P R O S P E C T U S

of the Issuer

DRUŠTVO ZA ISTRAŽIVANJE, PROIZVODNJU, PRERADU, DISTRIBUCIJU I PROMET NAFTE I NAFTNIH DERIVATA I ISTRAŽIVANJE I PROIZVODNJU PRIRODNOG GASA NAFTNA INDUSTRIJA SRBIJE A.D. NOVI SAD

Novi Sad, August 2010

А) PROSPECTUS INTRODUCTION

The Securities Commission shall neither be liable for accuracy and completeness of data stated in the Prospectus neither for issuing securities, nor for the ability of the securities issuer to fulfill the obligations arising from the securities it issues.

1. ISSUER 1.1. Name, Registered office, Company ID number, Tax ID number DRUŠTVO ZA ISTRAŽIVANJE, PROIZVODNJU, PRERADU, DISTRIBUCIJU I PROMET NAFTE I NAFTNIH DERIVATA I ISTRAŽIVANJE I PROIZVODNJU PRIRODNOG GASA NAFTNA INDUSTRIJA SRBIJE A.D. NOVI SAD, NARODNOG FRONTA 12 COMPANY ID NUMBER. 20084693 TAX ID NUMBER. 104052135

1.2. Main activity 11101 – Crude oil extraction

1.3. Amount of share capital presented in the last financial statement RSD 87,128,024,000 REMARK: Basic capital in the amount of RSD 87,128,024,000.00 is comprised of the share and the other capital. The value of the registered share capital in the amount of RSD 81,530,200,000 is based on the assessment of the value of in kind contribution on 31 May 2005, that was made for the purpose of preparation of division balance and establishment of NIS a.d. Novi Sad by decision of the Government of the Republic of Serbia. Auditor of the financial statements for 2005 has determined that in the accountancy records of NIS a.d. Novi Sad the value of the share capital is higher for the amount of RSD 5,597,804,000 when compared to the amount registered with the Business Registers Agency and the Central Registry. Upon order of the auditor this difference is presented as the other capital. In 2009, the amount of RSD 20,000 is moved to the position Other capital in order to bring into line position between the value of the share capital registered with the Central Registry (RSD 81,530,200,000) and the value in the business records (RSD 81,530,220,000) which is shown in the statement as the changes in the capital.

2. SHARES TO BE ISSUED

2.1. Type, class, issue number, CFI code and ISIN number of securities

3. VOLUME OF SHARE ISSUE

3.1. State the total par value of all securities to be issued in RSD

4. NUMBER OF SHARES AND THEIR PAR VALUE

4.1. Total number of securities to be issued

4.2. Par value of a security

5. SALE PRICE OF SHARES

5.1. State the price the securities will be offered at

5.2. Method of payment for securities

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6. RIGHTS AND OBLIGATIONS DERIVING FROM THE SHARES

6.1. State all rights and obligations deriving from the shares

6.2. Pre-emption rights 6.2.1. Persons with pre-emption rights, right to subscribe and acquire shares and grounds of such rights (holders of ordinary shares, warrant holders, holders of convertible bonds and convertible preference bonds)

6.2.2. Total number of securities based on which the pre-emption right if subscription is exercised

6.2.3. Number of newly issued shares with respect to which pre-emption rights of subscription can be exercised

6.3. Tax liabilities of share holders 6.3.1. Property tax, Sales tax, Profit tax, Tax relief, Tax incentives

6.4. Manner of settling potential disputes between the issuer and the holder of securities and the name of the competent court

7. TIME, PLACE AND DEADLINE FOR SUBSCRIPTION OF SHARES

7.1. State the business name, registered office, address and working hours of BDC/bank and a period of time for subscription of shares (particularly state the deadline for subscription based on the pre-emption rights of subscription)

8. PLACE AND TERMS OF PAYMENT OF SHARES

8.1. State the business name, registered office, address, deadline for payment of the shares and the business hours of the bank with which the payment can be made

8.2. State the manner of distribution of excess subscribed and paid up securities to the persons that subscribed and paid the securities.

8.3. Consequences of non-payment or failure to meet payment deadline

8.4. Number of securities to be subscribed and paid up for the sale to be considered successful (success threshold)

8.5. Manner and deadline of repayment of paid up amounts in case of sale failure, including the interest rate and the manner of its calculation to the paid up amounts

8.6. Name and the registered office of the person in charge for the register keeping and clearing and settling obligations deriving from the securities to be issued (Central Registry)

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9. SECURITIES TRADING MARKET

9.1. Name and registered office of the organized market, date of admission of the same type of share to the organized market, transaction volume with that type of securities on the organized market in the past six months, stating the highest and the lowest price realized

10. BRIEF OVERVIEW OF THE SHARES ISSUER

10.1. Date of passing the decision on securities issuance and the name of the competent body passing of the issuer of such decision

10.2. Designation of proceeds collected from securities issuance; state the purpose of use of proceeds (for performing issuer’s activities or purchase of assets not intended for regular issuer’s activities, e.g. securities of other issuers)

10.3. State main data on issuer’s conduct of business and development plans

11. BROKER DEALER COMPANY AND/OR AUTHORIZED BANK PARTICIPATING IN ORGANIZATION OF THE PUBLIC OFFER

11.1. State the business name and registered office of the agent, i.e. issue underwriter who participates in organization of securities issuing

11.2. State the business name and registered office of the main organizer of issuing, if more parties participate in organization of issuing

11.3. State the type of the contract on organization of issuing and the type of agent’s obligation, i.e. underwriter’s obligation

11.4. State the amount of fee charged to the issuer by the agent, i.e. underwriter, for services related to issue organization, i.e. state the price difference between the price at which the underwriter buys securities from the issuer and the price at which it sells those in the issue procedure

11.5. State whether the agent’s obligation, i.e. issue underwriter’s obligation, relates to all or any particular portion of securities to be issued

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B) BASIC PROSPECTUS

1) “Prospectus for issuing securities with supporting data, contains all necessary information enabling investors to make objective assessment of the financial and legal status of the securities issuer and assessment of rights and obligations related to such securities.”

2) “Prospectus for issuing securities does not contain data that can make investors have misconception about the issuer of the securities, securities to be issued and issuer’s securities already issued.”

1. DATA ON SHARES ISSUER

1.1. Main data 1.1.1. Name, registered office, address, company ID number and tax ID number: DRUŠTVO ZA ISTRAŢIVANJE, PROIZVODNJU, PRERADU, DISTRIBUCIJU I PROMET NAFTE I NAFTNIH DERIVATA I ISTRAŢIVANJE I PROIZVODNJU PRIRODNOG GASA NAFTNA INDUSTRIJA SRBIJE A.D. NOVI SAD, NARODNOG FRONTA 12 COMPANY ID NUMBER. 20084693 TAX ID NUMBER. 104052135

1.1.2. Number and date of registration with the Business Registers Agency: BD 92142 as of 29 September 2005

1.1.3. Date of incorporation: NIS a.d. Novi Sad predecessor company was the Company for Crude Oil Exploration and Production, incorporated in 1949 by the Resolution of the Government of the Federative National Republic of Yugoslavia, which in 1953 was named Naftagas. Naftagas was later transformed into the company incorporating refineries in Pančevo and Novi Sad, as well as Pančevo Azotara, a fertilizer plant. By the end of 1973 Naftagas integrated the retail companies Jugopetrol – Belgrade and Jugopetrol - Novi Sad (current NAP). Naftna industrija Srbije was established in 1991 as a public company for the exploration, production, refining and trade in crude oil, oil products and natural gas. At that time it was integrating the following companies: Naftagas, Gas, Energogas, Jugopetrol, Naftagas promet and Inzinjering as well as the production companies Pančevo Oil Refinery, Novi Said Oil Refinery, Belgrade Oil Refinery and Kruševac Lubricant Factory. In accordance with the article 2 of the Law on Repeal of the Law on Incorporation of the Public Company for Exploration, Production, Refining and Trade in Crude Oil, Oil Products and Natural Gas (Official Gazette of RS, no. 74/05) and the Resolution of the Government of the Republic of Serbia 05 no. 023-4377/2005-1 as of 7 July 2005, the Company for exploration, production, refining, distribution and trade in crude oil, oil products and exploration and production of natural gas Naftna industrija Srbije a.d. Novi Sad was established in the legal form of the closed joint stock company. The Shareholders Assembly of NIS a.d. Novi Sad has on 21 June 2010 issued the decision on transformation on NIS into open joint stock company.

1.1.4. Position of the issuer within the group 1.1.4.1. Relation with other companies:  NIS a.d. Novi Sad is a subsidiary company of Gazprom Neft (Gazprom Neft owns 51% of ownership interest in NIS a.d. Novi Sad share capital)  NIS a.d. Novi Sad is the parent/controlling company of the following companies: - O Zone a.d. Belgrade, ownership interest in share capital 100% - NIS –OIL Trading GmbH Frankfurt am Main, ownership interest in share capital 100% (the company in undergoing liquidation on the basis of the founder’s decision issued in 2010) - NIS Oversiz o.o.o. Moscow, ownership interest in share capital 100% - NIS-Investments ltd, 62, London, ownership interest in share capital 100% (the company in undergoing liquidation on the basis of the founder’s decision) - NIS – Svetlost d.o.o. Bujanovac, ownership interest in share capital 51.32%

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- JUBOS d.o.o. Bor, ownership interest in share capital 51% - OOO SP Ranis o.o.o., Moscow area, Cernogolovka, Russian Federation, ownership interest in share capital 51%  NIS a.d. Novi Sad has significant ownership interest in the following companies: - Eurol International (Bermuda) ltd, ownership interest in share capital 50% - Maco nafta d.o.o. Skopje, ownership interest in share capital 49% - PINKI-ZEMUN a.d. Beograd – Zemun, ownership interest in share capital 48.7% - HIP Petrohemija a.d. Pancevo – in restructuring, ownership interest in share capital 20.51% - Prokons d.o.o. Subotica, ownership interest in share capital 20.15%.

1.1.4.2. Relationship between the issuer and other legal entities: NIS a.d. Novi Sad is affiliated with the other legal entities through the ownership relations.

1.1.4.3. Grounds for issuer’s engagement in managing other legal entities, i.e. grounds for other entities’ engagement in managing legal entity of the issuer: NIS a.d. Novi Sad is engaged in the management of the other legal entities on the basis of the ownership interest in the share capital, while the other legal entities are engaged in the management of the NIS a.d. Novi Sad depending on the number of the shares they hold.

1.1.5. Issuer’s bylaws, with reference to the location and time for insight issuer’s Incorporation Act or Statute as well as other by-laws, along with latest amendments and supplements: The insight into the Incorporation Act, the Statute and the other bylaws can be made at the registered office of NIS a.d. Novi Sad, Narodnog fronta str. 12, from 8 a.m. until 4 p.m. each business day from Monday to Friday, in the minority shareholders office and on the web page of NIS a.d. Novi Sad www.nis.rs.

1.2. ISSUER’S CAPITAL 1.2.1. Share capital on 31 December 2009 (thousand RSD) DESCRIPTION AMOUNT Share capital 81,530,200 Other capital 5,597,824 Subscribed Capital, Unpaid - Share premium - Reserve 889,424 Revaluation reserves 39 Unrealized gains on securities 130,243 Unrealized loss on securities 28,172 Retained earnings - Loss up to amount of equity 55,836,391 Purchased own shares and stakes - Total capital 32,283,167 Loss exceeding equity -

1.2.2. Issued shares 1.2.2.1. Number of ordinary shares issued, CFI code and ISIN number: Number of ordinary shares issued: 163,060,400 CFI code: ESVUFR ISIN number: RSNISHE79420

1.2.2.2. Number of preference shares issued by classes, CFI code and ISIN number: /

1.2.2.3. Rights derived from shares by type and class: Each ordinary share of NIS a.d. Novi Sad gives to its holder the same rights, in accordance with the Companies Law, that include in particular:

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- the right to access legal and other documents and information of the company; - the right to participate in the shareholders assembly; - the right to vote at the shareholders assembly based on the principle that one share gives the right to one vote; - the right to dividends payment, after full payment of dividends payable on preferential shares; - the right to receive a distribution on liquidation surplus deriving from liquidation of the company, after the claims of creditors and holders of any preferred shares have been satisfied; - pre-emptive rights to acquire newly-issued shares and convertible bonds; - the right to dispose of all types of shares in accordance with the Law.

1.2.2.4. Manner of shares issuing: On the basis of the Resolution of the Government of the Republic of Serbia on establishment of the joint stock company for exploration, production, refining, distribution and trade in crude oil, oil products and exploration and production of natural gas as of 7 July 2005, 8,153,020 of shares with par value amounting to RSD 10,000 per shares has been issued. On 17 August 2009, the Shareholders Assembly of NIS a.d. Novi Sad has issued the Decision on issuance of the second issue of the ordinary shares for the purpose of replacing existing shares due to their split, whereby 163,060,400 shares has been issued, with the par value of RSD 500.00 per share that had replaced the existing 8,153,020 shares with the par value of RSD 10,000.00 per share.

1.2.3. Changes in capital/equity 1.2.3.1. State the provisions of the issuer’s general regulation related to changes in capital In accordance with the article 9 of the Incorporation Act of NIS a.d. Novi Sad, increase and decrease of the share capital is within the competence of the Shareholders Assembly. As long as the Republic of Serbia is the holder of at least 10% of the ownership interest in the share capital of NIS a.d. Novi Sad, affirmative vote of the Republic of Serbia is necessary for rendering Shareholders Assembly decisions on increase or decrease of the share capital.

1.2.3.2. Description of changes in share capital, revaluated and other reserves, subscribed and unpaid capital, purchased own shares, issue premium, own shares, total capital (data to be provided for the previous three years): Share capital (thousand RSD) 2007 2008 2009 Opening balance 81,530,220 81,530,220 81,530,220 Correction of substantive errors in the current year - - - Restated opening balance 81,530,220 81,530,220 81,530,220 Total increase in the current year - - - Total decrease in the current year - - (20) Closing balance 81,530,220 81,530,220 81,530,200

Other capital (thousand RSD) 2007 2008 2009 Opening balance 5,593,656 5,597,804 5,597,804 Correction of substantive errors in the current year - - Restated opening balance 5,593,656 5,597,804 5,597,804 Total increase in the current year 4,148 - 20 Total decrease in the current year - Closing balance 5,597,804 5,597,804 5,597,824

Subscribed capital, Unpaid (thousand RSD) 2007 2008 2009 Opening balance - - - Correction of substantive errors in the current year - - - Restated opening balance - - - Total increase in the current year - - - Total decrease in the current year - - -

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Closing balance - - -

Share premium (thousand RSD) 2007 2008 2009 Opening balance - - - Correction of substantive errors in the current year - - - Restated opening balance - - - Total increase in the current year - - - Total decrease in the current year - - - Closing balance - - -

Reserves (thousand RSD) 2007 2008 2009 Opening balance 140,024 484,601 889,424 Correction of substantive errors in the current year - - - Restated opening balance 140,024 484,601 889,424 Total increase in the current year 344,577 404,823 - Total decrease in the current year - - - Closing balance 484,601 889,424 889,424

Revaluation reserves (thousand RSD) 2007 2008 2009 Opening balance 60,783 275,984 60,783 Correction of substantive errors in the current year - - Restated opening balance 60,783 275,984 60,783 Total increase in the current year 215,201 178,585 - Total decrease in the current year (393,786) (60,744) Closing balance 275,984 60,783 39

Unrealized gains on securities (thousand RSD) 2007 2008 2009 Opening balance - - 136,760 Correction of substantive errors in the current year - - - Restated opening balance - - 136,760 Total increase in the current year - 195,816 - Total decrease in the current year - (59,056) (6,517) Closing balance - 136,760 130,243-

Unrealized loss on securities (thousand RSD) 2007 2008 2009 Opening balance - - 33,169 Correction of substantive errors in the current year - - - Restated opening balance - - 33,169 Total increase in the current year - 33,169 - Total decrease in the current year - - (4,997) Closing balance - 33,169 28,172

Retained earnings (thousand RSD) 2007 2008 2009 Opening balance 15,970,913 3,205,707 - Correction of substantive errors in the current year - - Restated opening balance 15,970,913 3,205,707 - Total increase in the current year 13,967,323 2,083,654 - Total decrease in the current year (26,732,529) (5,289,361) -

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Closing balance 3,205,707 - -

Loss up to amount of equity (thousand RSD) 2007 2008 2009 Opening balance 9,926,271 9,926,271 18,200,280 Correction of substantive errors in the current year - - - Restated opening balance 9,926,271 9,926,271 18,200,280 Total increase in the current year - 10,121,645 (37,636,111) Total decrease in the current year - (1,847,636) - Closing balance 9,926,271 (18,200,280) 55,836,391

Purchased own shares and stakes (thousand RSD) 2007 2008 2009 Opening balance - - - Correction of substantive errors in the current year - - - Restated opening balance - - - Total increase in the current year - - - Total decrease in the current year - - - Closing balance - - -

Total capital (thousand RSD) 2007 2008 2009 Opening balance 93,369,325 81,168,045 69,981,542 Correction of substantive errors in the current year - - - Restated opening balance 93,369,325 81,168,045 69,981,542 Total increase in the current year 14,531,249 Total decrease in the current year (26,732,529) (11,186,503) (37,698,375) Closing balance 81,168,045 69,981,542 32,283,167

Loss exceeding equity (thousand RSD) 2007 2008 2009 Opening balance - - - Correction of substantive errors in the current year - - - Restated opening balance - - - Total increase in the current year - - - Total decrease in the current year - - - Closing balance - - -

1.2.3.3. Key elements of the issuer’s Incorporation Act related to the authorized capital, date of decision and the amount of capital increase. Incorporation Act does not contain provisions on the approved capital.

1.2.3.4. Key elements of the issuer’s Incorporation Act, date of decision on contingent capital increase, number and type of issued shares, with detailed description of requirements for share issue Incorporation Act does not contain provisions on contingent capital increase.

1.2.4. Own shares 1.2.4.1. Number and percentage of own shares by class NIS a.d. Novi Sad does not hold own shares.

1.2.4.2. Time and reason of share acquisition / 1.2.4.3. Data on portfolio of own shares /

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1.3. Shares book value and trade with issuer’s securities 1.3.1. Book value of shares 1.3.1.1. State the last book value of shares calculated by class and date of computation, and if the last book value was computed on the basis of non-audited data, then state book value of shares based on adjusted data; provide a brief description of the method used for computation of shares book value Shares book value is determined in the following manner: the amount of total assets is decreased with the amount of loss exceeding the equity and the amount of long term reserves and obligations, as well as the amount of deferred tax (if such amount is not contained in the amount of the long term reserves and obligations), and then divided with the total number of shares. On 31 December 2009 the book value of shares of NIS a.d. Novi Sad amounts to RSD 197.98.

