ina annual report 2012 3 · ina annual report 2012 11 ment, i.e. increased from hrk 106 million to...

3INA ANNuAl RepoRt 2012

INA Annual Report

4

coNteNt


coNteNt

1. INA GRoup At A GlANce 6

2. 2012 AwARds 7

3. Key fINANcIAl ANd opeRAtING dAtA 8

4. letteR of the pResIdeNt of the MANAGeMeNt BoARd 10

5. oveRvIew of the eNvIRoNMeNt 12

INA

1. exploRAtIoN ANd pRoductIoN 18

2. RefINING ANd MARKetING 24

3. RetAIl 28

4. coRpoRAte ANd otheR 30

ouR BusINesses

1. MANAGeMeNt dIscussIoN ANd ANAlysIs 34

2. Key GRoup opeRAtING dAtA 52fINANcIAl ANd opeRAtING peRfoRMANce

1. sustAINABle developMeNt 58

2. EnvironmEntalpErformancE–compliancE 62

3. occupAtIoNAl heAlth ANd sAfety 64

4. QuAlIty MANAGeMeNt 66

sustAINABle developMeNt, heAlth, sAfety ANd eNvIRoNMeNt (SD&HSE)

1. coRpoRAte GoveRNANce 70

2. MANAGeMeNt BoARd 74

3. executIve dIRectoRs 76

4. coRpoRAte ANd shAReholdeRs INfoRMAtIoN 78

5. expected developMeNt ANd ReseARch 79

6. shAReholdeRs INfoRMAtIoN 80

7. AddRess BooK 81

coRpoRAteGoveRNANce

1. inainDuStrijanaftED.D.–inDEpEnDEntauDitorSrEport 86

2. coNsolIdAted ANd uNcoNsolIdAted fINANcIAl stAteMeNts

foR yeAR 2012 87

3. Notes to the fINANcIAl stAteMeNts 98

fINANcIAl stAteMeNs ANd AudItoR’s RepoRt foR 2012

6

INA GRoup At A GlANce

ouR coRe ActIvItIes IN A sNApshotExplorationandproductionBusinessSegment isengaged inexploration,developmentandproductionofoilandnaturalgas incroatiaandabroad. Since its establishment, inaandcertaincompanieswithininaGroup(croSco)havebeenin-volvedinoilfieldoperationsin20foreigncountries.

therefiningandmarketingBusinessSegment’skeycompe-tenciesareprocessingofcrudeoilaswellasproduction,dis-tributionandsalesofcrudeoilproductsonthedomesticandinternationalmarkets.inaoperatesthecountry’stworefiner-ieslocatedinrijekaandSisak.rijekarefineryismediumsizedandlocatedontheadriaticcoast,withaccesstotheportfordeep-drawingshipsandthepipelinesystem,whiletheSisakrefinery is locatednear thecountry’scapital, theareawiththehighestconsumptionofoilproducts inthecountry.thecompanyhascontinuouslydevelopeditsrefiningsystemoverpreviousyearscompleting,amongother,severalkeyprojectslikehydrocrakingcomplexinrijekaandtheisomerisationunitinSisakrefinery.

retailBusinessSegmentoperatesaregionalnetworkof448petrolstations,ofwhich396stationsincroatiawithaddition-al 52 petrol stations in the neighbouring countries: Bosniaand Herzegovina, Slovenia andmontenegro. the extensiveretailnetworkdevelopmentandmodernizationproject“Blueconcept” intensively continued in 2012 throughout croatiaonnumerous locations.“Blueconcept”projectwas,amongother things, initiated to offer top quality products to ourcustomers,aswellashigherlevelofservicesonourstations,withsignificantimprovementofsiteappearanceandtechni-calconditionsincludingnewretailvisual identity.themaingoalofthisextensiveprogramistocreateatop-levelpetrolstation network service quality leader in croatia, with im-provedefficiencyontopofit.

inaisaEuropeanoilandgascompanywiththeGroupEBitDaofuSD782millionin2012.inahasacrucialrole incroatianoil businessanda strongposition intheregionintheoilandgasexplorationandproduc-tion, oil processing, andoil products distribution ac-tivities.at theendof2012, inahad267millionboeprovenandprobablehydrocarbonreservesandhydrocarbonproduction of 48.6mboe/day. its refineries in rijekaandSisakhaveatotalthroughputcapacityof135.000bbl/day(6.7mt/Y)andhaveproducedatotalof81.000bbl/day(4.1mt)ofrefinedproductsin2012.asofDe-cember31st2012,retailServicesoperated448petrolstations,mostlyincroatiaandBosnia.


20

12

Aw

AR

ds

marcH:awardfordedicationtoqualityservicesinahasreceivedanawardfordedicationtoqualityservicesforyear2011.companywasawardedduringmysteryshoppingdaycalled“feedbackmanagement -managingyour feedbackabout thebuyingexperience.”theawardwaspresentedbymarketresearchagencyHeraklea.

april:inaselectedastrustedBrandinthepetrolStationcategoryforthe6thconsecutiveyearforthe6thconsecutiveyearinawasselectedastrustedBrandinpetrolStationcategoryaccordingtotheresearchconductedbythereader’sDigestamongitsreadersinordertodiscoverwhichbrandsaretrustedthemostbycroatianconsumers.

maY:EmployerpartnercertificateinahassuccessfullycompletedtherecertificationprocessandwaspresentedwiththeEmployerpart-nercertificate,which is awarded for excellence inhuman resourcesmanagement. inaonceagainproveditsapplicationofhigheststandardsinenhancingthebusinessperformanceandworkquality.

SEptEmBEr:croatianchamberofEconomySisakawardtoSisakrefinerycroatianchamberofEconomySisakawardedSisakrefineryfor85yearsofbusiness.

DEcEmBEr:thevolunteerawardfor2012inthecategoryofcontributionofbusinesssector’stothedevelopmentofvolunteeringinSlavonijaandBaranja

inavolunteerclubwonthevolunteerawardfor2012inthecategoryofcontributionofbusinesssec-tor’stothedevelopmentofvolunteeringinSlavonijaandBaranja,awardedbythevolunteercenterosijekwith thesupportof thecouncil for thevolunteeringDevelopment.With thisaward,volun-teercenterosijekwishestocontributetothepromotionofvolunteeringasadesirablesocialvaluethroughtheevaluationoftheindividualandorganizationalcontributiontothecommongood.

april:Goldenindexina receivedGolden index award in six categories: scholarships, participation in student projects,organizingprojectswiththestudent’sparticipation,practice,thebestemployerimageaccordingtostudentsandtheGrandprix.theaward,whichwasfoundedbytheeStudentstudentassociation,wasgivenforthesecondtimethisyearandwiththegoalofawardingandpromotingthosecompaniesandinstitutionsthatsupportstudentcommunity.

INA GRoup At A GlANce

8

2010 2011 2012 12/11HrKmln HrKmln HrKmln HrKmln % netsalesrevenues 25,866 30,028 29,895 (0)EBitDa 4,080 6,522 4,578 (30)EBitDaexcl.specialitems 4,583 6,776 4,963 (27)o/w Exploration and Production 5,514 8,122 5,571 (31)o/w Refining and Marketing (329) (1,020) (366) (64)o/w Retail 35 140 148 6 operatingprofit 2,158 3,039 1,356 (55)operatingprofitexcl.specialitems 2,955 4,078 2,863 (30)netfinancialexpenses (840) (663) (289) (56)netprofit/lossfortheperiod 961 1,815 681 (62)netprofitfortheperiodexcl.specialitems 1,593 2,634 1,893 (28)operatingcashflow 1,563 3,282 3,742 14capitalexpenditureswithone-off 2,891 1,545 1,286 (17)o/w Exploration and Production 1,473 814 746 (8)o/w Refining and Marketing 1,328 575 228 (60)o/w Retail 52 106 229 116 Earningspershare Basicanddilutedearningspershare(kunaspershare) 96.1 181.5 68.1 (62.5)netgearing% 43.72 38.82 30.83 (20.59) KEYEXplorationanDproDuctionData 2010 2011 2012 12/11%Grosscrudeoilreserves(mmbbl)2p 90 90 97 8Grossnaturalgasreserves(mmboe)2p 188 165 154 (7)totalgrosshydrocarbonreserves(mmboe)2p 305 278 267 (4)averagecrudeoilproduction(mbbl/day) 16.3 15.3 12.3 (20)averagecondensateproduction(mboe/day) 7.2 9.9 3.2 (68)averagenaturalgasproduction(mboe/day) 42.0 49.2 33.0 (33)totalhydrocarbonproduction(mboe/day) 65.5 74.4 48.6 (35) KEYrEfininGanDmarKEtinGData 2010 2011 2012 12/11%totalrefinerythroughput(kt) 4,450 4,051 4,065 0totalcrudeoilproductsales(kt) 4,012 3,561 3,424 (4) KEYrEtailSErvicESData 2010 2011 2012 12/11%totalnumberofpetrolstations 476 456 448 (2)totalsales(000t) 1,180 1,131 1,042 (8)

Key fINANcIAl ANd opeRAtING dAtA


Key fINANcIAl ANd opeRAtING dAtA

2012. 29,895

2010. 25,866

2011. 30,028

2009. 22,331

2008. 28,808

2012. 4,578

2010. 4,080

2011. 6,522

2009. 2,807

2008. 2,024

2012. 13,854

2010. 14,703

2011. 14,217

2009. 16,304

2008. 16,632

2012.

2012.

1,356

681

2010.

2010.

2,158

961

2011.

2011.

3,039

1,815

2009.

2009.

(205)

(392)

2008.

2008.

(392)

(1,098)

netsalesravenues(HrKmln)

EBitDa(HrKmln)

numberofemployees

operatingresult(HrKmln)

netprofit/(loss)(HrKmln)

10

Duringthepastnearly50yearsinbusiness,inahaspositioneditselfasoneofthekeyenterprisesintheregion.throughouttheyears,someofwhichwerequitechallenging,wehavelearnedvaluablelessonsfromdoingsuccessfulbusinessintimesofnumerouslimitations.

ourbusiness results for2012alsoconfirmthisexperience.Despiteconsiderablechallenges,asaresultof the lackofSyrianproductionanddeclinesingasolineanddieseldemandcontinuingforthefourthconsecutiveyear,inamanagedtosignificantlyincreasetheshareofinvestmentsincroatiain2012,from72%in2011to94%in2012(HrK1.166billion).Wetripledcapitalexpendituresindomesticexplorationandproductionandmorethandoubledinvestmentsinretailactivitiescomparedto2011.

Havinginmindalltheabovementionedlimitations,weareproudtoseethecompany’spositivebusinessresultsin2012.thereisacontinuationofthepositivetrendinitiatedinpreviousyears.EBitDa(excludingspecialitems)ofalmostHrK5billionisfirstofallaresultofourstrongfocusonoperationalefficiencyimprovementofinaGroup.Diligentworkandjointeffortsoftheman-agementandemployeesinoptimizingefficiencyandprocurementprocedureresultedinsavingsofapproximatelyHrK2.2billionfromyear2010untilnow.Weareparticularlypleasedwiththeimprovementinthefinancialpositionasreflectedinthereductionofina’snetindebtednessby27%comparedto2011.

Explorationandproductionsegmenthasmarkedasignificantjubileeinyear2012–its60yearsanniversary.Sixdecadesofsys-tematicandprofessionalexplorationandproductionofoilandgasincroatia.thatfactisofgreatsignificance,notonlyfortheinaemployeeswhoaredirectlyinvolvedinthisactivityandtoinaasacompany,butalsoforthecroatianeconomyasawhole.

itissymbolicthatjustintheyearofitsbigjubilee,inareturnedsuccessfullytotheplacewhereitallbeganonce–thepanno-nianBasin.intensificationofexplorationactivities,whichwelaunchedafewyearsago,aswellasincreaseininvestment(fromHrK187millionin2011toHrK558millionin2012),ledtothetwooildiscoveries:withHrastilnica-3wellnearivanic-GradandDjeletovci-1Westwell,atoilfieldprivlakanearvinkovci.theseaccomplishmentsareimportant,notonlyforinaasacompany,butalsoforthecroatianenergyindependence,securityofmarketsupplyandthebudgetsoflocalcommunities.inaddition,welaunchedconstructionworksinEorprojectsinthefieldsZuticaandivanic.thatisthefirstexampleofthetertiaryenhancedoilrecoverymethodapplicationincroatiaandwouldenabletheextensionofproductionontwooldoilfieldsforabout25years.ihonestlybelievethatourExplorationandproductionsegment,especiallythankstothenewexplorationandproductionprojects,isgoingtomaintainitspositionastheleadinggearofthecompany’sfinancialstability.

ourrefiningandmarketingBDachievedsignificantimprovementinefficiencyin2012.utilizationofthenewplants,togetherwithbetterfeedstockselectionledtoagreatershareofmarketablemotorfuelswhichhashelpedustoadjustthestructureofourproductiontomarketdemand.additionally,inlinewithpreparationsfortheupcomingmajordevelopmentprograms,during2012numerousprogramshavebeeninitiated,aimedatgrowth,HSEandsustainabledevelopment.

WhenitcomestoourretailBD,weareproudtosaythatcomparedto2011wemorethandoubledourinvestmentsinthisseg-

letteR of the pResIdeNt of the MANAGeMeNt BoARd


ment,i.e.increasedfromHrK106milliontoHrK229million.asofthebeginningofthisyearweownthelargestmodernpetrolstationnetworkinthecountry.asapartofanextensiveretailnetworkmodernizationprojectlaunchedinlate2010,intotalwehavereconstructedandrenovatedover130petrolstationsandbuiltandputintooperationtwonewones(Galizana–WestandZupa).Giventhesizeanddistributionofourretailnetwork,themodernizationofourpetrolstationsisconsideredtobealong-termproject.inordertostrengthenourmarketpositionandincreasethelevelofservicetoourcustomersthisprojectwouldbecontinuedintheyearsahead.consideringthechallengingmarketenvironmentwebelievethatthiswaywewillgaindecisiveadvantageoverourcompetitorsandthereforewewillbeabletomaintainaleadingmarketpositioninthissegment.

acrucialroleintherealizationofallourpastandfuturebusinessprojectsbelongstoouremployees.theirexpertise,experienceandhardworkarethefirmestguaranteeofourfuturesuccess.Beingawareofthatweremainstronglyfocusedoncreatingthebestpossibleenvironmentforeachemployee,aswellastocreatethemostadequateconditionsfortheimprovementoftheirskillsandcareerdevelopment.Weareaswellfocusedonattractingthebesthumancapital.ourGrowwwtrainees’employmentprogramprovedthatourapproachtothehumanresourcesmanagementiswellbasedandshowedusthatweareonthebestwaytoachieveourlong-termgoaltobetheemployeroffirstchoiceintheregion.in2012nearly4000young,highlyeducatedandmotivatedyoungpeoplehaveappliedforajobatinaastheyseeinaasacompanythatwillprovidethemthebestworkingenvironmentforthebeginningoftheirprofessionalcareer,givingthemopportunitiesfor learninganddevelopmentthroughworkininternationalbusinessenvironment.

BeingcontinuouslycommittedtocSr,inthepreviousyearwetriedtosystematicallyidentifythespecificneedsofthecommunityinwhichweoperateandtosupportnumeroushumanitarian,cultural,educational,environmental,health,andscienceprojects.onethinginthissegmentweareextremelyproudofisthefactthatapositivecontributionwasnotonlymadebythecompanyasawhole,butalsobyouremployeesandtheirdirectactiononbehalfofthecommunity.infact,thankstoourcorporatevolunteer-ingprojectlaunchedinSeptember2010inanowhasvolunteers’clubwithnearly200memberswhoarewillingtoputtheirfreetime,effortandskillstotheserviceofthegeneralwelfare.Wearedelightedthatthecommunityhasrecognizedtheseefforts.inavolunteers’clubhaswonthevolunteerawardfor2012inthecategoryofbusinesssectorcontributiontodevelopmentofvolunteerinSlavoniaandBaranja.tobeprecise,inawasawardedbythevolunteercenterosijekwiththesupportofthecouncilfortheDevelopmentofvolunteering.

in2013wecontinuewithdedicatedworkonfurthergrowthofthecompany.Eventhoughqualityrequirementsareincreasingandcompetitionisgettingstrongeronthemarketwearenotdiscouraged.infact,itisanadditionalmotivationtobeevenbetterandfaster.Wewillcontinuetostrivetoimproveourefficiency,aswellaskeepinvestingtocreatevalueforourshareholders.ourcommitmenttoahighlevelofinvestmentactivityincroatiaisquiteafirmguaranteethatwewillkeepourtraditionalroleasoneofthelargestinvestorsinthecountry,aswellasthemotoroftheoverallcroatianeconomy.moreover,wewillnotforgetthecommunitiesinwhichweoperate,andwewillcontinuetomakeeveryefforttoberecognizedasareliablepartner.

ouremployees,theirprofessionalism,exceptionalexpertise,enthusiasmandambitiontoworktogetherinordertoachieveevenmoreareessentialforthecompany.Despitethetrulychallengingtimesweplanourfuturedevelopmentandinvestmentstostrengthenourmarketpositionandtoattractnewyoungtalentswhilekeepingthosewhoarealreadyinthecompany.

Havingthishumancapital,enrichedwithclearvisionofourfuturegrowthandqualityinvestmentprojectswhichrepresentsolidbasistoconfirmourposition,ihonestlybelievethatthereisnofearthatinawillcontinuetobeareliableguarantorofsecurityofenergysupplyforthecroatianmarket,afirmlinkofthecroatianeconomyandoneoftheleadingcompaniesintheregion.

ZoltánÁldott,presidentofthemanagementBoard

12

During2012crudeoilpricesonaveragewerenear2011levels,yetthisminimalmovementinaveragepricesmaskslargedifferenceswithintheyear.astheglobaleconomicoutlooksouredinthefirsthalfof2012crudeoilpricesfellfromearly-2012levelsofuSD120/barreltowardsuSD90/barrelinjune.WiththeonsetoftheEu’simposingofthelatestsanctionsoniraninjuly2012thepriceofcrudeoilrose,reflectingsupplyconcerns.attheendof2012abarrelofBrentcrudestoodatuSD110.thusthepriceofcrudeoilremainedhighin2012,despiteweakeconomicgrowthindevelopedcountries.inall,oildemandroseonly0.8%in2012.thedownstream/refiningsegmentof theoilbusinessenjoyedabet-teryearin2012,especiallyinthesecondhalfoftheyearwhencrackspreadsforbothgasolineanddieselrecovered.thisrecoveryincrackspreads is a temporary phenomenon, rather than foreshadowing ofasustainedreturntobettertimesfortherefiners. unplannednorthamerican refineries’outagesdue toadverseweatherconditionsandaccidents, combinedwith a heavymaintenance schedule, contribut-edtohighercrackspreads.refineryclosuresontheuSatlanticcoastduring2012alsosupportedcrackspreads.inaddition,during2012Q3,refinedproductstockswererelativelylow,whichalsoinfluencedmar-gins.nonetheless,therefiningindustryisstillcharacterisedbyglobalexcesscapacityandwithnewplantscomingonline(mainlyinasiaandrussia)in2013-2015.thatexcesscapacitywouldremainpronounced,despiteexpectedincreasesindemand,whichimpliescontinuedstressfortheEuropeanrefiningsector.inthemediterraneanmarket,acom-bination of sanctions on iran andrussian focus on increasing dieselexportstoEurope,aregeneratingadditionalchallenges.namely,withiraniancrudeoil(whichisanimportantfeedstockformanymediterra-neanrefiners)exports’subjecttoEusanctionssincejuly2012,russianuralscrudehasriseninpriceasitisoneoftheclosestsubstitutes.Bothfactorsarecontributingtoahigherfeedstockpricesformanymediter-raneanrefineries.

theglobaleconomyinthefirsthalfof2012wascharacterisedbyin-creasingconcernoverthefateoftheEurozone.itwasnotuntillatejuly,whentheGovernoroftheEuropeancentralBankstatedhewoulddo“whateverittakes”toresolvethecrisisthatmarketsentimentbegantoturn.thereafterinSeptember,theEcBannouncedaprogrammecalled

oveRvIew of the eNvIRoNMeNt

tHEGloBalEconomY–improvinGseNtIMeNt towARds the eNd of the yeAR, But stIll weAK

GloBalupStrEam&DoWnStrEam:HiGHoIl pRIces, teMpoRARy IMpRoveMeNt IN dowNstReAM


outrightmarkettransactions.inreturnforamemberstateagreeingaformalprogrammeoffiscalconsolidationandstructuralreform,theEcBwouldcommittobuyingunlimitedamountsofthatcountry’ssovereignbondsofupto3yearsoutstandingmaturity.althoughnotasinglecoun-tryhasappliedforthisprogrammesinceitsinception,financialmarketswereconvincedoftheEcB’scredibilityandperipheralcountries’bondspreadsbegantofall.SentimentwasfurtherbuoyedwhenGreecefi-nallycametoanagreementattheendofnovemberwithitscreditorstoreceivethenextEur33bninstalmentinitsrescuepackage.Headinginto2013financialmarketsentimentisfarbetterthanatanystageintheprevioustwoyears,buoyedbyimprovingforwardlookingsurveydata.theEueconomyhoweverremainsveryweak,havingcontracted0.4%in2012. unemploymenthas risen to record levels (11.7% in theEu-rozoneattheendof2012)andinsomememberstatessuchasSpainandGreecetheoverallunemploymentrateiswellover20%withyouthunemploymentatover50%.althoughimprovedmarketsentimentto-wardstheendof2012isawelcomepositiveheadinginto2013,fiscalausteritywillcontinuetolimitgrowthpotentialintheshortterm,espe-ciallyincountriessuchasfrance,whichhasembarkedonloweringitsbudgetdeficitlaterthanitsmediterraneanneighbours.theuSeconomygrewby2.2% in2012,although in thefinalquarterof2012theeconomywasflat,impactedbyuncertaintyoverthereso-lutionofthefiscalcliffnegotiations.nonetheless,theuSisonapathofmildeconomicgrowth.unemployment,however,remainshigh,near8%,whilemonetarypolicyissettoremainaccommodativeforthenextcoupleofyearsaccordingtothefederalreserveguidance.althoughuSeconomicgrowthisclearlystrongerthaninEurope,thepaceofgrowthremainsfairlymutedandassuchdoesnotsuggestameaningfulfallinunemploymentinthenearterm.china’seconomicgrowthslowedto7.8% in2012,theslowestpaceofgrowth in over a decade. DuringQ2 andQ3 in particular therewereconcerns that theslowdownwouldbemorepronounced than feared,howeveraninfrastructureproject-basedstimuluspackagesupportedrel-ativelystronggrowthinthefinalquarterandissettosupportgrowthinthefirsthalfof2013.Givenchina’s(andindia’s)importancetotheglobalenergydemand,howchinawouldmanagearebalancingofitseconomyfrominvestmentandexport-ledgrowthtoamodelbasedonagreatercontribution fromprivateconsumption isan important issue, sameasthefallintheworkingagepopulationexpectedtocommenceinthenextfewyears.Whilethisisamulti-yearissue,thebottomlineisthatareturntodoubledigiteconomicgrowthlookslikebeinginthepast.

thecroatianeconomycontractedby2%inrealtermsin2012.Domes-ticdemandwasagainthemainbrakeonthegrowthwithinvestment

activitycontractingbyover4%accordingtoourestimates,whiletheslumpinhouseholdconsumptionacceleratedas2012progressed–weexpectedhouseholdconsumptioncontractionupto3%in2012asun-employmentrose,realwagesfellandbankinglendingcontracted.asinmuchoftheEuropeanunion,fiscalausteritywasoneofthefac-torsbehind the recession in 2012. the new Government embarkeduponloweringthebudgetdeficitin2012byfocusingonimprovingrev-enuecollectionandincreasingtaxes.valuedaddedtaxwasincreasedfrom23%to25%on1march;incometaxchanges,whileslightlyrev-enuenegativeintotalsawhigherearners’overalltaxburdenincreaseslightly.theGovernmentalsoloweredsocialcontributionsforhealthby2%pointsto13%frommayhelpinglowerthecostoflabour.unemploymentroseduring2012,followingtheusualseasonalpattern(up in thefirst and fourthquarter anddownas the agricultural andtourismseasons’peakactivityapproachedinthespringandsummer).Weestimatedthatinternationallabourorganisation(ilo)comparableaverageunemploymentrateincroatiain2012roseto15%comparedto13.4%in2011.realwagesin2012fellforthefourthyearinarow,byover2%yoyaccordingtoourestimates.Domesticbanklendingtocompaniesfell13%in2012.partofthisde-clineinvolvedthetransferofstate-ownedshipyardobligationstopublicdebt,butalargepartofthedeclineinlendingtocompanieswasalsodrivenbybanksactivelyseekingtoreduceexposure.loanstohouse-holds fellonaggregateby1.6% in2012withevenmortgage lendingcontracting.carloans,meanwhile,fellcloseto30%yoyin2012.merchandiseimportsfell0.7%in2012whilemerchandiseexportsfellby0.2%yoy,reflectingbothaweakdomesticdemandandanunsupport-iveexternalenvironment.merchandiseimports,excludingoil,slowedthroughoutthe2012andintheendrisingbyonly0.5%yoy,whilemer-chandiseexports,excludingoil(refinedoilproductexportsrose10.1%yoyinEuroterms)andships,rosealmost4%during2012withanumberof industrialsectorssuchasindustrialmachinery,telecommunicationsequipmentandpharmaceuticalproductsrevealingdoubledigitexportgrowth.aheadoftheEuaccessionthisisanencouragingdatasinceitsuggeststhathighervalueaddedexportswouldfarewellasapartoftheEucommonmarket.consumerpricesroseby3.4% in2012as theGovernment increasednumerousadministeredprices(electricity,gas,andheatingoil)inordertomeetobligationsassociatedwithEuaccessionon1 july2013. intheshort-term,theseprice increaseswouldadversely impactdispos-ableincome,butinthemediumtolongerterm,clearerpricesignalswillbuttressinvestmentintheenergysector,improvethesecurityofsupplyandmotivatemoreefficientenergyusepatterns.theEur/HrKremainedstablethroughout2012andmonetarypolicyset-tingswerelargelyunchangedin2012.Duringthecourseof2012thecen-tralbankintervenedfivetimes,fourtimestolimitdepreciationpressuresandonceinSeptembertolimitappreciationpressures.thisresultedinamplemoneymarket liquidityandfallingyieldsonshort-termgovern-mentdebtastheyearprogressed.inmid-DecemberS&pdowngraded

oveRvIew of the eNvIRoNMeNt

tHEcroatianEconomYin2012:ANotheR touGh yeAR As AdjustMeNt coNtINues


croatia’slong-termsovereigncreditratingfromBBB-toBB+,movingitfrominvestmentgradetospeculativegrade.Givenpoorgrowthfiguresin2012,littlescopeforimmediateimprovement,Euaccessionnotwith-standingandaplannedincreaseinthebudgetdeficitin2013comparedto2012thiswasnottoosurprising.Stilllong-termbondyieldswhichhadbeenonadownwardtrajectorysincesummerendedtheyearroughly50basispointshigherthanthedaypriortothedowngrade.in2013wecontinuetoexpectachallengingdomesticandregionaleco-nomicenvironment.Domesticdemandwouldremainweakandcon-sumptionofrefinedproductsislikelytoremainsubdued.croatia’smaintradingpartners,italyandSlovenia,wouldremaininrecession,whileanygrowthinSouthEastEuropeanmarketsislikelytobedrivenbynetexportsratherthandomesticdemand.Euaccession,schedueledfor1july2013,wouldbepositiveforcroatia,notonlybecauseofthepros-pectofgreateraccesstostructuralfunds,butalsobecauseofgreaterpolicycredibility.Still,manyeconomysectors,especiallyinthegoodsmarket,wouldbeexposedtogreatercompetitionwhichintheshort-termmaydampengrowthprospects. However, that same competi-tionwillprovideconsumerswithgreaterchoiceandexertdownwardpressureonprices,supportingdisposableincomesandthuseconomicgrowthoverthemediumterm.

Withregardstocroatia,thesecondhalfof2012sawanincreaseinexportactivityandcroatia’srefinedproductexportsalsoreflected

thetrendofhighercrackspreads.Whileinthefirsthalfof2012ex-portsofrefinedproductsfellbyover25%yoyinvolumeterms, inthesecondhalfof2012exportsroseby42%yoyto866,000tonnes.Given the strongprice signalspresent inQ32012and toa lesserextentinQ42012,theproductionofrefinedoilproductsandcokeroseby6.3%during2012–atthesametimetheoverallindexcon-tracted5.5%in2012.indeed,inthesecondhalfof2012productionofrefinedoilproductsroseby26.7%yoy.thedomesticgasmarketin2012wentthroughanumberofimpor-tantchangesresultinginthefunctionalliberalisationofthemarket,whichwasoneofthekeyrequirementsforEuaccession.atthebe-ginningof2012all customers (includinghouseholds)were free tochoose their own supplier of gas.However, households, althoughfreetochoosetheirsupplier,alsohad(have)recoursetogasunderpublicserviceobligationconditionswhichareregulated.at the beginning of 2012 wholesale household gas prices werecappedat1.7HrK/cm,while industrialusersof lessthan0.1bcmperannumwerealsosubjecttoapricecapof2.13HrK/cm.inmaythepricecapforhouseholdswasincreasedto2.2HrK/cmwhereitremainedfortherestof2012andtoday,whichisstillbelowmarketprices.forindustrialusersoflessthan0.1bcmofgasperannum,pricesinjulyrosefrom2.13HrK/cmto2.75HrK/cmandasofocto-berthepricecapwasabolishedaltogether.theliberalisationofthegasmarketalsosawacertainnumberofsuppliersandendusers,eitherimportnaturalgasorbuyquantitiesfromdifferentsuppliers.thecombinationofmarketliberalisationandreducedconsumptionofnaturalgasduetoweakeconomicconditionssawpricesbegintotrenddownwardsinthesecondhalfof2012.

croatia’SoilanDGaSinDuStrY:oilinDuStrYmirrorSGloBaltrEnDS;lIBeRAlIsAtIoN chARActeRIses the GAs MARKet

16

ouR BusINesses


ouR BusINesses

18

Exploration and production Business Segment is en-gagedinexploration,developmentandproductionofoilandnaturalgasincroatiaandabroad.Sinceitwasfoundedithasbeeninvolvedinoilfieldoperationsin20foreigncountries,currentlyinangolaandEgypt.attheendof2012,inahad267millionboeprovenandprobablehydrocarbonreserveswithhydrocarbonpro-ductionof48,6mboeperday.

on23february2012croatiangovernmenthaspassedtheDeci-sionontheimplementationofinternationalrestrictivemeasuresestablishedbythedecisionofthecounciloftheEuropeanunion2011/782/ZvSpinrelationtotheSyrianarabrepublic.theDe-cisionprohibitspurchase,importandtransportofoilandotherpetroleumproducts fromSyria, sell and transfer of oil and gas

exploRAtIoN ANd pRoductIoN

hIGhlIGhts

> twonewdiscoveries;explorationdrillingandtest-ingofoilwellsHrastilnica–3andĐeletovci-1z> inEgypt,productionstart-upofrizkfieldonEastYidmaconcessioninmay2012;50%shareincreaseinEastYidma;innovember2012farm-inagreementforfuturedevelopmentleaseinDisouqconcessonhasbeensignedwithrWEDea> infebruary2012inaannounced“forcemajeure”andtemporarilysuspendedallbusinessactivitiesinSyriafollowinginternationalregulation> SpE2preservesof267mmboeasofend2012> Dailyproductionof48.6mboeachievedin2012


technologyaswellasprovidingfinancialorinsuranceservicesforsuchtransactions.fullyadheringtotheaforementionedDecisioninatookallstepsnecessarytoalignitsbusinessactivitiesinSyriawiththerestrctivemesures.therefore,on26february2012inaannounced „forcemajeure“ and temporarily suspended all it’sbusinessactivitiesinSyriauntilthe„forcemajeure“circumstanc-esceasetoexist.

inonshorecroatia,inaiscontinuingwithsuccessfulexplorationactivities, two new discoveries nearby existing oil fields weremadeinthesecondhalfoftheyear.nearoilfieldŽutica,Hrastil-nica-3,obtainedmaximumevertestedoilflowrateincroatia,ap-proximatly 2400bbls/day andĐeletovci-1z testedapproximatly600bbls/dayofoil.newoildiscoveriesaregoing tobe furtherdevelopedandconnectedtoina’sinfrastructure.

Key AchIeveMeNts IN 2012CROATIA ONSHORE • Reserves(SPE2P,2012Y/E):184mmboe • Production(2012):26.2mboepd

regardingcroatianexplorationactivities,drillingofthreeonshorewellswassuccessfullyperformed,twoofthemweretestedwithsignificantoilflowobtainedandonewasdry.

inordertoachieveplannedrecoveryefficiency,maintainproduc-tionandprolongeconomiclifeofmaturefields,developmentac-tivities includeddrillingonere-entrywellwithnocost-effectivehydrocarbonflowandnumbersofsuccessfulworkoversthatre-sultedinlowerproductionnaturaldeclineonmaturefields.mostEor project activities planned for onsite work on compressorstationsandco2pipelinesonoilfieldsaswellaspilotre-liningononewellwerefinishedaccordingtoschedule.preparationofnecessarydocumentationandsettlingofpropertylegalrelationstoobtainnecessarylicenceswereinfocusofmeđimurjeandSe-lecprojectsinordertoachievenewgasandoilproductioninthecomingyears.

in thefieldofunconventionalexploration, inastartedprepara-tionsforthepilotunconventionaloperationsinthenWcroatiameđimurjeareawithinZebanecminingplot.preparatoryactiv-ities included re-opening and testing of Zebanec-3 well, whichflowed gas and condensate frommiocenetight sandstone res-ervoir.

asofthe2012year-end,inaisoperatingonly2onshoreexplora-tionlicenseslocatedinnorthcroatia(EastSlavonialicenseareais5500sqkmandSWSava4870sqkm).

CROATIA OFFSHORE • Reserves(SPE2P,2012Y/E):38mmboe • Production(2012):15.8mboepd

regardingcroatianexploration,thenorthadriaticoffshoreactiv-ities,drillingoftwowellstargetingthingaslayerswaspostponedto 2013 due to non-availability of offshore drilling rigs. 2D/3Dseismicwhichwasacquiredearly in2012intheareaofcentralandSouthadriaticwaspartiallyprocessedandinterpretedbytheyear2012end.through a joint operating company inagip, ina and Eni havestartedwith the preparations for the drilling and developmentcampaignofgasfieldikajZ.ExploitationofnaturalgasreservoirsontheiKajZfieldwouldcushiondeclineofgasproductionandbringadditionalgasfromtheadriaticoffshore.mentionedactiv-itiesincludecontractingthejack-updrillingrig,drilling&equip-ping5doublecompletedwells,Epcforplatform,platformsandsealineinstallation.Developmentprogramactivitiesrelatedtoivanaa/Koptimizationthatisdirectlyconnectedtotheproductionontheisabelafieldanddevelopmentofilena&ikajZwerepostponedto2013duetodelayedstart-upoffieldproductionaswellaspostponeddrillingcampaign.ivanaKoverhaulprojectwasdevelopedasplanned.inagipsignedacontractfortheconstructionofoffshoregasplat-forms with the italian company rosettimarino, with significantpartof the constructionworks tobeperformedby thecroatiansubcontractor,viktorlenac.thecontractiscoveringtheconstruc-tionofoneplatforminthenext20monthsthatwillbeinstalledintheexistinggasfield iKaSW(southwest)whileconstructionofasecondplatformisoptionalanddependantontheresultsoffur-therexploration.

INTERNATIONAL CONCESSIONSa)ANGOLA • Reserves(SPE2P,2012Y/E):5.59mmboe • Production(2012):1.49mboepd

ina has been involved in E&p activities in angola since 1980,participating indevelopmentandproductionactivitiesonthreeconcessions,alllocatedonoffshoreBlock3.inaisanon-operat-ingpartnerwithvariouspercentagesofparticipatinginterestandproductionsharing.

BLOCK3/05Block’s operator is Sonangol p&pwith 25% participating inter-est.otherpartnersare:chinaSonangol(25%),ajoco(20%),Eni(12%),Somoil (10%)andniS(4%). ina’sparticipatinginterest is4%andproductionsharingrangesbetween0.89–3.50%,averag-ing2.60%in2012.thisistheformerBlock3/80withproduction


20

licensesextendedin2005.therearesevenproductionoilfieldsontheblock:palanca,pacassa,Bufalo, impalaSE, impala,coboandpambi.operationswerefocusedonwellinterventionstoim-proveperformance.theBlock’slicensewillexpirein2025.Drillingofone infillwellon impalafieldanddrillingofanotherinfillwellandworkoversonBufalofieldareplanned.activitiesonmajor development projects started in theprevious period aretobecontinued:tfuproject: i.e.Glcc/llpS/llcc/iWSpackageandWatertreatmentfacilitiesupgrade(tobecompletedin2015)andSoocprojectandSoocHook-upproject(tobecompletedin2016).

BLOCK3/91theBlockisoperatedbySonangolp&pwith6.25%ofparticipat-ing interest. other partners are: total (50%), Eni (15%), ajEX(12.5%),Svenska(6.25%),andniS(5%).ina’sparticipatinginter-estis5%andproductionsharingrangesbetween2.54–3.75%,averaging2.87%in2012.operationswerefocusedonwellinter-ventionstoimproveperformance.oombofield,theonlyproduc-ingfieldintheblock,hasbeentransferredtoBlock3/05onjanu-ary1st,2013,ineffectterminatingBlock3/91.

BLOCK3/05AtheBlock’soperator isSonangolp&pwith25%ofparticipatinginterest.otherpartnersare:chinaSonangol(25%),ajoco(20%),Eni(12%),Somoil(10%),andniS(4%).ina’sparticipatinginter-estis4%.fieldDevelopmentplansforcaco-Gazelaandpunjaoilfieldswereapprovedbytheministerofpetroleumonapril26th,2012.frontEndEngineering&Design(fEED)activitieswereon-goingonbothfields.theBlock’slicensewillexpirein2030.onBlock3/05apunjaDevelopmentarea:Engineeringprocure-mentconstructionandinstallation(Epci)contractfortwowell-headplatforms is tobecompleted, fourdevelopmentwellsaretobedrilled,andtwoofthemtobecompleted.onBlock3/05acaco-GazelaDevelopmentarea:completeEpcicontractforthetripod platform and drill and complete Gazela-1, Gazela-2 andcaco-1developmentwells.

b)EGYPT • Reserves(SPE2P,2012Y/E):3.19mmboe • Production(2012):1.91mboepd

inahasbeeninvolvedinE&pactivitiesinEgyptsince1989.inaholdsinterestsinfourdevelopmentconcessionsintheWesternDesertandoneexplorationconcessioninnileDeltaofEgypt.inaistheoperatoroftheSidirahmanandrizkDevelopmentleasesoftheEastYidmaconcession,whileithasnon-operatorstatusinfourotherconcessions(rasQattara,WestabuGharadig,north

BahariyaandDisouq).investmentsin2012werefocusedprimari-lyondrillingandworkoveractivities.

DisouqConcessionina signed a farm-in agreement with rWE Dea to participateas a 50% partner in the last exploration campaign and in anyfuture development lease in Disouq concession on november11th,2012.Estimatedentitlementrecoverableresourcesare7.0mmboe.furtherdevelopment ispendingonresultsofexplora-tionwellHelal-1currentlybeingdrilled.

EastYidmaConcession–SidiRahman&RizkDevelopmentLeasesinaistheoperatorwhilerWE-DEausedtobethepartnerwithbothpartnershaving50%workinginterestand29%interestinproduction.inaexerciseditspre-emptionrighttoacquire50%stakeatEastYid-maconcession.Bythisinahasacquiredadditional50%stakefromGermancompanyrWEDeaaGandbecamea100%operatoratthisconcession.Salesandpurchaseagreement(Spa)wassignedonno-vember29th,2012.theproductionandfinancialfiguresregardingina’ssharefor2013willbeadjustedfromjuly1st,2013,upontheapprovalofDeedofassignment.Sidirahmanoilfieldisinproduc-tionfrom2007andoperatedbyjointventurecompanymarinape-troleumcompany(mpc).productionstart-upofrizkfieldwasinmay2012.therewerenodrillingactivitiesin2012.mainactivityin2013shouldbedrillingofonedevelopmentwellonSidirahmanfield.

RasQattaraConcessiontheconcessionconsistsoftwooilfields:ZarifandElfaras.oilpro-ductionstartedin1994.theoperatorisiEoc(Eni’sEgyptianbranch).inahas25%workinginterestand10.825%shareinproduction.there were no drilling activities in 2012.Workover operationswereperformedonbothfieldsinordertooptimizeproduction.farasGaspowerGenerationactivitiesstartedin2012andexpectto be completed in 2013. further drilling andworkover opera-tionsareplannedonbothZarifandfarasfieldsinordertoopti-mizeproductionrateoftheseoldfields.

WestAbuGharadigConcessiontheconcessionconsistsoftwooilfields:ramlandramlSW.oilproduction started in 1996. theoperator is iEoc. inahas25%workinginterestand14.5%shareinproduction.twooilproductionwellsweredrilledinQ42012.Workoverop-erationswereperformedinordertodecreasenaturalproductiondeclineoftheoldfields.WasteWatertreatmentplantiscomplet-ed.GeologicalmodelupdateforramlreservoirStudyiscomplet-edwhile dynamic update is ongoing.Workoveroperations andnewwellsareincludedinWorkprograminordertodecreasenat-uralproductiondeclineoftheoldfields.


NorthBahariyaConcessiontheconcessionconsistsoffiveoilfields(ferdaus,Gana,rawda,ryan,andabrar).theprojectstartedin2004.theoperatorisSa-haranorthBaharyia;thepartnersareinaandipr.inaholds20%workinginterestand9.015%interestinproduction.Eight wells were drilled in 2012. Drilling campaign resulted insevensuccessfulwellswhileoneexplorationwellwasdry.newproducing intervalswereopenedandput inproductioncomin-gledwithalreadyproducingintervalsinthreeexistingwells.theaveragedailyproductionrateincreasedfor1,900boedin2012.Drillingcampaign isplanned tobecontinued in2013withnewdevelopmentwells.

c) SYRIAinahasbeeninvolvedinE&pactivitiesinSyriasince1998. • Reserves(SPE2P,2012Y/E):35.8mmboe • Production(2012):3.1mboepd

On26February2012INAannounced„forcemajeure“andtem-porarily suspendedall it’sbusinessactivities inSyriauntil the„forcemajeure“circumstancesceasetoexist.

inaGrouphasbeenactiveinSyrianarabrepublicsince1998basedonsignedproductionSharingagreements(pSa).firstpSahasbeensignedforHayanblockconcessionin1998andfollowingthesuc-cessfulexplorationandappraisalinahasannouncedsixcommer-cialdiscoveriesonHayanblockwithsignificantoil,condensateandgasreserves.jointventurecompanyHpc(Hayanpetroleumcom-pany)wasestablishedbetweenina(contractor)andGeneralpe-troleumcompany,Gpc(company)inordertocarryoutpetroleumoperationsonHayanblock.

the secondpSacoversaphamiablockconcessionandbecameeffectiveinjune2004.

