HZ INFRASTRUKTURA d.o.o., Zagreb Annual financial statements and Independent Auditor's Report for the year 2018 CONTENT Page Responsibility for the Annual Financial Statements 1 Independent Auditor's Report 2-7 Income Statement and Statement of Other Comprehensive Income 8 Statement of financial position / Balance sheet 9-10 Statement of Changes in Equity 11 Statement of Cash Flows 12 Notes to the Financial Statements 13-91 RESPONSIBILITY FOR THE ANNUAL FINANCIAL STATEMENTS The Management Board of HZ INFRASTRUKTURA d.o.o., Zagreb, (hereinafter: "the Company") is responsible for ensuring that the annual financial statements for the year 2018 are prepared in accordance with the Accounting Act (Official Gazette No. 78/15, 134/15, 120/16, 116/18) and International Financial Reporting Standards, to give a true and fair view of the financial position, the results of operations, the changes in equity and the cash flows of the Company for that period. After making enquiries, the Board has a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Board has adopted the going concern basis in preparing the financial statements of the Company. In preparing these financial statements, the Board is responsible that: * Selection and consistent application of suitable accounting policies in accordance with the applicable financial reporting framework; * Giving reasonable and prudent judgements and estimates; and * Using the going concern basis of accounting, unless it is inappropriate to presume so. The Board is responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the financial position, the results of operations, the changes in equity and the cash flows of the Company and their compliance with the Accounting Act and the International Financial Reporting Standards. The Management Board is also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and othe irregularities. UK0 Signed on behalf of the agementB : Ivan Kr ic, Darko Bariie President of the Management Board Member of the Management Board Nikola Lju n Marko Z. Zubrinic Member of he Management Board Member of the Management Board Krunoslav Pap', dipl. ing. Member of te Management Board HZ INFRASTRUKTURA d.o.o. Mihanovieeva 12 10 000 Zagreb Republic of Croatia 23 May 2019 1 Te: 385 1 2395 741 BDO Croatia d.o.o. Fax: +-385 1 2303 691 10000 Zagreb E-mail: bdo-croatia.hr Trg I F. Kennedy 6b INDEPENDENT AUDITOR'S REPORT To the Owner of company H! INFRASTRUKTURA d.o.o., Zagreb Report on the Audit of the Annual Financial Statements Qualified opinion We have audited the enclosed annual financial statements of Hi INFRASTRUKTURA d.o.o., Zagreb, Mihanoviceva 12, (the "Company") for the year ended 31 December 2018, which comprise the Statement of financial position (Balance Sheet) as at 31 December 2018, the Income Statement, the Statement of other comprehensive income, the Statement of changes in equity and the Statement of cash flows for the year then ended, and Notes to the financial statements, including a summary of significant accounting policies and other explanations. In our opinion, except for the possible effects of the matter described in the Basis for qualified opinion, the accompanying annual financial statements, give a true and fair view of the financial position of the Company as at 31 December 2018, and of the financial performance and the cash flows of the Company for the year then ended in accordance with the Accounting Act and the International Financial Reporting Standards as adopted by European Committee and published in official gazette of European Union (the "IFRS"). Basis for qualified opinion 1. In the Statement of Financial Position (Balance Sheet) at 31 December 2018, the Company has reported an investment in subsidiary company Pruine gradevine d.o.o. in the amount of HRK 193,858 thousand. The Company did not estimate the recoverability of the value of the investment of long-term financial assets in order to determine the economic benefits that the Company will receive from the said assets and whether it is necessary to effect impairment of long-term financial assets. As a result, we are unable to determine the effects of impairment to the Company's financial statements for 2018. 2. In the Statement of Financial Position (Balance Sheet) as at 31 December 2018, the Company, has unregulated ownership in the land registry over a significant number of real estates recorded in the business books. Settling property rights is ongoing. Thus, we are unable to determine the effects of corrections of the Company's financial statements for 2018. We conducted our audit in accordance with Accounting Act, Auditing Act and International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the annual financial statements section of our Independent Auditor's report. We are independent of the Company in accordance with the Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion. 2 Registrirano kod Trgovakog suda u Zagrebu pod brojem 080044149 018 76394522236 jB D O BDO Croatia d. Emphasis of matter 1. We draw attention to Note 45 of the Annual financial statements due to the uncertainty related to legal proceedings that have been initiated against the Company. Our opinion has not been modified in this regard. Other matters 1. We draw attention to Note 43 to the financial statements where, in accordance with point (b) item 8 of Article 21 of the Accounting Act, it is stated that a web page where the separate non-financial report of the Company will be published will be set up no later than 6 months from the date of the Statement of financial position (Balance Sheet). Our opinion has not been modified in this regard 2. We draw attention to Note 43 where it is stated that the consolidated financial statements of the Company will be published by 30 September 2019. For a better understanding of the Company's operations as a whole, users should read the consolidated annual financial statements of the Company in connection with these annual financial statements. Key audit matters Key audit issues are those issues that were, by our professional judgment, of the utmost importance in our audit of the annual financial statements of the current period and include the recognized most significant risks of significant misstatement due to error or fraud with the greatest impact on our audit strategy, the disposition of our available resources and the time spent by the engaged audit team. We have dealt with these issues in the context of our audit of the annual financial statements as a whole and in forming our opinion about them, and we do not give a separate opinion on these issues. We have identified that the issues listed below are the key audit issues to be disclosed in our Independent Auditor's Report. Key audit issues How we addressed key audit issues Impairment of assets pursuant to LAS 36 Our audit procedures included the following; In its financial statements, as at 31 December 2018, _ We have reviewed the Company's valuation the Company recorded HRK 2,425,231 thousand of methodology for impairment of assets; the assets in preparation. - We have checked for the remaining part of the As at 31 December 2018, the assets in preparation assets in preparation for additional impairment includes investments in progress over three and indicators. more years in the amount of HRK 641,491 thousand. This amount also contains the project of the Lika railway which the Company had value adjusted on 31 December 2017. Related Disclosures in Annual Financial Statements. Please see note 17. 3 IB D O BOO Croatia d.o.o. Other Information in the Annual Report The Management Board is responsible for other information. Other information include information included in the Annual Report, but do not include the annual financial statements and our Independent Auditor's Report on them. Our opinion on the annual financial statements does not include other information, except to the extent explicitly stated in the part of our Independent Auditor's Report, entitled Report on compliance with other legal or regulatory requirements, and we do not express any kind of conclusion with assurance on them. In connection with our audit of the annual financial statements, it is our responsibility to read the other information and consider whether other information have significant contradictions to annual financial statements or our knowledge gained while performing the audit, or otherwise appear to be materially misstated. If, based on the work we have performed, we conclude that there is material misstatement of these other information, we are required to report this fact. In this sense, except notified in section Basis for qualified opinion, we do not have anything to report. Responsibilities of the Management Board and Those Charged with Governance for the Annual Financial Statements The Management Board is responsible for the preparation of annual financial statements that give a true and fair view in accordance with IFRS, and for such internal control as the Management Board determines is necessary to enable the preparation of annual financial statements that are free from material misstatement, whether due to fraud or error. In preparing the annual financial statements, the Management Board is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Management Board either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company's financial reporting process. Auditor's Responsibilities for the Audit of the Annual Financial Statements Our objectives are to obtain reasonable assurance about whether the annual financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Independent Auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. 4 B D O BDO Croatia d.o.o. Auditor's Responsibilities for the Audit of the Annual Financial Statements (continued) We also: * Identify and assess the risks of material misstatement of the annual financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Management Board. * Conclude on the appropriateness of the Management's Board use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our Independent Auditor's report to the related disclosures in the annual financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our Independent Auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern. * Evaluate the overall presentation, structure and content of the annual financial statements, including the disclosures, and whether the annual financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. 5 IB D O BDO Croatia d.o. Report on Compliance with Other Legal or Regulatory Requirements Report based on the requirements of Regulation (EU) No. 537/2014 On 27 September 2018, the Company's General Assembly appointed us on the basis of the Management Board's proposal to revise the annual financial statements for 2018. At the date of this Report, we have been continuously engaged in carrying out the Company's legal audits of the Company's annual financial statements for 2010, up to the Company's annual financial statements for 2018, totalling 8 years. In addition to the issues we have set out as a key auditing issue in our independent auditor's report as outlined in the fundamentals section, we do not have any information to report regarding point (c), paragraph 2 of Article 10 of Regulation (EU) No.537/2014. Through our statutory audit of the Company's annual financial statements for the year 2018 we are able to detect irregularities, including fraud under Section 225, Response to Non-Compliance with the IESBA Code and the Rules of the IESBA Code that requires us to see if the Company complied with the laws and regulations which are generally recognized to have a direct impact on the determination of significant amounts and disclosures in their annual financial statements, as well as other laws and regulations that do not have a direct effect on the determination of significant amounts and disclosures in its annual financial statements, but compliance with which may be crucial for operational aspects the Company's business, its ability to continue as a going concern or to avoid significant penalties. Except in case we encounter, or find out about, disrespect of any of the foregoing of the aforementioned laws or regulations that are apparently insignificant, according to our judgment of its content and its influence, financially or otherwise, for the Company, its shareholders and the wider public, we are obliged to inform the Company thereof and request to investigate this case and take appropriate measures to resolve the irregularity and to prevent the reappearance of these irregularities in the future. If the Company does not correct any irregularities arising from incorrect disclosures in the audited annual financial statements that are cumulatively equal to or greater than the amount of significance to the financial statements as a whole, we are required to modify our opinion in an independent auditor's report. In the audit of the Company's annual financial statements for the year 2018, we determined the significance for the financial statements as a whole in the amount of HRK 18,200 thousand, which represents approximately 1.8% of of sales revenues. We chose sales revenue as a measure of significance because we consider it to be the most appropriate benchmark for the Company's activities. Our audit opinion is consistent with the additional audit report prepared for the Company's Audit Board in accordance with the provisions of Article 11 of Regulation (EU) No. 537/2014. During the period between the initial date of the Company's audited annual financial statements for the year 2018 and the date of this report, we have not provided the Company with any prohibited non-scheduled services and we did not provide services for the design and implementation of internal control or risk management procedures related to the preparation and I or control of financial information or the design and implementation of technological systems for financial information, and we have maintained our independence in the performance of the audit in relation to the Company. 6 IB D O BDO Croatia do.o. Report on Compliance with Other Legal or Regulatory Requirements The Management Board of the Company is responsible for compiling the Management Report as an integral part of the Company's Annual Report and we are required to express an opinion on the compliance of the Company's Management Report as an integral part of the Company's Annual Report with the Company's annual financial statements. In our opinion, based on the work we per-formed during the audit, the information contained in the Management Report for the year 2018, which is an integral part of the Company's Annual Report for 2018, has been aligned with the information provided in the Company's annual financial statements presented on pages 8 to 91 on which we have expressed our opinion as outlined in the Qualified Opinion section above. In our opinion, based on the activities we conducted during the audit, the 2018 Management Report of the Company, which is an integral part of the Company's Annual Report for 2018, is drawn up in accordance with the Accounting Act. Based on the knowledge and understanding of the Company's business and its environment within the scope of the audit, apart from the sections in the Qualified Opinion and Emphasis of Matter sections, we have not found that there are significant misstatements in the Management Report for 2018, which is an integral part of the Company's Annual Report for 2018. The Management Board of the Company is responsible for compiling the annual financial statements of the Company for the year ended 31 December 2018 in the prescribed form on the basis of the Ordinance on the structure and contents of the annual financial statements (Official Gazette 95/16), and in accordance with other regulations governing the Company's business ("Standard annual financial statements"). The financial information presented in the Company's standard annual financial statements is in accordance with the information contained in the Company's annual financial statements presented on pages 8 to 91 for which we have expressed the opinion as set forth in the Qualified Opinion section above. Zagreb, 23 May 2019 BDO Croatia d.o.o. Trg J. F. Kennedy 6b 10000 Zagreb zai,1140- It~ Ivan Cajko, Member of the Ivan Cajko, Cerified Auditor Management Board 7 HZ INFRASTRUKTURA d.o.o., ZAGREB INCOME STATEMENT AND STATEMENT OF OTHER COMPREHENSIVE INCOME for the year ended 31 December 2018 2017 2018 restated Note HRK'000 HRK'000 Sales revenue 3 181,761 183,988 Other operating revenues 4 1,031,045 1,030,411 Operating revenues 1,212,806 1,214,399 Raw material and material costs 5 90,486 87,524 Costs of goods sold 6 5,164 4,281 Other external costs 7 211,034 213,455 Staff costs 8 644,446 641,906 Depreciation 9 36,131 42,092 Other expenses 10 96,656 112,466 Impairment 11 117,923 42,094 Provisions 12 90,390 52,109 Other operating expenses 13 14,769 10,348 Operating expenses 1,306,999 1,206,275 Financial income 14 10,264 5,429 Financial expenses 15 15,707 10,589 TOTAL INCOME 1,223,069 1,219,828 TOTAL EXPENSES 1,322,706 1,216,864 LOSS / (PROFIT) BEFORE TAXATION (99,637) 2,964 Corporate income tax 16 LOSS / (PROFIT) FOR THE PERIOD 29 (99,637) 2,964 COMPREHENSIVE LOSS I (PROFIT) FOR THE PERIOD (99,637) 2,964 The accompanying notes from 1 to 48, set out below, form an inseparable part of these financial statements. 8 HZ INFRASTRUKTURA d.o.o., ZAGREB STATEMENT OF FINANCIAL POSITION I BALANCE SHEET for the year ended 31 December 2018 31 Dec 2018 31 Dec 2017 1 Jan 2017 POSITION restated restated Note HRK'000 HRK'000 HRK'000 ASSETS Intangible assets 17 44,910 57,357 60,640 Tangible assets 17 11,857,617 11,460,206 11,421,660 Financial assets 18 194,725 194,576 194,569 Receivables 19 5,074 11,177 18,228 Prepaid expenses and accrued income 28 7,677 9,313 9,595 LONG-TERM ASSETS 12,110,003 11,732,629 11,704,692 Inventories 20 115,679 140,512 168,528 Receivables from related parties 21 171,940 188,909 154,145 Trade receivables 22 16,633 13,871 19,149 Receivables from employees and members 23 6,783 6,180 6,400 Receivables from State and other institutions 24 6,145 4,364 5,278 Other receivables 25 15,191 13,285 13,444 Financial assets 26 4,801 6,175 5,796 Cash and cash equivalents 27 527,660 668,608 482,681 Prepaid expenses and accrued income 28 3,294 1,131 237 SHORT-TERM ASSETS 868,126 1,043,035 855,658 TOTAL ASSETS 12,978,129 12,775,664 12,560,350 OFF BALANCE SHEET ITEMS 41 6,816,612 6,636,928 6,565,160 The accompanying notes from 1 to 48, set out below, form an inseparable part of these financial statements. 9 HZ INFRASTRUKTURA d.o.o., ZAGREB STATEMENT OF FINANCIAL POSITION / BALANCE SHEET for the year ended 31 December 2018 31 Dec 2018 31 Dec 2017 1 Jan 2017 POSITION restated restated Note HRK'000 HRK'000 HRK'000 CAPITAL AND RESERVES Subscribed capital 224,188 224,188 224,188 Capital reserves 8,357,869 8,476,079 8,596,429 Transferred loss 0 0 0 Loss / (profit) for the current year (99,637) 2,964 (3,942) CAPITAL AND RESERVES 29 8,482,420 8,703,231 8,816,675 Provisions 30 192,920 139,344 142,283 Liabilities toward banks and other financial institutions 31 785,141 707,553 810,885 Other long-term liabilities 9,356 15,246 21,499 Accrued expenses and deferred income 40 1,904,976 1,760,005 1,774,103 Long-term liabilities 2,699,473 2,482,804 2,606,487 Liabilities to related parties 32 123,321 76,569 96,923 Liabilities for loans, deposits, etc.-related parties 28 10 55 Liabilities for loans, deposits, etc. 33 194,018 192,936 193,725 Liabilities toward banks and other financial institutions 34 228,495 234,764 198,607 Prepayments received 35 3,293 7,597 8,117 Trade payables 36 163,278 148,384 80,438 Liabilities toward employees 37 30,391 30,339 30,134 Liabilities for taxes, contributions and similar fees 38 21,043 22,801 22,007 Other liabilities 39 798,373 586,366 371,646 Accrued expenses and deferred income 40 41,075 150,519 (6,747) Short-term liabilities 1,603,315 1,450,285 994,905 TOTAL CAPITAL AND LIABILITIES 12,978,129 12,775,664 12,560,350 OFF BALANCE SHEET ITEMS 41 6,816,612 6,636,928 6,565,160 The accompanying notes from 1 to 48, set out below, form an inseparable part of these financial statements. 10 ��,°а омj Ф•�а t�s ц�i ц�i ц� �'' 47 г-, ,� 1в ^ CJ м С5 ®� м.6 е�- w ry Ф т- С7 Ф q д'сР �'v 6,^,� � r су "' �s о� сп а�п � �`- ш`� и s� ,д г- п ау т г'+ т.. а, r,p ьл v г'+ n ^' ц� г J С7 _ ич .„ �а w � ет р� 'ег tT п с0 � 4 и Г .е7 . Q о°^ *- r�'а в'� v а� " м �+ ю иь ® м сч н "� �"+ г: � w �_ �: ь*г Q У�," 4 N N tv r-= =~' ...... �. �« ,,.,'� ю v `� `v ® .�- м м--� р, ? �. � Т �- W � О+ `'- W W 44 х N 4 N. �, б 4® 6® б О� f'l ГЧ . Q ® 4 О� 4? О Ф 0 ц'� � 6 О О С7 Q О® О^ ^�.. N Р � rn �, Т . rn °° ь°`О б' � •мр '�мО А Ф� б sj м. м .,. м гл х-1 ;.# й О: q7, С � ¢ Ф 4 � S] � � � �.% � Ф м, � Ф � J � � � б � LL f17 SSi � Ф г � Ф 4 С7 Ф Ф 4 Ф Ф О 4 С7 4 С7 С3 4 Ф CS О Ф С7 Ф О О С7 С7 Ф Ф Ci tl Ф д�U и д� ti �^ со С oD ау^ Ri в м ;� Ki С в � �' v а` � �. q] с � � Н с°а ч- -� Ф С7 _� � i i ъ а Ф � ы д � � � '� ы гб � � � � . м Гг С? �b W � п С7 СА � 1[3 ^^ 47 Ф N^'"" N С7 161 ц^ Ф� ' �Г! ^ � t6 7 1f1 'е! г�гу Ф�л�°1 Оп .L1 SD .6 1й5 Р� р. �., .�!' цу [V е•э м� М.р г О`а м' а' 'а �� С1+ С � q� Ф„р Ф сЛ С} �О а7 I�. .,G yty ry р1, v п {. гУу v N г rj ГЛ �� � м N п п р а � W w еу т а сп п а5 [з и Ri � р м� м'"� � "" ,� й-° V�. цу ами �= с. �� г� Fм+ N Р „'�'.а й: м� в � .е т �д Г "; `р ro "i ._.� �, � �. V " "? � д а са" `" n' аъ � ai со го� �г w 4 7 7 Q Р+1 ty N О t7 и'1 4 О Cs Гl С7 О п т�. � Ф О О С� д® 6 О'q' д 6 б 6 С7 О 6 С3 Ф Q q� (� .