1.3.2. Trade in issuer’s securities 1.3.2.1. Organized market on which issuer’s shares are traded Belgrade Stock Exchange ad Belgrade Omladinskih brigada 1 Novi Beograd

1.3.2.2. Time period set for trading in such shares Shares of the issuer are traded on the stock exchange market – Prime Market, by continuous trading method, each business day from 10 a.m. until 1 p.m.

1.3.2.3. Graphic presentation of daily price and volume trade fluctuations in the past six months, where the x-axis presents the date, while y-axis presents the price, i.e. trade volume. /

1.4. Shareholders Name/Business name of the Number and % of voting shares Number and % of the shareholder preference shares Gazprom Neft 83,160,800 of shares, i.e. 51.00% / The Republic of Serbia 48,779,129 of shares, i.e. 29.92% / Minority Shareholders 31,120,471 of shares, i.e. 19.08% / Central Securities Depository and Clearing house data as of 17 May 2010. Book of Shares is available at the web page of the Central Registry www.crhov.rs

The above table shows data about entities with more than 5% of voting shares or ten major shareholders with voting rights. Below the table is the date of receiving data from the Central Securities Depository and Clearing House

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Structure of the share capital

19.08%

Gazprom neft 51.00% The Republic of Serbia

29.92% Minority Shareholders

2. ISSUER’S CONDUCT OF BUSINESS, ASSETS AND LIABILITIES 2.1. Issuer’s business activity In addition to the data on the issuer, if the issuer is a parent company, the same data are to be provided about the subsidiaries (in which the issuer has 25% or more ownership interest in the share capital), as well as the business name, registered office, subsidiary ID number and percentage of the ownership interest in the share capital and decision-making of the subsidiary held by the parent company.

2.1.1. Core business activity 2.1.1.1. Name and code of the core business activity 11101 – Crude oil extraction

2.1.2. Income from business activity 2.1.2.1. State the value of income from business activity based on which issuer generated its largest income in the past three years (thousand RSD) DESCRIPTION 2007 2008 2009 Income sales 159,051,572 168,458,472 118,375,584

2.1.3. Market position 2.1.3.1. Estimate of issuer’s percentage in market share at the goods and services market for each issuer’s activity; major competitors on such market and estimation of their market share

Exploration and exploitation of the oil and gas

The production of the domestic oil (665.5 thousand tons) and gas (322 million cubic meters) in 2009 has been the largest volume in the past 6 years. The significant increase in the oil production has been affected by introduction of new, modern methods for oil exploitation and the use of the modern equipment for oil production.

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Production of dometic oil (t)

643,449 638,011 655,019 640,806 638,517 665,529

2004 2005 2006 2007 2008 2009

Participation of the domestic oil and the natural gas in the overall consumption in the Republic of Serbia The participation of the domestic crude oil and the natural gas in the overall consumption in the Republic of Serbia is increasing.

Consumption of crude oil in RS (t)

domestic oil import oil

2,520,000 1,907,000

638,000 666,000

2008 2009

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Consumption of natural gas in RS (mil m³)

natural gas import gas

2,203 1,939

245 256

2008 2009

The position on the oil refining market

When compared to 2008, oil refining for own needs has increased for 3% and was 2,622 thousand tons. At the same time, demand for oil products is in decline and is unstable, with frequent disparities of import and cost-based price, which caused the fall in crude oil refining in NIS a.d. Novi Sad refineries for the needs of third parties.

Oil refining in thousands of t

3.158 2.873 608 251

2,550 2,622

2008 2009

Trade with oil products

Despite the general decrease of consumption, NIS a.d. Novi Sad has increased its participation in the overall trade of the oil products in Serbia for 2.68% in 2009.

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Participation in trade in RS

NIS Others

3.448.121 t -2,68% 37.49% 34.81%

+2,68%

62.51% 65.19%

2008. 2009.

Trade with liquid petrol gas

LPG consumption holds tendency of increase for years now, which is particularly obvious in LPG consumption for motor vehicles («auto-gas»). NIS a.d. Novi Sad has significantly increased its participation in this segment of the trade of the motor fuels by intensive construction of installations for sales of auto-gas on the petrol stations.

TNG consumption in RS (t) 350.000

291.488 300.000 288.288

250.000 210.220 201.352 200.000

150.000 102.196 100.000 69.502

50.000

0 Other purpose Auto gas NIS 2008 2009

Competition on the retail market of the oil derivatives

Decline of gross national income (GNI) of 2.8%, as well as significant decrease of the activities in the construction industry (11%) and the transport industry (6%), led to decrease of the total consumption of the motor fuels (motor gasoline, diesel and auto gas) as well as the retail sales of the fuels on the

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petrol stations. Due to decrease in oil refining for the needs of third parties NIS a.d. Novi Sad share in consumption of motor gasoline and D2 was increased, as well as in total sales of motor fuels, by 1.94% as compared to 2008. On the other hand, since September 2009 NIS has been importing only LPG, which resulted in the minimum NIS a.d. Novi Sad share in import of oil products since 2005. Due to the impact of the said factors, the structure of NIS a.d. Novi Sad and international companies’ share in retail of motor fuels was changed, depending on the type of motor fuels. In spite of decrease in total consumption of motor fuels, NIS a.d. Novi Sad share in total consumption in the Republic of Serbia increased (from 62.5% to 65.2%). A large number of vehicles in the motor pool of Serbia can use both LPG and gasoline and the consumption depends mostly on the price of these products. In addition to this, as the result of the world trend of switching to diesel engines, total consumption of these oil products has been in decline for the past several years. In 2009, the decline of 0.6% was recorded, with decrease in motor gasoline MB95 of even 20.5%, while the increase of 3.5% was recorded in unleaded motor gasoline BMB95.

Declining trend in consumption of D2 as compared to Euro diesel continued in 2009. This fact, in addition to growing presence of newer diesel engines, is also affected by the difference in price which provides larger profit for the companies when they replace D2 with imported Euro diesel.

Due to all above-mentioned factors, the share in retail of motor fuels varies, so NIS a.d. Novi Sad share decreased by 0.12%, international oil companies’ share increased by 5.55%, and other participants’ share on market of oil products decreased by 5.42%. Participation in sales on petrol stations in RS

NIS International companies Third parties

-5.42% 48.79% 43.37%

+5.55% 21.42% 26.97%

-0.12% 29.79% 29.67%

2008. 2009.

2.1.4. Activities performed outside of the registered seat 2.1.4.1. Name of the location, other than the issuer’s head office, on which issuer carries out its activity - organizational units and representative offices: Name of location Organizational unit / Business unit / Representative office

Branch office NIS - NAFTAGAS covers the area Novi Sad, the Republic of Serbia of exploration and production of oil and gas including oil services that provide support to realization of the production activities. Oil services

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are multidisciplinary conceived in order to follow all the phases of the process of exploration and oil and gas production, ranging from geophysics services, drilling and repair, to transport procedure and maintenance and production of the drinking water. NIS NAFTAGAS has entered into 3 agreements on crude oil production allocation in the Republic of Angola. Within NIS – NAFTAGAS there is refinery of the natural gas in Elemir that is constructed for production of approximately 60.000 tons of liquid gases (propane, butane) and gasoline.

Branch office NIS - PETROL is engaged in the activity of oil and oil derivates refinery and trade. Refining complex is comprised of two oil refineries that are located in Pancevo and Novi Sad. Within these the spectrum of oil derivatives is produced – ranging from motor fuels, raw materials for petrol industry, motor oils to other oil products. Average annual volume of the refining in the past few years is approximately 3 million tons of the crude Belgrade, the Republic of Serbia oil, while the maximum capacity of the refining facilities of the two refineries is approximately 7 millions of tons of crude oil annually. The trade is comprised of the external and internal trade, wholesale trade with all oil derivates as well as the retail trade, which includes trade with final oil derivates, liquid oil gas and the auxiliary goods. NIS PETROL owns 476 active petrol stations, 8 large installations 31 active warehouses on the territory of the Republic of Serbia.

Branch office NIS – TNG is in charge for Elemir, the Republic of Serbia production and the trade with the liquid oil gas and owns 7 warehouses for liquid oil gas.

Branch office of NIS a.d. – NIS – Naftasgas in Turkmenistan represents and protects the interests of NIS a.d. Novi Sad in Turkmenistan. The branch office is engaged in negotiations, undertakes drilling works on oil and gas Balkanbath, Turkmenistan reservoirs, provides lab services and is engaged in exploration works. It also undertakes analysis of the raw materials and fluids. It is engaged in construction and servicing of the oil and gas facilities, and it is also engaged in activity and provision of services in the oil and gas industry.

The representative office of NIS a.d. Novi Sad, Moscow, Russian Federation represents and protects the interests of NIS a.d. Novi Sad and undertakes their realization in the procedure Moscow, the Russian Federation establishment, maintenance and development of the contacts with the companies and their association on the territory of the Russian Federation, that are engaged in exploration, production, refining and distribution of the crude

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oil and the natural gas and their final products, and is also intermediary between the said organizations and associations and NIS a.d. Novi Sad. The activity of the representative office is also establishment, maintenance and development of the contacts with science-technical institutes and academies in the field of exploration, production and refining of oil and gas on the territory of the Russian Federation and making the relation between such entities and NIS a.d. Novi Sad. Branch office also makes contacts with Ministries other state bodies of the Russian Federation that are of relevance for oil and gas industry and science.

The representative office NIS a.d. Novi Sad – NIS - NAFTAGAS in Luanda, Angola is Luanda, Angola established for the purpose of undertaking the activity on the block Angola as well as representation and protection of interests of NIS a.d. Novi Sad.

2.1.5. Special circumstances 2.1.5.1. State other important facts and circumstances related to issuer’s operation that can affect data on issuer’s conduct of business In February 2009, within Serbian-Russian international arrangement in the area of oil and gas industry, 51% of the shares of NIS a.d. Nis Sad were transferred in the ownership of the company Gazprom Neft, while the Republic of Serbia remained the owner of the remaining 49% of the shares. In accordance with the criteria that are defined in the Law on Right on Distribution of Free Shares and Monetary Compensation Exercised by Citizens in the Privatization Process (Official Gazette of RS, nos. 123/07 and 30/10) and the conducted procedure for collecting the applications for registration in the registry of right holders by the Privatization Agency of the Republic of Serbia, on the basis of the Decision of the Government of the Republic of Serbia, 19.08% of share capital of NIS a.d. Novi Sad was transferred to the citizens of the Republic of Serbia, as well as on NIS employees and ex- employees in NIS a.d. Novi Sad. On 17 May 2010, NIS a.d. Novi Sad had 4,828,984 shareholders in total. In accordance with the Agreement for Sale and Purchase of shares of NIS a.d. Novi Sad, Gazprom Neft has the commitment to provide to NIS a.d. the amount of EUR 500,000,000 by way of special purpose loans for purpose of implementing the program for reconstruction and modernization of the technological complex of NIS a.d. Novi Sad on the following terms:  Obligation to provide EUR 500,000,000 as the principle amount of the loan shall be fully performed in the period between the day the transfer closing and 31 December 2012;  The interest accruing the principal of the loan provided to the NIS shall accrue quarterly and for each quarter shall equal to 12 month EUR LIBOR + 2% (no further charges or commissions shall );  The term of the loan shall be 14 years as of the first disbursement date;  The grace period shall be the later of 31 December 2012 or the competition of the actual performance by Gazprom Neft of its obligation;  There shall be no collateral. Reasons for losses from business disclosure in the financial statement for 2009 are as follows: - Property depreciation; - Redundancies expenses; - Negative exchange rates; - Correction of value of irrecoverable claims; - Reserved funds for court disputes etc.

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2.1.6. Interruption of business operations 2.1.6.1. State interruptions in issuer’s business operation in the past three years and reasons of interruption There has been no interruption in business activities in the past three years.

SUBSIDIARIES Joint stock company for hotels and tourism O ZONE ad Beograd Head office Marsala Birjuzova 3-5, Belgrade, Serbia ID number 20094630 % ownership interest in capital of the controlling 100% company in the subsidiary % portion indecision making of the controlling 100% company in the subsidiary Name and the code of the main activity 55110 – Hotels and motels with restaurant Income from the business activity (income from 2007. 2008. 2009 the sales in thousand RSD) 293,518 381,641 263,915 Activities conducted outside the registered seat – Branch offices: organizational and business units and the - FOLLOW ME Belgrade representative offices - *LCC FOLLOW ME Novi Beograd - *LCC FOLLOW ME Novi Sad - *LCC FOLLOW ME Nis * On the basis of the agreement on franchising these have become the parts of the unique multinational network of the tourist agencies that conduct business under the name Lufthansa City Centar.

OOO “NIS OVERSIZ” Moscow, Russian Federation Head office Baljsoj golovin perulok 12, Moscow, RF ID number % ownership interest in capital of the controlling 100% company in the subsidiary % portion indecision making of the controlling 100% company in the subsidiary Name and the code of the main activity Crude oil and oil gas extraction, as well as extraction of natural gas and gas condensate; analysis of the primary and the secondary marketing of the hydrocarbon Income from the business activity (income from 2007. 2008. 2009. the sales in thousand RSD) - - -

NIS-OIL Trading Gmbh, Frankfurt am Main Head office Mendelssohnstr. 59, Frankfurt am Main, Germany ID number % ownership interest in capital of the controlling 100% company in the subsidiary % portion indecision making of the controlling 100% company in the subsidiary Name and the code of the main activity - wholesale and retail trade; - export and import of the crude oil, oil products, chemical and petrochemical goods etc.; - intermediation and representation in trade affairs from the range of the said products Income from the business activity (income from 2007 2008 2009

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the sales in thousand RSD) 24,560 366 8,755 *Remark: the company is undergoing liquidation procedure on the basis of the founder’s decision issued in 2010

*NIS-Investments ltd London Head office 62 Wilson Street, London, Great Britain ID number % ownership interest in capital of the controlling 100% company in the subsidiary % portion indecision making of the controlling 100% company in the subsidiary Name and the code of the main activity Activities within registered activity of the founder *Remark: the company is undergoing liquidation procedure on the basis of the founder’s decision

Limited liability company NIS-SVETLOST BUJANOVAC Head office Industrijska zona bb, Bujanovac, Srbija ID number 20125535 % ownership interest in capital of the controlling 51.32% company in the subsidiary % portion indecision making of the controlling 51.32% company in the subsidiary Name and the code of the main activity 51510 – Wholesale trade with solid, liquid and gas fuels and similar products Income from the business activity (income from 2007. 2008 2009 the sales in thousand RSD) 114,872 208,738 296,595

The Company for digging, transport and refining of melting slag and copper production JUBOS d.o.o. Bor Head office Djordja Vajferta 29, Bor, Srbija ID number 20133597 % ownership interest in capital of the controlling 51% company in the subsidiary % portion indecision making of the controlling 51% company in the subsidiary Name and the code of the main activity 27441 – Copper production Income from the business activity (income from 2007. 2008. 2009. the sales in thousand RSD) - - -

OOO "Sovmestnoe predprijatie RANIS" Moscow area, Cernogolovka Russian Federation Head office Cernogolovka, Moskovskaja oblast, RF ID number % ownership interest in capital of the controlling 51% company in the subsidiary % portion indecision making of the controlling 51% company in the subsidiary Name and the code of the main activity Scientific explorations and elaboration in the area of the natural and technical sciences Income from the business activity (income from 2007 2008 2009 the sales in thousand RSD) - - -

Eurol International (Bermuda) ltd Head office Clarendon House, Church Street West, Hamilton HM 11, Bermuda ID number % ownership interest in capital of the controlling 50% company in the subsidiary % portion indecision making of the controlling 50%

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company in the subsidiary Name and the code of the main activity Oil trading activities encompassing the import and export of oil products, including but not limited to LPG, naphtha, gasoline, kerosene, jet, gasoil and fuel oil, and crude oil trading opportunities arising from Republic of Serbia / Jugopetrol interests in countries other than Yugoslavia

Maco nafta d.o.o. Skopje Head office 15 korpus br.3, Skopje, Macedonia ID number % ownership interest in capital of the controlling 49% company in the subsidiary % portion indecision making of the controlling 49% company in the subsidiary Name and the code of the main activity Wholesale trade with solid, liquid and gas fuels and similar products

Joint stock company cultural-sports centre PINKI – ZEMUN, Zemun Head office Gradski park 2, Belgrade-Zemun, Serbia ID number 07026781 % ownership interest in capital of the controlling 48.7% company in the subsidiary % portion indecision making of the controlling 48.7% company in the subsidiary Name and the code of the main activity 92622 – Other sports activities Income from the business activity (income from 2007 2008 2009 the sales in thousand RSD) 19,171 22,757 19,143

2.2. Issuer’s assets and liabilities on 31 December 2009 (thousand RSD) NON CUREENT ASSETS Property, plant, equipment and biological assets 83,721,202 Property, plant, equipment 83,221,228 Investment properties 499,974 Intangible assets 4,792,744 Long-term investments 7,220,214 TOTAL FIXED ASSESTS 95,734,160 CURRENT ASSESTS Inventories 23,056,296 Fixed assets intended for sale and assets from discontinuing 135,649 operations Short-term receivables, investments and cash 25,125,210 Accounts receivable 11,390,933 Receivables for overpaid income tax 41,689 Short-term investments 875,839 Cash and cash equivalents 8,671,501 Value added tax and deferred expenses and prepayments 4,145,248 Deferred tax - TOTAL CURRENT ASSETS 48,317,155 TOTAL ASSETS 144,051,315 In addition to data on the issuer, if the issuer is a controlling company, the same data are provided for subsidiaries in which the controlling company holds 25% and more of the ownership interest in the share capital

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Assets of subsidiaries on 31 December 2009 (thousand RSD) O ZONE JUBOS NIS NIS SP NIS Oil Pinki Svetlost Oversiz RANIS Trading Zemun NON- CURRENT ASSETS Subscribed - - 7,396 - - - - capital unpaid Property, plant 3,423,106 - 36,428 - - 130 141,341 equipment Investment 1,610,655 - - - - - 57,247 properties Intangible 7,210 ------assets Long-term 1,323 - - - - 35 - investments Total fixed 5,042,374 - 43,824 - - 165 198,588 assets CURRENT ASSETS Inventories 13,479 - 853 - 4,859 16 3,669

