Public Disclosure Authorized HRVATSKE CESTE d.o.o. Vončinina 3, Zagreb Annual Financial Statements Public Disclosure Authorized and Independent Auditors’ Report for the year ended 31 December 2019 Public Disclosure Authorized Public Disclosure Authorized Contents PAGE Responsibility for the Annual Financial Statements 1 Independent Auditors’ Report 2 – 7 Income Statement and Statement of Other Comprehensive Income 8 Statement of Financial Position/Balance Sheet 9 – 10 Statement of Changes in Equity 11 Cash Flow Statement 12 Notes to the Financial Statements 13 – 57 Public Good Financial Statements 58 - 60 2 Tel: +385 1 2395 BDO Croatia 741 d.o.o. Fax: +385 1 2303 10000 691 Zagreb E-mail: bdo- Trg J. F. [email protected] Kennedy 6b INDEPENDENT AUDITORS’ REPORT To the Owner of Hrvatske ceste d.o.o., Zagreb Report on the audit of the annual financial statements Opinion We have audited the annual financial statements of Hrvatske ceste d.o.o., Zagreb, Vončinina 3 for the year ended 31 December 2019, which comprise the Statement of Financial Position as at 31 December 2019, Income Statement, Statement of Other Comprehensive Income, Statement of Changes in Equity and Cash Flow Statement for the year then ended, and Notes to the Financial Statements, including a summary of significant accounting policies. In our opinion, the accompanying annual financial statements give a true and fair view of the financial position of the Company as at 31 December 2019, and of its financial performance and cash flows for the year that ended, in accordance with the International Financial Reporting Standards as adopted by the European Commission and published in the Official Journal of the European Union and with the Roads Act. Basis for Opinion We conducted our audit in accordance with the International Standards on Auditing (ISAs) Our responsibilities under those standards are further described in our Independent Auditors’ Report in the section Auditors’ responsibilities for the audit of the annual financial statements. We are independent of the Company in accordance with the Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of matter /i/ We draw attention to Notes 2.9 b) and c) and 13 to the financial statements which explain that the financial statements are prepared in accordance with the International Financial Reporting Standards with some exceptions determined by the Roads Act. Our opinion has not been modified in this respect. /ii/ We draw attention to Notes 15 and 2.7. c) which explain that the Company has not completely resolved property and legal affairs, i.e. ownership over property. Procedures of resolving and registering ownership over property are in progress. Our opinion has not been modified in this respect. /iii/ We draw attention to Note 39 to the financial statements where it is determined that a significant number of legal disputes are initiated against the Company. Our opinion has not been modified in this respect. /iv/ The Company prepared the annual consolidated financial statements, and in order to better understand the overall business operations of the Company, users should read the consolidated financial statements of the Company combined with these annual separate financial statements. Our opinion has not been modified in this respect. 2 BDO Croatia d.o.o. Registrirano kod Trgovačkog suda u Zagrebu pod brojem 080044149 OIB 76394522236 BDO Croatia d.o.o. Key Audit Matters Key audit matters are those matters that were, in our professional judgment, of the most importance in our audit of the annual financial statements of the current period and include the recognized most significant risks of substantial misstatement due to error or fraud with the highest impact on our audit strategy, on our resources and the time spent by the engaged audit team. We have dealt with these issues within our audit of the annual financial statements as a whole and in forming our opinion about them, and we do not provide a separate opinion on these matters. We have determined the matters described below as the key audit matters to be communicated in our Independent Auditors’ Report. Key Audit Matters How we addressed Key Audit Matters Investment maintenance and reconstruction of property, plant and equipment In the 2019 annual financial statements, the Company In the audit, we focused on: realized increase and decrease in property, plant and • verifying whether the transactions in equipment as set out in Note 15. 2019 were recorded in accordance with the accounting policies of the Company, and Investment maintenance and reconstruction of • verifying whether for all road property, plant and equipment is defined as a key reconstructions an estimate of the share of audit matter because it involves significant estimates. reconstruction in the investment project has been made and whether this estimate is reasonable. Related disclosures in the corresponding annual financial statements Please see Notes 2.7 (c) (Accounting Policies) and Additionally, we have considered whether 15. the accounting policies are in accordance with International Financial Reporting Standards and whether changes in accounting policies are disclosed in the Notes to the Financial Statements. Other issues The audit of the annual financial statements of the Company for the year ended at 31 December 2018 was performed by audit firm BDO Croatia d.o.o., Zagreb it expressed its unmodified opinion on those financial statements in the Independent Auditors’ Report of 11 June 2019. 3 BDO Croatia d.o.o. Other Information in the Annual Report The Management Board is responsible for other information. Other information include information included in the Annual Report, but do not include the annual financial statements and our Independent Auditors’ Report on them. Our opinion on the annual financial statements does not include other information, except to the extent explicitly stated in the part of our Independent Auditors’ Report and we do not express any kind of conclusion with assurance on them. In connection with our audit of the annual financial statements, it is our responsibility is to read the other information and consider whether other information have significant contradictions to annual financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of other information, we are required to report this fact. In this sense , we do not have anything to report. The Management Board of the Company is responsible for the preparation of the Management Report as part of the Company’s Annual Report. In that regard we have conducted procedures required by the Croatian Accounting Act. These procedures include considering of: • whether the Management Report was prepared in accordance with Article 21 of the Accounting Act; Based on the procedures required to be performed as part of our audit of the annual unconsolidated financial statements and the above procedures, in our opinion: • Information contained in the Management Report for the financial year for which the financial statements were made, are complied, in all significant parts, with the annual financial statements of the Company presented from page 8 to 61 to which we have expressed our opinion as stated in the section Opinion above. • The Management Report has been prepared, in all significant aspects, in accordance with Articles 21 and 22 of the Accounting act; Furthermore, taking into account the knowledge and understanding of the Company's business operations and the business environment in which it operates, and which we acquired during our audit, it is our responsibility to report any material misstatements in the Management Report. In this sense we do not have anything to report. Responsibilities of the Management Board and those in charge of management for the annual financial statements The Management Board is responsible for the preparation of annual financial statements that give a true and fair view in accordance with IFRS; as defined by the European Commission and published in the Official Journal of the European Union, and for such internal control that the Management Board deems necessary to enable the preparation of the annual financial statements that are free from material misstatement, whether due to fraud or error. In preparing the annual financial statements, the Management Board is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Management Board either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those in charge of management are responsible for overseeing the Company’s financial reporting process. 4 BDO Croatia d.o.o. Auditors’ responsibilities for the audit of the annual financial statements Our objectives are to obtain reasonable assurance as to whether the annual financial statements as a whole are free from material misstatement due to fraud or error and to issue the Independent Auditors' Report that includes our opinion. Reasonable assurance is a higher level of assurance, but is not a guarantee that the audit performed in accordance with