ка , .q � и п n r. н п п � п� о о o-Q � о а � �,� м м` м з v �- т "' `° ,а Q � � � � � v� •а х �а 00 и b. О � г4 cj п) Ф Ф Ф Ф {} г7 Ф С? е7 а0 сб Ф а О д О о С) в 6 9О [S О€7 Ф t7 С7 с7 4 4 Ф t9 .,�г W W 47 ., b7 йJ tQ � т q е�� N'� N N N N� N � в e�s ' га и м� н rv �"' v °а `t°` а � � д ` г ц 4 � и 7 � 5/У � � �н � Фь'i 6Фд оvП `� LL _� а ,L} .� � Q {� � � � ` .i�..� а'�.. :�.а � Q�+� � � W "t] ° � ы, ° _� ® � � �ь � � Ф т� •а �g г+ ,v °` в .°` (U V ++ ,,'�, а .�'+ у � �и, � � и � й � � � � ? и � ;� � ш иил ? а а� I- С7 ` �° , ` v -в '�f С7 С] в д с и о а с,,, +i� с и iu �. м й� �ц ._ i� Ф R. г:а го йi � +� � а т ' `� � 'в v `w ' г° � �а гз Ф � °о о Q г"'r е� ^О Ъ� с� а н'� м с� и� м �� и г� � � � Ф Ф �, Ф © ��.� ,. м � 4 0, � � ап ы в� � � �, ь. рп Q � ь i.,� �� с � � t, Ф w �у с � т� Ф с Е та т �• � � щ +ц 43. � • N А дв ¢ q1 �? ев`3 ^� �.. '�S n � � .Р � д `,� "С7 � �' А �' `п о -v '3 �' в л � Е Q- �' w о 'S �'.` � .д ¢и Е о '� : ` � а Е ��,�-5 С �'� � iэ ° N Ф ви` си сФi � � о °��+ и с.п. � v г`вч ы�� а q �- V L J, с р С еу О в Ct � � С 41 [% С гч 47 в б�.. С. ц � а � м С QI � � � у. Ф 1] �✓+ С О Т5 i tU О?,о 1У �� О"С7 t� �� �j 6 � ы D� V 47� © � 4�е -i О� .�! гд С1 fj � Р ar -k 4� .V гtl а� О гип, Е {= (д 4. р г0 � �. � . � . Q � � � � � � puj н +� ы р� б ы С: д � � � и � ®� � � �© э g � �. �� +� fi Q Ф � i1 С т� у г4 4 �3 � �. L7. �,0 С � СУ у N +[3 и с' �0 С @ б йу � °б r � � � � а � ,, ц с � Q �. 'О , ы # � � � � � ® С1 4 � ии � ,. � с а в [1 D , . � . � W ы-�. Ф r0 41 - м п5 � у р Ф. '^ т в [U � �. � sG � � � Ф Ш у п7 У й1 � � Ф �� i 4 ц sa �� мФ- '�-у б в v U и � Е ц� � ц 4 К U ы��.v � V D Х � и #�: С 4г С °� _ и П1 +i ,р '} ^� С т С й _ � 47 v у�, ц.ь � с.. й Ф � S1 Ш +' С }N � L i9 6 i6 b � ге ь@.. ® @�'У U) �' С7 �С � N. �' Z= �II 47 []. .. д1 `{у Пi `в 7 �R ` Q ti ,-. N L ��`у го = V7 i7 т ц о7 �ы � l� 1- ы С3 Z,а �� т ii т р � V Н ri. д г Н ы. т в. � ц[- а�. 4 Z[L- G а. т��'. HZ INFRASTRUKTURA d.o.o., ZAGREB STATEMENT OF CASH FLOWS for the year ended 31 December 2018 Position 2018 2017 HRK'000 HRK'000 Cash flow from operating activities Loss before tax (99,637) 2,964 Adj ustments 183,688 105,670 Depreciation 36,130 42,092 Gains and losses on the sale of tangible and intangible assets 0 (56) Interest and dividend income (4,026) (2,449) Value adjustments 117,923 42,094 Income from state aid (34,425) (34,426) Interest expense 5,354 6,780 Provisions 59,458 52,109 Foreign exchange differences (unrealized) 3,274 (474) Increase or decrease in cash flows before changes in working capital 84,051 108,634 Changes in working capital 62,518 435,418 Increase or decrease in short-term liabilities 134,139 465,009 Increase or decrease in short-term receivables (96,454) (33,240) Increase or decrease in inventories 24,833 3,649 Other increase or decrease in working capital 0 0 Cash from operating activities 146,569 544,052 Cash paid for interest (5,354) (6,780) NET CASH FLOWS FROM OPERATING ACTIVITIES 141,215 537,272 Cash flow f rorn investing activities Proceeds from sale of long term tangible and intangible assets 0 56 Proceeds from sale of financial assets 0 0 Proceeds from interest 4,019 1,722 Proceeds from dividend 7 6 Other proceeds from investing activities 1,374 0 Total cash proceeds from investing activities 5,400 1,784 Purchase of tangible and intangible assets (583,175) (347,942) Total cash outflows from investing activities (583,175) (347,942) NET CASH FLOWS FROM INVESTING ACTIVITIES (577,775) (346,158) Proceeds from principal of loans, loans and other borrowings 303,697 0 Other proceeds from financing activities 6,103 7,050 Total proceeds from financing activities 309,800 7,050 Repayment of loans, borrowings and other debt instruments (14,188) (12,236) Total cash outflows from financing activities (14,188) (12,236) NET CASH FLOWS FROM FINANCING ACTIVITIES 295,612 (5,186) NET INCREASE OR DECREASE IN CASH AND CASH EQUIVALENTS (140,948) 185,928 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD 668,608 482,680 CASH AND CASH EQUIVALENTS AT THE END OF PERIOD 527,660 668,608 The accompanying notes from 1 to 48, set out below, form an inseparable part of these financial statements. 12 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS for the yer ended 31 December 2018 1. GENERAL 1.1. Activity HZ INFRASTRUKTURA d.o.o., Zagreb, Mihanoviceva 12, ("the Company") is engaged in managing, maintenance and building of railroad infrastructure as its basic activity. 1.2. Employees The number of staff employed by the Company at 31 December 2018 was 4,835 employees (31 December 2017: 4,818 employees). The structure of the staff by qualification level is presented below: 31 Dec 2018 31 Dec 2017 Doctor's degree 2 2 Master's degree 23 23 University degree 673 660 Two-year post secondary diploma 423 431 Secondary school certificate 2,633 2,609 Skilled workers 137 141 Unskilled workers 20 21 High skilled workers 85 86 Low-skilled qualification 827 834 Semi-skilled workers 11 11 Total 4,835 4,818 1.3. Supervisory and Management Board of the Company Members of the Supervisory Board of the Company are as follows: Ivan Miloi, president Tomislav Jukic, member Slavko Proleta, member Members of the Management Board are as follows: Ivan Krik, president of the Management Board Darko Bari ic, member of the Management Board Nikola Ljuban, member of the Management Board Marko Z. iubrinic, member of the Management Board Krunoslav Papic, member of the Management Board The amount of compensation to members of the Management Board of the Company is stated in Note 8 to the financial statements. 13 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 1.4. Subsidiaries Subsidiaries on 31 December 2018 are presented as follows: Share in equity SUBSIDIARY (%) Subsidiaries - Group Prune gradevine d.o.o. 100 Croatia Express d.o.o. 100 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Set out below are the principal accounting policies. 2.1. Statement of compliance and basis of presentation The financial statements of the Company for 2018 are prepared in accordance with the Accounting Act (Official gazette No. 78/15, 134/15, 120/16, 116/18) and the International Financial Reporting Standards ("IFRS") in force in European Union, and in accordance with the Regulation on the Structure and Content of Annual Financial Statements (Official gazette No 95/16). The International Financial Reporting Standards ("IFRS"), which are published by the Financial Reporting Council, appointed by the Croatian Government (Official Gazette No. 136/09, 08/10, 18/10, 27/10, 65/10, 120/10, 58/11, 140/11, 15 I 12, 118/12, 45/13, 69/13), which were in force until the Croatian accession to the European Union, in accordance with IFRS which are adopted by European Committee and published in official gazette of European Union. Financial statements are prepared with the application of the basic accounting assumption of the occurrence of a business event upon which the effects of operations are recognized when arisen and are shown in the financial statements for the period to which they relate and with the application of the basic accounting assumption of the concept of going concern. In addition to the separate financial statements, the Company also prepares the consolidated financial statements. These financial statements should be read together with the consolidated financial statements which will be available in the register of the annual financial statements. On 18 July 2013, entered into force the new Railway Act, which is regulated that the accumulated losses and the differences between revenues and expenses realized in the business year are reimbursed at the expense of public capital. 14 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 2.2. Adoption of new accounting policies The Company first applied the following standards and amendments for annual reporting period beginning on 1 January 2018: * IFRS 9 Financial Instruments * IFRS 15 Revenue from Contracts with Customers * Classification and Measurement of Share based Payment Transactions - Amendments IFRS 2 8 Annual Improvements to IFRSs 2014 to 2016 Cycle * Transfers to Investment Property - Amendments IAS 40 * IFRIC INTERPRETATION 22: Foreign Currency Transactions and Advance Consideration Application of the above standards and amendments did not have significant impact on the Company's financial statements. 2.3. Adoption of new and revised international financial reporting standards (IFRS) Standards and Interpretations effective for the current period * IFRS 9 Financial Instruments: Classification and Measurement The Standard is effective for annual periods beginning on or after January 1, 2018, with earlier application being allowed. Final version of IFRS 9 Financial Instruments refers to all phases of a financial instruments project and modifies IAS 39 Financial Instruments: Recognition and Measurement as well as all prior versions of IFRS 9. The Standard introduces new classification and measurement requirements, impairment and hedge accounting. Management of the Company has adopted the standard with the effective date and its effects are visible in Note 2.14. 15 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 2.3.1. Adoption of new and revised international financial reporting standards (IFRS) - continued At the date of initial application on 1 January 2018, financial instruments were as follows: Measurement category Carrying amount Original New Original New Difference (in thousands of HRK) (lAS 39) (IFRS 9) (lAS 39) (IAS9) Long - term assets Equity instruments Available Fair value 665 665 - for sale through other comprehensive income Receivables from flats Amortized Amortized cost 11,177 11,177 sold cost Short - term assets Trade receivables and Amortized Amortized cost 226,609 226,609 - other receivables cost Short - term financial Amortized Amortized cost 6,175 6,175 - assets cost Cash and cash Amortized Amortized cost 668,608 668,608 equivalents cost Total The Standard is effective for annual periods beginning on or after January 1, 2018, with earlier application being allowed. Final version of IFRS 9 Financial Instruments refers to all phases of a financial instruments project and modifies IAS 39 Financial Instruments: Recognition and Measurement as well as all prior versions of IFRS 9. The Standard introduces new classification and measurement requirements, impairment and hedge accounting. Management of the Company has adopted the standard with the effective date and its application did not have any significant impact on the financial statements. * IFRS 15 Revenue from Contracts with Customers The Standard is effective for annual periods beginning on or after 1 January 2018. The standard introduces a 5-step model applicable to customer-based revenue (with limited exceptions), regardless of the type of revenue transaction or industry. Standard requirements will also apply to the recognition and measurement of profits and losses from sales of some non-financial assets which is not a part of the Company's regular activities (for example, the sale of property, plant and equipment or intangible assets). Management of the Company has adopted the standard with the effective date. 16 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 2.3.1. Adoption of new and revised international financial reporting standards (IFRS) - continued * IFRS 15 Revenue from Contracts with Customers (Explanation) The Standard is effective for annual periods beginning on or after 1 January 2018. The standard introduces a 5-step model applicable to customer-based revenue (with limited exceptions), regardless of the type of revenue transaction or industry. Standard requirements will also apply to the recognition and measurement of profits and losses from sales of some non-financial assets which is not a part of the Company's regular activities (for example, the sale of property, plant and equipment or intangible assets). Extensive disclosures will be required, including disaggregation of total revenue; information on execution obligations; changes in amounts of contracted assets and liabilities between periods and key estimates and judgments. Management of the Company has adopted the standard with the effective date. IAS 40: Transfers to Investment Property (Amendments) The Amendments are effective for annual periods beginning on or after 1 January 2018 with earlier application permitted. The Amendments clarify when an entity should transfer property, including property under construction or development into, or out of investment property. The Amendments state that a change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. A mere change in management's intentions for the use of a property does not provide evidence of a change in use. Management of the Company has adopted the standard with the effective date and its application did not have any significant impact on the financial statements. * IFRIC INTERPRETATION 22: Foreign Currency Transactions and Advance Consideration The Interpretation is effective for annual periods beginning on or after 1 January 2018 with earlier application permitted. The Interpretation clarifies the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency. The Interpretation covers foreign currency transactions when an entity recognizes a non- monetary asset or a non-monetary liability arising from the payment or receipt of advance consideration before the entity recognizes the related asset, expense or income. The Interpretation states that the date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non-monetary prepayment asset or deferred income liability. If there are multiple payments or receipts in advance, then the entity must determine a date of the transactions for each payment or receipt of advance consideration. Management of the Company has adopted the standard with the effective date. 17 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 2.3.1. Adoption of new and revised international financial reporting standards (IFRS) - continued Standards and Interpretations issued by IASB issued but not yet effective and not early adopted by the Company * IFRS 16 Leases The Standard is effective for annual periods beginning on or after January 1, 2019. IFRS 16 defines the rules for recognition, measurement, presentation and disclosure for the leases of both contractual parties, i.e. the buyer (the "lessee") and the supplier (the "lessor"). In accordance with the new standard the lessees should recognize most leases in their financial statements. A single accounting model will be applied to alt leases, with certain exceptions. Accounting treatment of leases at the lessor will not be significantly altered. Management of the Company estimated that the application of IFRS 16 will not have significant impact on the Financial Statements of the Company. * Prepayment Features with Negative Compensation (Amendments to IFRS 9) The Amendments are effective for annual periods beginning on or after 1 January 2019 with earlier application permitted. Amends the existing requirements in IFRS 9 regarding termination rights in order to allow measurement at amortised cost (or, depending on the business model, at fair value through other comprehensive income) even in the case of negative compensation payments. Management of the Company estimated that the application of new standard will not have significant impact on the Financial Statements of the Company. * Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28) The Amendments are effective for annual periods beginning on or after 1 January 2019 with earlier application permitted. Amends the existing requirements in IFRS 9 regarding termination rights in order to allow measurement at amortised cost (or, depending on the business model, at fair value through other comprehensive income) even in the case of negative compensation payments. Management of the Company estimated that the application of new standard will not have significant impact on the Financial Statements of the Company. 18 Hi INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 2.4. Key estimates and uncertaintly estimates Certain estimates are used during the preparation of the financial statements which have inflow to the statement of property and liabilities of the Company, income and expenses of the Company and the disclosure of potential liabilities of the Company. Future events and their effects cannot be predicted with certainty, thus the real results may differ from those estimated. The estimates made during the preparation of the financial statements are subject to changes from the occurrence of new events, by gaining additional experience, obtaining additional information and comprehensions and by the change in the environment in which the Company operates. Key estimates used by the application of accounting policies during the preparation of the financial statements relate to the calculation of depreciation of the long-term intangible and tangible assets, impairment provision of assets, impairment provision of inventories, impairment provision of receivables, provisions and the disclosure of potential liabilities. Expected credit loss model With IFRS 9, the expected credit loss model is introduced (ECL). The measurement of the expected loss is based on reasonable and supporting information that is available without excessive expense and effort and which includes information on past events, current and foreseeable future conditions and circumstances. When estimating expected future impairment requirements, historical probabilities of non- fulfilment and future parameters relevant to credit risk are used. The most important part of the financial assets are trade receivables and cash. Trade receivables are largely related to receivables from legal entities. i. Trade receivables are stated at invoiced amount. Impairment of bad and doubtful receivables is based on the best estimate of the Management Board of bad debt. All receivables in bankruptcy and sued receivables are fully written off. ii. Management of the Company is carried out impairment of bad and doubtful receivables based on the aging of all receivables and a specific review of significant individual amounts is included in receivables. (see Note 2.15). 19 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 2.5. Reporting currency Financial statements of the Company are prepared in HRK as a measuring and reporting currency of the Company. 2.6. Revenue recognition Revenues from the sale of goods and services are recognized at the time of delivery of goods and services and transfer of control over the goods. Significant revenues of the Company are revenues from fees for access to railway infrastructure, revenues from informatics services, revenues from services of formation and dismatting of the train composation, rental revenues (open and closed), revenues from sale of goods and materials and revenues from the budget for maintenance and regulation of traffic and revenues from excise. In accordance with the new IFRS 15, relating to the recognition of contracts with customers, the Company applies the model of five steps: 1) Identify the contract with the customer 2) Establish the obligation of delivery in the contract 3) Determine the price of transaction 4) Allocate the transaction price in the contract delivery obligations 5) Recognize revenue when a subject fulfils the obligation of delivery Revenue is recognized as transaction price for each delivery obligation in the contract. Transaction price is the amount of compensation in the contract in which the Group expects to be entitled in exchange for transferring promised goods to the customer. Revenues are stated in the amounts deducted for value added tax. Changes in Accounting policies in accordance with the new Type of products Fulfilment of obligations standard The customer takes control over the Revenue is recognized when the product, completely has the same and products are delivered to the there is no unfulfilled obligation that customer Sales of goods could affect its acceptance IFRS 15 had no impact on the Agreed maturity of payment in most cases Accounting policies of the is 30 days Company According to the above, revenue recognition takes place at the same time as when IAS 18 - Revenue was effective and no significant impact of IFRS 15 is determined. 20 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 2.6. Revenue recognition - continued Sales of services Provided that the amount of revenue can be measured reliably and if the Company is likely to receive a fee, the service revenues are recognized in the period in which they are provided. Interest income Interest income is accrued on the basis of outstanding and at the applicable effective interest rate. Interest income is recognized as a financial income in the statement of profit or loss. Dividend income Income from dividends and profit shares is recognized at the time the rights to receive the dividend or the profit share have been established. 2.7. Borrowing costs Borrowing costs are charged to the statement of comprehensive income in the period in which they were incurred. 2.8. Transactions in foreign currencies Foreign currency transactions are initially translated into Croatian kuna using the exchange rates on the date of the transaction. Cash, receivables and payables denominated in foreign currencies are subsequently translated at exchange rates at the balance sheet date / statement of financial position. Gains and losses arising from translation are included in the statement of comprehensive income for the current year. As of 31 December 2018 HRK / EUR exchange rate amounted to 7.42 (31 December 2017: 7.51) and HRK / USD exchange rate amounted to 6.47 (31 December 2017: 6.27). 