Management s Responsibility for the Consolidated Financial Statements

Transcription

1 ABCD KPMG d.o.o. Beograd Kraljice Natalije Belgrade Serbia Telephone: Fax: Internet: info@kpmg.rs Independent Auditor s Report T R A N S L A T I O N TO THE OWNERS OF JAVNO PREDUZEĆE ELEKTROPRIVREDA SRBIJE, BEOGRAD Report on the Financial Statements We have audited the accompanying consolidated financial statements of the company Javno preduzeće Elektroprivreda Srbije, Beograd and its subsidiaries, (hereinafter: the Group) which comprise the consolidated balance sheet as at 31 December 214 and the related consolidated statement of income, consolidated statement of other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, as well as notes which contain a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and true and fair view of these consolidated financial statements in accordance with accounting regulations effective in the Republic of Serbia, and for establishing internal controls that are considered relevant to the preparation of the consolidated financial statements that are free from material misstatements, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We have conducted our audit in accordance with the Law on Auditing effective in the Republic of Serbia and International Standards on Auditing. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the consolidated financial statements are free of 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 our 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, we consider internal control relevant to the entity s preparation and fair and objective presentation of the consolidated financial statements in order to design appropriate audit procedures, but not for the purpose of expressing an opinion on the effectiveness of applied internal controls. Also, an audit includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, with overall assessment of consolidated financial statements presentation. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion. 215 KPMG d.o.o. Beograd, a Serbian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. All rights reserved. Matični broj: PIB: Račun: KPMG d.o.o. Beograd je jednočlano društvo.

2 ABCD T R A N S L A T I O N Basis for Qualified Opinion As disclosed in Note 16 to the consolidated financial statements, property, plant and equipment amount to RSD 922,483,56 thousand, and intangible assets amounts to RSD 4,222,885 thousand, as at 31 December 214. The aforementioned assets also comprise the following: - Assets under construction in the amount of RSD 66,418,689 thousand which also include projects whose realization has been interrupted for a number of years and in which no significant construction progress has occurred over a period of 4 or more years in the amount of RSD 8,962,15 thousand (31 December 213: RSD 8,278,372 thousand for assets with interruption in construction of 4 or more years). Also, the aforementioned assets under construction include the amount of RSD 1,258,989 thousand which relates to the commercialenergy complex in Blok 2 New Belgrade. Related investments were initiated in 28, while the largest portion of the investment was carried out in 212. Over the last two years there were no significant movements in these assets under construction, and according to information received, only the first phase of the project has been concluded. The mentioned scheduling of project realization, as well as the uncertainty in terms of future construction schedules, also point to the potential existence of the basis for writing down these assets to their recoverable amounts. In this respect the Group did not consider whether there is potential justification for writing down the carrying amounts of the aforementioned assets under construction to their recoverable amounts, as required by IAS 36 Impairment of Assets. Based on the available information we were unable to quantify the effects of such detraction from IAS 36 on the accompanying consolidated financial statements. This issue was also the subject of qualification in the audit opinion on the consolidated financial statements for 213 in respect of projects whose realization is interrupted for a number of years and in which no significant construction progress has occurred in a period of 4 or more years. - Intangible assets under construction in the amount of RSD 1,753,849 thousand, investments under construction in the amount of RSD 4,183,548 thousand, land and buildings in the amount of RSD 4,48,97 thousand (a total of RSD 1,345,494), which relate to the construction project of the thermal power plants Kolubara B and Nikola Tesla B3. The aforementioned assets are intended for joint construction of the aforementioned production capacities with a potential strategic partner, as a contribution in kind to the future joint company (Note 37), which to this day still had not been realized. In view of the aforementioned facts and the existence of significant uncertainty in respect of future realization of the construction plans, we believe that there is basis for impairment of the aforementioned assets. Group management did not estimate the recoverable amount of these assets as at 31 December 214 and as a result did not determine whether there is any potential need for recognition of impairment in accordance with IAS 36 Impairment of Assets. We were not provided with appropriate information based on which we could determine the recoverable amounts of these assets and on that basis to quantify the potential impairment effects thereof on the financial statements for 214. This issue was also the subject of qualification in the previous auditor s opinion on the consolidated financial statements for 213. As disclosed in Note 14 to the consolidated financial statements, losses on disposal and sale of fixed assets in the amount of RSD 1,198,913 thousand and shortages of assets in the amount of RSD 336,468 thousand are reported under other expenses. These expenses include expenses arising from the damage to assets suffered by individual subsidiaries as the result of inclement weather conditions (floods) which occurred in the month of May in 214. Related losses were calculated by decreasing associated revaluation reserves formed in previous valuations. Based on the available documentation and information, as well as due to the method of recording sub-ledger records of fixed assets, we were unable to assure ourselves that the estimated amount of damages 2

