PETROLINVEST D.D. SARAJEVO Financial statements for the year ended 31 December 2019 together with the Independent auditors’ report This version of the of the financial statements is a translation from the original, which was prepared in Bosnian language. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of the financial statements takes precedence over translation. Contents Page Responsibility for the financial statements 1 Independent Auditors’ Report 2 - 6 Income statement 7 Balance sheet 8 Statement of changes in equity 9 Statement of cash flows 10 Notes to the financial statements 11 - 39 Independent Auditors’ Report To the shareholders of Petrolinvest d.d. Sarajevo Opinion We have audited the financial statements of Petrolinvest d.d. Sarajevo (“the Company”), which comprise the balance sheet as at 31 December 2019, the income statement and statements of changes in equity and cash flows for the year then ended, and notes, comprising significant accounting policies and other explanatory information. In our opinion, the accompanying 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 its cash flows for the year then ended in accordance with the Financial Reporting Framework in the Federation of Bosnia and Herzegovina (“the Framework”). Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in the Federation of Bosnia and Herzegovina, and we have fulfilled our other ethical responsibilities in accordance with these requirements and 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 matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This version of the of the auditors’ report is a translation from the original, which was prepared in Bosnian language. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of the financial statements takes precedence over translation. 2 Independent Auditors’ Report To the shareholders of Petrolinvest d.d. Sarajevo (continued) Key Audit Matters (continued) Revenue recognition For the year ended 31 December 2019, the Company recognized revenue in the amount of BAM 7,920 thousand (2018: BAM 7,100 thousand). Revenue from long-term projects made up 97% of total revenue in 2019 (2018: 92%). Refer to Note 3 to the financial statements and the accounting policies on page 21. Key audit matter How our audit addressed the matter The Company generates its revenue via three Our audit procedures in this area included, among streams: long-term construction and engineering others: projects, preparation of project and technical • Assessing the Company’s revenue recognition documentation and revenue from loaned staff. policy, including considering whether the policy is Recognition of revenue is inherently complex due in accordance with the five-step approach required to the multitude of contracts with customers in by the revenue standard. place. Significant judgement and complex • Assessing the design and implementation of key estimates are required of the Management Board, internal controls within the revenue recognition including in respect of identifying performance process, including those over contract obligations and selecting the appropriate pattern authorisation, monitoring of progress toward of revenue recognition for the performance satisfaction of contract obligation, as well as obligations identified (assessing whether measuring and recognizing revenues; performance obligations are satisfied at a point in time or over time). • For a sample of contracts with key customers, inspecting the terms of the contracts to assess Significant risk is also associated with estimating whether the underlying consideration was the progress toward satisfaction of performance recognized within revenue in compliance with the obligations for those services that are provided applicable revenue recognition requirements. This over time. Specifically, given the nature of the included, among other things: long-term construction contracts with customers, revenue is recognized on the basis of the o challenging the Company’s identification of "progress toward satisfaction" of the performance performance obligations, particularly with obligations, which is usually calculated using the respect to the evaluation of whether or not the cost-based "input" method that measures the contract includes a single performance share of the contracted costs associated with the obligation; work completed until the reporting date in o assessing the nature of each contract and relation to the estimated total contractual costs timing of control transfer (primarily ˝at a point necessary for the performance of the contract in time˝ versus ˝over time˝); obligation. • Specifically, for a sample of contracts with revenue Therefore, the accounting for long-term accounted for over time: construction contracts requires the Management Board to make reliable estimates with respect to o challenging the appropriateness of the method future costs to completion of a contracts and the used to measure “progress toward satisfaction” fulfilment of contractual obligations. This (cost-based “input” method versus “output” estimate directly impacts the amount or revenue method based on surveys of work performed) recognized and the timing thereof. by considering contract terms and the nature of goods and services promised to customers; This version of the of the auditors’ report is a translation from the original, which was prepared in Bosnian language. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of the financial statements takes precedence over translation. 3 Independent Auditors’ Report To the shareholders of Petrolinvest d.d. Sarajevo (continued) Key Audit Matters (continued) Key audit matter How our audit addressed the matter This area also required our increased attention in o Independently estimating the "progress to the audit because revenue represents the satisfaction", by reference to the contract costs Company’s key performance indicator and as incurred as a percentage of total forecast costs, such is associated with increased inherent risk of with actual and forecast costs critically manipulation of the timing of the recognition of evaluated by us through inspection of the revenue to meet specific targets or expectations. underlying contracts and other supporting documentation, such as invoices, reports on the progress toward satisfaction of performance obligation and / or reports on work performed; • For a sample of trade accounts receivable outstanding at the reporting date, obtaining related debtor confirmations and investigating any differences from the Company’s records; • Evaluating the quality of the Company’s forecasting by reference to the project forecasts for the prior years compared to the actual outcomes; • Inspecting subsequent payments and invoices in 2020 in order to assess the Management Board’s cost estimates made as at 31 December 2019; • Considering the adequacy and accuracy of the revenue recognition-related disclosures in the financial statements. This version of the of the auditors’ report is a translation from the original, which was prepared in Bosnian language. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of the financial statements takes precedence over translation. 4 Independent Auditors’ Report To the shareholders of Petrolinvest d.d. Sarajevo (continued) Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation of the financial statements that give a true and fair view in accordance with the Framework, and for such internal control as management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management 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