2.9. Corporate income tax The corporate income tax liability for the current year is determined on the basis of the results achieved in that year, adjusted for amounts not included in the tax base or tax deductible costs (50% of the costs of entertainment, 50% of the cost of using personal vehicles, etc.). Income tax is calculated by applying tax rates that were effective at the balance sheet/statement of financial position date. Deferred tax assets and deferred tax liabilities arise from temporary differences between the value of assets and liabilities disclosed in the financial statements and the values disclosed for the purpose of determining the profit tax base. Deferred tax assets are recognized for unused deferred tax losses if there is a probability that future taxable profit will be realized on the basis of which deferred tax assets will be utilized. Deferred tax assets and deferred tax liabilities are accounted for using the profit tax rate applicable to the future period when the asset or liability is to be realized. 21 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 2.10. Long - term tangible and intangible assets Long-term intangible and tangible assets are initially recognized at cost, which includes the purchase price, including import taxes and non-refundable taxes after deduction of trade discounts and rebates, as well as any costs directly attributable to bringing the asset to the site and in its working condition for intended use. Long-term intangible and tangible assets are recognized if it is probable that future economic benefits attributable to property will flow to the Company, if the cost of asset acquisition can be reliably established and if the individual acquisition value of the asset exceeds HRK 3,500 kn. After initial recognition, assets are recognized at cost less accumulated depreciation and accumulated impairment losses. Maintenance costs and repairs, replacement and investment maintenance are recognized as an expense of the period in which they were incurred. In situations where it is clear that the costs have resulted in an increase in future expected economic benefits that need to be realized by using assets above its originally estimated options, they are capitalized or included in the carrying amount of this asset. Gains and losses on disposal or sale of assets are reported in the statement of comprehensive income in the period in which they were incurred. Depreciation of assets begins when the asset is ready for use, i.e. when it is on the location and in the conditions it needs to be used. Depreciation of assets ceases when the asset is classified as held for sale. Depreciation is calculated so that the cost of the acquisition of each asset, other than Land and long-term intangible and tangible assets in preparation, is written off during the estimated useful life of the asset using the straight- line method as follows: Depreciation rate (from - do %) Concessions, patents, licenses, trade and service brands, software and other rights 20 Buildings 1 - 10 Plant and equipment 7 - 50 Tools, plant inventories and transportation assets 5 - 25 Other material assets 2 - 10 22 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 2.11. Financial assets The Company has adopted IFRS 9 Financial instruments as at 1 January 2018 and its implementation did not have a significant impact on the financial statements. The Company recognizes financial assets in its financial statements when it becomes party to the contractual provisions of the instrument. Depending on the business model for asset management and contractual features cash flows for the said asset, the Company measures financial assets at amortized cost, fair value through other comprehensive income or fair value through statement of profit and loss. Asset items are classified and measured as follows: Classification and measurement Non-curent asset Financial assets through other Equity instruments / fair value through other comprehensive income comprehensive income Long-term receivables Hold to collect / amortized cost Current asset Given loans Hold to collect / amortized cost Cash and cash equivalents Hold to collect / amortized cost Trade and other receivables Hold to collect / amortized cost i) Financial assets through other comprehensive income Financial assets carried at fair value through fair value changes in profit or loss are stated at fair value, with each gain or loss being recognized in profit or loss. Net income and net loss recognized in profit or loss also includes dividends and interest earned on financial assets and are included in other income and other losses. Initial recognition The Company recognizes a financial asset or liability when and only when it becomes a party to the contractual provisions of the instrument. The Company initially recognizes financial assets at fair value plus transaction costs that can be attributed directly to the acquisition or issue of a financial asset. 23 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 2.11. Financial assets - continued Subsequent measurement After initial recognition, the Company measures financial assets at fair value through other comprehensive income. ii) Trade receivables Trade receivables that do not have a significant financial component at initial recognition have been measured in accordance with IFRS 15 at their transaction price. iii) Impairment The Company on the basis of expected credit losses, recognizes impairment of financial assets. At each reporting date, the Company measures the expected credit losses and recognizes the same in the financial statements. Expected credit losses from financial instruments are measured in a manner that reflects: Impartial and weighted amount of probability which is determined by assessing the range of possible outcomes, * The time value of money, * Reasonable and acceptable data about past events, current conditions and predictions of future economic conditions. For trade receivables, the Company applies a simplified approach of IFRS 9 measurement of expected credit losses using the expected provision for credit losses of account receivables. (see Note 2.15). The Company derecognises financial assets when; * Contractual rights to cash flows from financial assets expire, * Financial assets are transferred and the transfer fulfils conditions for termination of derecognition. The Company transfers financial assets if, and only if, either: (a) Transfers contractual rights to receive cash flows from financial assets, or (b) Retains contractual rights to receive cash flows from a financial asset but assumes a contractual obligation to pay cash flows to one or more recipients in the arrangement. 24 Hi INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 2.11. Financial assets - continued When the Company transfers financial assets, it is required to estimate the extent to which it retains the risks and rewards of ownership of the financial asset. In this case, when all risks and rewards of ownership are transferred, the Company ceases to recognize financial assets and recognizes separately, as assets or liabilities, all rights and obligations that have arisen or are retained in the transfer. If almost all the risks and rewards of ownership of financial assets are retained, the Company continues to recognize financial assets. If the Company neither transfers nor retains almost all the risks and rewards of ownership of financial assets, the Company determines whether it has retained control of the financial asset. If no control over financial assets is retained, the Company derecognises financial assets and recognizes separately as assets or liabilities and all rights and obligations that have arisen or are retained in the transfer. If control is retained, the Company continues to recognize financial assets to the extent that it continues to participate in that financial asset. 2.12. Equity (shares) in related companies Subsidiaries are companies in which the Company has control over the adoption and implementation of financial and business policies. Associated companies are companies in which the Company has significant influence but not control over the adoption and implementation of financial and business policies. Investments are expressed at cost method. 2.13. Inventories Inventories are stated at cost or net selling value, whichever is lower. Cost of inventory should include all purchase, conversion, and other costs incurred by bringing inventory to current location and current state. Net selling value is the estimated selling price during the ordinary course of business less estimated cost of completion and the estimated costs that are necessary for the sale. In cases where it is necessary to reduce the value of the inventory to the net selling value, an adjustment to the value of the inventory is made in the statement of comprehensive income for the current year. Sleek inventory, packaging and auto-tires are written off 100% when they are put into use. 25 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 2.14. Long - term assets held for sale Property held for sale constitutes long-term intangible and tangible assets that are expected to be sold within one year from the date of classification due to termination or discontinuation of operations. Assets held for sate are stated at their carrying value or fair value less costs of sale, whichever is lower. 2.15. Receivables Trade receivables that do not have a significant financial component at initial recognition have been measured in accordance with IFRS 15 at their transaction price. i) Impairment The Company, on the basis of expected credit losses, recognizes impairment of customer receivables by applying a simplified approach. At each reporting date, the Company measures expected credit losses and recognizes them in the financial statements. On the analysis of the aging structure, the Company carried out impairment of customer receivables for all receivables older than one year. For those receivables that were not due and up to one year, the Company conducted an analysis as described below. On the basis of historical data for the last three years, the share of value adjustments was compared with the reported turnover of customers. The analysis provided the percentage of expected credit losses of 1.38%, which is adjusted with the future macroeconomic trends, and the percentage of total impairment is 1.63% Expected loan losses were estimated at HRK 3,133 thousand. Expected loan losses are recorded in the profit and loss account in the stated amount. 2.16. Cash and cash equivalents Cash includes sight deposits in banks, cash in hand, and deposits and securities receivable on a call or at the latest within three months. 26 H! INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 2.17. Impairments At each balance sheet / statement of financial position date, the Company checks the carrying amounts of its assets to determine whether there are any indications that impairment losses have been incurred. If there are such indications, the recoverable amount of the asset is estimated in order to determine any toss incurred by impairment. If the recoverable amount of an asset is estimated to be less than the carrying amount, the carrying amount of the asset is reduced to the recoverable amount. Impairment toss is recognized as an expense in the statement of comprehensive income. 2.18. Leases The Company classifies each own lease as operating or financial lease. Leases are classified as financial leases if all the risks and economic benefits associated with ownership are transferred from the lessor to the lessee. Financial lease is recognized in the Balance sheet of the lessee as an asset and liability for financial lease. Leases are classified as business leases if there is a contract on which the lessor transfers the right to the lessee to use a property (lease) in the agreed period in exchange for countervailing. The new standard which is in effect on 1 January 2019 established the obligation to recognize a business lease in the financial statements as a property with the right of use under the lease. The Company is defined exception of application of this standard on: * Short-term leases (up to one year) * Leases whose object of lease is low value. In that case, business / operating lease is recognized as an expense in the lessee's profit and loss account on a straight- line basis over the lease term. Initial measurement From the first day of the lease, the Company is measured asset with the right of use at cost, whereas the obligation on the basis of this lease is measured at the current value of all payments in connection with leases which have not been made on that day. The payments are discounted at an interest rate which is contained in the lease or per incremental borrowing rate in cases when this rate can not be determined. Subsequent measurement After initial recognition, the Company is measured asset with the right of use by cost model. The company increases lease liability for the amount of interest on the basis of lease and reduces for payments made. Also, the Company remeasured the established obligation for tease for all possible changes. 2.19. Provisions Provision is then recognized only if the Company has a present obligation as a result of the past event and if it is probable that settling the obligation will require the outflow of resources with economic benefits and if a reliable estimate can determine the amount of the liability. Provisions are reviewed at each balance sheet / statement of financial position date and adjusted to the latest best estimates. 27 H INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 2.19. Provisions - continued Provisions are set for the costs of court disputes and rewards for employees for long-term employment and retirement (regular jubilee awards and severance payments) and for the cost of unused annual leave. The provision of long-term employee reward and retirement benefits (regular jubilee awards and severance payments) is established as the present value of future cash outflows using a discount rate corresponding to the interest rate on government bonds. 2.20. Contingent liabilities and potential assets Contingent liabilities are not recognized in the financial statements but are only disclosed in the notes to the financial statements. Potential assets are not recognized in the financial statements but are recognized at a time when an inflow of economic benefits becomes probable. 2.21. Events after the Balance sheet date Events after the balance sheet / statement of financial position date, providing additional information about the Company's position at the balance sheet / statement of financial position date (events that have the effect of adjustment) are recognized in the financial statements. Those events that do not result in adjustment are disclosed in the notes to the financial statements if they are of material significance. 28 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 2.22. Correction of errors of previous periods The financial statements for 2017 are restated as follows: Income statement Initial balance Correction Restated balance I-XII 2017 l-XII 2017 HRK'000 HRK'000 HRK'000 Other external expenses 213,598 (142) 213,455 Other operating expenses 10,331 17 10,348 Foreign exchange differences and other financial income 2,512 474 2,986 Interest expenses and similar expenses 7,163 (558) 6,605 Total 1.158 Balance sheet Initial balance Correction Restated balance 31 December 2017 31 December 2017 HRK'000 HRK'000 HRK'000 Long-term tangible assets 11,482,092 (21,886) 11,460,206 Receivables from related parties 188,634 274 188,909 Trade receivables 14,145 (274) 13,871 Receivables from State and other institutions 4,381 (17) 4,364 Capital reserves 9,394,279 (918,200) 8,476,079 Profit / Loss for the period 1,806 1,158 2,964 Liabilities to related companies 73,561 3,008 76,569 Liabilities for loans, deposits, etc. 132,125 60,811 192,936 Liabilities to banks and other financial institutions 239,473 (4,709) 234,764 Trade payables 148,402 (18) 148,384 Other liabilities 586,906 (540) 586,366 Accrued expenses and deferred income -long term 923,418 836,587 1,760,005 29 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 2.22. Correction of errors of previous periods - continued Balance sheet Initial balance Correction Restated balance I January 2017 1 January 2017 HRK '000 HRK '000 HRK '000 Long-term tangible assets 11,443,527 (21,867) 11,421,660 Capital reserves 9,293,337 (696,908) 8,596,429 Liabilities to related companies 93,915 3,008 96,922 Liabilities for loans, deposits, etc. 132,914 60,811 193,724 Liabilities toward banks and other financial institutions 201,147 (2,540) 198,607 Accrued expenses and deferred income -long term 1,160,341 613,762 1,774,103 In the financial statements for 2017 the position of tangible assets is restated for the amount of depreciation in 2018 for assets which were put into use in previous years, but it was not activated in the business books of the Company, and for the same was not conducted the transfer of assets under construction at assets in use in that year when it really started its use. Impairment on 31 December 2017 in the amount of HRK 14,862 thousand (2016: HRK 14,843 thousand, difference of HRK 19 thousand represents depreciation in 2017) refers to the buildings and plant and equipment. Impairment of tangible assets (buildings and plant and equipment) on 1 January 2017 amounted to HRK 14,843 thousand. Both implemented changes are related to the property of the public good so that they had no impact on the income statement from the previous period but were carried out at the expense of capital public good. On 31 December 2017 was conducted impairment of assets under construction in the amount of HRK 7,024 thousand and stated business changes had an effect on the correction of the position of long - term tangible assets in the financial statements as at 31 December 2016 and as at 1 January 2016. Later was determined that the value of completed investments in the amount of HRK 7,024 thousand by the investment decision UI-94-5/13 (demining the railway line Ostarije, Sunja - Blinjska road, bridge Sava Greda - Novska) refers to ongoing maintenance rather than on investment. Accordingly, and because it is the posting investments from previous years (2013-2015), for the said amount, are corrected the position of the balance sheet, reduction of assets - assets under construction (long - term tangible assets) and capital and liabilities - capital reserves as at 31 December 2017 and as at 1 January 2017. 