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KORIDORI SRBIJE D.O.O., BEOGRAD

FINANCIAL STATEMENTS

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FOR THE YEAR ENDED 31 DECEMBER 2014

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EY Building a better working world

Ernst & Young d.o.o. Beograd Spanskih boraca 3 11070 Beograd, Srbija

INDEPENDENT AUDITORS' REPORT

Tel: +381 11 2095 800 Fax: +381112095 890 ey.com/rs

This is an English translation of the Report Originally issued in Serbian language

(For management purposes only)

TO THE MANAGEMENT AND OWNERS OF KORIDORI SRBIJE D.O.O., BEOGRAD

Report on the Financial Statements

We have audited the accompanying financial statements of Koridori Srbije d.o.o., Beograd (hereinafter: the Company), which comprise the balance sheet as at 31 December 2014, and the income statement, statement of changes in equity and cash flows statement for the year than ended, and a summary of significant accounting policies and other explanatory notes. The financial statements have been prepared by management of the Company in accordance with the basis of preparation and accounting policies as disclosed in Note 2.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements in accordance with the basis of preparation and accounting policies as disclosed in Note 2, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opm1on on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of the financial statements 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 entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

PIB: 101824091 • Matitni broj: 17155270 • Upi.an i unet osno<ni kapital: 15.075.01 EUR ReQistarski broj 47839 kod Agencije za privredne reqistre Poslovni ratun 160·0000000399176·13 kod Banca lntesa a.d. Beo9rad

EY Building a better working world

Opinion

In our opinion, the financial statements of the Company for the year ended 31 December 2014 are pepared, in all material respects, in accordance with the basis of preparation and accounting policies as disclosed in Note 2.

Report on Other Reporting Requirements

The accompanying Statement of Sources and Uses of Funds presented in Annex 1 and Statement of Reconciliation of Designated Accounts presented in Annex 2 to the financial statements are presented for the purpose of additional analysis as required by f inancial reporting provisions of contracts with certain creditors, and do not form an integral part of the Company's financial statements. The management's policy is to prepare the accompanying statements on the cash receipts and disbursements basis. These statements are the responsibility of the management of the Company. The information presented within these statements is consistent with the audited financial statements referred to above.

Basis of Accounting and Restriction on Distribution and Use

Without modifying our opinion, we draw attention to Note 2 to the financial statements, which describes the basis of accounting. These financial statements are prepared to assist the Company to comply with the financia l reporting provisions of the contracts with creditors which are described in further detail in Note 13 to the financial statements. As a result, the financial statements may not be suitable for any other purpose. Our report is intended solely for use by the management and owners of the Company and such creditors specified in Note 13 and should not be distributed to or used by any other parties without our consent.

A member lirm ol Ernst & Young Global Limited


INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2014

In RSD'OOO Note 2014 2013

OPERATING INCOME Sales 3 2,129 1,811 Other operating income 342,815 249,000

OPERATING EXPENSES 344,944 250,811 Cost of material 4 (4,042) (9,815) Costs of salaries, fringe benefits and ot her persona l expenses 5 (304,327) (279,982) Costs of depreciation and provisions 6 (4,543) (3,964) Other operating expenses 7 (48,238) (39,537)

(361,150) (333,298)

LOSS FROM OPERATIONS (16,207) (82,487)

Financial income 8 19,547 83,069 Financial expenses (183) (30) Other income 230 Other expenses (2,651)

OPERATING PROFIT BEFORE TAXES 506 782

Income tax 9 506 782

Net Income/Loss

Beograd, 30.06.2015

Legal representative Financial Director Person responsible for the Dmitar Durovic Radinka Mirkovic preparation of the financial

statements Rados Milovanovic

3


BALANCE SHEET AS AT 31 DECEMBER 2014

In RSD' 000

ASSETS Non-current assets Intangible assets Property, plant and equipment

Current assets Inventories Receivables Cash and cash equivalents Prepaid expenses, accrued income and VAT

TOTAL ASSETS

EQUITY AND LIABILITIES Equity Share capital Net income

Long-term provisions and liabilities Other long term liabilities

Short-term libilities Trade and other payables Other short-term liabilities VAT liabilities, accruals and deferred income Liabilities for income tax

TOTAL EQUITY AND LIABILITIES

Beograd, 30.06.2015

Note

10

11 12

13

14

15

Legal representative Dmitar Durovic

Financial Director Radinka Mirkovic

31.12.2014 31.12.2013

284 219 62,911,225 39,363,764

62,911,509 39,363,984

1,362 1,913 6,696 5,737

2,641,768 2,450,052 265,914 229,932

2,915,740 2,687,634

65,827,249 42,051,618

500 500

63,513,780 39,965,979

2,205,055 1,965,155 6,006 37,287

101,908 82,021 676

2,312,969 2,085,139

65,827,249 42,051,618

Person responsible for the preparation of the financial


4


STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2014

In RSD'OOO Paid capital

Balance at 1 January 2013 Adjustment- decrease of finance income in 2012

Balance at 1 January 2013, after adjustments Retained earnings

Balance at 31 December 2013

Balance at 1 January 2014 Retained earnings Decrease of subscribed capital

Balance at 31 December 2014

Beograd, 30.06.2015



500

500

500

500

Retained earnings Total

500

500

500

500

Person responsible for the preparation of the financia l


5

KORJDORI SRBIJE D.O.O., BEOGRAD

CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2014

In RSD 'OOO

CASH FLOWS FROM OPERATING ACTI VITIES Cash inflow from operating act ivities

Sales and advances received Interests received from operating activities Other inflow from ordinary operations

