financial liabilitiescomprise interest-bearing loans and borrowings,overdrafts and trade payables.The main purpose of these financial liabilitiesis to raise finance for the Group’soperations. The Group has various financialassets such as trade and otherreceivables and short-term deposits,which arise directly from its operations.In the past the Group entered into derivativetransactions, including forwards,options and swaps, to manage the currencyrisks arising from its operations.The Group did not entered into any derivativecontracts in 2012 and 2011.The main risks arising from the Group’sfinancial instruments are interest raterisk, liquidity risk and credit risk. TheBoard of Directors reviews and agreespolicies for managing each of these riskswhich are summarised below.Interest rate riskThe Group’s exposure to the riskof changes in market interest rates relatesto the Group’s long-term and shorttermborrowings and overdrafts withfloating interest rates. The Group hasa broad portfolio of borrowings bearinga range of fixed and floating interestrates.The following table demonstrates thesensitivity of the Group’s profit beforetaxes for the period of 12 months afterthe reporting date to a reasonablechange in interest rates of 50 basispoints higher/lower, with all other variablesheld constant. There is no impacton the Group’s equity.In thousand of EUR 31 December 2012 31 December 2011EURIBOR (+0.5%) 666 517EURIBOR (-0.5%) (267) (517)Liquidity riskThe Group’s policy is to maintain sufficientcash and cash equivalents or haveavailable funding through an adequatenumber of credit facilities to cover theliquidity risk in accordance with its financingstrategy. The amounts availablein the form of credit facilitiesas at 31 December 2012 and 2011consist of the following:In thousand of EUR 31 December 2012 31 December 2011Long-term loan facilities available - 9,629Short-term loan facilities available 28,592 36,151Total loan facilities available 28,592 45,780As at 31 December 2012 the Group did not have any banks guarantees (EUR 0 thousand at 31 December 2011).100

The table below summarises the maturity profile of the Group’s financial liabilities at 31 December 2012 based on contractualundiscounted payments.In thousand of EUROn demandLess then3 monthsFrom 3 to12 monthsFrom 1 to5 yearsOver5 years TotalSubordinated debt - 9,750 9,750 78,000 58,720 156,220Long-term loans - - - - - -Trade and other payables 4,071 48,136 7,454 104,468 - 164,129Obligations under finance leases - 718 15,615 61,292 9,230 86,855Short-term loans - 4,702 95,039 - - 99,7414,071 63,306 127,858 243,760 67,950 506,945The table below summarises the maturity profile of the Group’s financial liabilities at 31 December 2011 based on contractualundiscounted payments.In thousand of EUROn demandLess then3 monthsFrom 3 to12 monthsFrom 1 to5 yearsOver5 years TotalSubordinated debt - - 19,500 78,000 68,470 165,970Long-term loans - 1,497 - - - 1,497Trade and other payables 20,159 39,636 7,110 1,394 86,021 154,320Obligations under finance leases - 476 14,126 62,143 13,242 89,987Short-term loans - 22,683 82,809 - - 105,49220,159 64,292 123,545 141,537 167,733 517,266Credit riskThe Group provides a variety of customerswith products and services,none of whom, based on volume andcreditworthiness, present a significantcredit risk, individually or in aggregate.The Group has three major customers,US Steel Košice, Budamar Logistics andExpress Slovakia, sales to which represent55% of transport and relatedrevenues (51% in 2011), but managementis confident, based on historic experience,projections for the future andcontracts in place, that the Group is notoverly exposed to credit risk in respectof these three customers. The Group’sprocedure is to ensure that sales aremade to customers with appropriatecredit histories and that acceptablecredit limits are not exceeded.The value of financial assets, recognisedin the balance sheet reduced by impairmentlosses reflects the Group’s maximumexposure to credit risk.Capital managementThe primary objective of the Group’scapital management is to ensure thatit maintains a strong credit rating andhealthy capital ratios in order to supportits business and maximise shareholdervalue.The Group manages its capital structure,and makes adjustments to it, in lightof changes in economic conditions.No changes were made in the objectives,policies or processes during theyears ended 31 December 2012 and31 December 2011.The Group monitors indebtedness usinga debt to equity ratio, by which debt consistsof external interest-bearing loansand borrowings and excludes subordinateddebt provided by related partiesand finance lease obligations, dividedby total equity. In 2012 the ratio hasdeteriorated in comparison with theprevious period.101