30 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 2.22. Correction of errors of previous periods - continued By the reconciliation of the differences between accrued supplied electricity for train traction and actually consumed according to tariff conditions of suppliers of electricity for the period between 13 December 2015 and 9 December 2017, in 2018 was conducted the correction of trade receivables based on electricity for train traction. Accordingly to buyer Hi PutniEki prijevoz d.o.o. additionally was invoiced the amount of HRK 1,257 thousand while the rest of the railway carriers were granted for the consumed electric energy for train traction in the same amount. The net effect on the position of correction of the financial statements, balance sheet - short-term receivables was 0 HRK. Receivables from state and other institutions on 31 December 2017 were reduced in the amount of HRK 17 thousand and posted to the cost, or on accumulated loss on 31 December 2018 which resulted in reduction of positions of assets - short-term receivables and capital and liabilities - capital reserves as at 31 December 2018 while as at 31 December 2017 were reduced short-term receivables and corrected financial result in 2017, and are increased other operating expenses for 2017 in the stated amount. As at 31 December 2017, the position of capital and liabilities were restated for the following amounts: * calculated depreciation in 2018 for assets that were put into use in previous years, but it was not activated in the Company, respectively for the same was not conducted the transfer of assets under construction to the assets in use in that year when it actually began its use - HRK 14,862 thousand kuna (charged to capital reserves) * EU capital transferred from the position of capital reserves to Long-term accruals - accrued expenses and deferred income in the amount of HRK 832,957 thousand to equalize treatment with sources of assets of the public good * accrued foreign exchange differences for 2016 for loans - current maturity (Privredna banka Zagreb d.d., Istarska Kreditna Banka Umag d.d. and OTP Bank d.d.) in the amount of HRK 462,000 thousand (charged to capital reserves) * Impairment of assets under construction in the amount of HRK 7,024 thousand for completed investments in period between 2013-2015 signed by the investment decision UI-94-5/13 (demining the railway line Ostarije, Sunja - Blinjska road, bridge Sava Greda - Novska, etc.), and the same in 2018 was reposted at the cost of ongoing maintenance (charged to capital reserves) * in accordance to the Croatian Governments decision Class: 022-03/13-04/266, Reg. No. 50301-05/20-13-2 from 13 June 2013, the existing debt to CERP was increased by 20% or for HRK 60,811 thousand, for the same amount were increased short-term liabilities for loans, deposits, etc. (liabilities) and reduced capital reserves * in 2018 was conducted refund of the more paid net profit to Pruine gradevine d.o.o. realized in 2013 in the amount of HRK 3,008 thousand, for the said amount was increased position of capital and liabilities - liabilities to related companies and reduced capital reserves 31 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 2.22. Correction of errors of previous periods - continued As at 1 January 2017, the position of capital and liabilities were restated for the following amounts: * calculated depreciation in 2018 for assets in previous years were put into use, but it was not activated in the Company, respectively for the same was not conducted the transfer of assets under construction to the assets in use in that year when it actually began its use - HRK 14,843 thousand kuna (charged to capital reserves) * EU capital transferred from the position of capital reserves to long-term accruals - accrued expenses and deferred income in the amount of HRK 611,683 thousand to equalize treatment with sources of assets of the public good * accrued foreign exchange differences for 2016 for loans - current maturity (Privredna banka Zagreb d.d., Istarska Kreditna Banka Umag d.d. and OTP Bank d.d.) in the amount of HRK 462,000 thousand (charged to capital reserves). Impairment of assets under construction in the amount of HRK 7,024 thousand for completed investments in period between 2013-2015 signed by the investment decision U-94-5/13 (demining the railway line Ostarije, Sunja - Blinjska road, bridge Sava Greda - Novska, etc.), and the same in 2018 was reposted at the cost of ongoing maintenance (charged to capital reserves) * in accordance to the Croatian Governments decision Class No.: 022-03/13-04/266, No. 50301-05/20-13-2 from 13 June 2013, the existing debt to CERP was increased by 20% or for HRK 60,811 thousand, for the same amount were increased short-term liabilities for loans, deposits, etc. (liabilities) and reduced capital reserves * in 2018 was conducted refund of the more paid net profit to Pru2ne gradevine d.o.o. realized in 2013 in the amount of HRK 3,008 thousand, for the said amount was increased position of capital and liabilities - liabilities to related companies and reduced capital reserves The calculation of exchange rate differences on loans - current maturity in 2016 and 2017 resulted in the correction of position of capital and liabilities - liabilities to banks and other financial institutions amount to: * HRK 4,709 thousand as at 31 December 2017 on loans of Privredna banka Zagreb d.d., Istarska Kreditna Banka Umag d.d. and OTP banka (HRK 825 thousand), the European Bank for Reconstruction and Development - EBRD (HRK 111 thousand) and ErsteftSteiermaerkische Bank, SG - Splitska banka d.d. and OTP banka d.d. (HRK 3,773 thousand) * HRK 2,540 thousand as at 1 January 2017 on loans of Privredna banka Zagreb d.d., Istarska kreditna banka Umag d.d. and OTP banka d.d. (HRK 462 thousand) and Ersteft Steiermaerkische Bank d.d., SG - Splitska banka d.d. and OTP banka d.d. (HRK 2,078 thousand) 32 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 2.22. Correction of errors of previous periods - continued The financial statements on the position of long-term accruals (accrued expenses and deferred income) are restated for: * Increased by HRK 832,957 thousand as at 31 December 2017 to equalize the treatment of EU capital (sources of assets financed by EU funds) with sources of assets of public good and HRK 3,773 thousand relating to accrued foreign exchange differences on loans - short-term maturity in 2016 and 2017 and reduced by the calculated costs of ongoing maintenance from 2017 in the amount of HRK 143,000 kuna * Increased by HRK 611,683 thousand as at 1 January 2017 to equalize the treatment of EU capital (sources of assets financed by EU funds) with sources of assets of public good and HRK 2,078,025 relating to accrued foreign exchange differences on loans - short-term maturity for 2016 (ErstetSteiermaerkische Bank, SG - Splitska banka d.d. and OTP banka d.d.) The financial statement for 2017, the statement of comprehensive income is revised for the amount of HRK 540,000 thousand which refer to the obligation for paid interest on the loan of Privredna banka Zagreb d.d., Istarska Kreditna Banka Umag d.d. and OTP Bank d.d., in the above amount, interest costs are more posted on 31 December 2017. Correction of postings in 2018 were reduced liabilities to banks and retained earning resulting in a correction of the business results of the Company on 31 December 2017. The impact on the correction of the business results of the Company for 2017 in addition to the above had: * Accrued foreign exchange differences on loans - short-term maturity for 2017 in the amount of HRK 474 thousand for loan of Privredna banka Zagreb d.d., Istarska kreditna banka Umag d.d. and OTP banka d.d. (in favour of business results) * Cancellation of accrued cost for 2017 in 2018 in the amount of HRK 143,000 thousand (at the expense of operating results) * Cancellation of suppliers' invoices for the calculation of interest for 2017 in the amount of HRK 18 thousand (in favour of business results) * Decrease in receivables from the Ministry of the Sea, Transport and Infrastructure in the amount of HRK 17,000 thousand, subsequently determined that this receivables recognize the cost of the Company (at the expense of operating results) Previously profit for 2017 in the amount of HRK 1,806 thousand was corrected for the above transactions in the total amount of HRK 1,158 thousand and restated business result of the Company for 2017 represents a profit for the period in the amount of HRK 2,964 thousand. 33 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 3. SALES REVENUES Sales revenues - related parties 2018 2017 HRK'000 HRK'000 Income from fees for access to railway infrastructure 98,052 102,414 Revenue from informatics services 5,776 5,987 Revenue from the formation and dissolution of the composition train 14,525 16,301 Revenue from using railway stations 9,705 9,730 Income from using the garage track 1,841 1,779 Revenue from fees for capacity reservations 667 441 Income from sale of tickets 1,048 1,545 Income from rent of premises 4,014 5,863 Income from rent of optical equipment 1,108 2,054 Income from rent of machines and equipment to related parties 118 113 Income from secondary activities 259 210 Revenue from the sale of material 161 51 Revenue from other services and works 346 530 Total 137,620 147,019 Sales revenues - non-related parties 2018 2017 HRK'000 HRK'000 Income from fees for access to railway infrastructure 16,857 11,250 Revenue from the formation and dissolution of the composition train 3,514 1,993 Income from using the garage track 199 120 Revenue from fees for capacity reservations 125 79 Income from rent of premises 13,000 12,829 Income from rent of optical equipment 161 823 Income from rent - other 4,248 4,149 Income from secondary activities 666 939 Revenue from the sale of material 5,315 4,727 Revenue from other services and works 56 60 Total 44,141 36,969 34 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 4. OTHER OPERATING INCOME Other operating income - related parties 2018 2017 HRK'000 HRK'000 income from telecommunication services 957 1,225 Income from reimbursement of damages 1,092 576 Cassa - sconto income 2,301 903 Other income 402 953 Total 4,752 3,657 Other operating income - non-related parties 2018 2017 HRK'000 HRK'000 Restated Income from the Budget of the Republic of Croatia for the railroad infrastructure 442,900 450,000 Income from the Budget of the Republic of Croatia for the railroad infrastructure - excise 456,005 508,317 Income from the Budget of the Republic of Croatia at the level of proportional part of depreciation 34,426 34,426 Income from consumption of own products 3,803 2,076 Income from cassation 12,303 7,829 Income from rent of flats 2,685 2,707 Income from the sate of flats (35%) 2,924 3,227 Income from reimbursement of damages 777 564 Income from co-financing 1,597 1,021 Income from release of provisions 30,931 11,755 Income from collection of value adjusted receivables 21,118 2,226 Income from sale of assets 0 45 Penalty income 3,304 14 Impairment of obsolete inventories 8,064 0 Other income 5,456 2,547 Total 1,026,293 1,026,754 Income from calculation of utility costs on 31 December 2018 amounted to HRK 13,243 thousand and the same have been reversed in the annual financial statements of the Company with costs of other companies (calculation of utility costs by receipted invoices of suppliers) in the same amount (see Note 28 and 40). Income from calculation of energy costs for train traction on 31 December 2018 amounted to HRK 83,049 thousand and the same have been reversed with energy costs (see Note 5). 35 H INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 4. OTHER OPERATING INCOME - continued Income from release of provisions for court disputes on 31 December 2018 have been reversed in the amount of HRK 5,875 thousand with realized costs in the same period on the basis of: * Staff costs in the amount of HRK 5,463 thousand (net salaries and wages for HRK 3,157 thousand, taxes and contributions from salaries for HRK 1,466 thousand and contributions on salaries for HRK 840 thousand) (See note 8) * Other expenses - employee costs in the amount of HRK 35 thousand (See Note 10) * Other operating costs - costs related to compensation of damages in the amount of HRK 224 thousand and court expenses in the amount of HRK 80 thousand (See Note 13) * Financial expenses - interest expenses from non-related parties in the amount of HRK 73 thousand (See Note 15) The same netted approach of income from release of provisions for court disputes in the amount of HRK17,993 thousand with realized costs in 2017 were carried out in annual financial statements on 31 December 2017 on the basis of: * Staff costs in the amount of HRK 8,163 thousand (net salaries and wages for HRK 4,575 thousand, taxes and contributions from salaries for HRK 2,317 thousand and contributions on salaries for HRK 1,271 thousand) (See Note 8) * Other expenses - employee costs in the amount of HRK 24 thousand (See Note 10) * Other operating costs - costs related to compensation of damages in the amount of HRK 41 thousand and court expenses in the amount of HRK 4,397 thousand (See Note 13) * Financial expenses - interest expenses from non-related parties in the amount of HRK 5,368 thousand (See Note 15) 5. COST OF RAW MATERIALS AND SUPPLIES DESCRIPTION 2018 2017 HRK'000 HRK'000 Cost of raw material and supplies 40,201 43,844 Cost of spare parts 8,165 6,550 Cost of small inventory, car-tires and protective equipment 3,309 6,798 Energy costs 12,665 9,551 Energy costs - related parties 26,146 20,781 Total 90,486 87,524 The energy costs for train traction on 31 December 2018 amounted to HRK 87,442 thousand and the same have been reversed with income from calculation of energy for train traction in the amount of HRK 83,049 thousand (see Note 4). 36 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 6. COST OF GOODS SOLD Costs of goods sold in the amount of HRK 5,164 (2017: HRK 4,281) relate to the purchase value of goods sold. 7. OTHER EXTERNAL EXPENSES DESCRIPTION 2018 2017 HRK'000 HRK'000 Restated Telephone, postal services and transportation costs 7,920 3,164 Transport costs - related parties 3,885 5,578 Maintenance services 26,576 25,614 Maintenance services - related parties 142,502 149,342 Rental costs and lease 12,841 12,586 Rental costs and lease - related parties 4 7 Cleaning services 9,124 9,393 Cost of property safe-keeping 3,378 4,282 Municipal services 4,325 3,160 Other external expenses 479 329 Total 211,034 213,455 8. STAFF COSTS DESCRIPTION 2018 2017 HRK'000 HRK'000 Restated Net salaries and wages 397,128 397,781 Taxes and contributions from salaries 146,540 143,578 Contributions on salaries 100,778 100,547 Total 644,446 641,906 Staff costs on 31 December 2018 have been reversed with income from release of provisions for court costs in the amount of HRK 5,463 thousand while on 31 December 2017, the amount of netted costs was HRK 8,163 thousand (See Note 4). Net salaries include receiving of the Menagament Board in the amount of HRK 1,341 thousand (2017: HRK 464 thousand) and are an integral part of staff costs. 37 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 9. DEPRECIATION DESCRIPTION 2018 2017 HRK'000 HRK'000 Depreciation of intangible assets 24,187 24,376 Depreciation of property, plant and equipment 11,944 17,716 Total 36,131 42,092 10. OTHER EXPENSES DESCRIPTION 2018 2017 HRK'O00 HRK'000 Restated Per diems and travelling expenses 2,886 3,337 Transportation on a business trip - related companies 1,175 1,391 Compensation of costs to employees (support and severance payment) 36,406 52,353 Employee costs - transportation (related companies) 3,759 2,876 Entertainment 86 51 Compensation to Supervisory Board members 145 134 Compensation to Audit Board members 90 76 Consulting services 769 0 Lawyer services 499 0 Intellectual services 556 1,869 Cost of education and scholarships 1,932 1,951 Health services 111 145 Insurance premiums 231 131 SAP system maintenance 2,688 2,847 Cost of banking services and payment transactions 300 295 Contributions, membership fees and similar expenses 37,822 37,962 Water management fees - related companies 5,259 5,226 Other expenses 1,564 1,357 Other expenses -related parties 378 464 Total 96,656 112,465 In 2018 was paid HRK 230,000 to auditing company for audit of the annual financial statements for 2017 while other auditing services amount to HRK 69,550. Other expenses - employee costs on 31 December 2018 have been reversed with income from release of provisions for court costs in the amount of HRK 35 thousand while on 31 December 2017, the amount of netted costs was HRK 24 thousand (See Note 4). 38 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 11. IMPAIRMENT DESCRIPTION 2018 2017 HRK'000 HRK'000 Value adjustments of short-term receivables 2,102 5,644 Value adjustments of short-term receivables - related companies 112,688 12,084 Value adjustments of obsolote inventories 0 24,366 Value adjustments of short-term receivables - IFRS 9 3,133 0 Total 117,923 42,094 12. PROVISIONS DESCRIPTION 2018 2017 HRK'000 HRK'000 Provisions for incentive severance payments 822 1,364 Provisions for court disputes 45,583 24,532 Provisions for tax liabilities 18,684 0 Provision for jubilee awards 0 913 Provisions for unused annual leave 25,300 25,300 Total 90,389 52,109 13. OTHER OPERATING EXPENSES DESCRIPTION 2018 2017 HRK'000 HRK'000 Restated Net book value of disposed assets 295 24 Deficits 2,923 144 Fees for traffic delays 1,438 455 Value of cracked and disposed material 768 365 Cost related to compensation of damages 1,738 2,778 Costs related to compensation of damages - related parties 1,483 1,849 Court expenses and penalties 2,210 3,683 Other operating expenses 3,602 1,008 Other operating expenses - related parties 312 42 Total 14,769 10,348 Other operating expenses - costs related to compensation of damages and court expenses on 31 December 2018 have been reversed with income from release of provisions for court costs in the amount of HRK 304 thousand while on 31 December 2017, the amount of netted costs was HRK 4,438 thousand (See Note 4). 39 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 14. FINANCIAL INCOME 2018 2017 HRK'000 HRK'000 Restated From related parties Interest income 266 898 266 898 From non-related parties and other entities Interest income 3,754 1,546 Foreign exchange gains 6,238 2,980 Dividend income and a share in the profit 6 5 9,998 4,531 Total 10,264 5,429 15. FINANCIAL EXPENSES 2018 2017 HRK'000 HRK'000 Restated From related parties Interest expense 160 175 160 175 From non-related parties and other entities Interest expense 5,194 6,605 Foreign exchange losses 9,512 1,819 14,706 8,424 Other financial expenses - cost of borrowings 841 1,990 Total 15,707 10,589 Financial expenses - interest expenses from non-related parties on 31 December 2018 have been reversed with income from release of provisions for court costs in the amount of HRK 73 thousand while on 31 December 2017, the amount of netted costs was HRK 5,368 thousand (See Note 4). 40 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 16. CORPORATE INCOME TAX The Company is a taxpayer, in accordance with the tax laws and regulations of the Republic of Croatia. The tax base is determined as the difference between the income and the expense of the period and is increased for expenditures that are not tax deductible. The profit tax rate is 18% (2017: 18%). The reconciliation between the income tax and profit and loss account presented in the Income Statement is presented as follows: 2018 2017 HRK'000 HRK'000 Accounting profit (Loss) (99,637) 1,806 Profit increase / Loss decrease 28,711 57,450 Profit decrease / Loss increase (19,218) (12,425) Tax profit / loss (90,143) 46,831 Tax losses to carry forward 1,007,616 1,074,673 The Company is able to carry forward tax losses in future periods for the purpose of impairing taxable profits over the next five (5) years. At 31 December 2018 the total net losses transferred were determined in the amount of HRK 1,007,616 thousand. The net amount of tax Losses in the amount of HRK 1,007,616 thousand available for transfer can be utilized as follows: HRK'000 31 December 2019 333,128 31 December 2020 584,346 31 December 2021 19,456 31 December 2022 25,615 31 December 2023 45,071 1,007,616 Deferred tax assets on the basis of transferred tax losses are not recognized in the financial statements due to the uncertainty of obtaining conditions for their future use. 41 е'з v� n ьл ^ � 4�� иэ со v ^ и � "Йi ' а�о г�.M1 '^ ,°OрM1 n�i � м „°`а й м н w еа � � *t w о а n чч �? w, м �, r-- J�' и " �Е' � � n:" гл г� т _' -Г а-" �а^^ t7 � и R и т � �' � sti ,а, N N цч N �4� н с+и�. н � г�ч � Н и о и .а гз сь о cs � са с3 а а о -- о• � оз аа и � г. м � .а �р м� и и sTM м N °Г? �. N .'"-, й а� о• � � 4 ю °` w а� cv н м гч Е �` э. л а'т а С � го � �' гn .� га ^ t� о г.� г� ,е м -н v� о �- [а сэ и°ь v о м N м � ^" г�.� е'�'т "м"� а н � � *, е� , „ р _ „ ,а _ ar мN � он,� �`` Ри.. � й.. � � � � гу � '. ал � м м м � v w ,д qk � �� 4 1�и � Г � � О � д t7 � 4 Q м� ^. Сл t7 � V 4 Су �j ц,L17 CJ и.. и и О Q м s � � qt д� �[ч .,о м гn �+ � п+ а' � С м +[ч � �D мы ц1 �. �у �1'м О � пд г+ ., .О С7 �t7� С? Сь ^ С7 С7 б �^ R б V'Ч С7 С3 .,� Гв q� у®, о�р �7! `V" �^ г%` � R.,. С7 м '� � '� � С s+ Q. V Т^' У^' ,❑"� � м� еу 7 �� 3 е�а бд 'д а � - к�7' С д`л � ,, г7 С ео о � v о � о � 4 со .д ® �, n � м г3 т С� w on *'? „°� � � г'�' ° о °' � '� '^ '"х �' г �° г '¢' � � � С ,� � � N�. А. R5 � CL � а• � ст г� а � Q с' й м � а "' v Q Q `D °о и м..�.. м,.. и5 � гц � � tl^ �. г* � и А �ру �'S м гы+ R м �' 4 с °м° г46.. � �- м�j +[) ц� С� п ffi г��х м н N °$ rn гЭ т о о ® е� о сч а+ � в в в сз о ^ м � н гу м � � до � г � n n .r .д � г. n n' г." г� .л м м м у� с и а+_ � а+ С J � О U � м �... �" QO v7 ал о с, �а сз --- с� r.� сэ .а �л сэ r� сз са с� ® � W� О 4 a�i А г�'- Р � °�r �+�-„ гиа (i � ['V W � ., и°i й `а �' Q и ... ,р � 1.i.1 i J q' ' н гмJ у N е�+г I � � � � �.,. д � � G � � Q `�'С ' � � � � в ? � Q � � n �.. � •� � aCi у s�ч �Z� ws � ы Ш н сQч � � й` � ы � �;; � `v д д с � � ЬуJ � J iь. f� �с н �а [3 t1. � �. � С и О �, �и Q *м�- � .�. (�j �_ п1 ftl • .v д q 4 �?� а • .� С1. р й р 0 � �' � L � а С 4 С С i^п С А � а.а�+ а �� � 4. гп � й � �" �f г с, � сэ � т ro о ш ш � а тв т о ш � а � _ �� 4U ' ffн Q г С � й� 3� .� � м й� 3� � � 3 � (,L 3^ У �ё ,а О С � � rt О С �'" .ы С � � У Q1 ~ �t ,6 од �f U'°° _4 р с С N 4ъ 'О � ч=. .О С'� �!5 с � ,II а �Еы� � й� й v � г�м �,� '°й Ут т�+; � а`rг� F, `°т�ч �� �,ro �о eai #� С и. С " С7° ,л п7 и 7' +л С и � ы`� � й гд � й.� - ев С� � ь` Н й �в а!с .`� � с п. рь й ;' °� � у 3 с ci �' оа ш� а. ;� � гр '� � р �'' С� Cf т ал т у ш`� � `n к� ti Р п ь. а`� � о к q� �� а w го �� ь� г Н c.r nn а т�. z F- о. и w�. � са аа , г м- сл. и ш гх а в т � v м -л � N � � v с� а � � w+ r. .о о м т� п`�'i м Ги. ц? � 7 � т �а м' .'4О и ор � � м *� i� � м '--' С3 1'* ® т' Q г � •в � n. n � и •п " м � м Г�. аб 7� V � �t � v � � т � � г ¢ F п а Н � r5 � гл а а а � а О а а о � � А ��+ гл sл с• сп ' м м �а u�j � н м о го с т н п�i н го а � т ;� ,о а G �у ... с7 а а Cs С� гS а Сэ [7 [э Сэ [7 а б й ау � 4 �.��... W N м 'ыу s`З i ? хб°i R t� т Q � v м i � и С7 �� �t5 -{г п CJ� � [� rv а ^ о5 Г+ е•'f й � uro ил rn м � с оо r,иу и rv � са SS tiSi ил •л м � •л А. 4, �[з ri ...� ��... си +С ��'. � '� � �п и0 р` �О � q.... Р- гЧ�. со ��. сл � а г� а "{ м о ° v� �йr и'.. и и ы '0 � Сз ь� v о � rn в а м w --- а н и �- с+� �� х, б ы С] Су , �;р � � ер 4 г~е � г U. � Г1 �#, �, Ту ,р •р � ,а А v ыу о' м иу^ С'^ а Сз -- � б м�� ' пk '' �.. а э � � �r � т -- v С1 � ы у Е- '- и n пti ш ^ ^ сз и и --- -- о м м о� �rr а7 е-а и r -а г n °n° м т "' i.. т а w � м л о с яэ `н � о � '�' --- н �" `� � � n г�. ''' F1 и и и и С т �� а �' аь v и' � м а w [а а r- м и' а и м ор м С7 �n '..... А � а� Q' м v7 R� в� еи т .д г� �. '"� а� ' �. i^� ;� оу ,в ю м а+ V' ц' А Q � .ац wч ао м rл С Cs гк ,.ti,� rv м ,..� w sa � '�i' 'v' и '�t •а ьn и и � м м м м г: w. г� .� "С7 � N � С � о а о о а сг са а в в с� е� r3 м а. а+ С т н п а ,д n R CJ С h. Гв 6`. 1 М м М 1 4�'+ ii+ iT+ iPi ' � � г �/ �(у � ц• а Ф� � г а С7 � � О а а � Oi . � � � j' W L й � т •о � р n� м а+ ... м .кг ... е� � ii1 '' и и°i гл гк� м � � � � ео .д .в cn � v й .,ар � � а � � �+ о�а � � 'Q � R t'. � � � �ь � ы ai' ,.л, ь °.h � Ël � LL '°{у � м� � а+ N0. � 's7 � `^ т. и � 5 � LL.I � �' �` � р � о й ч- у � � q� � � с � г`i � � ц�а а�. � ш � .��- т г. � � � а � +�в � 4 � "° о v � ` � й [' � с°.