3 ABCD T R A N S L A T I O N has been reported realistically, that the reported expenses are associated with the appropriate revaluation reserves and that impairment thereof has been adequately calculated, nor whether in this respect the Group should have disclosed potential receivables and income in respect of compensation of damages from insurance companies. As disclosed in Note 2 to the consolidated financial statements, as at 31 December 214 inventories of materials, spare parts, tools and fittings amount to RSD 23,31,751 thousand, before reduction for allowances for impairment in the amount of RSD 5,9,29 thousand. The aforementioned inventories include inventories with a carrying amount of RSD 1,13,551 thousand, whose balance had not been confirmed by the physical count as at 31 December 214, nor had a reconciliation of actual and accounting balances been performed as at the said date. The physical count of these inventories and reconciliation of actual and accounting balances will be carried out in an extraordinary physical count at a future period, when conditions for this are met. Given the above mentioned, we were unable to assure ourselves of the reported balance of inventories as at 31 December 214, nor to determine any potential allowances for impairment of these inventories, nor their effects on the accompanying consolidated financial statements for 214. In the process of preparing the consolidated statement of cash flows, cash receipts and payments from internal transactions were not fully reconciled, while the amount of unreconciled internal cash flows remained unconsolidated and was included in the accompanying consolidated cash flow statement. Such practice is not in line with the requirements of IFRS 1 Consolidated Financial Statements, which requires full elimination of internal cash flows occurred within the group. Qualified Opinion In our opinion, except for the effects of the issues raised in the Basis for Qualified Opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 214, and the consolidated results of its operations and consolidated cash flows for the year then ended, in accordance with the accounting regulations effective in the Republic of Serbia. Emphasis of Matter Without further qualifying our opinion, we draw attention to the following: /i/ As disclosed in Note 1 to the consolidated financial statements, the Group has significant equity investments (49%) in two companies (Ibarske hidroelektrane d.o.o., Kraljevo and Moravske hidroelektrane d.o.o., Beograd), and joint control in the company Energija Novi Sad a.d., Novi Sad. These companies are not consolidated and are not included in the accompanying consolidated financial statements, nor are the three subsidiaries on the territory of Kosovo and Metohija in which the Group does not have control since 1999, since when Kosovo and Metohija are under the control of the international community (Note 3.1). /ii/ As disclosed in Note 17 to the consolidated financial statements, advances given for intangible assets, property, plant and equipment amount to RSD 1,737,42 thousand, after reduction for allowances for impairment which as at 31 December 214 amount to RSD 147,156 thousand. The mentioned advances also include advances for future expropriation of the settled territory of Vreoci in the amount of RSD 1,227,333 thousand as at the said date, the majority of which had been paid out in 21. The process of expropriation is not unfolding according to planned schedule and is currently in delay by around 3 years. Besides this, the initial decision on expropriation of the settlement of Vreoci which is indirectly affected by 3

4 ABCD T R A N S L A T I O N planned mining works is currently in the process of review by the competent Ministry, where there is a possibility that it could be reversed and cancelled, in full or in part. The funds paid for the expropriation of this part of the settlement of Vreoci comprise the majority of funds paid for the expropriation of the entire settlement. Furthermore, for the majority of the advances paid, around 9% of their value, secured by mortgages over property which is the subject of expropriation, including collaterals provided for the amounts paid, have expired as at 31 December 214. In view of all of the above stated, there is significant uncertainty in terms of the amount for which these advances will be justified in a future period, where at the present time it is not possible to estimate reliably whether they are reasonably stated. Potential adjustments to advances given would be the subject of financial reporting in future periods, when the expropriation process is initiated based on which it could be determined whether there are grounds for potential adjustments to advances given thus far which are disclosed in the accompanying consolidated financial statements. Report on Other Statutory and Regulatory Requirements We reviewed the Group s consolidated annual business report. Group management is responsible for preparing and presenting the consolidated annual business report, in accordance with the Law on Accounting (Official Gazette of RS number 62/213). Our responsibility is to express an opinion on the extent to which the consolidated annual business report is reconciled with the consolidated financial statements for the financial year 214. In this respect our test procedures are limited to the assessment of the extent to which the accounting information contained in the consolidated annual business report is reconciled with the consolidated annual financial statements which are the subject of the audit. In accordance with this, our procedures did not include a review of other information contained in the consolidated annual business report which originate from information and records which were not the subject of audit. In our opinion, the accounting information presented in the consolidated annual business report is, in all materially significant aspects, reconciled with the Group s consolidated financial statements for the year ended 31 December 214. Belgrade, 3 June 215 KPMG d.o.o. Beograd (L.S.) Ivana Manigodić Certified Auditor This is a translation of the original Independent Auditors Report issued in the Serbian language. All due care has been taken to produce a translation that is as faithful as possible to the original. However, if any questions arise related to interpretation of the information contained in the translation, the Serbian version of the document shall prevail. Belgrade, 3 June 215 KPMG d.o.o. Beograd (L.S.) Ivana Manigodić Certified Auditor 4