APHAMIABLOCKtheaphamiablockissituatedinHamadistrict,tothenorth-westoftheHayanblock.theaphamiapSaallowsforaninitialexplora-tionperiodoffouryearsandtwofurtherextensionstotheinitialexplorationperiodoftwoyearseach.inafulfilledcontractualob-ligationsoftheinitialexplorationperiodandthefirstextensionofinitialexplorationperiod. inahasacquired270km23Dseismicdata anddrilled four explorationwells (jaddua-1drywell,mu-dawara-2,mudawara-3andBeerasSib-1oilandgassuspendedwells).oilandgassaturatedlayersatmudawaraandBeerasSibstructureshavebeendetermined.thesecondandlastextensionoftheexplorationphaseoperationswereinterruptedbydeclar-ingforcemajeureof26february2012,duetoEu/unsanctionstowardsSyria.Bydeclaringforcemajeure,inasuspendedallits

petroleumactivitiesinaphamiablockasperpSaandrecalledallits local and expatriate employees. the second extension end-edon11november2012withnon-fulfilledcommitmenttodrilloneexploratorywellinordertoconfirmthecommercialityofoilsaturated layers.DespitethefactthatpSahasexpired, inahasnot received any comment fromGpc orministry side yet. inaiswithholdingitsrighttocontinueoperationsuponliftingforcemajeure. HAYANinamadesix(6)commercialdiscoveries(jihar,almahr,jazal,pal-myra,mustadyra,andmazrur)onHayanblockHayanBlockdevel-opmentphasestartedwiththefirstcommercialdiscovery–jihar,in2004. ina’sfirstoil production in Syria startedon25august2005withjihar2wellaspartofanearlyproductionphase.ina’sfirstgasproductionstartedinSyriaonpalmyrafieldon13Decem-ber2006. in2008theconstructionof theoil-and-gasgatheringstationstarted,whichwascompletedin2009,andinthebegin-ningof2011gas treatmentplant started.according to theGasSalesagreementbetweenSpc,inaandtheSyrianGascompany,inaisobligedtosell itsshareofthegasandcondensatetotheSyrianGascompany.

on23february2012croatiaadoptedEusanctionstowardsSyr-ianarabrepublic,henceinadeclaredforcemajeureforHayanandaphamia licenceson26february2012.Bydeclaringforcemajeure,inasuspendedallitspetroleumactivitiesinHayanandaphamiablockandrecalledallitslocalandexpatriateemployees.pursuant to Decision of croatian Government on the imple-mentationof international restrictivemeasuresdefinedbyEucouncilDecision2011/782/ZvSprelatedtoSyrianarabrepub-lic (official Gazette no. 22/12), company General petroleumcorporation, onwhich all the rights and obligations from theSpchavebeen transferredon14february2009 in relation toblockHayanandaphamia, isdefinedasdesignatedentityandinadidn’thaveotherpossibilitybuttoannounceforcemajeureandsuspendallofitsactivitiesunderthepSa.Generalpetrole-umcorporation isbeing listedasa “designatedentity”asperrestrictivemeasures leaving inawithout other possibility buttosuspendperformanceunderthepSa.currentdevelopmentsbeingoutside the company’s control andwith ina staffbeingrepatriated, the company is not able to assess the quality ofcurrentoperationsand levelofpotentialriskrelatingtoexter-naldevelopments.DailyproductioninSyriaamountedto13.7mboe/duntil “forcemajeure”announcementand suspensionofiNA’sactivities.

22

pRoductIoNin 2012, total croatian onshore production amounted to 8.8mboepdofcrudeoil,2.5mboepdofcondensateand15mboepdofgas.asaresultoffieldproductiondepletion,thiscorrespondstodecreasesof3%incrudeoil,of11%inonshorenaturalgas,aswellasof14%incondensateproductioncomparedto2011.in 2012, total croatian offshore production amounted to 15.8mboepdnaturalgas.asaresultoffielddecline,thiscorrespondstodecreasesof28%comparedto2011causedbymaintenanceworksintheaizalauracontractareaandhigherwatercutsandnaturaldeclineinthenorthadriaticcontractarea.in 2012 ina’s share of production in angola amounted to 543mbbl(6%lowerthanproductionin2011)i.e.1.5mboepd,fromthreenon-operatedconcessions.toimproveperformance,oper-ationswerefocusedonwellinterventions.

EgyptianproductioncontributedtoGroupresultswithaproduc-tionof1.9mboepdfromthreenon-operatedandoneoperat-edconcession.investmentsin2012werefocusedprimarilyondrillingandworkoveractivitiesinordertoincreaseproductionperformanceofoilfields.ina’sshareofproductioninEgyptin2012was698mbbl,whichis8%higherthanproductionin2011.

outlooK intheupcomingthreeyears,ourplanistocontinuewithdrillingexploration anddevelopmentwells, 3D seismic acquisition andgeologicalstudies,aswellaswithactivitiesonprojectsEorandmeđimurje.otheronshoreactivitiesarerelatedtoprocessplantoptimizationandwellgeneralworkoversinordertomaintainpro-ductionlevel.Despitetherevocationoflicencesforexplorationinthecontinen-talpartofcroatia,inaremainsdedicatedtoitscroatianexplora-tion.itiscurrentlytheonlyentitywiththenecessaryequipment,experience, knowledge and projects to accelerate explorationactivitiesincontinentalcroatia,pendingthedecisionofthenewGovernmentregardinglicensing.inthenearfuture,mainoffshoreactivitiesarerelatedtoexplora-tionanddevelopmentdrilling,geologicalstudies,constructionofexportsealinestoconnectikaSWplatformwiththeexistingikaaplatformandtocontinuewiththesecondphaseoftheboosterunitcompressorinstallationonivanafield.

pRIRodNI plINGas trading activities are organised through ina’s subsidiaryprirodniplinwhichisregisteredforenergytrading,supplyofnat-uralgasandagencyservices.totaldomesticneedsfornaturalgasin2012weresuppliedfromdomestic sources (1,660 bcm) and imports (1.129 mcm). GassalesandpurchaseagreementwithEnihasbeenconcludedfortheperiodfrom1january2011until31December2013.During2012,additionalquantitiesofgaswereimported,basedonshort-termcontractssignedwithotherforeigntraders.in2012(from1october2012)theGovernment’sresolutiononhighestgaspriceforeligiblecustomerswhoperformproductionactivitywithannualconsumptionlessthan100millioncm,whichwas imposed starting from 1 September 2011, was abolished.regulatedgaspricefortheperiod1Septemberto30june2012was2.13kn/cmandforperiod1july2012to20September2012was2.75kn/cm.regulatedgaspriceforhouseholdsis2.20kn/cmfrom1may2012.naturalgasissoldtotheendcustomersandsuppliersondistribu-tionsystembasedonlongtermandoneyearcontracts.in20122,652bcmofnaturalgaswasdeliveredtothecustomers.


ReseRves BReAKdowN

MMBoe 1p 2p 2010 2011 2012 2010 2011 2012Bycountry croatiaonshore 161 160 153 194 190 184croatiaoffshore 47 35 21 57 44 38Syria 33 24 22 46 37 36Egypt 3 3 2 4 4 3angola 3 2 2 4 4 6total 246 224 201 305 278 267 Byproduct oil 75 76 74 90 90 97Gas 151 130 115 188 165 154condensate+lpG 21 18 13 26 23 16total 246 224 201 305 278 267

HydrocarbonproductionbyregionHydrocarbonproduction(mboe/day) 2010 2011 2012 %croatia 54.1 50.8 42.1 -17%angola 1.6 1.6 1.5 -6%Egypt 1.9 1.8 1.9 8%Syria 7.9 20.3 3.1 -85%total 65.5 74.4 48.6 -35%

HydrocarbonproductionbyproductsHydrocarbonproduction(mboe/day) 2010 2011 2012 %crudeoil 16.3 15.3 12.3 -20%naturalgas 42.0 49.2 33.0 -33%condensate 7.2 9.9 3.2 -67%total 65.5 74.4 48.6 -35%

24

RefINING ANd MARKetING

hIGhlIGhts

> themainfocusin2012wastomaintainsafeandsecureoperations,efficiencyimprovement(incl.energyefficiency,strengtheningsynergiesbetweentherefiner-iesandlogisticbottleneckremoval)andstrengtheningmarketpresence.> refineriesusedtheexpandedcrudebasketoptions,processingseveraladditionalcrudeoiltypesbesideuralgrade,introducingforcados(nigeria)andincreasingSiberianlight(russia)andazerilight(azerbaijan)pro-cessing.> processingalternativefeedstocktooptimizekeypro-cessingunitsandincreasingmotorfuelsyieldratio.> Externalenvironmentopportunities,especiallyinmo-torfuelsproductquotations,wereseizedwithincreasedproductionandexportsales,finallyresultingwithposi-tiveeffectsontheBusinessSegmentEBit.> inventorymanagementoptimizationprojectwasiniti-ated,includingcontinuouscrudeevaluationandhedg-ingoptions,decreasingworkingcapitalcostsandcrude/productpricevolatilityrisk.

rEfininGanDmarKEtinG-INtRoductIoNinarefining&marketingBusinessSegment (“inar&m”)managestwocrudeoilrefineries,lubricantsproduction,wholesalecommercialnetworkandlogisticsnetworkrequiredforcrudeoilproductsdistribu-tion.mainrefineryproductsincludeEurovqualitygasolineanddie-sel,jEtfuel,virginnaphtha,benzeneconcentrate,heatingoils,severalgradesoffueloils,sulphur,bitumenandcalcinedandgreen(regular)petroleumcoke.Keymarketsincludecroatia,BosniaandHerzegovina,Slovenia,Serbia,albania,Hungary,italyandthemediterranean.


RIjEKAREFINERYtherefineryislocatedontheadriaticSeawithconnectiontojadran-skinaftovod(“janaf”,crudeoilpipelinesystem).thislocationena-blesrijekarefinerytopurchasecrudeoilandrawmaterialcargoesfromtheworldmarketandtoexportrefinedproductstoseamarkets.therefineryisalsoconnectedtoadriaticdepotsviarentedvesselsandisconnectedtotheinlanddepotswithextensiverailnetwork.During the refinery system development program,with significantprojectscompleted in2011, three facilitieswerecompletedwithintheHydrocrackingcomplex-mildhydrocracking,HydrogenunitandDesulphurizationplant (claus), aswell asnumerous supporting fa-cilitiesandinstallations.thehydrocrackingcomplexsignificantlyin-creasedconversionandtherefinerycomplexity(9.1nelsoncomplex-ityindex,“nci”).afterthemodernizationprogram,rijekarefineryisproducingonlyEurovqualitygasolineanddieselfuels,beingcom-pliant tohighEuropeanenvironmental standards.Besidesgasolineanddieselfuels,rijekarefineryisproducingjEtfuel,virginnaphthafor petrochemical industry, benzene concentrate, heating oils andseveralgradesoffueloils.

SISAKREFINERYSisakrefineryislocatedincentralcroatianeartheZagrebmarket,placing it in themaincentreofcroatianmotor fuelconsumption.therefineryhaswellestablishedrailanddepotconnectionstosup-plyotherlocalmarketsincroatia,aswellasthoseinnorth-westernBosnia andHerzegovina, north-eastern Slovenia andwestern andnorthernSerbia.connectiontojanafcrudeoilpipelinesystemena-blesthetransportofcontinentalandseapurchasedcrude.thelocaloilpipelineisusedtotransportoilandcondensatefromdomesticoilfieldsinmoslavina,andtheSavariverisusedtotransportcrudeoilfromSlavoniafields.latestinfrastructuralimprovementincludedtheisomerizationunit,finalized in 2011 as a part of refinerymodernizationprogram in-creasingtherefinerycomplexityindexto6.1nci.therefineryisabletoproduceEurovdieselandmotorgasoline,highsulphurgasoils,jEtfuel,virginnaphtha,benzeneconcentrate,heatingoils, severalgradesof fueloils,bitumenandcalcinedandregularpetroleumcoke.

coMpetItIve AdvANtAGe inaDownstreamoperateswithingeographicallocationsoftwore-fineries,havingcrudeslateoptimizationpossibleontheworldcrudemarketandjanafpipelinesystemenablingthetransportofconti-nentalandimportedcrudeoiltothecontinentalrefinery,decreas-ingtheinputsupplycost.mediterraneanmarketaccess increasesthesalespotentialandsemi-finishedproductspurchasingflexibility.

Keycompetitiveadvantagesinclude:• rijeka refinery’s mediterranean access and Sisak refinery’s

centralized location – enabling high level market coverage andmaximizingcrudeselectionandoptimizationpossibilities.• accesstodomesticcrudeoilandnaturalgassources.• Stronglogisticconnectionsbetweentherefineriesanddepots,includingthepossibilitytotransportproductsbyroad,rail,sea,riv-erandpipelineensuredflexible,safeandefficientmarketsupply.• Grouplevelsynergiesandjointoptimizationofseveralproduc-tionsites,continuouslyimprovingrefiningyieldsbykeyhighercon-versionunitutilizationsandfuelcomponentsusageoptimization.

Key AchIeveMeNts IN 2012marketdemanddeclinetrend incroatiafrom2008onwardcon-tinued in 2012, presenting an additional challenge for inar&moperations.WhileaveragedatedBrentpricein2012remainedatthe2011 level,averageproductprices increasedcreatingaposi-tiveexternalenvironmentforoperations.Evenwiththedecreasedmarketdemand,inar&mmanagedtokeepitsmarketshare,op-timizeditsrefiningandlogisticsoperationsimprovingthebusinessresultcomparedto2011,butstillhavingnegativefinalresult.

Keyachievementsinclude:Efficiencymanagement:• Several efficiency improvements have been initiated and im-plemented.theenergyefficiencyprojectwascontinuedfromthepreviousperiodandisplannedtocontinuein2013also.• Existingrefineryassetutilizationtooptimizewhiteproductslateproduction,introducingtheon-demandrefineryoperationsmode,focusingonkeyconversionunitutilization.• optionalalternativefeedstockprocessing(directlyfeedingthespe-cificunits,otherthanthecrudeprocessingunit),optimizingthekeyprocessingunitperformanceandincreasingmotorfuelsyieldratio.

Logisticanddistributionoperations• logisticconstraints,especiallyrelatedtorailmanipulation,wereimproved (manipulation increased, the contract in Hrvatske žel-jezniceextendedtobemoredependentonrealization).Besidesrailmanipulation,allinternalandexternaldisturbanceswereoptimiz-ingotherexistingcapacity limitations includingroadandinternalwarehousecapacitymanagement.• inventorymanagement optimization resulting with improvedstoragecapacityutilizationinrefineriesanddepots,decreasingtheoverallworkingcapitalcost.

Marketpresenceandcommercialoperations• Dieselwithbiocomponentwas introducedresultingwithfur-therproductdifferentiationandintroducinginatothesustainabledevelopmentmarket.


26

• Bunkerfuelmarketwasutilizedinhigheramountcomparedtothepreviousperiod.• Severalmarketopportunitieswerecapturedbyleveragingfa-vourable peaks of external environment (crude/product quota-tions).• utilizedpriceenvironmentpeaksbyincreasingseasales.

to keep the pace with the European downstream competition,businessprocessesininar&mwerefocusedtooperationsopti-mizationthroughtheentirevaluechain.themainoperationalgoalwastoincreaseprofitabilityandreduceriskthroughimprovedcostefficiency,flexibleoperationsandfocusonglobaloptimums.

outlooK

ina is focused on further strengthening its market presence byconstantdevelopmentofhighqualityfuelsandserviceswiththemaximumefficiencyandcostreduction.Wewillcontinuetofocusonsafeandreliableoperations,improvingtheoverallperformanceandcostefficiency. furthermore,webelieve that investments inincreasingtherefiningunitconversionlevelandbiofuelssegmentare thekey for the futuresustainabledevelopmentandsuccess.HigherGroup levelsynergiesutilizationandcompany integrationwill result in increased optimization possibilities and extra valuecreationinthecurrentmarketenvironment.

inar&mwilltrytofurtherstrengthenitspositionbyfocusingonthenextsteps:

Efficiencyandproductionmanagement:productionandsalesflexibilityisneededincaseoffavorablespreadsoncertainproducts.Quickdecisionmakingonthispointbetweendieselsversusgasoline(basedonexternalenvironmentprojections)canproduceextravalueinaveryshorttime.increasingwhiteproductratiocanbeachievedthroughon–demandrefineryoperationmodeandincreasedutilizationofthemaincon-versionunits.Extravaluecanbeachievedbyprocessingahighervolumeofsemi-finishedproductsandloweringownconsumption.initiativesthatfocusonenergycost,togetherwithfuellossesmin-imizationthroughmeasurementequipmentimprovement,aretobeimplementedwiththefinalgoalbeingtosimultaneouslyensurecompliancewiththeenvironmentallegislationandtominimizeop-erationalcosts.

Marketpresenceandcommercialoperations:furtherincreaseofmarketshareintheregioncanbeachievedbyusing themarket leaderposition advantages: two refineryoper-ations,warehousecoverage,modernized retail stationsandhighqualityfuels.

inthelongterm,weareplanningtofurtherincreaselogisticcon-nectionsbetweenthetworefinerieswiththeaimoffurtherfacil-itationofinar&msynergicoperationsandflexibility.Besidestheexistingassetstructure,aresidueupgradeprojectisplannedinri-jekarefinery,projectedtoincreaseconversiontolighterandmorevaluableproducts,improvingtheoverallinar&mcompetitivenessonthemarket.

refineryprocessing(kt) 2011 2012Domesticcrudemix 551 627ReB 2,246 1,760 azerilight 424 509forcados 104Siberianlight 75 75vacuumgasoil 151 387naturalgas(feedstock) 52 66Demiwater 87 99alkylate,mtBE,isopentane,famE 98 118otherfeedstocks 367 320totAl 4,051 4,065


RefINed pRoduct sAles By pRoduct

eNvIRoNMeNt

2011

lpG 6%

Gasoline 28%

virginnaphta 3%

Dizel 35%

jet 3%

Heatingoil 6%

fueloil 15%

Bitumen 3%

other 1%

2012

lpG 8%

Gasoline 30%

virginnaphta 2%

Diesel 38%

jet 3%

Heatingoil 5%

fueloil 11%

Bitumen 2%

other 1%

crudeoilpricesaverageuSD/bbl EurodieselpricesaverageuSD/t

Gasolinecrack-spreadaverageuSD/t uSD/HrKexchangerateaverage

111.3

136.2

115.2

5,34

2011

2011

2011

2011

2012

2012

2012

2012

111.6

177.0

124.3

5,85

3,561 (kt)

3,424(kt)

28

RetAIl

hIGhlIGhts

> newvisualidentity“Blueconcept”-continuation ofretailnetworkrestructuringandmodernization program> Strongfocusonthequalityandconsistencyinfuel andservice/staffimprovementthrough continuouseducationsandtrainings

inaGroupretailServicesoperatesaregionalnetworkof448petrolstationsincroatia,BosniaandHerzegovina,Slo-veniaandmontenegro,ofwhich396petrolstationsincro-atia,45inBosniaandHerzegovina,6inSloveniaand1inmontenegro.

continuedadverseeconomictrends,negativemovements in thelabourmarket,higherpricesandadeclineinrealincome,resultedintheweakeningofdomesticdemand,whichreflectednegative-lyonthefuelsales in2012.comparedtothepreviousyear, inaGroup’sretailservicesrecordeda8%dropinsalesvolumes,whichmainly consists of gas oil andmotor gasoline. in relation to theplan,whichforeseesamoreoptimisticscenario,thegasoilsaleswere6%lower,motorgasolinesalesdecreasedby10%,andsalesofliquefiedpetroleumgasdroppedby15%.theextensiveretailnetworkdevelopmentandmodernizationpro-ject“Blueconcept”whichinastartedin2010,intensivelycontin-uedthrough2012throughoutcroatiaonnumerouslocations.Withinthepastyears,competitioninretailsectorhassignificant-lygrown,togetherwithcustomers’expectations.forthatreasonBlueconceptprojectwas,amongother things, initiated tooffertopqualityfuelandlubricantstoourcustomers,aswellasahigherlevelofservicesatourstations.anewvisualidentityandimprovedtechnicalequipmentwillmakeourpetrolstationsthefirstchoiceofourcustomers.thepetrolstationsweredesignedaccordingtothenewestbusi-nessstandards,includingthehighlystrictstandardsonprotectionofenvironmentandhumanhealth,allwiththepurposeoffulfillingthehighestexpectationsofconsumers.Sinceinahasagoaltobepermanentlyviewedasastrongregionalplayer,effortstowinthetrustofcustomersabroadwithqualityproductsandinvestmentsintothenetworkwillalsocontinueinthefuture.totheconstantandquickchanges inourbusinesssurroundings,


moreandmoreaggressiveandtoughcompetitionandincreasingexpectationsfromourcustomers,wehaverespondedwithanewapproachtothecustomer,butalsowithamoreprofessionalap-proachtobusinessprocessesingeneral.forthatreason,theprojectnamed“mysatisfiedcustomer”waslaunched in2011.Basedongoodresultsof theeducationalpro-gramforthesalespersonnel,aswellasasignificantimprovementinthequalityofserviceandsalesofconsumergoods,adecisionwas brought on establishing a permanent training retail team,whichwenowcallretailacademy.retailacademywasestablishedinmayandstartedworkinginjune2012.afterthesummerpro-gram,thetrainers’teamparticipatedinaprofessionalprogramfortrainers’training,forthepurposeof improvingtheresultsofthetrainings.inthefinalquarterof2012,atrainingprogramfor2013waslaunchedanditwillincludeeachandeverypetrolstationem-ployeeinthefollowingyear.implementationoftopqualityclaSSfuelwithadditiveshasbroughtpositivechangesinthefuelportfolio,providingforastronggrowthofqualitativeperceptionofina.theofferonourpetrolstationsattheendofmarch2012wasenrichedwithanothertopqualityfuel,

EurosuperBS98+class. inadditiontoEurovandclassfuel,thestartof2012wasalsomarkedwithintroductionofnewEurodieselBSfuelwithabiocomponent,whichbroughtusevenclosertothecustomers,offeringthetopqualityEurovfuel.thewirelessinternetwasimplementedonahundredofina’spet-rolstations,implementationofinaradiocommencedonina’s110selected modernized petrol stations, a project designed for im-provingthemarketingcommunicationwithourcustomers.takingintoconsiderationpositiveeffectsfromthepreviousyears,inahadseveralsuccessfulloyaltyprogramsin2012,withthegoalofrewardingregularcustomersonourpetrolstations.Duringtheimplementationofthepetrolstationsmodernizationprogram, special carewas taken inensuring safeandhealthyworking conditions, care for the environment and achievingsustainabledevelopmentprinciples.furtherHSEactivitiessuchas soil analyses during preliminary assessment and soil exca-vation,soilandwaterremediation,waterpumpingandpurifi-cation,wastemanagement,ecological supervisionand imple-mentationofapprovedrecoveryplancontinueontheplannedpetrolstations.

RetAIl

RetAIl sAles By pRoductinkt 2010 2011 2012motorgasoline 418 386 349Gasandheatingoils 715 707 662lpG 44 34 29 otherproducts 3 3 3total 1,180 1,131 1,042

RetAIl sAles By couNtRyinkt 2010 2011 2012croatia 1,124 1,079 994Bh 40 39 36 othermarkets 16 14 13total 1,180 1,131 1,042

NuMBeR of petRol stAtIoNs 2010 2011 2012croatia 424 404 396B&H 45 45 45othermarkets 7 7 7total 476 456 448

Numberofpetrolstations

Croatia 396

BH 45

Othermarkets 7

30

coRpoRAte ANd otheR

hIGhlIGhts

inthecourseof2012numeroussectorlevelinitiativeswereconducted.theaforementionedinitiative’smaingoalwastoimprovebusinessoperationsthrough:> optINA2> procurementSpendingoptimization(pSo)> careermanagement> projectmanagementandpermittingprocessimprovement> Warehouseandinventorymanagementstrategydevelopment> contractorsafetyimplementation> culturechangeprojectandothers


KEYacHiEvEmEntS–2012

optINA2asapartofthecontinuingeffortsforefficiencyimprovementstheperformance improvementproject–optina2was launched injune2009.theobjectivesweretocreatetransparentbaselineofina’sfinancialandoperationalperformance,tovalidateandiden-tifyshortandlong-termimprovementopportunitiesandtotrans-latetheidentifiedimprovementpotential intotargetstosecureEBitimprovementinthenextthreeyears.thetotalimprovementtargetamountstoHrK2,031blncomparedto2008baseline.asofDecember2012,theoptina2projectdelivered:HrK2,234blnEBitimprovements(110%ofYtDtarget).Keyoptina2costsav-inginitiativesover-deliveredprimarilyduetoprocurementSpendoptimization(pSo)projectperformance,maintenance,insurancecostoptimization,andothercostinitiativesoninaGrouplevel.

psotheprocurementSpendingoptimization(pSo)projectthatwaslaunchedin2010wascontinuedalsoin2012oninaGrouplevel.theprojectwas initiated inordertoenhancetransparencyandoptimizetheprocessesininaprocurementwiththegoaltoim-proveoverallefficiencyandmarketcompetitivenessofthecom-pany.throughoutthe3phasesoftheprojectmorethenHrK290mil savingswas achievedona cost baselineofmore thanHrK3bn.Benefitswerenotonlyachievedthroughsavings,butalsoprocessimprovementactions,continuousmarketresearchinor-der to increase involvement of new vendors, and cutting-edgeapproaches inprocurement likee-procurementwiththeaimtofurtherimprovetransparencyandefficiency

cAReeR MANAGeMeNtin2012,inaconductedover3.000selectionproceduresthere-sultofwhichwasemploymentofover120graduatesthroughtheGrowww2012program.inaHrcontinuestoimproveandraisethequalityofHrserviceandvisibilitytowardsinternalandexter-nalclients.Dueto itsstrongpresence in thecommunitywithinthe frameworkof theEmployerBrandingplatform, inahas re-ceivedalargenumberofrewardsinthepastyears.in2012,inawassuccessfullyrecertifiedfortheEmployerpartnercertificateandreceivedthe‘BestHrpractice’recognitionforHrexcellenceandtheGrowwwprogram. pRoject MANAGeMeNt ANd peRMIttING pRocess IMpRoveMeNtin order the increase overall capEX utilization key internal im-provementareaswereaimedatincreaseinperformanceofpro-ject management through business process review and teamcapability strengthening/recruitment. focus of team capability

strengtheningwastobuild internalcapabilities inrespectofre-source management, setting clear measurable milestones andgoals,timemanagementaswellasinternalandexternalcommu-nication.additionally,specialattentionwasgiventotheimprove-mentoftheproactivepermittingmanagement,aswellasconclu-sionofframecontractsforengineering,geodeticandsupervisionservices,identifiedascrucialintheprojectimplementationpro-cesswhichleadtosignificanttimeefficiencyimprovementoftheprojects.

wARehouse ANd INveNtoRy MANAGeMeNt stRAteGyasaplanningimprovementmeasure,toinstallintegratedprofes-sionalmonitoringandcontrol, cost rationalizationandenhancebusinessmanagementofthissegmentoninaGrouplevelware-houseandinventorymanagementstrategywasset.

coNtRActoR sAfetyin2012,ina’scontractorsafetyimplementationactivitieskeyob-jectivewas theachievementofworld-class safetyperformanceandthroughanewapproachtomanagingemployeehealth,en-vironmental impact, safety, and reliability. the purpose of thisprocess is to establish clear accountabilities, ensure active en-gagement of contractors, and provide a consistent program toeliminatehealth,safetyandenvironmentandincidentsandinju-riesamongcontractors.

cultuRe chANGemaingoaloftheculturechangeprojectwastobuildandstrength-enina’scorporatecultureandmoreactivelyengageallinaem-ployees on a corporate culture journey. for this purpose thefollowingactivitieswereconducted:Bestina-tiative2012compe-tition,intensiveinternalcommunicationcampaign,culturejour-neyguide, Engagementworkshop, andEmployeesengagementsurvey.allactivitieswereaimedtocontinuouslyencouragecul-tureofinnovationinsideourcompany,aswellastouseallavail-ablecommunicationchannelstointroduce,promoteandexplaintoouremployee’ssevenkeycorporatevalues.

outlooKina will continue to further improve efficiency, transparency,optimize business processes and develop internal capabilitiesthroughtheimplementationofmoderntoolssuchastheperfor-manceandcareermanagementSystem,HaYmethodandappli-cationofHrmetrics,projecttrackingSystem,andotherswhilesimultaneouslyfocusingonattractionoftalents,retention,mo-tivationandengagementofemployees, striving tosupportandmotivateallemployeesontheirprofessionaljourneys

coRpoRAte ANd otheR

32

fINANcIAl ANd opeRAtING peRfoRMANce


fINANcIAl ANd opeRAtING peRfoRMANce

34

MANAGeMeNt dIscussIoN ANd ANAlysIs

suMMARy of 2012 Results

in2012,inaGroupoperatedinamixedexternalenvironment.forthe4thconsecutiveyearcompanyhadtooperateinlinewithdepressedmarketdemandforkeyoilderivativesandnaturalgasresultingfromtheprolongedeconomicslowdowninthecompany’scoremarkets,andprolongedsanctionsanduncertaintyinSyria,oneofthecoreup-streammarketsfortheGroup.ontheotherhand, improvement inthecrackspreadenvironmentwithrelativelystablecrudepricescom-paredto2011positivelyaffectedina’sresults.inaGroupwasabletomaintainstablerevenuesofaroundHrK30billionasaresultofimprovedrealizedhydrocarbonprice.atclosetoHrK5billion,EBitDaexcludingspecial itemsdeclinedby27%year-on-yearmainlyduetoalackofupstreamrevenuesfromourSyrianoperations.Despitethis,thecompanywasabletoachievepositiveresultsinbothoperatingprofitandnetprofitexcludingspecialitemswhichstoodatHrK2.9billionandHrK1.9billion,respectively.amajorcontributiontothissolidperformancewasourcontinuedsuccessinincreasingop-erationalefficiency, resulting in cost savingsofoverHrK2.2billioncomparedtothe2010baseline.ina’soperatingcashflowfor2012increasedby14%toHrK3.7billioncomparedto2011,strengthen-ingthecompany’sfinancialpositionandbuildingasolidbaseforfu-tureinvestmentplansanddebtrepayment.improvedgearinglevels,whichdeclinedfrom39%to31%year-on-year,aretheresultofman-agement’scontinuouseffortstomaintaintheGroup’ssolidfinancialposition.theGroup(ifweadjustfortheactivityinSyria)maintainedthelevelofitsinvestmentactivitydespitethecontinuedeconomiccrisisexpe-riencedinitscoreregionalmarkets,spendingHrK1.29bnin2012,

5%morethanin2011(adjustedforSyria),increasingcapEXspend-ingportionincroatiafrom72%in2011to94%in2012.aftercom-missioningthenewhydrocrackingunitinrijekarefineryin2011,thefocusofcroatianinvestmentsshiftedtoupstreamandretailin2012,withinvestmentsindomesticupstreamjumpingfromHrK187milliontoHrK558millionandinretailmorethandoublingfromHrK106mil-liontoHrK229millionduetothelarge-scalemodernizationofina’sretailnetwork.netprofitexcludingspecialitemsfor2012reachedHrK1.9billion,a28%declineyear-on-yearduetoaweakfirsthalfof2012drivenbystrongernegativecappednaturalgaspricesimpact(increasedhouse-hold’spricefromto1.70to2.20HrKpercmandliberalizedsmallandindustrialconsumerprices)andlessfavourableexternalenvironment.However, the company’s performance in the second half of 2012showedasignificantimprovementoverthesameperiodof2011,withnetprofitexcludingspecialitemsmorethandoublingatHrK1.2bil-lionagainstHrK0.5billioninsecondhalfof2011.theExplorationandproductionSegmentcontinuedtobetheleadingcontributortoGrouplevelresults.atthesametime,despitethenega-tivecontributionfromtherefiningandmarketingSegmentcausedbydecliningdemandpartlyoffsetbyfurtherimprovementinoperatingefficiency,theperformanceofthisbusinessimprovedduringtheyearmainlyreflectingahealthierenvironmentcharacterizedbyimprovedcrackspreads.ExplorationandProduction:in2012,EBitDaexcl.specialitemswasHrK5.6billion(uSD952million),31%downduetoalackofSyrianproductionvolumesandrevenues,loweroffshorevolumes,anda35%lowertotalproductioncomparedto2011.resultswereadditionallyburdenedwiththegaspricecapappliedtosmallbusinesscustomersandregulatedpricesforsupplyingtariffhouseholdcustomers,despite


anincreaseduringthereportingperiod.thesenegativedriverswereslightlymoderatedbyimprovedaveragerealizedhydrocarbonprices.RefiningandMarketing:in2012,thesegmentreportedaHrK654million improvement in EBitDa excluding special items comparedto2011atHrK (366)millionvia capturing improvedcrack spreadenvironmentwithhighermotorfuelsalesandimprovedyieldstruc-ture of the refineries, aswell as through initiatives introduced toimproveoverallefficiency levels.Whileoptimized feedstockselec-tionandplantutilizationcontributedtoshiftingtovaluablemotorfuelsandreducingheavyfueloilsales,inventorymanagementandoptimizationofrefineries’operationsaimedatlowerownconsump-tionand loss furthersupported theperformanceof this segment.However,higherenergycostsandcontinuallydecliningdemandintheregionnegativelyaffectedresults.thesegmentimproveditsop-eratingresultexcludingspecialitemsreducingitslossby31%toHrK1.1billion.Retail:Despiteadversemarketconditionsduring2012,thesegmentreporteda6%higherEBitDa(excludingspecialitems)year-on-yearatHrK148million(uSD25million).adeclineintheoperatingprof-itexcludingspecial itemstoHrK19millionwasmainlyaresultof8%lowersalesvolumesreflectingreducedeconomicactivity,higherprices anddepressed customerpurchasingpower. thesenegativetrendswerepartiallyoffsetbyloweroperatingcosts,theintroduc-tionof diesel fuelwith bio component and further network opti-mization. Within the network modernization program, aimed atstrengtheningbrandidentityandcustomersatisfactionlevels,mod-ernizationof92fillingstationswascompletedbytheendof2012,

witha further23 stations currently in constructionand tenderingphases.CorporateandOther: the5% loweroperating lossof thesegment(HrK499million,excludingspecialitemsoruSD85million)in2012comparedtothesameperiodlastyeardemonstratesthesuccessofourinitiativesintheareasofprocessoptimizationandcostcontrol.CAPEXspending in2012reachedHrK1.3billion,resultinginsignif-icant increase in shareofdomestic investmentsup to94per cent,comparingto72percentin2011,reachingHrK1.2billion.thema-jorityofcapitalexpenditurewasspentonanumberofcroatianpro-jectsincludingintensifiedonshoreexploration,aretailmodernizationprogramanddownstreamHSEandefficiencyimprovement.theEx-plorationandproductionsegment’scapEXreachedHrK746million(including one-off opEX related to seismic acquisitions), covering,amongotherthings:a2D/3DseismicacquisitionintheSouthadriaticSea,theaccelerationofourEorprojectandanintensifiedonshoredrillingcampaign.thetemporarysuspensionofallSyrianexplorationactivitiesdecreasedinternationalspendingandplacedstrongerem-phasisondomesticexploration.thecompletionofsignificantrefinerydevelopmentprogramsduring2011 led to a lowercapEX in2012.However, new initiatives planned for 2013 includeHSE and energyefficiencyprojectsaimedatimprovinginternaloperationalefficiencyandpreparationsforadeepconversionprojectattherijekarefinery.However,majorrefineryprojectsaresubject toapprovals,which insomecases,havebeensubjecttodelays.themodernizationprogramofina’sretailnetwork,thesocalled“Blueconcept”,continueswithincreasedintensityin2013.

MANAGeMeNt dIscussIoN ANd ANAlysIs

proDajatrGovinEnamalopoproiZvoDima

2010 2011 2012 12/11% HrKmln. HrKmln uSDmln HrKmln uSDmln HrKmln uSD HrKnetsalesrevenues 25,866 4,703 30,028 5,620 29,895 5,109 (0) (9)EBitDa(1) 4,080 742 6,522 1,221 4,578 782 (30) (36)EBitDaexcl.specialitems(2) 4,583 833 6,776 1,268 4,963 848 (27) (33)operatingprofit 2,158 392 3,039 569 1,356 232 (55) (59)operatingprofitexcl.specialitems(2) 2,955 537 4,078 763 2,863 489 (30) (36)netfinancialexpenses (840) (153) (663) (124) (289) (49) (56) (60)netprofit/lossfortheperiod(3) 961 175 1,815 340 681 116 (62) (66)netprofitfortheperiodexcl.specialitems(2) 1,593 290 2,634 493 1,893 323 (28) (34)operatingcashflow 1,563 284 3,282 614 3,742 640 14 4Earningspershare Basicanddilutedearningspershare(kunaspershare) 96.1 17.5 181.5 34.0 68.1 11.6 (62) (66) netgearing% 43.72 38.82 30.83 (21)

(1)EBitDa=EBit+Depreciation+impairment+provisions(2)Excludesspecialitemsrelatedtoassetimpairment,provision,severancepaymentsandspecialitemsincome.the2012EBitwasnegativelyinfluencedbyHrK1,507millionspecialitems(3)inaGroupnetprofitattributabletoequityholder

36

Explorationandproduction 2010 2011 2012 12/11%SegmentifrSresults HrKmln uSDmln HrKmln uSDmln HrKmln uSDmln HrK uSDnetsalesrevenues 10,882 1,979 13,329 2,494 12,264 2,096 (8.0) (16.0)EBitDa 5,413 984 8,053 1,507 5,361 916 (33.4) (39.2)EBitDaexcl.specialitems 5,514 1,003 8,122 1,520 5,571 952 (31.4) (37.4)operatingprofit 4,572 831 6,141 1,149 3,787 647 (38.3) (43.7)operatingprofitexcl.specialitems 4,577 832 6,129 1,147 4,475 765 (27.0) (33.3)capEXwithone-off 1,473 268 814 152 746 128 (8.4) (16.3)


oveRvIew

upstream operating profit in 2012 excluding special items de-creasedtoHrK4.5billion,drivenby(1)a35%decreaseinhydro-carbon production, mainly due to the lack of Syrian productionvolumesandloweroffshorevolumes,(2)a29%increasednaturalgasimportscombinedwith(3)a5%increasednegativenaturalgaspricedifferential (prirodni plindeliveredanEBit lossofHrK993millionin2012).fullyearresultsreflecttheforcemajeureeventinSyriaannouncedon26february,puttingatemporarysuspensiontoSyrianactivities.During2011,thecompanyrecordedalmostHrK2.3billionrevenuesfromSyriabasedonanaveragedailyhydrocar-bonproductionlevelof20mboe/d;whichhavebeenabsentduringthisyear.negativeeffectsofdecreasedproductionhavebeeninpartmit-igatedbyinternalefficiencyimprovementeffortsincorporatingstaffandprocessoptimizationsactivitiesandbycroscoGroup’simproved contribution driven by on-going recovery in libyanactivities.

reportedoperatingprofitfor2012amountedtoHrK3.787mil-lion andwas negatively affected byHrK 688million of specialitems,mainbeingangolanprovisionsandtax,servicecontractiniranestimatedcostsandassetimpairment.

totalnaturalgasproductionwas33%lowerreflecting(1)alackofSyrianproductioninmajorityoftheperiodduetotheannounce-mentofforcemajeure,(2)anaturaldeclineandwatercutsonbothonshoreandoffshorefields incroatia,(3)adecrease inoffshoreproductionduetosevereweatherconditions inthefirstquarter,

maintenanceworkontheBarbaratplatforminthenorthadriaticandalowerinashareduetodecommissioning.croatiancrudeproductiondeclinedin2012duetonaturaldeple-tionofthefields.internationalcrudeproductionwas8%higherinEgyptduetothepositiveeffectsofdrillingandworkoveractivitiesonnorthBahariyaanddrillingactivitiesonWestabuGharadig;thebeneficialeffectofthiswasdiminished,however,by6%low-er crudeproduction inangola. Syrian crude volumeswere sig-nificantlylower(withnoproductionrecordedinQ2,Q3andQ4)comparedtothesameperiodoflastyearasthecompanytempo-rarilysuspendedactivitiesinlinewithinternationalanddomesticregulationandlocalSyriandevelopments.productionvolumesinSyriawereaccountedforonlyuptotheforcemajeureannounce-ment,withnorevenuesrecordedsinceoctober2011.

asaresultoftheabovementionedtrends,upstreamsalesreve-nueswerelowerthanlastyear’sunderlining(1)adecreaseinpro-ductionandlowernaturalgassalesvolumes,(2)anincreaseintheaveragerealizedhydrocarbonpriceand(3)positiveexchangeratemovementsduetothedeteriorationoftheHrKagainsttheuSD.2012upstreamexpendituresincreasedby18%toHrK8.5billion,underlining increasingfixedcostsofnatural gas imports, afore-mentionedspecialitemsandincreasedroyaltypayments.Signif-icantlyincreasedimportednaturalgasvolumesandanincreasedimportpricedueto internationalmarketmovements,werethemaindriversoftheincreaseinthesecosts.Higherimportednatu-ralgasvolumesof1,129mcm(+29%year-on-year)werenecessarytomaintaincontinuityofsupplyandstabilityofthedomesticen-ergysystemfollowingatechnicaldisruptionofdeliveriescausedbysevereweatherconditions,adecreaseindomesticproductionandadditionalimportsrequiredtocoverpeakconsumptiondur-ingperiodsofexceptionallylowtemperatures.


refiningandmarketing 2010 2011 2012 %SegmentifrSresults HrKmln uSDmln HrKmln uSDmln HrKmln uSDmln HrK uSDrevenues 15,777 2,869 17,926 3,355 19,704 3,368 9.9 0.4EBitDa (537) (98) (1,078) (202) (417) (71) (61.3) (64.7)EBitDaexcl.specialitems (329) (60) (1,020) (191) (366) (63) (64.1) (67.2)operatinglossreported (1,237) (225) (2,528) (473) (1,833) (313) (27.5) (33.8)operatinglossexcl.specialitems (823) (150) (1,637) (306) (1,132) (193) (30.8) (36.8)replacementmodification 480 87 266 50 99 17 (62.7) (65.9)impairmentoninventories (28) (5) (15) (3) 13 2 n.a. n.a.foreignexchangeratedifferences (260) (47) 69 13 (7) (1) n.a. n.a.ccS-basedr&moperatingloss (1,012) (184) (1,956) (366) (1,237) (211) (36.7) (42.2)capEXandinvestments(w/oacquisition) 1,328 241 575 108 228 39 (60.3) (63.8)

RefINING ANd MARKetING oveRvIew

theSegmentimproveditsEBitDa(excludingspecialitems)in2012,reachingavalueofHrK(366)million;animprovementofHrK654millioncomparedtolastyear.thisimprovementreflects:(1)asignif-icantlyhigheraveragecrackspread,and(2)increasedshareofmotorfuelsshareinsales(66.8%in2012vs.60.4%in2011),(3)diversifiedfeedstockselectionandlowerownconsumptionandloss(13.1%in2012vs.14.9%in2011),(4)on-demandoperationmodeofrefineriesresulting(5)inhighwhiteproductyieldsinbothrefinerieswiththeaverage74.3%in2012vs.67.9%in2011,(6)inventorymanagementmaterialized in low volume levels at the end of the year. positivetrendswereoffsetby(1)increasedprocessedcrudeoilprice(2)ade-creaseintheBrent-uralspread(1.1uSD/bblin2012vs.2.2uSD/bblin2011),(3)adeclineinmotorfuelconsumptionincoremarketsand(4)higherenergycosts,mainlyduetoacombinedeffectofincreasednaturalgasconsumptionandhigherprices.theimprovedoperatingresultinther&mSegment(excludingspe-cial items)underlinespositiveexternalenvironment,especially intermsofthehighgasolinecrackspread,andmatchedproductionyieldwithmarketdemand,(i.e.theshareofmarketablefuelprod-

uctswaskepthighwhiletheshareofnon-profitableblackproductswaskeptlow).increaseddepreciationrelatedtoputtingnewassetsonstreamandthepricecapinthedomesticmarketonbothmotorfuelsandlpGlimitedpositiveeffects.

reportedoperating loss for2012amountedtoHrK1,833millionandwasnegatively affectedbyHrK701million of special items,includingimpairmentofassets(iaS36)intheamountofHrK663mln.theseassetbasedimpactscombinedwiththeunfavorableex-ternalenvironmentresultinnegativeEBitDaoutlook.although both the gasoline and diesel demand on the domesticmarkethavebeeninacontinuousdeclineforthefourthconsecu-tiveyear,ther&msegmentmanagedtoachievehighermotorfuelsalesintheperiodwhichresultedinhighermarketshareduetothecontinuouseffortsofthecompany.negativeGDpmovementsandreduced spending are apparent across all sectors,mostly in con-structionandtransportwhichhadlimitedtheperformanceofthecompany.inordertoincreaseefficiencyandtomitigatethenegativetrendinthecroatianregion,sincenovember2012,theproductionprocessoflubricantsisorganizedatonelocationinZagreb.