� �°ч г,- а �'1 ."й 'C7 �� г-^ Q} -� � w С7 L 6 �®+� У ~ т� `�, т а 3,� -�., м`�i б� � ik -� �з � Ф 4t � li N � � ш т � го Я «� ® � го +с v �, � � т '� � Е Е � 91 rt1 �, iV р.' .. � Ч7 Q1 v6 Z ш� .J � й � ц е"д �й й;: ro ц��й W`,�' � ц ¢ и и 4� � � � .� � � � � а � � � а а � °7 � � °гз, � � � � � ;�' a�r $, т °° � в о � п�s N Г� - -- - *- G t� � ес �� L а� � `о а"r .? .:^_ го с7 й а сэ и� .i" го а � � qF -" � Z� F ,.. б] ,v, б1 �© 7+ U 9 оп n д0 fV р 7, CJ С] сц1 С] б] N Z. м м t� т H2 INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 17. TANGIBLE AND INTANGIBLE ASSETS - continued As at 31 December 2018 the total value of assets in preparation amounted to HRK 2,425,231 thousand. As at 31 December 2017 the Company carried out an estimate of the recoverable amount of tangible fixed assets disclosed in accordance with the requirements of IAS 36 Impairment of Assets and, in accordance with the above, carried out value adjustment of assets under preparation in the amount of HRK 600,670 thousand at the expense of public capital. The impairment of assets in preparation for the most part relates to the modernization of the O tarije-Knin-Split line in the amount of HRK 535,611 thousand, white the remainder of HRK 65,058 thousand relates to other projects. As at 31 December 2018 were carried out activation of previously value adjustment of assets in preparation in the amount of HRK 21,284 thousand and it is for the same amount reduced impairment of assets in preparation and increased capital of public good on 31 December 2018. At 31 December 2018, the assets in preparation include investments in the amount of HRK 641,491 thousand in duration of 3 years and over. 44 г. Q n м Р � С3 са .-,. .--,. ао rл � .-- ^^ м v Гi� tfl ат � пл '^ +э4 м т � "" ал �rэ '"w 'и' у � а� а' ц �'�' � n n �t_ ,`'�гг у v. и� г^ .а '� �,� г а ��и,, т � и u�i .. й м �� м "'� ео м � мч <3 x�i � � � и � � и � � � ^ � � н � й м s,j " м "' м *С 4' м м м см F r` Q £7 '��.. О с7 4 Q Q С7 4 4 4 С] Cs 6 4 4 С3 С] О с7 б � � w а� �' £ И � т Е v �д � .Бп ar � � ,� а ьИ С 4 С7 О Sэ � Сэ s� м С7 Сз в р в � r�з t7 � [� в О р v ог `r' ? 'L7 v �- `�'� � ь�... м м гв г�п у � м м д а •� � с � � � ы сс 4� сгд о в rп в с} а в r�t в сэ rч о а ta в ^ ю й ;t � � кч с� � м .С1 n � м г'+ �- ^cr � и .� � M1 � н N R � в ю х+ и у_ '^ а '9 д 4 ., � С] � 4 Q 4 [7 С7 9 С7 Q � ��.., .9 (7� 47 С7 Г3 4 С7 Q '�` �' r�й м м М а° с4ь,� .... р у ��с1 дСt 4 G +''.7 � � .� и.... С] и с� еэ с7 в о --- о r� .д в ^ в о са в v � �л а й v w `ry х+ � v�i � � й р� tT м у� h. С7 {.� С С f�' м �" .,... � � -.r � Гв +С � � ц�''а i�п ' tt5 , 4! С �' N 7 L1 � С7 � (� С7 С] д в"'� С7 �� � Р� о7 4 С'] 7' Ci ^ ы � '�Т� С] � СТ '� � ['�� С� ц'� �, --� V � � ц� � �`' м б+ Gi С �у м n.i г,` м ,- ,- r ми ,� ч orj 7 #i � м еч м � м � Q. г+ С С � ' м м и r� ++ D �� е�ч н �м �^�`ц С V т � ' ii�� 1 �� � � Q � в О в О в в CJ в � � б 6 О CS [i 4 С7 �О �.�.. (�] г Г V1� еП с0 cD �`�' с4 W � � � 'iJ � ,,, �' � �' � W � � J � `- `_ ~ N � � � �� � � 1�1 С7 +с� � � �,� и и ,еэ ° "`� са г � � -� �; � д � � � ц^ С1 �, 'м а � � с n. �N .� °'. � с вг_1 Д и +�' О f� Q� � г� r. a�i а--- �. л а�� м й+ �"^ 4 л �•� � � � � � +о пf ` � � � � W г°ч °н � `� �� а, о. л �, � `� с д � л л ` ПУ и � Q_ �, � 91 `.L �� ,,.J °о ,� у � � Е Е а ш w д °�.' .G й лn � ы �, и д W С tl �' `" �' с и о о а rx '� Е с и а с, о Q а, ^� Е � Q1 �_ У +й V �r ' � U U� О fl� fl QI - [1. • t3 о D �' д1 �� L � � С С С� С й С� � а � у ы� С� й Сл � � а й у 1�'L � д � у г iG О вд� R1�� п5 С�-5 .н ++ +ц 97 � � г9 п7 4 0. д1 +71 � � .�� ь�J �' � � л- � т. й Е 3 Е Е ,�' ,� 3 р� й Е 3� � � L�Y � r L��G � Q7 � С V. д Q О 4 �. 'О С а+ 4 б а а� б С. � С ал �б GiY П1 w- w w � ПI tW ^�-� w С �р Пf LW -� и �" :� �' �ar � аа +� � � т '° � т с'�i � `т '� а� с `а ro '� т ar � Г• �' J Н С Ои С++ f1 й, и. ,у'",п й - � а �+�+ CL � � w° � й и . � и и �'j и и b С к � 'N � Q �" � 4 го с�"+ rts Фу ш � о`� °а L°_ � й'� а� ы � � ��� п�д о й w n sa _� ь}. г 4'�. 4J fO С. Ф �. 2: F-� U И-- фR Е- й'1 БL б � tY5 i � F°- Е.] F-- V I--� 4 Ш О ® Ф �', ,п'р ' � 4 � р н� � vгs Г. им., м �D Я� �+ °° м � � � � о ors о, т и �'�' � n n..,_, :',� � л м cr w � ,. .,д � м � .b О т м гп ,д м� т :Л � м ST .. f[у б 'С�` м м q� сц � rЧ сч � rs гч м н и м р` n м м м �� м м rri мi сп гл' ст 4 а[ F � . б'... О б б О 4 б б б., б С] б б б Cj С] О р +Q а.�'i и а� � С � д1 � � �. � 6У � ` го � *' �� '�.. р р р б б б б CS д t7 С7 б б а ¢ [} С] С] �r � м � п�i '� м 01 Q д Gp '�у � С �^ го � � .� w пбi б N а� а в а� .г.а б м г� м ам+ 4t а+ гц � о б а � н г^+ � н н и г*, ri �i ' с а'� � � "�' � .на ос' � 'i' �` го а� хл и L '^ а `� t О м� [7 и.'' .[э 47 О 4 4 4 а• О с] с7 СJы '7 R м.. са со м н м .а ьп ci ' c�t С � � и � 4 � CL �¢,, а й � � С .С б 7° i °L О С д� � �, ... � А ^ ,, � а б.. б � б м � �. R. О м [Ч � +�У .. гм м � �д � С N CJ lЛ га'r 111 +О_ �`'~ � � R_ 9Q Q�_ ,, лС3 С � г Q О м н � W ,� v м м''� -- и н г� ', юг .а м Е м м м м С .д й 3 � 6 QF � �р5 rtj, п.� .-м � б б м еТ ^ б геи �г . �,. ���. о+ м гt •© "'1 v м �+ `° м со [7 � цч w м "'"' � n г� гч м "` �а н вг v С дп г-- v л+ � � н` � " V" v' гкi :Н � абs т г" ..° r "'' e8 м, �' м � � "С� 1 . t+i н' м м г-- h� r� О �� U т � V'ч � � W� е7 [} р о о в а а а р а а о о р .д �...., �''. � � � са гА cn � v � е�( F�л С r-�. п n N � � J �'�С1 р G 1�" � °' � � � r ,- � � � � � R ы [� Ъ � .� 4 � Uп � N й � {у в б �'•' е д Q � бУ �' � � 91 � 91i `� W � б С' �` � а °Uл а а � Е � о � � £ � ,� � ` N П1 гiп g•,LL, l3 С1 а 4i Wt [7. р б 4Т 4 о0 г � г i � С с � ал .в qi а �°-' �� ал '' � Gr � � �' � S ед �С � р а. � ' ` О � � � 'ь® б д н н А � +L р т yg � � sJэ -r � -о а � � v а 3 � � � ь � � r � �' �'' р z ., с н Q � ° � � 'р з с ++ � с � с � � д� � N L� U7 4U 4а Ш '° v�п •� р�,.. а"°• а с гn га �� р с г� го а Е Е �* га т т у q� ,� Z ц� '�С €i � г.�s � й� •й v w'Эi а w `т +, й cai '°� `-' v ,вп й д и и � I- �' � � с" а? ` и i.г и•" "v о с:З т v �� р с с.а w т � у,,,, рр � �й � iV � � .. С С� .д +«-. Сг R qr iг 'w р- ? � О t7 �т N С] йу � � пь � �о у v `о `� ы`� � o-� '^ па � ar `а ru '" +о � i Z ьW, а. �е т о. и 1` h�• п. а ©. т. а� tJ в © т а м мч � м `r о о '" ао � д т�'+ � о �°� "�' �'^ � а�э а м v г- ш г� ,,, су ,р м cj �„ q ,n Q �д л, n ат 4, � � �"j Си+F � � е`�8 b3 � `0: N Г'�* � �' � г CV � � г п v_ о с� `° :; ^ о � "_'. ,г-�- м" � 4<Е м м м лм F^ и t[У ьО б i3 О С7 С3 ^ q," г С7 д U С7� б С} д ^ Т � � и �� R � `� чСl �� и и �^ й r.t � � н �п" w „� � й в� о' .�д v г g` �сэ с и еа н ым га а `� Е �' ад �'а'п т � � '� � У и � r� в о --- са с� т м -- а с� -� о �• сэ о и '�i G Т��. д` и а^ fV "'1 а .[э Q' м м� w � а а м � м � � � п rn � о � � т "" ы ...... гч. и 'йё i%' �''� �- � егч 1'�q го� с9 f'` f� � � г"1 Ф] � Г�п А N �... сЕ' � го rrt м --- м � м W д а аа � с �- Н � � �' � о а _ са о о м и_ о о� о v чг о с� � �о ,р n n ,�•� � н `х' � � м n. .�" а•" „л" ,С ь+ '�, ei+ йТ r' tT г' V= �б П} ы и � '^ 9i � L � и [ri о�� Q С7�� � С7 С7 О 4 � � с7 ti� е7� С] гч Сз � О м 9J � сЛ. м q V г Гу а+ с� �[т п'� м L]. б 7 ., � � � � м � � � � ti � д б _С �' F" ^ С го � 'О С м г+�7 �.. � Q р. 4 С7 (s О � � С7 � О Q ц7 С7 � 4 � С у Т ST � ^"3 r' � � � 4b . ъ � � п а.+ � � ......�... � � "V' ��., �.. � 'з а в' �r О�П ., М М �' � Ч' � А �" v1 Гв О. ® � М 4 Смs Q' � р 4'7 iik � С' � � �'"' �у Г 5� г ц' �;, и 7 ц' � Q1 � � 7 й й � --- й � и = С т � � � v � � С � Q м м' v v о о в с:э сэ м г� с� с� с� о о о о ^ г. V � „� ор а� т �' �о ' ' � 4$ G} W й1 �л � н сч rr" ем' � � � сл .� о, ем г � ��� � .,. А Фг� �" 4 � 4 4 4 Ci *Q .. 9t3 9 С7 4 4 О С3 Q ����. � V'1 б+ ' te'4 �s5 � Q' � N � W L � ,р н 4'�� rv- _ � � /� 1.1 ы ,�у trti R_i '�` `Wi `°- •С. 1п с�ц N � N N�,. "� � � ё � С1 � � р � Ф Z ��© Н �ач � �а�х � v т � � �, � � � � ��� Г., ц a�i ;� �, й cj ы ^. о � й � С7 й �гап �, � 4а � а � �� с О а. й" `а � с о �. л � с`r в�' i7 е� 'з � � с й а°п � q`� w� j,� й ы Е v•G qд � ,п � Ш� � �' '°' го с и а и 4 i1 �� е� �,и v cs. гэ. '+° � I�7 �.i�I U U 4 р . iJ 9� д ,� 61 �+ 2 � [У а э 1у v ы� д q� п+at+ al Т� г°1л �' -° ы z й � w Gi F- �� СС � т а т т n 4 а_ � ш � � т L о. -й �ц т q� с� �� а С� � г j г й Е 3 Е � ,� З� й� $ Е Е ш 4 � 3 м � 7+ + го о� а о•р � гд о G о о� " С "° 'о м L� �l�ь � �L �+ � � т й w � � w` м о � т т � �« .а � �« У« а � � ,с� � е .� о г. а v � о л о ,�, гв лс Z==, � r п�1 й м й а�� [7� w� w� и й � а�+ р„ w й й+� � w� и� т ,+�-� w � � Р1 � С а С 95s ра и О.. и. и Q С и�ц � и б. и.� �л �j: у� G sN Г� L i�. � `^ !� а'� 3,�с ы� �� г��с n w °. п� � 4 a4i L� и� �а �•в. � w о- а 2Zь� � й� т а� т г�ай F�ь-а ш в т� z Е--`а.й h--й4--c�i ш�а в°7 а т н б г`^.г н д � й �'* п°�i м � .а v а' a�i � ro � J м м v � г. � t. or � � .а г� н r� `t т� н п�i н � v n � � н м`°s а l7 rn .. Si• О+ дг� С+ иЭ О 4 � N r+r г+i F � .а s� са о с3 с� •n с� о [.� rз ю м w а� � о о а о аэ ц� г-- 4� сл sЛ� а+� 4Т м м цУ °} N' м С] � й N .,.,.. N ' N Q! Е �' Т ,а_ а. °�' а С i '� б С7 о с� в о о р сэ� о са о р и �п аИ С � о й у р ар м м � У 1Л cD 1Л � т а�а v ' м � t° - - д а г г а' °� L С д � С �а � ,�... Кй w гп С7 4 Г-- 4в. м С7 ^ и'k � 1n [V £7 v м м ед аа � sy ar w � �л w w иа � са вз � � � а � �' n м о+ гч Сл с+3 � Ч`�'° �' r� � `� r" v� й v'� г� а ., и i '^ у го � а Ог t�+! N Np 4 t7 С7 4 ^ й[S � �^� 4 � ', f�: , N� tT и i� v' о' �_ � ю ar,..`�� `.`1 сд h. _ С }�, s ьЛ^ . ��. иЭ ti ,� r'- �: йП Ss] � М .... и°i т L� а О L7 г С7 м М а. � у а � т --- � ^ С У � О 3 Q 4 = Н -� � � а.� м м Г•Э ^ С7 ® ® (] д7 ^ ^ О tf] . М ё й етгь �'`�-'- � то и °�� � а � � � н � . . г С� м м {''Э `"� +О ry Ргj И м .6 F+. +а ci е. е. n- -- м ы, �� г г � '�] ФП �D �D � А м � `а '�Т � д' � � О (в h 6в � . С.. г г г"� q� h г�е т г � � [Ч м Г-, ��� м'. � -о ry н г- а �'- т � v сч � '� ° ° `° ° " :., � � г `f,t Ф С ® р р с� С:ь Са [� О р С7 С� б b с} ' � гп .n �= .а Кь п7� и] � С къ аэ w сл � н sv н" �� �' °' � г ��� а� т cs � са о сэ ео .n га сч с� .t с5 ао о т1 f» и � а+ � и "'� (,� V�,[ L д� �_ '� 'о р.-, [7 "� м � м �в ��� �� ю ю � а`r'з � м v й w Q � ы С г � � � � � � +�.� а А_ С � 'R7 �ь�уΡ, � � N: � д Т а R5 .-,. �, 0 н � б�� г � Т � Т•� С м 7. �+ � L. '� ~�� О N N qA � р й Gi � � L у f и и l] и 1] Z L "� � С о �' �` *' о й' в �� +-' а а w Е 3 �' �� � � а С ал .о v г� й � � о � й � т n �. � г С С '� С з � �� � Q а" а, ¢ д а у��ь � � Ш � � v ° °' � � ` � �С � и н н и• � г 3 Е Е г � 3 г г � � а С°� �'' + � " s о � v `n а �` -а ,�' � .� .р '� LL cn � л u�i � �� ° � ч- д'а о � т Г р � +Са а rr 2 Vj `С м а��е ц � й v '�i й.а т w°л "ц U�as 'r�^� V � iв � а й й � � �� д � С G#' б1 qj и СС и и р с�' бА q� � с. и G! 47 С '� �у �,, � � го � ±а '3 � с� � С� � � т � а � � w � б с3 т � � г� а � �а Е �а � w `а � а � .^ +о � п� о ш .� +а .- �- 2 Z ч� и _ т_ т�. г� и м и � а а ео 4 с� и С, с� т г м м г HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 18. LONG - TERM FINANCIAL ASSETS Long - term financial assets represents investment in money, property and rights granted to earn income, whose repayment is expected to last no longer than one year. Investment in securities in domestic companies and banks were put at disposal of the Croatian Privatization Fund (now the Center for Restructuring and Sale), pursuant to the Decision of the Croatian Government after 25 June 2011, for the settlement of debts and state receivables in state and mostly state ownership. 31 Dec 2018 31 Dec 2017 HRK'000 HRK'000 Shares (stocks) in related parties Subsidiary companies Pru2ne gradevine d.o.o. 193,859 193,859 Croatia expres d.o.o. 292 20 194,151 193,879 Associated companies Proizvodnja-regeneracija d.o.o. 4,522 4,522 Less: value adjustment (4,522) (4,522) 194,151 193,879 Investment in securites Shares - Industrogradnja 95 95 Shares- Industrogradnja grupa 133 133 Shares - Salonit Vranjic 3,866 3,866 Shares - Duro Dakovk 3 5 Shares- KonEar 248 332 Shares - OT - Optima telekom 63 101 Shares- ietjezara Sisak 31 31 Less - value adjustment of shares - Salonit Vranjic (3,866) (3,866) Less - value adjustment of shares - 2e[jezara Sisak (31) (31) 542 665 Other long-term financial assets 32 32 Total 194,725 194,576 49 Hi INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 19. LONG - TERM RECEIVABLES In Note 19 are stated receivables for flats sold to HZ employees on loan and receivables for given loans to employees. In the context of long - term receivables are recorded bonds for flats sold for the old foreign currency savings in the amount of HRK 5,762 thousand. The old foreign currency savings was maintained in banks in which was situated at the time of buying flats and the same is in accordance with the Act (Official Gazette No. 71/91), converted into public capital for which the State issued bonds. Receivables based on bonds in the amount of HRK 5,762 thousand have been reversed in the financial statements of the Company with liabilities based on repurchasing flats (old and new foreign currency savings, see Note 39). 31 Dec 2018 31 Dec 2017 HRK'000 HRK'000 Receivables for flats sold 9,361 15,251 Less: current maturity (see Note 25) (7,614) (8,171) 1,747 7,080 Other receivables Housing loans to employees 3,327 4,097 3,327 4,097 Total 5,074 11,177 50 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 20. INVENTORIES Inventories are measured at cost or net worth, whichever is the lower. The cost of inventories includes purchase price and all costs which are incurred in bringing inventories to their present location and situation. Calculation of consumption of raw materials and spare parts is determined using the method of weighted average prices. 31 Dec 2018 31 Dec 2017 HRK'000 HRK'000 Raw material and supplies 102,334 101,621 Spare parts 309,826 344,143 Small inventory and packing 3,298 2,798 Balance of inventories 415,458 448,562 Incoming inventories 198 (1) Material in others' warehouses 3,958 3,958 Material in process 81 73 Small inventories and packaging in use 41,244 41,443 Less: impairment of raw material, supplies spare parts, small inventory and packaging (345,260) (353,523) Total 115,679 140,512 Inventories without a turnover in 2018 in the amount of HRK 249,385 thousand were subject to review, with the aim of their possible provision being charged to the income statement. Following the judgment on their useability, the value adjustment in the amount of HRK 8,064 thousand was carried out and in benefit to the statement of comprehensive income. The total value of the investment stock without turnover was HRK 225,974 thousand. Value of HRK 220,118 thousand relates to inventories for the modernization of the Otarije-Knin-Split line, which represents 79% of the total project stock value of HRK 280,966 thousand. 51 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 21. SHORT - TERM RECEIVABLES FROM RELATED PARTIES 31 31 December December 2018 2017 Restated HRK'000 HRK'000 Receivables from related parties Subsidiaries Pruine gradevine d.o.o., Zagreb 4,845 8,222 Less: value adjustment (3,652) (4,360) Croatia expres d.o.o, Zagreb 124 35 Less: value adjustment (32) 0 1,285 3,898 Associated company Proizvodnja i regeneracija d.o.o. u steaju, Zagreb 8,851 8,851 Less: value adjustment (8,851) (8,851) 0 0 Other state-owned railroad companies HZ Putni6ki prijevoz d.o.o., Zagreb 29,204 24,143 Less: value adjustment (1,937) (2,074) HZ Cargo d.o.o., Zagreb 293,218 214,759 Less: value adjustment (153,956) (57,046) TehniLki servisi ieljeznikih vozila d.o.o., Zagreb 1,501 1,668 Less: value adjustment (1,238) (1,238) Odriavanje vagona d.o.o., Zagreb 5,881 4,215 Less: value adjustment (2,727) (864) TZV Gredelj d.o.o. u stetaju, Zagreb 150 157 Less: value adjustment (147) (147) RPV Slavonski Brod d.o.o., Slavonski Brod 3 0 169,952 183,573 Other state-owned companies Odailjai i veze d.o.o., Zagreb 672 1,369 Hrvatski opeartor distribucijskog sustava d.o.o.,Zagreb 15 76 Less: value adjustment 0 (7) Hrvatske lume d.o.o., Zagreb 19 4 Less: value adjustment (3) (3) 703 1,439 Total 171,940 188,909 52 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 21. SHORT - TERM RECEIVABLES FROM RELATED PARTIES - continued Receivables from related parties for delivered goods and services and customers refers to domestic trade receivables and foreign trade receivables for sale of materials, rent of optical equipment, rent of equipment and machines, services of access to infrastructure, informatics services, calculation of costs, compensation of damages, etc. 21. 1. Ageing structure of receivables from related parties is as follows: Due Up to 30 30-60 60-90 90-120 More Total Not due days days days days days 31 December 2018 38,897 14,530 10,596 8,902 10,217 88,798 171,940 31 December 2017 - restated 128,745 14,480 9,858 6,801 9,622 19,403 188,909 21.2. Receivables from related parties uncertain as to the amount of HRK 96,136 thousand were subject to re-examination for their possible adjustment to the income statement. Consequently, a value adjustment of receivables from related parties was performed in accordance with the estimates of the uncertainty of their collection in the amount of HRK 96,136 thousand. In accordance with the Accounting Policies of the Company on 31 December 2018, is carried out impairment of short - term receivables which are not collected and are older than one year in the amount of HRK 97,170 thousand being charged to the statement of comprehensive income. RECEIVABLES OLDER THAN 1 YEAR Customer HRK'000 HZ PutniEki prijevoz d.o.o. 21 HZ Cargo d.o.o. 94,207 OV-Odriavanje vagona d.o.o. 1,875 Croatia express put.agencija d.o.o. 32 Other customers 1,035 TOTAL 97,170 Impairment of trade receivables of H2 Cargo d.o.o. on 31 December 2018 amounted to HRK 94,207 thousand, mostly refers to the accounts of the settlement concluded on 21 June 2017 in the amount of HRK 44,031 thousand (not fully paid or partly paid) while the amount of HRK 50,177 thousand refers to the accounts outside of the settlement for which receivables are incurred during 2017 and the same until the day of preparation of the annual financial statements for 2018 are not paid. 53 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 22. TRADE RECEIVABLES 31 31 December December 2018 2017 Restated HRK'000 HRK'000 TRADE RECEIVABLES Domestic customers 38,275 39,635 Less: value adjustment (24,498) (25,766) 13,777 13,869 Foreign customers 2,903 2 Less: value adjustment (47) 0 2,856 2 Total 16,633 13,871 22.1. Trade receivables doubtful for collection amounting to HRK 1,035 thousand were subject to review, with the aim of the possible provision being charged to the statement of comprehensive income. Consequently, an adjustment to the value of trade receivables was made according to estimates of the uncertainty of their collection in the amount of HRK 1,035 thousand. 22.2. Ageing structure of trade receivables is as follows: Due Undue Up to 30 30-60 60-90 90-120 More than 120 Total days days days days days 31 December 2018 6,896 1,658 822 889 3,834 2,534 16,633 31 December 2017 - 6,402 934 1,494 808 367 3,866 13,871 restated 54 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 23. RECEIVABLES FROM EMPLOYEES AND MEMBERS 31 31 December December 2018 2017 HRK'000 HRK'000 Receivables from employees and members Receivables for deficits 6,851 6,302 Other receivables from employees (68) (122) Total 6,783 6,180 Receivables from employees and members refers to receivables for advance for a business trip, receivables for shortages and damage incurred, receivables for costs of mobile phones and other. 24. RECEIVABLES FROM STATE AND OTHER INSTITUTIONS 31 31 December December 2018 2017 Restated HRK'000 HRK'O00 Receivables from state and other institutions Receivables from state for the remission of debt 300,923 300,923 Less: value adjustment of receivable from state (300,923) (300,923) Receivables for VAT 2,691 1,557 Receivables from the budget for unpaid excise duties 0 2,246 Receivables from te budget for EU projects (see Note 39) 3,454 269 Receivables from MMTI - IBRD loan 8500 0 292 Total 6,145 4,364 In the context of receivables from state and other institutions are recorded receivables from state for taking loans in the amount of HRK 300,923 thousand. 