Cash outflow from operating activ ities

Payments and prepayments to suppliers Salaries, compensations and other employee benefit s Int erest paid Profit tax Payments for other public income

Net cash lnflow/(outflow) fr om operating activit ies

CASH FLOWS FROM INVESTING ACTI VITIES Cash outflow from Investing activities Purchase of intangible assets, property, plant and equipment and biological assets

Cash inflow from Invest ing activit ies Other f inancial placements

Net cash Inflow from Investing act ivities

CASH FLOWS FROM FINANCING ACTIVITIES

Cash inflows from f inancing activit ies

Long and short term loans (net inflows)

Cash outflows from f inancing activities Long and short term loans (net outf lows) Net cash Inflow from financing activities

Total Cash inflow Total Cash outflow

Net decrease in cash and cash equivalents Cash and cash equivalents at 1 January Foreign exchange gains/(losses) on cash and cash equivalents

Cash and cash equivalents at 31 December

Beograd, 30.06.2015

Note

3

11


Financia l Director Radinka Mirkovic

2014 2013

250,811 250,811

2, 167 1,811 13,964

358,000 249,000

23,181,031 19,346,371

22,870,573 19,063,653 304,327 279,982

5 717 782

5,409 1,964

(22,806,900) (19,095,560)

(19,053) (740)

( 19,053) ( 740)

164,346 83,069 164,346 83,069

145,293 82,329

22,768,949 19,868,634

19,868,634 15,080,142

22,768,949 19,868,634

23,307,426 20,202,514 23,200,084 19,347,111

107,342 855,403 2,450,052 1,594,547

84,374 102

2,641,768 2,450,052


statements Rados Miladinovic

6

KORIDORI SRBIJE 0 .0 .0 ., BEOGRAD

NOTES TO THE FINANCIAL STATEMENTS

1. CORPORATE INFORMATION

The financial statements of Koridori Srbije d.o.o. Beograd ("the Company") for the year ended 31 December 2014 were authorized for issue in accordance with a resolution of the Director.

The limitied liabilited company Koridori Srbije, that has operated up to 8 February 2011 under name Koridor 10 d.o.o. Beograd, was founded in accordance with the decision of the National Infrastructure Council of the Republic of Serbia by which the construction of Koridor 10 was marked as an strategic interest of the Republic of Serbia, Decision of the Board of Directors of public company ,Putevi Srbije" no. 953-67/08-48 on 22 January 2009.

The Government of the Republic of Serbia in its conclusion no 05 023-278/2009-1 from 22 January 2009 concu red with the decision on the foundation of the limited liability company "Koridor 10" d.o.o.

Total paid-up capita l of the Company amounted to RSD 250,000,000. In accordance with the request of the Ministry for infrastructure on 4 February 2009, the Republic of Serbia Budget paid portion of the initial capital in the amount of RSD 125.000.000,00 on the account openned with Komercijalna banka Beograd after which Koridor 10 d.o.o. was registered within the Serbian Business Registry Agency under no. BD 4787/2009.

The Company's goal has been to manage the state owned roads in construction in undefined period of time.

In accordance with the Decision on amendments and additions to the Decision on the Company formation, no. 119-2/09 from 14 April 2009, given by the Company's General Assembly and based on the obtained approval from the Government of Serbia no 05 023-278/2009-4 from 9 April 2009 the initia l capita l was reduced to the amount of RSD 50.000.000,00. Public company "Putevi Srbije" paid in RSD 25 mi llion for initia l capital on 24 July 2009 with obligation to pay another RSD 25 million in the period of one year.

The Decision on amendments and aditions of the Decision of the Company formation no. 888/10 from 21 July 2010, given by the Company's General Assembly, the initial capital was reduced from RSD 50 million to RSD 25 million.

Funds in the amount of RSD 125 million, paid from by the Budget of the Republic of Serbia on 4 February 2009 in accordance with the Decision of the Ministry for Infrastructure - classification 451, which were partially used in accordance with Law on Budget for 2009, for financing operations of Koridor 10 d.o.o.

Based on the Decision of Koridor 10 d.o.o General Assembly number 1933/10 dated November 12, 2010, at which the Government had prior approval, by Decision 05 number 023-8171/2010, dated November 11, 2010 initial capital is increased from RSD 25,000,000 to 3,025,000.000

In accordance with the agreement on the transfer of ownership in the Company no. 023-01-00010/2010-01 which was concluded between Public company "Putevi Srbije" and the Government of Serbia on 24 November 2010 Public company "Putevi Srbije" transferred its ownership rights and its stake in the amount of RSD 3.025.000.000,00 to the Republic of Serbia. The change in the ownership was registered within the Serbian Business Registry Agency under no. BD 134765/2010 on 30 November 2010.

In accordance with the Decision of the Governement of Serbia on Article of Association of the KORIDOR 10 BEOGRAD, Vlajkoviceva 19 A no. 023-9271/2010-3 on 21 January 2011 the following amendments were :

- the capital was reduced to RSD 500.000; - change in business name from KORIDOR 10 d.o.o. to KORIDORI SRBIJE Limited liability

company Bograd, Vlajkoviceva 19 A; - General Assembly - is to be formed of up to five members which are to be named by the

Government; - The Company is represented by the Director (replacing management board).