5 To be filled in by the legal entity - entrepreneur Registration number Activity code TIN - Tax identification number Company Head office Account group, account INCOME STATEMENT for the period from to I T E M REVENUES FROM REGULAR OPERATIONS AOP Note no. 4 Current year 5 - in thousands of Dinars - Amount Previous year 6 6 to 65, except 62 and A OPERATING REVENUES ( ) 11 I INCOME FROM THE SALE OF MERCHANDISE ( ) Sales of merchandise to parent companies and subsidiaries - domestic market Sales of merchandise to parent companies and subsidiaries - foreign market Sales of merchandise to other associated companies - domestic Sales of merchandise to other associated companies - foreign Sales of merchandise to domestic customers Sales of merchandise to foreign customers II INCOME FROM SALES OF PRODUCTS AND SERVICE RENDERED ( ) Sales of merchandise to parent companies and subsidiaries - domestic market Sales of merchandise to parent companies and subsidiaries - foreign market Sales of finished goods and services rendered to to other associated entities - domestic Sales of finished goods and services rendered to to other associated entities - foreign Sales of merchandise to domestic customers III Sales of merchandise to foreign customers 115 INCOME FROM PREMIUMS, SUBVENTIONS, DONATIONS, ETC IV OTHER OPERATING INCOME COSTS FROM REGULAR OPERATIONS 5 to 55, 62 and 63 B OPERATING EXPENSES ( ) I II III IV COST OF GOODS SOLD - COGS 119 INCOME FROM THE OWN USE OF PRODUCTS, SERVICES AND MERCHANDISE INCREASE OF FINISHED GOODS, WORK IN PROGRESS AND SERVICES IN PROGRESS DECREASE OF FINISHED GOODS, WORK IN PROGRESS AND SERVICES IN PROGRESS except 513 V COST OF MATERIAL VI VII COST OF FUEL AND ENERGY 124 COSTS OF SALARIES, FRINGE BENEFITS AND OTHER PERSONAL EXPENSES VIII COSTS OF PRODUCTION SERVICES

6 Account group, account I T E M Note no. Current year - in thousands of Dinars - Amount Previous year AOP 54 IX DEPRECIATION COSTS to 549 X LONG-TERM PROVISIONS COSTS XI NON-PRODUCTION COSTS C D OPERATING PROFIT (11-118) 13 OPERATING LOSS (118-11) E FINANCIAL INCOME ( ) , except 662, 663 and I Financial income incurred with other associated companies Income from share in associated entities and joint ventures Other financial income II INCOME FROM INTEREST (FROM THIRD PARTIES) and 664 III 56 F FINANCIAL EXPENSES ( ) 14 56, except 562, 563 and I 1 FINANCIAL INCOME INCURRED WITH ASSOCIATED COMPANIES AND OTHER FINANCIAL INCOME ( ) Financial income incurred with parent companies and subsidiaries FX GAINS AND INCOME FOR THE EFFECTS OF CURRENCY CLAUSE FINANCIAL EXPENSES INCURRED WITH ASSOCIATED COMPANIES AND OTHER FINANCIAL EXPENSES ( ) Financial expenses incurred with parent companies and subsidiaries Financial expenses incurred with other associated companies Losses for share in loss of associated companies and joint ventures and Other financial expenses II COSTS OF INTERESTS (TO THIRD PARTIES) and 564 III FX LOSSES AND LOSSES FOR CURRENCY CLAUSE EFFECTS G FINANCIAL PROFIT (132-14) and and and 68, except 683 and and 58, except 583 and minus minus 69 H I J K L M N O P Q FINANCIAL LOSS (14-132) 149 INCOME FROM OTHER ASSETS VALUATION ADJUSTMENTS VALUED AT FAIR VALUE EXPENSES FROM OTHER ASSETS VALUATION ADJUSTMENTS VALUED AT FAIR VALUE OTHER EXPENSES 153 PROFIT FROM OPERATIONS BEFORE TAXATION ( ) LOSS FROM OPERATIONS BEFORE TAXATION ( ) NET OPERATING PROFIT FROM DISCONTINUED OPERATIONS NET OPERATING LOSS FROM DISCONTINUED OPERATIONS PROFIT BEFORE TAXATION ( ) OTHER INCOME

7 Account group, account I T E M Note no. Current year - in thousands of Dinars - Amount Previous year AOP R S LOSS BEFORE TAXATION ( ) 159 CORPORATE INCOME TAX p.o. 722 p.o I II III T TAX EXPENSES FOR THE PERIOD DEFERRED TAX COSTS FOR THE PERIOD DEFERRED TAX INCOME FOR THE PERIOD EMPLOYER`S EARNINGS PAID OUT U NET PROFIT ( ) V I II NET LOSS ( ) 165 NET PROFIT ATRIBUTABLE TO MINORITY INVESTORS NET PROFIT ATRIBUTABLE TO MAJORITY INVESTORS III IV V NET LOSS ATRIBUTABLE TO MINORITY INVESTORS 168 NET LOSS ATRIBUTABLE TO MAJORITY INVESTORS 169 EARNINGS PER SHARE 1 Basic earnings per share 17 2 Diluted earnings per share 171 In Legal representative Date Stamp Financial statements forms prescribed by the Rulebook on the Content and Form of Financial Statements Forms for Companies, Cooperatives and Entrepreneurs (Official Gazette of RS. no. 95/214 and 144/214).