Syria

Egypt

angola

croatia

condenzate

naturalgas

crudeoil

Productionbyregion(Mboe/day) Productionbyproducts(Mboe/day)

2010 2011 2012 2010 2011 2012

38

RefINed pRoduct sAles By couNtRy

RefINeRy pRoductIoN

2011

cro54%

B&H15%

other31%

2011

lpG 6%

Gasoline 30%

virginnaphtha 3%

Diesel 31%

jet 3%

Heatingoil 6%

fueloil 17%

Bitumen 1%

other 3%

2012

lpG 7%

Gasoline 32%

virginnaphtha 2%

Diesel 38%

jet 3%

Heatingoil 5%

fueloil 12%

Bitumen 1%

other 1%

2012

cro53%

B&H14%

other33%

3,561 (kt)

3,448 (kt)

3,424(kt)

3,532(kt)


RetAIl seGMeNt oveRvIew

in2012,theretailsegmentrecordedanimprovementinEBitDaexcluding special items generating HrK 148million underliningimprovedprofitabilityinspiteofdecreasedsalesvolumes.adropindemandandthetighteningofthecroatianmarket,whichde-creased sales volumesandmargins,wasoffsetbymanagementeffortstoloweroperatingcosts.reportedoperating loss in2012amountedtoHrK3million, in-cludingthenegativeimpactofHrK22millionspecialitems.in2012totalretailsalesvolumesdecreasedby8%comparedto2011.inrelationtothepreviousyear,motorgasolinesalesrecord-edadropof10%,whilegasoilsalesdecreasedby6%.anotice-able sales slump resulted from the weaker consumer demand,

causedbytheslowdownineconomicactivity,higherretailprices,increasedunemployment rate,aswellas thenegative influenceofthestrongwinterandalowernumberofoperatingfillingsta-tions resulting from intensifiednetworkmodernizationprogramin2012.in order to increase the quality of service, new type of fuel oil0.1%S was introduced in December 2012 replacing 0.5%S fueloil.throughputpersite in2012was4% lowercomparedtothepreviousyear,indicatingbothcontractingmarketandintensifiednetworkmodernizationprogramhavingcertainnumberofpetrolstationstemporarilyclosed.on31December2012,inaGroupoperatedanetworkof448fill-ingstations(396incroatiaand52abroad,ofwhich45inBosniaandHerzegovina,6inSloveniaand1inmontenegro).

retail 2010 2011 2012 change%SegmentifrSresults HrKmln uSDmln HrKmln uSDmln HrKmln uSDmln HrK uSDrevenues 6,453 1,173 7,676 1,437 7,788 1,331 1.5 (7.3)EBitDa (9) (2) 95 18 122 21 28.4 17.3EBitDaexcl.specialitems 35 6 140 26 148 25 5.7 (3.5)operatingprofit/(loss) (186) (34) 47 9 (3) (1) n.a. n.a.operatingprofit/(loss)excl.specialitems 38 7 109 20 19 3 (82.6) (84.1)capEXandinvestments(w/oacquisition) 52 9 106 20 229 39 116.0 97.3

2010

otherproduct

lpG

Heatingoil

motorfuel

othermarkets

B&H

croatia

2010

Retailsalesbyproducts(kt) Retailsalesbycountry(kt)

2011 20112012 2012

40

cApItAl expeNdItuRes

exploRAtIoN ANd pRoductIoN cApItAl expeNdItuResExploration andproduction segment’s capEX spending in 2012amountedtoHrK746million(includingHrK56millionexplora-tionrelatedone-offopex).capitalinvestmentsincroatiareachedHrK558million,whileforeigninvestmentswerearoundHrK86millionandcroSco’sinvestmentsamountedtoHrK102million.comparedtothepreviousyear,capEXspendingdeclinedfor8%,which reflects thedifficult international operatingenvironmentespeciallyinthemEnaregion.Decreasedinvestmentlevelsweremainly a resultof temporarily suspendedexploration,develop-mentandproductionactivitiesinSyriacombinedavailabilitycon-straintsofcertainequipmentandcontractors.

2012 cApex (HrKmillion) croatia Syria Egypt angola

Exploration 149.6 3.4 1.5 0o/wexpl.oneoffopex 56.3 Development 298.3 6.2 52.1 19.2

Exploration:oncentralandSouthadriatic2D/3Dseismicacquisitionwasfinishedinmarch2012anditwasacquired1215km2of3Dareaand843kmof2Dlinewasacquired.ononshoreinafinisheddrillingofexplorationwellsHrastilnica-3(inmarch)andĐeletovci-1Z(inapril).Bothwellsweretestedandtheyaresuccessful.ExplorationwellsZala-ta-1East(ina50%)andantunovac-1weredrilledandareunsuccessful.

Development:ontheadriaticinvestmentswerere-latedtoivanaKplatformoverhaul.ononshoreinthescopeoftheEorprojectinafinishedre-liningonŽu-111,on-siteworkforthecSco2molveandmembraneseparatorunitsisongoing.on-siteworkforcSco2Ethaneandco2pipelineisaheadoftheplanduetoaccelera-tionofactivities.Drillingofdevelop-mentwellKalinovac-4rstartedinmayandfinishedinSeptember.themainoftherestdevelopmentac-tivitieswererelatedtowellgeneralworkovers.

allplannedactivitieswerecancelledduetothepoliticalsituation.investmentsrepresentallocatedG&acostsandconstructionactivitiesfortheperiodjan-feb26thbeforeforcemajeureannouncementanddifferencepostedinDecember2012basedonreceivedfinalbillingstatementfor4Q2011.

Explorati

on(including

Iran

):15

8.1(21.2%

)

Develop

men

t:375

.8(5

0.4%

)Other:2

12.2(2

8.4%

)

investmentsonblock3/05awererelatedtofEED(frontengi-neeringanddesign)activitiesonpunjaandcacoGazelafields.onblock3/05invest-mentswererelatedtofSopalancadrydockmaintenanceandGlcc-llccseparatorconstructionactivities.onbothblocksplannedactivitieswereindelayduetolatena-tionalconcessionaire’sapproval.

NorthBahariya:Sixdevelopmentwellsweredrilledandputintoproduction(abrar4,5,7,11,13andGanna-3).inDecemberthedrillingofabrar-9wellstartedanditisexpectedtofinishinfebruary2013.twoexplo-rationwellsweredrilledrawda-SE1(foundeddry)andSidra-2-putintoproduction).

RasQattara:Workoveroperationswereperformedinordertoop-timizeproductionlevel.

WestAbuElGharadig:Drillingofproductionwellraml-27finishedinoctoberandproductionwellraml-28(convertedformwaterinjectortooilproducer)wasdrilledandcompletedinnovemberandputintoproduction,alsoworkoveroperationswereperformed.


RefINING ANd MARKetING cApItAl expeNdItuResa large scale refinery development programwas completed in2011.asaresultofthis,in2012capEXspendingwaslowercom-paredtothepreviousyear(HrK228millionvs.HrK575million).thesuccessfulstart-upandputtingon-streamoftheisomeriza-tionunitattheSisakrefineryhassignificantlyimprovedtheoc-tanepoolingasolineblendingandwasthemostimportantpro-jectcompleted in2012.numerousgrowthandHSE/sustainableprojectshavebeenlaunchedin2012,inlinewithpreparationforupcomingsignificantdevelopmentprograms.

RetAIl cApItAl expeNdItuRescapital expenditures in the amount of HrK 229millionin 2012were 116% higher than in 2011,when they amounted to HrK106million. themain reason for suchhigh realization in2012,comparedtothepreviousyear,wastheintensivemodernizationprogram.aspartof the intensive inaretailnetworkmodernizationpro-gram,whichaimstoincreasethebrandidentityandfunctionalityoffillingstationsandtoachieveahighlevelofcustomerserviceandconsumersatisfaction,92fillingstationsweremodernizedin2012.

42

asat31December2012, inaGrouptotalassetsamountedtoHrK28,187millionandwere9%lowercomparedto31Decem-ber2011.intheperiodendingwith31December2012,theGroupinvest-edHrK99millioninintangibleassets.theeffectofdepreciationequals to HrK 48million. foreign exchange revaluation of oil

andgasfieldsdecreasedthenetbookvalueinamountofHrK13million.impairedinvestmentsamountedtoHrK127millionandtransfer fromexplorationtodevelopmentdecreasednetbookvalueofintangibleassetsinamountofHrK117million.transferfromtangibleassetsincreasednetbookvalueinamountofHrK2million

31Dec2011 31Dec2012 % assets non-currentassets 22,900 20,887 (9)currentassets inventories 3,693 3,352 (9)tradereceivablesnet 3,282 2,770 (16)otherreceivables 456 516 13Derivativefinancialinstruments 2 2 0othercurrentassets 76 30 (61)prepaidexpensesandaccruedincome 79 142 80cashandcashequivalents 337 488 45currentassets 7,925 7,300 (8)totalcurrentassets 7,925 7,300 (8)totalassets 30,825 28,187 (9)

Equityandliabilities capitalandreserves Sharecapital 9,000 9,000 0revaluationreserve - 13 n.a.otherreserves 2,616 2,505 (4)retainedearnings/(Deficit) 2,759 3,437 25Equityattributabletoequityholderoftheparent 14,375 14,955 4non-controllinginterests (10) (1) (90)totalequity 14,365 14,954 4non-currentliabilities 8,575 4,075 (52)currentliabilities n.a.Bankloansandoverdrafts 1,918 1,266 (34)currentportionoflong-termdebt 1,904 4,725 148othercurrentliabilities 4,063 3,167 (22)currentliabilities 7,885 9,158 16liabilitiesdirectlyassociatedwithassetsclassifiedheldforsale - - n.a.totalcurrentliabilities 7,885 9,158 16totalliabilities 16,460 13,233 (20)totalequityandliabilities 30,825 28,187 (9)

BalancESHEEt–inaGroup

conDEnSEDconSoliDatEDStatEmEntoffinancialpoSition–ina-Groupat31DEcEmBEr2011anD2012(inHrKmillionS)


intheperiodendingwith31December2012,inaGroupinvest-edHrK1,131millioninproperty,plantandequipment.reversalofcapitalizeddecommissioningcostsdecreasedthevalueofas-setsbyHrK117million.foreignexchangerevaluationdecreasedthenetbookvalueinamountofHrK90million.impairmentofassets equals HrK 623million and impairment of investmentequals to HrK 32million. the effect of depreciation reducednetbookvalueofproperty,plantandequipmentinamountofHrK1,968million.transferfromintangibleassetsincreasedthevalueofproperty,plantandequipmentinamountofHrK115million.DisposalofassetsamountedtoHrK7million.increaseofinaGroupnetbookvalueisalsoresultofforeignexchangedifferencesintheamountofHrK12million.correctionofprioryear depreciation increasednet book valueof property, plantandequipmentinamountofHrK1million.issued capital at 31 December 2012 amounted to HrK 9,000million.therewerenomovementsintheissuedcapitalofthe

companyineitherthecurrentorthepriorfinancialreporting.inventoriesamountedtoHrK3,352million,whichisadecreaseof9%comparedto31December2011,asaresultoflowervol-umes of crude oil inventories.trade receivables decreased by16%totheamountofHrK2,770millionasaresultofmanage-menteffortstocollectoverduereceivablesanddecreasedsalesvolumes.on31December2012,totalliabilitiesdecreasedby20%totheamountofHrK13,233millionmostlyasaneffectof lower in-debtednesscomparedtothe31December2011level.inaGroupnetindebtednessdecreasedby27%andamountedtoHrK 6,664million, as ina primarilymanaged to reduce itslong-termdebtasaresultofhigherowncashgeneratingcapa-bilities.Gearingratiodecreasedfrom38.8%asat31December2011,to30.8%asat31December2012.tradepayablesdecreasedby17%toHrK1,684million,asare-sultofloweramountofpurchasedcrudeoil.

44

incomEStatEmEnt–inaGroup

conDEnSEDconSoliDatEDincomEStatEmEnt–ina-GroupfortHEpErioDEnDED31DEcEmBEr2011anD2012(inHrKmillionS)

2011 2012 %

totalsalesrevenue 30,028 29,895 (0)incomefromownconsumptionofproductsandservices 309 269 (13)otheroperatingincome 485 353 (27)totaloperatingincome 30,822 30,517 (1)operatingexpenses (27,783) (29,161) 5profitfromoperations 3,039 1,356 (55)netlossfromfinancialactivities (663) (289) (56)profitbeforetax 2,376 1,067 (55)incometaxexpense (573) (380) (34)profitfortheyear 1,803 687 (62)Earningspershare Basicanddilutedearningspershare(kunaspershare) 181.5 68.1 (62)

total sales revenues in2012amounted toHrK29,895millionandwereslightlybelow2011level,aslowercrudeoilandnat-uralgassalesvolumeswereoffsetbyhigherrealizedoilderiva-tivesandnaturalgaspricescomparedtothelastyear.costsofrawmaterialsandconsumableswere11%highercom-pared to2011andamounted toHrK15,151million, resultingfrom increasedvGoprocessingaswellas12%higheraverageimportpriceof crude,while volumesof importedcrudewere11%lower.costsofgoodssoldrecordedasmallincreaseby2%to the amount of HrK 5,377million triggered by a combinedeffectofhighersoldvolumesofimportednaturalgasandhigherpricescomparedto2011.Withintheotheroperatingcostsrealizedin2012:• othermaterialcostswerelowerby6%andamountedtoHrK1,696million.• ServicecostsintheamountofHrK1,360millionrecordedanincreaseof12%mainlyduetohigherroyaltycostscomparedto2011aswellascostsrelatedtoexitingservicecontractiniran.• Depreciation was 24% lower and amounted to HrK 2,016millionmainlydue to “forcemajeure”announced infebruary2012thatreducedExplorationandproductiondepreciation• adjustments and provisions of HrK 1,206 million were by43%higherandrelatedtointernationaloperationsaswellasre-

finingandmarketingassetsimpairmentasthesegmentplannedperformanceisstronglyimpactedbylowconversionofrefineryassetsandhighdistributionnetworkcosts.StaffcostsintheamountHrK2,636millionwere4%lowercom-paredto2011asaresultofworkforceoptimization.StaffcostsrepresentcostofnetsalariesintheamountofHrK1,309mil-lion,costofemployeeincometaxintheamountofHrK569mil-lion,taxonpayrollintheamountofHrK332millionandotherpayrollrelatedcostsintheamountofHrK428millionforthetwelvemonthperiodended31December2012.forthetwelvemonthperiodended31December2011staffcostincludescostofnetsalariesintheamountofHrK1,367million,costofem-ployeeincometaxintheamountHrK565million,taxonpayrollintheamountHrK399million,andotherpayrollrelatedcostsintheamountHrK421million.inaterminatedthecontractsof594employeesandseverancepaymentsinthetotalamountofHrK 179millionweremade (the number ofworkers includes127employeeswhoweregoneon31December2011and117employeeswhoweregoneon31December2012,becausethecostsoftheirseverancepaymentswereincludedin2012costs).incometaxexpensesdecreasedfor34%totheamountofHrK380million.taxcostsanddeferredtaxesduringtheinterimperiodarecalcu-


latedonthebasisofactualresultsandtheprofittaxrate,20%forboth2012and2011.

netfinancialexpensesintheamountofHrK289millionwererecorded in 2012, compared to the net financial expenses ofHrK663millionin2011.• netforeignexchangegainswereHrK37millionin2012main-lyrelatedtotheappreciationofHrKagainstuSD,comparedtoHrK278millionnetforeignexchangelossesrecordedin2011• interestpayableamountedtoHrK174millionand interestreceivedHrK23millionin2012,comparedtointerestpayableofHrK191millionandinterestreceivedHrK26millionin2011.thecompanyhasrecognizedrevenuesintheincomestatementfromhydrocarbonsalesinSyriawhichhadbeenrealized,inlinewithinternationalaccountingstandards,meaningthatthecashprinciplehasbeenappliedsincethebeginningof2011.inaun-tilnowdidnot receive theoutstanding revenues for its shareofhydrocarbonproductioninSyrianeitheritexpectstorealizeitsproductionsharefromitsSyrianprojectfortheforeseeablefuture,i.e.atleastuntilthe“forcemajeure”conditionsceasetoexist.followingthechangesoftheparametersforthefunction-

al depreciation (ina’s production share during the “forcema-jeure”)onthemajorpartoftheSyrianassetsand in linewiththeifrS,depreciationwouldnotbebookedforthecashgener-atingassetsfromfebruary2012untilforcemajeureconditionswillceasetoexist.under current practice and in line with the international ac-counting standards the company adjusts its receivables thatare 180 days or older. accordingly the company has adjustedasignificantamountofitsreceivablesinEgyptthatmeetthesecriteria.restatementof thepreviousperiodsunderstands thereclassificationrelatingtofinancialstatementspresentations(inlinewithiaS1)inrespectofnettingtherevenuesandexpensesandtechnicalcorrectionsrelatingtorecordingoftheassetim-pairmentmadeat2011yearendtotheappropriatecorrespond-inginterimperiodofthatyear.untiltheendof2012,HrK1,619millionrecurringcostsavings(1,287excludinginter-segmental)andHrK615millionrevenueimprovementshavebeenachievedwhencomparedtothe2008baselineatinaGrouplevel.altogether,HrK2,234millionofre-curringEBitimprovement(1,902excludinginter-segmental)hasbeendeliveredsincetheprogram’sinceptionin2010.

46

caSHfloW–inaGroup

conDEnSEDconSoliDatEDcaSHfloWStatEmEnt-inaGroupfortHEpErioDEnDED31DEcEmBEr2011anD2012(inHrKmillionS)

HrKmln 2011 2012 %

netcashinflowfromoperatingactivities 3,282 3,742 14netcashusedforinvestingactivities (1,339) (1,118) (17)netcashfromfinancingactivities (1,852) (2,461) 33net(decrease)/increaseincashandcashequivalents 91 163 79

theoperatingcash-flowbeforechangesinworkingcapitalamountedtoHrK4,541millionin2012,representingadecreaseofHrK1,915million,or30%,comparedto2011,mainlyasaresultoflowerEBitDa.changesinworkingcapitalaffectedtheoperatingcashflowpositivelybyHrK449million,primarilydueto:• DecreaseinreceivablesbyHrK379million• DecreasedvalueofinventoriesbyHrK190million

netoutflows in investingactivitiesamounted toHrK1,118million, in comparisonwithHrK1,339millionofoutflows in2011.positiveinflowintheamountofHrK142millionwasrecordedresultingfromrepaidloansbysubsidiariesofjointventures.thelowerlevelofcashinflowwasaconsequenceofthenatureofkeyprojects,someofwhichwerecompleted,andfromcurrentlessfavorableoperatingmarketenvironment.


BalancESHEEt–ina,D.D.

INA, d.d. uNcoNsolIdAted stAteMeNt of fINANcIAl posItIoNat31DEcEmBEr2011anD2012(inHrKmillionS)

2011 2012 %

assets non-currentassets 22,421 20,771 (7)currentassets inventories 3,030 2,485 (18)tradereceivablesnet 1,781 1,103 (38)intercompanyreceivables 1,588 2,226 40otherreceivables 379 428 13Derivativefinancialinstruments - - n.a.othercurrentassets 313 83 (73)prepaidexpensesandaccruedincome 54 79 46cashandcashequivalents 229 270 18currentassets 7,374 6,674 (9)totalcurrentassets 7,374 6,674 (9)

totalassets 29,795 27,445 (8)Equityandliabilities capitalandreserves Sharecapital 9,000 9,000 0revaluationreserve - 13 n.a.otherreserves 2,239 2,123 (5)retainedearnings/(Deficit) 3,043 4,366 43totalequity 14,282 15,502 9non-controllinginterests - - n.a.totalequity 14,282 15,502 9non-currentliabilities 8,388 3,854 (54)currentliabilities Bankloansandoverdrafts 1,784 1,057 (41)currentportionoflong-termloans 1,817 4,648 156othercurrentliabilities 3,524 2,384 (32)currentliabilities 7,125 8,089 14totalcurrentliabilities 7,125 8,089 14totalliabilities 15,513 11,943 (23)totalequityandliabilities 29,795 27,445 (8)

ina,d.d.totalassetsamountedtoHrK27,445millionasat31December2012andwere8%lowercomparedto31December2011.property,plantandequipmentdecreasedby8%andamountedtoHrK17,063million.tradereceivablesamountedtoHrK1,103millionandwere38%lowercomparedto31December2011asaresultofmanagementeffortstocollectoverduereceivablesanddecreasedsalesvolumes.totalliabilitiesamountedtoHrK11,943million(23%lowerthanon31December2011),mainlyasaneffectoflowerindebtednesscomparedto31December2011level.ina,d.d.netindebtednesswasHrK6,488millionasat31December2012,whichisadecreaseof27%comparedtotheendof2011primarilybecauseinamanagedtoreduceitslong-termdebtasaresultofhigherowncashgeneratingcapabilities.Gearingratiowas29.5%asat31December2012,decreasingfrom38.5%asat31December2011.tradepayablesamountedtoHrK964millionandwere13%lowercomparedtotheendof2011asaresultofloweramountofpurchasedcrudeoilproducts.

48

incomEStatEmEnt–ina,D.D.

INA, d.d. uNcoNsolIdAted INcoMe stAteMeNt fortHEpErioDEnDED31DEcEmBEr2011anD2012(inHrKmillionS)

2011 2012 %

Salesrevenue a)domestic 15,820 17,188 9b)exports 10,471 9,216 (12)totalsalesrevenue 26,291 26,404 0incomefromownconsumptionofproductsandservices 5 2 (60)otheroperatingincome 560 419 (25)totaloperatingincome 26,856 26,825 (0)changesininventoriesoffinishedproductsandworkinprogress 349 181 (48)costofrawmaterialsandconsumables (13,814) (15,628) 13Depreciationandamortization (2,397) (1,835) (23)othermaterialcosts (1,514) (1,536) 1Servicecosts (965) (1,204) 25Staffcosts (1,666) (1,617) (3)costofothergoodssold (2,644) (1,324) (50)impairmentandcharges(net) (1,306) (1,967) 51provisionsforchargesandrisks(net) 244 (132) n.a.operatingexpenses (23,713) (25,062) 6profitfromoperations 3,143 1,763 (44)Shareintheprofitofassociatedcompanies financeincome 355 393 11financecosts (933) (487) (48)netlossfromfinancialactivities (578) (94) (84)profitbeforetax 2,565 1,669 (35)incometaxexpense (598) (346) (42)profitfortheyear 1,967 1,323 (33)attributableto ownersofthecompany 1,967 1,323 (33)non-controllinginterests - - n.a. 1,967 1,323 (33)Earningspershare Basicanddilutedearnings/(loss)pershare(kunaspershare) 196.7 132.3 (33)

totalsalesrevenuesin2012amountedtoHrK26,404millionwhichisalmostthesamelevelasinthelastyear.lowercrudeoilandnaturalgassalesvolumeswereoffsetbyhigherrealizedoilderivativesandnaturalgaspricescomparedtothelastyear.

costsofrawmaterialsandconsumablesincreasedby13%totheamountofHrK15,628million,resultingfromincreasedvGopro-cessingaswellas12%higheraverageimportpriceofcrude,whilevolumesofimportedcrudewere11%lower.

costsofgoodssolddecreasedby50%totheamountofHrK1,324millioncomparedtothesameperiodlastyear.Withintheotheroperatingcostsrealised2012:• othermaterialcostsslightlyincreasedby1%totheamountofHrK1,536million.• ServicecostsintheamountofHrK1,204millionrecordedanincreaseof25%mainlyduetohigherroyaltycostscomparedto2011aswellascostsrelatedtoexitingservicecontractiniran.


caSHfloW–ina,D.D.

INA, d.d. uNcoNsolIdAted stAteMeNt of cAsh flowfortHEpErioDEnDED31DEcEmBEr2011anD2012(inHrKmillionS)

• Depreciationwaslowerby23%andamountedtoHrK1,835millionmainlydueto“forcemajeure”announcedinfebruary2012thatreducedExplorationandproductiondepreciation• adjustmentsandprovisionsamountedtoHrK2,099millionandwererelatedtointernationaloperationsaswellasrefiningandmarketingassetsimpairmentasthesegmentplannedperformanceisstronglyimpactedbylowconversionofrefineryassetsandhighdistributionnetworkcosts.

StaffcostsamountedtoHrK1,617million,whichisadecreaseof3%resultingfromworkforceoptimization.inaterminatedthecontractsof594employeesandseverancepaymentsinthetotalamountofHrK179millionweremade(thenumberofworkersincludes127employeeswhoweregoneon31December2011and117employeeswhoweregoneon31December2012,becausethecostsoftheirseverancepaymentswereincludedin2012costs).

netfinancialexpensesintheamountofHrK94millionwererecordedin2012,comparedtothenetfinancialexpensesofHrK578millioninthesameperiod2011.

in2012incometaxexpensedecreasedbyHrK252milliontotheamountofHrK346million.

HrKmin 2011 2012 %

netcashinflowfromoperatingactivities 2,285 3,702 62netcashusedforinvestingactivities (1,375) (1,214) (12)netcashfromfinancingactivities (952) (2,432) 155net(decrease)/increaseincashandcashequivalents (42) 56 n.a.

theoperatingcash-flowbeforechangesinworkingcapitalamountedtoHrK5,653millionin2012,representingadecreaseof15%comparedto2011,mainlyasaresultoflowerEBitDa.changesinworkingcapitalaffectedtheoperatingcashflownegativelybyHrK707million,dueto:• DecreasedvalueofinventoriesbyHrK413million• lowerliabilitiesbyHrK247million• HigherreceivablesbyHrK873million

taxpaymentaffectedoperatingcashflowbyHrK1,244million.mentionedfactorsresultedinHrK3,702millionnetcashinflowfromoperatingactivitiesthatina,d.d.generatedin2012.

50

INteGRAted RIsK MANAGeMeNt

riskmanagementandHedgingpolicyforinaGroupisprovidingtheframeworkunderwhichinaanditsconsolidatedsubsidiar-iesmanageandmaintaincommodity,foreignexchangeandin-terestrateriskatanacceptablelevel.Besidefinancial(market)risks, themost important risks include the credit risk and theliquidityrisk.

a)marKEtriSKCommoditypriceriskmanagementinapurchasescrudeoilonaspotmarketprice,mostlythroughshort-term credit facility arrangements in uS dollars. the re-quiredquantitiesofgasarepurchasedatapricedenominatedinuSdollarsinaccordanceto3-yearsupplycontractwithitalianEni.DomesticpricesofrefinedproductsaredeterminedunderthepricingformulasetoutintheHighestretailrefinedproductpricingregulationwhich, toa limitedextent, isprotectingtheGroupfromthechangesincrudeandoilproductpricesandtheforeigncurrencyrisk,enablingrefineryproductstobereprisedbi-weekly.inamayalsousederivativeinstrumentsinmanagingitscommodityexposure.

ForeigncurrencyriskmanagementmanyGrouptransactionsarepricedanddenominatedinforeigncurrency and thus theGroup is exposed to currency risk. theGrouphasnetlonguSDandEur,andnetshortHrKoperativecashflowposition.theGroupmayusecrosscurrencyswapstoadjustthecurrencymixofthedebtportfolio.asofDecember31,2012,therewerenoopencrosscurrencytransactions.

Interestrateriskmanagementina Group companies use borrowed funds at both fixed andfloatinginterestrates(mostlyfloating)andtheGroupisconse-quentlyexposed to the interest rate risk.theGroupdoesnotspeculateoninterestratedevelopmentsandprimarilychoosesfloating rates. as ofDecember 31, 2012, therewere no openinterestrateswaptransactions.otherpriceriskina isexposedtoequitypricerisksarisingfromequity invest-mentsheldforstrategicreasonsandnotfortrading.

B)crEDitriSKcredit risk refers to the risk that thecounterpartywilldefaultonitscontractualobligationsresultinginafinanciallosstotheGroup.accordingtoexistingcreditriskmanagementprocedureGroupestimatescreditworthinessandriskindealingwithcus-tomersbasedoninternalmodelofevaluationaswellasusing

theservicesofcreditworthinessagencies.thereisnosignificantcreditriskexposureofinaGroupthatisnotcoveredwithcollat-eral,otherthanthosetotheinstitutionsandentitiescontrolledby the state and the local government, and exposure towardcustomersundercertainconcessionagreementsabroad.inor-der to extend the availablemeasures for collection of receiv-ables, ina isalsousingservicesofagencies for“outofcourt”collectionofreceivables.

c)liQuiDitYriSKtheGroup’sliquidityriskismanagedbymaintainingadequatereservesof liquidityandcredit linesbycontinuousmonitoringofprojectedandactualcashflowandduedatesforaccountre-ceivablesandpayables.asofDecember31,2012,theGrouphadcontractedshort-termbankcreditlinesamountingtoHrK1.99bn(cnBmiddlerate),excludingoverdraftsandtradefinancingcreditlinesestablishedwith thepurpose tofinance thepurchaseof crudeoil andoilproducts, and contracted long-term credit lines amounting toHrK7.42bn(cnBmiddlerate).

D)fairvaluEoffinancialinStrumEntStheGrouphasconcludedsomelong-termsaleorpurchasecon-tractsthatcontainembeddedderivativesasdefinedbyiaS39.


AppeNdIximpactofSpEcialitEmSonopEratinGprofitanDEBitDaofinaGroup(inHrKmillion))

2011 2012INA GRoup totalimpactofspecialitemsonoperatingprofit (1,039) (1,507)totalimpactofspecialitemsonEBitDa (254) (385)Exploration&production 12 (688)incentivemeasures (69) (82)impairmentofassets - (161)angola - (273)Egypt-extracostofproduction - (11)provisions(Eni,litigations,incentives) (31) (43)reversal-iaS36 - 77iranmoghan-2Block-servicecontractexitaccrual - (196)impairmentofassetsinlibya(crosco) - -provisions(prirodniplintaxcase) 112 -refining&marketing (891) (701)impairmentofassets-refinery (655) (665)incentivemeasures (58) (66)provisions(litigations,incentives) (13) (6)reversalofprovisions(litigations,incentives) - 21revenuesfrominsurance - 15impairmentofgasbottles-proplin (165) -retail (62) (22)incentivemeasures (45) (26)impairmentofassets - (31)reversalofprovisions(litigations,incentives) - 39provisions(litigations,incentives) (17) (4)corporatefunctions (98) (96)incentivemeasures (82) (99)impairmentofassets - (1)reversalofprovisions(litigations,incentives) - 21provisionsforincentives (16) (18)revenuesfrominsurance - 1

52

Key GRoup opeRAtING dAtA

MMBoe 1p 2p 2010 2011 2012 2010 2011 2012Bycountry croatiaonshore 161 160 153 194 190 184croatiaoffshore 47 35 21 57 44 38Syria 33 24 22 46 37 36Egypt 3 3 2 4 4 3angola 3 2 2 4 4 6total 246 224 201 305 278 267Byproduct oil 75 76 74 90 90 97Gas 151 130 115 188 165 154condensate+lpG 21 18 13 26 23 16total 246 224 201 305 278 267

exploRAtIoN ANd pRoductIoN 2010 2011 2012 12/11%Hydrocarbonproduction crudeoilproduction(boe/d) 16,336 15,284 12,295 (19.6)croatia 9,672 9,106 8,792 (3.4)Syria 3,144 2,837 109 (96.1)Egypt 1,942 1,762 1,908 8.3angola 1,577 1,579 1,486 (5.9)naturalgasproduction(boe/d) 41,973 49,169 33,024 (32.8)croatia-offshore 22,699 21,783 15,768 (27.6)croatia-onshore 14,892 13,923 14,978 7.6Syria 4,381 13,462 2,278 (83.1)condensate(boe/d) 7,170 9,911 3,234 (67.4)croatia 6,814 5,957 2,537 (57.4)Syria 355 3,954 697 (82.4)totalhydrocarbonproduction(boe/d) 65,479 74,366 48,554 (34.7) averagerealisedhydrocarbonprice crudeoilandcondensateprice(uSD/bbl) 69.7 98.7 96.1 (2.6)averagerealisedgasprice(uSD/boe) 55.4 70.5 78.3 11.0totalhydrocarbonprice(uSD/boe) 59.2 77.6 83.1 7.1 naturalgastrading-mlncm naturalgasimports 1,214.3 876.1 1,128.8 28.8totalnaturalgassales-domesticmarket 3,026.2 3,033.2 2,630.9 (13.3) naturalgaspricedifferentialtoimportprices(HrK/000cm) Eligiblecustomers’price (355.9) (379.9) (285.0) (25.0)tariffcustomers’price (396.7) (921.3) (1,248.2) 35.5totalprice (369.7) (509.9) (535.7) 5.1

ReseRves BReAKdowN


Key GRoup opeRAtING dAtA

EXPLORATIONANDDEvELOPMENTPROGRESS

country Block Well progress commentcroatia Sava Hrastilnica-3 drilledandtested testresultsQo=cca400m3/day EastSlavonija Đeletovci-1Z drilledandtested testresults-totallyobtained:Qo=391,7m3; Qw=3.74m3in108,5hoursoftesting Sava Žutica-186r suspended,nottested projectsuspendedduetotechnicalriskevaulate EastSlavonija antunovac-1 drilled,nottested nohydrocarbonshowswhiledrilling panon Kal-4r drilledandtested expectedhydrocarbonflowhasnotbeenobtained

Egypt northBahariya abrar-4 completedasoilproducer drilledinQ1 abrar-5 completedasoilproducer drilledinQ1 abrar-7 completedasoilproducer drilledinQ2 rawdaSE-1 drywell exploratorywell,drilledinQ2 Ganna-3 completedasoilproducer drilledinQ2 Sidra-2 completedasoilproducer exploratorywell,drilledinQ3 abrar-11 completedasoilproducer drilledinQ3 abrar-13 completedasoilproducer drilledinQ4 abrar-9 drillingisinprogress spudinQ42012,expectedtobecompleted inQ12013Egypt WestabuGharadig raml-28 completedasoilproducer drilledinQ4 raml-27 drilledinQ42012 oilproducer-completionisexpectedinQ12013

54

2010 2011 2012 12/11%refineryprocessing(kt) Domesticcrudeoil 459 399 496 24.2importedcrudeoil 3,562 2,745 2,448 (10.8)condensate 138 129 113 (12.6)otherfeedstock 291 777 1,009 29.7totalrefinerythroughput 4,450 4,051 4,065 0.4 refineryproduction(kt) lpG 249 214 236 10.1 motorgasoline 958 877 1,164 32.7Diesel 1,084 982 1,334 35.8Heatingoil 222 199 181 (9.1)Kerosene 95 118 97 (17.6)naphtha 73 95 61 (35.8)fueloil 628 545 440 (19.3)Bitumen 66 49 26 (48.2)otherproducts 564 369 (6) n.a.total 3,939 3,448 3,532 2.4 2010 2011 2012 12/11%refineryloss 35 29 26 (11.6)ownconsumption 475 573 507 (11.5)totalrefineryproduction 4,450 4,051 4,065 0.4 refinedproductsalesbycountry(kt) croatia 2,049 1,923 1,814 (5.7)B&H 443 539 485 (10.0)othermarkets 1,520 1,100 1,125 2.3total 4,012 3,561 3,424 (3.9) refinedproductsalesbyproduct(kt) lpG 284 246 258 5.0 motorgasoline 1,011 902 975 8.0Diesel 1,266 1,247 1,312 5.3Heatingoil 232 201 154 (23.6)Kerosene 109 116 117 1.3naphtha 74 95 60 (37.0)fueloil 615 537 402 (25.2)Bitumen 68 91 57 (37.4)otherproducts 355 127 89 (29.7)total 4,012 3,561 3,424 (3.9)o/wretailsegmentsales 1,125 1,023 1,026 0.2



2010 2011 2012 12/11%refinedproductretailsales(kt) motorgasoline 411 386 349 (9.7)Gasandheatingoils 701 707 662 (6.4)lpG 43 34 29 (15.1)otherproducts 3 3 3 (13.3)total 1,159 1,131 1,042 (7.8) refinedproductretailsales(kt) croatia 1,103 1,079 994 (7.9)B&H 40 39 36 (6.9)othermarkets 16 14 13 (6.5)total 1,159 1,131 1,042 (7.8) numberofpetrolstations 2010 2011 2012 12/11%croatia 424 404 396 (2)B&H 45 45 45 0othermarkets 7 7 7 0total 476 456 448 (2)

RetAIl

56

sustAINABle developMeNt, heAlth, SafEtYanDEnvironmEnt(SD&HSE)


sustAINABle developMeNt, heAlth, SafEtYanDEnvironmEnt(SD&HSE)

58

as a companywith significant impact to the societyand environment ina is committed to performbusi-ness in accordance with sustainable developmentprinciples, tending toabalanced integrationof long-termeconomic,environmentalandsocialfactorsintoitsdailybusiness.accordingly, new ina Group HSE policy emphasizessustainable development elements, including reduc-ing environmental footprint andmaximising positiveeffectonsocietyingeneral.

forthesecondconsecutiveyear,in2012inapublishedsustain-abilityreportoninaGrouplevel,andthesixteenthconsecutivenon-financialreport.WithintheHSEpartwehavefocusedouractionsonHSEman-agementsystemdevelopmentandfinishedtherevisionofinaGroupHSEpolicy.thecooperationandcommunicationwithininaGroupaswellaswithalltheotherstakeholders,fromstateinstitutions tocustomersand localcommunitieswasstrength-ened. Special attentionwaspaid toensuring safeandhealthyworking conditions and care for the environment by applyingtheprinciplesofpreventionandrationalmanagement,thuscre-atingthefoundationfortheachievementsinsustainabledevel-opment.