55 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 24. RECEIVABLES FROM STATE AND OTHER INSTITUTIONS - continued Following the Decision of the Assembly Board No. S-12/13 from 26 April 2013, the Management Board of the Company on 30 April 2013 has adopted the Decision No. Ul-73-12/13 and IM-73-13/13 which HZ Infrastruktura d.o.o. completely forgives receivables from companies HZ PutniEki prijevoz d.o.o. and HZ Cargo d.o.o. incurred on 31 December 2012 and unpaid until the date of 26 April 2013, except for receivables incurred from the use of electricity. The Management Board of the Company is following the aforementioned Decision of the Assembly Board proposed to the Assembly Board to decide on the Croatian Government submitting a proposal on the decision on the intention of taking over the following loan obligations: - credit indebtedness at OTP banka d.d. No. 130213357791 concluded on 13 February 2013 with state guarantee for security of current liquidity in the amount of HRK 170 million, - credit indebtedness at Erste & Steiermaerkische Bank d.d. - (at the time of adoption of the proposal was in the process of implementation, meanwhile, the debt was realized and is intended for financing the Business Plan for 2013 on the maintenance of the railway infrastructure and traffic management) in the amount of HRK 650 million. - credit indebtedness for financial funds for the redundant workers in 2012 and 2013 in the amount of HRK 250 million (the procurement procedure was in progress during adoption of proposals). On the suggestions, the Assembly Board of the Company gave approval of Decision No. S-14- 1/13 from 14 June 2013, but until the day of preparation of the financial statements for 2013 loans were not taken. Consequently, in 2013 was made the impairment of receivables. On 23 December 2014, the Government of the Republic of Croatia adopted the Decision on granting approval for the debt take over of the Company on the basis of the given guarantees and unpaid mandatory debts of the Debtors by increasing the capital of the public good to reduce the indebtedness and financial consolidation of the railway infrastructure operator in the total amount of HRK 1,915,791 thousand (HRK 1,770,963 thousand on behalf of the principal, HRK 63,902 thousand on behalf of regular interest, HRK 73,386 thousand on behalf of paid principal and HRK 7,540 thousand on behalf of accrued default interest). This approval relates to the takeover of long - term at Erste Et Steiermaerkische Bank d.d., Erste a Steiermaerkische Bank d.d. and Sberbank d.d. and short-term debt with OTP banka d.d. In the balance sheet of the Company in the position of receivables from state, receivables from the budget for EU projects have been reversed in the amount of HRK 55,739 thousand on 31 December 2018 and in the amount of HRK 72,014 thousand 31 December 2017 with the payables for the return of infrastructure (see Note 39). Receivables from the budget for EU projects in the amount of HRK 58,924 thousand refer to: - project Construction of the new suburban railway section Gradec - Sveti Ivan tabno in the amount of HRK 11,501 thousand, - project Reconstruction of the existing and construction of 2nd railway track section Dugo Selo - Kriievci in the amount of HRK 35,454 thousand, - project related to works - SS double track OkuLani - Novska and railway station Rajic in the amount of HRK 11,969 thousand. 56 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 25. OTHER RECEIVABLES 31 31 December December 2018 2017 HRK'000 HRK'000 Other receivables Domestic prepayments 2,701 2,455 Prepayments to related companies 299 299 Less: value adjustment of prepayments (994) (994) Current maturity of long-term receivables (flats sold) 7,614 8,171 Other current receivables 7,020 4,803 Less: value adjustment of other current receivables (1,449) (1,449) Total 15,191 13,285 In the context of other receivables, the biggest item of receivables are receivables for flats sold for the new foreign currency savings in the amount of HRK 67,954 thousand (receivables for flats sold for the old foreign currency savings amounted to 124 thousand). The same is retained in Privredna banka Zagreb as a income of the Budget of the Republic of Croatia (Official Gazette No. 43/92. Art. 44) for which the State should issue bonds through Privredna banka. This receivables have been reversed in the balance sheet of the Company with receivables based on on repurchasing flats (old and new foreign currency savings, see Note 39). 26. SHORT - TERM FINANCIAL ASSETS Short-term financial assets consist of investments in money, property, rights granted to earn income, whose repayment is expected to last no longer than one year and are reported in the business books at the cost of the investment. 31 December 31 December 2018 2017 HRK'000 HRK'OOO Loans given to related parties Proizvodnja-regeneracija d.o.o., Zagreb 14,234 14,234 Pru2ne gradevine d.o.o., Zagreb 2 473 Less: value adjustment (14,234) (14,234) 2 473 Given loans, deposits, etc. Deposits 4,659 5,563 Other 140 140 4,799 5,703 Total 4,801 6,176 57 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 26. SHORT - TERM FINANCIAL ASSETS - continued As a co-debtor for the long-term loan of Pro-Reg in ZagrebaCka banka, the Company paid loans installments and interests in the amount of HRK 17,719 thousand of which HRK 3,485 thousand were compensated. The rest of receivables of Pro-Reg for paid loans installments amount to HRK 14,234 thousand. For the same amount, in accordance with the accounting policies of the Company was made impairment. On 21 November 2016, was given loan to subsidiary Pruine gradevine d.o.o. in the amount of HRK 3,982 thousand (principal) with a repayment period of three years. On 31 December 2018 outstanding principal and interest amount to HRK nit, outstanding principal on the reporting date amounted to FIRK 1,770 thousand and interest amounted to HRK 34 thousand. In addition to the aforementioned loans, the Company approved two loans in 2018. The first loan agreement was concluded on 3 April 2018 with subsidiary Pruine gradevine d.o.o. in the amount of HRK 6,374 thousand which the parent company undertakes to ensure a subsidiary funds for the payment of trade payables (subsidiary) over one year. As at 31 December 2018, loan was fully repaid. The second loan was concluded on 27 April 2018 with a subsidiary Croatia Expres putniEka agencija d.o.o. in the amount of HRK 270,000 thousand. For the amount of given loan, the parent company increased its shares in the subsidiary on 31 December 2018 (see note 18). Deposits (term deposits) stated at this position refer to deposits for land expropriation to: a) Lika railway line in the amount of HRK 787 thousand, b) Railway line Gradec - Sv. Ivan Zabno in the amount of HRK 148 thousand, c) Railway line Plavno - Buzin in the amount of HRK 116 thousand, d) Railway line Dugo Selo - Kriievci in the amount of HRK 2,677 thousand, e) Railway line Kriievi - Koprivnica - State border in the amount of HRK 71 thousand, f) Railway line Zapre k - Cakovec in the amount of HRK 756 thousand, g) Railway line Dugo Selo - Novska in the amount of HRK 94 thousand and h) Railway line Vinkovci - Vukovar in the amount of HRK 10 thousand. 58 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 27. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash at bank and are stated in the balance sheet. Foreign currency assets in banks are stated in Croatian kuna at the middle exchange rate of the Croatian National Bank at the balance sheet date. Exchange differences on foreign currency adjustments with he middle exchange rate of the Croatian National Bank are recorded in the income statement. 31 December 31 December 2018 2017 HRK'000 HRK'000 Gyro account balance 95,845 236,636 Foreign currency account balance 67,588 60,184 Tied foreign currency assets 364,227 345,442 Foreign currency letter of credit 0 26,346 Total 527,660 668,608 Tied foreign exchange assets amounting to EUR 49,103,304 thousand (HRK 364,227 thousand) relate to EU grants received for the projects funded by the European Connecting Instrument (CEF - Connecting Europe Facilitiy): - works on the reconstruction of the railway station Rijeka-Brajdica and construction of intermodal container terminal Brajdica in the amount of EUR 5,103,304 (HRK 37,854 thousand) and - reconstruction of the existing and construction II. railroad track at the Krievci- Koprivnica-State border in the amount of EUR 44,000,000 (HRK 326,373 thousand). Foreign currency letter of credit in the amount of EUR 567,732 (HRK 26,346 thousand) is given to supplier Plasser Ft Theurer GmbH during 2017. Given letter of credit was settled through EBRD loan. On 31 December 2018 the same was closed by account of supplier for delivered assets (TMD). 59 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 28. PREPAID EXPENSES AND ACCRUED INCOME 31 December 31 December 2018 2017 HRK'000 HRK'000 Prepaid expenses and accrued income (long-term) Paid expenses for railroad accidents 5,246 4,994 Other accruals 628 649 Other accruals - related (see Note 40) 1,803 3,670 7,677 9,313 Prepaid expenses and accrued income (long-term) Recalculated expenses to other companies 1 33 Recalculation of costs - MMTI- loan IBRD 8500 3,293 1,098 3,294 1,131 Total 10,971 10,444 Accruals in the amount of HRK 10,971 thousand (31 December 2017 in the amount of HRK 10,444 thousand) relate to deferred costs. In the context of accruals are recorded prepaid expenses for the railway accident in Rudine in the amount of HRK 5,246 thousand (31 December 201: HRK 4,994 thousand). Other accruals to related parties mostly refer to the value adjustment of receivables based on interest, and which are recorded after payment as a financial income in favour of the statement of other comprehensive income. In the amount of HRK 26,802 thousand for which amounts value adjustment of receivables based on interest (H[ZCargo d.o.o.) have been reversed with deferred income in the position of capital and liabilities in the balance sheet of the Company on 31 December 2018 and 31 December 2017 (see Note 40). The remaining amount of accruals to related parties refer to the outstanding principal and interest on given loans to subsidiaries. Investments that are financed by loans that increased the capital of public good on 31 December 2018 amount to HRK 1,639,038 thousand (on 31 December 2017 amounted to HRK 1,491,185 thousand). In 2013 and 2014, the Government of the Republic of Croatia adopted the Decision on granting approval for the debt take over of the Company on the basis of the given guarantees and unpaid mandatory debts of the Debtors by increasing the capital of the public good to reduce the indebtedness and financial consolidation of the railway infrastructure operator in the total amount of HRK 3,334,166 thousand (2013: HRK 1,418,375 thousand and 2014: HRK 1,915,791 thousand). This approval relates to the takeover of long- term borrowing at Erste Ft Steiermaerkische Bank d.d., Erste Et Steiermaerkische Bank d.d. and Sberbank d.d., Privredna banka Zagreb d.d., Zagrebaka banka d.d. and short-term debt with OTP banka d.d.. These loans are funded by the public good. 60 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 28. PREPAID EXPENSES AND ACCRUED INCOME - continued Upon the takeover of the loan, the Company increased the capital of the public good for the above mentioned amount, and for the amount of capitalized investments it was necessary to make a correction of the capital. This approval relates to the takeover of long-term borrowing at Erste Et Steiermaerkische Bank d.d., Erste & Steiermaerkische Bank d.d. and Sberbank d.d., Privredna banka Zagreb d.d., Zagrebaka banka d.d. and short-term debt with OTP banka d.d.. These loans are funded by the public good. Upon the takeover of the loan, the Company increased the capital of the public good for the above mentioned amount, and for the amount of capitalized investments it was necessary to make a correction of the capital. Costs of other companies (calculations of utility costs by receipted invoices of suppliers) on 31 December 2018 amounted to HRK 12,977 thousand and the annual financial statements have been reversed with income from calculation of utility costs in the same amount at the expense of operating results (see Note 4). Income from calculation of utility costs in 2018 amounted to HRK 13,243 thousand and they do not represent the Company's income. The difference of HRK 266 thousand in the annual financial statements of the Company represents other accruals (see Note 40). 29. CAPITAL AND RESERVES i. The subscribed capital of the Company amounts to HRK 224,188 thousand (31 December 2017 in the same amount) and represents permanent own sources for Company's operating as well as the share principal registered at the Commercial Court in Zagreb. The only member of the Company is the Republic of Croatia. i. Capital reserves in the amount of HRK 8,357,869 thousand (31 December 2017: HRK 8,476,079 thousand) refer to Public good equity for the Public good assets in common use in the ownership of the Republic of Croatia in the amount of HRK 8,354,795 thousand (31 December 2017: HRK 8,473,005 thousand) and to the reserves of the Company in the amount of HRK 3,074 thousand as at 31 December 2018 and as at 31 December 2017. 61 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 29. CAPITAL AND RESERVES - continued Movements in capital reserves are as follows: Public good HRK'000 Balance at 1 January 2018 - restated 8,473,005 Activated fixed assets from the Budget of the Republic of Croatia 193,903 Activated fixed assets from the Budget of EU 198,543 Depreciation of the Public good assets (356,035) Net book value of the written-off Public good assets (11,524) Surplus of fixed assets 1,795 Decrease of fixed assets (7) Adjustment of posting - reversal of provisions 7 Increase of public capital for profit in 2017 - restated 2,964 Financial investments from the loan for which the public good capital was increased (147,853) Transfer from Public good to the Company (3) Balance at 31 December 2018 8,354,795 Company Balance at 1 January 2018 - restated 3,074 alance at 31 December 2018 3,074 Company's operations during 2018 resulted in a loss in the amount of HRK 99,637 thousand (in 2017 initially reported profit in the amount of HRK 1,806 thousand was restated for HRK 1,158 thousand and after correction amounted to HRK 2,964 thousand). 62 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 30. PROVISIONS Movements in provisions are shown as follows: Provisions of Provisions of jubilee awards Provisions court and retirement based on tax disputes benefits liabilities Total HRK'000 HRK'000 HRK'000 HRK'000 31 December 2017 106,046 33,298 0 139,344 Additional provisions 45,583 822 18,684 65,089 Reversal of provisions (11,151) (362) - (11,513) 31 December 2018 140,478 33,758 18,684 192,920 Liability of provisions for employee benefits is resulting from the collective agreement, and the provisions are determined in accordance with IAS 19 "Employee benefits". Provisions for employee benefits include provisions for retirement and jubilee awards. Provisions are measured at the present value of expenses which are expected to be required to settle the obligation; using a discount rate of 1.68%. Actuarial estimates are derived based on the following main assumptions and according to the following calculation: 31 December 2018 Discount rate 1.68% Fluctuation rate 5% During the preparation of the annual financial statements it was necessary to calculate compensation for unused vacation days at the expense of the results of the current accounting period. According to Article 82 of the Labor Law in the event of termination of the employment contract, the employer shall provide the worker who has not used a vacation in full, to pay compensation instead of vacation days. The fee is determined in proportion to the number of unused vacation days. To the preparation of the financial statements exactly can be calculated how much is the fee for a given financial year, and this fee is expense in the year in which was incurred, not in the year in which will be paid. It is about recognized tax costs. The cost in the amount of HRK 25,300 thousand through the business books of the Company as at 31 December 2018 was conducted as a provision of costs being charged to the statement of comprehensive income. Provisions of costs as at 31 December 2017 in the amount of HRK 25,300 thousand have been abolished during 2018 for the realization of the costs based on the rights to use vacation days for 2017 until 30 June 2018. Reversal of provisions of costs in the business books of the Company was carried out in the favour of the statement of comprehensive income. 63 H! INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 30. PROVISIONS - continued Provisions of costs for 2018 and the elimination of costs for 2017 for an unused vacation days resulted in a positive net effect on the annual financial statements for 2018 in the amount of HRK 82. Provisions of costs for an unused vacation days in the annual financial statements are removed from the position of capital and liabilities, other provisions at the position of deferred prepaid expenses as at 31 December 2018 and 31 December 2017. As at 1 January 2018 entered into force a new International Financial Reporting Standard, IFRS 9 in which the Company is required to display certain accounting postings in its annual financial statements for 2018. All receivables overdue more than 365 days, the Company must 100% value adjusted and all those customers who are considered that may not be due to any of the above groups but are believed to be at risk (that are entered in the pre-or bankruptcy), these receivables should also 100% value adjusted. The mentioned above, the Company for years continuously carried out in accordance with the accounting policies of the Company. The Company has all receivables older than 365 days (from the date of invoice) and that are considered to be uncollectible corrected in previous years. By the requirements of IFRS 9, the Company has developed expected credit loss model: Calculation of expected credit losses More HRK'000 than Due Undue Up to 60 61- 120 121 -365 366- 730 731 139,647 52,059 27,606 20,709 84,851 5,643 838 Reduction (1.63%) 851 451 338 1,387 92 14 Total 3,133 In order to value of short-term trade receivables and related companies on 31 December 2018 more realistically presented in the financial statements, the Company has additionally conducted value adjustment, and established provisions for expected credit losses in the amount of HRK 3,133 thousand. The above provision was removed from the position of capital and reserves, other provisions at the position of assets and for the same are reduced receivables from related parties and other receivables. 64 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 31. LONG - TERM LIABILITIES 31 31 December December 2018 2017 HRK'000 HRK'000 Liabilities to banks and other financial institutions Erste Et Steiermaerkische Bank d.d., Zagrebaka banka d.d., Privredna banka Zagreb d.d., HBOR, Splitska banka d.d. iandHrvatska poftanska banka d.d. 348,626 67,623 Privredna banka Zagreb d.d., lstarska kreditna banka Umag d.d. and OTP banka d.d. 33,078 67,838 Erste ft Steiermaerkische Bank d.d., SG - Splitska banka d.d. and OTP banka d.d. 314,410 473,122 European bank for reconstruction and evelopment (EBRD) 134,949 151,197 World bank (IBRD) 182,573 187,246 1,013,636 947,026 Less: Current maturity (see Note 34) (228,495) (234,764) Foreign exchange differences on current maturity from previous periods 0 (4,709) 785,141 707,553 Other on-term liabilities Liabilities for flats sold 9,356 15,246 Total 794,497 722,799 /il In accordance with the Railway Act, Republic of Croatia took over the repayment of long-term loan and related interests liabilities concluded until 1 January 2006 and the obligations for loans are removed from the records in favour of state aid. After activation of fixed assets of public good purchased from the loan, equity of public good is increased. Depreciation of public good long-term assets is not recognized as an expense and it is charged to public good equity. /ii/ Foreign exchange differences and interest upon long-term loan liabilities are stated by charging / crediting state subsidies. /iii/ Long-term liabilities on domestic loans bear an interest rate of 6 M EURIBOR + margin for all domestic loans other than loan of EUR 48 million concluded with Zagreba6ka banka d.d., Erste t Steiermaerkische Bank d.d., Privredna banka Zagreb d.d., HBOR, Splitska banka d.d. and HPB d.d. where the fixed interest rate is 2.92%. /iv/ Other long-term liabilities relate to long-term loans to employees for the purchase of HZ flats. Pursuant to the Law on Sale of Flats with Tenancy Right (Official Gazette 43/1992), the flats sold were removed from the Company's assets and capital and posted as employee claims and at the same time an obligation towards the seller of the apartment was created. 65 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 31. LONG - TERM LIABILITIES - continued 31. 1. The movements in liabilities to banks and other financial institutions during the year may be summarized as follows: 2018 HRK'000 Balance at 1 January 2018 947,026 New loans 303,697 Repayment (219,883) Foreign exchange differences (17,204) 1,013,636 Less: current maturity (228,495) Balance at 31 December 2018 785,141 The repayment schedule of long-term liabilities to banks and other financial institutions become due for the repayment: 31 December 2018 HRK'000 Due in one to two years 192,862 Due in two to three years 60,457 Due in three to four years 93,727 Due in four to five years 93,727 Due in more than five years 344,368 Total 785,141 66 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 32. SHORT - TERM LIABILITIES TO RELATED PARTIES In the context of short - term liabilities are stated liabilities to related parties for purchased materials, works perfomed, services and other liabilities (calculation of utility costs (electricity, water, network fee, etc), calculation of rent and other according to section 6.2. Plan of division of HZ Hrvatske ieljeznice d.o.o. (obligations and other rights are defined by court decisions, administrative decisions, notaries and out of court settlement), per diems, costs of official car and business travel costs, damage claims, rail, P-2d tickets, subsidies P-7, etc). 