7

KORIDORI SRBIJE 0.0.0., BEOGRAD


1. CORPORATE INFORMATION (continued)

In Accordance with the Decision of the General Assembly no. 665/11 from 21 March 2011, the Company's seat was changed from Vlajkoviceva 19a to Kralja Petra 21. The change in seat was registered with the Serbian Business Registry Agency on 25 March 2011 no. BD 372702/2011.

The Company's main goal is to manage operations in traffic infrastructure - highways on the territory of the Republic of Serbia including organizing and performing expert works on construction of the highways, expropriation of land, creation of the project documentation, supervision, construction and planning of the construction of highways.

As at 31 December 2014, the Company had 109 full time employees (31 December 2013: 97 employees).

2. BASIS OF' PREPARATION

These financial statements are prepared for the purpose to assist the Company to comply with the financial report ing provisions of the contracts with creditors which are described in further detail in Note 14 to the financial statements .

The financial statements of the Company have been prepared in accordance with the accounting policies as disclosed in Note 2 .

The accompanying financial statements have been prepared on the assumption that the Company will continue as a going concern in the foreseeable future. As of the date of authorization of these financial statements, the Company management is not aware of any facts or circumstances that would indicate a threat to the clontinued activity of the Company.

Basis of accounting

These financial statements are presented in Republic of Serbia Dinars ("RSD") and all values are rounded to the nearest thousand (RSD'OOO) except where otherwise indicated. These financial statements have been prepared on a historical cost basis except where it is specifically mentioned to be on a fa ir value basis, as specified in the accounting policies.

The principal accounting policies applied in the preparation of these financial statements are set forth in the fo llowing notes.

Foreign currency translation

The functional and presentation currency of the Company is the Republic of Serbia Dinar (RSD).

Transactions in foreign currencies are initially recorded in the functional currency, applying the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the balance sheet date. Foreign exchange differences which are the result of translation are disclosed in the balance sheet. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of initial transaction. Non-monetary items measured at fair value in a foreign currency are converted using the exchange rates at the date when the fair value was determined.

8



2. BASIS OF PREPARATION (continued)

Financial income

Interest income on deposits with banks is recognized by crediting liabilities relat ing t o t he specific financing purposes to which deposits relate. Financial income is recognized in the amount necessary to cover the net expenses of the Company during the year and is charged to the funds received from the Republic of Serbia for the Company's own expenses.

Property, plant and equipment

Property, plant and equipment are stated "at cost and/or deemed cost " deducted for accumulated depreciation and any impairment in value. The cost represents the prices billed by suppliers together with all costs incurred until the assets are brought to their present location and condition.

Repair and maintenance costs are expensed as incurred.

The carrying value of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.

Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:

Office furniture and equipment- 33%

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the income statement in the year the item is derecognized.

The assets' residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate.

Under 'construction in progress' and 'prepayments for fixed assets' the Company presents investments in road construction which are under Company ' s management. After the completion of construction, the booked value of the investment will be de-recognized and transferred to the Republic of Serbia by debiting the liabilities which are reported under long-term liabilities.

Intangible assets

Intangible assets acquired separately are capitalized at cost as at the date of acqu isition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses.

The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired.

Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-generating unit level. Such intangibles are not amortized.

The useful lives of the Company's intangible assets are assessed to be finite. The amortization of these assets is calculated on a straight line basis over the estimated useful life of 3 years.

Gains or losses arising from derecognizing of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the income statement when the asset is derecognized.

9



2. BASIS OF' PREPARATION (continued)

Financial assets

Financial assets are classified as financial assets at fair value through profit and loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets.

The Company determines the classification of its financial assets at initial recognition. Financial assets are recognized initially at fair value plus, in the case of investments not at fair value through profit or loss, directly attributable transactions costs .

The Company's financial assets include cash and cash equivalents and short term deposits as well as trade and other receivables.

Trade receivables and other receivables

Trade receivables are recorded and measured based on amount of the invoiced value less allowance for doubtful debts. Allowance for impairment is made when there is objective evidence that the Company will not be able to collect certain trade receivables. Estimation of the amount of uncollectible receivables is based on the aging structure of the receivables. Bad debts are written off when identified.

Cash and cash equivalents

Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less. For the purpose of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above.

10




2.1. Summary of significant accounting policies

Impairment of financial assets

The Company assesses at each reporting date whether there is any objective evidence that an asset or a group of financial assets is impaired. An asset or a group of assets is deemed t o be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of assets (as incurred " loss event") and that loss event has an impact on the estimated future cash flow of the financia l asset or the group of assets that can be reliably estimated.

Financial liabilities

The Company's financial liabilities include trade and other payables, and government grants.

Based on the confirmation from the Ministry of Finance of the Republic of Serbia liabilities derived from principal and interest on financing arrangements as disclosed in Note 13 to the financial statemetns, are part of the loan obligations of the Republic of Serbia on the basis of public debt and the resources needed for settlement of those obligations for the principal and interest payments will be allocated in the budget of the Republic of Serbia. The Company does not recognize interest expense and interest liabilities on these funds.