Fixed assets ------intended for sale and assets from discontinuing operations Short-term 38,639 1,744 36,209 2,397 23,969 127,245 26,058 receivables, investments and cash Accounts 28,584 - 19,619 2,397 23,949 94,337 17,567 receivable Receivables for ------10 overpaid income tax Short-term 1,152 - 485 - - - 8,448 investments Cash and cash 7,209 1,744 8,444 - 20 32,908 31 equivalents Value added tax 1,694 - 7,661 2 793 1,265 2 and deferred expenses and prepayments ------Deferred tax Total current 52,118 1,744 37,062 2,399 29,621 128,526 29,727 assets TOTAL 5,094,492 1,744 80,886 2,399 29,621 128,691 228,315 ASSETS (in thousand RSD)

2.2.1. Real estate, plants and equipment 2.2.1.1. Data on real estate, type, location, surface area, value, including rented or leased property on 31 December 2009

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Location Type of object Quantity On the Outside the Basis for use* territory of territory of the Republic the Republic of Serbia of Serbia NIS ownership 6 NIS right of usage – ownership Land of the Republic of Serbia 2,413 (constructed, non- 2,760 2,759 1 NIS possession 14 constructed) Third parties’ rights 312 Not registered right 15 NIS ownership 7 NIS right of usage – ownership of the Republic of Serbia 303 Petrol stations 532 507 25 NIS possession 23 Third parties’ rights 35 Not registered right 164 NIS ownership - NIS right of usage – ownership Warehouses, of the Republic of Serbia 50 Storage houses, 67 62 5 NIS possession 3 depository Third parties’ rights 6 Not registered right 8 Buildings , business NIS ownership 26 premises NIS right of usage – ownership (administrative of the Republic of Serbia 361 buildings, production 654 647 7 NIS possession 18 buildings, garages, buildings, parts of the Third parties’ rights 22 buildings, stores, premises) Not registered right 227 Reservoirs NIS ownership - NIS right of usage – ownership (-up to 150m2; 266 2 of the Republic of Serbia - from 150m up to 360 360 - NIS possession - 1000m2; 2 Third parties’ rights 6 - over 1000m ) Not registered right 68 NIS ownership - Roads NIS right of usage – ownership (internal roads, of the Republic of Serbia 33 external roads, 420 420 - NIS possession - railway, parking, PP Third parties’ rights 1 roads) Not registered right 386 NIS ownership - Supply leads (gas pipelines, oil NIS right of usage – ownership of the Republic of Serbia 1 pipelines, leads and 1,191 1,191 - drainage, drilling NIS possession - pipelines, other Third parties’ rights 1 pipelines) Not registered right 1,189 NIS ownership - NIS right of usage – ownership Complexes of the Republic of Serbia 81 (geophysics institute, 84 84 - NIS possession - computation stations) Third parties’ rights - Not registered right 3

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NIS ownership - NIS right of usage – ownership of the Republic of Serbia 34 Wells 1,303 1,303 - NIS possession - Third parties’ rights - Not registered right 1,269 NIS ownership - Energetic objects NIS right of usage – ownership 37 (trafo stations, of the Republic of Serbia 217 217 - transmission lines, NIS possession 1 aggregate stations) Third parties’ rights - Not registered right 179 NIS ownership - Other objects NIS right of usage – ownership 390 (petrol stations, of the Republic of Serbia 700 700 - awnings, cornerstones NIS possession - etc.) Third parties’ rights 22 Not registered right 288 NIS ownership 39 NIS right of usage – ownership of the Republic of Serbia 3,969 IN TOTAL 8,288 8.250 38 NIS possession 59 Third parties’ rights 405 Not registered right 3,816 *REMARK: - All the objects on which rights of usage of NIS a.d. Novi Sad is registered are the ownership of the Republic of Serbia; - The procedure of registration of the ownership rights of NIS a.d. Novi Sad on the real property is ongoing, according to dynamics determined by the Government of the Republic of Serbia and its competent bodies, which is the reason why registration of the ownership rights in favor of NIS a.d. Novi Sad is not completed; - The objects on which the third parties have the rights are the objects on which ownership relations are not regulated in relation to the land (e.g. objects built on the public surface with the temporary license, objects built on third parties’ land for which no legal basis for purchase has been made i.e. the land itself has not been paid); - Objects on which NIS a.d. Novi Sad has the possession rights are the objects for which e.g. no construction permit has been obtained, but that are recorded and inserted into the cadastral plans and public records on the real property. In the case of such objects, real property cadastres usually register the possession rights and in encumbrances sheet mark that these are the objects build without permit; - Objects on which no right is registered are mostly objects for which legal issues related to the land are not solved, objects for which there is no usage permit and geodetic shot, objects undergoing legalization procedures, mining objects constructed in accordance with the mining law, pipelines etc.

The Value and the Surface of the Real Estate Type of the object Book value on 31 December Surface 2009 - m2 - - thousand RSD*- Land 10,485,421 64,269,488 Objects 36,528,209 2,141,729 IN TOTAL 47,013,630 66,411,217 *REMARK: All the objects and the land shown in the previous table are contained in the accountancy business record at the account of the group 02 – Property, plant equipment and biological assets: 020 – Land 022 – Construction objects 024 – Investment property

Rented real estate Type of the object Quantity Land 7 Buildings, Business premises 62 Garages 7 IN TOTAL 76

PROPERTY OF SUSIDIARIES Joint stock company for hotel and tourism O ZONE Belgrade

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Location Type of the object Quantity On the On the Basis for use territory of territory of the Republic the Republic of Serbia of Serbia NIS ownership 2 NIS right of usage – ownership 8 Land of the Republic of Serbia 11 7 4 NIS possession - Third parties’ rights 1 Not registered right - NIS ownership 4 NIS right of usage – ownership 6 Buildings, business of the Republic of Serbia 23 18 5 premises NIS possession 1 Third parties’ rights - Not registered right 12 NIS ownership 6 NIS right of usage – ownership of the Republic of Serbia 14 IN TOTAL 34 25 9 NIS possession 1 Third parties’ rights 1 Not registered right 12

Value and the surface Type of the object Book value on 31 December Surface 2009 - m2- - thousand RSD- Land 321,321 102,776 Objects 4,652,264 82,108 (property, investment property, property in preparation) IN TOTAL 4,973,585 184,884

Limited liability company NIS-SVETLOST Bujanovac

Type of the object Quantity Basis for use

NIS ownership (mixed ownership) 1 NIS right of usage – ownership of the Republic of - Land Serbia 1 NIS possession - Third parties’ rights - Not registered right - NIS ownership (mixed ownership) 9 NIS right of usage – ownership of the Republic of - Buildings, Serbia 9 business premises NIS possession - Third parties’ rights - Not registered right - NIS ownership (mixed ownership) 10 NIS right of usage – ownership of the Republic of - IN TOTAL 10 Serbia NIS possession - Third parties’ rights -

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Not registered right -

Value and the surface Type of the object Book value on 31 December Surface 2009 - m2- - thousand RSD- Land - 13,696 Objects 34,204 1,279 IN TOTAL 34,204 14,975

Joint stock company cultural-sports centre PINKI – ZEMUN, Zemun

Type of the object Quantity Basis for use

NIS ownership - NIS right of usage – ownership of the Republic of - Land Serbia - NIS possession - Third parties’ rights - Not registered right - NIS ownership - NIS right of usage – ownership of the Republic of - Buildings, business Serbia 1 premises NIS possession - Third parties’ rights - NIS ownership 1 NIS right of usage – ownership of the Republic of Serbia - NIS possession - IN TOTAL 1 Third parties’ rights - Not registered right - NIS ownership 1 *Remark: According to the confirmation from the Republic Direction for Property of the Republic of Serbia, 04 no: 46-732/2009 as of 14 December 2009, on the basis of the available documents, i.e. resolution of the Fourth Municipality Court in Belgrade, (business no. dl. I 3765/02 as of 22 September 2003), it is determined that the building KSC „Pinki-Zemun“ a.d. on the cadastral lot no.1153 Cadastral Municipality Zemun, is the ownership of the Republic of Serbia, with the right of usage in favor of Zemun Municipality. (taken from the Audit Report of Financial Statements of the company Pinki Zemun a.d. for 2009) The basis for use of the respective object is subject to ongoing legal dispute. The said object is registered in joint stock company Pinki Zemun accounting records.

Value and the surface Type of the object Book value on 31 December Surface 2009 - m2- - thousand RSD- Land - - Objects 135,881 12,000 (construction objects) IN TOTAL 135,881 12,000

2.2.1.2. Value of the plants and the equipment thousand RSD Book value of the plants and equipment on 31 December 2009 amount to RSD 27,109,542.

2.2.2. Participation in the share capital of other legal entities Name and head office of the legal Participation of the Ownership interest Voting right of the entity investment in the of the issuer in the issuer in the legal assets of the issuer share capital of the entity %

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on 31 December legal entity 2009 -in thousand RSD-* O ZONE a.d. Beograd 3,262,486 100% 100% OOO "NIS OVERSIZ" Moscow, 9,856 100% 100% Russian Federation NIS-OIL Trading Gmbh, Frankfurt 24,147 100% 100% am Main (the company is undergoing liquidation procedures in accordance with the founder’s decision issued in 2010) NIS-Investments ltd London (the - 100% 100% company is undergoing liquidation procedures in accordance with the founder’s decision) NIS-Svetlost d.о.о. Bujanovac 17,045 51.32% 51.32% JUBOS d.о.о. Bor 904 51% 51% OOO "Sovmestnoe predprijatie 522 51% 51% RANIS" Moscow area, Cernogolovka, Russian Federation

Eurol International Bermuda ltd 2,999 50% 50% Maco nafta d.o.o. Skopje 4,269 49% 49% PINKI-ZEMUN a.d. Beograd - 97,999 48.7% 48.7% Zemun HIP-PETROHEMIJA a.d. Pancevo 1,682,522 20.5% 20.5% – in restructuring Prokons d.o.o. Subotica 174 20.15% 20.15% Linde Gas Srbija a.d. Becej 112,376 12.44% 12.44% RTV Politika d.o.o. Beograd 23,685 13.07% 13.07%** *REMARK: In 2009 ownership interest of NIS a.d. Novi Sad in the share capital of the subsidiary companies, other affiliated legal entities, other legal entities and other securities that can be sold amounts to RSD 7,266,584,000, while correction of the value amounts to RSD 4,347,720,000, so that the ownership interest in the share capital of the other companies with the situation on 31 December 2009 amounts to RSD 2,918,864,000. ** REMARK: According to data published on the web page of Business Registers Agency, ownership interest of NIS a.d. Novi Sad in share capital of RTV Politika doo amounts to 10.03%. According to the confirmation received in 2008 from RTV Politika doo, ownership interest of NIS a.d. Novi Sad in share capital of RTV Politika doo amounts to RSD 23,685,000, i.e. 13.07%, and according to the confirmation from 2009 the amount of the ownership interest in the share capital is RSD 23,685,000. NIS a.d. Novi Sad does not possess data that the ownership interest of NIS a.d. Novi Sad in RTV Politika doo has been decreased.

The upper table shows data on issuer’s investments that involve ownership interest in the share capital of the other legal entities in the amount higher than 10%. If the issuer’s has the position of the controlling company, the table should also contain the following data for subsidiaries.

Joint stock company for hotels and tourism O ZONE ad Beograd Business activity 55110 – Hotels and motels with restaurants Members of the Management Kirill Kravchenko, Chairman of BD Dmitry Fomenko, member of BD Roman Kvitko, member of BD 2007 2008 2009. Net profits/loss (1,719,235) (123,633) (915,084) Total share capital 2,918,889 2,794,270 2,226,692 Total assets 5,721,916 5,709,045 5,094,492

OOO "NIS OVERSIZ" Moscow, Russian Federation Business activity Crude oil and oil gas extraction, as well as extraction of natural gas and gas condensate; analysis of the primary and the secondary marketing of the hydrocarbon

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Members of the Management Zeljko Kirin, director 2007 2008 2009 Net profits/loss (6,230) 4,768 64 Total share capital 220 1,503 1,572 Total assets 2,764 2,548 2,399

NIS Oil Trading Gmbh, Frankfurt am Main Business activity - wholesale and retail trade; - - export and import of the crude oil, oil derivatives, chemical and petrochemical goods etc.; - - intermediation and representation in trade affairs from the range of the said products Members of the Management Nikola Popovic, director 2007 2008 2009 Net profits/loss 5,737 (16,964) (18,720) Total share capital 40,323 26,630 28,423 Total assets 1,482,950 136,240 128,691 *REMARK: The company is undergoing liquidation proceedings on the basis of the founder’s decision issued in 2010

*NIS Investments London Business activity Activities within registered activity of the founder

Members of the Management Branko Micovic, director 2007 2008 2009 Net profits/loss - - - Total share capital - - - Total assets - - - *REMARK: The company is undergoing liquidation proceedings on the basis of the founder’s decision

Limited liability company NIS-SVETLOST Bujanovac Business activity 51510 – Wholesale trade with solid, liquid and gas fuels and similar products Members of the Management Dragan Stojanovic, director 2007 2008 2009 Net profits/loss (2,819) 4,768 10,611 Total share capital i 38,173 42,941 53,552 Total assets 74,105 68,429 80,886

The Company for digging, transport and refining of melting slag and copper production JUBOS d.o.o. Bor Business activity 27441 – Copper production Members of the Management Snezana Djukic, Chairman of BD Katarina Vukmirovic, member of BD Olivera Basta, member of BD Dragan Bojovic, member of BD Borivoje Stojadinovic, member of BD 2007 2008 2009 Net profits/loss 0 0 0 Total share capital 1,744 1,744 1,744 Total assets 1,744 1,744 1,744

OOO "Sovmestnoe predprijatie RANIS", Moscow area, Cernogolovka, Russian Federation Business activity Scientific explorations and elaboration in the area of the natural and technical sciences

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Members of the Management Bozidar Djukic, director 2007 2008 2009 Net profits/loss - (49) - Total share capital 3,666 3,531 3,701 Total assets 24,375 28,268 29,621

Eurol International Bermuda ltd Business activity Oil trading activities encompassing the import and export of oil products, including but not limited to LPG, naphtha, gasoline, kerosene, jet, gasoil and fuel oil, and crude oil trading opportunities arising from Republic of Serbia / Jugopetrol interests in countries other than Yugoslavia Members of the Management Directors: Robert P. Finch David P. Fransen Barbara E. West 2007 2008 2009 Net profits/loss - - - Total share capital - - - Total assets - - -

Maco nafta d.o.o. Skopje Business activity Wholesale trade with compact, liquid and gas fuels and similar products Members of the Management Elena Lazarevska, director 2007 2008 2009 Net profits/loss - - - Total share capital - - - Total assets - - -

Joint stock company cultural-sports centre PINKI – ZEMUN, Zemun Business activity 92622 – Other sports activities Members of the Management Vyacheslav Yakovljev, Chairman of BD Predrag Curcic, member of BD Oleg Almazov, member of BD Danijela Mirkov-Arkula, member of BD Petar Djukic, member of BD Aleksandar Bozovic, member of BD Zoran Stanojevic, member of BD Denis Danilov, member of BD Vadim Zharkov, member of BD Vesna Ziric, member of BD Tatjana Levinskaja, member of BD 2007 2008 2009 Net profits/loss (228) (543) 337 Total share capital 192,346 191,803 192,140 Total assets 224,388 221,991 228,315

2.2.3. Patents, concessions, special permits 2.2.3.1. State briefly conditions and expected duration of approved concessions, patents, important commercial contracts, and franchise agreements, special permits for import or export of goods or performing business activates, etc. LICENCES NIS A.D. NOVI SAD FOR UNDERTAKING ENERGY ACTIVITIES RESOLUTION ISSUED BY: Energy Agency of the Republic of Serbia № NAME OF THE LICENCE RESOLUTION NO LICENCE NO VALID AS OF VALIDITY TERM

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1 License for conducting energy 10 years activity: oil products 311.02-335/2006-L-1 005/06-LN-11 21.07.2006 production (21.07.2016) 2 License for conducting energy activity: 10 years 311.01-340/2006-L-1 005/06-LG-24 18.08.2006 Sales of natural gas at the free (18.08.2016) market 3 License for conducting energy 10 years activity: storage of oil and oil 311.01.336/2006-L-1 119/07-LN-14 20.04.2007 (24.04.2017) products 4 License for conducting energy 10 years activity: 311.01.-337/2006-L-1 120/07-LN-15 20.04.2007 (20.04.2017) Sale of oil and oil products 5 License for conducting energy activity: 10 years Retail sale of oil products 311.02.-338/2006-L-1 571/09-LN-15a 03.02.2009 (03.02.2019.) (petrol station for supply of vehicles with the motor fuel)

LICENCES NIS A.D. NOVI SAD FOR EXPLORATION OF THE MINERALS OIL AND GAS № EXPLORATION AREA RESOLUTION NO ISSUED BY VALID AS OF VALIDITY TERM Istraţni prostor 1915- The Republic of Serbia, „Teritorija republike 1 310-02-059/2010-06 Ministry for Mining and 01.04.2010 31.12.2019 Srbije juţno od Save i Energy Dunava“ The Republic of Serbia, Istraţni prostor 5070- AP Vojvodina, Regional 2 115-310-00206/2004-02 29.10.2004 31.12.2015 „Juţni Banat“ Office for Energy and Minerals The Republic of Serbia, Istraţni prostor 5072- AP Vojvodina, Regional 3 115-310-00205/2004-02 29.10.2004 31.12.2015 „Srednji Banat“ Office for Energy and Minerals The Republic of Serbia, Istraţni prostor 5071- AP Vojvodina, Regional 4 115-310-00204/2004-02 29.10.2004 31.12.2015. „Severni Banat“ Office for Energy and Minerals

The Republic of Serbia, Istraţni prostor 5073- AP Vojvodina, Regional 5 115-310-00202/2004-02 29.10.2004 31.12.2015 „Srem“ Office for Energy and Minerals

The Republic of Serbia, Istraţni prostor 5074- AP Vojvodina, Regional 6 115-310-00207/2004-02 29.10.2004 31.12.2015 „Juţna Bačka“ Office for Energy and Minerals The Republic of Serbia, Istraţni prostor 5069- AP Vojvodina, Regional 7 115-310-00203/2004-02 29.10.2004 31.12.2015 „Severna Bačka“ Office for Energy and Minerals

LICENCES NIS A.D. NOVI SAD FOR OIL AND GAS EXPLOITATION (Issued for indefinite term, except Resolution no. 18 – Melenci duboko)

SREDNJI BANAT DATE OF RESOLUTION № EXPLOITATION APPROVAL ISSUED BY RESOLUTION NO ISSUANCE SFRJ, The Republic of Gasno polje Serbia, AP Vojvodina, 1 natural gas 24.01.1978 „Banatski dvor“ III-310-6/78 Regional Office for Economy SFRJ, The Republic of Gasno polje Serbia, AP Vojvodina, 2 gas 310-15/85 06.03.1985 „Banatski dvor-zapad“ Regional Office for Industry, Construction,