8 To be filled in by the legal entity - entrepreneur Registration number Activity code TIN - Tax identification number Company Head office Account group, account STATEMENT OF OTHER COMPREHENSIVE INCOME for the period from to I T E M AOP Note no. - in thousands of Dinars - Amount Current year Previous year A NET RESULT FROM OPERATIONS I II NET PROFIT (AOP 164) 22 NET LOSS (AOP 165) B OTHER COMPREHENSIVE PROFIT OR LOSS a Items that will not be reclassified subsequently to profit or loss 1 Revaluation of intangibles and PPE 33 a) increase in revaluation reserves 23 b) decrease in revaluation reserves Actuarial gains (losses) on defined benefit plans 331 a) gains 25 b) losses 26 3 Gains or losses on investments in equity instruments 332 a) gains 27 b) losses 28 4 Share of other comprehensive income of associates 333 b 1 a) gains 29 b) losses 21 Items that may be reclassified subsequently to profit or loss Foreign currency translation differences for foreign opeartions 334 a) gains b) losses Gains and losses on hedge of investment in foreign operations 335 a) gains 213 b) losses Cash flow hedges 336 a) gains 215 b) losses Gains and losses on available for sale financial assets 337 a) gains 217 b) losses

9 Account group, account I T E M - in thousands of Dinars I II III IV V C I II D OTHER COMPREHENSIVE GROSS PROFIT ( ) - ( ) OTHER COMPREHENSIVE GROSS LOSS ( ) - ( ) TAXES ON OTHER COMPREHENSIVE PROFIT OR LOSS FOR THE PERIOD OTHER COMPREHENSIVE NET PROFIT ( ) OTHER COMPREHENSIVE NET LOSS ( ) TOTAL COMPREHENSIVE NET RESULT FOR THE PERIOD TOTAL COMPREHENSIVE NET PROFIT ( ) TOTAL COMPREHENSIVE NET LOSS ( ) TOTAL COMPREHENSIVE NET PROFIT OR LOSS ( ) = AOP 224 ili AOP 225 > AOP Note no. Amount Current year Previous year Attributable to owners 227 Attributable to non-controlling interest In Legal representative Date Stamp Financial statements forms prescribed by the Rulebook on the Content and Form of Financial Statements Forms for Companies, Cooperatives and Entrepreneurs (Official Gazette of RS. no. 95/214 and 144/214).

10 To be filled in by the legal entity - entrepreneur Registration number Company Head office Activity code TIN - Tax identification number Account group, account ASSETS I T E M BALANCE SHEET as at Note no. Current year Amount Previous year Closing balance as at Opening balance as at AOP - in thousands of Dinars - A UNPAID SUBSCRIBED CAPITAL 1 B FIXED ASSETS ( ) INTANGIBLE ASSETS 1 I 3 ( ) , p.o Investment in development 4 11, 12, p.o Concessions, patents, licenses, similar rights, software and other rights , p.o Goodwill 6 14, p.o Other intangible assets , p.o Intangible assets in development , p.o Advance payments for acquisition of intangible assets 9 2 II PROPERTY, PLANT AND EQUIPMENT ( ) , 21, p.o , p.o , p.o , p.o Land Buildings Plant and equipment Investment property , p.o Other property, plant and equipment , p.o , p.o , p.o , 31, p.o , p.o , p.o , p.o III Property, plant and equipment under construction Investment in PPE owned by third parties Advance payments for property, plant and equipment BIOLOGICAL ASSETS ( ) Forests and plantations Livestock Biological assets under construction Advance payments for biological assets except 47 IV LONG TERM FINANCIAL INVESTMENTS ( ) , p.o Investments in subsidiaries 25 41, p.o Investments in associates and joint ventures , p.o Investments in other legal enitities and other securities available for sale

11 Account group, account I T E M Note no. Current year Amount Previous year Closing balance as at in thousands of Dinars - Opening balance as at p.o. 43, p.o. 44, p.o. 49 p.o. 43, p.o. 44, p.o AOP Long-term loans to parent companies and to subsidiaries Long-term loans to other associated companies 29 p.o. 45, p.o Long-term loans to domestic enetities p.o. 45, p.o Long-term loans to foreign enetities 31 46, p.o Securities held to maturity 32 48, p.o Other long term investment V LONG TERM RECEIVABLES ( ) , p.o Long term receivables- parent companies and subsidiaries 35 51, p.o Long term receivables- other associated entities 36 52, p.o Long term trade receivables 37 53, p.o , p.o , p.o , p.o C Trade receivables for financial lease sales Long term receivables for guarantees Doubful long term receivables Other long term receivables DEFFERED TAX ASSETS D CURRENT ASSETS ( ) I INVENTORIES ( ) Material Work in progress Finished products Merchandise (goods, purchase for sale) Non-current assets held for trading Advance payaments , p.o. 29 II 1 TRADE RECEIVABLES ( ) Trade receivables - domestic parent companies and subsidiaries , p.o , p.o , p.o , p.o , p.o Trade receivables - foreign parent companies and subsidiaries Trade receivables - domestic other associated entities Trade receivables - foreign other related parties Trade receivables - domestic third party Trade receivables - foreign third party , p.o Other trade receivables III RECEIVABLES FROM SPECIFIC BUSINESS OPERATIONS IV OTHER RECEIVABLES