Derecognition of financial assets and liabilities

Financial assets

A financial asset (or, where appropriate a part of a f inancia l asset or a part of a group of financial assets) is derecognized where:

• the r ights to receive cash flows from the asset have expired; • t he Company retains the right to receive cash flows from the asset, but has assumed an

obligation to pay them in full without material delay to a third party under a "pass-through" arrangement;

• The Company has transferred the rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all t he risks and rewards of the asset, but has transferred control of the asset.

Financial liabilities

A financia l liability is derecognized when the ob ligation under the liability is discharged or cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the income statement.

11




2.1. Summary of significant accounting policies (continued)

Government grants

Government grants are recognized where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates t o an expense item, it is recognized as income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, it is recognized as deferred income and released to income in equal annual amounts over the expected useful life of the related asset.

Where the Company receives non-monetary grants, the asset and that grant are recorded at nominal amount s and released to profit or loss over the expected useful life of the relevant asset by equal annual installments.

Provisions

Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event. It is probable that an outflow of resources embodying economic benefits will be required to sett le the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time va lue of money and, where appropriate, the risks specific to the liability.

Pensions and other post-employment benefits

Short-term employee benefits

The Company makes contributions to the Government's health, retirement benefit and unemployment schemes at the statutory rates in force during t he year, based on gross sala ry payments. The cost of social security payments is charged to the statement of income in the same period as part of the salary cost. There is no additional liability for those plans.

Retirement benefit

In accordance with the labor contracts, there is a retirement indemnity equal to three gross monthly salaries, based on the Company average sa lary earned in the month prior to retirement. The cost of providing these benefits is considered by management t o be insignificant and they are not disclosed in financial reports as of 31 December 2014.

Revenue

Revenue is recognized to the extent that it is probable that economic benefits will flow to the Company and revenue can be reliably measured. Revenue is measured at fair value of the consideration received, excluding discounts, rebates, and other related taxes or duties. The Company recognizes revenues up to the amount which is necessary to cover current year expenses, while the excess of revenues over expenses is being deferred within long term liabilities.

12

KORIDORI SRBIJE 0 .0.0., BEOGRAD




Taxes

Current tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

Current income tax relating to items recognized directly in equ ity is recognized in equity and not in the income statement. Management periodica lly eva luates positions taken in the tax returns with respect to situations in which applicable ta x regulations are subject to interpretation and establishes provisions where appropriate.

Deferred tax

Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences, except:

• where a deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• In respect of taxable temporary differences associated with investments in subsidiaries, assoc iat es and interests in joint ventures, where the timing of the reversal of the temporary difference can be contro lled and it is probable that the temporary differences will not reverse in the foreseeable fut ure.

Deferred income tax assets are recognized for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, t o the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilized, except:

• where a deferred income tax asset relating to a deductible temporary difference arises from the initial recognition of and asset or liability in a transaction that is not a business combination and, at the time of the t ransaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

The carrying amount of deferred income t ax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be util ized. Unrecognized deferred income tax assets are reassessed at each balance sheet date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabili t ies are measured at the t ax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

13





Taxes (continued)

Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction either in other comprehensive income or directly in equity.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Other income and expenses

Maintenance, repairs and renewals are charged to the income statement as incurred.

Other expenses are recognized on an accrual basis

Financial income

The Company recognizes financial income on cash and cash equivalents held with banks on an accrual basis.

Comparative data

Comparative data is data from 2013.

14



3. SALES

Sales of tender documents on local market Sales of tender documents on foreign market

Total sales

4. COST OF MATERIAL

Cost of material Fuel and energy cost

Total cost of materials

2014 2013 ---=-R-=-s-=-o-=-·o=-o=-o=-

1,150 979

2,219

RSD'OOO 960 851

1,811

---~2..;;..0.;;;_14~ 2013 RSD'OOO RSD 'OOO

2,929 8,954 1,113 861

4,042 9,815

5. SALARIES, FRINGE BENEFITS AND OTHER PERSONAL EXPENSES 2014 2013

Gross salaries Taxes and contributions on salaries Cost of temporary service contracts Authors and other contracts expenses Other allowances t o employees Total costs of salaries, fringe benefits and other personal expenses

6. DEPRECIATION

Depreciation of intangible fixed assets Depreciation of tangible fixed assets (Not e 10)

Total depreciation

RSD'OOO 239,500

42,871 4,187

17,770

304,327

2014 RSD'OOO

175 4,367

4,543

RSD'OOO 214,104

38,318 10,321

17,238

279,981

2013 RSD'OOO

125 3,839

3,964

15

KORIDORI SRBIJE 0 .0.0., BEOGRAD


8. OTHER OPERATING EXPENSES

Rent expenses Cost of non-production services Service cost of outputs Transportation services Cost of other services Other non-production costs Entertainment cost Maintenance cost Bank fees Contributions Advertising cost Cost of insurance premiums Membership fees Tax expenses

Total for other operating expenses

8. FINANCIAL INCOME

2014 2013 RSD'OOO RSD'OOO

12,639 14,341 5,573 4,962

726 752 6,730 6,126 5,609 3,766

553 1,304 1,230 2,536 6,535 1,067

862 2,322 4,179

398 1,311 76 254

928 138 2,199 660

48,239 39,539

Financial income during the financial year relates to income earned on monthly bank deposits of excess cash.