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and Tertiary Activities SFRJ, The Republic of Naftno polje Serbia, AP Vojvodina, 3 „Banatsko oil III-310-3/80 Regional Office for 05.02.1980 KaraĎorĎevo“ Industry, Construction, and Tertiary Activities SFRJ, The Republic of Gasno nalazište Serbia, AP Vojvodina, 4 gas 310-85/2-70 11.03.1970 „Begejci“ Regional Office for Economy

SFRJ, The Republic of Serbia, AP Vojvodina, Gasno polje „Begejci- 5 gas 310-32/87 Regional Office for 23.04.1987 Novi“ Industry, Construction, and Tertiary Activities

FNRJ, The Republic of oil and Serbia, Executive 6 Naftno polje „Boka“ 04-2319/61 28.01.1961 natural gas Committee Office for Industry FNRJ, The Republic of oil and Serbia, Executive 7 Naftno polje „Elemir“ 04-2319 30.01.1961 natural gas Committee Office for Industry SFRJ, The Republic of Serbia, AP Vojvodina, 8 Gasno polje „Itebej“ land gas 310-42/82 Regional Office for 06.10.1982 Industry, Construction, and Tertiary Activities SFRJ, The Republic of Serbia, AP Vojvodina, 9 Gasno polje „MeĎa“ natural gas 310-448/71 22.11.1971 Regional Office for Economy SFRJ, The Republic of Serbia, AP Vojvodina, 10 Polje „Melenci“ gas 310-266/81 Regional Office for 05.03.1981 Industry, Construction, and Tertiary Activities SFRJ, The Republic of Serbia, AP Vojvodina, 11 Naftno polje „Mihajlovo“ oil III-310-97/91 18.07.1991 Regional Office for Economy SFRJ, The Republic of Serbia, AP Vojvodina, 12 Naftno polje „Rusanda“ oil III-310-4/90 20.02.1990 Regional Office for Economy SFRJ, The Republic of Gasno polje „Srpska Serbia, AP Vojvodina, 13 land gas 310-8/77 02.03.1977 Crnja“ Regional Office for Economy SFRJ, The Republic of Naftno polje Serbia, AP Vojvodina, 14 oil III-310-3/90 05.02.1990 „Vojvoda Stepa“ Regional Office for Economy SFRJ, The Republic of Serbia, AP Vojvodina, Gasno nalazište 15 gas III-310-10/89 Regional Office for 23.03.1989 „Ţitište“ Industry, Construction, and Tertiary Activities SFRJ, The Republic of Serbia, AP Vojvodina, Naftno nalazište 16 oil III-310-44/87 Regional Office for 23.06.1987 „Zrenjanin“ Industry, Construction, and Tertiary Activities SFRJ, The Republic of Naftno polje Serbia, AP Vojvodina, 17 oil III-310-56/91 17.07.1991 „Zrenjanin sever“ Regional Office for Economy 18 Nalazište oil 115-310- The Republic of Serbia, 15.12.2008 g.

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„Melenci duboko“ 00267/2008-02 AP Vojvodina, Regional (duration 10,5 years) Office for Energy and Minerals

BACKA DATE OF RESOLUTION № EXPLOITATION APPROVAL ISSUED BY RESOLUTION NO ISSUANCE SFRJ, The Republic of Gasno polje Serbia, AP Vojvodina, 19 02.03.1977 „Ada“ land gas 310-8/77 Regional Office for Economy SFRJ, The Republic of Serbia, AP Vojvodina, Gasno polje 20 natural gas III-310-111/79 Regional Office for 16.08.1979 „Bačka Topola“ Industry, Construction, and Tertiary Activities SFRJ, The Republic of Serbia, AP Vojvodina, Gasno nalazište 21 gas (CO2) 310-25/83 Regional Office for 25.03.1983 „Bečej“ Industry, Construction, and Tertiary Activities SFRJ, The Republic of Serbia, AP Vojvodina, 22 Gasno polje „Čantavir“ land gas 310-42/2-76 01.06.1976 Regional Office for Economy

SFRJ, The Republic of Gasno polje Serbia, AP Vojvodina, 23 land gas 310-43/76 01.06.1976 „Gornji breg“ Regional Office for Economy

SFRJ, The Republic of Gasno nalazište Serbia, AP Vojvodina, 24 gas 18969 25.11.1968 „GospoĎinci“ Regional Office for Economy SFRJ, The Republic of Gasno nalazište Serbia, AP Vojvodina, 25 oil 310-448/3/71 22.11.1971 „Kelebija“ Regional Office for Economy SFRJ, The Republic of Serbia, AP Vojvodina, 26 Gasno polje „Martonoš“ gas 310-1/86 Regional Office for 13.02.1986 Industry, Construction, and Tertiary Activities SFRJ, The Republic of Serbia, AP Vojvodina, Gasno polje 27 gas 310-32/85 Regional Office for 21.05.1985 „Novi Kneţevac“ Industry, Construction, and Tertiary Activities SFRJ, The Republic of Serbia, AP Vojvodina, 28 Naftno nalazište „Palić“ oil 310-39/76 27.05.1976 Regional Office for Economy SFRJ, The Republic of Serbia, AP Vojvodina, Gasno polje 29 gas 310-35/85 Regional Office for 20.06.1985 „Ruski Krstur“ Industry, Construction, and Tertiary Activities SFRJ, The Republic of 30 Gasno polje „Srbobran“ gas 18967 Serbia, Republic Office 25.11.1968 for Economy undertaking the works SRJ, The Republic of Naftno leţište according to 31 310-02-356/97 Serbia, Ministry for 22.09.1997 „Turija - Sever“ additional Mining and Energy mining project Naftno polje SFRJ, The Republic of 32 oil 18968 25.11.1968. „Velebit“ Serbia, Republic Office

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for Economy SFRJ, The Republic of Serbia, AP Vojvodina, Gasno nalazište 33 gas III-310-69/89 Regional Office for 27.11.1989 „Velebit-Jug I“ Industry, Construction, and Tertiary Activities SFRJ, The Republic of Serbia, AP Vojvodina, 34 „Turija – sever“ oil III-310-72/91 23.07.1991 Regional Office for Economy

JUŢNI BANAT DATE OF RESOLUTION № EXPLOITATION APPROVAL ISSUED BY RESOLUTION NO ISSUANCE SFRJ, The Republic of Serbia, AP Vojvodina, Gasno polje 35 Regional Office for 06.09.1978 „Banatsko Novo Selo“ natural gas III-310-117/78 Industry, Construction, and Tertiary Activities SFRJ, The Republic of Gasno polje Serbia, AP Vojvodina, 36 „Banatsko Novo Selo gas III-310-26/92 05.11.1992 Regional Office for Jug“ Economy SFRJ, The Republic of Gasno nalazište Serbia, AP Vojvodina, 37 gas 5370 27.03.1968 „Banatsko Plandište “ Regional Office for Economy SFRJ, The Republic of Naftno polje Serbia, AP Vojvodina, 38 oil 5369/1 27.03.1968 „Janošik „ Regional Office for Economy SFRJ, The Republic of Naftno polje Serbia, AP Vojvodina, 39 oil III-310-5/90 20.02.1990 „Janošik-zapad „ Regional Office for Economy FNRJ, The Republic of Naftno polje Serbia, Executive 40 oil and gas 04-2319 28.01.1961 „Jermenovci „ Committee Office for Industry FNRJ, The Republic of Naftno polje Serbia, Executive 41 oil and gas 04-2319 28.01.1961 „Lokve„ Committee Office for Industry SFRJ, The Republic of Gasno nalazište Serbia, AP Vojvodina, 42 gas 310-85/3-70 11.03.1970 „Mramorak“ Regional Office for Economy SFRJ, The Republic of Serbia, AP Vojvodina, Gasno polje 43 natural gas 310-116/78 Regional Office for 06.09.1978 „Mramorak selo“ Industry, Construction, and Tertiary Activities SFRJ, The Republic of Gasno nalazište Serbia, AP Vojvodina, 44 natural gas 310-448/2/71 22.11.1971 „Nikolinci“ Regional Office for Economy SFRJ, The Republic of Gasno nalazište Serbia, AP Vojvodina, 45 gas 310-85/1/70 11.03.1970 „Tilva“ Regional Office for Economy FNRJ, The Republic of Gasno polje Serbia, Executive 46 land gas 04-2319 30.01.1961 „Velika Greda“ Committee Office for Industry SFRJ, The Republic of Serbia, AP Vojvodina, Naftno polje 47 oil and gas 310-17/85 Regional Office for 25.03.1985 „Velika Greda-Jug“ Industry, Construction, and Tertiary Activities

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SEVERNI BANAT DATE OF RESOLUTION № EXPLOITATION APPROVAL ISSUED BY RESOLUTION NO ISSUANCE SFRJ, The Republic of Gasno polje Serbia, AP Vojvodina, 48 18.11.1977 „Banatsko Miloševo“ natural gas III-310-56/77 Regional Office for Economy SFRJ, The Republic of Naftno i gasno polje Serbia, AP Vojvodina, 02.03.1977 49 oil and gas 310-8/77 „Čoka“ Regional Office for Economy SFRJ, The Republic of Serbia, AP Vojvodina, Gasokondenzatno polje 50 land gas 310-44/81 Regional Office for 03.11.1981 „Kikinda B“ Industry, Construction, and Tertiary Activities SFRJ, The Republic of Polje 51 oil and gas 5371/1 Serbia, Republic Office 28.03.1968. „Kikinda F2, F, D, E3 for Economy SFRJ, The Republic of Polje 52 oil 5367/1-68 Serbia, Republic Office 28.03.1968 „Kikinda Varoš“ for Economy SFRJ, The Republic of Naftno polje Serbia, AP Vojvodina, 53 oil III-310-16/90 01.03.1990 „Kikinda Varoš - jug“ Regional Office for Economy SFRJ, The Republic of Serbia, AP Vojvodina, Naftno polje 54 oil III-310-74/89 Regional Office for 22.12.1989 „Kikinda Varoš - sever“ Industry, Construction, and Tertiary Activities SFRJ, The Republic of Serbia, AP Vojvodina, Naftno polje 55 oil 310-61/85 Regional Office for 01.11.1985 „Majdan“ Industry, Construction, and Tertiary Activities Polja SFRJ, The Republic of 56 „Mokrin Škriljci i Mokrin oil and gas 5368/1 Serbia, Republic Office 28.03.1968 I, II“ for Economy SFRJ, The Republic of Gasokondenzatno polje 57 gas III-310-24/92 Serbia, Republic Office 27.10.1992 „Nakovo“ for Economy SFRJ, The Republic of Serbia, AP Vojvodina, 58 „Mokrin-jug“ oil 310-11/85 Regional Office for 29.01.1985 Industry, Construction, and Tertiary Activities

PODUNAVLJE DATE OF RESOLUTION № EXPLOITATION APPROVAL ISSUED BY RESOLUTION NO ISSUANCE SFRJ, The Republic of Naftno i gasno polje 59 Serbia, Republic Office 11.11.1989 „Sirakovo“ oil and gas 310-392/89 for Economy

LICENCE NIS A.D. NOVI SAD FOR EXPLOTATION OF THE DRINKING AND TERMOMINERAL WATER (Issued for indefinite term) DATE OF № EXPLOITATION APPROVAL RESOLUTION NO ISSUED BY RESOLUTION ISSUANCE The Republic of „Jazak-Jazački“ 1 Serbia, Ministry for 22.05.2002 Prnjavor drinking water 310-02-00091/2002-04 Mining and Energy The Republic of 2 Banja Kanjiţa termo-mineral water 115-310-00089/2005-02 Serbia, AP Vojvodina, 26.05.2005. Regional Office for

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Energy and Minerals The Republic of Serbia, AP Vojvodina, 3 Banja Junaković termo-mineral water 115-310-00182/2004-02 19.01.2005. Regional Office for Energy and Minerals

PARTICIPATION OF NIS-NAFTAGAS IN AGREEMENTS FOR PRODUCTION ALLOCATION IN ANGOLA AGREEMENT ON PRODUCTION ALLOCATION BLOCK BLOK 3 BLOK 3/05 BLOK 3/05A SIGNED 11.07.1980 04.10.2005 04.10.2005 ENTERING INTO FORCE 01.08.1980 01.07.2005 01.11.2005 OF THE AGREEMENT NIS PARTICIPATION 5% 4% 4% OPERATOR Total E&P Sonangol P&P, Angola Sonangol P&P, Angola PHASE production production/ exploration initial drilling PURPOSE OF THE Oil exploration and Contractual relation in the Contractual relation in the AGREEMENT production allocation in shore form of the agreement on form of the agreement on areas of Angola between the production allocation production allocation parties, Sonangol on one between the parties, between the parties, side, and other contracting Sonangol on one side, and Sonangol on one side, group of the other side other contracting group of the and other contracting (Operator) other side (Operator) with the group of the other side purpose of performing oil (Operator) with the operations purpose of performing oil operations LICENCE TERMINATION 31.12.2012 30.06.2025 20 year after the commercial discovery

2.2.4. Major capital investments 2.2.4.1.Description of major investments and withdrawal of funds invested in the above mentioned properties in the previous three years and description of method of financing each of such investments; description of other important investments and withdrawal of invested funds and method of financing such investments. MAJOR CAPITAL INVESTMENTS IN 2007 NIS a.d. Novi SAD has in 2007 invested RSD 6.86 billion in total for investment activities. When compared to total planed development and investment activity for 2007 (RSD 22.16 billion) realization of 31% was achieved. When compared to 2006 investments have increased for RSD 1.2 billion or for 21%. Investment plan was successful in low percent also due to the fact that only investments that were undisputable and urgent were financed with the purpose to define investment priorities and procedures for tracking investments. The amount of the funds spent in the respective period per branch office and fractions of the branch offices is presented in the following order: In RSD million Branch offices Realized Plan for Realized investments Ind Ind and fractions of investments in 2007 in 2007 4:2 4:3 the branch offices 2006 NIS a.d. Novi Sad 1 2 3 4 5 6 NIS-Naftagas 1,404.7 5,498.9 1,150.6 81.9 20.9 NIS-Petrol RNP 1,858.5 8,415.2 2,256.2 121.4 26.8 NIS-Petrol RNS 495.8 3,034.1 492.2 99.3 16.2 NIS-Petrol 1,291.4 2,354.2 790.7 61.2 33.6 Jugopotrol NIS-Petrol NAP 190.2 1,029.0 101.3 53.3 9.8 NIS-Petrol 587,2 Proffesional services NIS-TNG 310.8 621.2 326.3 105.0 52.5 NIS- Professional 122.1 622.6 1741.1 1426 279.6 services IN TOTAL: 5,673.5 22,162.4 6,858.4 120.9 30.9

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Total realized investments of NIS a.d. Novi Sad in the respective period are funded from the own funds (amortization and profits). Branch office NIS-Naftagas has realized total investments in the amount of RSD 1.15 billion, whereas for the investment of domestic needs RSD 900.8 million has been spent (78% of the funds spent), and for the foreign investments (Angola) RSD 249.8 million (22% of the funds spent). Realized investments present only 21% of the funds planned for 2007. Branch office NIS-Petrol has invested in total RSD 3.6 billion, which is 23.6% of the planed funds. In refineries was invested RSD 2.7 billion, i.e. 24% of the planned investments, in most part in ecological projects for environment protection and investment maintenance. In trade fraction was invested RSD 892 million, i.e. 26.4% of the planned funds in the largest part for reconstruction and revitalization of the petrol stations. Branch office NIS-TNG, within the plan of the investment activities, has envisages the funds in the amount of RSD 621.2 million, that are dedicated for partial overcome of the problem of obsolete equipment and technology. In fractions from which NIS-TNG has emerged (NIS-Gas, NIS- Energogas and NIS-Jugopetrol) liquefied petroleum gas has been subordinated to natural gas, and therefore, investments in capacities linked to LPG were very undersized. From the moment of establishment of the branch office there have been efforts to replace obsolete equipment and in 2007 total investment were RSD 326.3 million, i.e. 53% of the planned funds. Professional services of NIS a.d. Novi Sad invested in 2007 funds in the amount of RSD 1.7 billion. These investment are related to introduction of the information system SAP (license and implementation) and other intangible investments (Enhancement of Business Program Shell GS).

MAJOR CAPITAL INVESTMENTS IN 2008 NIS a.d. Novi SAD has in 2008 invested RSD 9.6 billion in total for investment activities. When compared to total planed development and investment activity for 2008 (RSD 22.1 billion) realization of 43,5% has been fulfilled, that was larger for 40% when compared to realization in 2007. The amount of the funds spent in the respective period per branch office and fractions of the branch offices is presented in the following order

In RSD million Branch offices Realized Plan for Realized investments Ind Ind and fractions of investments in 2008 in 2008 4:2 4:3 the branch offices 2007 NIS a.d. Novi Sad

1 2 3 4 5 6 NIS-Naftagas 1,150.6 4,637.9 2,621.2 227.8 56.5 NIS-Petrol RNP 2,256.2 9,120.0 2,038.1 90.3 22.3 NIS-Petrol RNS 492.2 2,544.0 351.9 71.5 13.8 NIS-Petrol 790,7 2.528,0 892.9 112.9 35.3 Jugopetrol NIS-Petrol NAP 101.3 832.0 356.1 351.5 42.8 NIS-Petrol 32.0 2.9 9.1 Professional services NIS-TNG 326.3 680.0 160.8 49.3 23.7 NIS-Professional 1,741.1 1,689.8 3,174.0 182.3 187.8 services IN TOTAL: 6,858.4 22,063.7 9,597.9 139.9 43.5

Total realized investments NIS a.d. Novi Sad in the respective period are funded from the own funds (amortization and profits). Branch office NIS-Naftagas has realized total investments in the amount of RSD 2.6 billion, whereas for the investment of domestic needs RSD 1.9 billion has been spent (72% of the funds spent), and the foreign investments (Angola) RSD 726.5 million (28% of the funds spent). Realized investments present only 56.5% of the funds planned in 2008. Branch office NIS-Petrol has invested in total RSD 3.6 billion, which is 24.2% of the funds planned. Different levels of preparedness of the investment-technical documentation, as well as complex procedure for making investment decisions have affected the level of investments realization. In

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refineries it has been invested RSD 2.4 billion (66% of the total investments), in most part in ecological projects for environment protection and investment maintenance. In trade fraction was invested RSD 1.2 billion (34%) in the largest part for construction of the petrol stations (NIS-NAP), for reconstruction and revitalization of the petrol stations, realization of the project for environment protection on the petrol stations in Belgrade and reconstruction of the reservoirs. Branch office NIS-TNG, within the plan of the investment activities, has envisaged the funds in the amount of RSD 680 million that are dedicated for partial overcome of the problem of obsolete equipment and technology. From the moment of establishment of the branch office there have been efforts to replace obsolete equipment and in 2008 total investment were RSD 160.8 million, which is only 23.6% of the funds planned. Professional services of NIS a.d. Novi Sad invested in 2008 funds in the amount of RSD 3.2 billion. These investment are related to introduction of the information system SAP (license and implementation) and other intangible investments (Enhancement of Business Program Shell GS).

