Annual non-consolidated financial statements and the Independent Auditor's Report for the year 2021 -9HZPP www.hzpp.hr Content Responsibility for the annual non-consolidated financial statements 1 Independent auditor's report 2-9 1. Non-consolidated statement of comprehensive income 10 II. Non-consolidated statement of financial position/balance sheet 11 Ill. Non-consolidated statement of cash flows - indirect method 12 IV Non-consolidated statement of changes in equity 13 V. Notes to the annual non-consolidated financial statements 14-56 RESPONSIBILITY FOR THE ANNUAL NON- CONSLIDATED FINANCIAL STATEMENTS The Management Board of the company HZ PUTNICKI PRIJEVOZ d.o.o., Zagreb, Strojarska cesta 11, (hereinafter: "the Company") is responsible for ensuring that the annual non-consolidated financial statements for the year 2021 are prepared in accordance with the Accounting Act (Official Gazette No 78/15, 134/15, 120/16 116/18, 42/20 and 47/20)) and International Financial Reporting Standards (IFRS) as adopted by the European union to give a true and fair view of the non-consolidated financial position, the non-consolidated results of operations, the non-consolidated cash flows and the non- consolidated changes in equity of the Company for that period. After making enquiries, the Board has a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Management Board has adopted the going concern basis in preparing the annual non-consolidated financial statements of the Company. In preparing the annual non-consolidated financial statements, the Management Board is responsible for: * suitable accounting policies are selected and then applied consistently in accordance with applicable financial reporting standards * judgments and estimates are reasonable and prudent; * the annual non-consolidated financial statements are prepared on the going concern basis unless such assumption is not appropriate. The Management Board is responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the non-consolidated financial position, the non-consolidated results of operations of the Company, non-consolidated cash flows and non-consolidated changes in equity and their compliance with the Accounting Act and the IFRS as adopted by the European union. 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. Signed on behalf of e Management Board: Zeijko UDamir Rub6id Mario Zubak Preside t qf th Member of the Member of the Managemeni Board Management Board Management Board H2 PUTNICKI PRIJEVOZ d.o.o. Strojarska cesta 11 10 000 Zagreb Republic of Croatia Zagreb, 6 June 2022 1 MOORE Moore Audit Zagreb Audit d,o.o, za revizijske isluge Trg lohna Fitzgerada Kennecyla 6B 10000 Zagreb HRVATSKA Tel:-385 (0) 1 3667 994 E-mail:audit-revizija@aud,t hr www audit.hr Independent auditor's report To the Owner of the company H± PUTNICKI PRIJEVOZ d.o.o., Zagreb Report on the Audit of the Annual Non-consolidated Financial Statements Qualified opinion We have audited the annual non-consolidated financial statements of the company H2 PUTNI6KI PRIJEVOZ d.o.o., Zagreb, Strojarska cesta 11, (the "Company") for the year ended 31 December 2021, which comprise the non-consolidated Statement of financial position (Non-consolidated Balance Sheet) as at 31 December 2021, non-consolidated Statement of comprehensive income, non-consolidated Statement of changes in the equity and non-consolidated Statement of cash flows for the year then ended and accompanying notes to the annual non-consolidated financial statements, including a summary of significant accounting policies and other explanations. In our opinion, except for the possible effects of the matters described in the Basis for Qualified opinion, in the paragraphs /il, fil and /iii, the accompanying annual non -consolidated financial statements, give a true and fair view of the non-consolidated financial position of the Company as at 31 December 2021, and of its non-consolidated financial performance and its non -consolidated cash flows of the Company for the year then ended in accordance with the Accounting Act and the International Financial Reporting Standards ("IFRS") as adopted by the European Commission and published in the Official Journal of the European Union. Basis for Qualified opinion /il In the non-consolidated Statement of financial position (Non-consolidated Balance sheet) as at 31 December 2021, the Company stated total value of the real estate in the amount of HRK 57,115 thousand of which in the position of buildings in the amount of HRK 25,322 thousand, and in the position of investment property in the amount of HRK 31,793 thousand for which ownership is not regulated by registration in the land registers. Furthermore, the value of the land that as an integral part of these real estates is not stated separately from the buildings in the financial statements. Given that the settling of property rights is ongoing, we are unable to determine the effects of any corrections, if any, to the Company's annual non-consolidated financial statements for the year 2021. 2 S MOORE Moore Audit ZLgreb liil In the Note 28 Provisions, the Company has stated liabilities for provisions for initiated court proceedings in the amount of HRK 52,965 thousand, of which HRK 22,956 thousand relates to provisions for the estimated losses arisng from disputes with the company Feroimpex d.o.o. In April 2021, a second instance verdict was passed in a dispute with the company Feroimpex d.o.o, in accordance with which the companies HZ Infrastruktura d.o.o., HZ Cargo d.o.o. and HZ Putnidki prijevoz d.o.o. should pay to Feroimpex d.o.o. the amount of HRK 1,684 thousand increased by interest, and Feroimpex d.o.o. should pay to the companies H: Infrastruktura d.o.o., H2 Cargo d.o.o. and H2 Putnieki prijevoz d.o.o. amount of HRK 15,805 thousand increased by interest. Following this second-instance judgment, Feroimpex d.o.o. filed a motion on 14 June 2021 to allow a review which was rejected by the Supreme Court on 26 October 2021. Furthermore, on 15 July 2021, the Constitutional Court of the Republic of Croatia issued a decision postponing the execution of the second-instance judgment of the High Commercial Court of 21 April 2021 until the end of the proceedings before the Constitutional Court. According to the received opinion of the Company's legal representatives, there is no risk of additional payments for the Company in this litigation and accordingly it was not necessary to make provision in the annual non-consolidated financial statements for 2021. However, since this is a long-standing lawsuit that has already been returned for retrial by the Decision of the Constitutional Court of the Republic of Croatia from 21 September 2018, we are not able to reliably determine whether provisions for this dispute on 31 December 2021. are necessary, ie realistically stated, and consequently we could not determine the effects, if any, of possible adjustments in the annual non-consolidated financial statements of the Company for 2021. /iii/ In the Note 38 Transactions with related parties the Company has stated receivables from the related companies in the amount of HRK 5,611 thousand (31 December 2020 in the amount of HRK 7,850 thousand), and liabilities to the related companies in the amount of HRK 51,657 thousand (31 December 2020 in the amount of HRK 74,097 thousand). These receivables and liabilities are not fully in line with the amounts recorded in the financial statements of these related companies. The unreconciled part of receivables that the Company did not accept from the related companies amounts to HRK 10,608 thousand (31 December 2020 in the amount of HRK 6,073 thousand). Therefore, based on the available documentation, we are not able to determine the effects, if any, of possible adjustments in the annual financial statements of the Company for the year 2021 related to the adjustment of these liabilities. We conducted our audit in accordance with Accounting Act, Auditing Act and International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the annual financial statements section of our Independent Auditor's report. 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 qualified opinion. Emphasis of matter li/ We draw your attention to Note 28 Provisions and Note 40 /iii/ Litigation and contingent liabilities where information on income tax audits for 2015 and 2016 is published, within which severance pay and travel reimbursement payments are controlled - mileage. The company filed an appeal against the first-instance decision, and in the meantime, the Ministry of Finance annulled the obligations for tax benefits from 2015 due to the statute of limitations with the second-instance decision, and the dispute 3 MOORE Moore Audi re for 2016 liabilities is still in dispute. The position of the Tax Administration regarding the payment of reimbursement of travel expenses - mileage is that is a taxable benefit. Since, the Company treated as non-taxable benefits, an assessment of possible additional tax benefits based on reimbursement of travel expenses (mileage) for the period from 2017 to 2021 it amounts to approximately HRK 54,659 thousand. Our qualified opinion has not been modified on this issue. /111/ We draw attention to Note 41. Impact of the COVID 19 pandemic and the war in Ukraine on the Company's operations in which are disclosed information related to the impact of the COVID-19 pandemic and the war in Ukraine on non-consolidated financial results, non-consolidated financial position and non-consolidated cash flows of the Company for the year 2021. Our qualified opinion has not been modified on this issue. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the annual financial statements of the current period and include identified most significant risks of material misstatement due to error or fraud with the highest impact on our audit strategy, on our resources available and the time spent by the engaged audit team. These matters were addressed in the context of our audit of the annual financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined that the issues below are the key audit issues to be reported in our Independent Auditors Report. Operating revenues - revenues from passenger transport and revenues from passenger transport Incentives The Company in the Non-consolidated Statement of Comprehensive Income for the year 2021, stated sales revenue in the amount of HRK 159,017 thousand and revenues from railway incentives under the Public Services of General Economic interest in Public Railway Transport in the Republic of Croatia in the amount of HRK 495,000 thousand. For more detailed information see Note 2.6. Revenue recognition, Note 2.25. Key accounting judgments and estimates, Note 3. Sales revenue and Note 4. Other operating income in the annual non-consolidated financial statements. Key audit matter How we have audited Key audit matter 4 MOORE The main activity of the Company is the transport Our audit procedures included, among others: of passengers in domestic and international rail * examine the design, implementation and transport, and revenues from sales in a significant effectiveness of internal controls related to the part are a large number of transactions of low revenue recognition cycle and evaluate controls in value. IT systems that support revenue accounting; Revenue from the carriage of passengers is * assessing the revenue recognition policy, including recognized on the basis of the agreed fee that the considering whether the policy is in accordance Company expects to have with the customer and with the accounting standard for revenue; reduced by the amounts earned with third parties. * we assessed the manner in which the Company The Company recognizes revenue when it determines the revenue recognition form (at a transfers risk to a customer over a product or particular point in time or time) in relation to service. Revenues are stated in amounts less value identified performance obligations by reference to added tax, rebates and discounts. contractual provisions and our understanding of the forms and manner in which those performance State aid in the form of direct financial support obligations are performed; under public service contracts (PSOs) for services * we tested postings in revenue accounts to identify of general economic interest in public rail transport unusual or irregular items; without any additional related conditions is conducted detail tests on the selected sample, in recognized in other gains in the statement of order to verify the accuracy of revenue calculation comprehensive income for the period in which they and the correctness of their recognition in the are received. State aid is recognized when there is accounting period; sufficient assurance that the Company will meet the conditions required for it and that the aid will be * we considered the security and consistency of the received. The fee shall not exceed what is transfer of financial information to the business necessary to cover the net costs incurred in books of account and conducted tests of controls discharging the public service obligation, taking into at the level of operating revenues; accont eveue ad rasoableproit.* we checked the correctness of the revenue account revenue and reasonable profit presentation to the corresponding periods; We consider this matter to be a key audit matter * we checked the consistency of the revenue due to the possibility of significant effects on the recognition policy and reviewed the related notes financial statements if revenues are stated in an and assessed the appropriateness of the revenue- incorrect or inaccurate amount. Given the related disclosures. pervasive impact of the COVID-19 pandemic on the Company and its environment, and consequently Through our audit procedures, we have verified that the impact on the Company's financial statements, operating revenue are in material items have been recorded this matter is of particular importance to our audit. and disclosed in accordance with International Financial Reporting Standards. 