12 Account group, account I T E M Note no. Current year Amount Previous year Closing balance as at in thousands of Dinars - Opening balance as at except 236 and , p.o. 239 V VI 1 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS SHORT-TERM FINANCIAL INVESTMENTS ( ) Short-term loans and investments in parent companies and subsidiaries 231, p.o Short-term loans and investments in other related parties , p.o Short term loans - domestic , p.o Short term loans - foreign 66 AOP , 235, 238, p.o Other short term investments VII CASH AND CASH EQUIVALENTS VIII RECEIVABLES FOR VAT except 288 IX PREPAYMENTS AND ACCURED INCOME E TOTAL ASSETS = OPERATING ASSETS ( ) F OFF BALANCE ASSETS EQUITY AND LIABILITIES 3 A I EQUITY ( ) = ( ) BASIC CAPITAL ( ) Share capital Stakes in limited liability companies Participating interests State owned capital Socially owned capital Stakes in co-operatives Share premiums Other capital II UNPAID SUBSCRIBED CAPITAL and 237 III OWN SHARES PURCHASED IV RESERVES except except 33 V VI VII REVALUATION RESERVES FOR REVALUATION OF INTANGIBLES AND PPE NON REALIZED PROFIT FROM SECURITIES (debit saldo of account group 33 except 33) NON REALIZED LOSSES FROM SECURITIES (credit saldo of account group 33 except 33) VIII RETAINED EARNINGS ( ) Retained earnings from previous years Retained earnings from current year IX NON-CONTROLLING INTEREST 42

13 Account group, account I T E M Note no. Current year Amount Previous year Closing balance as at in thousands of Dinars - Opening balance as at AOP X ACCUMULATED LOSS ( ) Previous year's losses Current year loss B I LONG- TERM PROVISIONS AND LIABILITIES ( ) LONG- TERM PROVISIONS ( ) Provisions for costs incurred during the warranty period Provisions for the recovery of natural resources Provisions for restructuring costs Provisions for employees benefits Provisions for litigations and 49 6 Other long-term provisions II LONG- TERM LIABILITIES ( ) Liabilities that can be converted into capital Liabilities to parent companies and subsidiaries Liabilities to other associated companies Liabilities for long-term securities Long-term loans - domestic Long-term loans - foreign Liabilities for financial lease Other long-term liabilities C DEFFERED TAX LIABILITIES to 49 (except 498) 42 D I SHORT-TERM LIABILITIES ( ) SHORT-TERM FINANCIAL LIABILITIES ( ) Short-term loans from parent companies and subsidiaries Short-term loans from other associated companies Short- term loans - domestic Short-term loans - foreign , 425, 426 and except II III Libilities for fixed assets and assets of discounting operations held for sale Other short-term financial liabilities RECEIVED ADVANCES PAYMENTS, DEPOSITS AND BAILS LIABILITIES FROM BUSINESS OPERATIONS ( ) Trade payables - parent companies and subsidiaries - domestic Trade payables - parent companies and subsidiaries - foreign 453

14 Account group, account I T E M Note no. Current year Amount Previous year Closing balance as at in thousands of Dinars - Opening balance as at Trade payables - other associated companies - domestic Trade payables - other associated companies - foreign 455 AOP Trade payables - domestic Trade payables - foreign Other liabilities from business operations , 45 and 46 IV OTHER SHORT-TERM LIABILITIES V LIABILITIES FOR VALUE ADDED TAX VI LIABILITIES FOR OTHER TAXES, CONTRIBUTIONS AND OTHER DUTIES except 498 VII ACCRUALS AND DEFFERED INCOME E F LOSS OVER CAPITAL ( ) = ( ) TOTAL EQUITY AND LIABILITIES ( ) G OFF BALANCE LIABILITIES In Legal representative Date Stamp Financial statements forms prescribed by the Rulebook on the Content and Form of Financial Statements Forms for Companies, Cooperatives and Entrepreneurs (Official Gazette of RS. no. 95/214 and 144/214).