MAJOR CAPITAL INVESTMENTS IN 2009 Originally adopted plan of capital investments for 2009 amounted EUR 423 million i.e. RSD 34.3 billion at the exchange rate of RSD 80 effective at that time. After change in ownership structure, the plan for 2009 was reviewed and in April a new investment plan was defined, in the amount of EUR 91.2 million i.e. RSD 9.1 billion at the planned exchange rate at the time. Larger volume of project realization with economic effect when compared to 2008 is caused by the partial advanced payment for the projects MHC/DHT+H2, the most significant NIS planned investment in the following three years. It is also worth mentioning that the agreements in the value over EUR 160 million were signed for MHC/DHT+H2. In addition to the above-mentioned project, it should be noted that the works on the following facilities in the trade area were completed:  Reconstruction of three petrol stations (Sabac, Pozarevac, Adasevci Sever)  Construction of one new petrol station (Krusevac 5)  Fitting and installations for LPG at 8 petrol station. Significant investments were also made in NIS-Naftagas on projects for increase in oil and gas production:  Fracturing  ESP pumps (electric submersible pumps);  New drillings in the area of Kikinda municipality;  Angola. The most significant capital investments related to ecology were made in Pancevo Refinery, where RSD 0.8 billion was invested with the key projects such as:  Reconstruction of jetty  FCC (fluid catalytic cracking)  Reconstruction of tank truck loading facility

In RSD billion Projects Paid Financing

MHC+H2 4.69 GPN Ecology 1.06 GPN Processing 0.42 OCF Trade 0.50 OCF NGS 1.28 OCF STS 1.12 OCF IN TOTAL 9.06 OCF Payments for capital investments in 2009

The budget structure of capital investments was improved - RSD 6 billion of total investments are investments with economic effect (positive net present value).

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Project with economy effect Ecology PPOF/support to business Consultancy services

9.06

8.03 0.92%

-68% 1.05% 2.84% 1.05% -13%

1.20% -54%

2.30% 6.04%

257%

1.69%

Paid in 2008. Paid in 2009.

Investments in information technologies:  SAP (payments in the amount of RSD 0.64 billion) - Successful completion of the system and the existing modules upgrading - organizational preparations and training for introduction of the Bulk logistics were conducted.

 IT equipment (realization 0.2 billion) - Purchase of computer equipment and software (workstations, servers for connecting of petrol stations, new licenses for upgrading work platforms with Windows XP and Office 2003 on Windows 7 and MS Office 2007).

Sources of financing

37% Gazprom Neft Company's funds 63%

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Sources of financing Financing from Gazprom Neft funds RSD 5.75 billion Financing from company’s funds RSD 3.32 billion

Investments in human resources

NIS a.d. Novi Sad is committed to continuous professional development of employees, as one of the Company’s most important resource. During 2009, NIS a.d. Novi Sad rationalized the existing professional development programs and earmarked about RSD 50 million for these purposes.

Costs of employees’ training in RSD million Training costs 2008 2009 Costs of professional education 130.1 44.6 Costs of consultancy 34.8 4.5 Costs of business association membership 1.1 1.0 fees Total 166 50.1

Employees training costs in mil RSD

2008. 2009. 130,1

44,6 34,8

4,5 1,1 1

Costs of professional Advising cost Costs of membership fees education in business associations

2.2.5. Liens 2.2.5.1. Main data on issuer’s assets pledged as collateral: type of lien, value of pledged asset and liability, validity of lien, business name of the lien creditor Value of pledged Name of the lien Type of lien assets and the Validity of lien creditor secured claim Lien on real estate (lots 11178/1 Value of pledged Srbobran and 11179/1 in real estate sheet assets RSD Municipality, 539 Cadastral Municipality Not defined 461,635.02 secured Srbobran, Srbobran - Amar) no. 323/70 as claim RSD 1,500.00 Trg slobode 2 of 8 April 1970

2.2.6. Litigations and other proceedings 2.2.6.1. Data are provided only for the key proceedings before the court or administrative body: number of proceedings with the issuer as a defendant and the total value of all disputes; number of proceedings with the issuer as a plaintiff and the total value of all disputes;

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proceedings related to industrial property rights and abuse of monopoly position should be stated separately

Analysis of the court disputes shows the tendency in growth of the court disputes in the period of the past few years of NIS a.d. Novi Sad conduct of business. On 30 April 2010, 4,267 of the court disputes was registered, whereof NIS a.d. Novi Sad is plaintiff in 2,638 disputes, while it is defendant in 1,613 disputes. Other disputes relate to disputes in which NIS a.d. Novi Sad is interested party or disputes that are officially commenced against the third parties. Subject of the most disputes is debt collection, damage compensation and the labor disputes. NIS a.d. Novi Sad makes regular analysis of the possibility of the negative outcome and the amount of certain or reasonable dispute expenses.

NIS as defendant; 1,613 NIS as plaintiff; 2,638

Disputes structure on 30 April 2010 4.500 4.000 3.500 3.000 2.500 2.000 4.267 1.500 1.000 2.196 500 768 770 0 150 360 23

Numbers according to the dispute type and organizational units on 30 April 2010

High value disputes

PLAINTIFF DEFENDANT VALUE Uni Credit bank NIS a.d. Novi Sad EUR 12,000,000* Copechim Trading Uni Credit bank, EUR 6,300,000 HypoAlpeAdria Bank, Trizon, NIS a.d. Novi Sad Unipress NIS a.d. Novi Sad EUR 3,000,000 IBA UNITED NIS a.d. Novi Sad USD 25,000,000

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Stambena zadruga NIS a.d. Novi Sad EUR 630,000,000** Energoprojekt NIS a.d. Novi Sad, O Zone a.d. EUR 8,500,000 Visokogradnja Belgrade *REMARK: On 1 June 2010 agreement on amicable settling of dispute between UniCredit bank and NIS ad Novi Sad has been entered. **REMARK: The dispute upon the legal suit of the Stambena zadruga Rafinerija vs. NIS a.d. Novi Sad, Javno preduzece Srbijagas, Javno preduzece Transnafta and the Republic of Serbia The cause of the dispute is non-performance of the obligation of NIS a.d. Novi Sad on the basis of the 11 agreements on assumption of debt, entered between JP NIS (new debtor) and the Ministry of the Internal Affairs (initial debtor). The debt is based on the agreement on franchising in apartments construction that were entered between MUP RS and Stambena zadruga Rafinerija. The Commercial Court in Novi Sad has in 2005 issued judgment whereby JP NIS was obliged to pay to the plaintiff the amount of RSD 2,954,000,000 with the daily interest of 0.2% as of 1 March 2005 until the payment. By application of this interest rate NIS a.d. Novi Sad would be obliged to pay approximately EUR 630,000,000. Higher Commercial Court has repealed the judgment and returned the dispute for new trial. In the repeated procedure the Commercial court in Belgrade has on 29 April 2010 issued first instance judgment no. 7.P. 4996/2010 wherewith it has rejected in total the claim of Stambena zadruga against NIS a.d. Novi Sad, JP Srbijagas and JP Transnafta due to lack of the passive legitimating of the defendants.

As of the date of taking over the controlling package of shares by the company Gazprom Neft, one of the main goals of the management of NIS a.d. Novi Sad is decrease in number of the court disputes, and establishment of control and risk management.

2.2.7 Total amount of issuer’s liabilities not mature on the application day (on the day of 30th April 2010) 2.2.7.1. Amount of issuer’s liabilities for bank loans (thousand RSD) Long-term 34,127,239 Shorter 17,452,474 IN TOTAL 51,579,713

2.2.7.2. Amount of issuer’s liabilities for issued debentures /

2.2.7.3. Оther issuer’s liabilities (thousand RSD) Obligations (short-term and long-term) towards other creditors (Deposit Insurance Agency, Gazprom Neft, SINOCHEM): 14,927,971. Obligations towards leasing companies and other creditors (short-term and long-term): 159,951. Obligations towards suppliers: 17,732,025.

2.2.8. Total amount of issuer’s liabilities not settled within the maturity period by the application date (on the day of 30th of April 2010) 2.2.8.1. Amount of issuer’s liabilities for bank loans /

2.2.8.2. Amount of issuer’s liabilities for issued debentures /

2.2.8.3. Other issuer’s liabilities (thousand RSD) Obligations towards suppliers: 1,753,611.

2.2.9. Employees 2.2.9.1. Total number of employees employed with the issuer, their qualification level and the average number of employees in the previous three years: Qualification level 2007 2008 2009 Phd 21 18 14 Master 94 106 109 VSS 2003 2042 1992 VS 876 886 765

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SS 4914 4826 4322 VK 1314 1298 1217 KV 2569 2460 2244 NS 560 526 431 In total 12351 12162 11094 Average number of employees 11869

2.2.9.2. Total amount owed to employees: (thousand RSD) Total amount of obligations towards the employees on 30 April 2010 is 645,603.

2.3. Financial data 2.3.1. Data from issuer’s non-consolidated financial statements for the previous three years 2.3.1.1. Balance sheet (thousand RSD) ASSETS AND LIABILITIES 2007 2008 2009 TOTAL ASSETS 162,696,639 160,606,975 144,051,315 Non-current assets 108,151,875 112,752,770 95,734,160 Subscribed capital, unpaid - - - Goodwill - - - Intangible assets 3,021,837 5,453,480 4,792,744 Property, plant, equipment, and biological 96,843,356 96,938,045 83,721,202 assets Long-term financial investments 8,286,682 10,361,245 7,220,214 -Investments in capital 4,305,285 4,063,090 2,918,864 -Оther long-term financial investments 3,981,397 6,298,155 4,301,350 Current assets 54,544,725 47,854,205 48,317,155 Inventories 30,322,007 24,525,882 23,056,296 Non-current assets held for sale and - - 135.649 assets from discontinuing operations Short-term receivables, investments and 24,222,718 23,328,323 25,125,210 cash Deferred tax assets 39 - - Operating assets 162,696,639 160,606,975 144,051,315 Loss exceeding capital - - - Off-balance sheet assets 43,947,429 106,528,611 151,211,899 TOTAL LIABILITIES 162,696,639 160,606,975 144,051,315 Equity 81,168,045 69,981,542 32,283,167 Basic capital 87,128,024 87,128,024 87,128,024* Subscribed capital, unpaid - - - Reserves 484,601 889,424 889,424 Revaluation reserves 275,984 60,783 39 Unrealized gains on securities - 136,760 130,243 Unrealized losses on securities - (33,169) (28,172) Retained earnings 3,205,707 - - Loss (9,926,271) (18,200,280) (55,836,391) Purchased own shares - - - Long-term provisions and liabilities 76,957,902 86,810,052 109,836,132 Long-term provisions 8,778,189 7,846,215 16,040,464 Long-term liabilities 12,922,652 12,340,006 40,653,678 -Long-term loans 12,751,908 12,248,861 34,733,451 -Оther long-term liabilities 170,744 91,145 5,920,227 Short-term liabilities 55,257,061 66,623,831 53,141,990 -Short-term financial liabilities 13,056,524 47,407,595 18,566,832 - Liabilities in respect of assets held for - - - sale and assets from discontinuing operations - Trade and other payables 31,879,359 11,655,148 23,367,446

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- Other short-term liabilities and accruals 3,888,903 4,031,732 3,884,567 - Liabilities for VAT and other public 5,839,410 3,369,927 7,323,145 income - Liabilities for income tax 592,865 159,429 - - Deferred tax liabilities 4,570,692 3,815,381 1,932,016 Off-balance sheet liabilities 43,947,429 106,528,611 151,211,899 *REMARK: Basic capital in the amount of RSD 87,128,024,000.00 is comprised of the share and the other capital. The value of the registered share capital in the amount of RSD 81,530,200,000 is based on the assessment of the value of in kind contribution on 31 May 2005, that was made for the purpose of preparation of division balance and establishment of NIS a.d. Novi Sad by decision of the Government of the Republic of Serbia. Auditor of the financial statements for 2005 has determined that in the accountancy records of NIS a.d. Novi Sad the value of the share capital is higher for the amount of RSD 5,597,804,000 when compared to the amount registered with the Business Registers Agency and the Central Registry. Upon order of the auditor this difference is presented as the other capital. In 2009, the amount of RSD 20,000 is moved to the position Other capital in order to bring into line position between the value of the share capital registered with the Central Registry (RSD 81,530,200,000) and the value in the business records (RSD 81,530,220,000) which is shown in the statement as the changes in the capital.

2.3.1.2. Income statement (thousand RSD) INCOME AND EXPENSES 2007 2008 2009 Operating income 158,847,026 169,223,773 118,275,185 Sales 159,051,572 168,458,472 118,375,584 Revenue from consumption of own 480,094 694,168 724,015 products Increase in value of inventories 281,492 - 4,415,513 Decrease in value of inventories 1,344,030 225,751 5,610,722 Other operating revenues 377,898 296,884 370,795 Financial income 9,764,905 8,524,544 11,121,612 Other income 3,209,789 8,525,742 5,858,173 Operating expenses 155,433,531 164,244,154 120,375,891 Cost of goods sold 52,528,963 39,400,747 6,008,675 Cost of materials 67,216,424 93,188,785 68,609,999 Cost of salaries, salaries compensations 16,036,521 14,087,407 19,834,025 and other employee benefits Depreciation and provisions 8,675,391 6,914,861 12,698,952 Оther operating expenses 10,976,232 10,652,354 13,224,240 Financial expenses 7,784,811 18,927,262 15,878,008 Оther expenses 5,142,657 11,013,671 38,520,547 PROFIT(LOSS) from regular operations 3,460,721 (7,911,028) (39,519,476) before taxation Net income(loss) from discontinued - - - operation PROFIT (LOSS) before taxation 3,460,721 (7,911,028) (39,519,476) Income tax - - - Current income tax (592,865) (111,587) - Deferred tax expense for the period - - - Deferred tax income for the period - - 1,883,365 Salaries paid to employer - - - NET PROFIT (LOSS) 2,867,856 (8,022,615) (37,636,111) Net profit belonging to minority - - - shareholders Earnings per share - - - Basic earnings per share - - - Diluted earnings per share - - -

2.3.1.3. Cash flow statement: (thousand RSD) 2007 2008 2009 CASH FLOWS Cash inflow from operating activities 232,804,128 175,316,997 185,017,980

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Cash inflow from investing activities 2,554,899 1,104,131 6,953 Cash inflow from financing activities 3,720,346 26,102,453 82,002,205

CASH OUTFLOWS Cash outflows from operating activities (226,846,069) (187,097,944) (167,399,487) Cash outflow from investing activities (6,858,400) (11,548,881) (9,469,672) Cash outflows from financing activities (6,290,929) (858,918) (85,522,238) TOTAL CASH INFLOWS 239,079,373 202,523,581 267,027,138 TOTAL CASH OUTFLOWS (239,995,398) (199,505,743) (262,391,397) NET CASH INFLOW - 3,017,838 4,635,741 NET CASH OUTFLOW (916,025) - - Cash at the beginning of the accounting 2,663,384 1,784,304 3,989,794 period Foreign currency gains on translation of 912,169 1,173,780 143,915 cash Foreign currency losses on translation of (875,224) (1,986,128) (97,949) cash Cash at the end of accounting period 1,784,304 3,989,794 8,671,501

2.3.1.4. Statement of changes in equity: (thousand RSD) DESCRIPTION 31.12.2007. 31.12.2008. 31.12.2009. Share capital 81,530,220 81,530,220 81,530,200 Оther capital 5,597,804 5,597,804 5,597,824 Registered capital unpaid Share premium - - - Reserves 484,601 889,424 889,424 Revaluation reserves 275,984 60,783 39 Unrealized gains on Securities - 136,760 130,243 Unrealized losses on Securities - 33,169 28,172 Retained earnings 3,205,707 - - Loss to amount of equity 9,926,271 18,200,280 55,836,391 Purchased own shares and stakes - - - Total 81,168,045 69,981,542 32,283,167

2.3.1.5. Important explanations of specific items from financial statements contained in notes to financial statements

Note 2.1.2. with the financial statements: Company made the following re-classifications of the comparable data (thousand RSD): 2008 (as Reclassification of Reclassification 2008 (as reported) excise from for deposits with restated) inventory to maturity less than prepayment 3 months

Cash and cash 555,454 - 3,434,340 3,989,794 equivalents

Short term 6,079,682 - (3,434,340) 2,645,342 financial investments

VAT and prepaid 1,114,720 652,429 - 1,767,149 expenses

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Inventories 25,178,311 (652,429) - 24,525,882

Net assets 69,981,542 - - 69,981,542

2.3.1.6. Final auditor’s opinion (last three years)

Auditor's opinion for 2009 – the Company for Auditing, Accountancy, Financial and Consulting Services PricewaterhouseCoopers d.o.o. Belgrade To the Shareholders and Board of Directors of Naftna industrija Srbije a.d. Novi Sad We have audited the accompanying financial statements of Naftna industrija Srbije a.d., Novi Sad (the „Company“) which comprise the balance sheet as of 31 December 2009 and the income statement, statement of changes in shareholder's equity and cash flow statement for the year then ended and a summary of significant accounting policies and other explanatory notes. The statistical annex is an integral part of these financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the requirements of the Law on Accounting and Auditing of the Republic of Serbia. This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements 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 entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of 31 December 2009, and of its financial performance and its cash flows for the year then ended in accordance with the Law on Accounting and Auditing of the Republic of Serbia and disclosures in the Note 2 to the financial statements. Emphasis of Matter Without qualifying our opinion, we draw attention to the following matters: (a) The Company incurred a net loss of RSD 37,636,111 thousand during the year ended 31 December 2009 (31 December 2008 – RSD 8,022,615 thousand) and, as of that date the Company’s net assets are RSD 32,283,167 thousand (net assets as of 31 December 2008 – RSD 69,981,542) and the share capital amounts to RSD 87,128,024 thousand (31 December 2008 – RSD 87,128,024 thousand). In accordance with the Company Law of the Republic of Serbia, if the Company has incurred losses higher than 50% of its registered share capital, shareholders of the Company must be informed of this event in order to take the actions mandated by law. Furthermore, if the net asset value of the Company is below the minimum share capital required by the Company Law for that form of company, and remains in that manner for a period of six months from the moment it becomes first apparent, adverse consequence may follow. The ultimate outcome of this matter cannot presently be determined and, consequently, the financial statements do not include adjustments or disclosures to reflect these issues. b) In accordance with the Agreement of Sale and Purchase of Share of Naftna Industrija Srbije a.d.,

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Republic of Serbia, as a Seller, is obliged to give written official consent for Naftna industrija Srbije a.d. to register its title or right of use to all immovable properties recorded in Fixed Assets Register as at 31 December 2007. Until 31 December 2009, such a written consent was not issued and transfer of ownership of properties on the Company’s name is still in progress. c) In accordance with Agreement of Sale and Purchase of Share of Naftna Industrija Srbije a.d., Republic of Serbia, as a Seller, is obliged to ensure that if operations of the Company’s equipment that existed at the date of the Agreement result in violations of environmental requirements due to obsolescence or physical wear, no sanctions are applied against Naftna industrija Srbije a.d. with respect to such non-compliance until such equipment is modernized or replaced. The Company has engaged independent consultant to assess exposure of the Company to environmental requirements of Republic of Serbia as of the date of the Agreement. The consultant’s report is pending and as such the total environmental exposure of the Company is still under evaluation.