SuStainaBlEDEvElopmEnt(SD)

asthe leadingenergycompanyandoneof the largest incro-atia, ina is committed to sustainable development. for inasustainabledevelopmentmeansthecorporatecommitmenttothebalancedintegrationoflong-termeconomic,environmentalandsocialfactorsintoeverydaybusinessoperations,inordertomaximiselong-termstakeholdervalue.inaissignatoryoftheunGlobalcompactandisthuscommit-tedtopromoteandsupporttheGlobalcompact10principlesintheareaofhumanrights, labour rights,environmentandcor-ruptioncombating.SDactivities in inaGroupare coordinatedby central SD&HSESector.SD is incorporated inHSEactivitiesandresponsibilities



(Descriptionof task andresponsibilities) and SD&HSEorgani-zation.inaGroupSDworkinggroupcontinueditswork,aimingtoensureinvolvementofalltherelevantorganizationalunitsinsustainabledevelopment.additionally,in2012corporateSocialresponsibility(cSr)coun-cilwasestablished,inordertocommunicateinternallyandex-ternallyonSDrelatedissues,analysesustainabilityrelateddataand information of external evaluations, as well as support,checkandcontrolsustainabilityreportingoninaGrouplevel.inordertoimplementsustainabledevelopmentprinciplesintothekeyprocessesofina,d.d.andtheotherinaGroupcompa-nies,in2012SustainableDevelopmentGuidelinewasissued,adocument providing an overviewof the governance structure

andmanagementofSDrelatedissues.inaGroupSustainabilityreportfor2011waspublishedasthe16thannual non-financial report, covering a full range of eco-nomic,environmentalandsocialimpactsofina.anditssubsid-iariesonstakeholders.in2012newinaGroupcodeofEthicswasadopted,aimingtoprovideinternalandexternalstakeholderswithanoverviewofthe ethical normswhich ina, d. d. and all inaGroup compa-niesconsidertobeessentialtotheirsuccessfuloperations.thecodeisbasedonrespectforfundamentalhumanrightsandtheethicalprinciplesofintegrity,honesty,trust,respect,humanity,tolerance and responsibility. Ethics committee, chaired by anexternalindependentexpert,hasbeenactivesince2010.

wAteR MANAGeMeNtina,d.d. 2007 2008 2009 2010 2011 2012Waterwithdrawal(m3) 57,121,364 55,211,935 52,733,518 37,487,634 37,310,332 38,593,890

ina,d.d. 2007 2008 2009 2010 2011 2012coD(t) 818.96 663.01 402.05 611.74 413.25 192.05BoD5(t) 180.09 176.90 115.40 152.45 129.52 69.30totalsuspendedsolids(t) 135.69 126.19 93.74 105.26 96.38 75.71mineraloils(t) 28.45 23.88 22.8 24.94 8.09 5.59totaloilsandGreases(t) 30.25 22.28 9.08 10.41 16.41 4.65

AIR eMIssIoNsco2co2t/year 2007 2008 2009 2010 2011 2012refineryrijekaSector-urinj&mlaka 953,065.60 907,814.60 1,031,072.90 797,798.51 858,141.46 854,448.31refinerySisakSector 701,335.90 576,771.90 633,427.90 585,772.84 449,351.96 445,019.77logisticsSector - - - 301.00 411.43 1,292.78Exploration&productionBD 818,438.67 769,848.45 662,347.07 663,303.53 673,088.09 571.946.26retailSmSector 52.00 28.21 111.58 144.06 87.69 75.92totalco2t/year 2,472,892.17 2,254,463.16 2,326,959.45 2,047,319.94 1,981,080.63 1,872,783.08

so2, No2, co, pARtIculAte MAtteRina,d.d. 2007 2008 2009 2010 2011 2012So2(t) 16,493.11 9,346.30 12,392.37 10,203.24 7,841.89 5,509.44no2(t) 4,864.54 6,377.09 3,863.90 4,432.19 4,331.26 3,902.06co(t) 963.18 821.35 768.56 736.32 880.85 454,18particulatematter(t) 174.24 156.32 178.48 176.85 132.80 132,72

EnvironmEntalpErformancE–inDicatorS


60

wAste MANAGeMeNtina,d.d. 2007 2008 2009 2010 2011 2012Hazardouswaste(t) 6,099.90 8,298.60 4,062.70 4,545.06 4,417.38 6,450.81non-hazardouswaste(t) 7,534.90 7,282.30 8,359.00 8,021.57 6,070.89 11,735.37totalina,d.d. 13,634.80 15,580.90 12,421.70 12,566.60 10,488.20 18.186,18

HYDrocarBonSpillSovEr1m3totalnumberofunforeseenevents/accidentsatina,d.d.fromyearthe2006to2012 2006 2007 2008 2009 2010 2011 2012Exploration&productionBD 9 3 5 4 6 3 7rijekarefinerySector-urinjandmlaka 0 3 1 4 3 0 3SisakrefinerySector 0 0 0 0 0 0 1retailSalesmanagementsector 1 0 1 0 0 0 0logisticsSector 0 1 1 0 1 2 1totalina,d.d. 10 7 8 8 10 5 12(Hydrocarbonspillsover1m3)

in2012,inarecorded12unforeseenevents/accidentswithenvironmentalimpact(volumeofspillsequalorgreaterthan1m3),whatismuchhigherresultinrespectto2011.ourresponseinemergenciesispromptandprofessional,andin2012,allenviron-mentaldamageswereremediedsuccessfully.mostoftheaccidentswereregisteredinourE&pDivision(7).SpillsthatoccurinourE&pDivisionareusuallycausedbythelengthandconditionofpipelines,whichisthereasonforsignificantfinancialinvestmentsmadeintotheirre¬vitalizationorreplacement.logisticssectortotallyregistered1spillabove1m3.

62

minimizingina’simpacttotheenvironmenthasbeencontinuos.inacommitmentofminimizingitsimpacttotheenvironmentiscontinuous.combiningtheknowl-edgeofourexpertsandbestpracticesoftheindustry,followingthestrictregulatoryenvironment,incombi-nationwiththeintroductionofnewtechnologiesinacontrolsitsenvironmentalfootprint.

a) HARMONIZATIONOFINABUSINESSWITHORDERSOFIPPCDIRECTIvEthetranspositionoftheippcDirectiveincroatiahasbeenac-complishedbytheDecreeonDetermining integratedEnviron-mentalprotectionconditions(officialGazetteno.114/08).thegoaloftheDirectiveistoestablishcomprehensivemechanismsfor prevention and control of environmental pollution whichcouldariseasaresultofindustryactivities.toalign itsoperationswith theDecree requirements, inahasprepareddetailedstatusanalysesandsurveysonharmonisationforthesitesEthane,centralGasStationmolveandtheSisakandrijekarefineries. inorder toverifypreparedreports, in2012,the contractwasmadewith an authorized company Ecoina.During 2012 request to obtain integrated environmental pro-tectionrequirementsarecommittedtoministryofEnvironmentandnatureforalloftheselocations.aseriesofprojectsatvar-iousimplementationstagesareunderwaytomeettherequire-ments,ensuringalignmentoftheexistingtechnologywiththeBestavailabletechniques (Bat). insimplewords, the ippcDi-rectiverequiresmeetingtheregulatoryrequirementsapplicabletosoil,water,noise,wastemanagementandincreasingenergyefficiency.Besidesthebiginvestmentsanimportantelementisalsodynamicsofprojects,soinaaskedandgottransitionalpe-riodsforharmonizationofSisakandrijekarefineriesuntilendof2017.

b) HARMONIZATIONOFINABUSINESSWITHLEGISLATIONINTHEDOMAINOFGREENHOUSEGASEMISSIONSMANAGEMENTintheyear2012,muchnewlegislationinthedomainofairpro-tectionhasbeenissued,butairprotectionact(oG130/11)stillremainsthemaindocument.after1january2013,rijekarefin-ery,Sisakrefinery,EtanplantandcentralGasStationmolvewillbeincludedintheEuropeanEmissiontradingSystem(EuEtS),andauctioningwillbeginwithcroatia’saccessiontotheEuro-peanunion. inmay2012methodologyreport, BaselineDatareport, verification report and request for free allocation ofemissionallowanceshavebeensubmittedtotheministryofEn-vironmentalandnatureprotectionforallfourina’sinstallations.

EnvironmEntalpErformancE–compliancE


allthesereportswerealsodeliveredtotheEuropeancommis-sionbytheministryandarebeingreviewed.updatedrijekaandSisakrefineryGreenhousegasmonitoringplansweresubmittedtotheministryinjulyduetonewprocessunitswhichwerecon-structed, toensuremodernstandards forcrudeoilprocessingandproductionofmotorfuelsinaccordancewiththerequire-mentsofcroatianandEuropean standards (Eurov). inrijekarefinery integrated Hydrocracking complex was constructed(includes Hydrocracking process unit, Hydrodesulphurisation,HydrogenproductionunitandSulphurremovalunit),whileinSisakrefinery,isomerisationunitwasconstructed.GreenhouseGasmonitoringplansforEtanplantandcGSmolvehavebeenupdatedaswell, inaccordancewiththerecommendations/in-structionsoftheverifier,andweresubmittedtotheministryinnovember2012.annualco2emissionsreportforallfourina’sinstallationsarepreparedandwillbeverifiedandsubmittedtothecroatianEnvironmentagencyuponthereceiptoftheupdat-edgreenhousegasespermit.

c) HARMONISATIONOFINA’SOPERATIONSWITHTHEPROvISIONSOFREACHLEGISLATIONtocomplywithcroatianregulationlowof implementationonEc/1907/2006 and amendments Ec/1995/45 (official Gazetteno.53/08) inahadreiterated14substancesand4 intermedi-atestobeabletoexportproductstoEumarket.BecausecroatiaisnotyetinEutheregistrationwasdonethroughmolGroupasonlyrepresentative.inawillregisterallofremainingprod-uctsandintermediatewhencroatiaentersEu.SincethedateofenteringtoEuisalreadydefinedthedeadlinesforpreregistra-tionandregistrationarealsoset.preregistrationperiodisfromjuly1st2013untilDecember31st2013.Deadlineforsubstancesthatareproducedinquantitieshigherthan100t/yandwhichhave cmr characteristic or are toxic for aquatic organisms isjune30th2014.Deadlineforregistrationofallsubstancespro-ducedinsmallerquantities(1–100t/y)ismay31st2018.

d) HARMONIZATIONOFINABUSINESSWITHPROvISIONSOFLEGISLATIONINTHEAIRPROTECTIONDOMAINinahasbudgetedfundsforthepurposeofcompliancewiththecroatianairprotectionregulationsoverthenextseveralyears.theseincludeprimarilymeasurestobringemissionsofairpol-lutants from stationary sources and technical environmentalprotectionstandardsapplicabletoemissionsofvolatileorganiccompounds(voc)duringpetrolstorageanddistributioninlinewith the requirements.asof theendof2012,380petrol sta-tionswerereconciledwiththerequirementsoftheDecreeonEnvironmentalprotectionStandards intheareaofvolatileor-ganiccompoundsfrompetrolStorageandDistribution(official

Gazetteno.135/06),whichisalmosttheentireretailnetworkofinapetrolstations.inahassubstantiallymettherequirementstoalign itsemissionsfromlargecombustionplants,arequire-mentsetoutintheDecreeonpollutantEmissionsfromStation-arySources,bybringingnaturalgasasanenergysourcetothecombustionplants.

e) ENvIRONMENTALLIABILITIESACCORDINGTOIAS37IEnvironmentalprovisionsEnvironmentalliabilitiesareobligationsofthecompanyfortheremediationofpollutioncausedbyitsactivities.theycanbedi-videdintotwocategories,theprovisionandthecontingentlia-bilities.inaGroupestimateditscontingentliabilitiesinamountofHrK660million,andinainamountofHrK630million.theseamounts for contingent liabilitiesarenotbookedbecause thetimeof itsoccurrence isuncertainandpollution isnotprovenas fact.partof contingent liabilities can come in thegroupofprovisionbyshiftingoftimeframeordecisiontoabandonthesiteswhere ina isoperating todayorabandon theactivityonspecificlocation.forexampleifinaabandonssomesitewhichis contaminated, soil and groundwater remediation has to beperformedifpollutionisproven.for2011,inabookedaprovi-siononthatbasisinamountofHrK312millionwhileinaGroupinamountofHrK327million.on 31 December 2012, ina Group recognized environmentalprovisioninamountHrK327millionwhichcoverstreatmentofaccumulatedwastegeneratedbyformeractivity,soilexcavationandreplacementduringthereconstructionoffillingstationsandinvestigationtodeterminetheextentofthecontaminations.itdoesnotcover thecostof remediation in lackofdetailedna-tionalregulations.

EnvironmEntalpErformancE–compliancE

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theoilindustryrequiresahighdegreeofhealthprotectionandsafetyatwork,sotheseareamongthetopprioritiesandbasicprerequisites for the successfuloperationof anyoil company.inahas therefore setupanall-encompassing systemofman-agingoccupationalhealthandsafetyatwork,with theaimtocontinuouslyimprovethelevelofsafetyandregularlymonitorthestatusofemployeehealth.Specialattentionisgiventoade-quateemployeetraining,topromoteandensureworkinasafemannerandtominimizetherisksrelatedtotheirdailyworkac-tivities.in2012therewasnofatalitiesofownstaff in inaoperations.losttimeinjuryfrequency(ltif)in2012oninalevelwas1.9and

therewere 34 lost time injury (lti) cases;whichpresents im-provement,of15%inrespectto2011.inaE&pwiththeltifof0.9hadbetterresultthanin2011.in2012inar&mshowedsig-nificantimprovementwithltifof2.4presentingthe45%betterresultincomparisonto2011,butisstillaboveEuropeanaverageaspresentedbyconcaWE.retailhadltifof1.9whichisslight-lyhigherthan1.6in2011.functionalunitsrecordedltifof1.9whichismuchhigherthanltifresultin2011.inaperformancefrom2005to2012isshowninthechartbelow: outof34injuries42%ofthemwerecausedby“slipandtrip”and40%werecausedbylackofattentionofinaemployees.accord-

occupAtIoNAl heAlth ANd sAfety


ingtocroatianregulationtherewere101injuriesin2012,40%ofthemwereresultofrobberiesoninafillingstations(ptSD)and85%oftotalinjuriesweretreatedaslightinjuries.lookingatsta-tistics,seasonaldistributionofinjuriesisvisible.

IRISto mitigate work related injuries in 2011 incident reportingandinvestigationsystem(iriS)wasestablished.additionally,in2012,inaimplementedHSEinfoapplicationtoimprovereport-ing,investigationandmonitoringofallincidents.intotal220in-cidentswerereported,78ofthemhadconsequencestopeople,60toproperty,40toenvironment,1tocompanyreputationand41incidentswereclassifiedasnearmisses.180incidentswereinvestigatedaccordingtoiriSregulation.

CONTRACTORSAFETYin2012 ina launchedcontractor Safetyprojectwith focuson8criticalcontractors’activities.projectleaderandBusinessDi-vision teamswere nominated and related regulationwas ap-provedbyinaExecutiveBoard.

PROCESSSAFETYMANAGEMENT(PSM)in2012,inaexecutedfirstphaseofprojectSafetymanagementproject.threeunitswereselectedforpilotselfassessment:fccunitsinrijekaandSisakrefineriesandnGlsectiononGtpmolve.foreachunitfiverepresentativeswereselectedandtrainedtobeableto“selfasses”theirunitsaccordingtopSmcriteriausingspe-cially prepared questionnaires. Based upon the results derivedfrom the self assessment andgapanalysesroaDmap forpSmimplementationininawasdeveloped.alsoinapSmrelevantlo-cationsstartedwithrenewalofp&iDandpHa.

ROADSAFETYincomparisonto2011inararimprovedfor10%,from4.3in2011to3.9in2012.in2012,SafeDrivingStandardhasbeenissued,thatprescribesproceduresand rules connectedwith safedriving. in thedoc-umentitisprescribedthattheemployerisresponsibleforen-suring that drivers are competent and qualified, and that theemployer is toorganize regular additional training for specifictargetgroups.inorder to take thesafedriving to thehigher leveland tobecompliant with the Safe Driving Standard ina started secondphaseofSafedrivingprojectincludingtheoreticalandpracticaltrainingson safedrivingpolygon in Zagreb, organized for 750employees based on defined target groups. first groupsweretrainedinDecember2012.toadditionallyimprovesafedrivingcultureinallinacarfleetve-hiclesGpSdeviceswereinstalledtomonitorvariousparameters.

FIREPROTECTIONfirefightingdrillsandprofessionaltrainingdrills,bothannouncedandunannouncedwereorganizedallthroughthemonthofmay(whichisincroatiaafireprotectionmonth),andthecurrentsit-uationwasanalyzed inordertodefineprioritiesthatwillmakeitpossibletoupgradethesystemofprotectionagainstfireandtechnology-causedexplosions.thefinalfireprotectiondrillwasorganizedbytheExplorationandproductionBDondrillingwellmol–20rwithinvolvementofSinacofirefightingprofessionalbrigade,municipalfirebrigadesandcroscointerventionteam.During2011,9fireswerereiteratedininaalthoughseveralofthemwerewithnotrelevantenvironmentandlowfinancialim-pactaswell,twoofthemhavetobementionedseparately.

occupAtIoNAl heAlth ANd sAfety

66

AwARds

• on the international invention Show inova 2012 held inŠibenikparticipatedinnovatorDubravkoČopwithhisinnovation„networkingtransportation“andhaswonthebronzemedal.

inaiscommittedtoact inaccordancewith internationalquali-tymanagementstandardssincethetimetheywerefirst intro-duced. following the global trends, from quality control andqualityassurancetoqualitymanagement,iSo9001certificateswereawardedtoinainthemid-ninetiesforexcellenceinbusi-nessprocessesinproduction,aswellasformeetingthecustom-ers’demands.inearly2000,thecompany’smanagementBoarddecided to opt for new management philosophy. a business

managementsystemwasdevelopedbasedoncompany’sinter-nalregulations,thelegalframework,industrystandards,there-quirementsofiSo9001,iSo14001andoHSaS18001standardsandotherstandardsinlinewithmanagementdecisions.

inahas a total of 9 certificates (iSo9001, iSo14001,oHSaS18001 and iScc) and 5 accreditations (iSo / iEc 17025:2000).Since2005,aqualitymanagementsystemisverifiedbycertifica-tiononinaplc.level.theiSo9001standardisappliedthroughasinglesystemoncoreprocesses,aswellasonsupportivepro-cesses.partsofinathathavethepotentialoractualimpactontheenvironmenthavecertifiedandmaintainedenvironmentalmanagementsystemsinaccordancewithiSo14001.Healthandsafetyatworkisimplementedinaccordancewiththestandard

QuAlIty MANAGeMeNt


oHSaS 18001 in order to prevent injury, occupational diseas-es,diseasesrelatedtowork,andtoprotectworkingandlivingenvironment,aswellasmaterialgoods.BiofuelsustainabilityiscertifiedinaccordancewiththeiScc(internationalSustainabili-tyandcarboncertification)standard,whileinalaboratoriesareaccreditedaccordingtoiSo/iEc17025,whichrequirescompe-tencytesting,measurementandsampling.

ina’s commitment to continuous improvementof itsbusinessprocessesandbusinessqualitywasconfirmedbytheintroduc-tionofSapsystemin2006andduring2007ina’sbusinesspolicywastodevelopanobligatoryinformationsecuritymanagementsystem.in2008theHaccp(Hazardanalysisandcriticalcontrolpoints)systemwasintroducedatcompany’scateringfacilities,asstatutorilyrequired.

Weactivelyparticipate indevelopmentof these systemsandtheir full integration into the existing business managementsystem.in2011weharmonizedthecertificationcycleoninaGrouplev-elforthefollowingstandards:• Quality management System according to standard iSo9001:2008• EnvironmentalmanagementSystemaccordingtostandardiSo14001:2004• HealthandSafetymanagementSystemaccordingtooHSaS18001:2007.

through the integration of business management system weachievedgreatertransparencyofbusinessprocesses,improvedmeasuringandpresentationofbusinessresultsandahigherlev-elofcustomerandemployeesatisfaction.Supervisionofthewholesystemisconductedbyexternalsur-veillanceauditandprocessofinternalauditsinaccordancewithannualplanningthroughspeciallydevelopeditsupport,analys-ingofcollecteddataandbyreportingtothemanagementBoardonmanagementsystem.thisyear’sexternalsurveillanceauditconfirmed ina’scompli-ancewithcorporaterulesandstandardsrequirementsaspre-requisiteforpossessionofcertificates.

respondingtotheneedforfurtherdevelopmentofourcompa-nyandothercompaniesininaGroup,anew,uniquedocumentmanagementsystemhasbeensuccessfullyintroducedatinaandcompaniesininaGroup.oninaGrouplevel,planistoissue144regulations(guidelinesandGorregulationsforinaGroup)bytheendof2014.untilnow,47regulationswere issued,which is inlinewithplanneddeadlines.ahighlevelofcustomersatisfaction

andloyaltyconfirmsthequalitymanagementsystemasadequateandefficientinreachingthetargetsaimedfor.

stANdARdIsAtIoN

inahasbeendevelopingandimprovingacorporatestandard-isationsystemforanumberofyearsinordertodefineuniquecorporate standards. ina Standards define quality specifica-tionsofina’sproductsandrawmaterials,theelementsofcom-pany’s visual identity, and business communication rules andstandards.

During2012followingINAStandardshavebeenharmonised:• “aviationturbinefuel”,revisedaccordingtoneweditionofafQrjoS„checklist“• “fueloilsExtralight”,newfuelqualityintroducedaccord-ingtostandardsinsurroundingcountries• “pavingbitumen”,penetration index introducedaccordingtoHrnEn1426,HrnEn1427andHrnEn12591standard• „Dieselfuels“,limitvalueforelectricalconductivityaccord-ingtorequestfromBSr&m(non-standardrequirement).

company standardisation policy defines the framework andguidelinesforsettingoutcompanystandardspursuanttoquali-tyrequirementsofinternationalandEuropeanstandards.inaisalsoworkingcloselytogetherwithgovernmentalbodiesandcro-atianStandardsinstituteindefiningandadoptingtheregulationsandstandardsintheareaofina’sinterests.Wesuggestprovisionto be harmonizedwith current Eu regulations, thus protectingandpromotingtheoilandgasindustryinterestsonthedomesticandtheforeignmarketwherethecompanyoperates,butatthesametimerespectingtheinterestsofallotherstakeholders.inaexpertsactivelyparticipateinmorethan36technicalcom-mittees/subcommittees/working groups at croatian Standardsinstitute. Work of technical committees our colleagues alsoimprove sustainable development process of our companybykeepingexcellentrelationstostakeholders,whichpromotesourinterestsinsocietyintransparentmannerthatisacceptableforallparties.

ReAch

Wecanemphasizeexcellentcooperationwithcroatiancham-berofEconomy,i.e.rEacHworkinggroup.During2012anum-berofmeetingsrelatedtopreparationofcroatiatofulfillrEacHregulationprovisions aftercroatia’s accession to theEuhave

QuAlIty MANAGeMeNt

68

been held. Simultaneously, ina rEacH team has startedwithcreationoflistofsubstancesinashouldregisteraftercroatia’saccessiontotheEu.currently,listcomprisesapproximately20substancesthatinaintendstoregisteruntilbeginningofaugust2013atthelatest.

INtellectuAl pRopeRty

inahascreatedanddeveloped fullprocess foran intellectualpropertymanagementsystemwithclearlydefinedpowersandresponsibilities and all the activities, from the generation ofideas to realisationofproducts, including theirmarketingandsales,andprotectionoftheresultingintellectualproperty.protectionofintellectualpropertyismanagedoninaGrouplev-elsince2008.Bycentralisingtheprotectionofintellectualprop-ertyattheinaGrouplevel,theprotectedintellectualpropertyof inaGroup(crosco,proplin,mazivaZabreb,SinacoandStSi)becomepart of ina brand and constitutive part of intellectu-alpropertyofina,d.d.SuchapproachprovidesconsistentandefficientprotectionofintellectualpropertyrightsontheGrouplevel aswell as for takingadequatemeasures in caseof theirinfringement,asrequiredinmodernbusinessenvironment.the protection of intellectual property includes the protectionofinventions(bypatents),trademarksandservicemarks,visualidentityand industrialdesigns. it is implemented inaccordancewiththecompany’s intellectualpropertymanagementStrategybothincroatiaandabroad,onthemarketswhereinaandoth-ercompaniesofinaGrouparealreadypresentorintendstobepresent.Greatattentionisgiventobrandprotection(thenamesofcompa-niesofinaGroup),andprotectionofthelubricantproductrange,visualidentityofina’spetrolstationsandallmarketrecognisable

marksinordertohavethelegalbasisfortakingmeasuresagainsttheir infringement and abuse. international registration of inanamewasalsoaccomplished,whichensuresprotectionofmen-tionednamein26countries. inaGroupholdsprotectionrightson65 trademarksand25 industrial designs.abroad, inaholdsprotectionrightson19trademarksinSlovenia,17trademarksinmacedonia,17trademarksinBosniaandHerzegovina,21trade-markinSerbia,11trademarksinalbania,22trademarksinKoso-vo,22trademarksinmontenegro,9trademarksinHungaryand,5industrialdesignsareprotectedabroad,i.e.inBosniaandHer-zegovina,Slovenia,Serbia,Kosovoandmontenegro.

numerousawardsatinnovationexhibitionsinthecountryandabroad,andregulatedintellectualpropertyaswellastheinno-vativework,confirm a long-standing company tradition of en-couragingemployeeinventivenessandcreativityultimatelyre-sultingincompanyinnovativenessandintellectualpropertythatcanbeprotected.ouraimistopromotetheimportanceofcompany-andpersonal-know-howthroughintellectualpropertymanagementprocesses.Soweconstantlystrivetomakeabetteruseofouroperationalre-sources,informationandemployeeknowledge,andasefficient-lyaspossiblemanagetheintangiblecompanyassetsastheyarevitalfactorsofourcompetitiveness.theguidelinesformanagingcorporate knowledge are open and communicative corporateculture,focusoncoreactivities,encouragementofcreativityandtransformingemployeeknowledgeintoaformofcorporateprop-ertythatcanbeusedandsharedwithinthecompany.thatwasthegoalbehindsettingupandcontinuouslymaintain-ingthecompanyKnowledgeBase,whereitispossibletofindallrelatedtocreativeworkofinaemployees.companyKnowledgeBaseisavailabletoina-intranetusers.

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AdMINIstRAtIve, MANAGeMeNt, ANd

supeRvIsoRy BodIes

ina’smanagementstructure isbasedona two-tierboardsys-tem,comprisingaSupervisoryBoardandamanagementBoard.WiththeGeneralassembly,theseconstitutethethreemanda-toryinternalbodiesofinainaccordancewithina’sarticlesofassociationandthecompaniesact.at ameeting held on 10 june 2009, inamanagement Boardapointed Executive Directors, authorized to operate, manageandsupervisetherespectivebusinessdivisions/functionsofthecompany,whileeachExecutiveDirector is responsible for thegeneral operationof the assigned segment towards theman-agementBoard.

theSupervisoryBoardisresponsiblefortheappointmentandrecallofmanagementBoardmembersandsupervisesthecon-ductofcompany’sbusinesses.pursuanttoina’sarticlesofas-

sociation,theSupervisoryBoardconsistsofninemembers,withonememberbeingtheemployees’representative.BasedontheShareholders’ agreement signed between mol and croatianGovernment, five members are delegated bymol and threebythecroatianGovernment.themanagementBoardconsistsofsixmembers.BasedontheShareholders’agreement,threemembersofaredelegatedbymol,includingthepresident,andthreebythecroatianGovernment.

MANAGEMENTBOARDthe listbelowcontains thenamesof currentmembersof themanagement Board and their respective positions on 31 De-cember2012.thebusinessaddressforallmembersoftheman-agementBoardisavenijav.Holjevca10,10002Zagreb,croatia.

ZoltánSándorÁldott,presidentofthemanagementBoardNikoDalić,memberofthemanagementBoardPálZoltánKara,memberofthemanagementBoardIvanKrešić,memberofthemanagementBoard

coRpoRAte GoveRNANce


DavorMayer,memberofthemanagementBoardPéterRatatics,memberofthemanagementBoard

EXECUTIvEDIRECTORSExecutiveDirectorsareappointedbythedecisionoftheman-agementBoard.theyareauthorizedandresponsibleforman-agement of operations of ina’s individual business sectors(Explorationandproduction,refiningandmarketing,retail,fi-nance,corporatecenter,corporateaffairs).

listofExecutiveDirectorsasof31December2012:AndrásHuszár,ExecutiveDirectorinchargeoffinanceDarkoMarkotić,ExecutiveDirectorinchargeofretailTvrtko Perković, Executive Director in charge of corporatecenterŽelimirŠikonja,ExecutiveDirectorinchargeofExplorationandproductionArtur Thernesz, Executive Director in charge of refining andmarketingTomislavThür,ExecutiveDirectorinchargeofcorporateaffairs

SUPERvISORYBOARDthe listbelowcontains thenamesof currentmembersof theSupervisoryBoardandtheirrespectivepositions(on31Decem-ber2012).thebusinessaddressforallmembersoftheSuper-visoryBoardisavenijav.Holjevca10,10002Zagreb,croatia.

SinišaPetrović,presidentofSupervisoryBoardSzabolcsI.Ferencz,memberofSupervisoryBoardFerencHorváth,memberofSupervisoryBoardBožoMikuš,memberofSupervisoryBoardjózsefMolnár,memberofSupervisoryBoardGyörgyMosonyi,vicepresidentofSupervisoryBoardŽeljkoPerić,memberofSupervisoryBoardMladenProštenik,memberofSupervisoryBoardOszkárvilági,memberofSupervisoryBoard

ISSUER’SAUDITCOMMITTEEauditcommitteeisabodyappointedbytheSupervisoryBoard,with the purpose to assist the Supervisory andmanagementBoardinexecutionoftheircorporatemanagementtasks,finan-cialreportingandcontrolofcompanyoperations.However,theauditcommitteeisanauxiliarybodyonly,andcannotrelinquishtheSupervisoryBoardandthemanagementBoardoftheirre-sponsibilities.SupervisoryBoardshalldiscussthereportonau-ditcommittee’sactivitiesonceayear.

auditcommittee’sresponsibilitiesareconnectedto:

1.accountingsegment;2.Externalauditorsegment;3.financialsegment;4.risk-managementsegmentin performing its tasks, the audit committee is authorised tooverseetheinternalprocessesinina,requestadditionalinforma-tionfromthecompanyoritsauditors,andtoconductinterviewswithemployees.further,thecommitteeisauthorisedtoengageindependentconsultantsattheexpenseofthecompany.

Members of INA Audit Committee on December 31, 2012 are:ŽeljkoPerić,chairmanjózsefMolnár,memberjózsefSimola,memberDamirvanđelić,member

Given the fact that the ina’s shares are listed on a regulatedmarket,ina – industrijanafte, d.d. applies the corporate Gov-ernance code, which has been jointly prepared by the croa-tian financial Services Supervisory agency (hereinafter: theagency) andthe Zagreb Stock Exchange (Zagrebačkaburzad.d.Zagreb), in effect asof 1 january 2011andpublishedon theinternet page ofthe Zagreb Stock Exchange (http://www.zse.hr).inadditiontothecorporateGovernancecode,inaGroupalsoappliesitsowncodeofEthics,whichdefinesthebasicval-uesandprinciplesof theconductof themanagementand theemployeesofinaGroupregardingtheirattitudetowardswork,associates,businesspartnersandthepublic.thecodealsosetsforththeobligationsofinaGroupofsecuringappropriateworkconditionsandprofessionaldevelopmenttoemployeesaswellastheavoidanceofunacceptableformsofbehaviour.thecodecoversabroadareaofbusinessrelationshipsandprocessesandhastobeobservedbyallpersonsactinginthenameandonthebehalfofinaGroup,includingnaturalpersonsorlegalentitieswhoareinacontractualrelationshipwithinaGroup(businesspartners,consultants,suppliers,sellersetc.).thesepersonsorentities can access thecodeon the internet pageof ina,d.d.(http://www.ina.hr).ina,d.d.ingeneralabidestotheprovisionsof the corporateGovernance code,with exceptions stated intheannualcorporategovernanceQuestionnairepublishedon

ina’swebsite.Someoftheexceptionsareasfollows:•ina,d.d.doesnotpublishnorupdatethelistofshareholders.theownershipstructureisavailableonthecompany’sinternetpage,whileadetailedlistofshareholdersiskeptbythecentralDepository&clearingcompanyinc.which,inaccordancewithlaw,publishesalistofthetenlargestshareholdersonitsinter-netpage.

coRpoRAte GoveRNANce

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•ina,d.d.doesnotpublishdataonthecompany’ssharesheldbythemanagementorSupervisoryBoardmembersonitsinter-netpage.insteadallannouncementsinreferencetothesecuri-tiesheldbymanagementorSupervisoryBoardmemberscanbefoundonthecompany’sinternetpage.•ina,d.d.doesnotprovideproxiestothecompany’ssharehold-erswho,foranyreason,wouldnotbeabletothisthemselves,without any additional costs for these shareholders who areobligedtovoteattheGeneralassemblyinaccordancewiththeinstructionsoftheshareholders.theshareholderswhoarenotabletovotethemselvesshould,attheirowndiscretion,appointappropriateproxieswhoareobligedtovoteinaccordancewiththeirinstructions.thecompanydidnotreceiveanyrequestofanyshareholderinthisrespect.• the company sets the terms and formal conditions to theshareholdersfortheirparticipationintheGeneralassemblyinaccordancewiththecompaniesactandthecompany’sarticlesof association, in order to protect the shareholders’ rights inconditionsofalargenumberofshareholders.•theSupervisoryBoardisnotcomposedofamajorityofinde-pendentmembers. it is composedofmajor shareholders rep-

resentatives and aworkers representative in accordancewithcompanyact.•thelong-termsuccessionplanhasnotbeenpublished;how-ever,theexistingsystemsofelectingmemberstotheSuperviso-ryBoard,managementBoardanduppermanagementtakeac-countofthecontinuityinperformingsupervisory,managementandadministrativefunctions.•theSupervisoryBoardhasnotorganizedaremunerationandbonus committee. as part of the best practice harmonizationprocess,inadditiontotheauditcommittee,ina,d.d.alsoplanstoestablishtheremainingproposedcommittees.•thecompany’sbonuspolicyispartoftheinternalruleswhicharepublishedonthecompany’s internetpage.Dataonremu-nerationstothemanagementandSupervisoryBoardmembersarepublishedintheannualreportintheirfullamount.thecur-rentinternalregulationsdonotenvisagethepossibilityofpublicannouncementofthesedata.•theamountsofremunerationspaidtoindependentauditorsfor rendered serviceshavenotbeenpublishedandconstitutebusinesssecret.

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MANAGeMeNt BoARd

ZoltÁnSÁnDorÁlDott,prESiDEntoftHEmanaGEmEntBoarDZoltánÁldott,presidentofinamanagementBoardsinceapril1st2010,startedhiscareerin1990asanassociateincreditumfinancialconsulting.from1992to1995heheldvariouspositionsinEurocorpfinancialconsulting.Hejoinedmolin1995astheleadofprivatizationDepartment.from1997until1999hewasDirectorofcapitalmarketsDepartmentandfrom1999until2000mrÁldottservedasDirectorofStrategy&BusinessDevelopment.fromnovember2000 to june2001hewas thechiefStrategyofficerand then fromjune2001,GroupchiefStrategyofficer.fromSeptember2004untiljune2011hewastheExecutivevicepresidentofExploration&pro-ductionDivisionofmolGroup.fromoctober2003untilapril2010hewasamemberoftheSupervisoryBoardofina.HeholdsauniversitydegreefromBudapestuniversityofEconomics.

niKoDalić,mEmBEroftHEmanaGEmEntBoarDnikoDalićhasbeenappointedmemberofinamanagementBoardinfebruary2011.Hestartedhiscareerin1986asageologistworkingonupstreamprojectsincroatia.in1996,hewasappointedHeadofbusinessunit,respon-sibleforEasternSlavoniaandpodravina.from2005to2008,hewasassistantExecutiveDirectorofnaftaplin,wherehewasinchargeofrunninginternationalprojects.apartfromthat,hewasalsotheHeadofthestrategyteaminnaftaplinandtheteamforEnergyStrategyoftherepublicofcroatia,aswellastheipoteam.afterthat,from2008to2009,hewastheHeadoftheExplorationSector.asofjune2009,hehasservedasamemberofthemanagementBoardofEdina,ajointventureofinaanditalianEdison,wherehehasfocusedontheactivitiesintheizabelafieldinnorthernadriatic.HegraduatedfromtheZagrebfacultyofScience(prirodoslovno–matem-atičkifakultet),wherehelateracquiredhismaster’sdegree.HepassedhisstatelicenceexamattheministryofSciencein1996.mrDalićattendedanumberofseminarsandprofessionaltrainingsincroatiaandabroad.Heisamemberofmanyprofessionalassociations,andhaspublishedseveralpapers.HespenttwotermsinthepositionofthepresidentofthecroatianGeologicalSociety,andiscurrentlyservingasthechairoftheSupervisoryBoardofthecroatianGeologicalSociety

pÁlZoltÁnKara,mEmBEroftHEmanaGEmEntBoarDpálZoltánKaraisthevicepresidentforlegalandGeneralcounsel(chieflegalcounsel)ofmolGroup.Hestud-iedlegalsciencesatEltE(Budapest)andobtainedhisdiplomawith„summacumlaude”.afterwardshebecamecompanysecretaryofandprovidedlegalsupportforprocurementandmarketinginGElightingtungsramco.untilmay1997.Between1997and2001,hewasHeadofHrandlegal inmEtroHoldingHungarytradeltd.HejoinedmolGroupin2001,whenhestartedworkingascounselofmolplc.untiljune2006,whenhewasappointedasmolGroupGeneralcounsel.Heisamemberofthepresidiumofthenational(Hungarian)tradeassociation(oKSZ),molEthicscouncilandsinceSeptember2006,chairmanof theSupervisoryBoardof thenewEuropefoundation.HewasappointedasamemberofthemanagementBoardofinainjune2011.


MANAGeMeNt BoARd

ivanKrEŠić,mEmBEroftHEmanaGEmEntBoarDivanKrešićhasbeenappointedmemberofinamanagementBoardinfebruary2011,afterservingastheDirec-toroftherijekarefinerysince2006.Hestartedhiscareerinina,inrijekabasedlubricantrefinery,asaprocessengineer.Hewastheheadofproductionfrom2000to2004,whenhewasappointedDirectorofinalubricantsrijeka.inaugust2006,hewasappointedDirectorofrijekarefinery.mr.KrešićgraduatedfromthefacultyofchemicalEngineeringandtechnology,Zagreb,wherehewontherector´sawardforbeststudentpaper.Heac-quiredhismaster´sdegreeattherochesterinstituteoftechnology,uSa,2001.HeholdsmBacertificate,2003year,fromBledSchoolofmanagement.additionaly,heattendededucationprogramsinfieldsoffinance,changemanagement,mergersandacquisitionsatlondonBusinessSchool.mr.KrešićhasbeenamemberoftheSuper-visoryBoardoflubricantsZagreb,amemberofinaGroup,from2009until2011,whileheservedasamemberoftheSupervisoryBoardatStSi,alsoamemberofinaGroup,from2009until2010.

dAvoR MAyeR, MeMBeR of the MANAGeMeNt BoARdDavormayer has been appointedmember of inamanagement Board in february 2011. He started his ca-reerasan intern in inarefineryZagreb(todaymazivaZagreb)andSisakoilrefinery,wherehe laterworkedoninarefineryprocessingoptimizationandthenininternationaltrade.HeservedasthepetroleumproductsWholesalemanagerinomvfrom1998to2002,whenhetookupapositionintifon,becomingtheheadoftherepresentativeofficeofGulfoilinternational.from2005to2008,hewastheindustrialterritorymanagerforSEEinExxonmobil.Hehasbeenworkingagainintifonsince2008asamemberofthemanagementBoardandwholesales,procurement,logisticsandcardbusinessmanager,andinjune2009heassumedapositionofthecardBusinessDirectorinina,alongsidehisseatontifonmanagementBoard.HegraduatedfromthefacultyofchemicalEngineeringandtechnology,andlaterattendedprofessionalseminarsandcourses.HeattendedapostgraduatecourseonmanagementsystemsattheinternationalschoolachieveGlobalinBrussels,Belgium,from2005to2008.

péteR RAtAtIcs, MeMBeR of the MANAGeMeNt BoARdpéterrataticsiscurrentlythevicepresidentforcorporatecentreofmolGroupandhasbeenamemberofthemanagementBoardofinasincejune2011.HegraduatedatcorvinusuniversityofBudapest,facultyoffinancespecialization in capitalmarkets.péterratatics startedhis careerasGastradingandBusinessDevelopmentexpertinmolplc.,andthenhewasappointedHeadofExecutiveBoardadvisoryteamin2009.Between2009and2010healsoactedasHeadoforganizationalDevelopmentandprocessmanagementandin2010-2011asHeadofmanagementServices.frommay2011hehasbeenworkingasDirectorandsinceoctober2012asvicepresidentofcorporatecentreofmolGroup.alongsideheisalsovice-chairmanoftheSupervisoryBoardoffGSZ(naturalGastransmission).

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executIve dIRectoRs

anDrÁSHuSZÁr,ExecutiveDirectoroffinanceandrasHuszárgraduatedfromtheuniversityofEconomicSciences,facultyofeconomicplanning,Budapest,in1988.HeisaDoctorofEconomicSciencesince1993.from1988until1990heworkedfor itcompanySzámalk. from1991 to1994heworkedat theBudapest StockExchange. laterhe joined investelplc.onthepositionofmanagerofcapitalmarkets.Since1999until2001heworkedatthesamepositionatmatavcompany,wherehelaterbecamethetreasurer.in2001hebecametheHeadofmolGrouptreasury.in2003hebecameamemberoftheSupervisoryBoardinthecompaniestvKandSlovnaft,bothmembersofmolGroup.injanuary2010hewasappointedExecutiveDirectorforfinanceinina.

ŽElimirŠiKonja,ExecutiveDirectorofExplorationandproductionmr.ŽelimirŠikonjagraduatedfromthefacultyofmining,GeologyandpetroleumEngineering(mGp),univer-sityofZagreb,croatiain1983.Hecompletednumberofcoursesandattendedadditionaleducationthroughprojectmanagement,BusinessleadershipandminimBaprograms.HewasappointedDirectoroftheSouth-eastEuropeExploration&productionSectorinjune2009.Beforethat,from2007hewasassistantDirectorofinctforrijekarefinerymodernisationprojects.Hisextensiveyearsofprofessionalexperienceweregainedinvariouspositionsmainlywithinina’sBusinessSegmentExplorationandproductionofoilandgas.from2005to2007hewasinagipGeneralmanager,whilefrom2000hewasheadofproductioncoordinationDe-partment.Beforethat,from1997to2000hewasfieldDevelopmentSectorDirector.HestartedhiscareerasproductionEngineeronStružecfacilityandafterwardswaschieftechnologistonmolvefacility.