15 To be filled in by the legal entity - entrepreneur Registration number Company Head office Activity code TIN - Tax identification number 8 9 Balance at end of the year for the period from to Components of Equity Unpaid DESCRIPTION Accumulated Retained subscribed Reserves Treasury shares AOP Core equity (3) AOP AOP AOP loss AOP AOP earings equity (32) (47 and 237) (35) (34) (31) Balance as at 1.1. of the previous year 1 a) debit balance account b) credit balance account Correction of material errors and changes in accounting policies 2 a) corrections on the debit side of the account b) corrections to the credit side of the account Adjusted opening balance as at 1.1. of the previous year 3 a) corrected debit balance account (1a + 2a - 2b) b) corrected credit balance accounts (1b - 2a + 2b) Changes in the previous year 4 a) turnover on the debit side of the account b) turnover on the credit side of the account Balance at the end of the previous year a) debit account balance (3a + 4a - 4b) b) credit balance accounts (3b - 4a + 4b) Correction of material errors and changes in accounting policies 6 a) corrections on the debit side of the account b) corrections to the credit side of the account Corrected opening balance of the current year a) corrected debit balance accounts (5a + 6a - 6b) b) corrected credit balance accounts (5b - 6a + 6b) Changes in the current year No. STATEMENT OF CHANGES IN EQUITY a) turnover on the debit side of the account b) turnover on the credit side of the account a) debit balance account (7a + 8a - 8b) b) credit balance accounts (7b - 8a + 8b) In thousands of Dinars - 418

16 Components of Other Comprehensive Income - In thousands of Dinars - No. DESCRIPTION Gains or losses on foreign operations and Gains or losses Gains or losses Gains or losses Revaluation Actuarial gains on investment in on share in OCI on cash flow AOP reserves AOP or losses AOP equity AOP of associated AOP translation of AOP AOP hedges (33) (331) instruments entities (336) (332) (333) financial statements (334 and 335) Gains or losses on AFS securities (337) Balance as at 1.1. of the previous year 1 a) debit balance account b) credit balance account Correction of material errors and changes in accounting policies a) debit account balance (3a + 4a - 4b) b) credit balance accounts (3b - 4a + 4b) a) corrections on the debit side of the account b) corrections to the credit side of the account Adjusted opening balance as at 1.1. of the previous year a) corrected debit balance account (1a + 2a - 2b) b) corrected credit balance accounts (1b - 2a + 2b) Changes in the previous year a) turnover on the debit side of the account b) turnover on the credit side of the account Balance at the end of the previous year Correction of material errors and changes in accounting policies a) corrections on the debit side of the account b) corrections to the credit side of the account Corrected opening balance of the current year 1.1. Changes in the current year a) turnover on the debit side of the account b) turnover on the credit side of the account Balance at end of the year a) corrected debit balance accounts (5a + 6a - 6b) b) corrected credit balance accounts (5b - 6a + 6b) a) debit balance account (7a + 8a - 8b) b) credit balance accounts (7b - 8a + 8b)

17 - In thousands of Dinars - No. DESCRIPTION AOP Total equity [Σ(row 1б col 3 to col 15)] AOP Loss above the value of equity [Σ(row 1а col 3 to col 15) - Σ(row 1б col 3 to col 15) ] Balance as at 1.1. of the previous year 1 a) debit balance account b) credit balance account Correction of material errors and changes in accounting policies a) corrections on the debit side of the account b) corrections to the credit side of the account Adjusted opening balance as at 1.1. of the previous year 3 a) corrected debit balance account (1a + 2a - 2b) b) corrected credit balance accounts (1b - 2a + 2b) Changes in the previous year a) turnover on the debit side of the account b) turnover on the credit side of the account Balance at the end of the previous year a) debit account balance (3a + 4a - 4b) b) credit balance accounts (3b - 4a + 4b) Correction of material errors and changes in accounting policies a) corrections on the debit side of the account b) corrections to the credit side of the account Corrected opening balance of the current year 1.1. a) corrected debit balance accounts (5a + 6a - 6b) b) corrected credit balance accounts (5b - 6a + 6b) Changes in the current year a) turnover on the debit side of the account b) turnover on the credit side of the account Balance at end of the year a) debit balance account (7a + 8a - 8b) b) credit balance accounts (7b - 8a + 8b) In Legal representative Date Stamp Financial statements forms prescribed by the Rulebook on the Content and Form of Financial Statements Forms for Companies, Cooperatives and Entrepreneurs (Official Gazette of RS. no. 95/214 and 144/214).

18 To be filled in by the legal entity - entrepreneur Registration number Company Head office Activity code TIN - Tax identification number CASH FLOW STATEMENT for the period from to in thousands of Dinars - I T E M 1 AOP 2 Current year 3 Amount Previous year 4 A CASH FLOW FROM OPERATING ACTIVITIES I Cash inflow from operating activities (1 to 3) II Sales and advance payments received 32 Received interests from operating activities 33 Other inflows from operating activities 34 Cash outflows from operating activities (1 to 5) 35 Payments to suppliers and advance prepayments 36 Wages, salaries and other personal costs 37 Paid interests 38 Corporate income tax 39 Other payments to tax authorities III Net cash inflow from operating activities (I-II) 311 IV Net cash outflow from operating activities (II-I) B I CASH FLOW FROM INVESTING ACTIVITIES Cash inflow from investing activities (1 till 5) Sale of shares and stakes (net inflows) 314 Sale of intangible assets, property, plant, equipment and biological assets 315 Other financial investments (net inflows) 316 Interests received from investing activities Dividends received II Cash outflows from investing activities (1 till 3) 319 Purchase of shares and stakes (net outflows) 32 Purchase of intangible investments, property, plant, equipment and biological assets 321 Other financial investments (net outflows) III Net cash inflow from investing activities (I-II) 323 IV Net cash outflow from investing activities (II-I) C I CASH INFLOW FROM FINANCING ACTIVITIES Cash inflows from financing activities (1 till 5) Increase of basic capital 326