Auditor's opinion for 2008 (on adjusted financial statements) – KPMG d.o.o. Belgrade: Report on the Adjusted Financial Statements We have audited the accompanying separate adjusted financial statements of NIS a.d. - Naftna Industrija Srbije, Novi Sad (hereinafter: “the Company”) which comprise the separate adjusted balance sheet as at 31 December 2008 and the related separate adjusted statement of income, separate adjusted cash flow statement and separate adjusted changes in shareholders equity for the year then ended. Audit of the Company’s financial statements for 2007 was performed by another auditor who expressed a qualified opinion in his report dated 9 May 2008 in respect of recording of effects of error adjustments, non-compliance with IAS 19 – Employee Benefits, intangible assets, nature and measurement of inventories of investment materials, long-term investments, obsolete inventories and slow moving inventories, provisions for re-cultivation of environmental degradation, unreconciled receivables and payables, calculation and presentation of taxes in accordance with IAS 12 and cash flow statement. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the Law on Accounting and Auditing of the Republic of Serbia (as published in the “Official Gazette of the Republic of Serbia” no. 46/2006). This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatements, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We have conducted our audit in accordance with the Law on Accounting and Auditing of the Republic of Serbia (as published in the “Official Gazette of the Republic of Serbia” no. 46/2006) and International Standards on Auditing as issued by the International Federation of Accountants. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the financial statements 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 entity's internal control. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion: In our opinion, the separate adjusted financial statements give a true and fair view of the financial position of the Company as at 31 December 2008, and the results of its operations and cash flows for the year then ended, in accordance with the Law on Accounting and Auditing of the Republic of Serbia (as published in the „Official Gazette of the Republic of Serbia“ no. 46/2006). Emphasis of Matter

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Without qualifying our opinion, we draw attention to the following issues: As at 18 April 2008 the Shareholders’ Assembly of the Company adopted the Decision on profit distribution for 2007, whereby a liability was created toward its founder at the time in the amount of RSD 4,048,227 thousand. Out of this amount RSD 2,347,514 thousand was settled through compensation with JP Srbijagas and JP Ţeleznice Srbije, while the amount of RSD 263,582 thousand was returned to the Company, whereby the Company’s liability to its founder at the time as at 31 December 2008 amounts to RSD 2,126,363 thousand. Given that the Company’s Share Purchase Agreement includes a statement and guarantee from the seller that after 25 January 2008 no dividends have been paid, we are unable to confirm the validity of the Decision on distribution of dividends for 2007 and related postings. Also, the Decision dated 29 January 2009 on covering losses from earlier years and distribution of retained earnings from previous years to the founder, liability toward the founder has been established for the remainder of profits after covering of losses in the amount of RSD 7,171,908 thousand. This Decision by the Shareholders’ Assembly was not carried out in the Company’s accounting records. In March 2009 the Board of Directors initiated court proceedings to cancel the decision on profit distribution. In accordance with information received from the Company’s management, the validity of both decisions on profit distribution will be the subject of negotiation of interested parties. The Company reported an equity investment in HIP Petrohemija a.d. Pancevo in the net amount of RSD 487,986 thousand, as well as long-term financial investments and current receivables from HIP Petrohemija a.d. Pančevo as at 31 December 2008 in the amount of RSD 6.576.116 thousand (2007 – RSD 2,107,655 thousand). In view of the weak financial position of HIP Petrohemija a.d. Pančevo and its reported losses, Company management is considering ways to collect and the amount of potential impairment of investment and receivables from HIP Petrohemija. The Company does not have complete documentation as proof of ownership or right of use over all of its assets and property, nor has it made full separation with respect to former members of NIS. Company management believes that issues of ownership over property, separation with respect to former members of NIS and settling of relations with state authorities will be concluded successfully, and that there will not be any significant difficulties in defining ownership. The Company currently lacks documentation on ownership (detailed property list) for all of its properties, but relies on the obligation of the Government of the Republic of Serbia, arising from the Sale Purchase Agreement, to provide the appropriate documents. Due to the existence of aged equipment and the fact that particular production processes in the Company are outdated, it is possible that the Company might have breached and will be in breach of environmental laws of the Republic of Serbia, As a result, the Company is a potential environmental pollutant and it is reasonable to expect environmental claims and litigation against the Company in future. The Company did not make provisions for the costs of rectifying the consequences of environmental pollution that occurred prior to and after the preparation of the financial statements for 2008, given that management is relying on obligation of the Government of the Republic of Serbia to indemnify the Company from any such claims and litigation expect for industrial disasters until such time when the Programme for Reconstruction and Modernization of assets of the Company is completed in accordance with the Sale Purchase Agreement. Calculation of deferred tax liabilities was made based on the tax values of fixed assets and intangible assets that are assessed by the Tax Authorities, and which are the subject of an administrative dispute. Upon conclusion of this administrative dispute, with its ultimate outcome being difficult to estimate at this time, the value of deferred tax liabilities could be adjusted.

Auditor's opinion for 2007 – Deloitte d.o.o. Belgrade To the Management of Naftna industrija Srbije a.d. Novi Sad We have audited the accompanying financial statements (pages 5 to 45) of Naftna industrija Srbije A.D., Novi Sad (the “Company” or “NIS”), which comprise the balance sheet as at December 31, 2007, and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of the significant accounting policies and other explanatory notes. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the accounting regulations of the Republic of Serbia. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that

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are reasonable in the circumstances. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. Except as disclosed in Basis for Qualified Opinion, we conducted our audit in accordance with International Standards on Auditing and the Law on Accounting and Auditing of the Republic of Serbia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements 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 entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Basis for Qualified Opinion As disclosed in Note 4 to the financial statements, the Company charged the effects of error corrections of RSD 526,822 thousand to the current year opening balance of retained earnings, which departures from the provisions of IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors” under which material errors relating to the subsequently determined income and expenses dating from prior periods are to be stated as the adjustment of retained earnings at the beginning of the current period, where comparative information in the prior year financial statements is restated. As disclosed in Notes 3.4 and 7 to the financial statements, the Company did not perform an actuarial valuation in order to determine the present value of the accumulated employee rights to retirement benefits and jubilee awards, nor did it prepare a calculation of the short-term employee benefits, as required under the provisions of IAS 19, “Employee Benefits”. As a result, the accompanying financial statements do not include long-term provisions and short-term liabilities with respect to employee benefits. Accordingly, we were unable to determine the potential effects of the aforementioned liabilities on the Company’s financial statements for FY 2007. As disclosed in Note 13 to the financial statements, intangible assets stated as of December 31, 2007 in the amount of RSD 3,166,609 thousand comprise investment made during the year of RSD 1,951,658 thousand, which primarily relate to the investments in SAP business software and include costs of standard supporting services, consulting services and employee trainings. Based on the documentation made available, we were unable to satisfy ourselves as to the nature of the services rendered and whether the Company fully identified investments that do not qualify for recognition as intangible assets and which should have been charged to the current year results as delineated under IAS 38 “Intangible Assets.” As disclosed in the Note 14 to the financial statements, at December 31, 2007, property, plant and equipment of RSD 96,104,403 thousand include construction in progress and advances of RSD 7,316,052 thousand, comprising the inventories of investment material of RSD 1,634,733 thousand. Due to the nature of the Company’s accounting records, we were unable to satisfy ourselves as to the nature of the inventories of investment material, nor to confirm for which purpose these were used. Accordingly, we were unable to satisfy ourselves whether the entire amount of inventories of investment material complies with recognition and measurement criteria defined under IAS 16 “Property, Plant and Equipment.” As disclosed in Note 17 to the financial statements, other long-term investments stated at December 31, 2007 in the amount of RSD 7,656,261 thousand include long-term loans to employees of RSD 2,523,159 thousand and apartments rented to employees, which may be subject to repurchase by the occupants, with the net book value of RSD 896,081 thousand. These long-term loans and apartments rented to employees were valued at the amounts of outstanding receivable and at market value of apartments, respectively. In our opinion, such accounting treatment is not in line with IAS 39, “Financial Instruments: Recognition and Measurement”, according to which long-term receivables are measured at amortized cost using the effective interest rate. Based on the Company’s accounting records, we were unable to quantify the effects which the departure from the aforementioned standard could have on the accompanying financial statements. In addition, the long-term financial placement

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with the related party was disclosed as of the balance sheet date in the amount of RSD 1,616,295 thousand. The Company did not entirely define and disclose the maturity of these placements, given that the maturities of this placement have not been determined. As disclosed in Note 18 to the financial statements, the Company’s inventories stated as of December 31, 2007 in the net amount of RSD 31,528,100 thousand include obsolete and slow-moving inventories. Since the Company does not possess reliable aging analysis of inventories, we were unable to determine the potential impairment of these inventories. In addition, inventories of materials, goods, finished products and work in progress include the significant amount of internal profit. Due to the Company’s methodology for cost price calculation and a lack of accounting records substantiating the required data, we were unable to determine the effects of potential adjustments to the accompanying financial statements. As disclosed in Note 25 to the financial statements, based on the internal estimates of the Company’s management, as of December 31, 2007 the provisions for the restoration and re-cultivation of degraded natural environment amounted to RSD 831,365 thousand. Based on the information made available, we were unable to satisfy ourselves as to the methodology used to calculate the aforementioned provisions, as required by IAS 37 “Provisions, Contingent Liabilities and Contingent Assets.” In addition, due to the nature of its technological processes, in the previous period the Company potentially caused environmental pollution, based on which it could expect claims by citizens and criminal charges by relevant governmental authorities. The Company did not recognize a provision for costs of neutralizing the consequences of environmental contamination as required by the aforementioned standard. As disclosed in Notes 19 and 28 to the financial statements, at December 31, 2007 accounts receivable and accounts payable amounted to RSD 17,522,765 thousand and RSD 31,879,359 thousand, respectively and included receivables from domestic customers of RSD 24,554,548 thousand, interest receivables of RSD 24,554,548 thousand, as well as liabilities to suppliers of RSD 29,132,404 thousand. Based on documentation made available to us, performed cut-off testing and independent confirmations received from certain debtors and creditors, we identified discrepancies as to the balances recorded in the Company’s books of accounts. Given that up to the date of issuance of these financial statements, the Company’s management had not reconciled these amounts, we are unable to satisfy ourselves whether a certain portions of accounts receivable and accounts payable were fairly stated as of December 31, 2007. Deferred tax assets as of December 31, 2007 and income taxes for the year then ended amounted to RSD 487,537 thousand and RSD 592,865 thousand, respectively. Based on documentation made available to us, we were unable to satisfy ourselves whether deferred taxes were computed in accordance with IAS 12, “Income Taxes,” or to quantify potential effects thereof on the accompanying financial statements. In addition, these financial statements do not include all the disclosures required under IAS 12, “Income Taxes.” Certain information presented in the cash flow statement has not been reconciled with the amounts stated in the Company’s balance sheet as of December 31, 2007, as well as in the income statement and statement of changes in equity for the year then ended. Based on the information made available to us, and given the complexity of internal relations in the Company, we were unable to separate inflows and outflows arising on internal transactions and, accordingly, we do not express an opinion on the Company’s cash flow statement for the year ended December 31, 2007. Qualified Opinion In our opinion, except for the effects of the possible adjustments associated with the uncertainties and limitations on the performance of the audit procedures referred to in the preceding paragraphs, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2007, and its financial performance and changes in equity for the year then ended, in accordance with the accounting regulations of the Republic of Serbia. Emphasis of Matter Without further qualifying our opinion, we draw attention to the following matters: a) The Company is neither in possession of all documentation that would evidence its ownership over all assets and properties, nor has it performed a complete split-off with the former NIS members. The Company’s management believes that the ownership issues and the aforementioned split-off, as well as the settlement of balances with the state authorities of the Republic of Serbia arising on these issues will be successfully realized, and that no significant difficulties are anticipated in respect of the ownership titles. b) As disclosed in Note 32 to the financial statements, at December 31, 2007, the total amount of

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potential monetary damages arising from legal and administrative suits in which the Company has been named as a defendant amounted to RSD 8,493,023 thousand, without the effects of potential penalty interest for which the Company formed provisions of RSD 74,011 thousand. Although it is not possible to predict the final outcome of other litigations with any certainty, the Company’s management does not expect unfavorable outcome of materially significant proceedings and, accordingly, no additional provisions have been formed in these financial statements. In addition, the worth of lawsuits the Company filed against third parties amounts to RSD 8,094,108 thousand, which have not been disclosed in the accompanying financial statements or for which the corresponding allowance for impairment has not been provided for. c) As disclosed in Note 2 to the financial statements, these financial statements were prepared by applying the IAS which were in effect as of December 31, 2002 and the accounting regulations of the Republic of Serbia base on them. The Company’s management assesses IAS, IFRS and interpretations the application of which was prescribed pursuant to the February 12, 2008 Decision enacted by the Minister of Finance of the Republic of Serbia and once the standards and interpretations with reference to the Company’s activities have been established, the Company intends to apply them in preparing the financial statements for the period beginning January 1, 2008. With regards to the provisions contained in the newly-adopted and amended standards and interpretations which relate to the application date and the provisions with reference to the disclosure of comparative figures, upon their adoption and application by the Company, certain reclassification of data presented in the accompanying financial statements for the year 2007 might be required, as these will be used as comparative figures in the Company’s financial statements for the year 2008. d) As disclosed in Note 2.1, these financial statements include solely the receivables, payables and operating results of the parent company, without those of its related parties. The investments in subsidiaries are stated in the accompanying financial statements at cost. The consolidated financial statements for the year ended December 31, 2007, which the Company prepared and submitted to the National Bank of Serbia, Center for Credit Worthiness Assessment as delineated under the Law on Accounting and Auditing (See Official Gazette of the Republic of Serbia no. 46 of June 2, 2006) on April 24, 2008, provide a comprehensive insight into the Company’s financial position. * All the quoted opinions of the auditor (original) can be downloaded on NIS a.d. Novi Sad web site www.nis.rs

2.3.2. Data from issuer’s consolidated financial statements from the past three years 2.3.2.1. Legal entities included in the consolidated statement Business name % participation in share capital O Zone a.d. Belgrade 100.00 NIS-OIL Trading Gmbh, Frankfurt am Main 100.00 NIS Overseas, Moscow, Russian Federation 100.00 NIS Investments, London 100.00 Svetlost d.o.o., Bujanovac 51.32 Ranis, Moscow area, Cernogolovka, Russian 51.00 Federation Jubos d.o.o., Bor 51.00

2.3.2.2. Consolidated balance sheet АSSETS AND LIABILITIES 2007 2008 2009 TOTAL ASSETS 165,162,240 161,193,607 144,701,351 Non-current assets 110,570,124 113,524,879 96,356,741 Subscribed capital, unpaid - - - Goodwill - - - Intangible assets 3,028,533 5,462,308 4,800,245 Property, plant, equipment and biological assets 102,433,328 100,884,366 86,887,710 Long-term financial investments 5,108,263 7,178,205 4,668,786 Investment in capital 1,141,640 880,049 366,114 Оther long-term financial investments 3,966,623 6,298,156 4,302,672 Current assets 54,590,198 47,668,452 48,344,610 Inventories 30,288,485 24,423,527 23,031,345 Non-current assets held for sale and assets - - 135,649

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from discontinuing operations Short-term receivables, investment and cash 24,301,713 23,244,925 25,177,616 Deferred tax assets 1,918 276 - Operating assets 165,162,240 161,193,607 144,701,351 Loss exceeding equity - - - Off-balance sheet assets 43,947,429 106,528,611 151,211,899 TOTAL LIABILITIES 165,162,240 161,193,607 144,701,351 Equity 82,592,986 69,633,845 32,019,877 Basic capital 87,149,380 87,151,650 87,156,815 Subscribed capital, unpaid - - - Reserves 484,601 889,211 889,424 Revaluation reserves 1,880,271 61,362 - Unrealized gains on securities - 136,760 130,243 Unrealized losses on securities - (33,169) (28,172) Retained earnings 3,253,268 - - Loss (10,174,534) (18,571,969) (56,128,433) Purchased own shares - - - Long-term provisions and liabilities 77,934,351 87,677,795 110,749,419 Long-term provisions 8,796,400 7,878,920 16,111,675 Long-term liabilities 13,737,889 13,127,820 41,369,977 Long-term loans 12,748,337 12,245,150 34,733,451 Other long-term liabilities 989,552 882,670 6,636,526 Short-term liabilities 55,400,062 66,671,055 53,267,767 Short-term financial liabilities 13,028,390 47,409,746 18,567,835 Liabilities in respect of assets held for sale and - - - assets from discontinuing operations Trade and other payables 31,891,468 11,508,677 23,336,687 Other short-term liabilities 4,043,266 4,217,632 4,047,008 Liabilities for VAT and other public income 5,841,969 3,374,049 7,314,806 Liabilities for income tax 594,969 160,951 1,431 Deferred tax liabilities 4,634,903 3,881,967 1,932,055 Off-balance sheet liabilities 43,947,429 106,528,611 151,211,899

2.3.2.3. Consolidated income statement INCOME AND EXPENSES 2007 2008 2009 Operating income 159,552,279 169,607,132 118,701,874 Sales revenue 159,753,967 168,903,199 118,578,202 Revenue from consumption of own products 481,626 697,090 724,653 Increase in inventories - - 4,415,513 Decrease in inventories 1,062,538 225,751 5,396,875 Оther operating revenues 379,224 232,594 380,381 Financial income 9,786,963 8,505,247 11,124,507 Оther income 3,252,222 8,552,811 5,880,260 Operating expenses 156,327,484 164,812,386 121,009,774 Cost of goods sold 52,802,418 39,582,455 6,186,024 Cost of materials 67,298,673 93,033,146 68,676,064 Cost of salaries, salaries compensations and 16,216,585 14,170,110 19,983,605 other employee benefits Depreciation and provisions 8,747,261 6,975,591 12,743,544 Оther operating expenses 11,262,547 11,051,084 13,420,537 Financial expenses 7,794,829 18,907,824 15,884,833 Оther expenses 6,680,649 11,021,776 38,527,706 PROFIT(LOSS) from regular operations before 1,788,502 (8,076,796) (39,715,672) taxation Net gains(loss) from discontinued operation - - -