DarKomarKotić,ExecutiveDirectorofretailDarkomarkotićgraduatedfromthefacultyoflaw,Zagrebuniversity,in1998.Hejoinedina.in2000wherethroughthevarietyofdifferentorganizationalunitsheperformedmultiplefunctionswithinthecompany.attheverybeginningofhiscareerinina,hewasemployedinthelegalSector.injune2002hetookthepositionofBusinessSecretaryintheofficeofthememberofthemanagementBoardforcoordinatingtheprivatizationofina.inlate2003,hewaspromotedtoassistantSecretaryofthecompanyandin2005wasappointedcompanySecretaryandheldthatpositionforthreeandahalfyears.in2008hewaselectedasanewmemberoftheinamanagementBoardandafteroneyearonthatposition,in2009hewasappointedasExecutiveDirectorofcorporateServicesBf.Sincenovember2010,heservesastheExecutiveDirectorofretailBusinessDivision.


executIve dIRectoRs

arturtHErnESZ,ExecutiveDirectorofrefiningandmarketingarturtherneszisaninternationallyacknowledgedchemicalengineerandmanager.Hehasbeenworkinginthedownstreamoftheoilindustryformorethan20years.arturtherneszhasgainedexperienceintheamericancompanyExxon.HeworkedinHamburg,GermanywherehewasinchargeofretailplanningforESSocentralEuropeclustercoveringGermany,Switzerland,austriaandotherEast-Europe-ancountries.HeactivelycontributedtothemergeroflocalEXXonandmobil.afterjoiningthegrowingmolorganizationuponinvitationin2005,mr.therneszestablishedandhasbeenleadingtheco-locatedasset,product,andrenewablesDevelopmentactivitiesintheDownstreamDivision.mr.therneszhasbeenmaincontributortoidentifyingandpursuingmajorinvestmentprogramsinmolGroup.maintainingworld-classcapitaldiscipline,hecompletedtheEu-5fuelsprograminHungary,initiatedthetimelyintroductionofrenewa-blefuelsportfolioinallmolmarkets,ledthemodernizationprogramofiESrefineryinitalyandcontributedtoformingthepowerGen-erationsegmentinmol.throughouthismanagerialcareerinmol,hepro-activelypromotedyoungtalentsdevelopment.Whiletakingakeyroleinmol’s“Growww”and“fresssh”programs,heestablishedmol’smSccourseinHydrocarbonindustrieswithhiscolleagues,providingbusiness-orientedyoungengineeringgraduatesfortheinternationalmolGroup.mrarturtherneszspeaks4languages.injanuary2012hewasappointedExecutiveDirectorforrefiningandmarketinginina.

tvrtKopErKović,ExecutiveDirectorofcorporatecentertvrtkoperkovićwasappointedExecutiveDirectorforcorporatecentreBfinSeptember2012,afterservingasactingDirectoroftheHu-manresourcesSectorfromjuly2012.Hebeganhiscareerasaninternatinain1986intheExploration&productionBD,WorkoverandWellservicesfacility,afterwhichheworkedasaoperatingengineertobecometheheadoftheSpecialServicesSectorin1990.from1995until1997,hewastheassistantDirectorofthetechnicalServicesSector,whenhetransferredtocroSco,d.o.o.tothepositionofDirectoroftheStrategyandDevelopmentSector.in1999and2000hemanagedaprojectfortheimplementationoftheSapsystemininaafterwhichhewasappointedtothepositionofDirectoroftheStrategy,HumanresourcesanditSectoratcroSco,d.o.o.injuly2009,hereturnedtoinatoperformthetasksofDirectoroftheupstreamSupportSectorandwasappointedtothepositionofpresidentofthemanagementBoardofStSi,ltd.in2010,apositionhehelduntiljuly2012.

toMIslAv thüR,ExecutiveDirectorofcorporateaffairs

tomislavthürgraduatedfromthefacultyoflaw,universityofZagrebin1991andgainedhismaster’sdegreeattheHarvardlawSchoolin1998.mrthür joinedinaasmemberofthemanagementBoardandDirectorforcorporateprocesses. in2012hewasappointedExecutiveDirectorforcorporateaffairs.BeforejoininginahewasGeneralSecretaryofatlanticGroup.from1992until2001hewasemployedatthecroatianEmbassiesinBernandWashington,andthecroatianmissionattheunofficeinGeneva.mr.thüralsoservedastheHeadofthenationalcoordinator’sofficefortheStabilitypact.HestudiedexecutivemanagementatthelondonBusinessSchool,HarvardBusinessSchoolandinSEaD.HeismemberoftheExecutiveBoardofthecroatianEmployersassociationandasoffebruary2013presidentoftheExecutiveBoardoftheEnergyassociationofHupwithinthecroatianEmployersassociation.mrthürisalsomem-berofthenationalcompetitivenesscouncil.

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inawas founded on 1 january 1964 when the operations ofnaftaplin(oilandgasexplorationandproduction)weremergedwiththoseoftherefineriesofrijekaandSisak.in1990inabe-cameastateownedenterprise.in 1993, ina became a joint stock company (“d.d.”), its sharecapital divided into 10,000,000 ordinary shares. the nominalvalue of one sharewas HrK 900.00. Each ina ordinary sharecarriesonevoteandashareinthedividend.in2003,molrt (mol) acquired25%plusone shareof ina.throughacquisitionof25%plusoneshare,molbecameina’sstrategicpartnerandinahasbecomepartofanintegratedre-gionalpartnershipintheoilandgasindustryconsistingofmol,ina,SlovnaftandtvK.twoyearslater, in2005,7%ofinasharesweretransferredtothecroatianHomelandindependenceWarveteransandtheirfamilymembers’fund.ina-industrijanafte,d.d.wasofficiallylistedattheZagrebStockExchange on 30 november 2006. the trading in ina’s sharesofficially startedat 11:15on1December2006. theticker forinasharesisina-r-a.inasharesarealsotradedonthelondonStockExchange,wherethetickerforinasharesisHina.in2007,croatianGovernmentdecidedtosell7%ofinashares.(700,000shares)tothecurrentandformerinaemployees.on 14 july 2008, mol Hungarian oil and Gas public limited

company sent a letterof intent to thecroatian financial Ser-vicesSupervisionagencyannouncingavoluntaryoffertotakeoverallthesharesnotheldbymolortherepublicofcroatia.inSeptember2008,thecroatianfinancialServicesSupervisionagencypublishedadecision intheofficialGazette102/08ap-provingthepublicationofthemol’soffertotakeoverthepub-licjointstockcompanyina.followingthetakeoveroffer,theto-talnumberofordinarybearersharesheldbymolis4,715,538,accounting for47.15538%of the total sharecapital,croatianGovernment held 4,483,552 shares,while private and institu-tionalinvestorsheld800.910shares.on2December2010molplc.offeredtoina’sprivateandinsti-tutionalshareholderstopurchasethetotalofun-encumberedandfullypaidoffinaordinaryshares,bearingthesymbolina-r-a,eachinnominalvalueofHrK900forthepriceofHrK2,800pershare.validityperiodofthisofferisfrom15December2010to14 january2011. following the takeoveroffer,mol’s stakewas4,725,620,or47.26%ofsharecapitalofthecompany.

asof31December2012ina’sshareholders’structureisasfol-lows:• mol4,908,207shares–49.08%• republicofcroatia4,483,552shares–44.84%• institutionalandprivateinvestors–608,241shares–6.08%.

coRpoRAte ANd shAReholdeRs INfoRMAtIoN


Despite operating in extremley challenging environment, de-pressed market demand and lack of Syrian production, inamanagedtomaintainstablerevenuesandstrongEBitDaresultin 2012. Such a solid performance, although burdened withstrongnegativeimpactoffurthereconomicslowdownandpo-liticalsituationinSyria,wasinfluencedbycontinuingefficiencyimprovementsandstrongcostcontroltogetherwithimprovedcrack spread environment with relatively stable crude pricescomparedto2011.Boosting operating cash flow to the level ofHrK 3.7 billion in2012, shows 14% raise over 2011 figure, while strengthening

thecompany’sfinancialpositionandbuildinga solidbase forfutureinvestmentplansanddebtrepayment.Suchastrongfi-nancial position enabled significant improvements of compa-ny’sfinancialleverageandnetindebtedness.in2012inamanagedtosignificantlyincreaseshareofdomesticcapitalinvestmentsthatshowsthat94%oftotalcapitalinvest-mentsrefertocroatia,whichpositionsinaasthelargestinves-torinthecountry.there are no signs to indicate that uncertainty will stop toovercastthemarkets intheforeseeablefuture.therefore,thefinancial security remains ina’s overriding priority in the fu-ture. in2013 ina continues to expectoperating in challengingenvironment,bothdomesticandregional.Domesticdemandisexpectedtoremainweak,whichiswhytheconsumptionofre-finedproductsislikelytoremainsubdued.Despitechallengingenvironment, ina stays committed to further improve opera-tionalefficiency,costcontrollandprocurementprocesses,withanaimofreachingadditionalsavings.

the process of building the company’s value would advancethrough further development of exploration and productionactivitiesasthebackboneofina’sperformance,maximisingef-ficiencyoftherefiningsegment,improvingqualityofretailser-vice and products and through operational improvement andcostcontrolinothercorporatesegments.Beingthebackboneofthecompany’sgrowthandperformancein thepast,ExplorationandproductionBusinessSegmentwillcontinue to pursue an exploration-led strategy by developingexistingprojects and throughpotential inorganic steps. in theforthcomingperiod, inaplans to continuewithdrillingexplo-rationanddevelopmentwells,3Dseizmicacquisitionandgeo-logical studies.thecompany is targetinga sustainable reservereplacementandcompensatingnaturalproductiondeclinefromlegacyassetswithdevelopmentofexistingassetsinthestrate-gicperiod.Giventhatthecurrentproductionhasnotbeenmetwiththeoptimalreservereplacement, ina isactivlysearchingforaprojectscharacterizedbyasteadyandlong-lastingproduc-tionhorizon.majorinvestmentsinrefiningsectorhavebeenfinishedin2011,but company remains committed to further development ofthissegmentwithanumberofprojectsorientedonHSEandef-ficiencyimprovement.themanagementofinaiscommittedtosatisfyingfueldemandandattainingthehighestpossiblemar-ketsharebothondomesticandexportmarketsinaprofitableway,while related tomarket approach further improvementsincommercialsectorshallbetakenwithacontinuingefforttoensureastrongleadershippositiononthecroatianandBosnianmarketseveninchallengingmarketconditions.

expected developMeNt ANd ReseARch

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coRpoRAte AddRessina-industrijanafte,d.d.av.većeslavaHoljevca1010000Zagrebphone:+35816450000Web:www.ina.hr

ceNtRAl deposItoRy ANd cleARING coMpANy INc.Heinzelova62a10000Zagrebphone:+38514607300Web:www.skdd.hr

ZaGrEBStocKEXcHanGEivanalučića2a10000Zagrebphone:+38514686800Web:www.zse.hr

loNdoN stocK exchANGe plc.10paternosterSquarelondonec4M 7lsphone:+44(0)2077971000Web:www.londonstockexchange.com

ANNouNceMeNtsthe company publishes its announcements at ina’s website:www.ina.hr, at Zagreb Stock Exchange’s website: www.zse.hr,andatcroatiannewsagency’swebsitewww.hina.hr

INvestoR RelAtIoNsŠubićeva2910000Zagrebphone:+38514593231fax:+38516452444E-mail:[email protected]

shAReholdeRs INfoRMAtIoN


AddRess BooK

HEADQUARTER:ina–industrijanafted.d.avenijavećeslavaHoljevca10p.p.555,10002Zagreb,Hrvatskatel:+385(0)16450000E-mail:[email protected]:www.ina.hr

INA’s suBsIdIARIes IN cRoAtIACrosco,IntegratedDrilling&WellServicesCo.Ltd.Zagrebulicagradavukovara18,10000Zagreb,croatiatelephone:+38513652333,fax:+38513652448E-mail:[email protected]:www.crosco.com

STSI-IntegratedTechnicalServicesLtd.Zagreblovinčićevabb,10000Zagreb,croatiatelephone:+38512381122,fax:+38512450103E-mail:[email protected]:www.stsi.hr

INAMazivaZagrebradničkacesta175,10000Zagreb,croatiatelephone:+38512412000,fax:+38512412250E-mail:[email protected]:www.maziva.hr

HOSTINd.o.o.ZagrebSavskacesta41/ii,10000Zagreb,croatiatelephone:+38516155158,

fax:+38516155159E-mail:[email protected]:www.hostin.hr

ITRd.o.o.ZagrebŠubićeva29,10000Zagreb,croatiatelephone:+38514592611,fax:+38514617953

PRIRODNIPLINd.o.o.Šubićeva29,10002Zagreb,croatiatelephone:+38514592043;fax:+38514552029E-mail:[email protected]

INA-OSIjEKPETROLd.d.ivanaGundulića5,31000osijek,croatiatelephone:+38531250670,fax:+38531250671

TOPRAČUNOvODSTvOSERvISId.o.o.Savskacesta41,10000Zagreb,croatiatelephone:+385(0)16123143;fax:+385(0)16123115E-mail:[email protected]

INA’s suBsIdIARIes ABRoAdcoMpANIes ABRoAd IN INA’sowNeRshIp oR IN whIch INA hAs eQuItyINTERINAd.o.o.LjUBLjANAKotnikova5,1000ljubljana,Sloveniaphone:+386(1)3009240,

fax:+386(1)4320069E-mail:[email protected]:www.interina.si

INABHd.d.SarajevoazizeŠaćirbegovićbr.4b,71000Sarajevo,BiHphone:+387(33)723911,fax:+387(33)712161

INAd.o.o.BEOGRADjoveilića4,1000Beograd,Srbijaphone:+381(11)3099333,fax:+381(11)3099444E-mail:[email protected]

INACRNAGORAd.o.o.PODGORICA18jula33,81000podgoricaphone:+382(20)218302;218303fax:+382(20)218804tivat-phone:+382(32)660315E-mail:[email protected]

HOLDINAd.o.o.SarajevoazizeŠaćirbegović4b,71000Sarajevo,BiHphone:+387(33)723900,fax:+387(33)712161Web:www.holdina.ba

ADRIAGASS.r.l.MilanopiazzadelDuomo17,20123capmilano,italyphone:++39(2)72094718,fax:++39(2)222267898

82

fINANcIAl stAteMeNts

84

coNteNt

responsibilityforthefinancialStatements

independentauditors’report

inaGroupconsolidatedincomeStatement

inaGroupconsolidatedStatementofcomprehensiveincome

ina,d.d.unconsolidatedincomeStatement

ina,d.d.unconsolidatedStatementofcomprehensiveincome

inaGroupconsolidatedStatementoffinancialposition

ina,d.d.unconsolidatedStatementoffinancialposition

inaGroupconsolidatedStatementofchangesinEquity

ina,d.d.unconsolidatedStatementofchangesinEquity

inaGroupconsolidatedStatementofcashflow

ina,d.d.unconsolidatedStatementofcashflow

notestofinancialStatements


pursuanttothecroatianaccountinglaw,themanagementBoardisresponsibleforensuringthatfinancialstatementsarepreparedforeachfinancialyearinaccordancewithinternationalfinancialreportingStandards(“ifrS”)aspublishedbytheinternationalac-countingStandardsBoard(“iaSB”).internationalaccountingStandard1“presentationoffinancialStatements”requiresthatfinancialstatementspresentfairlyforeachfinancialyearthecompany’sfinancialposition,financialperformanceandcashflows.thisrequiresthefaithfulrepresentationoftheeffectsoftransactions,othereventsandconditionsinaccordancewiththedefinitionsandrecognitioncriteriaforassets,liabilities,incomeandexpensessetoutintheinternationalaccountingStandardsBoard’s‘frameworkforthepreparationandpresentationoffinancialStatements’.invirtuallyallcircumstances,afairpresentationwillbeachievedbycompliancewithallapplicableinternation-alfinancialreportingStandards.theBoardisalsorequiredto:

• properlyselectandapplyaccountingpolicies;• presentinformation,includingaccountingpolicies,inamannerthatprovidesrelevant,reliable,comparableandunderstandable information;and• provideadditionaldisclosureswhencompliancewiththespecificrequirementsinifrSisinsufficienttoenableuserstounder standtheimpactofparticulartransactions,othereventsandconditionsontheentity’sfinancialpositionandfinancialperformance• makeanassessmentofthecompany’sabilitytocontinueasagoingconcern.

aftermakingenquiries,theBoardhasformedajudgement,atthetimeofapprovingthefinancialstatements,thatthereisareason-ableexpectationthatthecompanyandtheGrouphaveadequateresourcestocontinueinoperationalexistencefortheforeseeablefuture.forthisreasontheBoardcontinuestoadoptthegoingconcernbasisinpreparingthefinancialstatements.theBoardisresponsibleforkeepingproperaccountingrecords,whichdisclosewithreasonableaccuracyatanytimethefinancialpositionoftheGroupandmustalsoensurethatthefinancialstatementscomplywiththecroatianaccountinglaw.theBoardisalsoresponsibleforsafeguardingtheassetsoftheGroupandhencefortakingreasonablestepsforthepreventionanddetectionoffraudandotherirregularities.

SignedonbehalfoftheGroup: ZoltánSándorÁldott,presidentofthemanagementBoardofina ina-industrijanafted.d. avenijavećeslavaHoljevca10 10000Zagreb republicofcroatia 12march2013

RespoNsIBIlIty foR the fINANcIAl stAteMeNts

86

totheShareholdersofina-industrijanafted.d.Wehaveauditedtheaccompanyingconsolidatedandunconsolidatedfinancialstatementsofina-industrijanafted.d.(“thecompa-ny”)anditssubsidiaries(“theGroup”),setoutonpages4to122,whichcomprisetheconsolidatedandunconsolidatedstatementsoffinancialpositionasof31December2012,theconsolidatedandunconsolidatedincomestatements,consolidatedandunconsolidatedstatementsofcomprehensiveincome,consolidatedandunconsolidatedstatementsofcashflowandconsolidatedandunconsolidat-edstatementsofchangesinequityfortheyearthenended,andasummaryofsignificantaccountingpoliciesandotherexplanatorynotes.

Management’s Responsibility for the Financial StatementsmanagementisresponsibleforthepreparationandfairpresentationofthesefinancialstatementsinaccordancewithinternationalfinancialreportingStandardsandforsuchinternalcontrolasmanagementdeterminesisnecessarytoenablethepreparationofcon-solidatedandunconsolidatedfinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.

Auditor’s Responsibilityourresponsibilityistoexpressanopiniononthesefinancialstatementsbasedonouraudit.WeconductedourauditinaccordancewithinternationalStandardsonauditing.thosestandardsrequirethatwecomplywithethicalrequirementsandplanandperformtheaudittoobtainreasonableassurancewhetherthefinancialstatementsarefreefrommaterialmisstatement.anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancialstatements.theproceduresselecteddependontheauditor’sjudgment,includingtheassessmentoftherisksofmaterialmisstatementofthefinancialstatements,whetherduetofraudorerror.inmakingthoseriskassessments,theauditorconsidersinternalcontrolrelevanttothecompany’sandtheGroup’spreparationandfairpresentationofthefinancialstatementsinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessofthecompany’sandtheGroup’sinternalcontrol.anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationofthefinancialstatements.Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion. Opinioninouropinion,thefinancialstatementspresentfairly,inallmaterialaspects,thefinancialpositionofthecompanyandtheGroupasof31December2012,andtheirfinancialperformanceandcashflowsfortheyearthenendedinaccordancewithinternationalfinancialreportingStandards.

Emphasis of matter politicalsituationinSyriaWedrawattentiontonote3tothefinancialstatementswhichdescribestheuncertaintyrelatedtothecurrentpoliticalsituationinSyria,wheretheinaGrouphasassetsofHrK4,562millionandliabilitiesofHrK5millioninthestatementoffinancialpositionat31December2012.ouropinionisnotqualifiedinrespectofthismatter(seenote3).

Deloitted.o.o.

Branislavvrtačnik,certifiedauditor

Zagreb,republicofcroatia12march2013

INdepeNdeNt AudItoRs’ RepoRt


ina-inDuStrijanaftED.D.INA GRoup coNsolIdAted INcoMe stAteMeNt fortHEYEarEnDED31DEcEmBEr2012(allamountSinHrKmillionS)

Salesrevenue a)domestic 19,090 18,115b)exports 10,805 11,913totalsalesrevenue 4 29,895 30,028incomefromownconsumptionofproductsandservices 269 309otheroperatingincome 5 353 485totaloperatingincome 30,517 30,822 changesininventoriesoffinishedproductsandworkinprogress 281 394costofrawmaterialsandconsumables (15,151) (13,657)Depreciationandamortisation 6 (2,016) (2,640)othermaterialcosts (1,696) (1,801)Servicecosts (1,360) (1,217)Staffcosts 7 (2,636) (2,752)costofothergoodssold (5,377) (5,267)impairmentcharges(net) 8 (1,063) (1,256)provisionforchargesandrisks(net) 9 (143) 413operatingexpenses (29,161) (27,783) profitfromoperations 1,356 3,039 financeincome 10 137 145financecosts 11 (426) (808)netlossfromfinancialactivities (289) (663) profitbeforetax 1,067 2,376incometaxexpense 12 (380) (573)profitfortheyear 687 1,803 attributableto: ownersofthecompany 681 1,815non-controllinginterests 6 (12) 687 1,803 Earningspershare Basicanddilutedearningspershare(kunaspershare) 13 68.1 181.5

Yearended Yearended notes 31December2012 31December2011

SignedonbehalfoftheGroupon12march2013by:

andrásHuszár ZoltánSándorÁldottExecutiveDirectorforfinance presidentofthemanagementBoard

theaccompanyingaccountingpoliciesandnotesformanintegralpartofthisconsolidatedincomestatement.

88

profitfortheyear 687 1,803 othercomprehensiveincome: Exchangedifferencesarisingfromforeignoperations (111) 276Gain/(loss)onavailable-for-saleinvestments,net 13 (27)othercomprehensive(loss)/income,net (98) 249totalcomprehensiveincomefortheyear 589 2,052 attributableto: ownersofthecompany 583 2,064non-controllinginterests 6 (12)




theaccompanyingaccountingpoliciesandnotesformanintegralpartofthisconsolidatedstatementofcomprehensiveincome.

ina-inDuStrijanaftED.D.INA GRoup coNsolIdAted stAteMeNt of coMpReheNsIve INcoMefortHEYEarEnDED31DEcEmBEr2012(allamountSinHrKmillionS)


Salesrevenue a)domestic 17,188 15,820b)exports 9,216 10,471totalsalesrevenue 4 26,404 26,291incomefromownconsumptionofproductsandservices 2 5otheroperatingincome 5 419 560totaloperatingincome 26,825 26,856 changesininventoriesoffinishedproductsandworkinprogress 181 349costofrawmaterialsandconsumables (15,628) (13,814)Depreciationandamortisation 6 (1,835) (2,397)othermaterialcosts (1,536) (1,514)Servicecosts (1,204) (965)Staffcosts 7 (1,617) (1,666)costofothergoodssold (1,324) (2,644)impairmentandcharges(net) 8 (1,967) (1,306)provisionforchargesandrisks(net) 9 (132) 244operatingexpenses (25,062) (23,713) profitfromoperations 1,763 3,143financeincome 10 393 355financecosts 11 (487) (933)netlossfromfinancialactivities (94) (578) profitbeforetax 1,669 2,565incometaxexpense 12 (346) (598)profitfortheyear 1,323 1,967 Earningspershare Basicanddilutedearningspershare(kunaspershare) 13 132.3 196.7

profitfortheyear 1,323 1,967 othercomprehensiveincome: Exchangedifferencesarisingfromforeignoperations (116) 287Gain/(loss)onavailable-for-saleinvestments,net 13 (27)othercomprehensive(loss)/income,net (103) 260totalcomprehensiveincomefortheyear 1,220 2,227




theaccompanyingaccountingpoliciesandnotesformanintegralpartofthisunconsolidatedstatementofcomprehensiveincome.

ina-inDuStrijanaftED.D.INA, d.d. uNcoNsolIdAted INcoMe stAteMeNtfortHEYEarEnDED31DEcEmBEr2012(allamountSinHrKmillionS)

90

aSSEtS notes 31December2012 31December2011non-currentassets intangibleassets 14 676 880property,plantandequipment 15 18,716 20,294Goodwill 16 183 183investmentsinassociatesandjointventures 18 34 34otherinvestments 19 187 355long-termreceivablesandotherassets 20 207 167Deferredtax 12 544 662available-for-saleassets 21 340 325totalnon–currentassets 20,887 22,900 currentassets inventories 22 3,352 3,693tradereceivables,net 23 2,770 3,282otherreceivables 24 516 456othercurrentassets 32 78prepaidexpensesandaccruedincome 142 79cashandcashequivalents 25 488 337totalcurrentassets 7,300 7,925totAl Assets 28,187 30,825

ina-inDuStrijanaftED.D.INA GRoup coNsolIdAted stAteMeNt of fINANcIAl posItIoNat31DEcEmBEr2012(allamountSinHrKmillionS)



theaccompanyingaccountingpoliciesandnotesformanintegralpartofthisconsolidatedstatementoffinancialposition.


ina-inDuStrijanaftED.D.inaGroupconSoliDatEDStatEmEntoffinancialpoSition(continuED)at31DEcEmBEr2012(allamountSinHrKmillionS)



theaccompanyingaccountingpoliciesandnotesformanintegralpartofthisconsolidatedstatementoffinancialposition.

EQuitYanDliaBilitiES notes 31December2012 31December2011capitalandreserves Sharecapital 33 9,000 9,000revaluationreserve 34 13 -otherreserves 35 2,505 2,616retainedearnings 36 3,437 2,759 Equityattributabletoownersofthecompany 14,955 14,375non-controllinginterests 37 (1) (10) totAl eQuIty 14,954 14,365 non–currentliabilities long-termloans 29 1,161 5,630othernon-currentliabilities 30 101 126Employeebenefitobligation 32 100 104provisions 31 2,713 2,715 totalnon–currentliabilities 4,075 8,575 currentliabilities “Bankloansandoverdrafts” 26 1,266 1,918currentportionoflong-termloans 26 4,725 1,904tradepayables 27 1,684 2,032taxesandcontributions 27 497 1,524othercurrentliabilities 27 596 246accrualsanddeferredincome 28 36 48Employeebenefitobligation 32 10 13provisions 31 344 200totalcurrentliabilities 9,158 7,885totalliabilities 13,233 16,460totAl eQuIty ANd lIABIlItIes 28,187 30,825

92

aSSEtS notes 31December2012 31December2011non-currentassets intangibleassets 14 671 876property,plantandequipment 15 17,063 18,555investmentinsubsidiaries 17 1,161 1,033investmentsinassociatesandjointventures 18 34 34otherinvestments 19 798 799long-termreceivables 20 210 207Deferredtax 12 494 592available-for-saleassets 21 340 325totalnon–currentassets 20,771 22,421 currentassets inventories 22 2,485 3,030intercompanyreceivables 2,226 1,588tradereceivables,net 23 1,103 1,781otherreceivables 24 428 379othercurrentassets 83 313prepaidexpensesandaccruedincome 79 54cashandcashequivalents 25 270 229totalcurrentassets 6,674 7,374 totAl Assets 27,445 29,795

ina-inDuStrijanaftED.D.INA, d.d. uNcoNsolIdAted stAteMeNt of fINANcIAl posItIoN at31DEcEmBEr2012(allamountSinHrKmillionS)



theaccompanyingaccountingpoliciesandnotesformanintegralpartofthisunconsolidatedstatementoffinancialposition.


EQuitYanDliaBilitiES notes 31December2012 31December2011capitalandreservesSharecapital 33 9,000 9,000revaluationreserve 34 13 -otherreserves 35 2,123 2,239retainedearnings 36 4,366 3,043 totAl eQuIty 15,502 14,282 non–currentliabilitieslongtermloans 29 1,053 5,556othernon-currentliabilities 30 71 106Employeebenefitobligation 32 67 61provisions 31 2,663 2,665totalnon–currentliabilities 3,854 8,388 currentliabilitiesBankloansandoverdrafts 26 1,057 1,784currentportionoflong-termloans 26 4,648 1,817intercompanypayables 383 646tradepayables 27 964 1,111taxesandcontributions 27 385 1,349othercurrentliabilities 27 328 197accrualsanddeferredincome 28 34 48Employeebenefitobligation 32 6 5provisions 31 284 168totalcurrentliabilities 8,089 7,125totalliabilities 11,943 15,513

totAl eQuIty ANd lIABIlItIes 27,445 29,795

ina-inDuStrijanaftED.D.ina,D.D.unconSoliDatEDStatEmEntoffinancialpoSition(continuED)at31DEcEmBEr2012(allamountSinHrKmillionS)



theaccompanyingaccountingpoliciesandnotesformanintegralpartofthisunconsolidatedstatementoffinancialposition.

94

ina-inDuStrijanaftED.D.INA GRoup coNsolIdAted stAteMeNt of chANGes IN eQuIty fortHEYEarEnDED31DEcEmBEr2012(allamountSinHrKmillionS)



theaccompanyingaccountingpoliciesandnotesformanintegralpartofthisconsolidatedstatementofchangesinequity.

Balanceat1january2011 9,000 2,340 27 1,424 12,791 2 12,793profitfortheyear - - - 1,815 1,815 (12) 1,803othercomprehensiveincome,net - 276 (27) - 249 - 249totalcomprehensiveincomefortheyear - 276 (27) 1,815 2,064 (12) 2,052 Dividendpaid - - - (480) (480) - (480)Balanceat31December2011 9,000 2,616 - 2,759 14,375 (10) 14,365 profitfortheyear - - - 681 681 6 687purchaseofnon-controllinginterest - - - (3) (3) 3 -othercomprehensiveincome,net - (111) 13 - (98) - (98)totalcomprehensiveincomefortheyear - (111) 13 678 580 9 589Balanceat31December2012 9,000 2,505 13 3,437 14,955 (1) 14,954

Sharecapital

retainedearnings

otherreserves

attributabletoequityholdersoftheparent

revaluationreserves

Non controlling

interest

total


ina-inDuStrijanaftED.D.INA, d.d. uNcoNsolIdAted stAteMeNt of chANGes IN eQuIty fortHEYEarEnDED31DEcEmBEr2012(allamountSinHrKmillionS)



theaccompanyingaccountingpoliciesandnotesformanintegralpartofthisunconsolidatedstatementofchangesinequity.

Balanceat1january2011 9,000 1,952 27 1,556 12,535profitfortheyear - - - 1,967 1,967othercomprehensivegain,net - 287 (27) - 260totalcomprehensiveincomefortheyear - 287 (27) 1,967 2,227Dividendpaid - - - (480) (480)Balanceat31December2011 9,000 2,239 - 3,043 14,282 profitfortheyear - - - 1,323 1,323othercomprehensiveincome,net - (116) 13 - (103)totalcomprehensiveincomefortheyear - (116) 13 1,323 1,220Balanceat31December2012 9,000 2,123 13 4,366 15,502

Sharecapital

retainedearnings

totalotherreserves

revaluationreserves

96

profitfortheyear 687 1,803adjustmentsfor: Depreciationandamortisation 2,016 2,640incometaxexpenserecognizedinincomestatement 380 573impairmentcharges 1,281 1,489reversalofimpairment (218) (233)Gainonsaleofproperty,plantandequipment (36) (14)foreignexchangeloss 44 201interestexpense(net) 123 140otherfinanceexpenserecognisedinincomestatement 98 166increase/(decrease)inprovisions 136 (389)Decommisioninginterestsandotherprovision 115 118othernon-cashitems (85) (38) 4,541 6,456movementsinworkingcapital Decrease/(increase)ininventories 190 (893)Decrease/(increase)inreceivablesandprepayments 379 (113)Decreaseintradeandotherpayables (120) (1,706)cashgeneratedfromoperations 4,990 3,744taxespaid (1,248) (462)netcashinflowfromoperatingactivities 3,742 3,282cashflowsusedininvestingactivities paymentsforproperty,plantandequipment (1,190) (1,281)paymentsforintangibleassets (99) (121)proceedsfromsaleofnon-currentassets 9 14paymentrelatedtosaleofsubsidiaries - 22Dividendsreceivedfromcompaniesclassifiedasavailable-for-saleandfromothercompanies 1 8interestreceivedandotherfinancialincome 19 28investmentsandloanstothirdparties,net 142 (9)netcashusedforinvestingactivities (1,118) (1,339) cashflowsfromfinancingactivities additionallong-termborrowings 318 80repaymentoflong-termborrowings (1,934) (1,313)additionalshort-termborrowings 15,280 19,267repaymentofshort-termborrowings (15,936) (19,081)Dividendspaid - (480)interestpaidonlong-termloans (93) (66)otherlong-termliabilities,net - (8)“interestpaidonshort-termloansandotherfinancingcharges” (96) (251)netcashusedinfinancingactivities (2,461) (1,852) netincreaseincashandcashequivalents 163 91at1january 337 317Effectofforeignexchangeratechanges (12) (71)at31December 25 488 337


ina-inDuStrijanaftED.D.INA GRoup coNsolIdAted stAteMeNt of cAsh flowsfortHEYEarEnDED31DEcEmBEr2012(allamountSinHrKmillionS)



theaccompanyingaccountingpoliciesandnotesformanintegralpartofthisconsolidatedstatementofcashflow.


profitfortheyear 1,323 1,967adjustmentsfor: Depreciationandamortisation 1,835 2,397incometaxexpenserecognizedinincomestatement 346 598impairmentcharges 2,156 1,838reversalofimpairment (189) (532)Gainonsaleofpropertyplantandequipment (6) (3)foreignexchange(gain)/loss (29) 50interest(income)/expense(net) (16) 231otherfinance(income)/expenserecognisedinincomestatement (4) 195increase/(decrease)inprovisions 121 (161)mergerofproplin - (34)Decommisioninginterests 113 118othernon-cashitems 3 18 5,653 6,682movementsinworkingcapital Decrease/(increase)ininventories 413 (934)increaseinreceivablesandprepayments (873) (863)Decreaseintradeandotherpayables (247) (2,125)cashgeneratedfromoperations 4,946 2,760taxespaid (1,244) (475)netcashinflowfromoperatingactivities 3,702 2,285 cashflowsusedininvestingactivities paymentforproperty,plantandequipment (1,048) (1,267)paymentforintangibleassets (147) (121)proceedsfromsaleofnon-currentassets 6 -aquisitionforinvestmentsinsubsidiaries,associatesandjointventuresandothercompanies (16) -Dividendsreceivedfromcompaniesclassifiedasavailable-for-saleandfromothercompanies 1 8paymentsreceivedfromsubsidiaries 33 164investmentsandloans,net (43) (159)netcashusedininvestingactivities (1,214) (1,375) cashflowsfromfinancingactivities additionallong-termborrowings 168 80repaymentoflong-termborrowings (1,808) (1,261)additionalshort-termborrowings 14,894 17,727repaymentofshort-termborrowings (15,612) (16,818)Dividendspaid - (480)interestpaidonlong-termloans (82) (56)otherlong-termliabilities,net (36) (9)“interestpaidonshorttermloansandotherfinancingcharges” 44 (135)netcashusedinfinancingactivities (2,432) (952) “netincrease/(decrease)incashandcashequivalents” 56 (42)at1january 229 260Effectofforeignexchangeratechanges (15) 11at31December 25 270 229


ina-inDuStrijanaftED.D.INA, d.d. uNcoNsolIdAted stAteMeNt of cAsh flowsfortHEYEarEnDED31DEcEmBEr2012(allamountSinHrKmillionS)



theaccompanyingaccountingpoliciesandnotesformanintegralpartofthisunconsolidatedstatementofcashflow.

98

1. GeNeRAl

Historyandincorporation

ina-industrijanafted.d.(inaorina,d.d.)wasfoundedon1january1964whentheoperationsofnaftaplin(oilandgasexplorationandproduction)weremergedwiththoseoftherefineriesofrijekaandSisakandbecameasharebasedcompanyin1993(or“d.d.”).apartfromcroatia,ina,d.d.todayhasbusinessoperationsinangola,EgyptandSyriaintheoilandgasexplorationandproductionsegment, ina,d.d.operatestworefineries inrijekaandSisakandaregionalpetrolstationsnetwork.additionally, ina,d.d.sellsproductsonEuropeanmarketandnon-Europeanmarket,inparticularinBosniaandHerzegovina.in2002,thecroatianparliamentpassedthelawontheprivatisationofina,d.d.andduringthesameyeartheGovernmentsolicitedfor,andreceived,bidsfromanumberofpartiesinterestedinacquiringastrategicinvestmentof25%plusoneshareofina.on10november2003,atransactionwascompletedwherebymolnyrt.(mol)acquired25%plusoneshareofina.in20057%ofinashares,weretransferredtothecroatianHomelandindependenceWarveteransandtheirfamilymembers’fundwithoutanyfee.in2006ina,d.d.wentintothenextprivatizationstage.theGovernmentoftherepublicofcroatiamadeavailable-for-sale1,700,000ordinarysharesofina-industrijanafted.d.,inapublicofferingtocroatiancitizenswithpriorityrightsandtodomesticandforeign,naturalandlegalpersonswithoutpriorityrightsandpreferentialterms.thesharesbecamepubliclytradedon1December2006.in2007,basedontheGovernmentDecisiontheexistingandformeremployeesofina,d.d.haspurchased628,695shares(6.28%sharecapital).in2008,molannounced,togetherwiththerepublicofcroatia,avoluntaryoffertotakeoverallthesharesnotheldbymolortherepublicofcroatiawhichwasacceptedby26,835shareholders.on30january2009molandtheGovernmentofcroatiasignedtheamendmenttotheShareholdersagreement.undertheamend-mentmoldelegatesfiveoutoftheninemembersintheSupervisoryBoardandthreeoutofsixmembersofthemanagementBoardincludingthepresident,resultinginmolgainingoperationalcontrolofina,d.d.theGovernmenthasvetorightsensuringthena-tionalsecurityofenergysupplyandsomedecisionswithrespecttostrategicassetsofina,d.d.theownershipstructure*oftheinaGroupasof31December2012and2011:

*Source:centralclearingDepositorycompanyregistrar

principalactivities

principalactivitiesofina,d.d.anditssubsidiaries(Group)are:(i)explorationandproductionofoilandgasdeposits,primarilyonshoreandoffshorewithincroatia;otherlicenceinterestsareheldinabroad;(ii)importofnaturalgasandsaleofimportedanddomesticallyproducednaturalgastoindustrialconsumersandmunicipalgasdis-tributors;(iii)refiningandproductionofoilproductsthroughrefinerieslocatedatrijeka(urinj)andSisak,andZagreblubricantsplants;(iv)distributionoffuelsandassociatedproductsthroughachainof448retailoutletsinoperationasof31December2012(ofwhich

Notes to the fINANcIAl stAteMeNts

31December2012 31December2011 numberofshares ownershipin% numberofshares ownershipin%Zagrebačkabankad.d./unicreditbankHungaryZrt,formolnyrt,Hungary 4,908,207 49.08 4,725,620 47.26Governmentoftherepublicofcroatia 4,483,552 44.84 4,483,552 44.84institutionalandprivateinvestors 608,241 6.08 790,828 7.90 10,000,000 100 10,000,000 100


Notes to the fINANcIAl stAteMeNts

396incroatiaand52outsidecroatia);(v)tradinginpetroleumproductsthroughanetworkofforeignsubsidiariesandrepresentativeoffices,principally inljubljanaandSarajevo;(vi)serviceactivitiesincidentaltoon-shoreandoff-shoreoilextractionthroughitsdrillingandoilfieldservicessubsidiarycroscod.o.o.

theGrouphasdominantpositionsincroatiaoveroilandgasexplorationandproduction,oilrefining,andthemarketingofgasandpetroleumproducts.ina,d.d.alsoholdsan11.795%interestinjanafd.d.,thecompanythatownsandoperatestheadriapipelinesystem.theheadquartersoftheGrouparelocatedinZagreb,avenijav.Holjevca10,croatia.asat31December2012therewere13,854per-sonsemployedattheGroup(14,217asat31December2011).asat31December2012therewere8,712personsemployedatina,d.d.(8,876asat31December2011).theGroupcomprisesanumberofwhollyandpartiallyownedsubsidiariesoperatinglargelywithintherepublicofcroatia.foreignsubsidiariesincludeanumberoftradingsubsidiarieswhichgenerallyactasdistributorsofinaGroupproducts,suppliersofrawma-terials,arrangersoffinanceandasrepresentativeofficeswithintheirlocalmarkets.

Directors,managementandSupervisory

BoardSupervisory Board from 19 April 2010 until 16 January 2011ivanŠuker chairman Györgymosonyi Deputychairman józsefmolnárÁbelGalácz tomislavivić józsefSimola Božidarpankretić oszkárvilági

SupervisoryBoardfrom17january2011until23May2011DavorŠtern chairman Györgymosonyi Deputychairman józsefmolnár ÁbelGalácz Damirvanđelić GordanaSekulić józsefSimola oszkárvilági SupervisoryBoardfrom24May2011until10April2012DavorŠtern chairman Györgymosonyi Deputychairman józsefmolnár ÁbelGalácz Damirvanđelić

GordanaSekulić oszkárvilági józsefSimola majarilović representativeofemployees Supervisory Board from 11 April 2012 until 17 December 2012DavorŠtern chairmanGyörgymosonyi DeputychairmanjózsefmolnárÁbelGaláczDamirvanđelićGordanaSekulićoszkárvilágijózsefSimolamajarilović representativeofemployees

Supervisory Board since 18 December 2012Sinišapetrović chairmanGyörgymosonyi DeputychairmanjózsefmolnárSzabolcsi.ferenczŽeljkoperićmladenproštenikoszkárvilágiferencHorváthBožomikuš* representativeofemployees*

*BožomikušparticipatesintheSupervisoryBoardfrom18December2012pursuanttothe

WorkerscouncilDecisionon21September2011

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Management Board from 1 April 2010 until 10 February 2011ZoltánSándorÁldott presidentofthemanagementBoardalácslajos memberofthemanagementBoardHolodaattilaistván memberofthemanagementBoardjosippetrović memberofthemanagementBoarddr.sc.tomislavDragičević memberofthemanagementBoardDubravkotkalčić memberofthemanagementBoard

Management Board from 11 February 2011 until 8 June 2011 ZoltánSándorÁldott presidentofthemanagementBoardalácslajos memberofthemanagementBoardHolodaattilaistván memberofthemanagementBoardnikoDalić memberofthemanagementBoardDavormayer memberofthemanagementBoardivanKrešić memberofthemanagementBoard

Management Board since 9 June 2011 ZoltánSándorÁldott presidentofthemanagementBoardpálZoltánKara memberofthemanagementBoardpéterratatics memberofthemanagementBoardnikoDalić memberofthemanagementBoardDavormayer memberofthemanagementBoardivanKrešić memberofthemanagementBoard

Executive Board appointed by the decision of the Management Board from 1 November 2010 until 13 June 2011Bojanmilković -cEoandExecutiveDirectorofExplorationandproductionpeter chmurčiak - ExecutiveDirector in charge of refining andmarketingDarkomarkotić-ExecutiveDirectorinchargeofretailandrásHuszár-ExecutiveDirectorinchargeoffinanceBerislavGašo-ExecutiveDirectorinchargeofcorporateServicestomislavthür-ExecutiveDirectorinchargeofcorporateprocesses

Executive Board appointed by the decision of the Management Board from 14 June 2011 until 7 November 2011ŽelimirŠikonja-ExecutiveDirectorofExplorationandproductionpeter chmurčiak - ExecutiveDirector in charge of refining andmarketingDarkomarkotić-ExecutiveDirectorinchargeofretailandrásHuszár-ExecutiveDirectorinchargeoffinanceBerislavGašo-ExecutiveDirectorinchargeofcorporateServicestomislavthür-ExecutiveDirectorinchargeofcorporateprocesses Executive Board appointed by the decision of the Management Board from 8 November 2011 until 31 August 2012ŽelimirŠikonja-ExecutiveDirectorofExplorationandproduction

arturthernesz-ExecutiveDirectorinchargeofrefiningandmarketingDarkomarkotić-ExecutiveDirectorinchargeofretailandrásHuszár-ExecutiveDirectorinchargeoffinanceBerislavGašo-ExecutiveDirectorinchargeofcorporateServicestomislavthür-ExecutiveDirectorinchargeofcorporateprocesses

Executive Board appointed by the decision of the Management Board since 1 September 2012ŽelimirŠikonja-ExecutiveDirectorofExplorationandproductionarturthernesz-ExecutiveDirectorinchargeofrefiningandmar-ketingDarkomarkotić-ExecutiveDirectorinchargeofretailandrásHuszár-ExecutiveDirectorinchargeoffinancetvrtkoperković-ExecutiveDirectorinchargeofcorporatecentretomislavthür-ExecutiveDirectorinchargeofcorporateaffairs

Secretary since 18 June 2008nivestroha,Bll Secretaryofina,d.d.