5 S MOORE A-idit Other matters- publication of a separate non-financial report of the Company li/ We draw your attention to page 5. of the Company's management report, which in accordance with point (b) of paragraph 8 of Article 21a of the Accounting Act lists the website where a separate non- financial report of the Company will be published no later than 8 months from the balance sheet date. Our opinion has not been modified on this issue. /ii The Company will also prepare annual consolidated financial statements and in order to better understand the Company's operations as a whole, users should read the Group's annual consolidated financial statements related to these annual non-consolidated financial statements. Other information in the Annual Report Management is responsible for other information. Other information includes the Management Report, but does not include the annual non-consolidated financial statements and our Independent Auditor's Report thereon. Our qualified opinion on the annual unconsolidated financial statements does not include other information, except to the extent expressly stated in the part of our Independent Auditor's Report entitled Report on Other Legal Requirements, and we do not express any form of conclusion expressing assurance about them. In connection with our audit of the annual unconsolidated financial statements, it is our responsibility to read the other information set out above and to consider whether other information is materially inconsistent with the annual unconsolidated financial statements or our knowledge gained during the audit or otherwise appears to be materially misstated. Regarding the Management Report, we also carried out the procedures required by the current Croatian Accounting Act (the "Accounting Act"). These procedures include considering: * Whether the Management Report has been prepared in all material respects in accordance with the accompanying annual unconsolidated financial statements; * whether the Management Report has been prepared in all material respects in accordance with Articles 21 and 24 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: * The information contained in the Management Report for the financial year for which the unconsolidated financial statements have been prepared has been reconciled, in all material respects, with the annual unconsolidated financial statements of the Company set out on pages 18 to 85 on which we have expressed an opinion. reserve up; * The management report has been prepared, in all significant respects, in accordance with Articles 21 and 24 of the Accounting Act. Furthermore, taking into account the knowledge and understanding of the Company's operations and the environment in which it operates, which we acquired during our audit, we are required to report whether we have identified material misstatements in the Management Report obtained before the date of this Independent Auditor's Report. In that sense, we have nothing to report. 6 S MOORE Mo e -ge Responsibilities of the Management Board and those who are responsible for managing the annual financial statements The Management Board of the Company is responsible for the preparation of annual financial statements that provide true and fair view in accordance with the IFRSs as adopted by the European Commission and published in the Official Journal of the European Union, and for such internal controls as the Management Board determines are necessary to enable the preparation of annual financial statements that are free from material misstatement, whether due to fraud or error. In preparing the annual financial statements, the Management Board of the Company 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 Management Board either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company's financial reporting process. Auditor's Responsibilities for Audit of Annual Financial Statements Our objectives are to obtain reasonable assurance about whether the annual financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Independent Auditor's Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual financial statements. As an integral part of the audit in accordance with IAS, we create professional judgments and maintain professional skepticism during the audit. We also: * identify and assess the risks of material misstatement of the annual financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Management Board of the Company. * we assess the appropriateness of the accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Company's Management Board. * conclude on the appropriateness of the accounting basis used based on the indefinite operation used by the Company's Management Board and, based on the obtained audit evidence, we conclude whether there is significant uncertainty regarding events or circumstances that may cast significant doubt on the Company's ability to continue as a going concern. unlimited business. If we conclude that there is significant uncertainty, we are required to draw attention in our Independent Auditor's Report to the related disclosures in the annual unconsolidated financial statements or, if 7 MOORE Moore Audit Zagreb such disclosures are not appropriate, to modify our opinion. Our conclusions are based on audit evidence obtained up to the date of our Independent Auditor's Report. However, future events or conditions may cause the Company to discontinue continuing operations for an indefinite period of time. * evaluate the overall presentation, structure and content of the annual financial statements, including the disclosures, and whether the annual financial statements represent the underlying transactions and events in a manner that achieves fair presentation. * we obtain sufficient appropriate audit evidence regarding financial information from individuals and business activities within the Company to express an opinion on the annual unconsolidated financial statements. We are responsible for directing, overseeing and performing the audit. We are solely responsible for expressing our opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and important audit findings, including in relation to significant deficiencies in internal controls identified during our audit. We also make a statement to those charged with governance that we have complied with the relevant independence requirements and will communicate with them on any relationships and other matters that may reasonably be considered to affect our independence, as well as, where is applicable, on related protections. Among the matters communicated to those charged with governance, we identify those matters that are of the utmost importance in the audit of the annual unconsolidated financial statements of the current period and are therefore key audit matters. We describe these matters in our Independent Auditors Report unless the law or regulation prevents the matter from being made public or when we decide, in extremely rare circumstances, that the matter should not be disclosed in our Independent Auditor's Report because the negative consequences of communication would outweigh the benefits public interest in such communication. Report on other legal requirements Report based on the requirements of Regulation (EU) No. 53712014 1. On 29 September 2021, the General Assembly of the Company appointed us to carry out an audit of the annual financial statements for the year 2021. 2. As at the date of this report, we are continuously engaged in carrying out the Company's statutory audits from the audit of the Company's annual unconsolidated financial statements for 2018 to the audit of the Company's annual unconsolidated financial statements for 2021, which totals 4 years. 3. In addition to the matters we have included in our Independent Auditors Report as Key Audit Matters within the subsection Report on the audit of annual financial statements, we have nothing to report in relation to point (c) of Article 10 of Regulation (EU) No. 537/2014. 4. By our statutory audit of the Company's annual financial statements for the year 2021, we are able to detect irregularities, including fraud in accordance with Section 225 Responding to Non- Compliance with Laws and Regulations of the IESBA Code, which requires us, in carrying out our audit engagement, to establish whether the Company complied with laws and regulations that are generally recognized to have a direct impact on the determination of significant amounts and their disclosures in annual financial statements, as well as other laws and regulations that do not have a direct effect on the determination of significant amounts and their disclosures in annual financial statements, but compliance with which may to be the key to the operational aspects of the Company's business, its ability to continue to operate as a going concern or to avoid significant penalties. 8 MOORE Unless we encounter, or find out about, non-compliance with any of the aforementioned laws or regulations that are apparently insignificant, according to our judgment of its content and its influence, financially or otherwise, for the Company, its shareholders and the wider public, we are obliged to inform the Company thereof and request to investigate this case and take appropriate measures to resolve the irregularity and to prevent the reappearance of these irregularities in the future. If the Company on the date of Statement of financial position, does not correct irregularities based on which incorrect disclosures in the audited annual financial statements arise that are cumulatively equal to or greater than the amount of materiality to the annual financial statements as a whole, we are required to modify our opinion in the Independent auditor's report. In the audit of the Company's annual financial statements for the year 2021, we determined the materiality for financial statements as a whole in the amount of HRK 11,581 thousands, representing approximately 1.5% of operating revenues, including key revenues from the activities the Company is engaged in, namely revenue from passenger transportation and income from government grants to encourage passenger transport. 5. Our audit opinion is consistent with the additional audit report prepared for the Company's Audit Committee in accordance with provisions of the Article 11 of Regulation (EU) No. 537/2014. 6. During the period between the initial date of the audited annual unconsolidated financial statements of the Company for 2021 and the date of this report, we did not provide prohibited non-audit services to the Company or the company under its control and did not provide services for designing and implementing internal control or management procedures. risks associated with the preparation and I or control of financial information or the design and implementation of technological systems for financial information, and we have maintained our independence from the Company in performing the audit. Report based on the requirements of the Accounting Act 1. In our opinion, based on the work that we performed during the audit, the information in the Company's Management Report for the year 2021 are in accordance with the accompanying annual financial statements of the Company for the year 2021. 2. In our opinion, based on the work that we performed during the audit, the Company's Management Report for the year 2021 is prepared in accordance with the Accounting act. 3. Based on the knowledge and understanding of the Company and its environment obtained while performing the audit, we have not found that there are material misstatements in the Company's Management Report for the year 2021 In Zagreb, 6 June 2022 AUDIT d.o.o. Trg Johna Fitzgeralda Kennedyja 6B 10000 Zagreb Darko Karid, director, certified aud d NOO I EDSTAT E F CH I F TEYEAR ENDED 31 DECEMBER 2021 POSITION Notes 2021 2020 HRK'000 HRK'000 Revenue from contracts with customers 3 159,017 160,308 Other income 4 610,944 568,724 Operating revenue 769,961 729,032 Changes in the value of work in progress (16) (19) and finished goods Costs of raw materials 5 (101,435) (82,585) Cost of sales of goods 6 (332) (9,197) Other operating expenses 7 (202,309) (188,965) Personnel expenses 8 (224,230) (218,866) Depreciation and amortization 9 (122,978) (131,213) Other expenses 10 (67,905) (62,969) Value adjustment 11 (1,844) (13,211) Provisions 12 (25,943) (3,076) Operating expenses (746,992) (710,101) Finance income 2.124 970 Finance costs (8,918) (15,769) Net finance results 13 (6,794) (14,799) TOTAL REVENUE 772,085 730,002 TOTAL EXPENSES (755,910) (725,870) PROFIT BEFORE TAX 16,175 4,132 Income tax 14 (2,484) (1,047) PROFIT FOR THE YEAR 13,691 3,085 Other comprehensive income 0 0 COMPREHENSIVE PROFIT FOR THE YEAR 13,691 3,085 The accompanying notes form an integral part of these annual non-consolidated financial statements. 10 NON-CONSOLIDATED STATEMENT OF FINANCIAL POSITON/BALANCE SHEET ON 31 DECEMBER 2021 POSITION Notes 31 Dec 2021 31 Dec 2020 HRK T000 HRK '000 ASSETS Intangible assets 15 8,641 13,135 Property, plant and equipment 16 2,071,257 2,013,737 investment property 17 31,793 31,360 Investments in related parties 18 31,936 31,936 Financial assets 19 29,368 29,445 Deferred tax assets 14 26,593 24,514 Non-current assets 2,199,588 2,144,127 Inventories 20 1,079 2,631 Receivables from related parties 21 i 38 409 506 Trade receivables 21 12,282 16,802 Receivables from employees 22 827 1,021 Receivables from state and other institutions 23 19,993 51,586 Other receivables 24 34 39 Financial assets 9 2 Cash and cash equivalents 25 72,490 26,218 Prepayments and accrued income 26 3,534 3,534 Current assets 110,657 102,339 TOTAL ASSETS 2,310,245 2,246,466 OFF-BALANCE SHEET RECORDS 37 1,855,813 2,080,978 CAPITAL AND RESERVES Share (subscribed) capital 872,368 872,368 Accumulated loss (82,747) (85,832) Profit / (loss) for the year 13,691 3,085 Total capital and reserves 27 803,312 789,621 Provisions 28 108,925 110,491 Long-term liabilities 29 758,915 620,963 Liabilities to related parties 32 i 38 29,204 25,091 Liabilities for loans, deposits, etc 30 710 1,086 Liabilities to banks and other financial institutions 31 53,000 51,564 Liabilities for advances 0 2 Trade payables 32 60,983 70,538 Liabilities to employees 33 13,602 13,130 Liabilities for taxes, contributions and similar fees 34 10,098 7,156 Other liabilities 35 21,886 21,688 Accrued expenses and deferred income 36 449,610 535,136 Short-term liabilities 639,093 725,391 TOTAL CAPITAL AND LIABILITIES 2,310,245 2,246,466 OFF-BALANCE SHEET RECORDS 37 1,855,813 2,080,978 The accompanying notes form an integral part of these annual non-consolidated financial statements. 