31 31 December December 2018 2017 Restated HRK'000 HRK'O0O Liabilities to related parties Subsidiaries Pruine gradevine d.o.o., Zagreb 86,671 42,673 Croatia expres d.o.o, Zagreb 14 1,096 86,685 43,769 Associated company Proizvodnja i regeneracija d.o.o. u steLaju, Zagreb 2,699 2,699 Other state-owned railroad companies HZ PutniLki prijevoz d.o.o., Zagreb 2,174 918 HZ Cargo d.o.o., Zagreb 2,818 1,159 Tehniki servisi ieljeznitkih vozila d.o.o., Zagreb 1,061 677 Odriavanje vagona d.o.o., Zagreb 418 0 T2V Gredelj d.o.o. u steaju, Zagreb 0 376 RPV Slavonski Brod d.o.o., Slavonski Brod 0 645 Radionica 2eljezniCkih vozila takovec d.o.o.,Cakovec 0 319 6,471 4,094 Other state-owned companies Hrvatski operator prijenosnog sustava d.o.o.,Zagreb 1,830 1,710 HEP ODS d.o.o., Zagreb 272 1,343 HEP Opskrba d.o.o., Zagreb 24,668 21,903 HEP Toplinarstvo d.o.o., Zagreb 471 757 HP - Hrvatska pota d.d., Zagreb 109 36 Narodne novine d.d., Zagreb 46 25 Hrvatske vode d.o.o., Zagreb 70 233 27,466 26,007 Total 123,321 76,569 67 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 32. SHORT TERM LIABILITIES TO RELATED PARTIES - continued 32.1. Ageing structure toward relatied parties is as follows: Due HRK'000 Undue Up tp 30 30-60 60-90 90-120 More than Total days days days days 1 20 days 31 December 2018 117,694 2,347 0 10 33 3,237 123,321 31 December 2017 - restated 67,655 2,904 3,154 10 3 2,843 76,569 33. SHORT TERM LIABILITIES FOR BORROWINGS, DEPOSITS, ETC. 31 December 31 December 2018 2017 Restated HRK'000 HRK'000 Liabilities for borrowings and deposits Liabilities for received deposits 3,892 2,792 Other 100 100 3,992 2,892 Public good Liabilities toward CERP Total 190,054 190,054 Liabilities for borrowings and deposits 194,046 192,946 68 H2 INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 33. SHORT TERM LIABILITIES TO RELATED PARTIES - continued In the amount of HRK 190,054 thousand are stated obligations to the Croatian Privatization Fund (now the Center for Restructuring and Sale) on the basis of settlement of the debt to INA and HEP. According to the conclusion of the Croatian Government, class: 305-01/01-02 /06, Regulation No. 503114-01-3 from 25 June 2001, the Croatian Privatization Fund settled the debt of Hrvatske ieljeznice in the amount of HRK 283,833 thousand to INA and HEP Zagreb. Hrvatske ieljeznice settled liabilities to INA and HEP for a total amount and submitted to the Croatian Privatization Fund shares and properties that are not the core business activities. CPF is charged interest on the outstanding amount after which the debt of the company amounted to HRK 319,415 thousand. Part of the debt was settled in 2013 and 2014, as follows: - by offsetting receivables in the amount of HRK 15,360 thousand (receivables for shares sold of Privredna banka Zagreb and previously paid dividend by Privredna banka and by Koncar d.d. on qyro account of CPF), - by transfering shares of the Hotel Miror d.o.o. to the Republic of Croatia in the amount of HRK 75,544 thousand, - by transfering shares of the Hotel Mursa d.o.o. to the Republic of Croatia in the amount of HRK 42,682 thousand, - by transfering real estate in Vinkovci (,,Hungarian school"), Kozala (,,lodging Rijeka") and Koprivnica (,,lodging Koprivnica") to the Republic of Croatia in the amount of HRK 56,586 thousand. In the Decision of the Croatian Government, Class No.: 022-03/13-04/266, No.: 50301-05/20- 13-2 from 13 June 2013 under No. I. Article. 3, is stated that for the rest of the debt in the amount of HRK 304,055 thousand (debt balance after completion of set-off in the amount of HRK 15,360 thousand) will be made transfer of shares and real estate owned by the Company whose market value must be 20% higher than the said amount or in the amount of HRK 364,864 thousand. Considering that the Company, according to the previously mentioned Decision of the Croatian Government should make the transfer of shares and real estate owned by the Company whose market price should be in the amount of HRK 364,866 thousand, and so far has been carried out for the same amount of HRK 174,812 thousand it is necessary to settle the debt in the remaining amount of HRK190,054 thousand, in accordance with the Decision of the Croatian Government on amendments to the Decision on the mutual settlement of debt between the Company, Agency for State Property Management and the Republic of Croatia from 19 March 2014, Class No.: 022 -03/14-04/69, No. 50301-05/18-14-2. According to these, existing debt to CERP was necessary to increase by 20% or for HRK 60,811 thousand in the business books of the Company, after which the same amounts to 190,054 thousand. 69 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 34. SHORT-TERM LIABILITIES TO BANKS AND OTHER FINANCIAL INSTITUTIONS 31 December 31 December 2018 2017 Restated HRK'000 HRK'000 Liabilities to banks and other financial institutions Current maturity: domestic loans 182,016 184,377 Current maturity: foreign loans 46,479 50,387 Total 228,495 234,764 In the Company there are no short-term liabilities to banks on the basis of short-term loans. Changes in liabitities to banks and other financial institutions during the year were as follows: HRK000 Balanceat1IJartua!y2018 234,764 Repayment of principal of credit indebtedness - Privredna banks Zagreb d.d., Istarska kreditna banka Urnag d.d. and OTP banka d.d. (33,511) Repayment of principal of credit indebtedness - Erste Et Steiermaerkische Bark d.d., SG - SpUitska banka d.d. and OTP banks d.d. (150,61) Repayment of principal of credit indebtedness - EBRO ( 15,117) Repayment of principal of credit indebtedness - OBRD (35,269) Repayment of principal of credit indebtedness - 1BRD - due in 2019 31,451 Repayment of principal of credit indebtedness - EBRD - due in 2019 15,026 Repayment of principal of credit indebtedness - Privredna banka Zagreb d.d., lstarska. kreditna banks Umag d.d. and OTP banks dd. due in 2019 33,078 Repayment of principal of credit indebtedness - Erste at Steiermaerkische Bank d.d., SG - Splitska banks d.d. and OTP banks, d.d. - due in 2019 148,938 Balance at 31 December 201828,9 70 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 35. LIABILITIES FOR PREPAYMENTS 31 December 31 December 2018 2017 HRK'000 HRK'000 Liabilities for prepayments From domestic customers 843 7,465 From foreign customers 2,450 132 Total 3,293 7,597 36. TRADE PAYABLES 31 December 31 December 2018 2017 Restated HRK'000 HRK'000 Trade payables Domestic 147,274 142,384 Foreign 16,005 6,000 Total 163,279 148,384 36.1. Ageing structure of trade payables is as follows: Due Up to 30-60 60-90 90- More than Total 30 120 120 HRK'000 Undue days days days 31 December2018 144,052 6,494 0 0 66 12,667 163,279 31 December 2017 - restated 135,536 2,990 75 54 331 9,398 148,384 37. LIABILITIES TO EMPLOYEES 31 December 31 December 2018 2017 HRK'000 HRK'000 Liabilities to employees Liabilities for net salaries 29,864 29,915 Secerance payments 242 80 Other liabilities 285 344 Total 30,391 30,339 71 H2 INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 38. LIABILITIES FOR TAXES, CONTRIBUTIONS AND SIMILAR FEES 31 December 31 December 2018 2017 HRK'000 HRK'000 Liabilities for taxes, contributions and similar fees Contributions from salaries 9,166 9,321 Contributions on salaries 8,496 8,637 Tax and surtax 3,365 4,758 Other liabilities 16 85 Total 21,043 22,801 39. OTHER SHORT - TERM LIABILITIES 31 December 2018 31 December 2017 Restated HRK'000 HRK'000 Other short-term liabilities Liabilities for invoiced goods 459 366 Liabilities to the Ministry of Finance 791,984 582,406 Other liabilities 5,930 3,594 Total 798,373 586,366 In the context of other short - term liabilities in the amount of HRK 73,840 thousand are stated liabilities to the setter of flat based on repurchase for foreign exchange savings, which will be close after payment of foreign currency from banks. These short - term liabilities in the Balance sheet have been reversed with trade receivables for flats sold in the amount of HRK 73,840 thousand (see Note 19 iand 25). The liabilities to the Ministry of Finance in the amount of HRK 791,984 thousand relate to interest, principal and fee liabilities of the Company, which have been settled by the Ministry of Finance. The liabilities to the Ministry of Finance relate to interest and principal liabilities of the Company, which have been settled by the Ministry of Finance. 72 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 39. OTHER SHORT - TERM LIABILITIES - continued Liabilities to the the Ministry of Finance for credit liabilities HRK'000 For credit at Erste t Steiermarkische Bank d.d., SG - Splitska banka d.d. and OTP banka d.d. 643,154 - principal 526,151 - due interest 113,569 - fee 3,434 For credit at Privredna banka Zagreb d.d., Istarska kreditna banka Umag d.d. and OTP banka d.d. 143,978 - principal 116,846 - due interest 27,087 -fee 45 For credit at Erste t Steiermaerkische Bank d.d., ZagrebaEka banka d.d., Privredna banka Zagreb d.d., HBOR, Splitska banka d.d. and Hrvatska poitanska banka dd. 4,852 - principal 0 - due interest 4,639 - fee 213 Total 791,984 As at 31 December 2018, the Company has stated repayment obligations of funds based on liabilities incurred by the EU projects paid from its own resources in the amount of HRK 55,739 thousand and related to works on the following contracts: 31 December 2018 HRK'000 RECONSTRUCTION OF THE EXISTING AND CONSTRUCTION Il. RAILROAD TRACK AT THE DUGO SELO - KRI2EVCI 32,270 CONSTRUCTION OF THE NEW SUBURBAN RAILWAY SECTION GRADEC-SVETI IVAN ZABNO 11,501 WORKS - SS DOUBLE TRACK AT THE OKUCANI-NOVSKA AND RAILWAY STATION RAJIC 11,969 TOTAL 55,73 In the balance sheet of the Company, these liabilities have been reversed with receivables from the budget for EU projects in the amount of 55,739 thousand (See Note 24). 73 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 40. ACCRUED EXPENSES AND DEFERRED INCOME 31 December 31 December 2018 2017 Restated HRK'000 HRK'000 Accrued expenses and deferred income (long term) State subsidies for modernisation of railways 301,071 330,332 State and EU subsidies for modernisation of railways (EU projects) 891,038 832,957 Deferred income 4,125 4,125 Dividends from investments 954 954 Accrued liabilities for flats sold 134,462 129,031 Foreign exchange differences on loans 17,768 7,858 Deferred payment of costs - IPA 48,935 46,590 Grants - CEF 495,756 397,332 Other 10,867 10,826 1,904,976 1,760,005 Accrued expenses and deferred income (short term) Interest and loan fee - JD (1,388) (6,047) Grants - CEF 0 (5) Grants - EU (ESF) 16,542 129,004 Other 25,921 27,567 41,075 150,519 Total 1,946,051 1,910,524 Accruals in the amount of HRK 1,946,051 thousand (31 December 2017: HRK 1,910,523 thousand) refers to: /il State subventions related to the modernization of the public good and loan repayments relate to the funds of the Republic of Croatia for the purchase of fixed assets. The capital of the public good is increased by activating the funds. Amount of amortization of fixed assets of the public good is charged to the capital of the public good. /ii/ UntiL 31 December 2000 the Company retained 35% of the funds paid from employees and paid 65% to the State Budget in accordance with the Law on Sale of Apartments. From 1 January 2001 the Company retains the total assets and the liability is stated at a special liability position as at 31 December 2018, amounting to HRK 134,462 thousand (as at 1 January 2018 amounted to HRK 129,031 thousand). 74 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 40. ACCRUED EXPENSES AND DEFERRED INCOME - continued /iii/ In the amount of HRK 495,756 thousand, grants for projects funded from the CEF - Connecting Europe Facility were reported as follows: - Grant Agreement for the Project "Development of Project and Other Documentation for Construction of Another Track, Modernization and Renovation of Railway Section Skrljevo - Rijeka - Jurdani" (Contract No. INEA / CEF / TRAN / M2014 / 1044654 - Signed in November 2015) - Grants received on 31 December 2018 amounted to HRK 18,236 thousand; - Grant Agreement for the Project "Multimodal Platform for the Development of the Port of Rijeka and Interconnection with the Container Terminal of the Adriatic Gate", works on the reconstruction of the railway station Rijeka - Brajdica and the construction of the intermodal container terminal Brajdica (Contract INEA / CEF / TRAN / M2014 / 1044613 - signed in November 2015) - Grants received on 31 December 2018 amounted to HRK 21,391 thousand; - Grant Agreement for the Project Technical Assistance to Improve the Capacity Building of Railway Infrastructure Manager in Croatia" (Contract MOVE / B4 / SUB / 2014-705 / CEF / PSA2 / 2 / S12.714460 - signed in December 2015) - Grants received on 31 December 2018 amounted to HRK 753 thousand; - Grant Agreement for the project "Reconstruction of the existing and construction II. railroad track at the Kriievci-Koprivnica-State border" (contract No. INEA / CEF I TRAN / M2015 / 1126931 - signed in October 2016) - Grant received on 31 December 2018 amounted to HRK 390,083 thousand; - Grant Agreement on the Project "Feasibility Study and Economic Financial Analysis of the Modernization of the Railway Line M104 Novska-Tovarnik-DG, OkuEani-Novska" - Receipt of Grants as of 31 December 2018 amounted to HRK 6,758 thousand; - Grant Agreement on the Project "Modernization of the Railway Line M202 Zagreb GK - Rijeka on the part of O tarije-Skrljevo" - Received grants on 31 December 2018 amounted to HIRK 3,753 thousand; - Grant Agreement for the Project "Development of the Railway Junction Development Study Zagreb" and the Project "Development of a Study on the Introduction of the European Rail Traffic Management System (ERTMS)" - Grants received on 31 December 2018 amounted to HRK 3,596 thousand; - Grant Agreement for the Project ,,Reconstructions of the cargo section of the railway station Rijeka and construction of the terminal for rail intermodal transport on container terminal ZagrebaEka obala" - Grants received on 31 December 2018 amounted to HRK 51,184 thousand. 75 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 40. ACCRUED EXPENSES AND DEFERRED INCOME - continued In the amount of HRK 26,802 thousand, net interest and deferred income (uncollected) have been reversed and for which value adjustments were recorded in the Company's business books in the position of other active time balances to the related parties (see Note 28). In the position postponed payment of expenses and income of the future period (short-term), the non-refundable funds received for OPKK projects in total amounted to HRK 16,542 thousand: - project Construction of the new suburban railway section Gradec - Sveti Ivan Zabno in the amount of HRK 0,122 thousand; - project Reconstruction of the existing and construction of 2nd railway track section Dugo Selo - Kriievci in the amount of HRK 8 thousand; - project Modernization and electrification of the railway line Zapre ie - Cakovec on the section Zaprei6 (exclusively) - Zabok (inclusive) in the amount of HRK 15,881 thousand - project Upgrading and electrification of the existing railway Line of importance for international traffic M601 Vinkovci - Vukovar in the amount of HRK 653 thousand In the position of long-term deferred paid costs and income for the future period, the employer's obligation for an unused vacation days to employees is recorded on 31 December 2018 in the amount of HRK 25,300 thousand. The difference between costs of other companies (calculations of utility costs by receipted invoices of suppliers) and income based on calculation of utility costs in the amount of HRK 266 thousand are stated under other accruals on 31 December 2018. (see note 28). 76 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 41. OFF BALANCE SHEET ITEMS Off-balance sheet items are stated at 31 December 2018 in the amount of HRK 6,816,612 thousand (31 December 2017 in the amount of HRK 6,636,928 thousand). 31 December 31 December 2018 2017 HRK'000 HRK'000 Received Guarantees 1,021,831 1,978,665 Guarantees given 12,341 135,127 Claims for funds destroyed in the war 269 269 Property in the unavailable area 369,836 369,836 EU - guarantee letters 355,035 355,035 EU agreements 5,023,086 3,763,782 EU - payment request to NF 34,214 34,214 Total 6,816,612 6,636,928 Posting unavailable, taken and completely destroyed property during the war was carried out in accordance with the Regulation of expression of assets, claims and obligations in war conditions (Official Gazette No. 2/92) and the Croatian Railways Act (Official Gazette No. 53/94). In the off-balance sheet item is stated asset at purchase value. Evidence of funds in an inaccessible area of the Republic of Croatia refers to the areas that have been mined and inaccessible to the census commission and which has not been listed yet: - railway lines and buildings on the section S. Brod - Bosanski Brod - railway lines and buildings, SIT and ETP devices on the sections: - Sisak-Caprag-Topusko and Sisak-Caprag-Sunja-Jasenovac - other assets in an inaccessible area 77 Hi INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 41. OFF BALANCE SHEET ITEMS - continued The Company on 31 December 2018 in its off balance sheet items has registered EU contracts in the amount of HRK 5,023,086 thousand: HRK'000 1.MMPI - Grant Agreement THE STUDY OF DEVELOPMENT OF THE RAIL JUNCTION ZAGREB 0 DB ENGINEERING GERMANY THE RECONSTRUCTION OF THE RAILWAY LINE DUGO SELO-NOVSKA 1. PHASE 40,391 2. THE PREPARATION OF DOCUMENTATION FOR RECONSTRUCTION OF THE RAILWAY LINE TYPSA SPAIN DUGO SELO - NOV5KA, ZGIB - SISAK - MOSLAVINA 7-7,935 MMPI - Grant THE RECONSTRUCTION OF THE EXISTING AND CONSTRUCTION I. RAILROAD TRACK AT Agreement THE DUGO SELO - KRIZEVCI 1,517,122 3 DIV-DALEKOVOD- THE RECONSTRUCTION OF THE EXISTING AND CONSTRUCTION II. RAILROAD TRACK AT ZAGREB-MONTA2A THE DUGO SELO - KRIZEVCI 1,239,558 SGS ADRIATICA - THE RECONSTRUCTION OF THE EXISTING AND CONSTRUCTION II. RAILROAD TRACK AT INVESTINiENJERING THE DUGO SELO - KRIZEVCI 14,425 4 MMPI - Grant Agreement THE STUDY OF INTRODUCTION OF EUROPEAN SYSTEM OF RAIL TRAFFIC MANAGEMENT 0 5 URS POLSKA RAILWAY LINE GOLJAK - SKRADNIK 67,290 MMPI - Grant THE CONSTRUCTION OF THE NEW SUBURBAN RAILWAY SECTION G RADEC - SVETI IVAN Agreement iABNO 222,733 6. SGS ADRIATICA - THE CONSTRUCTION OF THE NEW SUBURBAN RAILWAY SECTION GRADEC - SVETI IVAN INVESTINZENJERING ZABNO 9,889 THE CONSTRUCTION OF THE NEW SUBURBAN RAILWAY SECTION GRADEC - SVETI IVAN COMSA - H.F. WIEBE 2ABNO 195,595 ITALFERR ITALY THE RECONSTRUCTION OF THE RAILWAY LINE HRVATSKI LESKOVAC - KARLOVAC 41,372 8 URS POLSKA II. RAILROAD TRACK KRIZEVCI - KOPRIVNICA 39,937 BOMBARDIER ITALY WORKS - 55 DOUBLE TRACK OKUCANI - NOVSKA AND RAILWAY STATION RAJIC 64,507 DB ENGINEERING GERMANY WORKS - 55 DOUBLE TRACK OKUANI - NOVSKA AND RAILWAY STATION RAJI( 14,364 SALCEF ITALY WORKS - SS DOUBLE TRACK OKUCANI - NOVSKA AND RAILWAY STATION RAJk 193,936 10. THE PREPARATION OF DOCUMENTATION FOR THE RECONSTRUCTION AND ACCIONA ITALY ELECTRIFICATION OF THE RAILWAY LINE VINKOVCI - VUKOVAR 18,830 11. MMPI -SAFU - Grant THE CONCEPTUAL SOLUTIONS AND STUDY DOCUMENTATION OF THE MODERNIZATION Agreement OF THE RAILWAY JUNCTION ZAGREB 22,738 12. MMPI -SAFU - Grant THE DEVELOPMENT OF PROJECT AND OTHER DOCUMENTATION FOR MODERNIZATION Agreement OF RAILWAY LINE M202 Zagreb GK - Rijeka SECTION KARLOVAC - OSTARIJE 69,504 THE DEVELOPMENT OF PROJECT FOR MODERNIZATION OF RAILWAY SECTION KNIN - 13. MMPI -SAFU - Grant SPLIT RAILWAY LINE M604 Otarije - Knin - Split, M606 Knin - Zadar, M607 Perkovid - Agreement Sibenik SECTION KNIN - SPLIT 15,608 14. MMPI -SAFU - Grant THE PROJECT OF CONNECTING WITH RAIL WITHIN THE FUNCTIONAL REGION OF THE Agreement CENTRAL CROATIA - LEPOGLAVA JUNCTION 11,209 15. MMPI -SAFU - Grant THE STUDY DOCUMENTATION OF THE MODERNIZATION OF TRACK OSTARIJE-KNIN Agreement RAILWAY LINE M604 OSTARIJE - KNIN - SPLIT 15,422 16. MMPI -SAFU - Grant THE UPGRADING AND ELECTRIFICATION OF THE EXISTING RAILWAY LINE VINKOVCI - Agreement VUKOVAR 516,331 17. MMPI -SAFU - Grant Agreement THE MODERNIZATION AND ELECTRIFICATION OF THE RAILWAY LINE ZAPRESIC -ZABOK 614,390 TOTAL 5 023086 78 � � ч.- � � � � а � г-- й а т � �, й � й с]i г� � а � �, ,�,, , �,,я � , � �, � , � с, � �.rэ о r� cr L� и . й ,,. isl f�. и iU , � � � � �--й Т7 � Qi у W i S] � О � � � rч м � су � � � � � � � � � � � � � � ,С 7,А г,л � м � ц7 � � ц�/ � � N 'L� g%7 � � С v � � '� � � Ri �6 � � � � � � г � � � � � г в � в г � � � J.L.J �'j � _RS 'ид � � � � � � .L7 � � � � � J {rj д � гfi , � � , � � , � , � � � � � � � � � н '� V � Е11 П3 т � д О � `� �4J � � '¢r � � О �' � 41 � � � 'ь' � N � � � s•п � и r� а+ � г гч � О �t � ' ' г`г О [S а+ � гS ' er � гб Ш иа о� t� м nи м rv rn гч и и � �j р� � � acr г. s� ь� гn и м и а� na гл �. �� ш оа r.� еч м � г r. sп г �, � г Q � � ш as � ��"'' гСS � , � � � � � � I�°� Ih гЛ ., � *С7 � О� � М � N'е� DO �R Г N ', г'rM О г � 4� ,LZ т N О ..... � � �'.'.. ; � и � и г � г. � �--7 Х+ U � fiS � !fF �+ � о+ � ил � � со гч � � о со сч с� а• г• ��3 г.ч v г� а� г� .�- .[� м цs л. r- г=. о�# н � q} � � .В � r- оо �g Сз r�r .еэ rJ �#' � �з � '� � � � � гч м rv �- �- � �° Oi � й Н � 4 � � � � �. 41 -fl у Lь С н rw м � ь-. м м м�.пэо n� � � �у � � , � д,. � С гб а� а� агt ,а .д er Q] ,р ....., N N r N � ar, L �� ; т 1в ри М .,® у_, � ^ N r't 4- Г^. С � +� й Г *� R3 � Ф � � � 7+ V i-+ ,.� ,ы:,, ут егг � �.n�n� о � � � � � � � �_ Р .� � � V � � ci �' о � � � " �t с .�' � �s ,,� а, F � � � � � � �, � г� т Г� и � i ni W W q ш �� 4а �? ,:� � ,. � N 1- 3+ +� � а ., г.� а С7 ш � J ;�, +J � ,� ''� о " в � � � LLJ � � •�. � � Q б 'С7 �а� � �, ,�� � °а � а � _ 7 � а С {f7 N � 7 °^ й С± `'� � = tб г�Л � ^ t!а t � -n � й [J � ь. г] �� � � у� С ,L1 v � Rf � ы 077 О � � Qy г�7 � � г� V1 � т � � 66 "С3 �.. N {� � L ОП G7 � � � � �.. N L � � � гр � � Q т г � и гч �•`'� ° '^ �� v�� п�а о а�а n' � ап С} �� гц •� о д ва о ., г■r с пп га � Z_ '[7 �,, � v, .. v � v >rц � Q '� о р� гв � � �j '� r.� ��� С3 В�v, тs `� � бэ и�й с��•�, О Q �� N ein � Q � v _ �''�у dJ � в � }+ 'е7 ar rn Ш � а у� р >� � � L � � N v '� 'С7 �, яг гэ о о О_ �'�' ~ � � � � � а. v S � '� в "�' �, � '`" � � го v о v � � с ��г � i tг7 .� � а, Q- с? о. ''� � ���,� � У� [�! � � Н � � пi �' г��а �� v т� а '� �' � .� "" а � Т, ° с """ т �,, ,J �.. � � . Q • 'с �v � ' га ? � t � � �л °о � � � °' � �' �' � �' ' � �' � � � ° � а � �а ~ L С1 �� У.