Interest income on deposits with banks is recognized by crediting liabilities relating to the specific financing purposes to which deposits relate. Financial income is recognized in the amount necessary to cover the net expenses of the Company during the year and is charged to the funds received from the Republic of Serbia for the Company's own expenses.

9. INCOME TAX

Income tax for 2014 consists of current income tax in the amount of RSD 506 thousand (in 2013: RSD 782 thousand).

Based on projections of future taxable income due to the specific applicable method of exploiting these tax credits in the coming years, the Company has assessed that it is uncertain that they will be realized in future fiscal periods. As a result of the above, the funds for deferred tax are not recognized as of 31 December 2014.

16

KORIDORI SRBIJE D.O.O., BEOGRA D


10. PROPERTY, PLANT AND EQUIPMENT

Movements in property, plant and equipment during the year ended 31 December 2014 and 31 December 2013 were as follows:

Assets Leasehold under Advances for improvement

In RSD'OOO Equipment construct ion fixed asset s property Tot al Cost: At 1 January 2013 15,198 10,046,006 10,556,665 30,386 20,648,225 Purchases 740 17,198,605 10,556,665 18,750,908 impairment (24,688) Transfers

At 31 December 2013 1 5 ,938 27,244,611 12,108,228 5,698 39,374,475

Purchases 2,638 23,912,572 2,529,725 10,716 26,455,651 Impairment (2,887,411) (16,414) (2,903,825) Transfers

At 31 December 2014 18,576 51,157,183 11,750,542 0 62,926,301

Depreciation and impairment: At 1 January 2013 6 ,870 6,870 Depreciation for the year (Note 6) 3,840 3,840 At 3 1 December 2013 10,710 10,710 Depreciation for the yea r (Note 6) 4,367 4 ,367 At 31 December 2014 15,076 15,076

Net book value At 31 December 2013 5,227 27,244,611 12,108,228 5 ,697 39,363,763

At 31 December 2014 3 ,500 5 1,157,183 11,750,542 62,926,225

Assets under construction and Advances for fixe d assets

Assets under construction mainly relates to construction of part of the E 80 highway - road to Bulgaria and parts of road E75 financed from IBRD, EBRD and EIB, investment in land expropriation and other archaeological researches financed from the Company's own funds, as well as construction of part of the E 75 highway - road to FYR of Macedonia financed from HiPERB grant (RSD 2,055,658 thousand) as well as funds from the Government of Azerbaijan which are provided for the road E 763 - Sector 2 Ljig - Pozega.

Major pa rt of advances for f ixed assets are given to the contractors for construction of Sector 2 of highway E 763 which is financed by the Government of Republic of Azerbaijan in the amount of RSD 4,100,917 thousand as well as to the contractors for construction of section of E80 highway financed by IBRD and EBRD in the amount of RSD 2,504,073 thousand and the contractors for construction of sections f inanced by EIB in the amount of RSD 5,123,701 thousand.

17



11. CASH AND CASH EQUIVALENTS

Cash at bank in local currency Cash at bank in foreign currency+ guarantees Overnight deposits of IBRD funds Overnight deposits of HiPERB funds Non-interest bearing term deposits in domestic currency Deposits in local currency Collected guarantees (Alpine) Treasury account WBIF fund payment account

Total cash and cash equivalents

31.12.2014. 31.12.2013. RSD'OOO RSD'OOO

11,200 391 294,896 330 873,653 870,101 194,029 179,686

562,706 565,100 388,774 746,581 269,350 85,305

47,159 2,558

2,641,768 2,450,052

Cash at bank held in local currency and foreign currency are not interest bearing , except for overnight deposits. Monthly term RSD deposits bear interest rates, ranging from 7,20% p.a. to 9,50% p.a.

Overnight deposits in local banks are deposited on the account opened by the Ministry of Finance for the purpose of depositing IBRD funds.

The Ministry of Finance opened the special purpose account to be used for the transfer of funds from EIB and HiPERB. The Company is not authorized to directly use these funds, nor it records these funds in its financial statements.

12. PREPAID EXPENSES, ACCRUED INCOME AND VAT

Deferred upfront fee for IBRD funds Deferred upfront fee for EBRD funds Other deferred charges relating to the IBRD funds Other deferred charges

Prepa id expenses, accrued income and VAT

31.12.2014. RSD'OOO

83,219 181,437

382 876

265,914

31.12.2013. RSD'OOO

71,993 156,961

194 784

229,932

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13. OTHER LONG TERM LIAB ILITIES

Funds received from foreign creditors and donors for the construction of roads were recorded within other long-term liabilities, as well as funds received from the Government of the Republic of Serbia provided for financing of expropriation, planning and construction and for own consumption. Within other long term liabilities are also retained guarantees for good performance.

Based on the confirmat ion from the Ministry of Finance of the Republic of Serbia liabilit ies derived from principal and interest on these financing arrangements are part of the loan obligations of the Republic of Serbia on the basis of public debt and the resources needed for settlement of those obligations for the principal and interest payments will be allocated in the budget of the Republic of Serbia. The Company does not recognize int erest expense and interest liabilities on these funds.