11 NON-CONSOLIDATED STATEMENT OF CASH FLOWS-INDIRECT METHOD FOR THE YEAR ENDED 31 DECEMBER 2021 CASH FLOW 2021 2020 HRK'000 HRK '000 Profit/loss before taxation 16,175 4,132 Depreciation 122,978 131,213 Impairment 1,844 13,211 Provisions 25,943 3,076 Revenue from state aid (76,060) (76,060) Interests income (480) (374) Interests expenses 8,918 9,153 Exchange rate differences (unrealized) (1,330) 7,912 Other non-monetary transactions 29,195 0 111,008 88,131 Deferred tax assets (2,079) 696 inventories 1,552 4,907 Receivables from related companies 101 206 Trade receivables 3,652 4,620 Other receivables 31,792 (22,037) Provisions payable 15,281 3,063 Liabilities to the related parties 4,113 (3,821) Trade payables (10,873) (64,058) Other liabilities (39,772) (13,093) Deferred payable costs and PBR (11,950) 5,198 (8,183) (84,319) Paid interest (loans, suppliers) (7,600) (1,175) Paid income taxes (284) (4,375) NET CASH FLOW FROM OPERATING ACTIVITIES 111,116 2,394 Purchase of tangible assets and given advance (206,598) (348,777) Purchase of intangible assets (220) (2,236) Receipts from sale of property 686 182 Other cash inflows/outflows from investing activities-EU funds 0 126,707 Cash receipt from dividends 371 596 NET CASH FLOW FROM INVESTING ACTIVITIES (205,761) (223,528) Receipts from loans 190,819 212,372 Other cash inflows/outflows from financial activities (7) 36 Loan repayments (49,895) (19,028) NET CASH FLOW FROM FINANCIAL ACTIVITIES 140,917 193,380 NET REDUCTION IN CASH FLOWS 46,272 (27,754) CASH AT THE BEGINNING OF PERIOD 26,218 53,972 CASH AT THE END OF PERIOD 72,490 26,218 The accompanying notes form an integral part of these annual non-consolidated financial statements. 12 NON-CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2021 Profit for the DESCRIPTION Share capital Accumulated loss year TOTAL HRK '000 HRK'000 HRK'000 HRK'000 Balance on 31 December 2019 872,368 (89,235) 3,403 786,536 Profit allocation in 2019 0 3,403 (3,403) 0 Profit for the year 0 0 3,085 3,085 Balance on 31 December 2020 872,368 (85,832) 3,085 789,621 Profit allocation in 2020 0 3,085 (3,085) 0 Profit for the year 0 0 13,691 13,691 Balance on 31 December 2021 872,368 (82,747) 13,691 803,312 The accompanying notes form an integral part of these annual non-consolidated financial statements. 13 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENT ON 31 DECEMBER 2021 Notes to the annual non-consolidated financial statements 1 GENERAL INF RM ATON 1.1 Legal frame, activities and employees H2 PUTNICKI PRIJEVOZ d.o.o., Zagreb ("the Company") was founded on 30 August 2006 pursuant to the Law on the division of the company H2 HRVATSKE 2ELJEZNICE d.o.o. Zagreb and registered with the Commercial Court in Zagreb under company subject number 080590508 and personal identification number 80572192786. The Company's headquarters are in Zagreb, Strojarska cesta 11. As at 31 December 2021 the registered share capital amounts to 872.367 thousand (as at 31 December 2020 same amount) and the founder and sole owner of the Company is the Republic of Croatia. By a decision of the Commercial Court in Zagreb as of 19 January 2016 the Company's share capital was increased from HRK 75.627 thousand by the amount of HRK 796.740 thousand to 872.367 thousand pursuant to the Company's General Assembly decision on the increase of the share capital as of 21 December 2015. The Company is registered for the transport of passengers in domestic and international railway traffic. 1.2. Employees As at 31 December 2021 the Company had 1,680 employees ((31 December 2020 1,789 employees). The structure of the employees is presented below: Qualification 31 Dec 2021 31 Dec 2020 Ph.D. 1 0 Masters degree 7 8 University degree 132 137 Bachelor 79 79 High school education 1,394 1,477 Low-skilled qualification 45 62 High skilled workers 5 5 Skilled workers 10 14 Unskilled workers 7 7 Total 1,680 1,789 1.3. Governance and management Bodies of the Company are the General Assembly, Supervisory Board and the Management Board. As the founder, the Republic of Croatia exercises its rights in the General Assembly through the Croatian Government and competent ministry. The Supervisory Board has three members and the Management Board has also three members appointed by the General Assembly. 14 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ON 31 DECEMBER 2021 - CONTINUED The Supervisory Board * Irena Gerovac Zrnid president since 8 April 2019, member since 28 March 2019 * Zdeslav Milas member since 28 March 2019 * Jasna Divid member since 16 December 2021, Deputy Chairman of the Supervisory Board since 23 December 2021 * Gordan Han2ek member of the Supervisory Board from 28 March 2019 and Deputy Chairman of the Supervisory Board from 8 April 2019 to I March 2021. The Management Board * Zeljko Uki6 President of the Management Board from 2 October 2017 to 2 October 2021, Acting Management Board - Director from 3 October 2021 to 3 April 2022, and President of the Management Board from 4 April 2022 * Damir Rub6i member of the Management Board from 2 October 2017 to 2 October 2021, and member of the Management Board from 4 April 2022 * Mario Zubak member of the Management Board since 4 April 2022 * Mladen Lugari6 Member of the Management Board from 2 October 2017 to 2 October 2021 The compensations to the Company's Management Board and the Supervisory Board members are disclosed in the notes 8 and 10 to the annual financial statements. 1 4. Subsidiaries As at 31 December 2021 the Company had the following subsidiaries: Share in the SUBSIDIARY capital (%) Basic activity Subsidiaries - Group Tehnidki servisi 2eljezni6kih vozila d.o.o., Zagreb 100 Railway vehicles maintenance Subsidiaries over which the Company has no control Proizvodnja-Regeneracija d.o.o. in bankruptcy, Zagreb 77 15 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ON 31 DECEMBER 2021- CONTINUED 2 SUMMARY OF SIGNIEICANTACCOUNTING POLICIES 2 1 Statement of compliance and basis of presentation The Company's annual non-consolidated financial statements for 2021 have been prepared in accordance with the Accounting Act (OG 78/15, 134/15, 120/16, 116/18, 42/20 and 47/20) and International Financial Reporting Standards. " IFRS ") established by the European Commissions and published in the Official Journal of the European Union. Beneficiaries of these non-consolidated annual financial statements should read them together with the annual consolidated financial statements of the Company as at 31 December 2021 and for the year then ended for the purpose of obtaining complete information on the financial position of the Company and its subsidiaries (the Group), the results of its operations and changes in the financial position of the Group as a whole. The consolidated annual financial statements as at and for the year ended 31 December 2021 are not yet available. 22. Basic of measurement The annual non-consolidated financial statements have been prepared by the application of basic accounting presumption of the business event inception upon which the effects of operations are recognized when arisen and are shown in the financial statements for the period to which they relate and with the basic accounting presumption of the going concern. The financial statements are prepared on a historical cost basis, with the exception of financial assets and financial liabilities that are stated at fair value in accordance with IFRS 9 "Financial Instruments". The Company has considered the effects of the COVID 19 pandemic on the Company's business conditions and believes that the event will not jeopardize the Company's operations in accordance with current knowledge and has not called into question the Company's ability to continue as a going concern. Furthermore, considering the business events and indicators in the environment, the Company's Management Board believes that currently there are no indicators that would require additional adjustments and disclosures in the annual non-consolidated financial statements of the Company for the year ended 31 December 2021. Recognizing the unpredictability of the economic recovery and the impact of the adopted measures, the Management Board believes with reasonable certainty that the Company will continue to operate in the foreseeable future. As a result, in accordance with the provisions of lAS 1, these annual non-consolidated financial statements have been prepared on a going concem basis. 2.3 Functional and reporting currency The Company's financial statements are prepared in Croatian kuna as the functional and reporting currency of the Company. The financial statements are presented in thousands of Croatian kuna ('000 HRK),which is, since this is the currency in which most of the Company's business events are reported, also the functional currency of the Company. At 31 December 2021 the exchange rate for 1 USD i 1 EUR was 6,64 HRK or 7,52 HRK (31 December 2020: 6,14 HRK or 7,54 HRK). 2.4. Use of Estimated and Judgments The preparation of financial statements in accordance with IFRS requires Management to make judgments, estimates and assumptions that affect the applied policies and disclosed amount of assets and liabilities, revenue and expenses. 16 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS :ON 31 DECEMBER 2021 - CONTINUED The estimates and underlying assumptions are based on historical experience and various other factors that are considered to be reasonable in the given circumstances, the results of which is starting point for estimating value of assets and liabilities that cannot be obtained from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. The impact of an estimate adjustment is recognized in the period in which the estimate is revised if it affects only the said period, or in the period in which it is made and future periods if the adjustment affects both current and future periods. Judgments made by Management in the application of IFRS that have significant effect on the financial statements and estimates, having a high risk of materially significant corrections in the next year are disclosed in note 2.25 Key accounting judgement and estimates 2 5. New standards and interpretations of published standards that have not yet been adopted In the current reporting period, the following amendments to existing standards published by the International Accounting Standards Board (IASB) and adopted by the European Union are in force: * COVID-19 - Concessions after 30 June 2021 (Amendments to IFRS 16) - extended period of application of the exemption until 30 June 2022 (effective for annual periods beginning on or after 1 April 2021); * Reform of the reference interest rate - phase 2 introduces amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 and is not mandatory until annual periods beginning on or after 1. January 2021. The adoption of these amendments to existing standards did not lead to significant changes in the Company's financial statements. At the date of approval of these financial statements, the following amendments to existing standards issued by the IASB and adopted by the European Union have been issued but are not put in force: * Annual improvements to IFRS from the 2018-2020 cycle - effective for annual periods beginning on or after 1 January 2022); * IAS 37 Provisions, Contingent Liabilities and Contingent Assets (Amendment - Harmful Contracts - Contract Execution Costs): The amendments define which costs should be included in an entity's assessment of the harmfulness ofa contract (effective for annual periods beginning on or after 1 January 2022).; * IAS 16 Property, Plant and Equipment (Amendment - Revenue Before Intended Use): The amendment prohibits a reduction in acquisition costs for receipts from the sale of products produced by bringing plant and equipment into service for its intended use. Instead of the current practice, the entity will also recognize income and expenses generated by trial operation through the income statement (effective for annual periods beginning on or after 1 January 2022); * IFRS 3 Business Combinations - Link to the Conceptual Reporting Framework (effective for annual periods beginning on or after 1 January 2022); IFRS currently adopted in the European Union do not differ significantly from the regulations adopted by the International Accounting Standards Board (IASB), with the exception of the following new standards and amendments to existing standards, the adoption of which has not yet been 17 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ON 31 DECEMBER 2021 - CONTINUED decided by the European Union at the date of the report (the effective dates set out below refer to IFRSs issued by the IASB): * IFRS 17 - Insurance Contracts * IAS 1 Presentation of Financial Statements (Amendment - Classification of Liabilities in the Short and Long Term) * IAS 1 Presentation of Financial Statements and IFRS Statement of Practice 2 (Amendment - Disclosure of Accounting Policies) * IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (Amendment - Definition of Accounting Estimates) * lAS 12 Income Taxes (Amendment - Deferred Tax on Assets and Liabilities Arising from a Single Transaction) The above changes are effective for annual periods beginning on or after 1 January 2022. The Company does not expect that the adoption of these new standards and amendments to existing standards will lead to significant changes in the Company's financial statements in the period of the first application of the standards. 2.6. Revenue recognition Receivables for state aid to compensate for expenses or losses already incurred, or for the purpose of providing current financial support to the Company without future related costs, are recognized as income in the period in which the receivable is incurred. i) Revenues from the sale of services If the conditions that the amount of revenues can be measured reliably and there is possibility that Company will receive a fee are met the service revenues are recognized in the period in which they are provided. The revenues from service contract is recognized in relation to the level of performance of a contract. The levels of performance of a contract are as follows: * the services performed are recognized in relation to the level of execution, determined as a percentage of the time spent over the balance sheet date, in relation to the total planned time; * maintenance fees included in the price of the sold product are recognized in proportion to the share in the total cost of maintaining the sold product, taking into account the number of previous maintenance services for previously sold products; and * contract revenue based on time and material expense is recognized at agreed prices in the period in which the hours worked and in which direct costs were incurred. ii) Interest income Interest income is deferred on a timely basis, on the basis of unpaid principal and at the applicable effective interest rate, which accurately discounts estimated future cash receipts through the expected life of the financial instrument or the net book amount of financial assets. Interest income is recognized as a financial income in the income statement 18 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ON 31 DECEMBER 2021 - CONTINUED iii) Lease Income Income from operating leases is calculated on a straight-line basis over the lease term. iv) Dividend income and profit share Dividend income and profit share are recognized when the right to dividend and profit is established 2.7. Operating expenses Operating expenses are recognized in profit or loss on the basis of the direct link between the costs incurred and the specific income item. Confronting revenue expenditures involves simultaneous or combined recognition of revenue and expense arising directly or jointly from the same transactions or other events. Expense is recognized immediately in the income statement when an expenditure does not generate future economic benefits or in proportion and which future economic benefits are not such that they qualify for recognition in the balance sheet as assets. Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Other borrowing costs are recognized as expense.. 2.8. Foreign currency transactions Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the exchange date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in profit or loss. Non-monetary assets and items that are measured based on historical cost in a foreign currency are not translated using new exchange rates. Non-monetary assets and liabilities that are measured based on a historical cost in a foreign currency are translated using the exchange rate at the date of transaction. 2.9. Intangible assets Non-current intangible assets include software and leasehold improvements regarding rights of usage and are capitalized to the extent that future economic benefits are probable and will flow to the Company. Subsequent expenditure on capitalized intangible assets are recognized in the carrying amount of the items only when it increases the future economic benefits embodied in the asset and will flow into the Company. All other expenditure is recognized in the profit or loss as an expense as incurred. 19 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ON 31 DECEMBER 2021 - CONTINUED Depreciation is charged to profit or loss on a straight-line basis over the estimated useful lives of intangible assets. Intangible assets are amortized from the date on which they are available for use. The estimated useful lives of intangible assets are as follows: Software 5 years Leasehold improvements regarding rights of usage 5 - 10 years 2,10. Property, plant and equipment Property, plant and equipment are stated at cost less for accumulated depreciation and accumulated impairment losses, if any. Cost includes expenditures that is directly associated to bringing the asset to a working condition for its intended use. Assets under construction are not depreciated. Depreciation of the property, plant and equipment is calculated using a straight-line method for the purpose of allocating the cost of that asset over its estimated useful life as follows: 2.11. Investment property Property investments include properties that is held for rent by renting or increasing their market value or for both purposes. Built-in equipment is considered to be an integral part of investment property. The cost of the purchase includes all costs directly linked to the acquisition of that property. Investments in real estate, i.e. construction, are classified as fixed tangible assets until they are ready to be used. The Company uses a cost model for all investments property when re-measuring investment properties. Amortization is calculated using the straight-line method for the purpose of allocating the cost of that asset over its estimated useful life as follows: Estimated useful life of use (years) 2021. 2020. Investment property 10-50 10-50 Subsequent expenditure for investment property is recognized in the assets carrying amount only if it is probable that it increases the future economic benefits embodied in the specific asset to which it relates and it can be reliably measured. Regular maintenance expenditure is recognized in income statement as an expense as incurred. An investment property is derecognized upon disposal or when the investment property is permanently withdrawn from use as well as when no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property and it's calculated as the difference between the net disposal proceeds and the carrying amount of the asset, is included in profit or loss in the period in which the property is derecognized. 20 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ON 31 DECEMBER 2021 - CONTINUED 2.12. Impairment of non -financial assets At each reporting date, the Company reviews the carrying amounts of its non-financial assets (apart from inventory and deferred tax assets which are reviewed) to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, assets of the Company are also allocated to individual cash- generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately as an expense, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined net of depreciation or amortization had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately as income, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. 2.13. Investments in related companies 0 Subsidiaries Subsidiaries are all related companies over which the Company has control over financial and business policies, which usually includes more than half of the voting rights The existence and effect of potential voting rights that can be used or exchanged, are considered when assessing whether the Company has control over other business. Investments in subsidiaries are initially recognized at cost, and subsequently at cost less impairment. Investments in subsidiaries for impairment are carried out on an annual basis. ii) Associated companies Associated companies are those in which the Company has significant influence, but has no control, which usually includes 20% to 50% of the voting rights. Investments in associates are initially recognized at cost and at cost less impairment. Testing of investments in associates for impairment is carried out on an annual basis. 21 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ON 31 DECEMBER 2021 - CONTINUED 2.14 Financial assets The Company has adopted IFRS 9 - Financial Instruments as at 1 January 2020 and its application has not had a significant impact on the Company's annual financial statement. The Company recognizes financial assets in its financial statements when it becomes party to the contractual provisions of the instrument. Depending on the business model for asset management and contractual features of financial flows, the Company measures financial assets at amortized cost, fair value through other comprehensive income or fair value through profit or loss. The Company classifies assets as shown below: DESCRIPTION Classification / measurement Non - current assets Financial assets at fair value through profit or loss Equity instruments / fair value through profit or loss Current assets Cash and cash equivalents (deposits) Hold to collect I amortized cost Trade receivables and other receivables Hold to collect I amortized cost The business model reflects the way in which the Company manages assets to realize cash flows - whether the Company's objective is (i) solely the collection of contractual cash flows from assets ('holding due to contractual cash flows') or (ii) cash flows and cash flows arising from the sale of assets ("hold due to contractual cash flows and sales"), and if none of the points above are applicable, financial assets are classified as part of another business model and are measured at fair value through profit or loss or loss. i) Financial assets through profit or loss Initial recognition The Company recognizes a financial asset or liability when and only when it becomes a party to the contractual provisions of the instrument. Instruments are classified at fair value through profit or loss if the Company holds them for trading or are designated as such at initial recognition. Financial instruments are designated at fair value through profit or loss if the Company manages these investments and makes decisions about their purchase and sale on the basis of their fair value. At initial recognition, direct transaction costs are recognized in profit or loss at the time they arise. Subsequent measurement Financial instruments classified at fair value through profit or loss are measured at fair value and changes are recognized in profit or loss. With the application of the new IFRS 9 standard, all investments in equity instruments are presented at fair value through profit or loss. 22 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ON 31DECEMBER 2021- CONTINUED ii) Loans The Company loans are held within a business model whose purpose is to hold a financial asset in order to charge contractual cash flows. Contractual terms at a particular date are cash flows that represent only payments of principal and interest. At that, the principal is the fair value of the asset at initial recognition. Based on the above, the given loans are measured at amortized cost. Measurement at amortized cost implies; * interest income is calculated using the effective interest rate and applied to the gross book value of the asset at the calculation, iii) Trade receivables Trade receivables that do not have a significant financial component at initial recognition have been measured in accordance with IFRS 15 at their transaction price. iv) Impairment The Company recognizes a loss allowance for expected credit losses. At each reporting date, the Company measures expected credit losses and recognizes the same in the financial statements. Expected credit losses from financial instruments are measured in a manner that reflects: * an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes, * Time value of money, * Reasonable and supportable information about past events, current conditions and forecasts of future economic conditions. Regarding trade receivables, the Company applies a simplified approach allowed by IFRS 9 to measure expected credit losses by using expected provisions for credit losses from customers. To measure anticipated trade receivables losses, the Company has by analyzing the age structure and historical data determined potential future losses. v) Derecognition of financial assets The Company ceases to recognize financial assets when; * Contractual rights on cash flows from financial assets has been expired, * It transfers financial assets and the transfer is subject to conditions for termination of recognition. The Company transfers financial assets if and only if, or: * transferring contractual rights to receive cash flows from financial assets, or * retain contractual rights to receive cash flows from a financial asset but assumes a contractual obligation to pay cash flows to one or more recipients in the arrangement. When the Company transfers financial assets, it is required to estimate the extent to which it retains the risks and rewards of ownership of the financial asset. In this case, when all risks and rewards of ownership are transferred, the Company ceases to recognize financial assets and recognizes separately as assets or liabilities all rights and obligations that have arisen or are retained in the transfer. If almost 23 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ON 31 DECEMBER 2021- CONTINUED all the risks and rewards of ownership of financial assets are retained, the Company continues to recognize financial assets. If the Company neither transfers nor retains all the risks and rewards of ownership of financial assets, the Company determines whether the Company has retained control of the financial asset. If no control over financial assets is retained, the Company ceases to recognize financial assets and recognizes separately as assets or liabilities all rights and obligations that have arisen or are retained in the transfer. If control is retained, the Company continues to recognize financial assets to the extent that it continues to participate in that financial asset. 2.15 Financial obligations i) Initial Recognition and Measurement Financial liabilities are classified as financial liabilities that are measured at amortized cost. All financial liabilities are initially recognized at fair value plus the associated transaction costs. The Company's financial liabilities include liabilities to suppliers and other liabilities, overdrafts and loans. ii) Subsequent measurement After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the effective interest rate method. Borrowing costs that can be directly linked to the acquisition, construction or production of a qualifying asset, a means that necessarily requires a considerable amount of time to be ready for intended use or sale, are attributed to the cost of purchasing that asset until the asset is largely available intended use or sale. Borrowings are classified as short-term liabilities unless the Company has the unconditional right to postpone the obligation to pay at least 12 months after the reporting date. Short-term lending and supplier loans are shown on the original borrowed amount deducted by repayments. The interest expense is charged to the profit and loss account for the period in which the interest relates. iii) Derecognition The Company ceases to recognize the liability in the financial statements when and only when the obligation has been settled. When the existing financial liability is replaced by another by the same creditor under substantially different terms or the terms of the existing obligations have changed significantly, such change or modification is treated as termination of the original obligation and recognition of the new liability, and the difference in the corresponding carrying amounts is recognized in the profit and loss account. 2.16. Inventories Inventories are stated per cost and net realizable value, depending on which is lower. The cost of inventories comprises all purchase costs, the cost of conversion and other costs that have been incurred in bringing the inventories to their present location and condition. The net realizable value represents the estimated selling price during the normal course of operations less all estimated costs of completion and necessary costs to be incurred in selling. In cases when it is necessary to reduce the value of inventories to the net marketable sales value, the value of inventories is charged to the profit and loss account for the current year. Small inventories, packing and car tires are written off by 100% at the moment they are put into use. 24 INOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ON 31 DECEMBER 2021- CONTINUED 2.17. Cash and cash equivalents Cash and cash equivalents include cash on account and in cash register and they are stated in the balance sheet. The book values of cash and cash equivalents are generally approximate to their fair values. For the purpose of reporting cash flows, cash and cash equivalents comprise cash and deposits with banks with maturities up to three months. 