2. AccouNtING polIcIes

the principal accounting policies applied in the preparation oftheseconsolidatedandunconsolidatedfinancialstatementsaresetoutbelow.thesepolicieshavebeenconsistentlyappliedtoalltheyearspresented,unlessotherwisestated.

presentationofthefinancialstatementstheseconsolidatedandunconsolidatedfinancialstatementsareprepared on the consistent presentation and classification ba-sis.Whenthepresentationorclassificationof itemsinthecon-solidated and unconsolidated financial statements is amended,comparativeamountsarereclassifiedunless thereclassificationisimpracticable.the company´s and the Group´s financial statements are pre-paredinmillionsofHrK.

Basisofaccountingthe companymaintains its accounting records in croatian lan-guage,incroatiankunaandinaccordancewithcroatianlawandtheaccountingprinciplesandpracticesobservedbyenterprisesincroatia.theaccountingrecordsofthecompany’ssubsidiariesincroatiaandabroadaremaintainedinaccordancewiththere-quirementsoftherespectivelocaljurisdictions.the company’s and Group’s financial statements are preparedunderthehistoricalcostconvention,modifiedbytherevaluationofcertainassetsandliabilitiesunderconditionsofhyperinflationintheperiodto1993andexceptforcertainfinancialinstrumentsthataremeasuredatfairvalues,andinaccordancewithinterna-tionalfinancialreportingStandardsaspublishedbytheinterna-tionalaccountingStandardsBoard,andthecroatianlaw.Histor-icalcostisgenerallybasedonthefairvalueoftheconsiderationgiveninexchangeforassets.

adoptionofnewandrevisedinternationalfinancialreportingStandards

StandardsandInterpretationseffectiveinthecurrentperiodthefollowingnewandamendmentstotheexistingstandardsis-suedbytheinternationalaccountingStandardsBoardandinter-pretations issuedbythe internationalfinancialreporting inter-pretationscommitteeareeffectiveforthecurrentperiod: • amendmentstoifrS1first–timeadoptionofifrS–Severe

HyperinflationandremovaloffixedDatesforfirst-timeadopters(effectiveforannualperiodsbeginningonorafter1july2011),

• amendmentsto ifrS7financial instruments -Disclosures–transferof financialassets (effective for annual periodsbegin-ningonorafter1july2011),

• amendmentstoiaS12incometax-Deferredtax:recoveryofunderlyingassets (effective forannualperiodsbeginningonorafter1january2012),

theadoptionoftheseamendmentstotheexistingstandardsandinterpretationshasnotledtoanychangesintheinaGroupac-countingpoliciesanditisnotexpectedthatthesehaveamaterialimpactonthegroup.

StandardsandInterpretationsinissuenotyetadoptedatthedateofauthorisationofthesefinancialstatementsthefol-lowingstandards,revisionsandinterpretationswereinissuebutnotyeteffective:

• ifrS9financial instruments,asamendedin2010,(effectiveforannualperiodsbeginningonorafter1january2015),

• ifrS10consolidatedfinancialStatements,publishedinmay2011,supersedesthepreviousversionof iaS27(2008)consol-idated and Separate financial Statements, (effective for annualperiodsbeginningonorafter1january2013),

• ifrS 11 joint arrangements, published inmay 2011, super-sedesiaS31interestsinjointventures(effectiveforannualperi-odsbeginningonorafter1january2013),

• ifrS12DisclosureofinterestsinotherEntities,publishedinmay2011 (effective for annual periodsbeginningonor after1january2013),

• ifrS13fairvaluemeasurement,publishedinmay2011(ef-fectiveforannualperiodsbeginningonorafter1january2013),

• iaS27SeparatefinancialStatements(asamendedin2011),consolidation requirements previously forming part of iaS 27(2008) have been revised and are now contained in ifrS 10consolidatedfinancial Statements, (effectivedateof iaS27 (asamendedin2011)forannualperiodsbeginningonorafter1jan-uary2013),

• iaS 28 investments in associates and joint ventures (as

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amended in 2011). this version supersedes iaS 28 (2003) in-vestmentsinassociates(effectivedateofiaS28(asamendedin2011)forannualperiodsbeginningonorafter1january2013). • amendmentstoifrS1first–timeadoptionofifrS,publishedinmarch2012,amendmentsforgovernmentloanwithabelowmarketrateof interestwhentransitioningtoifrS,(effectiveforannualperiodsbeginningonorafter1january2013),

• ifrS 7 financial instruments: Disclosures, published in De-cember2011,amendmentsenhancingdisclosuresaboutoffset-tingoffinancialassetsandfinancialliabilities(effectiveforannualperiodsbeginningonorafter1january2013)andamendmentsrequiringdisclosuresabouttheinitialapplicationofifrS9(effec-tiveforannualperiodsbeginningonorafter1january2015),

• amendmentstoiaS1presentationoffinancialStatements-revisingthewayofpresentingtheothercomprehensiveincome(effectiveforannualperiodsbeginningonorafter1july2012).

• amendmentstoiaS19EmployeeBenefits-improvementstotheaccountingforpost-EmploymentBenefits(effectiveforannu-alperiodsbeginningonorafter1january2013),

• amendments to iaS 32 financial instruments: presentationand ifrS 7 financial instruments: Disclosures, published inDe-cember 2011, amendments to application guidanceon theoff-settingoffinancialassetsandfinancialinstruments(effectiveforannualperiodsbeginningonorafter1january2014),

• ifric20StrippingcostsintheproductionphaseofaSurfacemine,(effectiveforannualperiodsbeginningonorafter1janu-ary2013).

• annual improvements 2009–2011cycle, published inmay2012,acollectionofamendmentstoifrSs,inresponsetoissuesaddressedduringthe2009–2011cycle.fivestandards(ifrS1,iaS1, iaS16, iaS32, iaS34) areprimarily affectedby theamend-ments,withconsequentialamendmentstonumerousothers(ef-fectiveforannualperiodsbeginningonorafter1january2013).

• transitionguidance,published in june2012,amendment toifrS10,ifrS11andifrS12.,(effectiveforannualperiodsbegin-ningonorafter1january2013)

• amendmentstoinvestmententitiesforifrS10,ifrS12,iaS27publishedinoctober2012(effectiveforannualperiodsbegin-ningonorafter1january2014)

inaGroupandina,d.d.haveelectednottoadoptthesestand-ards, revisions and interpretations in advanceof their effectivedates.

KeyrequirementsofifrS9aredescribedasfollows:• requires all recognised financial assets that are within thescopeofiaS39financialinstruments:recognitionandmeasure-menttobesubsequentlymeasuredatamortisedcostorfairval-ue. • themostsignificanteffectofifrS9regardingtheclassificationandmeasurementoffinancialliabilitiesrelatestotheaccountingforchangesinthefairvalueofafinancialliability(designatedasatfairvaluethroughprofitorloss)attributabletochangesinthecreditriskofthatliability.changesinfairvalueattributabletoafinancialliability’screditriskarenotsubsequentlyreclassifiedtoprofitorloss.

inmay2011,apackageoffiveStandardsonconsolidation,jointarrangements, associates and disclosureswas issued, includingifrS10,ifrS11,ifrS12,iaS27(asrevisedin2011)andiaS28(asrevisedin2011).

KeyrequirementsoftheseStandardsaredescribedbelow:ifrS10replaces thepartsof iaS27consolidatedandSeparatefinancialStatementsthatdealwithconsolidatedfinancialstate-ments.under ifrS10, there isonlyonebasis forconsolidationthat iscontrol.newdefinitionofcontrolthatcontainsthreeel-ements: (a) powerover an investee, (b) exposure, or rights, tovariablereturnsfromits involvementwiththe investee,and(c)theabilitytouseitspowerovertheinvesteetoaffecttheamountoftheinvestor’sreturns.

ifrS 11 replaces iaS 31 interests in joint ventures.under ifrS11, jointarrangementsareclassifiedasjointoperationsorjointventures,dependingontherightsandobligationsofthepartiesto the arrangements. in contrast, joint ventures under ifrS 11arerequiredtobeaccountedforusingtheequitymethodofac-counting,whereasjointlycontrolledentitiesunderiaS31canbeaccountedforusingtheequitymethodofaccountingorpropor-tionateaccounting.

ifrS12isadisclosurestandardandisapplicabletoentitiesthathave interests in subsidiaries, joint arrangements, associatesand/orunconsolidatedstructuredentities.ingeneral,thedisclo-surerequirementsinifrS12aremoreextensivethanthoseinthecurrentstandards.

in june2012, theamendments to ifrS10, ifrS11and ifrS12


wereissuedtoclarifycertaintransitionalguidanceontheappli-cationoftheseifrSsforthefirsttime.

ifrS 13 fair valuemeasurement establishes a single source ofguidanceforfairvaluemeasurementsanddisclosuresaboutfairvaluemeasurements.theStandarddefinesfairvalue,establishesa framework formeasuring fair value, and requires disclosuresaboutfairvaluemeasurements.thescopeofifrS13isbroad;itapplies tobothfinancial instrument itemsandnon-financial in-strumentitemsforwhichotherifrSsrequireorpermitfairvaluemeasurementsanddisclosures about fair valuemeasurements,exceptinspecifiedcircumstances.

amendmentstoifrS7andiaS32offsettingfinancialassetsandfinancialliabilitiesandtherelateddisclosuretheamendmentstoiaS32clarifyexistingapplicationissuesre-latingtotheoffsetoffinancialassetsandfinancial liabilitiesre-quirements. theamendmentsto ifrS7requireentitiestodisclose informa-tionaboutrightsofoffsetandrelatedarrangements(suchascol-lateralpostingrequirements)forfinancial instrumentsunderanenforceablemasternettingagreementorsimilararrangement.

the amendments to iaS 19 Employee Benefits change the ac-countingfordefinedbenefitplansandterminationbenefits.themostsignificantchangerelatestotheaccountingforchangesindefinedbenefitobligationsandplanassets.

theannual improvementsto ifrSs2009–2011cycle issued inmay2012includeanumberofamendmentstovariousifrSs.theamendmentsareeffectiveforannualperiodsbeginningonoraf-ter1january2013.amendmentstoifrSsinclude:• the amendments to iaS 16 property, plant and Equipmentclarifythatspareparts,stand-byequipmentandservicingequip-mentshouldbeclassifiedasproperty,plantandequipmentwhentheymeetthedefinitionofproperty,plantandequipmentiniaS16andasinventoryotherwise.• theamendments to iaS32financial instruments:presenta-tionclarifythatincometaxrelatingtodistributionstoholdersofanequityinstrumentandtotransactioncostsofanequitytrans-actionshouldbeaccountedforinaccordancewithiaS12incometaxes.

ifric 20 Stripping costs in the production phase of a Surfacemineappliestowasteremovalcoststhatareincurredinsurfaceminingactivityduringtheproductionphaseofthemine(produc-tionstrippingcosts).undertheinterpretation,thecostsfromthis

wasteremovalactivity(stripping)whichprovideimprovedaccesstooreisrecognisedasanon-currentasset(strippingactivityas-set)whencertaincriteriaaremet.themanagementanticipatesthattheadoptionofifrS10consol-idatedfinancialStatements,ifrS11jointarrangementsandifrS12DisclosureofinterestsinotherEntities,willhavenomaterialimpactonthefinancialstatementsofGroupintheperiodofini-tialapplication.inaGroup has elected not to adopt these standards, revisionsandinterpretationsinadvanceoftheireffectivedates.theman-agementanticipatesthattheadoptionofifrS9financialinstru-mentswillhaveasignificantimpactonmeasurementanddisclo-sureoffinancialinstrumentsandapplicationofifrS13fairvaluemeasurementwillresult inmoreextensivedisclosuresinthefi-nancialstatements.themanagementanticipatethattheapplicationoftheseamend-mentstoiaS32andifrS7mayresultinmoredisclosuresbeingmadewithregardtooffsettingfinancialassetsandfinancial lia-bilitiesinthefuture,alsothemanagementanticipatethatifric20willhavenoeffecttotheGroup’sfinancialstatementsastheGroupdoesnotengageinsuchactivities.

Basisofparentcompanyfinancialstatement(ina,d.d.)theunconsolidatedfinancialstatementsofthecompanyrepre-sentaggregateamountsofthecompany’sassets,liabilities,cap-ital, provisions andof the results for theperiod thenendedofthedivisionswhichcomprised thecompany.all inter-divisionaltransactionsandbalancesareeliminated.inthecompany’sfinancialstatementsinvestmentsinsubsidiariesarestatedatcostlessimpairment. the consolidated financial statements incorporate the financialstatements of ina, d.d. (the company) and entities controlledbythecompany(itssubsidiaries)madeupto31Decembereachyear.control isachievedwherethecompanyhas thepowertogovernthefinancialandoperatingpoliciesofaninvesteesoastoobtainbenefitsfromitsactivities.Where necessary, adjustments aremade to thefinancial state-mentsofsubsidiariestobringtheaccountingpoliciesused intolinewiththoseusedbytheGroup.

incomeandexpensesofsubsidiariesacquiredordisposedofdur-ingtheyearareincludedintheconsolidatedstatementofcom-prehensiveincomefromtheeffectivedateofacquisitionandupto the effectivedate of disposal, as appropriate. total compre-

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hensiveincomeofsubsidiariesisattributedtotheownersofthecompanyandtothenon-controllinginterestsevenifthisresultsinthenon-controllinginterestshavingadeficitbalance.all intra-grouptransactions,balances, incomeandexpensesareeliminatedinfullonconsolidation.changes in theGroup’sownership interests in subsidiaries thatdo not result in the Group losing control over the subsidiariesareaccounted forasequity transactions.thecarryingamountsof the Group’s interests and the non-controlling interests areadjusted to reflect thechanges in their relative interests in thesubsidiaries. any differencebetween the amount bywhich thenon-controlling interests are adjusted and the fair valueof theconsiderationpaidorreceivedisrecogniseddirectlyinequityandattributedtoownersofthecompany.

WhentheGrouplosescontrolofasubsidiary,theprofitorlossondisposaliscalculatedasthedifferencebetween(i)theaggregateofthefairvalueoftheconsiderationreceivedandthefairvalueofanyretainedinterestand(ii)thepreviouscarryingamountoftheassets (including goodwill), and liabilities of the subsidiary andanynon-controllinginterests.Whenassetsofthesubsidiaryarecarriedatrevaluedamountsorfairvaluesandtherelatedcumu-lativegainor losshasbeen recognised inothercomprehensiveincomeandaccumulatedinequity,theamountspreviouslyrec-ognisedinothercomprehensiveincomeandaccumulatedineq-uityareaccountedforasifthecompanyhaddirectlydisposedoftherelevantassets(i.e.reclassifiedtoprofitorlossortransferreddirectlytoretainedearningsasspecifiedbyapplicableifrSs).thefairvalueofanyinvestmentretainedintheformersubsidiaryatthedatewhencontrolislostisregardedasthefairvalueonini-tialrecognitionforsubsequentaccountingunderiaS39financialinstruments:recognitionandmeasurementor,whenapplicable,thecostoninitialrecognitionofaninvestmentinanassociateorajointlycontrolledentity.

Businesscombinationacquisitionsofsubsidiariesandbusinessesareaccountedforus-ing theacquisitionmethod.theconsideration foreachacquisi-tionismeasuredattheaggregateofthefairvalues(atthedateofexchange)ofassetsgiven,liabilitiesincurredorassumed,andequityinstrumentsissuedbytheGroupinexchangeforcontroloftheacquiree.acquisition-relatedcostsarerecognisedinprofitorlossasincurred.Goodwill ismeasuredastheexcessofthesumoftheconsider-ation transferred, the amount of any non-controlling interestsin the acquiree, and the fair value of the acquirer’s previouslyheld equity interest in the acquiree over the net of the acqui-

sition-dateamountsof the identifiableassetsacquiredand theliabilitiesassumed.if,afterreassessment,thenetoftheacquisi-tion-dateamountsoftheidentifiableassetsacquiredandliabil-itiesassumedexceedsthesumoftheconsiderationtransferred,theamountofanynon-controllinginterestsintheacquireeandthefairvalueoftheacquirer’spreviouslyheldinterestintheac-quiree,theexcessisrecognisedimmediatelyinprofitorlossasabargainpurchasegain. non-controlling interests that are present ownership interestsandentitletheirholderstoaproportionateshareoftheentity’snetassets in theeventof liquidationmaybe initiallymeasuredeitheratfairvalueoratthenon-controllinginterests’proportion-ate share of the recognised amounts of the acquiree’s identifi-ablenetassets.thechoiceofmeasurementbasis ismadeonatransaction-by-transactionbasis.other typesofnon-controllinginterestsaremeasuredatfairvalueor,whenapplicable,onthebasisspecifiedinanotherifrS.

WhentheconsiderationtransferredbytheGroup inabusinesscombinationincludesassetsorliabilitiesresultingfromacontin-gentconsiderationarrangement,thecontingentconsiderationismeasuredatitsacquisition-datefairvalueandincludedaspartoftheconsiderationtransferredinabusinesscombination.changesin the fair valueof thecontingent consideration thatqualifyasmeasurement period adjustments are adjusted retrospectively,withcorrespondingadjustmentsagainstgoodwill.measurementperiod adjustments are adjustments that arise from additionalinformation obtained during the ‘measurement period’ (whichcannot exceed one year from the acquisition date) about factsandcircumstancesthatexistedattheacquisitiondate.

the subsequentaccounting for changes in the fair valueof thecontingentconsiderationthatdonotqualifyasmeasurementpe-riodadjustmentsdependsonhowthecontingentconsiderationisclassified.contingentconsiderationthatisclassifiedasequityisremeasuredatsubsequentreportingdatesanditssubsequentsettlement is accounted forwithinequity.contingent consider-ationthat isclassifiedasanassetora liability isremeasuredatsubsequentreportingdates inaccordancewith iaS39financialinstruments:recognitionandmeasurement,oriaS37provisions,contingentliabilitiesandcontingentassets,asappropriate,withthecorrespondinggainorlossbeingrecognisedinprofitorloss.Whenabusinesscombinationisachievedinstages,theGroup’spreviouslyheldequityinterestintheacquireeisremeasuredtofairvalueat theacquisitiondate (i.e. thedatewhentheGroupobtainscontrol)andtheresultinggainorloss,ifany,isrecognisedinprofitor loss.amountsarising frominterests in theacquiree


prior to the acquisition date that have previously been recog-nisedinothercomprehensiveincomearereclassifiedtoprofitorlosswheresuchtreatmentwouldbeappropriateifthatinterestweredisposedof.iftheinitialaccountingforabusinesscombinationisincompletebytheendofthereportingperiodinwhichthecombinationoc-curs, the Group reports provisional amounts for the items forwhichtheaccounting is incomplete.thoseprovisionalamountsareadjustedduringthemeasurementperiodoradditionalassetsorliabilitiesarerecognised,toreflectnewinformationobtainedaboutfactsandcircumstancesthatexistedattheacquisitiondatethat, if known,wouldhaveaffected theamounts recognisedatthatdate.

GoodwillGoodwill arising from an acquisition of a business is carried atcostasestablishedatthedateofacquisitionofthebusinesslessaccumulatedimpairmentlosses.forthepurposesofimpairmenttesting,goodwill isallocatedtoeachoftheGroup’scash-generatingunits(orgroupsofcash-gen-eratingunits)thatisexpectedtobenefitfromthesynergiesofthecombination.

a cash-generating unit towhich goodwill has been allocated istestedfor impairmentannually,ormorefrequentlywhenthereis indication that the unit may be impaired. if the recovera-bleamountof the cash-generatingunit is less than its carryingamount,theimpairmentlossisallocatedfirsttoreducethecarry-ingamountofanygoodwillallocatedtotheunitandthentotheotherassetsof theunitproratabasedonthecarryingamountofeachassetintheunit.anyimpairmentlossforgoodwillisrec-ogniseddirectlyinprofitorlossintheconsolidatedstatementofcomprehensive income/income statement. an impairment lossrecognisedforgoodwillisnotreversedinsubsequentperiods.ondisposaloftherelevantcash-generatingunit,theattributableamountofgoodwillisincludedinthedeterminationoftheprofitorlossondisposal.

investmentsinassociatesanassociateisanentityoverwhichtheGrouphassignificantin-fluenceandthatisneitherasubsidiarynoraninterestinajointventure. Significant influence is thepower toparticipate in thefinancialandoperatingpolicydecisionsoftheinvesteebutisnotcontrolorjointcontroloverthosepolicies.the results and assets and liabilities of associates are incorpo-rated in thesefinancial statementsusing theequitymethodof

accountingexceptwhenthe investment isclassifiedasheld forsale, inwhich case it is accounted for in accordancewith ifrS5.under theequitymethod, investments inassociatesarecar-ried in the consolidated statement of financial position at costasadjustedforpost-acquisitionchangesintheGroup’sshareofthenetassetsoftheassociate,lessanyimpairmentinthevalueofindividualinvestments.lossesofanassociateinexcessoftheGroup’sinterestinthatassociate(whichincludesanylong-termintereststhat,insubstance,formpartoftheGroup’snetinvest-mentintheassociate)arenotrecognised,unlesstheGrouphasincurred legalorconstructiveobligationsormadepaymentsonbehalfoftheassociate.anyexcessofthecostofacquisitionovertheGroup’sshareofthenetfairvalueoftheidentifiableassets,liabilitiesandcontingentliabilitiesoftheassociaterecognisedatthedateofacquisitionisrecognisedasgoodwill.thegoodwill is includedwithinthecar-ryingamountoftheinvestmentandisassessedfor impairmentaspartoftheinvestment.anyexcessoftheGroup’sshareofthenetfairvalueoftheidentifiableassets,liabilitiesandcontingentliabilitiesoverthecostofacquisition,afterreassessment,isrec-ognisedimmediatelyinprofitorloss.

therequirementsofiaS39areappliedtodeterminewhetheritisnecessarytorecogniseanyimpairmentlosswithrespecttotheGroup’s investment inanassociate.Whennecessary, theentirecarryingamountoftheinvestment(includinggoodwill)istestedforimpairmentinaccordancewithiaS36impairmentofassetsas a single asset by comparing its recoverable amount (higherofvalueinuseandfairvaluelesscoststosell)with itscarryingamount,anyimpairmentlossrecognisedformspartofthecarry-ingamountof the investment.anyreversalof that impairmentlossisrecognisedinaccordancewithiaS36totheextentthattherecoverableamountoftheinvestmentsubsequentlyincreases.upondisposalofanassociatethatresultsintheGrouplosingsig-nificantinfluenceoverthatassociate,anyretainedinvestmentismeasuredatfairvalueatthatdateandthefairvalueisregardedasitsfairvalueoninitialrecognitionasafinancialassetinaccord-ancewithiaS39. thedifferencebetweenthepreviouscarryingamountoftheas-sociateattributable to the retained interestand its fairvalue isincluded inthedeterminationofthegainor lossondisposalofthe associate. in addition, the Group accounts for all amountspreviouslyrecognisedinothercomprehensiveincomeinrelationtothatassociateonthesamebasisaswouldberequiredifthatassociatehaddirectlydisposedoftherelatedassetsorliabilities.therefore,ifagainorlosspreviouslyrecognisedinothercompre-hensive incomeby thatassociatewouldbe reclassified toprof-

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itor losson thedisposalof the relatedassetsor liabilities, theGroupreclassifiesthegainorlossfromequitytoprofitorloss(asareclassificationadjustment)whenit losessignificant influenceoverthatassociate.Whenagroupentitytransactswithitsassociate,profitsandlossesresultingfromthetransactionswiththeassociatearerecognisedintheGroup’consolidatedfinancialstatementsonlytotheextentofinterestsintheassociatethatarenotrelatedtotheGroup.

interestsinjointventuresajointventureisacontractualarrangementwherebytheGroupandotherpartiesundertakeaneconomicactivitythatissubjecttojointcontrolthatiswhenthestrategicfinancialandoperat-ingpolicydecisionsrelatingtotheactivitiesofthejointventurerequiretheunanimousconsentofthepartiessharingcontrol.WhenaGroupentityundertakesitsactivitiesunderjointventurearrangements directly, the Group’s share of jointly controlledassets and any liabilities incurred jointlywith other venturersarerecognisedinthefinancialstatementsoftherelevantentityandclassifiedaccordingtotheirnature.liabilitiesandexpensesincurreddirectlyinrespectofinterestsinjointlycontrolledas-setsareaccountedforonanaccrualbasis.incomefromthesaleoruseof theGroup’sshareof theoutputof jointlycontrolledassets,anditsshareof jointventureexpenses,arerecognisedwhenitisprobablethattheeconomicbenefitsassociatedwiththetransactionswillflowto/fromtheGroupandtheiramountcanbemeasuredreliably.

joint venture arrangements that involve the establishment ofaseparateentity inwhicheachventurerhasan interestarere-ferredtoasjointlycontrolledentities.theGroupreportsitsinter-estsinjointlycontrolledentitiesusingequitymethod.anygoodwillarisingontheacquisitionoftheGroup’sinterestinajointlycontrolledentityisaccountedforinaccordancewiththeGroup’saccountingpolicyforgoodwillarisinginabusinesscom-bination.

Whenagroupentity transactswith its jointly controlledentity,profitsandlossesresultingfromthetransactionswiththejointlycontrolledentityarerecognisedintheGroup’consolidatedfinan-cialstatementsonlytotheextentofinterestsinthejointlycon-trolledentitythatarenotrelatedtotheGroup.

thecompany’sandtheGroup’sproportionofdevelopmentex-penditureincurredthroughexplorationandproductionjointven-turearrangementsareincludedwithinproperty,plantandequip-ment-oilandgasproperties.

oilandgasproperties

ExplorationandappraisalcostsExplorationandappraisalcostsareaccountedforonthesuccess-fuleffortsbasis.costsrelatingtoexplorationandappraisaldrill-ingareinitiallycapitalisedasintangibleoilandgasassetspendingdeterminationofthecommercialviabilityoftherelevantoilandgasproperties.licenseanddataprovisioncostsandcostsassociatedwithgeo-logicalandgeophysicalactivitiesarechargedtotheincomestate-mentperiodinwhichtheyareincurred.if prospects are subsequently deemed to be unsuccessful oncompletionofevaluation,theassociatedcostsarechargedtotheincomestatementintheperiod.iftheprospectsaredeemedtobecommerciallyviable,suchcostsaretransferredtooilandgasproperties.thestatusofsuchprospectsisreviewedregularlybymanagement.

Fieldsunderdevelopmentcosts of exploring and oil and gas field development costs arecapitalisedasintangibleortangibleoilandgasassets.Suchcostsalso include,prospectively,applicableexplorationcostsandde-velopmentdrillingcosts.

Italian capitalisedexplorationanddevelopmentcostsofproducingdo-mesticandforeignoilandgaspropertiesaredepreciatedusingaunitofproductionmethod, in theproportionofactualproduc-tionfortheperiodtothetotalestimatedremainingcommercialreservesofthefield.

Commercialreservescommercial reserves are net proved developed oil and gas re-serves.changesinthecommercialreservesoffieldsaffectingunitofproductioncalculationsaredealtwithprospectivelyovertherevised remaining reserves. upstream performed reserves de-terminationinaccordancewithSpEprmS(SocietyofpetroleumEngineerspetroleumresourcesmanagementSystem)guidelines.

property,plantandequipment

property,plantandequipmentareshownathistoricalcostorval-uation lessaccumulateddepreciationandanyaccumulated im-pairmentloss,exceptforland,whichisstatedatcost.property,plantandequipmentinuse(excludingoilandgasproperties)aredepreciatedonastraight-linebasisonthefollowingbasis:


Software 5yearsBuildings 5-50yearsrefineriesandchemicalsmanufacturingplants 3-15yearspetrolservicestations 5-25yearstelecommunicationandofficeequipment 2-10years the estimated useful lives, residual values and depreciationmethod are reviewed at each year end,with the effect of anychangesinestimateaccountedforonaprospectivebasis.the initial cost of property, plant and equipment comprises itspurchaseprice,includingimportdutiesandnon-refundablepur-chasetaxesandanydirectlyattributablecostsofbringinganas-settoitsworkingconditionandlocationforitsintendeduse.Expendituresincurredafterproperty,plantandequipmenthavebeenput intooperationarenormally charged to incomestate-mentintheperiodinwhichthecostsareincurred.

in situationswhere it canbe clearlydemonstrated that theex-penditureshave resulted inan increase in the futureeconomicbenefitsexpectedtobeobtainedfromtheuseofanitemofprop-erty,plantandequipmentbeyonditsoriginallyassessedstandardperformance, the expenditures are capitalised as an additionalcostofproperty,plantandequipment.costseligibleforcapital-isation includecostsofperiodic,plannedsignificant inspectionsandoverhaulsnecessaryforfurtheroperation.thegainorlossarisingonthedisposalorretirementofanitemofproperty,plantandequipmentisdeterminedasthedifferencebetweenthesalesproceedsandthecarryingamountoftheassetandisrecognisedintheincomestatement.

impairmentoftangibleandintangibleassetsotherthangoodwillattheendofeachreportingperiod,theGroupreviewsthecar-ryingamountsofitstangibleandintangibleassetstodeterminewhether there isany indication that thoseassetshavesufferedanimpairmentloss.ifanysuchindicationexists,therecoverableamountoftheassetisestimatedinordertodeterminetheextentofthe impairment loss (ifany).Where it isnotpossibletoesti-matetherecoverableamountofan individualasset, theGroupestimates the recoverable amount of the cash-generating unittowhichtheassetbelongs.Whereareasonableandconsistentbasisofallocationcanbeidentified,corporateassetsarealsoal-locatedtoindividualcash-generatingunits,orotherwisetheyareallocatedtothesmallestgroupofcash-generatingunitsforwhichareasonableandconsistentallocationbasiscanbeidentified.

intangibleassetswithindefiniteusefullivesandintangibleassetsnotyetavailableforusearetestedforimpairmentatleastannu-ally,andwheneverthere isan indicationthat theassetmaybeimpaired.recoverableamount is thehigherof fairvalue lesscoststosellandvalueinuse.inassessingvalueinuse,theestimatedfuturecashflowsarediscountedtotheirpresentvalueusingapre-taxdiscount rate that reflects current market assessments of thetimevalueofmoneyandtherisksspecifictotheassetforwhichtheestimatesoffuturecashflowshavenotbeenadjusted.if the recoverableamountofanasset (orcash-generatingunit)is estimated to be less than its carrying amount, the carryingamountoftheasset(orcash-generatingunit)isreducedtoitsre-coverableamount.animpairmentlossisrecognisedimmediatelyasexpenditure,unlesstherelevantassetiscarriedatarevaluedamount,inwhichcasetheimpairmentlossistreatedasareval-uationdecrease.When an impairment loss subsequently reverses, the carryingamountof theasset (or a cash-generatingunit) is increased totherevisedestimateof its recoverableamount,butsothat theincreasedcarryingamountdoesnotexceedthecarryingamountthatwouldhavebeendeterminedhadnoimpairmentlossbeenrecognisedfortheasset(orcash-generatingunit)inprioryears.areversalofanimpairmentlossisrecognisedimmediatelyinprofitorloss,unlesstherelevantassetiscarriedatarevaluedamount,inwhichcasethereversaloftheimpairmentlossistreatedasarevaluationincrease.

financeandoperatingleasesthedeterminationwhetheranarrangementcontainsorisaleasedependsonthesubstanceofthearrangementatinceptiondate.iffulfilmentofthearrangementdependsontheuseofaspecificassetorconveystherighttousetheasset,itisdeemedtocontainaleaseelementandarerecordedaccordingly.financeleases,whichtransfertotheGroupsubstantiallyalltherisksandbenefitsincidentaltoownershipoftheleaseditem,arecapitalizedat the inceptionof the leaseat the fairvalueof theleasedpropertyor,iflower,atthepresentvalueoftheminimumleasepayments.minimum leasepaymentsareapportionedbe-tweenthefinancechargesandreductionoftheoutstandinglia-bility.thefinancechargeshallbeallocatedtoeachperiodduringthe lease termsoas toproducea constantperiodic rateof in-terestontheremainingbalanceoftheliability.financechargesarechargeddirectlyagainstincome.capitalizedleasedassetsaredepreciatedovertheshorterof theestimateduseful lifeof theassetortheleaseterm.initial direct costs incurred innegotiatingaoperating leaseare

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addedtothecarryingamountoftheleasedassetandrecognizedovertheleasetermonthesamebasesastheleaseincome.leas-eswherethelessorretainssubstantiallyalltherisksandbenefitsofownershipoftheassetareclassifiedasoperatingleases.oper-atingleasepaymentsarerecognizedasanexpenseintheincomestatementonastraightlinebasisovertheleaseterm.

receivablesfromcustomersreceivables from customers are shown in amounts identifiedin the invoices issued to the customers in accordancewith theagreement, order, delivery note and other documents whichserves asbasis for invoicing, decreasedwith impairmentof re-ceivables.the accountingpolicies adoptedby thecompany, defining andrecording impairmentofshort-termreceivablesforwhichthereisuncertaintythatreceivableswillbechargedinaccordancewiththeoriginalcontractual terms, isbasedonthe followingproce-dures:• estimateofrecoverabilityofaccountsreceivablewithindivid-ualapproachtothecompany’sstrategiccustomers;• impairmentofothershort-termreceivablesthatexceed120daysfromthematuritydate.companyrecordsimpairmentondoubtfuldebtbasedonthees-timateofrecoverabilityofreceivablewithindividualapproachtothecompany’sstrategiccustomersandimpairmentofallshort-term receivables which are not included in the individual esti-mate,regardlessoftheirfinancialamountbutinamountofduedoubtfuldebtthatexceeds120daysfromthematuritydate.adequate impairment for estimated non-refundable amount isrecognizedinprofitorlosswhenthereisobjectiveevidencethattheassetsshouldbereduced.

inventoriesinventoriesofcrudeoil,finishedandsemi-finishedproductsandnaturalgasarevaluedasfollows:• crudeoil iscarriedattheweightedaveragecostorthepro-duction cost. if finished i.e. refined products are impaired, acalculationisusedtoreducethecrudeoilreservebyanaliquotsharetoitsnetrecoverableamount.• finishedproductsarevaluedatthelowerofcostor96.5%offutureaveragesalesprice,whichapproximatesthenetrecovera-bleamount.• Semi-finished products are measured using a calculationmethod,bywhichtheyareimpairedtotheextentthatfinishedproductsonthebasisofactualinventoriesattheperiod-endareimpairedi.e.thatthecalculationshowsthattheirnetrealisable

valuemaynotberecovered,byapplyingtheimpairmentpercent-agetoeachindividualsemi-finishedproductonstockattheperi-od-end.• importednaturalgasheldinundergroundstorageisvaluedatthelowerofcost,basedonthepriceofimportedgasatyear-endincludingtransportcosts,andweightedaveragesalespricebasedonyear-endprices.• Domesticnaturalgasheldinundergroundstorageisvaluedatthelowerofweightedaveragesalespriceandcost.• otherinventories,whichcomprisemainlyspareparts,mate-rials and supplies, are valued at the lower of cost or valuationandnetrealisablevalue,lessanyprovisionforslow-movingandobsoleteitems.

cashandcashequivalentscashandcashequivalentscomprisecashonhandanddemanddepositsandothershort-termhighlyliquidinvestmentsthatarereadilyconvertibletoaknownamountofcashandaresubjecttoaninsignificantriskofchangesinvalue.

BorrowingcostsBorrowingcostsdirectlyattributabletotheacquisition,construc-tionorproductionofqualifyingassets,whichareassetsthatnec-essarily take a substantial periodoftime to get ready for theirintendeduseorsale,areaddedtothecostofthoseassets,untilsuchtimeastheassetsaresubstantiallyreadyfortheirintendeduseorsale.investmentincomeearnedonthetemporaryinvestmentofspe-cific borrowings pending their expenditureonqualifying assetsisdeductedfromtheborrowingcostseligibleforcapitalisation.allotherborrowingcostsarerecognised inprofitor loss in theperiodinwhichtheyareincurred.

foreigncurrenciesthe individual financial statements of each company and theGroupentityarepresented in thecurrencyof theprimaryeco-nomic environment inwhich the entityoperates (its functionalcurrency). for the purpose of the consolidated financial state-ments, the results and financial position of each entity are ex-pressedincroatiankunas(HrK),whichisthefunctionalcurrencyof thecompany,andthepresentationcurrencyfor theconsoli-datedfinancialstatements. inpreparingthefinancialstatementsoftheindividualGroupen-tities,transactionsincurrenciesotherthantheentity’sfunctional


currency(foreigncurrencies)aretranslatedtothefunctionalcur-rencyofentityat theratesofexchangeprevailingonthedatesofthetransactions.ateachstatementoffinancialpositiondate,monetaryitemsdenominatedinforeigncurrenciesareretranslat-edtothefunctionalcurrencyoftheentityattheratesprevailingonthestatementoffinancialpositiondate.non-monetaryitemscarriedat fairvaluethataredenominated in foreigncurrenciesareretranslatedattheratesprevailingonthedatewhenthefairvaluewasdetermined.non-monetaryitemsthataremeasuredintermsofhistoricalcostinaforeigncurrencyarenotretranslated.Exchangedifferencesarerecognisedinprofitorlossintheperiodinwhichtheyariseexceptfor:

• exchange differences on foreign currency borrowings re-lating to assets under construction for future productive use,which are included in the cost of those assetswhen they areregarded as an adjustment to interest costs on those foreigncurrencyborrowings;

• exchangedifferencesonmonetary items receivable fromorpayable to a foreign operation for which settlement is neitherplannednorlikelytooccur(thereforeformingpartofthenetin-vestmentintheforeignoperation),whicharerecognisedinitiallyinother comprehensive incomeand reclassified fromequity toprofitorlossondisposalorpartialdisposalofthenetinvestment.forthepurposeofpresentingconsolidatedfinancialstatements,theassetsandliabilitiesoftheGroup’sforeignoperations(includ-ingcomparatives)areexpressedincroatiankunausingexchangeratesprevailingon the statementoffinancial positiondate. in-comeandexpenseitems(includingcomparatives)aretranslatedat the average exchange rates for the period, unless exchangerates fluctuated significantly during that period, in which casetheexchangeratesatthedatesofthetransactionsareused.Ex-changedifferencesarising fromyear-endtranslation, ifany,areclassifiedasequityandtransferredtotheGroup’stranslationre-serve.Suchtranslationdifferencesarerecognisedinprofitorlossintheperiod inwhichtheforeignoperation isdisposedof.theforeignconcessionsof ina,d.d.meets thedefinitionof foreignoperationandaretreatedassuch.

on the disposal of a foreign operation (i.e. a disposal of theGroup’s entire interest in a foreign operation, or a disposal in-volving lossof controlovera subsidiary that includesa foreignoperation,adisposalinvolvinglossofjointcontroloverajointlycontrolledentitythatincludesaforeignoperation,oradisposalinvolving loss of significant influenceover an associate that in-cludesaforeignoperation),alloftheexchangedifferencesaccu-mulatedinequityinrespectofthatoperationattributabletothe

ownersofthecompanyarereclassifiedtoprofitorloss.inthecaseofapartialdisposalthatdoesnotresultintheGrouplosingcontroloverasubsidiarythatincludesaforeignoperation,theproportionateshareofaccumulatedexchangedifferencesarere-attributedtonon-controllinginterestsandarenotrecognisedinprofitorloss.forallotherpartialdisposals(i.e.reductionsintheGroup’sownershipinterestinassociatesorjointlycontrolledentitiesthatdonotresultintheGrouplosingsignificantinfluenceorjointcontrol),theproportionateshareoftheaccumulatedex-changedifferencesisreclassifiedtoprofitorloss.

Goodwillandfairvalueadjustmentsonidentifiableassetsandlia-bilitiesacquiredarisingontheacquisitionofaforeignoperationaretreatedasassetsandliabilitiesoftheforeignoperationandtrans-latedattherateofexchangeprevailingattheendofeachreportingperiod.Exchangedifferencesarisingarerecognisedinequity.

retirementBenefitandjubileecostsfor defined benefit plans for retirement and jubilee awards,thecostofprovidingbenefitsisdeterminedusingtheprojectedunitcreditmethod,withactuarial valuationsbeingcarriedoutateachstatementoffinancialpositiondate.actuarialgainsandlossesarerecognisedinfullintheperiodinwhichtheyoccurandchargedtotheprofitandloss.past service cost is recognised immediately to the extent thatthebenefitsarealreadyvested,andotherwiseisamortisedonastraight-linebasisovertheaverageperioduntilthebenefitsbe-comevested.the retirement benefit obligation recognised in the statementoffinancialpositionrepresentsthepresentvalueofthedefinedbenefitobligationasadjustedforunrecognisedpastservicecost,andasreducedbythefairvalueofschemeassets.anyassetre-sulting fromthis calculation is limited topast servicecost,plusthepresent valueof available refundsand reductions in futurecontributionstotheplan.

taxationthetaxexpenserepresentsthesumofthetaxcurrentlypayableanddeferredtax.

Currenttaxthetaxcurrentlypayableisbasedontaxableprofitfortheyear.taxableprofitdiffersfromprofitasreportedintheconsolidatedincome statementbecauseof itemsof incomeorexpense thatare taxableordeductible inotheryearsand it furtherexcludesitems thatarenever taxableordeductible.thecompany’sand

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theGroup’s liability for current tax is calculatedusing tax ratesthat have been enacted or substantively enacted by the state-mentoffinancialpositiondate.