IBRD funds (Note 16) EBRD funds (Note 16) EIB funds (Note 16) Liabil ities toward Government of Republic of Azerbaijan HiPERB funds Liabilities for assets from WBIF funds Liabilities toward the Government of the Republic of Serbia Liabilities toward Ministries Liabilities for received funds from the guarantee deposit Liabilities for retained guarantees for good performance

Total other long term liabilities

14. TRADE AND OTHER PA YABLES

Customers prepayments Liabilities to domestic suppliers Liabilities to foreign suppliers

Total trade and other payables

31.12.2014. RSD'OOO

16,011,181 5,259,175

13,987,829 18,515,223

1,957,402 187,174

3 ,076,084 1,765,705

679,236 2,074,770

63,513,779

31.12.2014. RSD'OOO

38 2,020,769

184,242

2,205,049

Trade payables are non-interest bearing and have an average term of 30-60 days.

31.12.2013. RSD'OOO

9,881,092 3,680,435 7,344,019

10,819,582 1,853,917

55,177 3,049,499 1,203,187

618,806 1,460,265

39,965,979

31.12.2013. RSD'OOO

36 1,898,222

66,897

1,965,155

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15. VAT LIABILITIES, ACCRUALS AND DEFERRED INCOME

Movements in VAT liabilities, accruals and deferred income may be summarized as follows:

Deferred interests Deferred budget subventions Other

At December 31

31.12.2014. RSD'OOO

99,627

99,627

31.12.2013. RSD'OOO

81,771

81,771

Deferred interest income as of 31 December 2014 is recognized within the related long-term liabilities (see note 13).

16. COMMITMENTS AND CONTINGENCIES

Pending litigations

As of 31 December 2014 the Company is defendant in a number of court cases in which the plaintiffs have claimed compensations on the ground of expropriation in the total amount of RSD 204,113 thousands . The Company did not record provisions for potential cash outflows in the cases of loss at the end of the court cases, since those liabilities are refunded from the Government budget. Koridori Srbije d.o.o, legally represented by Wolf Thais from Vienna , took legal steps in front of the Vienna Commercial Court against ALPINE BAU Gmbh on the ground of trade receivables collection in the amount of 78,322,819.9 EUR.

Other commitments and contingencies

The Company has entered into the following commitments due to acting as Implementing Agency of the Government and as a resu lt of loan contracts signed by the Government of the Republic of Serbia (Borrower) with International Financial Institutions:

International Bank for Reconstruction and Development (IBRD)

The Government of Republic Serbia entered into the Loan agreement with the IBRD on 13 July 2009 (number 7746-YF).

The purpose of the loans is to finance increase transport efficiency and improve traffic safety on three sections of Corridor 10, between Nis and Dimitrovgrad and Leskovac (Grabovnica) and Donji Neradovac respectively, and to improve road management and road safety in the Borrower's territory.

The loan agreement is for the total amount of EUR 275,200,000. The effective deadline was specified at 120 days from the date of the agreement, while the closing date is 31 December 2015. With the approval of IBRD, the loan has currency conversion option. Interest rate is defined as LIBOR for the loan currency plus variable spread.

The principal and interest are repayable in semi- annual installments starting 15 April 2017 and ending 15 October 2029. First actual withdrawal of funds by the Company occurred in April 2010.

The agreement specifies front-end fee of 0.25% (EUR 688,000) which was withdrawn on 6 November 2009.

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16. COMMITMENTS AND CONTINGENCIES (continued)

International Bank for Reconstruction and Development (IBRD) (continued)

The following table set categories of items to be financed out of the proceeds of the Loan, the allocation of the Funds to each category and the percentage of expenditures for items to be financed in each category.

Expressed in EUR

Category of expenditure 1. Goods, trainings and operating expenses 2. Front-end fee

TOTAL

European Bank for Reconstruction and Development (EBRD)

Loan amount for

distribution 274,512,000

688,000

275,200,000

% of expenditures

to be financed 100% 100%

The Government of Republic Serbia entered into the Loan agreement with the EBRD on 22 September 2009 (number 39750). The purpose of the loan is to assist the Borrower in the development of the Serbian core road transport network to facilitate trade and regional integration and capitalize on transit potential. The following two sections/parts of the branch of Corridor 10 that runs from Nis to Dimitrovgrad are to be financed from the loan proceeds:

Part A-1 Construction of the section from Crvenka reka to Ciflik Part A-2 Construction of the section from Pi rot to Dimitrovgrad

The loan agreement is for the total amount of EUR 150,000,000. The closing date is 31 December 2013. Interest rate is variable and payable on 8 March and 8 September each year. The principal is repayable in 22 equal semi-annua l installments during the period from 8 September 2013 to 8 March 2024.

According to the agreement commitment charge of 0.5% accrues 120 days from the agreement date (being 20 January 2010).

The agreement specifies front-end fee of EUR 1,500,000 which was withdrawn on 15 February 2011.

The following table set categories of items to be financed out of the proceeds of the Loan, the allocation of the Funds to each category and the percentage of expenditures for items to be financed in each category:

Expressed in EUR

Category of expenditure

1. Works for Part A-1

2. Works for Part A-2

3. Front-end Commission

TOTAL

Loan Amount for Allocation

%of Expenditures to

be Financed 100% of contract

value excluding 82,000,000 any Taxes

100% of contract value excluding

66,500,000 any Taxes

1,500,000 100%

150,000,000

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16. COMMITMENTS AND CONTINGENCIES (continued)

European Investment Bank (EIB)

EIB E75

The Government of Republic Serbia entered into the Loan agreement with the EIB on 23 October 2009 (number 25.198). The purpose of the loan is to assist the Borrower in the design and construction of 75 km of 2x2 motorway of Pan European Corridor X (E75), partly on new and partly on old alignment, between Grabovnica and Levosoje in Southern Serbia.