2.18 Leases Leases are recognized, measured and presented in accordance with IFRS 16 Leases. Any contract by which one party gives the other the right to use of certain property for a fee is a lease. In order for a contract to be considered a lease for accounting purposes, and in accordance with IFRS 16, it is necessary that the contract contains, or specifies: * non-cancellable period of a lease * periods covered by an option to extend the lease, if any * periods covered by an option to terminate the lease, if there is a reimbursement. Accounting treatment is based on an analysis of the contract in accordance with its substance, not just its form. Common assets leased from the Company includes motor vehicles and buildings. The Company applies the accounting model, which requires the lessee to recognize assets and liabilities for all leases, except for the exceptions specified in the accounting standard. The Company applies all exceptions to the standard for the recognition of leases, which in particular includes short- term leases and leases of low-value assets. In accordance with the accounting policies, the Company recognizes the property with the right of use and a lease obligations on the date of signing the agreement (the beginning of the lease) for all leases that transfer the right of control over the use of the underlying asset at a certain time. The commencement date of the lease is the date on which the lessor gives the property to the lessee for use. Assets with the right of use are initially measured at cost, which includes: * the amount of the initial measurement of the lease liability, * lease payments made before or on the lease start date, less incentives, * all initial direct costs incurred by the lessee * an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset or restoring the site on which it is located. After the date of commencement of the lease, the right to use asset is measured at cost less accumulated depreciation and accumulated impairment losses, and is adjusted for each subsequent measurement of lease liabilities. Depreciation is calculated on a straight line basis over their useful life, which are determined by reference to the lease term. If the lease transfers ownership of the underlying asset to the Company by the end of the lease term, or if the cost of the right of use asset reflects that the Company will exercise the purchase option, the Company depreciates right of use asset from the lease date to the end of its useful life. Otherwise, the Company depreciates the property with the right of use from the date of the beginning of the lease during the useful life or the lease period, whichever is shorter if at the end of the lease term, or after the expiration of the lease term, an expense is incurred in connection with the leased property that will have to be restored to its original condition at the end of the lease period, a provision is recognized for the 25 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ON 31 DECEMBER 2021 - CONTINUED estimated amount. Provisions for costs incurred in derecognising an asset are capitalized as part of the cost of the asset and are depreciated over their estimated useful lives. The fair value of these provisions is estimated using the average cost of returning such sites to their original condition and a discount rate equal to the interest rate of long-term government bonds. Lease liabilities are initially measured at the present value of lease payments that have not been made by that date. That includes: * fixed payments less receivables for incentives * variable lease payments that depend on an index or rate, with a particular index or a rate as at the measurement date * amounts expected to be paid by the lessee under the residual value guarantees * the exercise price of the purchase option if there is reasonable assurance that the lessee will exercise that option; and payment of a penalty for termination of the lease, if the terms of the lease do not allow the lessee to terminate the lease. Variable lease payments that are not included in the initial measurement of a lease liability are recognized directly in profit or loss. Lease payments are discounted using the incremental interest rate on the lessee's indebtedness or the interest rate contained in the lease. Since the Company does not borrow in determining the incremental interest rate, data on the yield of government bonds of the Republic of Croatia with comparable maturity in relation to the duration of leases will be used. 2.19. Employee benefits (i) Pensions obligations and post-employment benefits In the normal course of business through salary deductions, the Company makes payments to the mandatory pension funds on behalf of its employees as required by law. All contributions made to the mandatory pension funds are recorded as salary expense when incurred. The Company is not obliged to provide any other post-employment benefits with respect to these pension schemes. This obligation applies to all staff hired on the basis of employment contract. The contributions are paid at a certain percentage determined on the basis of gross salary. Contributions on behalf of the employees and the employer are accounted for as the expense for the period in which they arise. 2021. 2020. Contribution to pension insurance 20% 20% Contribution to health insurance 16,50% 16,50% Employment fund contributions Occupational injury (ii) Termination benefit Termination benefits are payable when employment is terminated by the Company before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Company recognizes termination benefits when it has demonstrably assumed an obligation to terminate its employment with current employees, according to a detailed formal plan without possibility of withdrawal or provide termination benefits as a result of an offer to encourage voluntary termination. 26 INOTES TO THE ANNUAL NONCONSOLIDATED FINANCIAL STATEMENTS ON 31 DECEMBER 2021 - CONTINUED (ii) Regular retirement benefits Retirement benefits falling due more than 12 months after the reporting date are discounted to their present value based on the calculation performed at each reporting date by an independent actuary, using assumptions regarding the number of staff likely to earn regular retirement benefits, estimated benefit cost and the discount rate which is determined as average expected rate of return on investment in government bonds of the Republic of Croatia which are quoted on the market and their currency and maturity dates are in accordance with currency and estimated duration of liabilities for the benefit payment. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized immediately in profit or loss. Based on the currently valid collective agreement, retired workers are entitled to a regular severance pay in the amount of HRK 8,000. (iv) Long-term employee benefit The Company recognizes the obligation to long-term employee benefits Oubilee awards) equally in the period in which the award was made based on the actual number of years of service. The reward for long-term work is from 1.500 to 5.000 kuna net for working in the Company from 10 to 40 years of continuous employment with the employer. The long-term employee benefit obligation is measured by an independent actuary at the end of each reporting period using the assumptions on the number of employees to which the said benefits should be paid, the estimated cost of the said benefits and the discount rate as the average expected return on investment in government bonds. Actuarial gains and losses arising from compliance and changes based on experience in actuarial assumptions are immediately recognized in profit or loss. 2.20. Provision Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Provisions are made for litigations, regular retirement benefits and jubilee awards and termination benefits. 2.21 Taxation (i Income Tax The Income tax expense consists of current and deferred tax. Income tax expense is recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in other comprehensive income. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. 27 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ION 31 DECEMBER 2021 - CONTINUED (i: Value Added Tax (VAT) The Tax Authorities requires VAT settlement on a net basis. VAT resulting from sales and purchase transactions is recognized and reported in the statement of financial position on a net basis. In the case of impairment of receivables, the impairment loss is recognized in the gross amount of receivables, including VAT. 2.22, Contingent liabilities and assets Contingent liabilities are not recognized in the financial statements but are only disclosed in the notes to the annual financial statements. Potential assets are not recognized in the annual financial statements, yet are recognized at the time when a inflow of economic benefits becomes probable. 223. Events after the Date of the Statement of financial position / Balance sheet Events which occur after the date of Statement of financial position / Balance sheet that provide additional information about the Company's position on the date of Statement of financial position / Balance sheet (adjusting events) are reflected in the annual financial statements. Events that are not adjusting are disclosed in the notes to the annual financial statements if they are material. 2.24. Comparative data The comparative information is reclassified as necessary to match the presentation of the current year. 2 25. Key accounting judgement and estimates The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and amounts disclosed for assets, liabilities, income and expenses and the disclosure of contingent liabilities. Actual results may differ from such estimates. Estimates and associated assumptions are reviewed on an ongoing basis.The effect of an adjustment to an estimate is recognized in the period in which the estimate is adjusted and in future periods if the adjustment affects current and future periods. Key assumptions related to the future and other key sources of uncertainty on the date of the Statement of financial position that bear significant risk of significant changes in the carrying amounts of assets and liabilities in the following financial years are as follows: (W Useful life of property, plants and equipment Determining the useful life of an asset is based on historical experience with similar assets as well as anticipated technological development. The suitability of the estimated useful life is considered annually, or whenever there are indications of significant changes in assumptions. We believe that this is an important accounting estimate, as it includes the assumptions about technological development and significantly depends on the Company's investment plans. Furthermore, given the significant share of Company's depreciable assets in total Company's assets, the impact of major changes in these assumptions could be significant for the financial position and results of the Company's business. 28 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ,ON 31 DECEMBER 2021 - CONTINUED (ii) Impairment testing of tangible and intangible assets If there is an indication of impairment, the Company conducts an impairment test for tangible and intangible assets to assess whether the recoverable amount indicates a potential impairment. For tangible and intangible assets, the Company assesses recoverable amount based on an fair value of the asset less costs to sell and reduces the carrying amount to lower than the carrying amount and recoverable amount. (iii) Fair value of financial instrument Determining the fair value of financial assets for which there is no directly and indirectly available market price requires the use of valuation techniques as shown in accounting policy 2.14. For financial assets that are rarely traded and have non-transparent prices, fair value is less objective and requires different degrees of assessment depending on liquidity, concentration, uncertainty of market factors, price assumptions and other risks affecting each instrument. (iv) Expected credit losses With the application of IFRS 9 Financial Instruments, the Company has adopted a new model of impairment of financial assets through the recognition of expected credit losses. The simplified approach reduces total receivables for expected credit loss over the life of the receivable. The calculation is based on historical billing data by defined periods of maturity (ranges) over a period of 3 years. According to historical data and customer structure, the calculation of expected credit losses for trade receivables is reduced in percentages as follows: 1% for overdue receivables of up to 60 days, 3% for delays of 61-120 days, over 121 days 30%. All receivables older than one year, sued receivables and receivables from customers who have declared bankruptcy have been reduced by 100%. The Company has prescribed deadlines after which reminders and value adjustments are made as determined in the matrix. (v) Recognition of deferred tax assets The net deferred tax asset represents income taxes recoverable through future deductions from taxable profits and is recorded in the Statement of financial position. Deferred tax assets are recorded to the extent that realization of the related tax benefit is probable. In determining future taxable profits and the amount of tax benefits that are probable in the future, management makes judgments and applies estimation based on previous years taxable profits and expectations of future income that are believed to be reasonable under the existing circumstances. (vi) Recoverability of inventories The Company adjusts the value of inventories according to the age structure. In 2021, due to expenses and sales of non-current goods, the Company reduced the value adjustment of inventories by HRK 329 thousand (2020 in the amount of HRK 795 thousand). (vii) Actuarial estimates used for calculation of retirement benefit The cost of defined benefits is determined using actuarial estimates. Actuarial estimates involve assumptions about discount rates, future salary increases and the mortality or fluctuation rates. Due to the long-term nature of those plans, these estimates contain an element of uncertainty. 