DeferredtaxDeferred tax is recognisedondifferencesbetween the carryingamountsofassetsandliabilitiesinthefinancialstatementsandthecorrespondingtaxbasesusedinthecomputationoftaxableprofitandareaccountedforusingthestatementoffinancialpo-sition liabilitymethod.Deferred tax liabilitiesaregenerally rec-ognised for all taxable temporary differences, anddeferred taxassetsaregenerallyrecognisedforalldeductibletemporarydif-ferencestotheextentthatitisprobablethattaxableprofitswillbeavailableagainstwhichthosedeductibletemporarydifferenc-escanbeutilised.Suchassetsandliabilitiesarenotrecognisedifthetemporarydifferencearisesfromgoodwillorfromtheinitialrecognition (other than inabusinesscombination)ofotheras-setsandliabilitiesinatransactionthataffectsneitherthetaxableprofitnortheaccountingprofit.

Deferredtaxliabilitiesarerecognisedonthebasisoftaxabletem-porarydifferencesoninvestmentsinsubsidiariesandassociatesandjointventures.thecarryingamountofdeferredtaxassets is reviewedateachstatement of financial positiondate and reduced to the extentthatitisnolongerprobablethatsufficienttaxableprofitswillbeavailabletoallowallorpartoftheassettoberecovered.Deferredtaxassetsand liabilitiesaremeasuredatthetaxratesthatareexpectedtoapply intheperiodinwhichtheliability issettledor theasset realised,basedon tax laws thathavebeenenacted or substantively enacted by the statement of financialposition date. themeasurement of deferred tax liabilities andassetsreflectsthetaxconsequencesthatwouldfollowfromthemannerinwhichthecompanyexpects,atthereportingdate,torecoverorsettlethecarryingamountofitsassetsandliabilities. Deferredtaxassetsandliabilitiesareoffsetwhenthereisalegal-lyenforceablerighttosetoffcurrenttaxassetsagainstcurrenttaxliabilitiesandwhentheyrelatetoincometaxesleviedbythesametaxationauthorityandtheina,d.d.andtheGroupintendtosettleitscurrenttaxassetsandliabilities.

Currentanddeferredtaxfortheperiodcurrentanddeferredtaxarerecognisedinprofitorloss,exceptwhentheyrelatetoitemsthatarerecognisedinothercompre-hensive incomeordirectly inequity, inwhichcase, thecurrentanddeferredtaxarealsorecognisedinothercomprehensivein-comeordirectlyinequityrespectively.Wherecurrenttaxandde-

ferredtaxarisesfromtheaccountingforabusinessacquiaition,thetaxeffectisincludedinthecalculationofaforthebusinessacquisition.

financialassetsallfinancialassetsare recognisedandderecognisedona tradedatewherethepurchaseorsaleofaninvestmentisunderacon-tract.thecontracttermsrequiredeliveryofthefinancialassetswithinthetimeframeestablishedbythemarketconcerned,andare initiallymeasuredat fairvalue,netof transactioncosts,ex-ceptforthosefinancialassetsclassifiedasatfairvaluethroughprofitorloss,whichareinitiallymeasuredatfairvalue.financialassetsareclassified intoavailable-for-sale (afS)finan-cialassetsandloansandreceivables.theclassificationdependson thenatureandpurposeof thefinancialassetsand isdeter-minedatthetimeofinitialrecognition.

Effectiveinterestmethodtheeffectiveinterestmethodisamethodofcalculatingtheamor-tisedcostofadebtinstrumentsandofallocatinginterestincomeover the relevant period. the effective interest rate is the ratethatexactlydiscountsestimatedfuturecashreceiptsthroughtheexpectedlifeofthedebtinstruments,orashorterperiodtothenetcarryingamountoninitialrecognition.income is recognisedon an effective interest basis for debt in-struments.

AFSfinancialassetslistedsharesheldbythecompanyandGroupthataretradedinanactivemarketareclassifiedasbeingafSandarestatedatfairvalue.fairvalueisdeterminedinthemannerdescribedinnote41.Gainsand lossesarising fromchanges in fair valueare rec-ognisedinothercomprehensiveincomeandaccumulatedintheinvestmentsrevaluationreservedirectlyinterestcalculatedusingthe effective interest method and foreign exchange gains andlossesonmonetaryassets,whicharerecogniseddirectlyinprofitorloss.Wheretheinvestmentisdisposedoforisdeterminedtobeimpaired,thecumulativegainorlosspreviouslyrecognisedinthe investmentsrevaluationreserve is included inprofitor lossfortheperiod.DividendsonafSequity instrumentsarerecognisedinprofitorlosswhentheGroup’srighttoreceivepaymentsisestablished. thefairvalueofafSmonetaryassetsdenominatedinaforeigncurrencyisdeterminedinthatforeigncurrencyandtranslatedatthespotrateatthestatementoffinancialpositiondate.thefor-eignexchangegainsandlossesthatarerecognizedinprofitand


lossaredeterminedbasedontheamortizedcostofthemonetaryassets.otherforeignexchangegainsandlossesarerecognizedinothercomprehensiveincome.

Loansandreceivablestradereceivables,loans,andotherreceivablesthathavefixedordeterminablepaymentsthatarenotquotedinanactivemarketareclassifiedas‘loansandreceivables’.loansandreceivablesaremeasuredatamortisedcostusingtheeffectiveinterestmethodless any impairment. interest income is recognisedby applyingtheeffectiveinterestrate,exceptforshort-termreceivableswhentherecognitionofinterestwouldbeimmaterial.

Impairmentoffinancialassetsfinancialassetsareassessedforindicatorsofimpairmentateachstatementoffinancialpositiondate.financialassetsareimpairedwhenthereisobjectiveevidencethat,asaresultofoneormoreeventsthatoccurredaftertheinitialrecognitionofthefinancialasset, the estimated future cash flows of the investment havebeenaffected.forfinancialassetscarriedatamortisedcost,theamountoftheimpairmentisthedifferencebetweentheasset’scarryingamountandthepresentvalueofestimatedfuturecashflows,discountedattheoriginaleffectiveinterestrate.

thecarryingamountofthefinancialassetisreducedbytheim-pairmentlossdirectlyforallfinancialassetswiththeexceptionoftradereceivableswherethecarryingamountisreducedthroughtheuseofanallowanceaccount.Whenatradereceivableisun-collectible,itiswrittenoffagainsttheallowanceaccount.Subse-quentrecoveriesofamountspreviouslywrittenoffarecreditedagainsttheallowanceaccount.changesinthecarryingamountoftheallowanceaccountarerecognisedinprofitorloss.

WhenanafSfinancialassetisconsideredtobeimpaired,cumu-lativegainsorlossespreviouslyrecognizedinothercomprehen-siveincomearereclassifiedtoprofitorlossintheperiod.WiththeexceptionofafSequityinstruments,ifinasubsequentperiod,theamountoftheimpairmentlossdecreasesandthede-creasecanberelatedobjectivelytoaneventoccurringaftertheimpairment was recognised, the previously recognised impair-mentlossisreversedthroughprofitorlosstotheextentthatthecarryingamountoftheinvestmentatthedatetheimpairmentisreverseddoesnotexceedwhat theamortisedcostwouldhavebeenhadtheimpairmentnotbeenrecognised.inrespectofafSequitysecurities,anyincreaseinfairvaluesub-sequenttoanimpairmentlossisrecognisedinothercomprehen-siveincomeandaccumulatedundertheheadingofinvestmentsrevaluationreserve.

Investments investmentsinimmaterialnon-consolidatedcompaniesaregen-erallyrecordedatcostlessprovisionforanyimpairment.

financialliabilitiesandequityinstrumentsClassificationasdebtorequityDebtandequity instruments issuedby theGroupareclassifiedaseitherfinancial liabilitiesorasequity inaccordancewiththesubstanceofthecontractualarrangementsandthedefinitionsofafinancialliabilityandanequityinstrument.

Equityinstrumentsan equity instrument is any contract that evidences a residualinterestintheassetsofanentityafterdeductingallofitsliabil-ities.Equity instruments issuedby theGroupare recognisedattheproceedsreceived,netofdirectissuecosts.repurchaseof thecompany’sownequity instruments is recog-nisedanddeducteddirectly in equity.nogainor loss is recog-nisedinprofitorlossonthepurchase,sale,issueorcancellationofthecompany’sownequityinstruments.

Financialliabilitiesfinancial liabilitiesare classifiedaseitherfinancial liabilities ‘atfvtpl’(fairvaluethroughprofitandloss)or‘otherfinanciallia-bilities’.

FinancialliabilitiesatFvTPLfinancial liabilitiesareclassifiedasatfvtplwhenthefinancialliabilityiseitherheldfortradingoritisdesignatedasatfvtpl.afinancialliabilityisclassifiedasheldfortradingif:• ithasbeenacquiredprincipallyforthepurposeofrepurchas-ingitinthenearterm;or• on initial recognition it is partof aportfolioof identifiedfi-nancialinstrumentsthattheGroupmanagestogetherandhasarecentactualpatternofshort-termprofit-taking;or• itisaderivativethatisnotdesignatedandeffectiveasahedg-inginstrument.afinancialliabilityotherthanafinancialliabilityheldfortradingmaybedesignatedasatfvtpluponinitialrecognitionif:• suchdesignationeliminatesorsignificantlyreducesameasure-mentorrecognitioninconsistencythatwouldotherwisearise;or• thefinancialliabilityformspartofagroupoffinancialassetsorfinancial liabilitiesorboth,which ismanagedand itsperfor-manceisevaluatedonafairvaluebasis,inaccordancewiththeGroup’s documented risk management or investment strategy,

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andinformationaboutthegroupingisprovidedinternallyonthatbasis;or• itformspartofacontractcontainingoneormoreembeddedderivatives, and iaS 39 financial instruments: recognition andmeasurementpermitstheentirecombinedcontract(assetorlia-bility)tobedesignatedasatfvtpl. financialliabilitiesatfvtplarestatedatfairvalue,withanygainsorlossesarisingonremeasurementrecognisedinprofitorloss.thenetgainorlossrecognisedinprofitorlossincorporatesanyinterestpaidanddividendsonthefinancialliabilityandisinclud-ed in the ‘other gains and losses’ line item in the consolidatedstatementofcomprehensiveincome.

Otherfinancialliabilitiesotherfinancial liabilities (includingborrowings and tradepaya-bles)aresubsequentlymeasuredatamortisedcostusingtheef-fectiveinterestmethod.

theeffectiveinterestmethodisamethodofcalculatingtheamor-tisedcostofafinancialliabilityandofallocatinginterestexpenseover the relevant period. the effective interest rate is the ratethatexactlydiscountsestimatedfuturecashpayments(includingallfeesandpointspaidorreceivedthatformanintegralpartoftheeffectiveinterestrate,transactioncostsandotherpremiumsordiscounts)throughtheexpectedlifeofthefinancialliability,or(whereappropriate)ashorterperiod,tothenetcarryingamountoninitialrecognition.

DerecognitionoffinancialliabilitiestheGroupderecognisesfinancialliabilitieswhen,andonlywhen,theGroup’sobligationsaredischarged,cancelledortheyexpire.thedifferencebetween thecarryingamountof thefinancial li-ability derecognised and the consideration paid and payable isrecognisedinprofitorloss.

DerivativefinancialinstrumentstheGroupentersintoavarietyofderivativefinancialinstrumentsin order tomanagewith exposure change in changing of com-modityprices.Derivativesareinitiallyrecognisedatfairvalueatthedatethede-rivativecontractsareenteredintoandaresubsequentlyremeas-uredtotheirfairvalueattheendofeachreportingperiod.theresultinggainor loss isrecognised inprofitor loss immediatelyunlessthederivativeisdesignatedandeffectiveasahedgingin-strument,inwhicheventthetimingoftherecognitioninprofitorlossdependsonthenatureofthehedgerelationship.

EmbeddedderivativesDerivatives embedded in other financial instruments or otherhostcontractsaretreatedasseparatederivativeswhentheirrisksand characteristics are not closely related to those of the hostcontractsandthehostcontractsarenotmeasuredatfairvaluewithchangesinfairvaluerecognisedinprofitorloss.anembeddedderivative ispresentedasanon-currentassetoranon-currentliabilityiftheremainingmaturityofthehybridin-strumenttowhichtheembeddedderivativerelatesismorethan12monthsanditisnotexpectedtoberealisedorsettledwithin12months.otherembeddedderivativesarepresentedascurrentassetsorcurrentliabilities. intheordinarycourseofbusiness,thecompanyandGrouphasenteredintocertainlong-term,foreigncurrencysupplyandsalescontracts which, under iaS 39, include embedded derivatives.anembeddedderivativeisacomponentofacontractwhichhastheeffectthatthecashflowsarisingunderthecontractvary,inpart,inasimilarwaytoastandalonederivative.iaS39requiresthatsuchembeddedderivativesareseparatedfromthehostcon-tractsandaccountedforasderivativescarriedatfairvalue,withchanges in fair value being charged or credited to the incomestatement.thefairvalueofembeddedforwardforeignexchangecontractsisdeterminedbyreferencetospotmarketforeigncurrencyratesat thestatementoffinancialpositiondate,becausethere isnoactiveforwardmarketinthecountriesinvolvedincontracts.thefair value of an embedded inflation index swap is determinedby the reference to the cumulative inflation index differentialbetween the contracted inflation escalator and inflation in thecountrywherethecontractisexecuted.thelong-termeffectsoftheseembeddedderivativesarediscountedwithriskfreerate.

SegmentalinformationifrS 8 operating segments requires operating segments to beidentifiedonthebasisof internalreportsaboutcomponentsoftheGroupthatareregularlyreviewedbythechiefoperatingde-cisionmakerinordertoallocateresourcestothesegmentsandtoassesstheirperformance.

provisionsfordecommissioningandotherobligationsprovisionsarerecognisedwhentheGrouphasapresentobliga-tion (legal or constructive) as a result of a past event and it isprobable(i.e.morelikelythannot)thatanoutflowofresources


willberequiredtosettletheobligation,andareliableestimatecanbemadeoftheamountoftheobligation.theamountrecog-nisedasaprovisionisthebestestimateoftheconsiderationre-quiredtosettlethepresentobligationattheendofthereportingperiod,takingintoaccounttherisksanduncertaintiessurround-ingtheobligation.Whentheeffectofdiscountingismaterial,theamountoftheprovisionisthepresentvalueoftheexpendituresexpected to be required to settle the obligation, determinedusing theestimated risk free interest rateas thediscount rate.When discounting is used, the reversal of such discounting ineachyear is recognisedasafinancialexpenseand thecarryingamountoftheprovisionincreasesineachyeartoreflectthepas-sageoftime.

provisionrelatingtothedecommissioningandremovalofassets,such as an oil and gas production facility is initially treated aspart of the cost of the related property, plant and equipment.Subsequentadjustmentstotheprovisionarisingfromchangesinestimatesasdecommissioningcosts,reservesandproductionofoilandgas,riskfreeinterestsuchasdiscountrateandinflationrarearealsotreatedasanadjustmenttothecostoftheproperty,plantandequipmentandthusdealtwithprospectivelyinthein-comestatementthroughfuturedepreciationoftheasset.

revenuerecognitionrevenue ismeasured at the fair value of the consideration re-ceivedor receivable.revenue is reduced for customer returns,rebatesandothersimilarallowances. Saleofgoodsrevenuefromthesaleofgoodsisrecognisedwhenallthefollow-ingconditionsaresatisfied:• theGroup has transferred to the buyer the significant risksandrewardsofownershipofthegoods;• theGroupretainsneithercontinuingmanagerialinvolvementto the degree usually associated with ownership nor effectivecontroloverthegoodssold;• theamountofrevenuecanbemeasuredreliably;• itisprobablethattheeconomicbenefitsassociatedwiththetransactionwillflowtotheentity;and• thecostsincurredortobeincurredinrespectofthetransac-tioncanbemeasuredreliably.Salesofgoodsthatresultinawardcreditsforcustomersareac-countedforasmultipleelementrevenuetransactions.thecon-sideration allocated to the award credits ismeasured by refer-encetotheirfairvalue–theamountforwhichtheawardcreditscouldbesoldseparately.

theGroup has not included extensive disclosure regarding theloyaltyprogrammeastheamountsarenotsignificant.

Renderingofservicesrevenuefromacontracttoprovideservicesisrecognisedbyref-erencetothestageofcompletionofthecontract.thestageofcompletionofthecontractisdeterminedasfollows:• installation feesare recognisedby reference to the stageofcompletionof the installation,determinedas theproportionofthe totaltimeexpected to install thathaselapsedat thestate-mentoffinancialpositiondate;• servicingfeesincludedinthepriceofproductssoldarerecog-nisedbyreferencetotheproportionofthetotalcostofprovidingtheservicingfortheproductsold,takingintoaccounthistoricaltrendsinthenumberofservicesactuallyprovidedonpastgoodssold;and• revenuefromtimeandmaterialcontractsisrecognisedatthecontractualratesaslabourhoursaredeliveredanddirectexpens-esareincurred.

DividendandinterestrevenueDividend revenue from investments is recognised when theshareholder’srighttoreceivepaymenthasbeenestablished.in-terest revenue is recognisedwhen it is probable that the eco-nomicbenefitswillflowto theGroupand theamountof reve-nue can bemeasured reliably.interest revenue is accrued on atimebasis,byreferencetotheprincipaloutstandingandattheeffective interest rate applicable,which is the rate that exactlydiscounts estimated future cash receipts through the expectedlifeofthefinancialassettothatasset’snetcarryingamountoninitialrecognition.

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3. sIGNIfIcANt AccouNtING judGe-MeNts ANd estIMAtes

useofestimatesinthepreparationoffinancialstatements

thepreparationoffinancialstatementsinconformitywithinter-national reporting financial Standards, as published by the in-ternational accounting Standards Board requires managementto make estimates and assumptions that affect the reportedamounts of assets, liabilities, income and expenses and disclo-sureofcontingencies.thesignificantareasofestimationusedinthepreparationoftheaccompanyingfinancialstatementsrelatetoemployeebenefits,impairmentofassets,determinationoffairvalues of assets and liabilities and estimated decommissioningcosts.futureeventsmayoccurwhichwillcausetheassumptionsused in arriving at the estimates to change. the effect of anychangesinestimateswillberecordedinthefinancialstatementswhendeterminable.

criticaljudgementsinapplyingaccountingpoliciesintheapplicationoftheaccountingpolicies,whicharedescribedinnote2,managementmadecertainjudgementsthathadasig-nificant impacton theamounts reported in thefinancial state-ments (irrespectiveof theunderlying estimates referred to be-low).these judgements are provided in detail in the accompanyingnotes. However, the critical judgements relate to the followingareas:Quantificationanddeterminationofthedecommissioningobli-gationsforoilandgaspropertiesmanagementmakesestimatesoffutureexpenditure inconnec-tionwithenvironmentalanddecommissioningobligationsusingpricesbyreferencetopriorsimilaractivities,aswellasotheras-sumptions.furthermore,thetimedeterminedforthecashflowsreflectsthecurrentestimatesofpriorities, technicalequipmentrequirementsandurgencyoftheobligations.theobligationwithrespecttothedecommissionprovisionforoilandgaspropertiesamountedtoHrK2,345millionasat31December2012(31De-cember2011HrK2,373million)(seenote31).consequently,theamountsreportedaresubjecttoalargenumberofvariablesthatmayaffectthecalculation.

Thelevelofprovisioningforenvironmentalobligationsthe applicable regulations, specifically the environmental pro-tectionlegislation,donotspecifytheexactscopeofactivitiesortechnology to be applied. provisions are recognised when theGrouphasapresentobligation(legalorconstructive)asaresultofapasteventanditisprobable(i.e.morelikelythannot)thatanoutflowofresourceswillberequiredtosettletheobligation,andareliableestimatecanbemadeoftheamountoftheobligation.Generally,thetimingoftheseprovisionscoincideswiththecom-mitmenttoaformalplanofactionor,ifearlier,ondivestmentoronclosureofinactivesites.indeterminingthelevelofprovisionsforenvironmentalobligationsanddecommissioningofoilandgasproperties,themanagementreliesonpriorexperienceandtheirowninterpretationoftherelatedlegislation.Wheretheliabilitywillnotbesettledforanumberofyears,theamountrecognizedis thepresentvalueof theestimated futureexpenditure.at31December2012 inaGroup recognizedenvironmentalprovisionin amount HrK 309 million (2011: HrK 292 million) (see note31),whichcoverstreatmentofaccumulatedwastegeneratedbyformer activity, soil excavation and replacement during the re-constructionoffillingstationsandinvestigationtodeterminetheextentofthecontaminations.itdoesnotcoverthecostofreme-diationinlackofdetailednationalregulations. Impairmentofnon-currentassets,includinggoodwilltheimpairmentcalculationrequirestheestimateofthevalueinuseofthecashgeneratingunits.valueinuseismeasuredusingthediscountedcashflowprojections.themost significantvari-ables indeterminingcashflowsarediscountrates,timevalues,theperiodofcashflowprojections,aswellasassumptionsandjudgments used in determining cash receipts and expenditure.theimpairmentreportedintheconsolidatedincomestatementamounted toHrK624million in2012 (2011:HrK609million).therewasnoimpairmentofgoodwillin2012whileimpairmentof goodwill has been reported in amount of HrK 49million in2011(seenote8).thecarryingamountofgoodwillamountedtoHrK183millionasof31December2012and2011respectively(seenote16).

Availabilityoftaxableprofitagainstwhichthedeferredtaxas-setscanbeutilisedadeferredtaxasset is recognizedforunusedtax lossesonlytotheextentthatitisprobablethattherelatedtaxbenefitwillberealiseagainstfuturetaxableprofits.Determiningtheamountofdeferredtaxesthatcanberecognisedrequiresasignificant lev-elof judgement,which isbasedon theprobablequantificationofthetimeandleveloffuturetaxableprofits,togetherwiththefuturetaxplanningstrategy.at31December2012thecarrying


amount of deferred tax assets of the inaGroup and ina, d.d.amountedtoHrK544millionandHrK494million, (31Decem-ber2011:HrK662millionandHrK592millionrespectively)(seenote12).Actuarialestimatesusedindeterminingtheretirementbonusesthe cost of definedbenefits is determinedusing actuarial esti-mates.actuarialestimatesinvolveassumptionsofdiscountrates,futuresalaryincreasesandthemortalityorfluctuationrates.Be-causeofthelong-termnatureofthoseplans,thereisuncertaintysurroundingthoseestimates.provisions forretirementbonusesandjubileeawardsforinaGroupamountedtoHrK110millionasat31December2012(31December2011:HrK117million),andina,d.d.amountedtoHrK73millionasat31December2012(31December2011HrK66million)(seenote32).

ConsequencesofcertainlegalactionsinaGroupmembersareinvolvedinnumberoflitigationsarisenfromtheregularcourseofbusiness.ifthereisapresentobliga-tionasaresultofapastevent(takingintoaccountallavailableevidence,includingtheopinionoflawexperts)forwhichisprob-ablethatoutflowofresourceswillberequiredtosettletheob-ligationandifareliableestimatecanbemadeoftheamountoftheobligation,provisionsarerecorded(seenote31).

Usefullifeoftheassetsthe inaGroup and ina, d.d. review the estimated useful livesof property, plant andequipment at theendof each reportingperiod.Estimationofuseful lifeisconsideredtobeasignificantaccountingestimationthateffectsonthechangeindepreciationrates.thenewestimationofassetusefullifeattheendof2012hadnosignificantchangescomparedtothepreviousestimate. Crudeoilandnaturalgaspricescrude oil, natural gas and refinery product demand and pricesdependonavarietyofvariousfactorsbeyondthecontroloftheinaGroup,including:• global and regional economic and political developments,particularlyinthemiddleEast;• the ability of international oil cartels and oil-producing na-tionstoinfluenceproductionlevelsandprices;• actionstakenbygovernments;• thelevelofconsumerdemand;• thepriceandavailabilityofalternativeproducts;and• weatherconditions.Historically, international crude oil and natural gas prices havefluctuated to a significant extent. a significant change in thecrudeoilandnaturalgaspricesmayhaveasignificantimpactontheoperatingresultsoftheinaGroup.lowercrudeoilandnatu-

ralgaspricesmayreducethequantitiesofoilandnaturalgasthatthe inaGroupcouldproduce intermsofeconomically justifiedproduction, that is, it can reduce economic justification of theprojectsthatareplannedoralreadyunderway.

ExplorationanddevelopmentWell exploration and development projects involve many un-certainties and business risks that may give rise to significantexpenditure. Exploration and development projects of the inaGroupmaybedelayedorunsuccessfulformanyvariousreasons,includingbudgetedcostoverrun,geologicalissues,difficultiesinmeetingtherequirementsofcompetentbodies, lacksofequip-mentandtechnicalproblems.theseprojects,particularlythosepertainingtothewells incontinentalareasorotherdemandingterrain,oftenrequiredeploymentofnewandadvancedtechnol-ogies,thedevelopment,purchaseandinstallationofwhichmaybeexpensiveandthatmaynotoperateasexpected.oilandnaturalgasexplorationanddrillingactivitiesaresubjecttoawiderangeofinherentrisks, includingtheriskoferuption,depositdamage,lossofcontroloverthewells,perforation,cra-ters,fireandnaturaldisasters.inaGroupoilandnaturalgasexplorationanddevelopmentex-penditureareaccountedforusingthesuccessfuleffortsmethod.inaccordancewith thatmethod the licenseanddataprovisioncostsandcostsassociatedwithgeologicalandgeophysicalactiv-itiesarechargedtothe incomestatementperiod inwhichtheyareincurred.

impairmentofnon-currentassetsbasedonthetreatmentofrevenuesfromoilandgasactivitiesinSyriatheunrestinSyriathatstartedin2011,transformedintoacivilwarduring2012.uptonowtherebelshavenotbeenabletose-cureanenclaveinthecountry,whichcouldbeabaseforwideningtheiroperations.thesizeandstrengthoftherebelforcearestillinferiortothoseofthegovernmentalforces,buttheyareimprov-ing their organization, logistics andweaponry. the governmenthas lost its fullcontroloverthecountryandthesilentmajorityis slowlydeparting from their side. the continuedviolencehasincreasedinternationalpressureontheregime.thegovernmentisnearly fully isolated fromtheoutsideworld,butunSecuritycouncildecisionsarevetoedbyrussiaandchina,thusforeignin-terventioniscurrentlyclosedout.instabilityassociatedwiththecivilwarandmassiveeconomicsanctionsrestrictingtradehavereversedpreviousgrowthintheSyrianeconomytoastateofde-clinefortheyears2011and2012. industrialproductionandoil

116

productionarecrippledandthereisasharpdepreciationintheSyriancurrency. up until now, the Hayan block area has been relatively securewithnofightingreportedintheclosevicinityandonlyacoupleofminorincidentsoccurring.nevertheless,ourplantanditssur-roundingarefornowrelativelysafe.Strategicallytheareaisveryvital for the government (nearby air and rocket base) and gas,lpGandcrudeproductionisveryimportantforSyriaaswell.on22 february2012croatiaadoptedEu/un sanctions towardsSyrianarabrepublic,hence ina,d.d.declaredforcemajeureasfrom26february2012.Bydeclaringforcemajeure,ina,d.d.sus-pendedallitspetroleumactivitiesinHayanandaphamiablocksasperproductionSharingagreement(Hayan/aphamia)andrecalledallitslocalandexpatriateemployeesfromHayanpetroleumcom-pany(hereinafter:Hpc).Hpcrefusedtheannouncement(claimingnon-applicabilityofcroatianGovernmentdecisionsoutsidethere-publicofcroatiahavinginaBranchofficesubjecttoSyrianlaw,andrejecting theexistenceof anyobstacle to contractperformance)and requested ina, d.d. to resume its petroleumactivities. ina,d.d.providedaresponsetoHpcandtotheSyrianministryofpe-troleumandmineralresourcesexplainingthenecessityofsuchac-tionduetoanapplicablecroatianGovernmentDecision(adoptingtheEuropeanunioncouncilDecision),whichina,d.d. isdirectlyboundtoadheretoandrequiredtocomplywith.HpcinitiatedacourtcaseagainstinarequestingthatitdelegatetothechairmanofHpcthepowersnecessarytomanagetheop-eratingcompanyandtransferthebankaccounts(asofthedateoftheforcemajeureannouncementuntil ina,d.d.resumes itsoperations).currently,ina,d.d.isrepresentedbyalocalattorneyat law,andthecourtcase ispending.Since ina,d.d. isnottheonlyinternationalcompanyoperatinginSyria,similarcourtcas-eshavebeeninitiatedagainstothercompanies likeShell,total,Suncor andGulfsands,whereby the court has awarded interimmanagementof theoperatingcompanyand therebymandatedinterimbookingofthecontractor’sshare/revenue.asperavaila-bleinformation,Hayanpetroleumcompanyhasnotreceivedanofficialwrittenjudgmentfromthecourt,whichwouldawardin-terimmanagementoftheoperatingcompany.ina,d.d.expectsasimilaroutcomeofitscourtcaseasinothercases.until26february2012ina,d.d.regularlyissuedinvoicestoHpcbutrecordedrevenuesonacashbasisonly.thelastinvoicewasissuedforfebruary2012.aftertheannouncementofforcema-jeurenoinvoiceshavebeenissuedtoHpcduetothesuspensionofpetroleumactivities.august2011wasthelastmonthforwhichinainvoiceswereregularlypaidbyHpcinfull.therefore,ina’sunrecordedrevenuesuntilfebruary2012amounttouSD372.5million.

changes in revenue recognition in Syria (beginning from ear-ly 2011, revenue is recognizedonlyonce cash is received fromHpc,theSyriannationaloilcompany)areconsideredasanim-pairmentindicator;thereforeinaperformedanimpairmenttestonitsSyriannon-currentassets,qualifyingasacashgeneratingunit.Suchimpairmentcalculationrequiresanestimateofthere-coverableamountoftheSyriancashgeneratingunit,thatis,thehigherof fair value less costs to sell and value inuse.value inusehasbeendeterminedon thebasisofdiscountedestimatedfuturenetcashflows.themostsignificantvariablesindetermin-ingcashflowsarediscountrates,theperiodforwhichcashflowprojectionsaremade,aswellastheassumptionsandestimatesused to determine the amount and timing of cash inflows andoutflows,includingcrudeoilandnaturalgasprices(consideringtheprice formulaesetout intherespectiveproductionSharingagreement), operating expenses and future annual productionvolumes. While such cash flows reflect themanagement’s best estimateforthefuture,theseestimatesareexposedtoanincreasedun-certaintyasaresultofthepolitical,securityandeconomiccon-ditions inSyria.asset-specificdiscountrateswerederivedfromtheuSD-basedweightedaveragecostofcapitalforinaandareadjustedforproject-specificrisks,asapplicable.thediscountrateappliedwas17.5%(seenote15).Basedon thesecalculations themanagementhasnot recordedanyimpairmentsinceitisconsideredthatthecarryingamountofnon-currentassetsinSyriaisrecoverablebasedonthenetpres-entvalueofdiscountedfuturecashflows,andthemanagementbelievesthatnoreasonablypossiblechangeinanyofthekeyas-sumptionswouldcausethecarryingvalueoftheseassetstoma-teriallyexceeditsrecoverableamountandmanagementbelievesthat futurebenefitswill flow fromSyrianoperations. thebookvalueoftotalGroupassetsinSyriaasat31December2012wasamountedofHrK4,562million(31December2011:HrK4,918million)and liabilitiesofHrK5million instatementoffinancialpositionat31December2012(31December2011:HrK10mil-lion),(seenote4).asper currentassumptions,no impairment isexpectedeven ifforcemajeure (with no payment) continues in 2013 and 2014.npvisexpectedtodecreasebelowbookvalue if forcemajeurelastsfurtherthansecondquarterof2015.theseassumptionspresumethatgasproductionsfromtheSyrianblock(continuesatthelevelsimilartothatprevailingpriortothedeclarationofforcemajeure).themanagement regularlymonitors and, if needed, re-assess-esimpairmentcalculationsbasedonlatestdevelopmentsinthecountry.


oil,condensate,gasandlpGproductioninSyriaisstillongoing.Expatriates(ina)workinginHayanpetroleumcompany(Hpc)onHpcHayanandHayanfieldsandinHpcDamascusheadquartershavenotbeenworking inSyria since25 january2012,and themainproductionactivitieshavebeen takenoverbyHpc’s localworkforce,whichina,d.d.considersillegal.

PoliticaldevelopmentsinEgyptinastartedwithexplorationactivitiesinEgyptin1989,asapart-ner,and in1997asanoperator,whenBranchofficewasestab-lishedincairo.oilproduction,asresultofexplorationactivities,startedin1994.inaGrouphas a shareof productiononrasQattara andWestabuGharadigconcessionsoperatedbyiEoc,onnorthBahariyaconcessionoperatedbySaharaoilandGas,andonEastYidmaconcessionoperatedbyina.concessionagreementsaboutpe-troleumexplorationandexploitationrightswerecontractedbe-tweenthearabrepublicofEgypt,nationalpetroleumcompanyEGpcandpartners.producedoilissoldtoEGpcaspercontract.at themoment political uncertainty remains high as the presi-dent,mohammedmorsi,andthemuslimBrotherhoodclashwithnon-islamistsoverthedirectionofpolicy.aparliamentaryelec-tionwillbeheld inearly2013, followingtheapprovalofanewconstitutioninareferendum.amoveinlatenovember2012by

mrmorsitoextendhisalreadysubstantialpowershasdeepenedthedifferencesbetween islamistson theonehandand liberalsand leftists on the other, sparking large protests by the presi-dent’sopponentsbutalsohissupporters. DependingontheoverallpoliticalsituationinEgypt,adverseef-fectsarepossible,suchasonthenetinvestmentincomeoftheinaGroup in Egypt,which could then have an adverse impactonthefutureoperatingresultsof the inaGroup.currently thecompanyrecords100%impairmentonthereceivablesfromEGpcoverduebymorethan120days.

Liquidityassessmentasof31December2012,theGroup’scurrentliabilitiesexceededitscurrentassetsbyHrK1,857million,mainlycomingfromthecurrentportionofthelongtermdebt,fortherepaymentofwhichcompanymanagementalreadystartedpreparatoryactivitiesandplanstoobtainadditionalexternalfinancing.asof31December2012,Grouphascontractedundrawnshort-termbankcredit linesamountingtouSD175million,excludingoverdrafts and tradefinancing credit lines establishedwith thepurposetofinancethepurchaseofcrudeoilandoilproducts,andhascontractedundrawnlong-termrevolvingcreditlinesamount-ingtouSD390.6million.

118

4. seGMeNt INfoRMAtIoN

theinaGroupoperatesthroughthreecorebusinesssegments.thestrategicbusinesssegmentsofferdifferentproductsandservices.reportingsegmentshavebeendefinedalongvaluechainstandardfortheoilcompanies:• ExplorationandproductionofoilandGas–exploration,productionandsellingofcrudeoilandnaturalgas• refiningandmarketing–crudeoilprocessing,wholesaleofrefineryproducts,tradingandlogistics• retail–sellingoffuelsandcommercialgoodsinretailstations• Businessfunction-inadditiontothethreecorebusinesssegmentsinabove,theoperationsoftheinaGroupincludethefourthbusinesssegmentBusinessfunctionwhichprovidesservicesforcoreactivities.informationregardingtheresultsofeachreportablesegmentis includedbelow.profitfromoperationsisusedtomeasureperfor-manceasmanagementbelievesthatsuch information is themostrelevant inevaluatingtheresultofcertainsegments.However,Groupfinancing(includingfinancecostsandfinanceincome)andincometaxesaremanagedongroupbasisandarenotrelevanttomakingbusinessdecisionsatthelevelofbusinesssegments.

Salestoexternalcustomers 8,886 13,203 7,757 49 - 29,895inter-segmentsales 3,378 6,501 31 549 (10,459) -totalrevenue 12,264 19,704 7,788 598 (10,459) 29,895operatingexpenses,netofotheroperatingincome (8,477) (21,537) (7,791) (1,193) 10,459 (28,539) profitfromoperations 3,787 (1,833) (3) (595) - 1,356netfinanceloss (289)profitbeforetax 1,067incometaxexpense (380)profitfortheyear 687 2011 Salestoexternalcustomers 10,684 11,609 7,649 86 - 30,028inter-segmentsales 2,645 6,317 27 588 (9,577) -totalrevenue 13,329 17,926 7,676 674 (9,577) 30,028operatingexpenses,netofotheroperatingincome (7,188) (20,454) (7,629) (1,295) 9,577 (26,989) profitfromoperations 6,141 (2,528) 47 (621) - 3,039netfinanceloss (663)profitbeforetax 2,376incometaxexpense (573)profitfortheyear 1,803

By BusINess INA Group 2012 Explorationand refiningand corporate production marketing retail andother Elimination total


By BusINess INA Group Explorationand refiningand corporate production marketing retail andother Elimination total

31December2012assetsandliabilitiesproperty,plantandequipment 11,571 5,359 1,116 695 (25) 18,716intangibleassets 566 12 2 96 - 676investmentsinassociatesandjointventures 34 - - - - 34inventories 1,610 2,219 60 139 (676) 3,352tradereceivables,net 1,748 780 330 217 (305) 2,770notallocatedassets 2,639totalassets 28,187 tradepayables 832 644 265 248 (305) 1,684notallocatedliabilities 11,549totalliabilities 13,233 othersegmentinformation capitalexpenditure: 690 228 229 83 - 1,230property,plantandequipment 648 220 229 34 - 1,131intangibleassets 42 8 - 49 - 99Depreciationandamortisation 1,193 623 96 104 - 2,016impairmentlosses/(income)pp&E,netrecognizedinprofitandloss (38) 663 (1) - - 624otherimpairmentlosses,netrecognizedinprofitandloss 243 150 43 3 - 439totalimpairmentcharges,net* 205 813 42 3 - 1,063 31December2011assetsandliabilitiesproperty,plantandequipment 12,375 6,417 990 524 (12) 20,294intangibleassets 782 13 4 81 - 880investmentsinassociatesandjointventures 34 - - - - 34inventories 1,270 2,598 61 150 (386) 3,693tradereceivables,net 1,977 985 388 318 (386) 3,282notallocatedassets 2,642totalassets 30,825 tradepayables 2,504 909 176 386 (1,943) 2,032notallocatedliabilities 14,428totalliabilities 16,460 othersegmentinformation capitalexpenditure: 799 575 106 50 - 1,530property,plantandequipment 726 567 105 11 - 1,409intangibleassets 73 8 1 39 - 121Depreciationandamortisation 1,894 502 92 152 - 2,640impairmentlosses/(income)pp&E,netrecognizedinprofitandloss (33) 655 (62) - - 560otherimpairmentlosses,netrecognizedinprofitandloss 325 351 9 11 - 696totalimpairmentcharges/(income),net* 292 1,006 (53) 11 - 1,256

*seenote8

120

INA Group 31December2012 republicofcroatia Syria othercountries totalproperty,plantandequipment 13,269 4,200 1,247 18,716intangibleassets 315 337 24 676investmentsinassociatesandjointventures 34 - - 34inventories 3,206 21 125 3,352tradereceivables,net 1,958 4 808 2,770notallocatedassets 2,639totalassets 28,187 othersegmentinformation capitalexpenditure: 998 56 176 1,230property,plantandequipment 935 50 146 1,131intangibleassets 63 6 30 99 INA Group 31December2011property,plantandequipment 14,815 4,539 940 20,294intangibleassets 300 336 244 880investmentsinassociatesandjointventures 34 - - 34inventories 3,505 41 147 3,693tradereceivables,net 2,779 2 501 3,282notallocatedassets 2,642totalassets 30,825 othersegmentinformation capitalexpenditure: 1,017 356 157 1,530property,plantandequipment 960 313 136 1,409intangibleassets 57 43 21 121

By GeoGRAphIcAl

ina,d.d. revenuesfromexternalcustomers 2012 2011 republicofcroatia 17,188 15,820Switzerland 2,796 2,826BosniaandHercegovina 2,504 1,141unitedKingdom 293 668Syria - 2,254othercountries 3,623 3,582 26,404 26,291

INA Group revenuesfromexternalcustomers 2012 2011 republicofcroatia 19,090 18,115Switzerland 2,796 2,826BosniaandHercegovina 2,650 2,128unitedKingdom 293 658Syria 30 2,448othercountries 5,036 3,853 29,895 30,028

Informationaboutmajorcustomersnosinglecustomercontributed10%ormoretotheGroup’srevenueineither2012or2011.


5. otheR opeRAtING INcoMe

6. depRecIAtIoN ANd AMoRtIsAtIoN

7. stAff costs

inaGroup ina,d.d.