The loan agreement is for the total amount of EUR 384,000,000 to be withdrawn in up to 25 tranches of EUR 10 mil at minimum. Deferment of disbursements is subject to deferment indemnity.

The Borrower shall pay interest on the outstanding balance of each fixed I floating rate tranche quarterly, semi-annually or annually in arrears on the relevant payment dates, as specified in the disbursement notice, commencing on the first such payment date following the date on which the disbursement of the tranche was made.

The loan agreement does not specify any front-end fees.

EIB E80

On 29 November 2010, the Government of Republic of Serbia entered into the Loan agreement with the EIB (SERAPIS number 2008-0546). The purpose of the loan is to assist the GRS in the design and construction of 34.67 km of 2x2 motorway of Pan European Corridor Xc (E80), consisting of two sections between Prosek (near city of Nis) and Ciflik in Eastern Serbia.

The loan agreement is for the total amount of EUR 195,000 thousand to be withdrawn in up to 20 tranches of EUR 10 mil at minimum. Deferments of disbursements are subject to deferment indemnity. Closing date is 31 December 2016.

The Borrower shall pay interest on the outstanding balance of each Fixed I Floating Rate Tranche quarterly, semi-annually or annually in arrears on the relevant Payment Dates, as specified in the Disbursement Notice, commencing on the first such Payment Date following the date on which the disbursement of the Tranche was made.

THE GOVERNMENT OF THE REPUBLIC OF AZERBAIJAN

On 22 February 2012, the Government of Republic of Serbia entered into the Loan agreement with the Government of Republic of Azerbaian in the amount of EUR 300,000,000. The purpose of the loan is to assist the Government of the Republic of Serbia in the construction of the following sections: Ljig-Boljkovci, Boljkovci-Takovo and Takovo - Preljina at highway E-763 in Republic of Serbia.

On 7 April 2012 Koridori Srbije d.o.o. has signed the construct ion agreement with Azvirt LLC in the amount of EUR 308,000,000. In addition, Republic of Serbia is going to provide EUR 8,000,000.

According to the agreement, 49% of the loan is going to be used for purchases of goods from Serbian manufacturers. The loan agreement is for the total amount of 300,000. Due date is 7 April 2016. The principal is repayable in 25 equal semi-annual instalments. The interest rate is defined as 4% annually.

According to the agreement commitment charge of 0.5% accrues 180 days from the agreement date (being 7 September 2012).

The loan agreement does not specify any front-end fees.

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17. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Company's activities expose it to a variety of financial risks. These risks primarily include market risk, credit risk and liquidity risk. The Company does not use derivate financial instruments or any other form of hedging against these risks because the market in which the Company operates is still emerging. The banks in the Republic of Serbia are in the process of preparation for offering derivate financial instruments to the companies.

The policies for managing each of these risks are summarized below.

Market risk

Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates and foreign exchange rates.

Due to the fact that the Government of the Republic of Serbia mostly bears those risks, the Company has no significant concentration of market risk.

Foreign currency risk

Currency risks arise on monetary accounts of financial instruments which are denominated in currency that is not the functional currency. As of 31 December 2014, some of the cash deposits and advances given are denominated in EUR. However, the Company does not have any particular policies to manage this kind of financial risk.

Credit risk

Credit risk is the risk that a counter party will not meet its obligations under a f inancial instrument or customer contract, leading to financial loss. The Company management believes that the Company is not exposed to credit risk from its operating act ivities due t o the fact that receivables are immaterial. The Company performs detailed analyses when select ing cont ractors.

Credit risk related to financial instruments and cash deposits: financia l instruments t hat potentially expose the Company to significant concentration of credit risk consist principally of excess cash holdings, deposits and accounts receivables. The Company places its deposits and excess cash with reputable financial institutions, limiting the amount of credit exposure wit h an individual institution. The Company's management monitors the status of banks with which deposits are kept.

Liquidity risk

Due to the fact that the Company has been formed by the Government with the basic objective of performing activ ities of public interest, it does not face liquidity risks. Namely, it is f inanced from the Government of Serbia budget.

Fair value risk

Financial assets and liabilities should be initially recognized within the ba lance sheet at hist orical cost, and subsequently at their fa ir value. The fair value of financial instruments is determined with reference to relevant market information , where appropriate. As at 31 December 2014, the management believes that the fair values of instruments held by the Company did not differ materially from their recorded values in these financial statements.

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18. EVENTS AFTER THE REPORTING PERIOD

After the balance sheet dat e there were no business events signif icant for t he financial position of t he Company and the resu lts of business operatons for the year ended 31 December 2014.

Beograd, 30.06.2015.