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PROFIT (LOSS) before taxation 1,788,502 (8,076,796) (39,715,672) Income tax - - - Current income tax (593,517) (111,629) (212) Deferred tax expense for the period (57,747) (2,065) - Deferred tax income for the period - - 1,949,912 Personal earnings/salaries paid to employer - - - NET PROFIT (LOSS) 1,137,238 (8,190,490) (37,765,972)

Net profit belonging to minority shareholders 1,381 - - Net profit belonging to parent company 1,135,857 - - Earnings per share - - - Basic earnings per share - - - Diluted earnings per share - - -

2.3.2.4. Consolidated cash flow statement 2007 2008 2009 CASH FLOWS Cash inflow from operating activities 233,099,048 174,873,512 185,401,228 Cash inflow from investing activities 2,554,899 1,029,606 8,911 Cash inflow from financing activities 3,814,567 26,102,453 82,002,205

CASH OUTFLOWS Cash outflows from operating activities (227,201,921) (186,979,539) (167,901,422) Cash outflows from investing activities (6,893,392) (11,579,840) (9,371,622) Cash outflows from financing activities (6,298,807) (435,703) (85,522,238) TOTAL CASH INFLOWS 239,468,514 202,005,571 267,412,344 TOTAL CASH OUTFLOWS (240,394,120) (198,995,082) (262,795,282)

NET CASH INFLOW - 3.010,489 4,617,062 NET CASH OUTFLOW (925,606) - - Cash at the beginning of the accounting period 2,751,678 1,862,109 4,060,250 Foreign currency gains on translation of cash 911,346 1,173,780 143,915 Foreign currency losses on translation of cash (875,309) (1,986,128) (97,949) Cash at the end of accounting period 1,862,109 4,060,250 8,723,278

2.3.2.5. Consolidated statement of changes in equity 31.12.2007 31.12.2008 31.12.2009 Share capital 81,530,220 81,530,220 81,530,200 Оther capital 5,619,160 5,621,430 5,626,615 Subscribed capital, Unpaid Share premium Reserve 484,601 889,211 889,424 Revaluation reserves 1,880,271 61,362 - Unrealized gains on securities - 136,760 130,243 Unrealized losses on - 33,169 28,172 securities Retained earnings 3,253,268 - - Loss to amount of equity 10,174,534 18,571,969 56,128,433 Purchased own shares and - - - stakes Total 82,592,986 69,633,845 32,019,877 Loss above the equity - - -

2.3.2.6. Important explanations on certain items in the financial statements contained in notes to financial statements

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Note 2.1.1. with consolidated financial statements: The Group made the following re-classification of the comparable data as well as write off of O Zone property valuation: Write –off after Reclassification of Reclassification for 2008 O Zone excise from deposits with 2008 (as property inventory to maturity less than restated) (as reported) valuation prepayment 30 days

Cash and cash equivalents 625,910 - - 3,434,340 4,060,250

Short term financial 6,091,856 - - (3,434,340) 2,675,516 investments

VAT and prepaid 1,118,736 - 652,429 - 1,771,165 expenses

Inventories 25,075,956 - (652,429) - 24,423,527

Property, plant 101,749,575 (1,604,162) - - 100,145,413 &Equipment

Revaluation 1,665.524 1,604,162 - - 61,362 reserves

Net assets 71,238,007 - - - 69,633,845

2.3.2.7. Final auditor’s opinion (previous three years) Auditor's opinion for 2009. – the Company for Auditing, Accountancy, Financial and Consulting Services PricewaterhouseCoopers d.o.o. Belgrade To the Shareholders and Board of Directors of Naftna industrija Srbije a.d. Novi Sad We have audited the accompanying consolidated financial statements of Naftna Industrija Srbije a.d., Novi Sad (the „Parent“) and its subsidiaries (the „Group“) which comprise the consolidated balance sheet as of 31 December 2009 and the consolidated income statement, consolidated statement of changes in shareholder’s equity and consolidated cash flow statement for the year then ended and a summary of significant accounting policies and other explanatory notes. The statistical annex is an integral part of these consolidated financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the requirements of the Law on Accounting and Auditing of the Republic of Serbia. This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor's Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that

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are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the Group as of 31 December 2009, and of its financial performance and its cash flows for the year then ended in accordance with the Law on Accounting and Auditing of the Republic of Serbia and disclosures in the Note 2 to the consolidated financial statements. Emphasis of Matter Without qualifying our opinion, we draw attention to the following matters: a) The Parent incurred a net loss of RSD 37,636,111 thousand during the year ended 31 December 2009 (31 December 2008 – RSD 8,022,615 thousand) and, as of that date the Parent’s net assets are RSD 32,283,167 thousand (net assets as of 31 December 2008 – RSD 69,981,542) and the share capital amounts to RSD 87,128,024 thousand (31 December 2008 – RSD 87,128,024 thousand). Subsidiary O Zone a.d. has also incurred losses in excess of 50% of its share capital. In accordance with the Company Law of the Republic of Serbia, if the company has incurred losses higher than 50% of its registered share capital, shareholders must be informed of this event in order to take the actions mandated by law. Furthermore, if the net asset value of the company is below the minimum share capital required by the Company Law for that form of company, and remains in that manner for a period of six months from the moment it becomes first apparent, adverse consequence may follow. The ultimate outcome of this matter cannot presently be determined and, consequently, the financial statements do not include adjustments or disclosures to reflect these issues. b) In accordance with the Agreement of Sale and Purchase of Share of Parent, Republic of Serbia, as a Seller, is obliged to give written official consent for Parent to register its title or right of use to all immovable properties recorded in Fixed Assets Register as at 31 December 2007. Until 31 December 2009, such a written consent was not issued and transfer of ownership of properties on the Parent's name is still in progress. c) In accordance with the Agreement of Sale and Purchase of Share of Parent, Republic of Serbia, as a Seller, is obliged to ensure that if operations of the Parent's equipment that existed at the date of the Agreement result in violations of environmental requirements due to obsolescence or physical wear, no sanctions are applied against Parent with respect to such non-compliance until such equipment is modernized or replaced. The Parent has engaged independent consultant to assess exposure of the Parent to environmental requirements of Republic of Serbia as of the date of the Agreement. The consultant's report is pending and as such the total environmental exposure of the Parent is still under evaluation.

Auditor's opinion for 2008 (on the adjusted consolidated financial statements) – KPMG d.o.o. Belgrade: Report on the Adjusted Consolidated Financial Statements We have audited the accompanying adjusted consolidated financial statements of NIS a.d. - Naftna industrija Srbije, Novi Sad (hereinafter: “the Company”) which comprise the adjusted consolidated balance sheet as at 31 December 2008 and the related adjusted consolidated statement of income, adjusted consolidated cash flow statement and adjusted consolidated changes in shareholders equity for the year then ended. Audit of the Company’s consolidated financial statements for 2007 was performed by another auditor who expressed a qualified opinion in his report dated 9 May 2008 in respect of recording of effects of error adjustments, non-compliance with IAS 19 – Employee Benefits, intangible assets, nature and measurement of inventories of investment materials, long-term investments, obsolete inventories, slow moving inventories and inventories with internal profits, provisions for re-cultivation of environmental degradation, unreconciled receivables and payables, calculation and presentation of taxes in accordance with IAS 12 and cash flow statement. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these adjusted consolidated financial statements in accordance with the Law on Accounting and Auditing of the Republic of Serbia (as published in the “Official Gazette of the Republic of Serbia“ no. 46/2006). This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair

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presentation of adjusted consolidated financial statements that are free from material misstatements, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor's Responsibility Our responsibility is to express an opinion on these adjusted consolidated financial statements based on our audit. We have conducted our audit in accordance with the Law on Accounting and Auditing of the Republic of Serbia (as published in the “Official Gazette of the Republic of Serbia” no. 46/2006) and International Standards on Auditing as issued by the International Federation of Accountants. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance whether the adjusted consolidated financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the adjusted consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the adjusted consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the adjusted consolidated financial statements 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 entity's internal control. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the adjusted consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion, the adjusted consolidated financial statements give a true and fair view of the consolidated financial position of the Company as at 31 December 2008, and the consolidated results of its operations and consolidated cash flows for the year then ended, in accordance with the Law on Accounting and Auditing of the Republic of Serbia (as published in the “Official Gazette of the Republic of Serbia” 46/2006). Emphasis of Matter Without qualifying our opinion, we draw attention to the following issues: As at 18 April 2008 the Shareholders' Assembly of the Company adopted the Decision on profit distribution for 2007 reported in the separate financial statements, whereby a liability was created toward its founder at the time in the amount of RSD 4,048,227 thousand. Out of this amount RSD 2,347,514 thousand was settled through compensation with JP Srbijagas and JP Ţeleznice Srbije, while the amount of RSD 263,582 thousand was returned to the Company, whereby the Company’s liability to its founder at that time as at 31 December 2008 amounts to RSD 2,126,363 thousand. Given that the Company’s Share Purchase Agreement includes a statement and guarantee from the seller that after 25 January 2008 no dividends have been paid, we are unable to confirm the validity of the Decision on distribution of dividends for 2007 and related postings. Also, the Decision dated 29 January 2009 on covering losses from earlier years and distribution of retained earnings from previous years to the founder, liability toward the founder has been established for the remainder of profits after covering of losses in the amount of RSD 7,171,908 thousand. This Decision by the Shareholders’ Assembly was not carried out in the Company’s accounting records. In March 2009 the Board of Directors initiated court proceedings to cancel the decision on profit distribution. In accordance with information received from the Company’s management, the validity of both decisions on profit distribution will be the subject of negotiation of interested parties. The Company reported an equity investment in HIP Petrohemija a.d. Pančevo in the net amount of RSD 487,986 thousand, as well as long-term financial investments and current receivables from HIP Petrohemija a.d. Pančevo as at 31 December 2008 in the amount of RSD 6,576,116 thousand (2007 – RSD 2,107,655 thousand). In view of the weak financial position of HIP Petrohemija a.d. Pančevo and its reported losses, Company management is considering ways to collect and the amount of potential impairment of investment and receivables from HIP Petrohemija. The Company does not have complete documentation as proof of ownership or right of use over all of its assets and property, nor has it made full separation with respect to former members of NIS. Company management believes that issues of ownership over property, separation with respect to former members of NIS and settling of relations with state authorities will be concluded successfully, and that there will not be any significant difficulties in defining ownership. The Company currently lacks

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documentation on ownership (detailed property list) for all of its properties, but relies on obligation of the Government of the Republic of Serbia, arising from the Sale Purchase Agreement, to provide the appropriate documents. Due to existence of aged equipment and the fact that particular production processes in the Company are outdated, it is possible that the Company might have breached and will be in breach of environmental laws of the Republic of Serbia. As a result, the Company is a potential environmental pollutant and it is reasonable to expect environmental claims and litigation against the Company in future. The Company did not make provisions for the costs of rectifying the consequences of environmental pollution that occurred prior to and after the preparation of the financial statements for 2008, given that management is relying on obligation of the Government of the Republic of Serbia to indemnify the Company from any such claims and litigation except for industrial disasters until such time when the Programme for Reconstruction and Modernization of assets of the Company is completed in accordance with the Sale Purchase Agreement. Calculation of deferred tax liabilities was made based on the tax values of fixed assets and intangible assets that are assessed by the Tax Authorities, and which are the subject of an administrative dispute. Upon conclusion of this administrative dispute, with its ultimate outcome being difficult to estimate at this time, the value of deferred tax liabilities could be adjusted. Within investments under construction the Company reported investments in the Crni Vrh hotel complex in the amount of RSD 2,850,035 thousand as at 31 December 2008. Following the last appraisal performed on 1 January 2007 no new investments were made in this hotel complex. Management did not reach a decision on future status of this investment in the hotel complex.

Auditor's opinion for 2007. – Deloitte d.o.o. Belgrade To the Shareholders and Board of Directors of Naftna industrija Srbije a.d., Novi Sad We have audited the accompanying consolidated financial statements (pages 5 to 45) of the Oil Industry of Serbia, Novi Sad (the “Company” or “NIS”) and its subsidiaries, which comprise the consolidated balance sheet as at December 31, 2007, and the related consolidated income statement, consolidated statement of changes in equity and consolidated cash flow statement for the year then ended, and a summary of the significant accounting policies and other explanatory notes. Management’s Responsibility for the Consolidated financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the accounting regulations of the Republic of Serbia. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor’s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing and the Law on Accounting and Auditing of the Republic of Serbia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements 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 entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Basis for Qualified Opinion As disclosed in Note 4 to the consolidated financial statements, the Company charged the effects of error adjustments in the amount of RSD – 495,453 thousand to the opening balance of retained earnings in the current year, which departures from IAS 8 “Accounting Policies, Changes in

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Accounting Estimates and Errors” requiring that materially significant errors relating to subsequently determined prior period income and expenses be stated as the adjustment to retained earnings at the beginning of the current year, while the comparative information included in the prior period financial statements is restated accordingly. As disclosed in Note 3.4 to the consolidated financial statements, with the exception of one subsidiary, the Company did not perform an actuarial valuation in order to determine the present value of the accumulated employee retirement benefits and jubilee awards, or did it prepare a calculation of short- term employee benefits payable as in the parent company so in its subsidiaries, which is a departure from the provisions of IAS 19, “Employee Benefits”. As a result, the accompanying consolidated financial statements do not include complete provisions and liabilities thereof. Accordingly, we were unable to satisfy ourselves as to the potential effects of the aforementioned liabilities and provisions on the Company’s consolidated financial statements for the year 2007. As disclosed in Note 13 to the consolidated financial statements, intangible assets stated as of December 31, 2007 in the amount of RSD 3,173,305 thousand include investments of RSD 1,952,683 thousand made during the year, most of which relate to the investments in the business software SAP, including the costs of standard support, consulting services and employee training. Based on the documentation made available, we were unable to satisfy ourselves as to the nature of services performed and we were therefore unable to satisfy ourselves whether the Company fully identified the investments which do not qualify for recognition and measurement defined by the provisions of IAS 38 “Intangible Assets – Recognition and Measurement“ and which should be charged to net profit for the year. As disclosed in Note 14 to the consolidated financial statements, at December 31, 2007, property, plant and equipment were stated in the amount of RSD 101,655,744 thousand include investments in progress and advances in the amount of RSD 10.178.319 thousand, containing the inventories of investment material of RSD 1,634,733 thousand. Due to the nature of accounting records available, we were unable to satisfy ourselves as to the nature of inventories of investment material stated or to determine whether such inventories qualify for measurement and recognition as delineated under IAS 16 “Property, Plant and Equipment.” As disclosed in Note 17 to the consolidated financial statements, other long-term investments stated at December 31, 2007 in the amount of RSD 6,039,966 thousand include long-term loans to employees in the net amount RSD 2,523,159 thousand and apartments rented to employees with the option of subsequent repurchase, in the net book value of RSD 896,081 thousand, which were valued at the amounts of outstanding receivables and at market value, respectively. In our opinion, such accounting treatment is not accordance with the requirements of IAS 39, “Financial Instruments: Recognition and Measurement”, whereby long-term receivables are receivables are measured at their amortized cost using the effective interest rate method. Based on the Company’s accounting records, we were unable to quantify the effects of the aforementioned departure from IAS 39 on the accompanying consolidated financial statements. As disclosed in Note 18 to the consolidated financial statements, inventories stated at December 31, 2007 in the net amount of RSD 31,542,211 thousand include obsolete and slow-moving items. Since the Company does not possess reliable aging analysis of inventories, we were unable to quantify their potential impairment. In addition, inventories of materials, goods, finished products and work in progress include the significant amount of internal profit included in inventories. Due to the Company’s methodology for cost price calculation and a lack of accounting records supporting the required data, we were unable to determine the effects of potential adjustments to the accompanying consolidated financial statements. As disclosed in Note 25 to the consolidated financial statements, based on the internal estimates of the Company’s management, as of December 31, 2007 the provision for the restoration and re- cultivation of degraded natural environment amounted to RSD 831,365 thousand. Pursuant to the documentation made available to us, we were unable to satisfy ourselves whether the methodology used in the computation of the aforementioned provision is in accordance with the requirements of IAS 37 “Provisions, Contingent Liabilities and Contingent Assets.” In addition, due to the nature of technological processes, the Company potentially caused environmental pollution in the previous and could expect citizens’ claims and criminal charges by the relevant governmental authorities. The Company did not recognize a provision for costs of neutralizing the consequences of environmental contamination as required by IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”. As disclosed in Note 27 to the consolidated financial statements, other long-term liabilities as of December 31, 2007, amounted to RSD 888.272 thousand, where the amount of RSD 714,235