19 - in thousands of Dinars - I T E M 1 AOP 2 Current year 3 Amount Previous year 4 2 Long-term loans (net inflows) Short-term loans (net inflows) Other long-term liabilities II Other short-term liabilities 33 Cash outflows from financing activities (1 till 6) Purchase of own shares and stakes Long-term loans (net outflows) 333 Short-term loans (net outflows) Other liabilities (net outflows) Financial lease 336 Paid dividends III Net cash inflows from financing activities (I-II) 338 IV Net cash outflows from financing activities (II-I) D TOTAL CASH INFLOWS ( ) E TOTAL CASH OUTFLOWS ( ) F NET CASH INFLOWS (34-341) G NET CASH OUTFLOWS (341-34) H CASH AT THE BEGINNING OF THE CALCULATION PERIOD I POSITIVE EXCHANGE RATE DIFFERENCES DUE TO CALCULATION OF CASH J NEGATIVE EXCHANGE RATE DIFFERENCES DUE TO CALCULATION OF CASH K CASH AT THE END OF REPORTING PERIOD ( ) In Legal representative Stamp Date Financial statements forms prescribed by the Rulebook on the Content and Form of Financial Statements Forms for Companies, Cooperatives and Entrepreneurs (Official Gazette of RS. no. 95/214 and 144/214).

20 PUBLIC ENTERPRISE ELECTRIC POWER INDUSTRY OF SERBIA Notes to the Consolidated Financial Statements For the Year Ended 215

21 PUBLIC ENTERPRISE ELECTRIC POWER INDUSTRY OF SERBIA CONTENTS Page Financial Statements: Consolidated Income Statement 2 Consolidated Balance Sheet 3 Consolidated Statement of Changes in Equity 5 Consolidated Statement of Other Comprehensive Income 6 Consolidated Cash Flow Statement 7 Notes to the Consolidated Financial Statements 8-69

22 31 December 214 CONSOLIDATED INCOME STATEMENT For the period from January 1 to (In thousands of RSD) In thousands of RSD (adjusted) For the year ended For the year ended December 31, 213 OPERATING INCOME Sales 23,9,37 21,172,373 Other operating income 9,413,363 5,553,2 212,53,4 215,725,393 OPERATING EXPENSES Cost of goods sold (7,175) (48,9) Own work capitalized 4,36,752 4,614,94 Change in value of inventories increase / (decrease) 114,756 (917,856) Costs of materials (49,859,22) (48,13,748) Gross salaries and wages (55,655,336) (53,87,995) Depreciation (38,774,716) (37,354,85) Provisions (3,841,234) (5,48,915) Other operating expenses (45,175,11) (42,473,538) (188,953,986) (183,113,943) OPERATING INCOME/(LOSS) 23,549,414 32,611,45 Financial income 15,726,997 16,754,412 Financial expense (14,424,237) (7,438,737) Other income 5,967,777 7,865,243 Other expense (4,652,189) (26,867,766) PROFIT/(LOSS) BEFORE TAX (9,832,238) 22,924,62 Income tax (2,914,267) (4,835,8) Deferred tax income/(expense) of the period 2,269,355 1,191,841 NET PROFIT/LOSS (1,477,15) 19,281,435 The accompanying notes on the following pages form an integral part of these consolidated financial statements. 2

23 31 December 214 CONSOLIDATED BALANCE SHEET As at (In thousands of RSD) As at 31 Dec 214 As at 1 Jan 214 after adjustments As at 1 Jan 213 after adjustments ASSETS Non-current assets Intangible assets 4,222,887 3,185,541 2,5,398 Land 35,91,6 34,551,39 32,966,17 Buildings 327,854, ,982, ,68,674 Plant and equipment 491,296, ,633,765 59,393,472 Other property, plant and equipment 618,758 64,984 59,362 Property, plant and equipment under construction 66,418,688 41,688,64 6,328,48 Advances for property, plant and equipment 1,737,42 11,626,329 12,234,737 Biological assets 392,991 34,438 26,449 Equity investments 1,478,55 1,239,99 1,243,912 Other long-term financial investments 1,847,133 1,822,934 1,264,351 Long-term receivables 784,45 4,85, , ,552, ,443,66 954,841,328 Current assets Inventories 23,698,831 22,467,976 2,384,245 Advances for inventories 3,334,932 2,981,281 3,786,412 Receivables 46,273,83 82,79,956 75,3,512 Short-term financial investments 1,637,121 6,835,844 1,899,191 Cash and cash equivalents 31,181,332 35,524,97 13,47,424 Value added tax and prepayments and deferred expenses 3,95,867 85,954 1,345,792 19,221,913 15,695,18 115,826,576 Total assets 1,5,774,626 1,95,138,714 1,7,667,94 Off-balance sheet assets 181,726, ,817, ,828,96 EQUITY AND LIABILITIES Equity Basic capital 36,11,21 36,1, ,167,867 Revaluation reserves 548,78,82 554,439, ,874,247 Unrealized gains on securities and other components of other comprehensive income 36,463 2,235 12,539 Unrealized losses on securities and other components of other comprehensive income (584,143) (73,355) (686,477) Retained earnings Accumulated loss (125,165,426) (114,896,7) (127,25,666) 783,6, ,843, ,162,51 3