Lega l representative Dmitar Durovic


Person responsible for the preparation of the financia l


24

AN EXES

KORIDORI SRBIJE D.O.O. BEOGRAD

ANN EX 1- STATEMENT OF SOURCES AND USES OF FUNDS

2014 2013 RSD'OOO EUR RSD'OOO EUR

OPENING BALANCE · CASH IBRD Designated account 870,102 7,589,722 586,849 5,666,505 EBRD Designated account EIB Designated account 13 113 HiPERB account WIBif Account 2,557 26,253 Current account 1,577,380 13.480.222 1 .007,698 9,873,290 Total Cash opening balance 2,450,052 21 ,096,310 1,594,547 1 5,539,795 SOURCES Of F'UNOS IBRD Direct payements 3,368,869 26,031 ,567 2 ,052,385 18,042,159 IBRD Withdrawal applications and interest 2,761,218 20, 128,790 2,229,798 19,658,155 IBRD Interest received 2,173 18,632 2,400 21,330 IBRD FX differences 69,087 62,933 Totai iBRD funds 6,201,347 46,178,989 4,347,517 37,721,644 EBRD Direct payements RSD 472,945 3,418,094 EBRD Direct payements EUR 1,105,795 7,954,820 EBRD front-end fees EBRD f X Differences Total EBRD funds 1,578,740 11,372,914 1 ,047,755 9,217,365 EIB Withdrawal applications 6,643,810 56,182,774 6,263,967 54,961 ,281 EIB Direct Payments EIB Front-end fees Total EIB funds 6,643,810 56,182,774 6,263,967 54,961,281 HiPERB Withdrawal applications 103,484 108,985 649,722 5,744,006 HiPERB Direct Payments HiPERB F'X differences 1 4.607 Total HIPERB funds 103,484 108,985 664,329 5,744,006 Azerbaijan withdrawals Azerbaijan direct payments 7,695,641 58,694,091 3,735,883 32,777,039 fX differences Total Azerbaijan sources 7,695,641 58,694,091 3,735,883 32,777,039 WBif withdrawal applications 130,166 1,052,165 55,177 495,264 WBif Direct Payments Total WBIF' funds 1,831 55,177 495,264 Other funds 131,997 1 ,052,165 334,110 2,935,844 Ministry of Finance and Transport 374,131 2,977,299 861,948 7,637,056 Payment of Alpine's guarantee 562,517 4,650,504 746,581 6,072,431 Other sources of funds 39,702 Interest received 60,430 760,121 Total other funds 1,036,780 8,387,924 1 ,942,639 1 6,645,331

Total funds 23,391,799 181,977,842 18,057,266 157,561 ,930 USES OF' fUNDS IBRD Works and goods 6,197,796 46,545,949 4,064,264 35,798,428 IBRO Consultants1 services IBRD Incremental Operating Cost Total IBRD expenditures 6,197,796 46,545,949 4,064,264 35,798,428 EBRD Wor ks for Part A·1 1,105.795 7,954,820 1,047,755 9,217,365 EBRD Works for Part A·2 472,945 3,418,094 EBRD f ront·end Commission Tota l EBRD expenditures 1,578,740 11,372,914 1 ,047,755 9,217,365 EIB Project expenditures 6,643,810 56,182,774 6,263,954 54,961 ,281 Tot al EIB expenditures 6,643,810 56,18Z,774 6,263,954 54,961,281 HiPERB works 103,484 108,985 664,329 5.744,006 HIPE RB expenditures 103,484 108,985 664,329 5,744,006 WBIF other expenses 83,509 688,537 Total WBIF' expenses 83,509 688,537 Azerbaijan works and advances 7,695,641 58,694,091 3,735,883 32,777,039 Total Azerbaijan expenses 7,695,641 58,694,091 3,735,883 32,777,039 Uses of funds from other sources 363,985 3,192,851 334,110 3,136,214 Investment In fixed assets 533,119 4,447,737 1,091 ,467 9,990,775 Total Other Expenditure 897,104 7,640,588 1,425,577 13,126,989

Total Expenditure 23,200,084 181,233,838 17,201,761 1 51,625,108 Foreign exchange gains on cash valuation Foreign exchange losses on cash valuation Cash balance per Bank's Statement CLOSING BALANCE · CASH IBRD Designated account 873,653 7,222,762 870,102 7,589,722 EBRD Designated account EIB Designated account 13 113 HiPERB account Azerbaijan account WJBIF account 47,159 389,881 2,557 26,253 Current account 1,720,955 14,227,672 1,577,380 13,860,529

Total Cash closlnq balance 2,641,767 21,840,315 2,450,052 21,476,617

Beog rad, 30 .06.2015

Financial Director Radinka MlrkoviC

25

KORIDORI SRBIJE D.O.O. BEOGRAD

ANNEX 2- STATEMENT OF RECONCILIATION OF DESIGNATED ACCOUNTS*

31.12.2014. 31.12.2013. RSD'OOO EUR RSD'OOO EUR

Opening balance 870,102 7,589,722 586,849 5,666,505 Add: Withdrawal Application 3,368,869 26,031,567 2,229,798 19,658,155 Direct payments 2,761,218 20,128,790 2,052,385 18,042,159 Interest 2,173 18,632 2,400 21,330

Total Funds 7,002,362 53,768,711 4,871,433 43,388,149 Deduct:

Project expenditure payment 6,197,796 46,545,949 4,064,264 35,798,428

Total Project Expenditure Payments 6,197,796 46,545,949 4,064,264 35,798,428

Foreign exchange gains on cash valuation 69,087 62,933

Excess of financing over funds used 873,653 7,222,762 870,102 7,589,722

Cash balance per Bank's statement 873,653 7,222,762 870,102 7,589,722

*Statement of reconciliation of designated accounts is presented only for funds received from IBRD

Beograd, 30.06. 2015

Legal representat ive Dmitar Durovic




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