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thousand represent liabilities to other legal entities related to the Agreement on Joint Construction and Mutual Relationship with respect to co-financing the construction of tourist center, Crni Vrh (signed on August 17, 1995). The Company did not determine maturities for the aforementioned liabilities nor did it accrue the related interest, which departures from the requirements of IAS 32– “Financial Instruments: Disclosure and Presentation“ and IAS 39 – „Financial Instruments: Recognition and Measurement“. As disclosed in Notes 19 and 29 to the consolidated financial statements, as of December 31, 2007 accounts receivable and accounts payable amounted to RSD 17,433,309 thousand and RSD 31,797,074 thousand, respectively and included domestic accounts receivable (RSD 24,649,830 thousand) and interest receivables (RSD 4,121,106 thousand), as well as accounts payable (RSD 29,048,413 thousand). Based on documentation made available to us, the accrual testing and independent confirmations received from certain creditors and debtors, significant differences were identified as compared with the balances recorded in the Company’s books of account. Up to the date of these financial statements, the Company’s management has not reconciled these amounts and accordingly, we are unable to satisfy ourselves whether these receivables and liabilities are fairly stated as of December 31, 2007. As of December 31, 2007, deferred tax assets of RSD 489,416 thousand, deferred tax liabilities of RSD 64,211 thousand and income taxes for the year then ended amounted to RSD 587,679 thousand. Based on the documentation made available to us, we were unable to satisfy ourselves as to the computation of deferred taxes in accordance with IAS 12, “Income Taxes”, or to quantify the potential effects on the accompanying consolidated financial statements. In addition, the accompanying consolidated financial statements do not include all the disclosures required under IAS 12, “Income Taxes.” Certain information presented in the consolidated cash flow statement has not been reconciled with the amounts stated in the Company’s consolidated balance sheet as of December 31, 2007, or with those in the consolidated income statement and consolidated statement of changes in equity for the year then ended. Based on the information made available to us, and given the complexity of internal balances in the Company, we were unable to separate inflows and outflows derived from internal transactions and, therefore, we do not express an opinion on the Company’s consolidated cash flow statement for the year ended December 31, 2007. Qualified Opinion In our opinion, except for the effects of the possible adjustments associated with the uncertainties and limitations on the performance of the audit procedures referred to in the preceding paragraphs, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company and subsidiaries as of December 31, 2007, and its financial performance and changes in equity for the year then ended, in accordance with the accounting regulations of the Republic of Serbia. Emphasis of Matter Without further qualifying our opinion, we draw attention to the following matters: (a) The Company is neither in possession of all documentation necessary to prove ownership over all assets and property, nor has it fully separated assets and liabilities with the former NIS members. The management believes that the issues of ownership over assets, split-offs with the former NIS members, as well as the matter of regulating relations with the state agencies of the Republic of Serbia arising thereof, will be successfully resolved, i.e., that the Company will not experience significant difficulties in proving its ownership titles. (b) As disclosed in Note 33 to the consolidated financial statements, at December 31, 2007, the aggregate of potential monetary damages arising from court and administrative proceedings in which the Company has been named -a defendant party, amounted to RSD 8,728,218 thousand without the effects of potential penalties for which the Company formed provisions in the amount of RSD 125,896 thousand. Although it is not possible to predict the final outcome of other litigations with any certainty, the Company’s management does not anticipate unfavorable outcome of materially significant proceedings and, accordingly, no additional provisions were included by these consolidated financial statements. In addition, the worth of lawsuits the Company filed against third parties amounts to RSD 8,094,108 thousand, the litigations which either have not been disclosed in the accompanying consolidated financial statements or for which the corresponding allowance for impairment has not been provided for. (c) As disclosed in Note 2 to the accompanying consolidated financial statements, these consolidated financial statements were prepared by applying the IAS which were in effect as of

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December 31, 2002 and the accounting regulations of the Republic of Serbia based on them. The Company’s management assesses IAS, IFRS and interpretations the application of which was prescribed pursuant to the February 12, 2008 Decision enacted by the Minister of Finance of the Republic of Serbia and once the standards and interpretations with reference to the Company’s activities have been established, the Company intends to apply them in preparing the consolidated financial statements for the period beginning January 1, 2008. With regards to the provisions contained in the newly-adopted and amended standards and interpretations which relate to the application date and the provisions with reference to the disclosure of comparative figures, upon their adoption and application by the Company, certain reclassification of data presented in the accompanying consolidated financial statements for the year 2007 might be required, as these will be used as comparative figures in the Company’s financial statements for the year 2008. * All the quoted Audit Reports (original) can be downloaded on NIS a.d. Novi Sad web site www.nis.rs

2.3.3. Key performance and success indicators 2.3.3.1. State key performance indicators including indicators of liquidity, solvency, net working capital, profitability and other indicators, relevant to the issuer’s core activity DESCRIPTION 2007 2008 2009 Liquidity of 1st degree (cash and 3% 6.0% 16.3% cash equivalents) Liquidity of 2nd degree (current 44% 35% 48% assets-inventory/current liabilities) Net working capital ratio( current -1% -39% -10% assets- current liabilities/current assets) Indicator of financial stability (own 55% 48% 34% capital/operating liabilities) Indebtedness ratio (current liabilities 42% 49% 65% long-term liabilities/operating liabilities) Debt-to-equity ratio ( current 76% 101% 194% liabilities + long-term liabilities/ equity) Profitability (net profit/average 1% -3% -16% operating liabilities) Profitability (net profit/average 2% -7% -37% shareholders’ equity)

2.3.4. Salary costs 2.3.4.1. State costs of salaries for the previous three months separately, both gross and net (thousand RSD) Costs of salaries Gross Net January 1,159,179 700,979 February 1,402,175 922,351 March 1,373,966 835,132

2.3.5. Gain/loss per share 2.3.5.1. State previous three business years: (RSD) 2007 2008 2009 Net gain or loss per share according to the non- 351.75 (984.01) (230.81) consolidated financial statements

Net gain or loss per share according to the 139.49 (1004.60) (231.61) consolidated financial statements

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Number of shares 8,153,020 8,153,020 163,060,400

If the number of shares has changed in the past three years, provide the new data that reflect such changes and method applied for replaced share valuation.

2.3.6. Dividends paid 2.3.6.1. State the following: - date of dividends payment, for the previous three years; - the amount of dividends paid per share, separately for each class; - ex-dividend day – certain date before the dividend payment date on which the persons that are registered as the share holders are entitled to receive the dividend, regardless of the fact that on the dividend payment date the holder of the share can be other person 2007: The Shareholders Assembly of NIS a.d. Novi Sad has passed the Decision on Distribution of Profit determined for the period from 1st January until 31st December 2007, on a extraordinary meeting held on 18th of April 2008, according to which the undistributed profit in the amount of 8,096,454,341.95 has been distributed as follows:  Dividends to the founder at the amount of 50% (4,048,227,170.98)  Statutory reserves at the amount of 5% (404,822,717.10)  Remunerations of the employees on the basis of profit participation (809,645,434.20)  Remainder of the profit has remained undistributed (2,833,759,019.68)

By means of Decision on profit distribution for 2007, a liability was created toward the founder at the time in the amount of RSD 4,048,227 thousand. Out of this amount RSD 2,347,514 thousand was settled through compensation with JP Srbijagas and JP Ţeleznice Srbije, while in the amount of RSD 263,582 thousand the obligation of NIS a.d. Novi Sad has been cancelled, so that NIS a.d. Novi Sad liability toward the founder at the time as at 31 December 2008 amounts to RSD 2,126,363 thousand. Also, the Decision dated 29 January 2009 on covering losses from earlier years and distribution of retained earnings from previous years to the founder, liability toward the founder has been established for the remainder of profits after covering of losses in the amount of RSD 7,171,908 thousand. This Decision by the Shareholders’ Assembly was not carried out in NIS a.d. Novi Sad accounting records.Given that the NIS a.d. Novi Sad Share Purchase Agreement includes a statement and guarantee from the seller that after 25 January 2008 no dividends have been paid, in March 2009 the member of the Board of Directors of NIS a.d. Novi Sad initiated court proceedings to cancel the said decision on profit distribution. The validity of this decision has been the subject of negotiation of interested parties, and on the basis of the mutual agreement the lawsuit has been dropped. 2008: The company has conducted business with losses in the amount of RSD 8,022,615,000. 2009: The company has conducted business with losses in the amount of RSD 37,636,111,000.

2.3.7. Off-balance items 2.3.7.1. Provide description on key off-balance items Off balance sheet assets and liabilities 2009 2008

Issued warranties and bills of exchange 131,982,082 91,582,736 Received warranties and bills of exchange 5,684,192 1,233,001 Properties (in ex-republics) 5,421,435 5,421,435 Claims (from companies from ex-republics) 4,096,875 3,861,809

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Third party merchandise and other third party goods 3,436,067 3,910,925 Assets for oil fields liquidation in Angola 591,248 518,705 151,211,899 106,528,611

Bills of exchange and guarantees are provided to financial institutions and crude oil suppliers to secure payments. Out of total amount, RSD 10,391,622 relates to open credit lines still not drawn.

2.4. Other important facts 2.4.1. Other important facts that may be significant for investor’s decision on business operations, activities and financial position of the issuer In accordance with the Agreement for Sale and Purchase of shares of NIS a.d. Novi Sad as of 24 December 2008, Gazprom Neft is obliged to initiate takeover bid procedure within 24 months as of the transfer closing date, in accordance with the applicable law, for purchase of all shares of minority shareholders arising out of distribution of shares to citizens and employees and ex-employees. In the takeover bid procedure, the price per share payable for all shares of the minority shareholders shall be in accordance with the law, but in no case less than the price per share that would result from the acquisition of 51% of the shares i.e. EUR 4.80996. The Republic of Serbia shall be obliged to restrain from participation in this takeover bid procedure to the effect not to sell any of its shares in NIS a.d. Novi Sad.

In accordance with the Agreement for Sale and Purchase of shares of NIS a.d. Novi Sad, Gazprom Neft has the commitment to provide to NIS a.d. the amount of EUR 500,000,000 by way of special purpose loans for purpose of implementing the program for reconstruction and modernization of the technological complex of NIS a.d. Novi Sad on the following terms:  Obligation to provide EUR 500,000,000 as the principle amount of the loan shall be fully performed in the period between the day the transfer closing and 31 December 2012;  The interest accruing the principal of the loan provided to the NIS shall accrue quarterly and for each quarter shall equal to 12 month EUR LIBOR + 2% (no further charges or commissions shall);  The term of the loan shall be 14 years as of the first disbursement date;  The grace period shall be the later of 31 December 2012 or the competition of the actual performance by Gazprom Neft of its obligation;  There shall be no collateral.

Reasons for losses from business disclosure in the financial statement for 2009 are as follows: - Property depreciation; - Redundancies expenses; - Negative exchange rates; - Correction of value of irrecoverable claims; - Reserved funds for court disputes etc.

3. ISSUER’S DEVELOPMENT POLICY 3.1. Planned issuer’s development activities 3.1.1. Planned capital increase 3.1.1.1. Specify issuer’s capital increase plans and methods, as well as planned time line for such plan implementation /

3.1.2. Planned expansion of business activities 3.1.2.1. Introduction of new types of activities, higher scope of business operations within the existing activities Within its five year strategy until 2014 (proposal), NIS a.d. Novi Sad intends to achieve the growth in values, increase its efficiency and the financial stability, and reduce the amount of debt when compared to the operating revenues to the level of best practice of the European companies. By

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business segments, until 2014 NIS a.d. Novi Sad plans to increase exploitation level for 40% and the volume of the reserves of the oil and gas for 20%. With the completion of reconstruction of Pancevo refinery, the refining volume will be increased for 50%, and the major part of the oil derivatives will be in compliance with the European quality. Essential improvement of the sales organizational system is planned, by increasing not only the market share, but also the efficiency of each retail entity. One of the goals of the five year strategy is also to achieve the internal efficiency. For the purpose of implementation of this strategy, the following goals are formulated: - increase in the indicators of production, refining and sales network growth; - increase in the oil products market share in the Republic of Serbia; - increase of sale of the oil products through own retail network; - increase of the export volume; - target markets – the Republic of Serbia and Balkans; - lower production costs; - lower refining expenses. The total volume of the capital investments projected in the strategy until 2014 will amount to RSD 101 billion. Almost half of this sum will be spent on realization of the modernization project of the refining capacities, as well as on ecological projects.

The realization of the NIS a.d. Novi Sad strategy necessitates gradual increase of the export since the refining potentials of NIS a.d. Novi Sad on the Serbian market are higher than demand.

3.1.3. Planned investments 3.1.3.1. Planned capital investments, as well as expected effects with regard to property and other legal entities, planned amount of funds for such investments and manner of their financing In 2009, The Medium-term investment plan (MIP) for the period 2010-1012 is accepted by the Investment Committee on the meeting held on 11 November 2009. The following investments objectives are determined in the plan (per area):

ECOLOGY - Reduction in the solid particles emissions into the atmosphere - Construction of the spent sulphuric acid regeneration unit - Jetty reconstruction in the Pancevo Oil Refinery - Reconstruction of the road tanks loading/unloading facilities - Remedy of the historical pollution - Injection of CO2 gas from the Melenci reservoir deep into the Rusanda II reservoir gas cap

PRODUCTION - Geological exploration for finding new oil and gas deposits - Activating of oil-wells that are temporarily out of production - Drilling of new oil-wells

REFINING - Construction of the new hydrogen generation unit - Construction of MHC/DHT complex with supporting units

TRADE - Construction of the new gasoline stations on the strategic locations - Reconstruction of the existing gasoline station - Sales of LPG on the gasoline filling stations

on the basis of which the following projects are defined: - Finalization of the construction of the mild hydro-cracking/hydro-treating complex in the Pancevo Refinery (MHC/DHT+H2) - total value of EUR 440 million - Gasoline station construction and reconstruction and implementation of LPG capacities - the value of EUR 80 million - Investment in increase of gas and oil production (Angola, GLD, development drilling, GTM) - the

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value of EUR 125 million - Investment maintenance - the value of EUR 40 million - Investment in the ecology - EUR 65 million

Investments plan in the period as of 2010 until 2012 in RSD billion STRATEGIC INVESMENT PLAN Project 2010 2011 2012 MHC + H2 11.29 23.65 6.87 Ecology 3.21 2.09 0.97 Refining 1.13 2.59 1.12 Trade 2.76 4.49 1.18 Naftagas 2.78 4.90 5.05 Professional services 0.59 0.30 0.30 In total 21.76 38.02 15.49

Strategic Investment Plan 38.02

21.76

15.49

2010 2011 2012

Capital investment plan in the period as of 2010 until 2012

3.1.4. Business trends 3.1.4.1. Issuer’s expectations with regard to business expansion, service and /or goods price trend Within investments in exploitation of crude oil and gas deposits and growth in the volume of production and usage coefficient of the oil and gas deposits of NIS a.d. Novi Sad in Serbia, the drilling of five holes in the Kikindska Varos field is commenced. Total estimated value of this project exceeds five million Euros. During the next 15 years the projected production in the Kikindska Varos field is 260 K mt of crude oil and 34 M m3 of natural gas.

Construction of the MHC/DHT+H2 Complex (mild hydro-cracking unit) will provide NIS a.d. Novi Sad with the possibility to produce motor fuel in accordance with the Euro 5 Standards after its commencement of operations. Implementation of this project commenced in 2009, and completion is scheduled for 2012. The Complex will include five new process units. In addition to that, within the complex 19 industrial infrastructure facilities required for operation of the hydro-cracking and hydro- treating units will be reconstructed, built and modernized.

The purpose of the project is to make NIS a.d. Novi Sad competitive on the liberalized Serbian market of crude oil products, scheduled for the end of 2010, and insure maximum compliance with the domestic and EU environmental standards.

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New ways of energy supply will have favorable effects on prices of the oil products by creating prerequisites for their lowering thanks to the reduced consumption of electric energy, and on the environment in the operation of the refineries owing to the installation of the additional treatment devices which will contribute significantly to the decrease in the air pollution in Pancevo and its surrounding area. Besides, the project envisaged establishment of the industrial waste system, which will reduce air, ground and surface water, and soil pollution to minimal levels.

Business trends: – increasing production and low production costs - efficiency increase in oil production, refining and trade with oil products at the Balkans.

3.1.5. Position of the company in the sector 3.1.5.1. Issuer’s assessment of its position within its sector NIS a.d. Novi Sad is the largest oil company in the Southeastern Europe and the only company in Serbia that has integrated and balanced system of exploitation, refining and sales of oil and oil products and exploitation of natural gas, and that plays important role in maintenance of the energy stability and the stability of the country.

4. MANAGEMENT AND SUPERVISORY BOARD MEMEBERS DATA

4.1. Management and Supervisory Board members 4.1.1. Specify the following: - name of the General Manager: Kirill Kravchenko

- name and position of the member of the Board of Directors

Name of the Board of Director Members Position of the Board of Director Members Vadim Jakovljev Chairman Kirill Kravchenko Member Aleksandar Dibalj Member Vladislav Barisnjikov Member Аnatolij Cherner Member Igor Antonov Member Dusan Petrovic Member Nikola Martinovic Member Danica Draskovic Independent member Stanislav Seksnja Independent member

- name and position of the member of the Supervisory Board Name of the Supervisory Members Position of the Supervisory Board Members Milivoje Cvetanovic Chairman Bozo Stanisic Member Maksim Sahov Member

4.2. Fees and other benefits paid by the issuer 4.2.1. Fees paid to members of the management (provide data for the previous three years separately, net amounts, for the General Manager and members of the Board of Directors):

- total amount of salaries and other benefits to members of the management 2007 2008 2009 General Manager RSD 5,644,016.22 RSD 11,110,030.41 RSD 3,505,139.56 Board of Directors RSD 38,070,700.57 RSD 34,944,057.77 RSD 14,415,357.96

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- total amount of borrowings or loans granted to members of the management 2007 2008 2009 General Manager RSD 68,130.00 - Board of Directors RSD 4,752,099.50 RSD 339,621.00

- total amount of other granting made to members of management 2007 2008 2009 - - -

4.2.2. Fees paid to members of the Supervisory board (provide data for the previous three years separately, net amount): - Total amount of fees to Supervisory Board members: 2007 2008 2009 - - -

- Total amount of other granting made to Supervisory Board members 2007 2008 2009 - - -

4.2.3. Special rights and benefits exercised by the management and Supervisory Board members State other cash earnings, other benefits or other rights granted by issuer to the management and Supervisory Board members: /

4.2.4. Business transactions between the issuer and management and Supervisory Board members State significant business transactions between the issuer and management and Supervisory Board members or the issuer and persons affiliated to management and Supervisory Board members in the past year /

4.3. Management and employees’ ownership interest in the issuer’s share capital 4.3.1. State the following: - management and Supervisory Board members ownership interest in the share capital Name Position of member of Number of shares % interest BoD/SB Nikola Martinovic Board of Directors 224 0.0001 member

- other issuer’s employees ownership interest in issuer’s share capital In accordance with the Decision of the Government of the Republic of Serbia on transfer of shares without consideration to citizens – holders of the rights and employees and ex-employees of Naftna industrija Srbije a.d. Novi Sad, the right to transfer of shares without consideration had 21,737 employees and ex-employees in NIS a.d. Novi Sad, to which 7,076,821 of shares has been transferred, which represents 4.34% of the share capital.

- issuer’s policy regarding employees interest in issuer’s core capital They have the same rights as the other shareholders on the basis of the ownership over shares.

5. RESPONSIBLE PERSONS

5.1. Name of the person responsible for this prospectus content

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Roman Kvitko, Deputy CEO, Director of Function for Legal and Corporate Affairs Aleksej Urusov, Deputy CEO, Head of Function for Economics, Finance and Accounting

5.2. Person responsible for prospectus content signs the following statement: “I hereby declare that this Prospectus includes true, correct, complete and the entire important data on the issuer and securities relevant for investors’ decision making”.

In Novi Sad 13 August 2010 ______Kirill Kravchenko, the General Manager

Prospectus shall be signed and certified by the person representing the issuer. Prospectus may be additionally signed by persons participating in the prospectus preparation.

6. COMMISSION’S DECISION 6.1. Number and date of Commission’s Decision on approval of Prospectus for share issuing.

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