29 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ON 31 DECEMBER 2021 - CONTINUED (viii) Income tax The calculation of income tax is done on the basis of the current interpretation of applicable rules and laws. The calculations that are the basis for calculating income tax may be subject to verification by the tax authorities. (ix) Consequences of certain court disputes The Company is a party to numerous court disputes arising from regular business. Provisions are recorded if there is a present obligation as a result of the past event (taking into account all available evidence including the opinion of legal experts) where it is likely that settlement of the obligation would require a resource outflow and if the amount of the liability can be reliably estimated (x) Ownership of land and buildings The Company has registered properties for which the procedure for determining and registering ownership rights has not been fully resolved.. The company acquired most of its properties by dividing the company Hrvatske 2eljeznice d.o.o. With this division, the company Hrvatske 2eljeznice d.o.o. divided into 5 companies: H2 Holding d.o.o., H2 Vuta vlakova d.o.o., HZ Infrastruktura d.o.o., H2 Putnitki prijevoz d.o.o. and H2 Cargo d.o.o. H2 Holding d.o.o. H2 Infrastrukturi d.o.o., HZ Vuda vlakova d.o.o. was divided and merged with H2 Cargo d.o.o. and H2 Putnidki prijevoz d.o.o. The division plan also divided the assets of the companies. Problems related to the real estate status of the companies H2 Putnifki prijevoz d.o.o., H2 Infrastruktura d.o.o. and HZ Cargo d.o.o. has not been fully resolved to date. 2 26 Correction of previous period During 2021, there were no corrections to the Company's unconsolidated financial statements. 30 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ON 31 DECEMBER 2021 - CONTINUED 3. SALES REVENUE 2021 2020 DESCRIPTION HRK'000 HRK'000 Revenue from sales to the related companies in the Group li/ 877 842 Revenue from sales (outside Group) /i/ 158,140 159,466 TOTAL 159,017 160,308 li/ Revenue from sales to the related companies in the group is as follows: 2021 2020 OPIS HRK'000 HRK'000 Revenue from domestic passenger transportation 811 800 Revenue from the sale of goods and material 59 35 Revenue from the sale of products 7 7 TOTAL 877 842 fil Revenue from sales outside group is as follows: 2021 2020 DESCRIPTION HRK'000 HRIK'000 Revenue from domestic passenger transportation 96,692 97,864 Revenue from intemational passenger transportation 25,980 14,632 Revenue from suburban passengers transportation 34,460 37,126 Revenue from passenger transportation - specific trains 162 19 Revenue from the sale of goods and material 85 9,165 Revenue from the sale of products 460 538 Other sales revenue 301 122 TOTAL 158,140 159,466 4 OTHER OPERATING INCOME 2021 2020 DESCRIPTION HRK'000 HRK'000 Other income from sales to the related companies in the group ll 3,235 2,910 Other income from sales outside group fl 607,709 565,814 TOTAL 610,944 568,724 31 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS O0N 31 DECEMBER 2021 - CONTINUED /il Other income from sales to the related companies in the Group is as follows: 2021 2020 DESC RI PTI ON HRK'000 HRK '000 Income from rent of offices 1,530 1,453 Income from recalculation of costs 918 939 Income from penalties for delayed goods and works 672 515 Other operating income 115 3 Total 3,235 2,910 fill Other income from sales outside Group is as follows: 2021 2020 DESCRIPTION HRK'000 HRK'000 Income from passenger transport incentives 495,000 461,500 Income from the state grants for the modemization of railway vehicles 76,060 76,060 Income from reversal of long-term provisions 13,479 6,729 Income from the damages fee 5,928 1,359 Income from the collection of impaired receivables 3,421 6,586 Income from rent of wagons and locomotives 1,719 2,636 Income from the costs recalculation 996 3,540 Income from rent of advertising space 783 175 Income from the traffic delay fees 781 552 Income from sale of the long-term tangible assets 686 182 Charged income from the settlements 406 1,149 Income from business premises rent 395 445 Income from the previously adjusted value of inventories 329 795 Other operating income 7,726 4,106 Total 607,709 565,814 /il Income from passenger transport incentives refers to fees under the Contracton Public Services of General Economic Interest in Public Railway Transport in the Republic of Croatia concluded between the Ministry of the Maritime Affairs, Transport and Infrastructure and the Company. On 21 December 2018, the Ministry of the Maritime Affairs, Transport and Infrastructure and the Company entered into Contract no. 1/2020 / DP-H2PP on public services for services of general economic interest in public railway transport in the Republic of Croatia for the period from 1 January 2019 to 31 December 2028, and . and II. addition to the Agreement in December 2019. The subject of the Contract is a service of general economic interest in public rail passenger transport in the Republic of Croatia by the Company and a contractual fee paid by the Ministry for the provision these service of general economic interest. The fee shall not exceed the amount required to cover the net costs incurred discharging in the public service obligation, taking into account income and a reasonable profit. The estimated contractual fee for the service the duration of the Contract is HRK 4,620,000 thousand. 32 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ON 31 DECEMBER 2021 - CONTINUED 5 COST OF RAW MATERIAL 2021 2020 DESCRIPTION HRK'000 HRK'000 Cost of raw material 1,821 2,355 Cost of spare parts 15 0 Cost of small inventory 870 745 Energy cost 98,729 79,485 Total 101,435 82,585 li/ Energy cost 2021 2020 DESCRIPTION HRK'000 HRK '000 Fuel costs 65,107 51,618 Electricity costs 31,724 26,439 Costs of other energy sources 1,898 1,428 Total 98,729 79,485 6. COST OF GOODS SOLD Costs of goods sold in the amount of HRK 332 thousand (2020 in the amount of HRK 9,197 thousand) relate to the purchase value of goods sold. 7. OTHER EXTERNAL EXPENDITURE 2021 2020 DESCRIPTION HRK '000 HRK '000 Maintenance (services) 121,749 109,588 Railway track lease (H2 Infrastruktura d.o.o.) 64,563 62,408 Maneuver and towing services 6,218 5,564 Towing, telephone, postal services and transport cost 5,337 6,329 Property cleaning service 1,598 1,431 Rental costs and lease 1,268 1,948 Advertising and promotion costs 166 70 Property protection services 52 11 Train dispatcher services o 133 Other external expenditure 1,358 1,483 Total 202,309 188,965 33 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ON 3-1 DECEMBER 2021 - CONTINUED 8 STAFF COST 2021 2020 DESCRIPTION HRK'000 HRK'000 Net salaries and wages 139,361 142,962 Taxes and contributions from salaries 47,840 43,657 Contributions on salaries 37,029 32,247 Total 224,230 218,866 i/ Remuneration to members of the Management Board and directors / managers I heads of regional units included in staff costs: 2021 2020 DESCRIPTION HRK '000 HRK '000 Net salaries and wages 4,554 4,324 Taxes and contributions from salaries 2,060 2,142 Contributions on salaries 1,108 1,087 Total 7,722 7,553 The number of members of the Management Board and directors / managers I heads of regional units in 2021 is 33 (in 2020 there were 30). 9. DEPRECIATION 2021 2020 DESCRIPTION HRK'000 HRK'000 Amortization of the intangible assets 4,493 4,810 Depreciation of property with the right of use 221 417 Depreciation of property, plant and equipment 115,738 123,682 Depreciation of the investments property 2,526 2,304 Total 122,978 131,213 34 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ON 31 DECEMBER 2021 - CONTINUED 10, OTHER EXPENSES 2021 2020 DESCRIPTION HRK'000 HRK'000 Employees material rights 20,365 20,109 IT services - SAP 16,325 15,938 Mileage 9,336 9,014 Insurance premiums 1,725 1,755 Banking services and payment system costs 1,539 910 Reimbursement of cost to the employees 1,497 1,683 Intellectual services 992 716 IT Services of H2 Infrastruktura d.o.o., Zagreb 801 592 Travel agency commissions 717 771 Taxes not depending on income and fees 291 311 Scholarship fees 190 199 Compensations to members of the Supervisory Board and Audit Committee 99 144 Entertainment expenses 99 72 Professional training costs 37 36 Other expenses 6,268 964 Fines, penalties, compensations and similar 7,204 8,639 Subsequently identified expenses 381 621 Value of abolished material and inventories write-off 0 468 Other operating expenses 39 27 Total 67,905 62,969 11. IMPAIRMENT 2021 2020 DESCRIPTION HRK'000 HRK'000 Impairment of long-term tangible assets 500 12,694 Impairment of short-term receivables 1,344 517 Total 1,844 13.,211 12. PROVISION 2021 2020 DESCRIPTION HRK'000 HRK'000 Provisions for incentive severance payments 0 330 Expenses on provisions for incentive severance pay 18,034 0 Provisions for legal proceedings 4,451 1.,253 Provisions for jubilee awards 2,390 928 Provisions for other risks 1,068 565 Total 25,943 3,076 35 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ON 31 DECEMBER 2021 - CONTINUED 13. NET FINANCIAL RESULT 2021 2020 DESCRIPTION HRK 000 HRK '000 Financial revenue From related parties inside the Group Interest income 4 3 4 3 Other Income from other long-term financial investments and loans 371 596 Interest income 476 371 Foreign exchange gains 1273 0 2,120 967 Total financial revenue 2,124 970 Financial expenses From related parties inside the Group Interest expense 0 0 0 0 Other Interest expense 8,918 9,153 Foreign exchange losses 0 6,616 8,918 15,769 Total financial expenses 8,918 15,769 Net financial result (6,794) (14,799) 36 [NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ON 31 DECEMBER 2021 - CONTINUED 14. INCOME TAX The Company is a taxpayer, in accordance with the tax laws and regulations of the Republic of Croatia The tax base is defined as the difference between the income and the expense of the period, increased by tax non-deductible expenditures. The profit tax rate is 18% (2020: 18%). Income tax includes: 2021 2020 DESCRIPTION HRK'000 HRK'000 Income tax 4.563 351 Deferred tax (2,079) 696 Tax expense 2,484 1,047 The reconciliation of the income tax is shown as follows: DESCRIPTION 2021 2020 HRK'000 HRK'000 Accounting profit 16,175 4,132 Non-deductible expenses 21,897 3,378 Tax incentives (12,722) (5,558) Profit after increase / decrease 25,350 1,952 Tax losses transferred from the previous periods 0 0 Tax losses that cannot be brought forward 0 0 Income tax 4,563 351 The table below summarizes the changes in deferred tax assets during the year- Provisions Inventory Receivable Tangible for jubilee Incentive value value ale and severance Total adjustment adjustment value and payment adjustment severance payments HRK '000 HRK '000 HRK '000 HRK '000 HRK '000 HRK '000 As at 31 December 2019 8,224 50 13,098 2,557 1,281 25,210 At the expense of profit and (143) (41) (255) (299) (252) (990) loss In favour of profit and loss 0 0 68 226 294 As at 31 December 2020 8,081 9 12,911 2,484 1,029 24,514 At the expense of profit and (59) 0 0 (509) (1,029) (1597) loss In favour of profit and loss 0 0 0 430 3,246 3,676 As at 31 December 2021 8,022 9 12,911 2,405 3,246 26,593 37 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ON 31 DECEMBER 2021 - CONTINUED 15 INTANGIBLE ASSETS Concessions, DESCRIPTION patents, licenses, software and Right of use Total and other rights assets HRK '000 HRK '000 HRK '000 Purchase value 1 January 2020 55,470 1,225 56,695 Transfer from tangible assets under construction 2,236 0 2,236 31 December 2020 57,706 1,225 58,931 Transfer from tangible assets under construction 220 0 220 Sale or disposal 0 (799) (799) 31 December 2021 57,926 426 58,352 Accumulated amortisation 1 January 2020 40,187 382 40,569 Amortization for the year 2020 4,810 417 5,227 31 December 2020 44,997 799 45,796 Amortization for the year 2021 4,493 221 4,714 Sale or disposal 0 (799) (799) 31 December 2021 49,490 221 49,711 Carrying amount 1 January 2020 15,283 843 16,126 31 December 2020 12,709 426 13,135 31 December 2021 8,436 205 8,641 38 т � ьхi .-. .--. .--. . SLJ [(+�Сг С7 ^'"` ® ^ i0 M1 N ^� Ct ®G � С? ^ Ci] е} �► M1 1~+. ��ih'ЛSЧт N i[f) � �� .С t,a4r,'�� �} ti�04[7� М F�i► CV цП. в- rt�D О N ...� [О С*�7 - LV СИ lП т 1Л М � C-S"3 . д� т 47 Ct N СК1 ,�у � tD G7 M1 С N�.Г r° +r т- � С7 08 т А � tp. у7 С� dJ �'-'' 4Ч LЛ 4V .tis � 47 р] т � СУ т � С Г► С'! 4 11Z � ц! �[А м М� � efi т�:�i CV N �.....�C7f.,^�О р гq� ФпСiС7 г О t7t?С7 а О С?Gl С7Са Ф 6У г т � i�'. цi � �7 S7D � ��'�, N 1M1►. � N � т-�'. 1Г1 eD 'V' . CQ т elt CD г хч} а fD г т С3 т цi г3 у, м � сч � +ги cW n �гs � w а �� мо'r"�°'�'�сз�т,�vсэомм оооавсrooQVV м�ts�ч �. � г fЧ � � О7 �� f�7 � .� �. г� G� С7 гп � т�а'+ р ..�л � С'�i ,`-д. д' � tii � Ш и v N v tП О � U ..�.fJC7C?Г�G7 � С]C7bC70 � ',,� daUC7 в C�C7C3L� С 0°С7 4°Lf C+D ' т r т '. OQ 40 ОО С9 м м v м м м м м сч � t] е� ev ез о о со га е� v v^ о ца rtч о cn м v а � w цт � �� � и � sд ыrт � un �� о�з°�' и n-v `r to �х т т с т а т г� � г. nt i'' �• w игз шN � вs4oenri` л т raw � мп пг и м гл � � г� oi cti с*� Г л кr �+л м 1. м а ш�'" h� етi °p � � 00 ц� cV cv .- °� м т � tч � Q м р й efi � i['1 N � M1- R т " Сь� r � 4'> ir 1+. Ср ....... у а[i- И �Г7 ц7 ц ц7 , С'7 V i�i С�у ............... т г г '"�,, ,,,. О С � lц � 7 � 1С ++ С+� М �"* 01 Р�ФООО '..ОООС7 д? дi С'7®Ой N СрОО т''. Ф,..� C17� т N � �'- ос� ' м и вs v M1 аа са us а о е7 �о� +л со �ш ммм � г�i� м � ev ' ео го esi 4iS ,� r т т ' т т г у � � iSf � � � � G7 С�'! LЭ С? С7 Li т СО �Q С5 r•�` 'р7 GO Т� °�' С3 а GY 'Ci3 Q!Ci t�- G CV С++1 � ц7 М , С�С? r- � �.... 6�7 iГ! р M1 цд'! Н � tA �'�.. СО 4�i М ......... � � й0 CD �- .. QD .... 1А т� �Ri ��Г! �.... N N N � � � � �."' � � LL.{ �_ +н. �' _ r � � � � Q �t{f �,.. в, � , Z ♦3 7 '� � ,Q w�,, �ь. �- � _ � � Q С3 �у СЭ и � N CV ■ � ii У v Ш q7 цл G N N у � [1' �' г7 � � гл '+� � .. � f.i г � � � � � ц�1 N � � � ш ,� ш ° � �. � т � 97 Q fI� т S? т � � v Q1 V7 � С tлл � C�Ti '� � �'" � '�G '�"' С l7 С О О � � С] �� ,�ц О 46 ,�р �О гд О� йц N:Э N а О [б 'ry ... �р д r�b i fl Ф i� � � � � � �.� � � � � � о т � � � � о а� � � о а� g � а+ т � Q ьи .��°�? °.��и � !'� °-,�°си �.°_��й � iR � Е � �.. [4 7 � '� r ч4У +Ш � � гh ч� � и� �' С) '� � �V ч� � � t�3 �. �С�3 ,N Е � C�i . � 7 U U .. �- �'� �� И И И О С� И N V1 4� Ф � � 6/ yj ., О у И,i '47 Ф� С+дУ Ф � е� � � � c v �с �' с � � +и � ,� � �с �т О �,� �ш С7 ' еа С3 О � ��. ����,. U'� l�S S`5 �� �U �'� ,� tб т L7 � д7 � iS1 т N� [4 т i4 � т т � � а т ����С1д т SН��гЛ е7 'Q т С1Н �U7 L'7 �� �fП М U т м r] . ........ - -- - ------- NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS 'ON 31 DECEMBER 2021 - CONTINUED /I/ At 31 December 2021, over a significant number of real estates recorded in the business books, the Company does not have a regulated ownership by entering into land registers, The procedure for settlement of the ownership rights is in progress 17. INVESTMENT IN PROPERTY Investment in D E S C R I P T 10 N properly HRK'000 Purchase value I January 2020 110,658 Increase 0 31 December 2020 110,658 Increase 0 Transfer from /on 2,959 Sale or disposal 0 31 December 2021 113,617 Accumulated depreciation I January 2020 75,238 Depreciation for the year 2020 2,304 Transfer from/on 1.756 31 December 2020 79,298 Transfer from/on 2021 2,526 Sale or disposal 0 31 December 2021 81,824 Carrying amount 1 January 2020 35,420 31 December 2020 31,360 31. December 2021 31,793 18. INVESTMENT IN SUBSIDIARIES DESCRIPTION Ownership Activity 31 Dec 2021 31 Dec 2020 HRK'000 HRIK'000 Subsidiarie Tehnidki servisi 2eljezni6kih vozila d.o.o., Zagreb 100% maintenance 75,433 75,433 Less: Impairment (43.497) L43,497) 31,936 31,936 Proizvodnja-Regeneracija d.o.o., in bankruptcy, Zagreb 15.099 15,099 Less: Impairment (115,09% (15,099) 0 0 Total 31,936 31,936 40 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ON 31 DECEMBER 2021 - CONTINUED 19. LONG-TERM FINANCIAL ASSETS 31 Dec 2021 31 Dec 2020 DESCR IPTION HRK'000 HRK'O00 Financial assets at fair value through profit or loss Eurofima 29,366 29,443 BCC 2 2 Ukupno 29,368 29,445 li/ EUROFIMA is a non-profit organization based in Basel, Switzerland for the financing of railway vehicles and support for the development of public passenger transport by rail in its Contracting States. EUROFIMA supports the railways of its members in renovating and modernizing its equipment by securing funding. The Company's share in the share capital of EUROFIME is 0.82%.. 20 INVENTORIES 31 Dec 2021 31 Dec 220 DESCRIPTION HRK '000 HRK '000 Raw materials 1,228 1,404 Spare parts 43,435 45,166 Less: Impairment of obsolete inventories of raw materials (44,569) (44,897) 94 1,673 Small inventory and packing 6,720 6,518 Less: Impairment of raw materials, spare parts and small inventory (5,886) (5,728) 834 790 Finished goods 151 168 Total 1,079 2,631 21. TRADE RECEIVABLES 31 Dec 2021 31 Dec 2020 DESCRIPTION HRK'000 HRK'000 Domestic trade receivables 78,169 87,272 Foreign trade receivables 10,054 10,444 Less: Impairment (75,532) (80,408) Total 12,691 17,308 41 'NOTES TO THE ANNUAL NONCONSOLIDATED FINANCIAL STATEMENTS ON 31 DECEMBER 2021 - CONTINUED 21.1. Movements in the impairment allowance of trade receivables are shown as follows: 2021 2020 DESCRIPTION HRK'000 HRK '000 Balance at 1 January (80,408) (88,374) New impairment (1,344) (517) Collection 3,421 8,483 Write-off during the year 2,799 0 Balance at 31 December (75,532) (80,408) 21.2. Age structure of the trade receivables is as follows: Due Undue < 30 30-60 60-90 90-120 > 120 Total days days days days days HRK HRK HRK '000 HRK '000 '00 HRK '000 '00 HRK '000 HRK '000 '000 '000 31 Dec 2021 5,418 1,276 2,401 945 817 1,834 12,691 31 Dec 2020. 8,317 2,411 1,378 2,117 400 2,685 17,308 22. RECEIVABLES FROM EMPLOYEES 31 Dec 2021 31 Dec 2020 DESCRIPTION HRK'000 HRK'000 Short-term receivables from employees for shortages and 827 1,021 damage Total 827 1,021 23. RECEIVABLES FROM THE STATE AND OTHER INSTITUTIONS 31 Dec 2021 31 Dec 2020 DESCRIPTION HRK'000 HRK'000 Value added tax receivables 18,793 49,421 Receivables from HZZO 1,200 1,058 Receivables for overpaid income tax 0 1,107 Total 19,993 51,586 42 * . .... .. ... . ..I.. . NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ON 31 DECEMBER 2021 - CONTINUED 24 OTHER RECEIVABLES 31 Dec 2021 31 Dec 2020 DESCRIPTION HRK '000 HRK '000 Prepayments in the country 33 37 Other receivables 1 2 Total 34 39 25 CASH AND CASH EQUIVALENTS 31 Dec 2021 31 Dec 2020 DESCRIPTION HRK '000 HRK '000 Gyro account balances 65,028 16,658 Foreign currency account balances 5,470 8,064 Cash in hands -Croatian kuna 1,992 1,496 Total 72,490 26,218 26. PREPAID EXPENSES AND ACCRUED INCOME DESCRIPTION 31 Dec 2021 31 Dec 2020 HRK'000 HRK'000 Prepayments for the accident in Rudine 3,534 3,534 Total 3,534 3,534 27. CAPITAL AND RESERVES /i The subscribed capital of the Company amounts to HRK 872,368 thousand (31 December 2019 in same amount) and represents own permanent sources for the Company's operations as well as share capital registered at the Commercial Court in Zagreb. The sole member of the Company is the Republic of Croatia. On September 24, 2015, the Government of the Republic of Croatia adopted a decision on granting the consent for the conversion of receivables from the debt assumption on the basis of given guarantees and unpaid compulsory contributions to the Company's equity in the total amount of HRK 796,740 thousand. The share capital increase was registered at the Commercial Court in Zagreb on January 19, 2016. /ii/ The accumulated losses are stated as at 31 December 2021 in the amount of HRK 82,747 thousand (31 December 2020 in the amount of HRK 85,832 thousand). /iii/ Profit for the current year is stated as at 31 December 2021 in the amount of HRK 13,691 thousand (31 December 2020 in the amount of 3,085 thousand). 43 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ON 31DECEMBER 2021- CONTINUED 28 PROVISIONS 31 Dec2021 31 Dec2020 DESCRIPTION HRK'000 HRK'000 Provisions for jubilee awards and retirement benefits 13,359 13,797 Provisions of incentive severance payments 18,034 5,716 Provisions for court litigations 52,965 67,479 Other provisions 24,567 23,499 Total 108,925 110,491 Movements in provisions are shown as follows: Retirement Provisions of benefits and incentive Court jubilee severance cases awards payments HRK'000 HRK'000 HRK'000 HRK'000 HRK'000 01 January 2020 14,202 7,115 67,900 22,934 112,151 Additional provisions 1,258 0 1,253 565 3,076 Reversal (1,663) (1,399) (1,674) 0 (4,736) 31 December 2020 13,797 5,716 67,479 23,499 110,491 Additional provisions 2,390 18,034 4,451 1,068 25,943 Use of reservations (1,301) (5,716) (7,014) 0 (14,031) Reversal (1,527) 0 (11,951) 0 (13,478) 31 December 2021 13,359 18,034 52,965 24,567 108,925 /if According to the Collective Agreements the Company has an obligation to pay jubilee awards, regular retirement benefits and other benefits to its employees. In accordance with the respective agreements, when employees leaving to regular retirement (without incentive severance pay they are entitled to a regular retirement benefit of HRK 8,000 net and jubilee awards in terms and amounts as defined in the Collective Agreement. There are no other forms of income after retirement. The long-term employee benefit obligation is measured by an independent actuary at the end of each reporting period using assumptions about the number of employees to whom the benefits are to be paid, the estimated cost of those benefits and the discount rate determined as the average expected rate of return on government bond investments. The calculation of the jubilee awards was made according to the following amounts: Number of years Amount in HRK 10 1,500 15 2,000 20 2,500 25 3,000 30 3,500 35 4,000 40 5,000 44 NOTES TO THE ANNUAL NONCONSOLIDATED FINANCIAL STATEMENTS ON 31 DECEMBER 2021 - CONTINUED Actuary estimates are based on the following main assumptions: Estimate 2021. 2020. Fluctuation rate 3,76% 3,44% Discount rate 0,38% 0,63% /ii/ Provision for other risks refers to the provision of tax liabilities and default interest in the total amount of HRK 24,567 thousand according to the Decision of the Tax Administration of 9 December 2020 for tax liabilities for the comparison period from 1 January 2016 to 31 December 2016. 29. LONG-TERM LIABILITIES 31 Dec 2021 31 Dec 2020 DESCRIPTION HRK '000 HRK'000 Liabilities to banks and other financial institutions l/ 811,850 672,333 Less: current maturity of loan liabilities (53000) (51,564) 758,850 620,769 Other long-term liabilities hil/ 204 415 Less: current maturity for rent (139) (221) 65 194 Total 758,915 620,963 liu Liabilities to the bank and other financial institution 31 Dec 2021 31 Dec 2020 DESCRIPTION HRK'000 HRK'000 Croatian Bank for Reconstruction and Development, 260,542 290,251 International Bank for Reconstruction and Development 258,317 252,749 EUROFIMA 292,991 129,333 Less: current portion (53,000) (51,564) Total 758,850 620,769 45 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ON 31 DECEMBER 2021 - CONTINUED /ii/ Other liabilities (leases) 31 Dec 2021 31 Dec 2020 DESCRIPTION HRK'000 HRK'000 Porsche leasing d.o.o. 204 415 Less: Current portion (139) (221) Total 65 194 The movement of lease liabilities through the year is shown as follows: 2021 2020 OPIS HRK'000 HRK'000 1 January 415 843 New lease 0 0 Lease payment (235) (445) Interest expense 24 17 31 December 204 415 Long-term lease liabilities are due as follows: 31 Dec 2021 31 Dec 2020 DESCRIPTION HRK'000 HRK'000 Maturity up to one year 139 221 Due in one to two years 65 194 Due in two to five years 0 0 Total 204 415 30. LIABILITIES FOR LOANS, DEPOSITS ETC 31 Dec 2021 31 Dec 2020 DESCRIPTION HRK'000 HRK'000 Liabilities for deposits - reconciliation 710 1,086 Total 710 1,086 31. LIABILITIES TO BANKS AND OTHER FINANCIAL INSTITUTIONS 31 Dec 2021 31 Dec 2020 DESCRIPTION HRK '000 HRK '000 Current portion of the long-term liabilities to banks 53,000 51,564 Total 53,000 51,564 46 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ON 31 DECEMBER 2021 - CONTINUED 32, TRADE PAYABLES AND RELATED PARTIES 31 Dec 2021 31 Dec 2020 DESCRIPTION HRK'000 HRK'000 Domestic trade payables 89,940 95,599 Foreign trade payables 247 30 Total 90,187 95,629 Age structure of trade payables is as follows: Due Undue 30-60 90-120 > 120 Total < 30 days das 60-90 days das dy days days days HRK'000 HRK'000 HRK'000 HRK'000 HRK '000 HRK'000 HRK '000 31.12.2021 88,221 1,057 869 0 3 37 90,187 31.12.2020 91,352 3,974 1 267 2 33 95,629 33. LIABILITIES TO EMPLOYEES 31 Dec 2021 31 Dec 2020 DESCRIPTION HRK'000 HRK'000 Liabilities for net salaries and contributions 10,701 11,323 Other liabilities to employees 2,901 1,807 Total 13,602 13,130 34. LIABILITIES FOR TAXES, CONTRIBUTIONS AND SIMILAR FEES 31 Dec 2021 31 Dec 2020 DESCRIPTION HRK'000 HRK'000 Liabilities for taxes and contributions from salaries 4,580 4,710 Income tax liabilities 3,172 0 Liabilities for contributions on salaries 2,346 2,446 Total 10,098 7,156 47 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ON 3.1 DECEMBER 2021 - CONTINUED 35. OTHER LIABILITIES 31 Dec 2021 31 Dec 2020 DESCRIPTION HRK'000 HRK'000 Liabilities to the Ministry of Finance for activated guarantees 23,795 22,478 Other short-term liabilities (2,048) (1,011) Current portion of leases 139 221 Total 21,886 21,688 /il Liabilities to the Ministry of Finance of the Republic of Croatia relate to regressive rights claims of the Ministry of Finance due payments per activated guarantees based on which the Ministry of Finance has settled part of the due liabilities to the commercial banks instead of the Company. Namely, based on the decisions of the Government of the Republic of Croatia, in the past years, the Ministry of Finance has issued several guarantees to commercial banks as a guarantee for the repayment of the lending obligations of the Company. The Guarantee Issuance Agreement between the Republic of Croatia and the Company for the settlement of long-term obligations states that if the guarantee is paid out of the State Budget funds, the amount paid is considered to be due receivable of the Ministry of Finance. The loan beneficiary is obliged immediately after the payment was made by the Ministry of Finance to allocate amount of the repaid funds increased by the statutory default interest with all the relevant costs. 36. ACCRUED EXPENSES AND DEFERRED INCOME 31 Dec 2021 31 Dec 2020 DESCRIPTION HRK'000 HRK'000 State subsidies for purchase and modernization of railway vehicles 315,244 391,304 li Deferred income from grants from EU funds 126,707 126,707 Accrued expenses for the unused vacation days 4,699 2,682 Deferred income 2,091 2,400 Accrued expenses for the current year 869 12,043 Total 449,610 535,136 fil State subsidies for the procurement and modernization of railway vehicles refer to funds provided by the Republic of Croatia for modernizing and regular maintaining of railway vehicles. 48 INOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ON 31 DECEMBER 2021 - CONTINUED 37. OFF BALANCE SHEET RECORDS 31 Dec 2021 31 Dec 2020 DESCRIPTION HRK'000 HRK'000 Received warranties 1,154,921 1,153,689 Given warranties 447,976 678,596 Receivables from the community of JZ 87,399 83,363 Locomotives in the ownership of railways of the former SFRY in 74,692 74,692 Croatia Receivables from Herceg Bosne 42,540 42,540 Locomotives in the ownership of railways of the former SFRY in 23,403 23,403 Croatia Property in inaccessible area 13,458 13,458 Balance of cash registers 1,281 1,095 Monoblocks in Goga 1,969 1,969 Actual costs for the utilization of space 819 819 Other 7,355 7,354 Total 1,855,813 2,080,978 38. TRANSACTIONS WITH RELATED PARTIES A party is associated with an entity when it is directly or indirectly controlled by one or more intermediaries, controlled by or under the control of a subject, has a share in a subject that gives it significant influence over that subject and has a common control over the subject. Total amounts of related party transactions, receivables and payables at year-end and associated expense and income for 2021 and 2020 are presented as follows: 49 � У г,� v сзоо о �ct+ar� ® aov � оооог�v�ао са ,° ш � г г �" аФ ill 7 ° с �t et сооо аэ' ��r_,ш г� v�v � осзсгоrsвва о�м У � � � г г _"' � О .° о,у-„ - � [С � � С д Ф... '� Ф О Ф О СЭ С] 4 С1 О О Сь б О С7 С7 С7 О 4`7 С? С7 б б •� .- У С � Cr С7 С � Ф LL J � � СЭ б бD С7 С1 OD f� � Q N � О� Ф � С7 b О С? О О О б б� Si У г т г RS Ф 7 �у .� СТ N 3 LL' i� 1+- Ф i3 д QO �. йо 1� СУ tЛ [� СЭ С] К'7 � С'� г б} f� C�i С7 Ф СЛ CV т ' у. У N N ц7 ц7 '��. N� @i i'�3 С�Э Сб N 4Сг � D1 �- ° v f+7 СУ t� СУ'�. г CF 5'f r� N t"� С3 г Р70 д� �� �г т f'�i С7 �...��,.', С] г г г г г�. � 3 г г г т [ц °� а г.� �ов � c,мv�v� Ф е7осз � аоооезооv v� и �� r г о_ v r- г г.Q v оа с+ 08 � Q •r" � �- :- с� м г пi ' � С С1 � ч=+ - � � П8 rn и� �� ovo с г�етr,°е7 а аФо г• avгr�rna®rr� гд г► +✓ �� У N N �7 �. � � N� с75 �t �7 r�л L? � � р +6� �t Г� ct т т .,, п] � С� lЧ N г N ц7 � J � � . гП CS3 iЛ С7 С'7 б С7 Ц7 Q О С7 'i� fYi 4V С? С7 С7 С? �? О О С7 б г ..... [ll t7 б С] т [г1 й7 �!' {Сг ® '� . С7 ,. г в, � � � st SСг � 'Т � �г W � ►Ч 4� �,р � М г r� г� цJ ��. ц] �� t7 U Ф N 7 ,...�,......