�.б s,,,. гб > N . а. U � Q а�.. С � й iб гб � � пi � � Ф еRд � � R5 G, CL Cs. i as у� � (1 � � UJ � Ш G � й � �N' �rV ра , 'v tц '4 � �. ш ш г Z w ц � сп � т� гч ta а� � т т�� о� Са т т т т г г г� �° � ° v7 � цi С7+ ° ° ° С7 ь ,С7.. , ь ° r � О г б ' ц'1 Q ^' �", ю С � � к Ш � г. � ° �э С� ^ Сз � � г,-i ° ° ° ° ° � ° ° ° а(у г� ос� гэ � пг гч �. v a4 � с и - Ф1 � ° ° � ° ° ° ° ° ° ° ° ° ° ° , ° ° � , ° ° '^ и 41 V .Г' г� � �i Rt � ✓ � [б � и � ° ° ° ° � ° ° �. � ° ° ° , ° ° � ° ° ° ° U) � 7 'v V ' а � гл м ° ч- rn о� �- � гч rn ° , , ао г� r,r� м*а �г- t� Q+ г.8 r- ч3 tп м и гд ст ач гч м rJ. +а [-- р�у С N fв tT О Рв К7 М 'S7 1*. � СТ r- С7 т1" �� +43 ц '�7 � � rJ пi Ф г-. и-а N �, fШi � � " � д� М ^ М N h� ' [�'3 !РУ �Т 4д тУ S7 ° ° �^'у ° � а , ьD � Q � и � �» 1дб'1 � 4�CJ � а] , (в. +27 41! V � U6 !�П г � С7 С � � - а+ и ~д м гТ 9С3�� с7� ° О� 4n .L7 ° Г�. ° ° б м м т R �О rn tT п3 и О� Г� Сл r� �С5 Г^. fв б tfi м и м г•7 � � г � .°� б *д7 �fs е7+� т м'и � м �С5 tв С7� г°7 N Г� yry. � �., ., ,. ,. «. .. � •r. � s'+! tV т м r t-- � С � q� � Й � � � б J ' т CV ° б 4% � � � � ° , � ° n ° ° Q, N v '� м � С�? Г-. м� � м йТ �' м м n. м � � � ' `� г ос> 'а� U N ас � 9� з с � -� с � й т3 � ' т *' w � � �, о � � и �. о � sz ��'а р, и � CL � �л а��г � an Ry пs г� � s _ ол L �, GwiG�� � ы+ � ° � � а С7 � s. � � � о � � " а 't � � ш �' - о � Q ° тз N � � � � а � '� � гл � �` �` � РвЕ � О V 7 •п �D � � � С! Е- ^ N v � il3 ,р �v +, J � �,7 7 Т3 д1 ` �� t3 С7 ,� Q � � � � � � �° � �' �r, о � �" � � � г�у � а � � ,й й 4'i � � � .�+ Q � г�гr �р V�- сл �, �� _ �, n+ � ,с а'г v с гз го � ш � а "' г � �! � ° � � ^ �N М � ,� � д v � '� � .� t�ы ��г Q � .�, '� Ф� р � `? .. � � �л � -- � г� F- � � � а р � -а � .� 4 r� � � � � ., а?, n`�i �л � 4 � гч =� W � � гэ � � Q г� г� � 'с � ro • о ri �� � � � � � �� i�] qJ} � i1J �7 q�j � Оп V О�С Сэ '�_ qг TJ Q б� N б йи � � � L � � °и ,� �1 :� � � N N � � `л � Ф1 пS 'С7 О qj t'�л � С � го �, .ы ŭi v .- в. Q v_ �о . з '� � Е � � ® -� '- � �� � � ь�g- ,Ч .. Q 'С7 tц � � rtS ��^ � �11 i31 4.1 � �. L] 4 � и О � � � � [� и н � � rV FЧ �91 г tN -r-w цf . sи Q i Т} 7 � +�-1 � . LL 1Л � б ь�,. � � � �С NS ,�,. ++ +л � 9б дС �t13 � � Уц7 V'} ka fy � {ёу �. �,� С7 Т� у ,гб � 4 �+ i С С �`= ? �V '� н й � а й 4 � С � �'." � � �-' �`' [�'6 >� � � L] �С � � ь�. f� С З..гл гб п3 � 4 гб ~ �i О п3 ут•i С] � cV � q� р р L° rN rгч о�`sr аг �° тэ �-+з �� ш ш� ш гz гЕз О 2 Z у.. �i" � t� tV Lj а С. z 2 4� сУ � CJ Н О г 2= 2 S 2= Z Н HZ INFRASTRUKTURA, d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 43. NON - FINANCIAL STATEMENT AND CONSOLIDATED FINANCIAL STATEMENTS The preparation of a separate non-financial statement on the Company's sustainability for 2018 is underway. In accordance with the provisions of the Accounting Act (Official Gazette No. 78/15, 134/15, 120/16, 116/18) the non-financial report shall be published on Company's website within 6 months from the balance sheet date, i.e. 30 June 2019 at the latest. The report wilt be published at the following link; http://www.hzinfra.hr/. The consolidated financial statements wit[ be published by 30 September 2019 in accordance with the provisions of the Accounting Act (Official Gazette No. 78/15, 134/15, 120/16, 116/18). 44. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT Capital risk management The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to stakeholders through the optimization of the debt and equity balance. The capital structure of the Company consists of debt, which includes credits, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, legal and other reserves and retained ea rni ngs /transferred loss. Gearing ratio The Management board reviews the capital structure on a semi-annuat basis. As part of this review, Management considers the cost of capital and the risks associated with each class of sources of funding. The gearing ratio at the year's end is presented as follows: 31 Dec 2017 31 Dec 2018 Restated DESCRIPTION H RK '000 HRK '000 Debt 1,013,636 942,317 Cash and cash equivalents (527,660) (668,608) Net debt 485,976 550,851 Equfty_ 8,482,420 8,703,231 Net debt to equity ratio 5,73% 6,32% Categories of financial instruments 31 Dec 2017 31 Dec 2018 Restated DESCRI PTION HRK'000 HRK'000 Financial assets Loans and receivables (including cash and cash equivalents) 732,260 880,536 Financial liabilities Arnortised cost 2,356,738 2,022,566 81 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 44. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT - continued Financial Risk Management Objectives The Company controls and manages the financial risk that could affect the Company's operations through the internal risk reports in which the exposure to risks is analysed on the basis of degree and significance of market risk, interest rate risk, credit risk, currency risk and liquidity risk. Market risk The Company operates on the Croatian and international markets. The Company's management determines the prices of its products and services separately for domestic and foreign markets. There were no significant changes to the influence of market risks to the Company's operations. Interest rate risk The interest rate risk is a risk that the value of a financial instrument will fluctuate due to changes in market rates relative to the interest rate applicable to the financial instrument. Interest rate cash flow risk is the risk that the interest cost of an instrument will fluctuate over time. Due to the fact that The Company uses loans with changeable interest rates, it is exposed to the interest rate risk. Sensitivity analysis on interest rates Sensitivity analysis was performed only for the financial instruments with variable interest rates based on the exposure to interest rates at the end of the reporting period assuming that the outstanding amount at the end of the reporting period was unsettled during whole year. If interest rates were 50 basis points higher, the balance of loan indebtedness as at 31 December 2018 would be influenced by the increase of the interest rate expense in the amount of HRK 5,068 thousand (31 December 2017: HRK 4,735 thousand) based on exposure to the interest rate risk. This is mainly attributable to the Company's exposure to interest rates on loans with variable interest rates. Credit risk Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Company. Financial assets that potentially expose the Company to credit risk consist mainly of cash, money equivalents and trade receivables. Trade receivables have been adjusted to allow for bad and doubtful accounts.There were no significant changes to the influence of credit risks to the Company's operations. 82 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 44. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT - continued Currency risk The official currency of the Company is the Croatian kuna ("HRK"). However, certain transactions denominated in foreign currencies are calculated in the Croatian kuna by applying the exchange rates in effect at the date of the Balance Sheet / Statement of Financial Position, and consequently, the Company is potentially exposed to risks of changes in currency rates. As the Company has a significant number of loans contracted with a currency clause (generally related to EUR), the Company is significantly exposed to this risk. Net carrying amount of cash and cash equivalents and liabilities of the Company denominated in foreign currencies on the Balance Sheet date is shown in the table below: Liabilities Assets 2018 2017 2018 2017 Balance at 31 December Restated Restated HRK 000 HRK 000 HRK '000 HRK '000 EUR 1,029,641 948,317 434,719 431,974 Analysis of sensitivity to foreign currency The Company is primarily exposed to the countries whose currency is EUR. The following table analyses the foreign currency risk of the Company in the event of a 1% increase in the value of Kuna against Euro. The 1% sensitivity rate is used in internal foreign currency risk reports to key managers and represents the Managements assessment of predictable changes in the exchange rates. The sensitivity analysis includes only open monetary items in foreign currency, and their translation at the end of the period is adjusted based on the 1-percent change in exchange rates. The influence of changes in the exchange rate is given in the following table: EUR influence Decrease by 1% Increase by 1% 2018 2017 2018 2017 DESCRIPTION HRK'000 HRK'000 HRK'000 HRK'000 Influence on the profit / toss for the period 1,004 938 1,024 957 Liquidity risk A solvency risk is a risk that the Company would not be able to fulfil its financial liabilities to the other contractual party. The Company manages solvency risk in a way that observes continuously and analyses expected and actual cash flow on the basis of maturity of financial assets and liabilities. Liquidity risk analysis The following table analyses the Company's liabilities based on the remaining period to contractual maturity. The table is prepared on the basis of undiscounted cash outflows by financial liabilities at the earliest date when payment can be requested from the Company. 83 H2 INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 44. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT - continued The remaining period up to the contractual maturity of the Company's financial liabilities is shown as follows: LIABILITIES Up to 1 month 1-3 months 3 months - 1 year Over 1 year Total HRK'000 HRK000 [RK '000 HRK '000 HRK '000 31 Dec 2018 Interest free 0 0 194,018 0 194,018 Interest bearing 0 0 228,495 785,141 1,013,636 31 Dec 2017 Restated Interest free 0 0 192,936 192,936 Interest bearing 0 0 234,764 707,553 942,317 The following table analyzes the remaining period until the contractual maturities of the Company's financial assets. The table is composed of undiscounted cash inflows on financial assets at the earliest date the Company may apply for payment. The remaining period up to the contractual maturity of the Company's financial assets is as follows: ASSETS Up to 1 month 1-3 months 3 months - 1 year Over 1 year Total HRK '000 HRK '000 HRK '000 HRK 000 HRK '000 31 Dec 2018 Interest free 0 0 139,904 0 139,904 Interest bearing 0 0 7,616,768 5,470,100 13,086,868 31 Dec 2017 Restated Interest free 0 0 139,904 0 139,904 Interest bearing 0 0 8,643,763 11,572,609 20,216,372 84 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 45. POTENTIAL LIABILITIES Court proceedings are ongoing against the Company, and the Company is exposed to potential liabilities in the amount of HRK 140,478 thousand which includes claims against interest. At 31 December 2018, the Company has determined provisions for contingent liabilities in the amount of 140,478 thousand. In addition to contingent liabilities for court disputes, the Company has established provisions for contingent liabilities on the basis of tax liabilities. Court disputes in which the Company's defaulting party on 31 December 2018 are as follows: li/ The Company as a defendant, together with HZ Cargo d.o.o., Zagreb and HZ Putniki prijevoz d.o.o., participates in numerous court cases in the total amount of HRK 31,618 thousand, the outcome of which is uncertain. According to the plan of division of the company HZ Hrvatske zeljeznice d.o.o., Zagreb, any new obligations arising from these disputes are borne by newly established companies based on their participation in the capital. The Company, as a defendant, participates in court proceedings initiated in 2007, 2008, 2012, 2013, 2014, 2015, 2016, 2017 and 2018 in the amount of HRK 135,088 thousand and EUR 643 thousand. /ii/ The Company is burdened with guarantees for certain subsidiaries in Croatia in the amount of HRK 12,341 thousand. /iii/ According to the adopted business plan of the Company for the period from 2019 to 2023, the costs of future severance payments amounts to HRK 43,3 million, per year as follows: * 2019 HRK 10,1 million * 2020 HRK 20,5 million * 2021 HRK 6,7 million * 2022 HRK 3,0 million * 2023 HRK 3,0 million 46. EVENTS AFTER THE BALANCE SHEET / STATEMENT OF FINANCIAL POSITION DATE On 28 March 2019, the Assembly Board of Croatia express putni ka agencija d.o.o. issued the Decision No. UI-S-74-1/19 on initiating activities related to the bankruptcy of Croatia express putniCka agencija d.o.o.. The Management Board of the Company on 7 May 2019, issued the Decision about credit indebtedness for financing the reconstruction of the railway infrastructure in the amount from HRK 350,000,000 in euro equivalent at OTP bank d.d. 85 Hi INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 47. FINANCIAL STATEMENTS OF THE COMPANY AND THE PUBLIC GOOD As Railway Act implies existence of two parallel records of public goods and own income and expenses, as well as assets, liabilities and capital emerging from these changes, we present below financial statements of the Company and financial statements of public good. 31 December 2018 Company Public good Total HRK '000 HRK '000 HRK'000 ASSETS Concessions, patents, licenses, trade and service brands, software and other rights _ w z91 Intangible assets 44,910 - 44,910 Land 192,867 1,744,816 1,937,683 Buildings 137,378 7,404,284 7,541,662 Plant and equipment 3,878 164,833 168,711 Tools, plant inventory and transport vehicles 38,971 154 39,125 Prepayments for tangible assets 262,363 - 262,363 Tangible assets in preparation 1,845,845 - 1,845,845 Other tangible assets 46,984 15,243 62,228 Tangible assets 2,528,286 9,329,330 11,857,617 Investment in shares (stakes) in related parties 194,151 - 194,151 Investment in securities 542 - 542 Other Long - term financiaL assets 32 - 32 Financial assets 194,725 - 194,725 Other receivables 5,074] 5,074 Receivables 5,074 - 5,074 LONG - TERM ASSETS 2,772,995 9,329,330 12,102,326 Raw materials and supplies 115,679 q 115,679 Inventories 115,679 - 115,679 Receivables from related parties 171,940 - 171,940 Trade receivables 16,633 - 16,633 Receivables from employees 6,783 - 6,783 Receivables from State and other institutions 6,145 - 6,145 Other receivables 15,191 - 15,191 Receivables 216,692 - 216,692 Given loans, deposits, etc. 4,80 4,801 Financial assets 4,801 - 4,801 Cash and cash equivalents 527,660 527,660 SHORT - TERM ASSETS 864,832 - 864,832 Prepaid expenses and accrued income 4,653,405 3,866,359 8,519,764 TOTAL ASSETS 8,291,233 13,195,689 21,486,922 OFF BALANCE SHEET ITEMS 6,520,575 296,037 6,816,612 86 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 47. FINANCIAL STATEMENTS OF THE COMPANY AND THE PUBLIC GOOD - continued 31 December 2018 1. Company Public good Total HRK 000 HRK '000 HRK '000 CAPITAL AND LIABILITIES Subscribed capital 224,188 - 224,188 Capital reserves 3,074 8,354,795 8,357,869 Accumulated loss / Retained earnings 0 0 0 Loss / (Profit) for the current year (99,637) - (99,637) TOTAL CAPITAL 127,625 8,354,795 8,482,420 PROVISIONS 192,920 - 192,920 Liabilities to banks and other financial institutions 785,14 785,141 Other long - term liabilities 9,356 9,356 Long - term liabilities 794,497 - 794,497 Liabilities to related parties 123,321 - 123,321 Liabilities for loans, deposits, etc. - related parties 28 28 Liabilities for loans, deposits, etc. 3,964 190,054 194,018 Liabilities to banks and other financial institutions 228,495 - 228,495 Liabilities for prepayments 3,293 - 3,293 Trade payables 163,279 163,279 Liabilities to employees 30,391 - 30,391 Liabilities for taxes, contributions and similar fees 21,043 21,043 Other liabilities 798,373 - 798,373 Short - term liabilities 1,372,187 190,054 1,562,241 Accrued expenses and deferred income 5,804,004 4,650,840 10,454,844 TOTAL CAPITAL AND LIABILITIES 8,291,233 13,195,689 21,486,922 OFF BALANCE SHEET ITEMS 6,520,575 296,037 6,816,612 87 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 47. FINANCIAL STATEMENTS OF THE COMPANY AND THE PUBLIC GOOD - continued 31 December 2017 Company Public good Total Restated Restated Restated HRK '000 HRK '000 HRK '000 ASSETS Concessions, patents, licenses, trade and service brands, software and other rights 57,357 - 57,357 Intangible assets 57,357 - 57,357 Land 192,883 1,744,847 1,937,730 Buildings 144,774 7,398,401 7,543,175 Plant and equipment 6,020 168,912 174,933 Tools, plant inventory and transport vehicles 13,724 187 13,911 Prepayments for tangible assets 243,368 - 243,368 Tangible assets in preparation 1,488,206 - 1,488,206 Other tangible assets 47,288 11,596 58,883 Tangible assets 2,136,263 9,323,943 11,460,206 Investment in shares (stakes) in related parties 193,879 - 193,879 Investment in securities 665 - 665 Other long - term financial assets 32 - 32 Financial assets 194,576 - 194,576 Other receivables 11,177 11,177 Receivables 11,177 - 11,177 LONG - TERM ASSETS 2,399,373 9,323,943 11,723,316 Raw materials and supplies 140I12 140,512 Inventories 140,512 - 140,512 Receivables from related parties 188,909 188,909 Trade receivables 13,871 13,871 Receivables from employees 6,180 6,180 Receivables from State and other institutions 4,364 4,364 Other receivables 13,285 - 13,285 Receivables 226,609 - 226,609 Given loans, deposits, etc. 6,175 - 6,175 Financial assets 6,175 6,175 Cash and cash equivalents 668,608 668,608 SHORT - TERM ASSETS 1,041,904 - 1,041,904 Prepaid expenses and accrued income 4,533,326 3,864,544 8,397,870 TOTAL ASSETS 7,974,603 13,188,487 21,163,090 OFF BALANCE SHEET ITEMS 6,340,891 296,037 6,636,928 88 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 47. FINANCIAL STATEMENTS OF THE COMPANY AND THE PUBLIC GOOD - continued 31 December 2017 Company Public good Total Restated Restated Restated HRK '000 HRK '000 HRK '000 CAPITAL AND LIABILITIES Subscribed capital 224,188 - 224,188 Capital reserves 3,074 8,473,005 8,476,079 Accumulated loss / Retained earnings 0 - 0 Loss I (Profit) for the current year 2,964 - 2,964 TOTAL CAPITAL 230,226 8,473,005 8,703,231 PROVISIONS 139,344 - 139,344 Liabilities to banks and other financial institutions 707,553 - 707,553 Other long - term liabilities 15,246 - 15,246 Long - term liabilities 722,799 - 722,799 Liabilities to related parties 76,569 76,569 Liabilities for loans, deposits, etc. - related parties 10 10 Liabilites for loans, deposits, etc. 2,882 190,054 192,936 Liabilities to banks and other financial institutions 234,764 - 234,764 Liabilities for pre payments 7,597 7,597 Trade payables 148,385 148,385 Liabilities to employees 30,339 30,339 Liabilities for taxes, contributions and similar fees 22,801 22,801 Other liabilities 586,366 - 586,366 Short - term liabilities 1,109,713 190,054 1,299,767 Accrued expenses and deferred income 5,772,521 4,525,428 10,297,949 TOTAL CAPITAL AND LIABILITIES 7,974,603 13,188,487 21,163,090 OFF BALANCE SHEET ITEMS 6,340,891 296,037 6,636,928 89 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 47. FINANCIAL STATEMENTS OF THE COMPANY AND THE PUBLIC GOOD - continued Pursuant to the provisions of Art. 21 st.2 of the Railway Act, the Company, on the expense of public good equity, compensates the retained losses or the same increases reitaned earnings. Pursuant to the Decision of the Government of the Republic of Croatia in 2013 and 2014 on granting approval for the Company's debt take over, the Company repaid long-term liabilities on loans and interest and exchange rate differences by increasing the capital of the public good. The total effect of these activities is changes in the capital of the public good (capital increase for HRK 3,866,359 thousand and capital decrease of HRK 3,011,802 thousand), which are stated in individual balances of the Company and public good under the item "Prepaid expenses" and "Accrued expenses and deferred income" while in the Company's total balance sheet, these changes were consolidated in the amount of HRK 6,878,161 thousand. Within the positions "Prepaid expenses" and "Accrued expenses and deferred income" are reported investments financed from loans for which the capital of the public good increased and at 31 December 2018 they amount to HRK 1,639,038 thousand. In 2013 and 2014, the Government of the Republic of Croatia adopted the Decision on granting approval for the debt take over of the Company on the basis of the given guarantees and unpaid mandatory debts of the Debtors by increasing the capital of the public good to reduce the indebtedness and financial consolidation of the railway infrastructure operator in the total amount of HRK 3,334,166 thousand (HRK 1,418,375 thousand in 2013 and HRK 1,915,791 thousand in 2014). This approval relates to the takeover of long-term borrowing at Erste ft Steiermerkische Bank d.d., and Sberbank d.d., Privredna banka Zagreb d.d., ZagrebaLka banka d.d. and short-term debt with OTP banka d.d.. These loans are funded by the public good. Upon the takeover of the loan, the Company increased the capital of the public good for the above mentioned amount, and for the amount of capitalized investments it was necessary to make a correction of the capital. 90 HZ INFRASTRUKTURA d.o.o., ZAGREB NOTES TO THE FINANCIAL STATEMENTS - continued for the year ended 31 December 2018 48. PREPARATION AND APPROVAL OF FINANCIAL STATEMENTS Financial statements set/out on previous pages were prepared by the Management Board of the Company, and authjrised theiOsiuance on 23 May 2019. For an on behalf of anagement Board:. Ivan Krlic, //mr.sc. Darko BaricP1, President of the Management Member of the Management Board Board Nikola Ljub n, Marko Z. Zubrinie, Member of t Management Member of the Management Board Board KrunosLav P ic, Member of the Management Board HZ INFRASTRUKTURA d.o.o. Mihanoviceva 12 10 000 Zagreb Republic of Croatia 91