Public Disclosure Authorized AUTOCESTA RIJEKA-ZAGREB d.d. Public Disclosure Authorized Širolina 4, Zagreb Annual Financial Statements and Independent Auditor's Report for 2018 Public Disclosure Authorized Public Disclosure Authorized C O N T E N T Page Responsibility for the financial statements 1 Independent Auditor's Report 2 – 7 Statement of comprehensive income 8 Statement of Financial Position/Balance sheet 9 Statement of changes in equity 10 Statement of cash flows 11 Notes to the financial statements 12 – 69 RESPONSIBILITY FOR THE FINANCIAL STATEMENTS The Management Board of Autocesta Rijeka-Zagreb d.d., Zagreb, Širolina 4 (the „Company“) is responsible for ensuring that the annual financial statements for the year 2017, are prepared in accordance with the Accounting Act (Official Gazette No. 78/15,134/15,120/16,116/18) and International Financial Reporting Standards established by the European Commission and published in the Official Journal of the European Union, to give a true and fair view of the financial position, the results of operations, changes in equity and cash flows of the Company for that period. After making enquiries, the Management Board has a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Board has adopted the going concern basis in preparing the financial statements of the Company. In preparing these financial statements, the Management Board is responsible for: • selection and consistent application of suitable accounting policies in accordance with the applicable financial reporting framework; • giving reasonable and prudent judgments and estimates; • using the going concern basis of accounting, unless it is inappropriate to presume so. The Management Board is responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the financial position, the results of operations, changes in equity and cash flows of the Company and their compliance with the Accounting Act and the International Financial Reporting Standards. The Management Board is also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Autocesta Rijeka-Zagreb d.d., Zagreb Širolina 4 10000 Zagreb The Republic of Croatia 28 May 2019 1 Audit d.o.o. za revizijske usluge Radnička cesta 54 10000 Zagreb HRVATSKA Tel:+385 (0) 1 3667 994 Fax:+385 (0) 1 3667 997 E-mail:[email protected] INDEPENDENT AUDITOR'S REPORT To the shareholders of Autocesta Rijeka-Zagreb d.d., Zagreb Report on the Audit of the Annual Financial Statements Opinion We have audited the annual financial statements of AUTOCESTA RIJEKA-ZAGREB d.d., Zagreb, Širolina 4 (the ''Company") for the year ended 31 December 2018 which comprise the Statement of financial position (Balance Sheet) as at 31 December 2018 the Income Statement, the Statement of Other Comprehensive Income, the Statement of Changes in Equity, the Cash Flows Statement for the year then ended and the accompanying Notes to the Financial Statements, including a summary of significant accounting policies and other explanations. 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 2017 and of its financial performance and cash flows of the Company for the year then ended in accordance with the Accounting Act and the International Financial Reporting Standards ("IFRS") which were established by the European Commission and published in the official list of the European Union. Basis for Opinion We conducted our audit in accordance with the Accounting Act, Auditing Act and International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in our Independent Auditor’s report under section Auditor's 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. Key Audit Matters Key audit matters are those issues that were, by our professional judgment, of the utmost importance in our audit of the annual financial statements of the current period and include the most significant risks of misstatement due to error or fraud with the greatest impact on our audit strategy, the disposition of our available resources and the time spent by the engaging audit team. These issues were dealt with in the context of our audit of the annual financial statements as a whole and in the formation of our rational regarding them, and we do not give a separate opinion on these issues. 2 An independent member firm of Moore Stephens International Limited - members in principal cities throughout the world We have determined that the issues below are the key audit matters to be reported in our Independent Auditor's Report. Key Audit Issues How we addressed the Key Audit Issues Court disputes and potential obligations Our audit procedures related to this area, among other things, included: At 31 December 2018, the Company had provisions for legal disputes and contingent - Receiving and analysing the attorney's liabilities. During the company's regular business responses to our written inquiries addressed to activities, potential exposure to court disputes them and evaluating underlying issues with may arise. Any liabilities disclosed or disclosed them; contingent liabilities, or non-disclosures in the - Critical review of the assumptions used and financial statements, are inherently uncertain estimates pertaining to the claims. This includes and depend on a number of significant assessing the likelihood of unfavourable assumptions and judgments. The determination outcome of court proceedings and the reliability of the amount for disclosure in the financial of the assessment of the related amount of statements, if applicable, is subject to a obligation; particular assessment regarding these - assessing the adequacy of disclosure in the potentially significant obligations. Because of all financial statements, taking into account this, we regard this area as a key auditor's issue. sensitivity and possible prejudice in the disclosure of detailed information. Related disclosures in the annual financial statements See Notes 3.17 (Accounting The results of our audit procedures were Policies) and Note IV. satisfactory and we agree that the assumptions used in the estimation model are appropriate. Valuation of intangible assets under the In the audit, we focused on the risk of concession contract overestimating the book value of the concession. We reviewed the key assumptions At 31 December 2018, the Company has used in the impairment test, including the reported intangible assets under the Concession discount rate and the long-term growth rate. We Contract. included our valuation experts to review the The carrying amount of the concession on 31 model used by the Company and key December 2018 amounts to HRK 4.032.636 assumptions, and we have analysed the thousand. Reduction in the value of investment sensitivity. in concession is defined as a key audit issue because it involves significant judgement in the Additionally, we have considered whether the estimate. In accordance with IAS 36, the Company's disclosure of judgments in Company has made a test of impairment of the assessing the cash flows and the sensitivity of carrying amount of the concession. the results of those judgments adequately reflect the risks associated with the reduction of Related disclosures in the annual financial the value of the concession. statements: See Notes 3.9 (Accounting Policies) and Note The results of our auditing procedures were 18. satisfactory. We reviewed the key assumptions used in the impairment test, including the discount rate, as reasonable. Other Matters The Company's annual financial statements for the year ended 31 December 2017 were audited by the auditing company BDO Croatia d.o.o., Zagreb, which in its Independent Auditor's Report of 20 June 2018 issued an unmodified opinion on these annual financial statements. 3 An independent member firm of Moore Stephens International Limited - members in principal cities throughout the world Other Information in the Annual Report The Management of the Company is responsible for other information. Other information include information included in the Annual report, but do not include the annual financial statements and our Independent auditor's report on them. Our opinion on the annual financial statements does not include other information, except to the extent explicitly stated in the part of our Independent auditor's report, entitled Report on compliance with other legal or regulatory requirements, and we do not express any kind of conclusion with assurance on them. In connection with our audit of the annual financial statements, it is our responsibility to read the other information and consider whether other information have significant contradictions to annual financial statements or our knowledge gained while performing the audit, or otherwise appear to be materially misstated. If, based on the work we have performed, we conclude that there is material misstatement of other information, we are required to report