In thousands of EUR 31 December 2012 31 December 2011Long-term debt, net of current portion (excluding subordinateddebt and finance lease obligations)- -Short-term debt, including current portion of long-term debt(excluding finance lease obligations)99,741 106,989Debt 99,741 106,989Equity 121,526 144,858Debt to equity ratio (%) 82% 74%28. Events after the balanced sheet dateNo events occurred subsequent to 31 December 2011 that might have a material effect on the fair presentation of the mattersdisclosed in these financial statements. The Group sold land classified as held for sale to a related party in February 2013.Approved by Ing. Vladimír Ľupták and Ing. Peter Fejfar on behalf of the Board of Directors on 16 April 2013.102

ORGANIZATION STRUCTURE AS AT 31. 12. 2012General AssemblySupervisory BoardBoard of DirectorsBoard of Directors OfficeInternal AuditChief Executive Officer (CEO)Legal servicesDepartmentControl, Inspection andProtection DepartmentProtectionand EconomicMobilization UnitControl UnitInspection UnitStrategy andDevelopmentDepartmentStrategyand Investment UnitProjectManagement OfficeICT SectionIT Operation UnitHuman resourcesmanagementDepartmentManagement andDevelopment of HumanResources UnitPersonal ControllingUnitSecurity and healthprotection UnitEducation UnitHR services SectionPersonal Services UnitWages Centre UnitTreasury DepartmentCash-FlowAdministration UnitCommunicationDepartmentInternalCommunication UnitExternalCommunicationand Internationalrelations UnitLogistics andPurchase ManagementDepartmentProcurement andMethodics SectionMethodicsand Analyses UnitProcurementand Purchase UnitDistributiveLogistics SectionStorage andDistribution of GoodsUnitEnergetics DepartmentTractive energetics UnitNon-tractiveenergetics UnitTrade and Services Division Operations Division Rolling stocks services DivisionEconomy DivisionIntermodal transportation UnitMarketing SectionSales SectionTrade Support SectionTrade Conditions UnitTrade support UnitSection of technical and technologicalpreparation of operationsOperations Analyses and Guidelines UnitOperations planning UnitOperations efficiency analyses UnitOperations, Transportation and WagonService SectionTechnology and Wagon Service UnitOperations and Traction Control SectionTransport Dispatching UnitFreight Wagons Control UnitTraction Control UnitEast Slovak transshipment SectionTransshipment UnitTransport and Transportation UnitTechnical UnitMatovce and EVO Transshipment UnitMaintenance and repairs trade SectionRolling Stocks Maintenanceand Repairs Sales UnitRolling Stocks Maintenanceand Repairs Back Office UnitRolling stocks maintenanceand repairs SectionMaintenance and repairsmanagement UnitMaintenance and repairs Technicalsecurity UnitRolling Stock ManagementSection - ECMDriving Railway Vehicles Management UnitFreight Wagons Management UnitInspection of Technical Control UnitControlling SectionAccounting taxes and reporting SectionAccounting UnitRail clearing centre SectionInput control and internationaltransportation price calculation UnitInternational transportationclaiming UnitInput control and domestictransportation price calculation UnitInternational transportationaccounting UnitTransportation accounting and clearingUnitFacility management SectionFacility efficiency UnitFacility Management andOperations UnitEcology Unit103

ContactsŽelezničná spoločnosť Cargo Slovakia, a. s.Drieňová 24820 09 Bratislavatel.: +421 2 20 29 77 76fax: +421 2 43 42 03 89e-mail: cargo.gr@zscargo.skwww.zscargo.skForeign representation:General Agency in UkraineŽelezničná spoločnosť Cargo Slovakia, a.s.General Agency in UkraineIng. Jozef VIRBAGogolya 1, 290 604 Lvivtel.: +380 322 971 198fax: +380 322 971 198mobil phone: +380 954 786 565e-mail: gzcargo.lviv@gmail.com104

ZSSK CARGOŽelezničná spoločnosť Cargo Slovakia, a. s.Drieňová 24, 820 09 Bratislavawww.zscargo.sk