Annual Report of Energoprojekt Holding Plc. for the year 2017 Belgrade, April 2018 Pursuant to Articles 50 and 51 of the Law on Capital Market (RS Official Gazette, No. 31/2011, 112/2015 and 108/2016) and pursuant to Article 3 of the Rulebook on Contents, Form and Method of Publication of Annual, Half-Yearly and Quarterly Reports of Public Companies (RS Official Gazette, No. 14/2012, 5/2015 and 24/2017), Energoprojekt Holding Plc. based in Belgrade, registration No.: 07023014 hereby publishes the following: ANNUAL REPORT FOR 2017 C O N T E N T S 1. FINANCIAL STATEMENTS OF ENERGOPROJEKT HOLDING Plc. FOR 2017 (Balance Sheet, Income Statement, Report on Other Income, Cash Flow Statement, Statement of Changes in Equity, Notes to the Financial Statements) 2. INDEPENDENT AUDITOR’S REPORT (complete report) 3. ANNUAL BUSINESS REPORT (Note: Annual Business Report and Consolidated Annual Business Report are presented as a single report and these contain information of significance for the economic entity) 4. STATEMENT BY PERSONS RESPONSIBLE FOR REPORT PREPARATION 5. DECISION OF COMPETENT COMPANY BODY ON THE ADOPTION OF ANNUAL FINANCIAL STATEMENTS* (Note) 6. DECISION ON DISTRIBUTION OF PROFIT OR COVERAGE OF LOSSES* (Note) 1. FINANCIAL STATEMENTS OF ENERGOPROJEKT HOLDING Plc. FOR THE YEAR 2017 (Balance Sheet, Income Statement, Report on Other Income, Cash Flow Statement, Statement of Changes in Equity, Notes to the Financial Statements) Energoprojekt Holding Plc. NOTES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR 2017 Belgrade, 2018 Notes to the Financial Statements for 2017 Page 1/98 Energoprojekt Holding Plc. C O N T E N T S 1. COMPANY BACKGROUND ......................................................................................................... 5 2. MANAGEMENT STRUCTURE ..................................................................................................... 7 3. OWNERSHIP STRUCTURE .......................................................................................................... 8 4. BASIS FOR PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS ......... 8 5. ACCOUNTING PRINCIPLES ...................................................................................................... 12 6. PRIOR PERIOD ERRORS, MATERIAL ERRORS AND CORRECTION OF OPENING BALANCE ..................................................................................................................................... 14 7. OVERVIEW OF PRINCIPAL ACCOUNTING POLICIES ......................................................... 14 7.1 Valuation ............................................................................................................................... 15 7.2 Effects of Foreign Exchange Rates ....................................................................................... 15 7.3 Revenues ............................................................................................................................... 16 7.4 Expenses................................................................................................................................ 17 7.5 Interest and Other Borrowing Costs...................................................................................... 18 7.6 Income Tax ........................................................................................................................... 18 7.7 Intangible Assets ................................................................................................................... 20 7.8 Property, Plant and Equipment ............................................................................................. 21 7.9 Lease ..................................................................................................................................... 22 7.10 Amortization of Intangible Assets, Property, Plant and Equipment ..................................... 23 7.11 Impairment of Intangible Assets, Property, Plant and Equipment ........................................ 24 7.12 Investment Property .............................................................................................................. 25 7.13 Inventories ............................................................................................................................. 26 7.14 Non-Current Assets Held for Sale ........................................................................................ 27 7.15 Financial Instruments ............................................................................................................ 27 7.16 Cash and Cash Equivalents ................................................................................................... 30 7.17 Short-Term Receivables ........................................................................................................ 30 7.18 Financial Investments ........................................................................................................... 31 7.19 Liabilities .............................................................................................................................. 32 7.20 Provisions, Contingent Liabilities and Contingent Assets .................................................... 33 7.21 Employee Benefits ................................................................................................................ 34 7.22 Information on Business Segments ....................................................................................... 35 8. FINANCIAL RISKS ...................................................................................................................... 35 8.1 Credit Risk ............................................................................................................................ 37 8.2 Market Risk ........................................................................................................................... 40 8.3 Liquidity Risk ....................................................................................................................... 45 8.4 Capital Risk Management ..................................................................................................... 46 9. OPERATING INCOME ................................................................................................................. 48 9.1 Income from Sale of Products and Services ......................................................................... 48 9.2 Other Operating Income........................................................................................................ 49 Notes to the Financial Statements for 2017 Page 2/98 Energoprojekt Holding Plc. 10. MATERIAL COSTS AND FUEL AND ENERGY COSTS ......................................................... 50 11. EMPLOYEE EXPENSES AND BENEFITS ................................................................................. 50 12. PRODUCTION SERVICES COSTS ............................................................................................. 51 13. DEPRECIATION EXPENSES AND PROVISION EXPENSES ................................................. 52 14. INTANGIBLE EXPENSES ........................................................................................................... 52 15. FINANCIAL INCOME AND FINANCIAL EXPENSE ............................................................... 53 15.1 Financial Income ................................................................................................................... 53 15.2 Financial Expense ................................................................................................................. 55 16. OTHER INCOME AND OTHER EXPENSE ............................................................................... 56 16.1 Other Income......................................................................................................................... 56 16.2 Other Expense ....................................................................................................................... 56 17. NET INCOME / LOSS FROM DISCONTINUED OPERATIONS, EFFECTS OF CHANGE IN ACCOUNTING POLICY AND ADJUSTMENT OF ERRORS FROM PREVIOUS YEAR ...... 57 18. PROFIT / LOSS BEFORE TAX .................................................................................................... 58 19. NET PROFIT ................................................................................................................................. 58 20. EARNINGS PER SHARE ............................................................................................................. 59 21. INTANGIBLE ASSETS ................................................................................................................ 60 22. PROPERTY, PLANT AND EQUIPMENT ................................................................................... 61 22.1 Property, Plant and Equipment Exclusive of Investment Property ....................................... 61 22.2 Investment Property .............................................................................................................. 63 23. LONG-TERM FINANCIAL INVESTMENTS ............................................................................. 64 26.1 Share Investments ................................................................................................................. 65 26.2 Long-Term Financial Investments ........................................................................................ 68 24. INVENTORIES .............................................................................................................................