24 31 December 214 Long-term provisions 15,12,57 14,381,681 12,718,556 Long-term liabilities Long-term loans 77,376,94 66,11,13 58,143,363 Other long-term liabilities 53,228 2,379,21 3,615,23 Deferred tax liabilities 88,113,673 9,383,43 91,527,77 166,2, ,863, ,285,643 Short-term liabilities Short-term financial liabilities 29,18,43 25,155,55 32,11,169 Operating liabilities 26,298,24 17,87,928 25,73,966 Other short-term liabilities 6,248,18 47,445,645 37,583,312 Liabilities for value added tax, other public duties and accruals 25,8,926 33,361,762 26,175,748 86,645, ,5,39 121,51,195 Total equity and liabilities 1,5,774,626 1,95,138,714 1,7,667,94 Off-balance sheet liabilities 181,726, ,817, ,828,96 The accompanying notes on the following pages form an integral part of these consolidated financial statements. 4

25 31 December 214 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the period from January 1 to (In thousands of RSD) Basic capital Revaluation reserves Translation reserves Gains/losses on securities Retained profit/(loss) RSD Total Balance as at Jan 1, 213 before adjustments 359,988,38 556,848,676 - (673,938) (135,34,925) 78,821,851 Opening balance adjustment (Jan. 1, 213) - (11,462) ,221 23,759 Balance as at Jan. 213, adjusted 359,988,38 556,837,214 - (673,938) (135,35,74) 78,845,61 Current year net profit ,281,436 19,281,436 Sale and disposal of PPE - (2,367,831) - - 1,159,151 (1,28,68) Effects of change in value of AVS securities (36,434) - (36,434) Valuation of PPE and intangibles 22, ,42 Other 48 (29,935) (3,89) (6,525) Balance as at December 31, ,1, ,439,448 - (71,12) (114,896,7) 798,843,449 Basic capital Revaluation reserves Translation reserves Gains/losses on securities Retained profit/(loss) RSD Total Balance as at Jan 1, 214 before adjustments 36,1, ,61,114 - (71,12) (112,613,174) 799,747,948 Opening balance adjustment: - as at Jan 1, (11,462) ,221 23,759 - as at Jan 1, 214-1,389, (2,318,54) (928,258) Balance as at Jan 1, 214, adjusted 36,1, ,439,448 - (71,12) (114,896,7) 798,843,449 Net profit of current year (1,477,15) (1,477,15) Effects of change in value of AVS securities , ,323 Profit distribution Gov of RS (1,316,55) (1,316,55) Sale and disposal of PPE - (5,727,226) - - 1,277,67 (4,45,159) Cancelation of VAT included in advance invoices (CMEC) , ,437 Transfer to inventories - (4,14) (4,14) FX gains/losses on translation of financial statements - - 1, ,117 Effects of purchase of apartments Other ,547 Balance as at December 31, ,11,21 548,78,82 1,117 (548,797) (125,165,426) 783,6,177 The accompanying notes on the following pages form an integral part of these consolidated financial statements. 5

26 31 December 214 CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME for the period January 1 to (In thousands of RSD) Previous Current year year A. NET OPERATING RESULT I. NET PROFIT - 19,281,435 II. NET LOSS 1,477,15 - B. OTHER COMPREHENSIVE PROFIT OR LOSS a) Items which will not be reclassified in the Income Statement of future periods Decrease in revaluation reserves based on revaluation of intangible assets, property, plant and equipment 5,731, ,799 b) Items which may be reclassified subsequently in the Income Statement of future periods 1. Gains on translation of financial statements of a foreign operation 1, Gains or losses on AVS securities a) gains 35,346 2,235 b) losses 584,143 73,355 NET OTHER COMPREHENSIVE LOSS 6,279,46 1,144,919 TOTAL NET COMPREHENSIVE RESULT OF THE PERIOD TOTAL NET COMPREHENSIVE PROFIT - 18,136,516 TOTAL NET COMPREHENSIVE LOSS 16,756,196 - TOTAL NET COMPREHENSIVE PROFIT OR LOSS - 18,136,516 Attributable to majority equity holders - 18,136,516 The accompanying notes on the following pages form an integral part of these consolidated financial statements. 6