�.. i�.. � �s i С7 # � ° Ш -,р � � О � � � ,� � °, v т w � ц � � � �, с т С� 4 ,[�дi � $ j i3i � � � �� У � ° � � 97 � D `7 � 4 N SiS 4 '��. N Q- °• � � � ш о � � °� гл • zy � ° г� �у ,� � т °• пari � � � '�т ® � .� Е��¢ � ��� ;� � д� � '� в� U szo �� о сэ с v а, д �' � g�A � � Cry� rY'° � ,� и о � � � � � г�� �N � и� �_{° ����Тв•� со� � �NNг°'uei .• .� � � д� � � о v" с,� �° � о ш N о гi N о �q ar � ;° ш � �� ci °i'� tэ .° � ° п� и vs _ а -п - -v ,� � сЕ ��N�г°�сс ��Е шт,�.��°�� �'rи а°�,� са .rnао ��� ��оонпаsп'а � � •� ° -�,�''v � � °. � •т йтэ й"� v о � � �� � с мм � � т v � т "� � �га � � '� т` а'п ш U °- � '� � о � �с ш � �'S С 7 ,� � 6 N lй -� Ш�� �- г�1д Й'� � 7 t1f С w � � д � ° } � ,� `т °ci � � с.'� � � �аСЭl� � й й� N � �� ,� мV7.���3`���ц С7 �t]�С]��аs3� �4,а�za=iпiaо¢ �р� v-� ш о��ч � � о=- �v �ч оо � п� - � � а� с а аэ т ш а���? а а � сч��� � `�aJ � � ==¢О[�гпtтаJ � `�z=т=г2� � � О Ф 1'� С� t� F+ С] Ф Cs !�s !р Ф Ф Сй ���. b � гд Cr а Са С7 с� Сэ г3 M1 �' � С'? М �f '�. +� F+ - О � о т � � � q� с°�м о�э�хv ��e�ooor��o� ос�саоооооо�м � У г ........... N !С 1 и 7 р 6� • � � � о �i � � пs � �, о+о г•.ае�г. огзгаvс]сл�оа .r.зc7c�vvovvor- ��' _ � м м м �. �°до � � � г�о оооо гиг�rзr�ог•�sкv ооаоо�тоосси И г г г � SГ �i � г Т � '� � 6 } � � � е��,� 3 L.f� е'ы N 6У Li С7 W С� ti Ci S3'J ф С7 �7 ГJ ŭh tC7 [ГJ Ф цl. 'д' i�i fD в3� Gi i3i � � � � м м � � � д � � � � � Ч � � ги ,с rti ti rn ci гfl ~ м r°° г м о.-- ао n = с7 v sr' сд Rд ш ьл сГ er � +r оо � о rn ar �л � r �о г м J ��,..... 3 q7 [V N tЛС3С3473 �s1� бС] 001й747 г � рСэС7С5ФС7�7 О 44 в� �� А Р�+ Cfl t�Q г ti N [�7 ���. 1t! дз fП � t7 [`7 �.. L'7 CD й1 г г '��. 1в +r � Ф 'р� С7 '�. т N '*' ц С7 �7 N � .� �.? � ПS � _ LП � г [3 О� � О � iLL1 Г3 (^J О О С3 C:t г Lii R� Р� С] С+ � Г� ц] 1�� С tЛ С% SЛ 09 GЭ [tJ �i � ц7 Г M1 СА � N cti 1Л °�ц ,ш � о о cv �cvi r- м сч м г м о � цл � � гз� v � ,� � °� � о сч м гч сч м м о � � � � пs � �` � ц' г� sЯ [Л 4'7 N+7 t3� �_ G N С7 t�- �� С? г� С7 О С? +С? Ф О G U � �� С ц�'7 �17 С'�i fC1 � N� CD ц7 � � м� г р�р + v �, 0 r С� � 1l"1 [мJ г r� i� 1в � г � � ,� ........................... � � ,��. �.......... � � �.. � � ............. � CL' о у 1� h- � гЛ � � � ,� �с � гз с а�'i � � � � v � � �. � � � � � � вr � � N � � trг v, � ги г�.] � о � ;i� � па га о � Ш х � � у ..�:� � �ц ® � � ,а ��,� � яw�� и7 О {7i q7 � # � гП � �рΡ �1 = в _Сй с4 � � ч�.+ ы � � 3 С} t� N� � qj � м К.! °�� � � 41 �у i7] . � � � � � � у7 -р О О1 Cfl1 � � �у � -�у °Q �71 ai � N � � ��ё v:пr �� �.�.�? �� � `NN °Sа .. � я ш у� й�� L� � о��` `� � w °� а a�s � о-о N о � _а '� N � � а7 �у �� о � с G сС � ? ш и t`п ry Q -а - -а ц�j � ��й в� б и�л и �� N� св � а a�i й •с N ci тa сс ��� +�'� � '� гл Q 4 tl7 � SO � iЭ ® v _� Й .� � � ' � ? б � � � я! '`� ,� �' •� � _� � � У � °� •� . � � � � о � L � � � � i [L � д7 cG ^ ts3 р� "сгi г3 л3 � � [1 � � � � � � 4 � О Ш F-. тэ `0 w г, � °ё � t � о � � °g- к �° � '° .х` = и � св е � � � � �tг � � � а s� � � =v � а ,� ы i � С7 L? Н � й й а �1 � � с+ ��� � _rv ггi � О� U � rJ �s ,� гл С7 � ic пt с t 4 � NU]t tП о и ,� ' N Е р= � Qпп , �Z �Н Ф-._ д1 L7 �. � � Ш О_,'1Ч N iЛ `в N � Ф � r#! +N 47 LL �� сц � д Q # т, � Н��.-мгZJ Н:� 2 г¢D� г.]а..._з ��.� 22�=х г l� [-Н NOTES TO THE ANNUAL NONCONSOLIDATED FINANCIAL STATEMENTS 'ON 31 DECEMBER 2021 - CONTINUED 39, FINANCIAL INSTRUMENTS AND RISK MANAGEMENT -7 t The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to stakeholders through the optimization of the debt and equity balance. The capital structure of the Company consists of debt, cash and Gash equivalents and equity attributable to equity attributable to owners, comprising issued capital, legal and other reserves and retained earn i ngslaccumu lated losses. The net debt to equity ratio is presented as follows: 31 Dec 2021 31 Dec 2020 DESCRIPTION HRK'000 HRK'000 Liabilities to the bank and other financial institutions 811,850 672.333 Cash and cash equivalents (72,490) (26,218) Net debt 739,360 646,115 Equity (capital and reserm); 803.311 789,621 Net debt to equity ratio 92% 82% Ca egor:es of financial instrum ents DESCRIPTION 31 Dec 2021 31 Dec 2020 HRK'000 HRK'000 Financial assets Loans and receivables (including cash and cash equivalents) 179,612 125,025 Financial liabilities Amortized cost 948,398 811,219 F The Corr pany controls and manages financial riskwhich could affect the Company's operations through internal risk reports which analyses exposures by degree and magnitude of the market risk, interest rate risk, credit risk, currency risk and liquidity risk. The Company operates in Croatian and international markets. The Management Board determines the prices of its products and services, separately for domestic and international markets. There were no significant changes in the impact of market risk on the Company's business. Interest rate nsk The interest rate risk is a risk that the value of a financial instrument will fluctuate due to changes in market rates relative to the interest rate applicable to the financial instrument. Interest rate cash flow risk is the risk that the interest cost of an instrument will fluctuate overtime. There were no significant changes of the influence of the credit risks on the Company's operations. 52 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENT'S ON 31 DECEMBER 2021 - CONTINUED Credit risk Credit risk is the risk that the counterparty will default on its financial obligations resulting in financial loss to the Company. Financial assets that potentially expose the Company to credit risk consist mainly of cash, cash equivalents and trade receivables. Trade receivables have been adjusted for bad and doubtful receivables. There were no significant changes of the influence of the credit risks on the Company's operations. Currency risk The official currency of the Company is the Croatian Kuna ("HRK"). However, certain transactions denominated in foreign currencies are calculated in the Croatian Kuna by applying the exchange rates in effect at the date of Statement of Financial Position / Balance sheet, and consequently, the Company is potentially exposed to risks of changes in currency rates. Net carrying amount of monetary assets and liabilities of the Company denominated in foreign currencies on the reporting date is shown as follows: Liabilities Assets 2021 2020 2021 2020 Net carrying amount of monetary assets and HRK'000 HRK'000 HRK'000 HRK '0 liabilities HRK '000 RRK '000 HRK '000 HRK '000 EUR 247 30 30,675 31,235 247 30 30,675 31,235 Liquidity risk A liquidity risk is a risk that the Company would not be able to fulfil its financial liabilities to the other contractual party. A Company manages liquidity risk in a way that observes continuously and analyses expected and actual cash flow on the basis of maturity of financial assets and liabilities. Fair value Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is based on quoted market prices, if available. If market prices are not available, fair value is estimated using discounted cash flow models or other appropriate pricing techniques. Changes in the assumptions underlying the estimates, including discount rates and estimated future cash flows, significantly affect the estimates. For this reason, the estimated fair value cannot be obtained from the sale of a financial instrument at this point. Valuation techniques and assumptions in determining the fair value When calculating the fair value, the Company takes into account the rules of IFRS fair value hierarchy that reflects the significance of inputs used in the valuation process. Each instrument is individually assessed in detail. The levels of the fair value hierarchy is determined based on the lowest level and input data which are important for determining the fair value of the instrument. 53 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ON 31 DECEMBER 2021 - CONTINUED The Balance sheet items that are measured at fair value are categorized into three levels of the IFRS fair value hierarchy, as follows: * 1st level indicators - fair value indicators derived from (unadjusted) prices listed on active markets for identical assets and identical liabilities. * 2nd level indicators - fair value indicators derived from other information, not the listed prices from the 1st level, and relating to observed asset or liability (i.e. their prices) or indirectly (derived from prices) and * 3rd level indicators - indicators derived from valuation method in which used input data on assets or liabilities are not based on the available market information (unobservable inputs). The Company's assets measured at fair value as at 31 December2021 are shown in the following table: Financial assets stated at fair value through profit or loss Level I Level 2 Level 3 Total u000 HRK u 000 HRK u 000 HRK u 000 HRK Investments in securities 0 0 29,368 29,368 Total assets at fair value 0 0 29,368 29,368 The Company adopted IFRS 13 under which it is obliged to issue the hierarchy of fair value of financial assets which is not measured at fair value as well as the write-off of evaluation method and inputs used. Loans and receivables (including deposits with banks) are stated at depreciated cost less value adjustment. Although the result of a variablelfixed interest rate, due to their specific nature, the Company's Management believes that the carrying amount of these instruments does not significantly differ from their fair value, under the assumption that all payments based on exposure, the value of which was not reduced, will be collected as contracted, not taking into account any future losses. The fair value of loans is estimated based on inputs the price of which is not market available; therefore, they would be classified on level 2 on the fair value hierarchy list. Investments with available market price which are classified under the portfolio of investment held to maturity would be allocated on level 1. 54 NOTES TO THE ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS ON 31 DECEMBER 2021 - CONTINUED 40. COURT DISPUTES AND CONTIGENT LIABILITIES /il The Company as a Defendant, together with the companies H2 Infrastruktura d.o.o., Zagreb and H2 Cargo d.o.o., Zagreb, participates in numerous court disputes. According to the plan of division of the company HZ Hrvatske ie[jeznice d,o.o., Zagreb, the eventual obligations incurred in these disputes are borne by newly founded companies based on their participation in the capital. As the legal successor of the merged company H2 Vu6a vlakova d.o.o., Zagreb, the Company inherited its court litigations. The Company is also the defendant in certain individual court litigations. As at 31 December 2021, the Company made provision for the contingent liabilities arising from these legal proceedings in the amount of HRK 52,965 thousand. /i/ The Company is exposed to contingent liabilities in the amount of HRK 1,154,921thousand (31 December 2020 in the amount of HRK 1,153,689 thousand) based on the guarantees given to subsidiaries. /iiit During 2019, the tax control of income tax for 2015 and 2016 was carried out, within which the payments of severance pay and compensation of travel expenses - mileage were controlled, and determined according to the submitted first-instance decision of the Tax Administration, tax payments for taxes and contributions amounting to approximately HRK 38,991 thousand. At the end of 2020, a second-instance decision of the Ministry of Finance was submitted, which annulled the liabilities for tax benefits from 2015 due to the statute of limitations, and now only potential liabilities for 2016 in the amount of HRK 24,567 thousand remain. Contingent liabilities according to the estimate for the paid reimbursement of travel expenses (mileage) for the period from 2017 to 2021 amount to approximately 54,659 thousand kuna. /iv1 As at 31 December 2021, the Company had concluded contracts according to which investments / services / works in various facilities and equipment were started but not completed. Unrealized contractual obligations amount to HRK 1,303,550 thousand, and liabilities for ongoing procurement procedures amount to HRK 396,571 thousand, which amounts to a total of HRK 1,700,121 thousand. 41, INFLUENCE OF COVID-19 AND THE WAR IN UKRAINE ON THE COMPANY'S OPERATIONS The unfavorable epidemiological situation with Covid - 19 continued in 2021, and the Company recorded a decrease in the number of transported passengers, and thus a decrease in revenue. Given that the crisis caused by the epidemic had a very negative impact on the Company's operations, as of December 25, 2020, operations were streamlined and temporarily reduced the volume of rail passenger transport, and changes in the timetable included reduced services by 10%. In 2021: * 13,541 thousand passengers were realized, which is 31.8% less passengers compared to the year 2019 (less by 6,313 thousand passengers) * PKM 539.9 million PPPs were realized, which is 26.4% less PPPs compared to 2019 (193.6 million PPPs less) * HRK 154.0 million in revenue from passenger transport was generated, which is 38.5% less revenue from passenger transport compared to 2019 (HRK 96.5 million less) * 13,653,916 train km were realized, which is 11.0% less train km compared to 2019 (less by 1,682,122 train km) 55 NOTES TO THE ANNUAL NON-CONSOLI DATED FINANCIAL STATEMENTS ON 31 DECEMBER 2021 - CONTINUED The war in Ukraine has further negatively affected the deteriorating energy situation in Europe, leading to rising oil and gas prices and the possibifty of a state of emergency due to the cessation of natural gas supplies provided by Russia. In 2022, uncertainty continued regarding the prevention measures taken to stop the spread and combat the covida-19 epidemic. It is not possible to estimate the duration of the epidemic, but the Society is actively monitoring the situation and will take all necessary measures to minimize potential negative impacts in the event of deterioration. 42. EVENTS AFTER THE DATE OF STATEMENT OF FINANCIAL POSITION/NON- CONSOLIDATED BALANCE SHEET After the date of the non-consolidated balance sheet / non-consolidated statement of financial position, there were no other significant events that should affect the annual non-consolidated financial statements of the Company for 2021. 43. PREPARATION AND APPROVAL OF ANNUAL NON-CONSOLIDATED FINANCIAL STATEMENTS The annual non-consolidated financial statements presented on the previous pages were prepared and approved for issue by the Company's Management Board on 6 June 2022. Signed on behalf the Management Board: Zeljko Iki6 Damir Rubdid Mario Zubak Presiden of the Member of the Management Member of the Management Management Board Board Board H PUTNICKI PRIJEVOZ d.o.o. Strojarska cesta 11 10 000 Zagreb 56