2012 2011 2012 2011Surpluses 107 119 66 96incomefromrentalactivities 45 29 38 27incomefromsaleofassets 43 19 36 10penantlyinterestfromcustomers 36 38 19 16foreignexchangegainsfromtradereceivablesandpayables 35 128 48 245incomefromcollecteddamageclaims 17 59 16 53other 70 93 196 113total 353 485 419 560

INA Grupa inaGroup ina,d.d. 2012 2011 2012 2011 Depreciationofproperty,plantandequipment(note15b) 1,968 2,563 1,789 2,324amortisationofintangibleassets(note14) 48 77 46 73 2,016 2,640 1,835 2,397

INA Grupa inaGrupa ina,d.d. 2012 2011 2012 2011 netpayroll 1,309 1,367 807 839taxandcontributionsforpensionsandhealthinsurance 899 964 584 613otherpayrollrelatedcosts 428 421 226 214 2,636 2,752 1,617 1,666

INA Grupa inaGrupa ina,d.d. 2012 2011 2012 2011 numberofemployeesExplorationandproduction 4,302 4,202 1,492 1,529retail 3,547 3,609 3,085 3,118refiningandmarketing 3,139 3,295 2,705 2,853corporatefunction 2,866 3,111 1,430 1,376 13,854 14,217 8,712 8,876

inaGroupandina,d.d.employedthefollowingnumberofemployees,themajorityofwhomworkwithintherepublicofcroatia:

122

8.impairmEntcHarGES(nEt)

9.proviSionSforcHarGESanDriSKS(nEt)

10. fINANce INcoMe

INA Grupa inaGrupa ina,d.d. 2012 2011 2012 2011impairmentofpp&Eandintangibleassets,net 624 560 624 544Writte-offpp&Eandintangibles,net 166 225 160 43impairmentofinventory,net 150 124 109 119impairmentoftradereceivables,net 110 273 1,063 189impairmentofloansgiven,net 2 12 2 646impairmentofgoodwillandinvestments,net - 49 - -otherimpairment,net 10 13 10 (235) 1,063 1,256 1,967 1,306

inaGrupa ina,d.d. 2012 2011 2012 2011provisionforcontractualliabilitiesfortaxonoilprofit 155 - 155 -provisionforcontractualliabilitiesfortaxation 35 - 35 -provisionforunusedholidays 6 (5) 4 (5)provisionforenviromentalliabilities 5 (47) 4 (46)revenuefromreleasedprovisionforlitigation (30) (172) (32) (146)revenuefromreleasedprovisionforincentives (22) (19) (37) 37revenuefromreleasedprovisionforretirementandjubileebenefits (14) (36) 4 (34)revenuefromreleasedprovisionfortaxation - (112) - -provisionforfieldabandonment - (7) - (7)other 8 (15) (1) (43) 143 (413) 132 (244)

inaGrupa ina,d.d. 2012 2011 2012 2011foreignexchangegains 75 87 60 75positivefairvalueofderivatives 35 22 35 22interestreceivedandotherfinancialincome 26 28 264 86incomefromdividends 1 8 1 8Dividendreceivedfromsubsidiaries - - 33 164 137 145 393 355


11. fINANce costs

12. tAxAtIoN

INA Grupa inaGrupa ina,d.d. 2012 2011 2012 2011otherinterestexpense 164 124 144 90interestforlong-termloans 104 162 92 152negativefairvalueofderivatives 74 117 56 104foreignexchangelosses 32 362 22 329otherfinancialcosts 62 194 183 409capitalizedborrowingcosts (10) (151) (10) (151) 426 808 487 933

INA Grupa inaGrupa ina,d.d. 2012 2011 2012 2011currenttaxexpense 263 948 252 947Deferredtaxcharge/(income)relatedtooriginationandreversaloftemporarydifferences 117 (375) 94 (349)incometaxexpensefortheyear 380 573 346 598

INA Grupa inaGrupa ina,d.d. 2012 2011 2012 2011profitbeforetax 1,067 2,376 1,669 2,565incometaxexpensecalculatedat20% 213 475 334 513Effectofunusedtaxlossesnotrecognizedasdeferredtaxassets 224 8 - -Effectofdifferenttaxratesofentitiesoperatinginotherjurisdictions (12) 4 (12) -taxeffectofpermanentdifferences (45) 86 24 85currentanddeferredtaxexpense 380 573 346 598

taxonprofitgeneratedincroatiaisdeterminedbyapplyingtherateof20percent,bothin2012and2011,onpre-taxprofitfortheyear.incometaxesarerecordedonthebasisofestimatedtaxableincomeinaccordancewiththefiscallawsprevailinginthecountryinwhichtheyoriginate.ina,d.d.issubjecttocorporateincometaxonitstaxableprofitsincroatia.theincometax,determinedonthebasisoftheaccountingprofit,isassessedasfollows:

in2012,theGroupdidnotrecognisedeferredtaxassetsintheamountofHrK224million.ofthisamount,HrK199millionisrelatedtounusedtaxlossesofprirodniplind.o.o.(2011:HrK112million)because,basedontheassessment,notaxableprofitsofthecom-panywillbeavailableinthefuturetoallowutilizationofdeferredtaxassetresultingfromunusedtaxlosses.Beforesubmittingtaxreturnfor2011ina,d.d.correctedtaxreturninrelationtopreviouslytaxrecognizedreceivables,whichwerepaidupto15daysbeforefilingthetaxreturnfor2011(itresultedintheincreaseoftaxliabilityforHrK8million).

inDecember2012,ina,d.d.submittedanamendedtaxreturnfor2011thatresultedinreducingthetaxliabilityfor2011forHrK76millionbasedoncalculatingthetaxpaidinangolaandtaxrecognitionforthepartofoutstandingreceivablesfromSyria.movementsindeferredtaxassetsaresetoutbelow:

124

INA Group Balanceat1january2011 42 176 (81) 75 38 30 280Debittoequityfortheyear - - - - 6 - 6reversaloftemporarydifferences (8) (50) (18) (25) - (24) (125)originationoftemporarydifferences 246 142 - 26 47 40 501Balanceat31December2011 280 268 (99) 76 91 46 662Debittoequityfortheyear - - - - (1) - (1)reversaloftemporarydifferences (244) (29) (28) (8) (8) (32) (349)originationoftemporarydifferences 4 151 - 53 16 8 232Balanceat31December2012 40 390 (127) 121 98 22 544

ina,d.d.Balanceat1january2011 34 160 (81) 79 31 223Debittoequityfortheyear - - - - 6 6reversaloftemporarydifferences (3) (25) (18) (25) - (71)originationoftemporarydifferences 239 142 - 12 41 434Balanceat31December2011 270 277 (99) 66 78 592Debittoequityfortheyear - - - - (3) (3)reversaloftemporarydifferences (243) (26) (28) (2) (6) (305)originationoftemporarydifferences 2 144 - 49 15 210Balanceat31December2012 29 395 (127) 113 84 494

impairmentofcurrentassets

impairmentofcurrentassets

impairmentof

tangibleand

intangible

assets

impairmentof

tangibleand

intangible

assets

reversalof

depreciationfor

impairedasset

reversalof

depreciationfor

impairedasset

other

provisions

other

provisions

impairmentof

financial

investments

impairmentof

financial

investments

taxlosses total

total


13. eARNINGs peR shARe

inaGroup ina,d.d. 31December2012 31December2011 31December2012 31December2011 “Basicanddilutedearningspershare(inHrK)” 68.1 181.5 132.3 196.7 Earnings Earningsusedinthecalculationoftotalbasicearningspershare 681 1,815 1,323 1,967 681 1,815 1,323 1,967

numberofshares numberofshares numberofsharesWeightedaveragenumberofordinarysharesforthepurposesofbasicearningspershare(inmillions) 10 10 10 10

14. INtANGIBle Assets

inaGroup ina,d.d.Balanceat1january2011 840 827additions 121 121amortisation (77) (73)Disposals (3) -impairment (34) (34)foreingexchangetranslationofforeignoperations 33 33othermovements - 2Balanceat31December2011 880 876additions 99 97amortisation (48) (46)impairment (127) (127)foreingexchangetranslationofforeignoperations (13) (13)transfertopp&E (115) (115)othermovements - (1) Balanceat31December2012 676 671

at31December2012inaGroupimpairmentofintangibleassetsequalsHrK127million.itconsistsofimpairmentofwellsinamountofHrK126million:Egypt-EastYidmaHrK77million(drywellcosts),iran-moghan2HrK26million(contractexpired)andHunga-ry-ZalataHrK23million.additionally,thereisHrK1millionimpairmentduetoiaS36inrefineryandmarketingbusinesssegment.at31December2011inaGroupimpairmentofintangibleassetsequalsHrK34million.itconsistofimpairmentofwellsinamountofHrK35millioninEgypt–EastKalabshairasElushandalsoofreversalofimpairmentduetoiaS36inamountofHrK1millioninretailsegment.additionally,inaGroupsubsidiariesreporteddisposalsinamountofHrK3million.

126

INA Group Balanceat1january2011 cost 38,227 15,984 2,931 2,115 59,257accumulateddepreciation 25,108 8,848 1,981 1,513 37,450netbookvalue 13,119 7,136 950 602 21,807 Balanceat31December2011 cost 39,214 16,224 2,897 2,091 60,426accumulateddepreciation 26,840 9,816 1,908 1,568 40,132netbookvalue 12,374 6,408 989 523 20,294 Balanceat31December2012 cost 38,895 16,413 3,103 2,928 61,339accumulateddepreciation 27,328 11,071 1,988 2,236 42,623netbookvalue 11,567 5,342 1,115 692 18,716 ina,d.d.Balanceat1january2011 cost 34,236 14,680 2,634 906 52,456accumulateddepreciation 22,368 8,090 1,814 662 32,934netbookvalue 11,868 6,590 820 244 19,522 Balanceat31December2011 cost 35,176 15,781 2,693 923 54,573accumulateddepreciation 24,052 9,484 1,777 705 36,018netbookvalue 11,124 6,297 916 218 18,555 Balanceat31December2012 cost 34,797 15,974 2,899 1,762 55,432accumulateddepreciation 24,440 10,730 1,852 1,347 38,369netbookvalue 10,357 5,244 1,047 415 17,063

oilandgasexplorationand

productionrefiningand

marketing retail other total

15. pRopeRty, plANt ANd eQuIpMeNta)Bybusinesssegment


b)Byassettype

INA Groupcost Balanceat1january2011 26,498 10,440 11,380 2,069 42 8,828 59,257additions - - - - - 1,409 1,409changeincapitaliseddecommissioningcosts 141 - - - - - 141foreignexchangetranslationofforeignoperations 258 - - - - - 258assetsputinuse 3,992 428 2,615 177 - (7,212) -Disposals (1) (30) (98) (105) (1) (1) (236)Write-off - - - (361) - - (361)othermovements (1) 1 (35) (7) - - (42)Balanceat31December2011 30,887 10,839 13,862 1,773 41 3,024 60,426additions - - - - - 1,131 1,131changeincapitaliseddecommissioningcosts (117) - - - - - (117)foreignexchangetranslationofforeignoperations (90) - - - - - (90)assetsputinuse 226 252 1,095 73 - (1,646) -Disposals (1) (12) (49) (25) - (41) (128)transferfromintangibleassets - - 3 - - 112 115transfer - - - - - (33) (33)othermovements - 2 85 (54) - 2 35Balanceat31December2012 30,905 11,081 14,996 1,767 41 2,549 61,339 accumulateddepreciation Balanceat1january2011 20,170 6,844 8,686 1,639 32 79 37,450chargefortheyear 1,712 205 510 136 - - 2,563reversalofdecommissioningdepreciationforaprioryear - (7) - - - - (7)impairment(net) (15) 48 500 28 - 5 566transfers - (51) 1 50 - - -Disposals (1) (28) (92) (99) (1) - (221)Write-off - - - (194) - - (194)othermovements (2) (1) (20) (2) 1 (1) (25)Balanceat31December2011 21,864 7,010 9,585 1,558 32 83 40,132chargefortheyear 982 280 612 93 1 - 1,968reversalofdecommissioningdepreciationforaprioryear (1) - - - - - (1)impairment(net) (38) 131 495 35 - 32 655transfers - 3 (34) (2) - (33)Disposals (1) (8) (47) (24) - (41) (121)othermovements - 17 45 (40) - 1 23Balanceat31December2012 22,806 7,433 10,656 1,620 33 75 42,623

carryingamount Balanceat31December2012 8,099 3,648 4,340 147 8 2,474 18,716Balanceat31December2011 9,023 3,829 4,277 215 9 2,941 20,294

oilandgasproperties

landand

buildings

plantand

machineryvehiclesand

officeequipment

collective

consumption

assets

assetsunder

construction total

128

ina,d.d.cost Balanceat1january2011 26,497 8,568 7,743 871 31 8,746 52,456additions - - - - - 1,268 1,268changeincapitaliseddecommissioningcosts 141 - - - - - 141foreignexchangetranslationofforeignoperations 258 - - - - - 258transfertointangibleassets - - (1) - - - (1)additionbymergerofproplin - 253 127 195 - - 575transferfrominventories - - - 1 - - 1assetsputinuse 3,992 425 2,639 102 - (7,158) -Disposals (1) (24) (45) (53) (1) (1) (125)Balanceat31December2011 30,887 9,222 10,463 1,116 30 2,855 54,573additions - - - - - 1,046 1,046changeincapitaliseddecommissioningcosts (117) - - - - - (117)foreignexchangetranslationofforeignoperations (90) - - - - - (90)transferfromintangibleassets - - 3 - - 112 115capitalincreaseofcroscod.o.o.,StSid.o.o. - (13) - - - - (13)assetsputinuse 226 236 906 63 - (1,431) -Disposals (1) (3) (30) (7) - (41) (82)Balanceat31December2012 30,905 9,442 11,342 1,172 30 2,541 55,432

accumulateddepreciation Balanceat1january2011 20,168 5,505 6,453 700 29 79 32,934chargefortheyear 1,712 162 391 59 - - 2,324reversalofdepreciationofdecommissioningfromaprioryear - (7) - - - - (7)additionbymergerofproplin - 163 65 109 - - 337transferfrominventories - - - 2 - - 2impairment(net) (15) 32 500 28 - 5 550transfer - (51) 51 - - - -Disposals (1) (23) (43) (54) - (1) (122)Balanceat31December2011 21,864 5,781 7,417 844 29 83 36,018chargefortheyear 982 211 531 65 - - 1,789reversalofdepreciationofdecommissioningfromaprioryear (1) - - - - - (1)capitalincreaseofcroscod.o.o.,StSid.o.o. - (10) - - - - (10)impairment(net) (38) 132 494 35 - 32 655othermovements - 15 (18) 2 - - (1)Disposals (1) (3) (31) (5) - (41) (81)Balanceat31December2012 22,806 6,126 8,393 941 29 74 38,369 carryingamountBalanceat31December2012 8,099 3,316 2,949 231 1 2,467 17,063Balanceat31December2011 9,023 3,441 3,046 272 1 2,772 18,555

oilandgasproperties

landand

buildings

plantand

machineryvehiclesand

officeequipment

collective

consumption

assets

assetsunder

construction total


i) oilandgasreservestheabilityofinaGroupandina,d.d.torealisethenetbookvalueofoilandgasproperties(seeb)above)inthefutureisdepend-entupontheextenttowhichcommerciallyrecoverableoilandgasreservesareavailable.During2012Explorationandproductionsegmentperformedassessmentof thequantitiesof thecompany’s remainingproveddevelopedoilandgas reserveswhichwerecommerciallyrecoverable.

ii)ownershipoflandandbuildingsDuetopoliticaldevelopmentsincroatiasince1990,certainlocalmunicipallandregistershavenotbeenfullyestablished.thecom-panyisintheprocessofregisteringofownership,throughthelocalcourtsincroatia.untilthedateofissuingofthesefinancialstate-ments,noclaimshavebeenmadeagainstthecompanyconcerningitstitletotheseassets.

iii)collectiveconsumptionassetscollectiveconsumptionassetsprincipallycomprisedomesticresidentialandholidayaccommodationfortheworkforceofthecompa-nyandsomeofitssubsidiaries.

iv)carryingvalueofrefiningandretailproperty,plantandequipmentat31December2012thenetbookvaluesoftheGroup’sproperty,plantandequipmentinExplorationandproductionsegmentwasHrK11,571million(31December2011:HrK12,375million).at31December2012thenetbookvaluesoftheGroup’sproperty,plantandequipmentinrefiningandmarketingsegmentwasHrK5,359million(31December2011:HrK6,417million).at31December2012thenetbookvaluesoftheGroup’sproperty,plantandequipmentinretailsegmentwasHrK1,116million(31December2011:HrK990million).at31December2012thenetbookvaluesoftheGroup’sproperty,plantandequipmentincorporateandothersegmentwasHrK695million(31December2011:HrK524million).themanagementBoardhasassessedthecarryingvaluesofitsExplorationandproduction,refining&marketingandretailassetswithreferencetothediscountedestimatedfuturenetcashflowsfromtherefiningandwholesalebusiness,inaccordancewiththerequirementsofiaS36.thetotalnetimpairmentchargeofinaGroupisHrK655millionin2012(2011:HrK566million).• thereversalofimpairmentincreasedExplorationandproductionsegmentassetsbyHrK38millionin2012andbyHrK33millionin2011.• refineryandmarketingsegmentrecordedanimpairmentofproperty,plantandequipmentinamountofHrK663millionin2012,comparedtoimpairmentinamountofHrK654millionin2011.• thereversalofimpairmentincreasedretailsegmentassetsbyHrK2millionin2012,comparedtoincreaseinamountofHrK60millionin2011.• impairmentchargestoinvestmentswasrecordedinamountofHrK32millionin2012,comparedtoimpairmentchargestoinvest-mentsinamountofHrK5millionin2011.at31December2012 impairmentcharges to investments inamountofHrK32million refers to impairmentofdomesticwells inamountofHrK24million inExploration&productionsegment(patkovec1HrK13millionandBokšić -KlokočevacHrK4millionaremostsignificantamounts)andimpairmentinamountofHrK8millioninretailsegment(closingofgasstationsandexpirationofconcessionatvrboskolocation).at31December2011inaGroupimpairmentofinvestmentsinamountofHrK5millionreferstoimpairmentofdomesticwellsinExploration&productionsegment(ferdinandovacHrK4millionandBruvnoHrK1million).GascylindersinproplinsubsidiarywerewrittenoffinamountofHrK167million.

130

Discountratesusedinthecurrentassessmentin2012andfor2011are:Explorationandproduction2012 2011croatia 10.54% 9.82%Syria 17.50% 14.96%Egypt,angola 14.50% 12.96%

refiningandmarketing 11.70% 10.91%

retail croatia 10.44% 10.17%BosniaandHerzegovina 13.62% 14.31%ariskfactorisincludedthediscountratesconsideringtheriskofeachcountry(seenote3).

v)reviewoftheresidualvaluetheGrouphasreviewedtheresidualvaluefordepreciationpurposestoreflectthechanges inthedefinitionoftheresidualvalueprovidedintheStandard,andnoneedforanyadjustmenttotheresidualvaluesrelatedtothecurrentorpriorperiodshasbeenes-tablished.

16. GoodwIll

INA Group 2012 2011cost 296 296accumulatedimpairmentlosses (113) (113) 183 183 2012 2011cost Balanceatthebeginningofyear 296 296Balanceattheendofyear 296 296 accumulatedimpairmentlosses Balanceatthebeginningofyear (113) (64)impairmentlossesrecognisedintheyear - (49)Balanceattheendofyear (113) (113) 2012 1january2012 31December2012 investmentofcrosco,d.o.o.inrotaryZrt.Hungary 183 183total 183 183 2011 1january2011 impairment 31December2012 investmentofcrosco,d.o.o.inrotaryZrt.Hungary 202 (19) 183investmentofina,d.d.inEnergopetrold.d.Sarajevo 30 (30) -total 232 (49) 183


on28march2007,pursuanttheagreemententeredintobytheGovernmentofthefederationofBosniaandHerzegovinaandtheina-molconsortium,inaGroupinvestedHrK132millionintheacquisitionofEnergopetrold.d.,Sarajevoandbecame,togetherwithmol,amajorshareholderoftheinvestee(ina,d.d.andmolnyrt.holdanequityshareof33.5%each).During2010and2011,basedonthecalculationofthenetpresentvalueofEnergopetrol,anegativenetpresentvaluewasdetermined.asaresult,thegoodwillofEnergopetrolwasfullyimpairedasat31December2011,andchargedtotheoperatingresult.

During2012goodwillrelatingtothecompanyrotaryZrt.wastestedforimpairmentandtestshowedthattheimpairmentisnotre-quired.thediscountrateof10.39percentwasusedwhentheimpairmenttestforrotaryZrt.hasbeencalculated.

17. INvestMeNts IN suBsIdIARIes

ina,d.d. 31December2012 31December2011 Equityinvestmentsinsubsidiaries 1,161 1,033 2012 2011Equityinvestmentsinsubsidiariesat1january 1,033 1,224StSid.o.oZagreb-additionalcapitalizationbytransferingpp&E 89 -croScod.o.o.-additionalcapitalizationbytransferingpp&E 58 -proplind.o.o.Zagreb-mergerintoina,d.d. - (88)ina-osijekpetrold.d.osijekpurchasesharebyagreement - -othersubsidiaries-impairment (19) (103) totalasof31December 1,161 1,033

liquidationproceedingsforinterinaltd.,londonandfpcltd.werecompletedin2012.Basedonthedocumentationreceivedregard-ingthedeletionofthecompaniesfromthecourtregister,thecompanieswerederecognisedfromthebooksofina,d.d.according to theSharepurchaseandtransferagreementbetween ina,d.d.andosimpexd.d.,osijekof6march2012, ina,d.d.acquiredthesharesofina-osijekpetrold.d.,whichrepresent20.87percentofthecompany’ssharecapital,withatotalamountofconsiderationzero,asforexchangereceivables,weregiveninamountofHrK18million,whichwerealreadyfullyimpaired.asaresultofthesharepurchase,thetotalownershipinterestofina,d.d.inina-osijekpetrold.d.increasedto97.34percent.on21December2011ina,d.d.managementBoardadoptedadecisiontoinitiatetheprocessofincreasingthesharecapitalofthecompaniesStSid.o.o.Zagrebandcroscod.o.o.Zagreb.Basedonthedecision,valuationsoftheassetsofthosecompaniestobecon-tributedtotheirrespectivesharecapitalwereperformed.

on19and20December2012thecommercialcourtinZagrebregisteredthesharecapitalincreaseofStSid.o.o.throughacontribu-tionofpropertiesintheamountofHrK89million,andofcroscod.o.o.ZagrebintheamountofHrK58million.thevalueoftheinvestmentswasadjustedduring2012bycomparingthenetsharesrecognisedatina,d.d.andthenetassetsofthecompanies,resultinginthefollowingadjustments;Sinacod.o.o.ofHrK6million;itrd.o.o.ofHrK6.6million;interinad.o.o.ljubljanaofHrK4,4million;inaKosovoofHrK800thousand,inaBeogradd.o.o.ofHrK700thousand;andadriagasS.r.lmilanofHrK500thousand.

132

thecompanyhasthefollowingprincipalsubsidiaries(*subsidiaryowneddirectlybythecompany): Shareholding

Nameofcompany Activity 2012 2011Oilfieldservices *crosconaftniServisid.o.o.Zagreb oilfieldservices 100% 100%croscointernationallimited,Guernsey oilfieldservices 100% 100%Geotehnikainternationalllc,abuDhabi,uaE(untilmay2012) oilfieldservices - 49%croscoB.v.amsterdam,netherland oilfieldservices 100% 100%nordicShippingltd,marshallislands leaseofdrillingplatforms 100% 100%SeaHorseShippinginc,marshallislands leaseofdrillingplatforms 100% 100%croscointernationald.o.o.Slovenia oilfieldservices 100% 100%rotaryZrt.,Hungary oilfieldservices 100% 100%croscoS.a.DEc.v.monterrey,mexico oilfieldservices 100% 100%croscointernationald.o.o.tuzla,BiH oilfieldservices 100% 100%mideastintegratedDrilling&WellServicescompanyllc,oman oilfieldservices 49% 49%cortecrosd.o.o.,Zagreb Distributionof anti-corrosionproducts 60% 60% Oilexplorationandproduction *inanaftaplininternationalExplorationandproductionltd,Guernsey oilexplorationandproduction 100% 100% Tourism *Hostind.o.o.Zagreb tourism 100% 100% ancillaryservices *StSiintegriranitehničkiservisid.o.o.Zagreb technicalservices 100% 100%*Sinacod.o.o.Sisak Security 100% 100%*itrd.o.o.,Zagreb carrental 100% 100%*topračunovodstvoservisid.o.o.,Zagreb accountingservices 100% 100%

Productionandtrading *mazivaZagrebd.o.o.Zagreb productionandlubricantstrading 100% 100%

Tradingandfinance *interinad.o.o.ljubljana,Slovenia foreigntrading 100% 100%*inaBHd.d.Sarajevo,BosniaandHerzegovina foreigntrading 100% 100%*interinad.o.o.Skopje,macedonia foreigntrading 100% 100%*inteinaltd,london,uK(untilapril2012) foreigntrading - 100%*inaHungaryKft.,Budapest,Hungary(inliquidation) foreigntrading 100% 100%*fpcltd,london,uK(untilfebruary2012) foreigntrading - 100%*Holdina(Guernsey)ltd,Guernsey(inliquidation) foreigntrading 100% 100%interina(Guernsey)ltd,Guernsey(inliquidation) foreigntrading 100% 100%Holdina(cyprus)ltd,cyprus(inliquidation) foreigntrading 100% 100%


*Holdinad.o.o.Sarajevo,BosniaandHerzegovina foreigntrading 100% 100%*inad.o.o.Beograd,Serbia foreigntrading 100% 100%*inaKosovod.o.o.prishtina,Kosovo foreigntrading 100% 100%*adriagasS.r.l.milan,italy pipelineprojectcompany 100% 100%*inacrnaGorad.o.o.,podgorica,montenegro foreigntrading 100% 100%*prirodniplind.o.o.Zagreb trading 100% 100%*inaBld.o.o.Banjaluka,BosniaandHerzegovina trading 100% 100%*petrold.d. trading 83% 83%*ina-osijekpetrold.d. trading 97% 76%*polybitd.o.o.rijeka(inliquidation) oilproductionandtrading 100% 100%

18. INvestMeNts IN AssocIAtes ANd joINt veNtuRes

inaGroup ina,d.d. 31December2012 31December201131 December2012 31December2011investmentsinassociatesandjointventures 34 34 34 34 34 34 34 34

inaGroup ina,d.d.nameofcompany activityproportionofownership 31December2012 31December2011 31December2012 31December2011croplind.o.oZagreb Gastrading 50% 12 12 12 12Sol-inad.o.o. industrialgasproduction 37.2% 22 22 22 22EnErGopEtrold.d.,SarajevoBiHretail(oilandlubricants) 33.5% 0 0 0 0 34 34 34 34

inaGroupandina,d.d.nameofcompany activity placeofincorporation andoperation 31December2012 31December2011Hayanpetroleumcompany operatingcompany(oilexploration, developmentandproduction) “Damascus,Syria” 50% 50%“tErmEZagrebd.o.o.,“ recreationandmedicaltourism Zagreb,croatia 50% 50%inagipd.o.o.Zagreb Explorationandproductionoperator(jointventure) Zagreb,croatia 50% 50%EDinad.o.o.Zagreb research,developmentandhydrocarbonproduction Zagreb,croatia 50% 50%Belvedered.d. Hoteltrade Dubrovnik,croatia 32% 32%marinapetroleumcompany Explorationandproductionoperator cairo,Egypt 25% 25%adrialnGStudycompanyltd oilexploration malta - 22.2%

otherinvestmentsinassociatesandjointventuresareasfollows:

During2012theliquidationofadrialnGStudy,malta,wascompleted.Basedonthedocumentationreceivedregardingtheliquida-tionofthecompanyanddeletionfromthecourtregister,thecompanywasderecognisedfromthebooksofina,d.d.

134

19. otheR INvestMeNts

20. loNG-teRM ReceIvABles

inaGroup ina,d.d. 31December2012 31December2011 31December2012 31December2011long-termloanstoEnergopertol 155 326 155 326otherlong-termloans - - 612 445Deposits 25 23 25 23“financialassetsatfairvaluethroughprofitorloss” 7 6 6 5 187 355 798 799

inaGroup 31December2012 31December2011receivablesforapartmentssold 115 126prepaymentsforintangibleassets 62 12prepaymentsforproperty,plantandequipment 25 22Derivativefinancialinstruments 5 5otherlong-termreceivables - 2 207 167

ina,d.d. 31December2012 31December2011receivablesforapartmentssold 114 125prepaymentsforintangibleassets 62 12prepaymentsforproperty,plantandequipment 22 21long-termreceivablesfromcrosco 11 48otherlong-termreceivables 1 1 210 207

longtermloanstoinvestmentfinancinghavebeengrantedtoEnergopetrol.loanisrevolvingtypewithvariableinterestmargininadditionto3mEuriBorandmaturityon1april2015.BasedontheBankruptcyplanforpevecd.o.o.,inbankruptcy,allthereceivablesofina,d.d.fromthecompany(HrK8million)havebeenconvertedintoanequityshare.followingadecreaseofthecompany’ssharecapital(thepartpertainingtoina,d.d.ofHrK7million)tocoverthelosses,thebusinessstakewasreducedto15percentofthetotalclaim.afterthetransformationofpevecd.o.o.intoapubliclimitedcompany,theinitialstakewasreplacedwithshares.asof21august2012ina,d.d.becametheownerof11974shares(0.97%),withatotalnominalvalueofHrK1million.

priorto1996,thecompanyhadsoldapartmentsitownedtoitsemployeesasprovidedbythelawsoftherepublicofcroatia.thepropertiesweregenerallysoldoncredit,andtherelatedhousingreceivablesarerepayableonmonthlyinstalmentsoverperiodsof20-35years.theamountspayabletocroatianstate,accountingfor65%ofthevalueofsoldapartmentsareincludedinothernon-cur-rentliabilities(seenote30).thereceivablesaresecuredwithmortgageoverthesoldapartments.theprincipleispresentedinthereceivableamounts.theamountsdonotincludetheinterestportion.


21. AvAIlABle-foR-sAle Assets

22. INveNtoRIes

Equityinstrumentsavailable-for-sale inaGroupandina,d.d.nameofthecompany %shareholdingheldbyina,d.d. activity 31December2012 31December2011jadranskinaftovodd.d. 11.795% pipelineownershipandoperations 321 321omvSloveniad.o.o.,Koper 7.75% oiltrading 31 31plinarad.o.o.pula 49.00% Distributionandoiltrading 17 17HocBjelolasicad.o.o.ogulin 7.17% operationsofsportsfacilities 5 6Bina-fincomd.d.Zagreb 5.00% constructionofhighwaysandotherroads, airfieldsairports 12 12totalcost 386 387fairvalueadjustment (46) (62) 340 325

inaGroup ina,d.d. 31December2012 31December2011 31December2012 31December2011 1,031 911 1,030 910refinedproducts 889 763 815 695Gasinventories 571 354 - 1crudeoil 320 973 320 972rawmaterial 241 287 159 192Spareparts,materialsandsupplies 226 233 92 101merchandise 74 172 69 159 3,352 3,693 2,485 3,030

asdiscussedinnote38,asubstantialportionofthetradingincomeofjanafd.d.isderivedfromina,d.d.thevalueoftheequityshareinjanafwasreportedbyreferencetothemarketvalueofthesharesasquotedontheZagrebStockExchangeasof31De-cember2012.thenetbookvalueoftheequityinvestmentinjanafincreasedbyHrK16.6millioncomparedtothebalanceasof31December2011duetoaincreaseinthemarketvalueofthejanafsharesontheZagrebStockExchange.themarketvalueoftheshares(118,855shares)asof31December2012amountedtoHrK2,370pershare(31December2011:HrK2,230pershareasof).

ByDecisionoftheassemblyofHocBjelolasicad.o.o.ogulin,thesharecapitalofthatcompanywasreducedon13june2012tocoverthecompany’slosses.Basedonthesharecapitaldecrease,thebusinessstakeofina,d.d.inHocBjelolasicawasreducedbyHrK1millionbutcontinuestorepresent7.17%oftheinvestee’ssharecapital.

asof31December2012,inventoriesweremeasuredatcostordeterminednetrealizablevalue.

136

23. tRAde ReceIvABles, Net

inaGroup ina,d.d. 31December2012 31December2011 31December2012 31December2011tradereceivables 3,539 3,957 1,568 2,184impairmentoftradereceivables (769) (675) (465) (403) 2,770 3,282 1,103 1,781

inaGroup ina,d.d. 31December2012 31December2011 31December2012 31December201160-90days 43 47 36 4191-120days 33 55 26 39121+days 33 240 - 63 109 342 62 143

inaGr0up ina,d.d. 31December2012 31December2011 31December2012 31December2011lessthan120days 14 40 1 16121-150days 38 28 23 9151-180days 20 25 17 11181-365days 156 179 136 148366+days 541 403 288 219 769 675 465 403

Belowisanageinganalysisoftradereceivablesoverdueandnotconsideredasimpairedfor:

tradereceivablesarecarriedatamortisedcostlessimpairment.accordingtotheimpairmentpolicy,allreceivablesfromthestrategiccustomersofina,d.d.areassessedonindividualbasis.allotheroutstandingreceivablesduebeyond120daysareimpaired.

impairmentoftradereceivables:


24. otheR ReceIvABles

25. cAsh ANd cAsh eQuIvAleNts

inaGroup ina,d.d. 31December2012 31December2011 31December2012 31December2011 Balanceatbeginningoftheyear 675 418 403 226impairmentlossesrecognisedonreceivables 252 336 191 207amountswrittenoffasuncollectible (16) (16) - (12)reversalofimpairmentonamountsrecovered (142) (63) (129) (18)Balanceatendoftheyear 769 675 465 403

inaGroup ina,d.d. 31December2012 31December2011 31December2012 31December2011 taxprepayments 347 278 309 232other 169 178 119 147 516 456 428 379

inaGroup ina,d.d. 31December2012 31December2011 31December2012 31December2011cashinthebank 316 296 125 195Depositsuntilthreemonths 110 31 86 20cashonhand 3 3 - -other 59 7 59 14

488 337 270 229

theageinganalysisofimpairedtradereceivables:

cashandcashequivalentscompriseofcashheldbytheGroupandshort-termbankdepositsupto3monthsmaturity.thecarryingamountoftheseassetsapproximatestheirfairvalue.

138

26. BANK loANs ANd oveRdRAfts ANd cuRReNt poRtIoN of loNG-teRM loANs

27. tRAde pAyABles, tAxes ANd coNtRIButIoNs ANd otheR cuRReNt lIABIlItIes

inaGroup ina,d.d. 31December2012 31December2011 31December2012 31December2011“currentportionoflong-termloans(note29)” 4,725 1,904 4,648 1,817overdraftsandshort-termloans 1,266 1,918 1,057 1,784 5,991 3,822 5,705 3,601

inaGroup ina,d.d. 31December2012 31December2011 31December2012 31December2011tradepayables 1,684 2,032 964 1,111payrollandother 583 212 325 162productionandsalesandothertaxespayable 411 1,437 334 1,303payrolltaxesandcontributions 86 87 51 46Embeddedderivativefinancialliabilities 10 2 - 3negativefairvalueofderivatives 3 32 3 32 2,777 3,802 1,677 2,657

inaGroup ina,d.d. 31December2012 31December2011 31December2012 31December2011unsecuredbankloansinuSD 730 847 700 805unsecuredbankloansinEur 392 1,009 357 979unsecuredbankloansinHrK 144 62 - - 1,266 1,918 1,057 1,784

themostsignificantshort-termloansasat31December2012arecreditfacilitieswiththefirstclassbankswiththepurposeoffinanc-ingpurchasesofcrudeoilandpetroleumproducts(‘’tradefinancing’’)andframeworkagreementsconcludedwithdomesticbanksforgrantingloans,issuingbankguarantiesandopeningletterofcredits.

ina,d.d.short–termcreditfacilitieswithunicreditandSplitskabankacontainfinancialcovenantsclauseandtosecureinaGroupsubsidiariesshort–termcreditfacilitiesina,d.d.issuedcorporateguarantees.

themanagementconsiderthatthecarryingamountoftradepayablesapproximatestheirfairvalues.


28. AccRuAls ANd defeRRed INcoMe

29. loNG-teRM loANs

inaGroup ina,d.d. 31December2012 31December2011 31December2012 31December2011accruedinterest–long-termloans 25 38 24 38accruedexpenses - 1 - 1other 11 9 10 9 36 48 34 48

objectiveoftheloan loancurrency 31December2012 31December2011Generalcorporatepurpose uSD,Eur 4,385 5,650projectfinancing uSD,Eur 1,316 1,723 5,701 7,373Duewithinoneyear (4,648) (1,817)totallong-termloansina,d.d. 1,053 5,556 loan(equipment) Eur,Huf - 72otherlongtermloans 185 89 185 161Duewithinoneyear (77) (87)totallong-termloansinaGroup 1,161 5,630

INA Group Weightedaverageinterestrate 31December2012 31December2011 31December2012 31December2011 % %BankloansinEur 1.05 2.21 3,519 4,296BankloansinuSD 1.84 1.65 2,258 3,154BankloansinHuf 9.78 8.88 69 3BankloansinHrK 5.02 5.20 40 81total 5,886 7,534payablewithinoneyear (4,725) (1,904)totallong-termloans 1,161 5,630

long-termloansaredenominatedinavarietyofforeigncurrenciesandaresubjecttoarangeofinterestrates.long-termloansofina,d.d.areunsecuredandthemajorityoftheseloanscontainfinancialcovenants.inaGroupsubsidiarieslong-termloansareinsomecasessecuredbybillsofexchange,debenturesorthroughcorporateguarantees.

theoutstandingloansoftheGroupareanalysedasfollows:

140

ina,d.d. Weightedaverageinterestrate 31December2012 31December2011 31December2012 31December2011 % % BankloansinEur 1.05 2.16 3,515 4,219BankloansinuSD 1.75 1.65 2,186 3,154total 5,701 7,373payablewithinoneyear (4,648) (1,817)totallong-termloans 1,053 5,556

thematurityoftheloansmaybesummarisedasfollows:

themovementinlong-termloansduringtheyearissummarizedasfollows:

inaGroup ina,d.d. 31December2012 31December2011 31December2012 31December2011currentportionoflong-termdebt 4,725 1,904 4,648 1,817payablewithinonetotwoyears 364 4,547 261 4,490payablewithintwotothreeyears 264 278 263 266payablewithinthreetofouryears 265 267 264 266payablewithinfourtofiveyears 268 268 265 267payableoverfiveyears - 270 - 267 total 5,886 7,534 5,701 7,373

inaGroup ina,d.d.Balanceat31December2011 7,534 7,373payablewithinoneyear(includedwithinbankloansandoverdrafts–note26) 1,904 1,817payableaftermorethanoneyear 5,630 5,556Balanceat1january2012 7,534 7,373 newborrowingsraised 318 168amountsrepaid (1,934) (1,808)foreignexchangegains (32) (32)Balanceat31December2012 5,886 5,701payablewithinoneyear(includedwithinbankloansandoverdrafts–note26) 4,725 4,648payableaftermorethanoneyear 1,161 1,053

theprincipallong-termloansoutstandingat31December2012andloanssignedduring2012wereasfollows:

privrednabankaZagrebtheremaininglong-termdebtofina,d.d.towardsprivrednabankaZagrebamountstoHrK2millionandrepresentsadebtundertherefinancedBondsagreementfortheissueofapibondsanditisdormant.

Bayerischelandesbankin2007, ina,d.d.entered intosyndicatedrevolvingcredit facilityagreementwithconsortiumof thebanks intheamountofuSD1billion.theloanfundsareintendedtobeusedforgeneralcorporatepurposes(includingrepaymentofthepreviouslyconcluded


inaGroup ina,d.d. 31December2012 31December2011 31December2012 31December2011liabilitiestoGovernmentforsoldapartments 63 69 63 69liabilitiesforderivativesfinancialinstruments 30 18 - -Deferredincomeforsoldapartments 8 39 8 37 101 126 71 106

thelong-termpayabletothegovernmentrelatestoobligationarisingonthesaleofhousingunitstoemployeesunderthegovern-mentprogram(note20).accordingtothelawregulatinghousingsales,65%oftheproceedsfromthesaleofapartmentstoemployeeswerepayabletothestateatsuchtimeastheproceedswerecollectedbythecompany.accordingtothelaw,ina,d.d.hasnoliabilitytoremitthefundsunlessanduntiltheyarecollectedfromtheemployee.

syndicatedloanandrefinerymodernizationproject).thematurityoftheloanisfiveyearswithanoptionofextensionforadditional2years(1+1).

eBRdin2010,ina,d.d.signedlong-termloanagreementwithEBrDintheamountofEur160millionwithalternativewithdrawalinuSD.thepurposeoftheloanisfinalizationofthefirstphaseofthemodernizationofSisakandrijekarefineries.

Icf deBt pool llpin2010,ina,d.d.signedlong-termloanagreementwithicfDEBtpoolllpintheamountofEur50million.thepurposeoftheloanistofinancethecompletionofthefirstphaseofthemodernisationofSisakandrijekarefineries.

molHungarianoilandGaspubliclimitedcompany(mol)in2012,ina,d.d.signedmulticurrencyrevolvingcreditfacilityagreementwithmolintheamountuSD200million.theloanfundsareintendedtobeusedforgeneralcorporatepurposeswithmaturityin2016.

cluBDEal,revolvingcreditfacilityin2012,thecompanysignedclubdealrevolvingcreditfacilitywithconsortiumledbyprivrednabankaZagrebintheamountofEur119million.creditfacilityhasbeenincreasedforadditionalEur20millioninthesameyear.theloanfundsareintendedtobeusedforgeneralcorporatepurposeswithmaturity3yearsandwiththeextensionoptionforadditional2years(1+1).

Compliance with loan agreements During2012inaGroupandina,d.drepaidalloftheirliabilitiesinrespectofloans(principal,interestandfees)onatimelybasis,andtherewerenoinstancesofdefaultordelinquency.

30. otheR NoN-cuRReNt lIABIlItIes

142

31. pRovIsIoNs

inaGroup other totalBalanceat1january2011 322 2,117 263 112 17 67 21 95 3,014chargefortheyear - - 33 - 44 63 - 3 143Effectofchangeinestimates (39) 141 - - - - - - 102interest 16 118 - - - - - - 134provisionutilisedduringtheyear (7) (3) (205) (112) (17) (68) - (66) (478)Balanceat31December2011 292 2,373 91 - 44 62 21 32 2,915chargefortheyear - - 13 - 22 67 - 202 304Effectofchangeinestimates 11 (117) 2 - - - - 2 (102)interest 12 97 - - - - - - 109provisionutilisedduringtheyear (6) (8) (44) - (44) (62) - (5) (169)Balanceat31December2012 309 2,345 62 - 22 67 21 231 3,057

ina,d.d. Balanceat1january2011 310 2,117 220 - 48 69 2,764chargefortheyear - - 32 37 43 2 114Effectofchangeinestimates (39) 141 - - - - 102interest 15 118 - - - - 133provisionutilisedduringtheyear (7) (3) (178) - (48) (44) (280)Balanceat31December2011 279 2,373 74 37 43 27 2,833chargefortheyear - - 10 - 47 193 250Effectofchangeinestimates 11 (117) - - - - (106)interest 11 96 - - - - 107provisionutilisedduringtheyear (6) (7) (42) (37) (43) (2) (137)Balanceat31December2012 295 2,345 42 - 47 218 2,947

Environmentalprovision

Environmental

provision

Decommission-

ingcharges

Decommission-

ingcharges

legal

claims

legal

claims

potentialtax

obligation

redundancy

costs

redundancy

costs

costofunused

holiday

costofunused

holiday

taxobligation

claimsof

Holdina

Sarajevo other

other

total

total

theenvironmentalprovisionrecordedbyinaGroupisHrK309millionon31December2012(31December2011:HrK292million).theenvironmentalprovisioncoverstreatmentofaccumulatedwastegeneratedbyformeractivity,soilexcavationandreplacementduringthereconstructionoffillingstationsandinvestigationtodeterminetheextentofthecontaminations.itdoesnotcoverthecostofremediationinlackofdetailednationalregulations.


32. RetIReMeNt ANd otheR eMployee BeNefIts

Decommissioning chargesasof31December2012,thecompanyrecognisedadecommissioningprovisionfor56oilandgasproductionfields,4non-productionfields,8positivenon-productionwellsand145negativenon-productionwells.asof31December2011,thecompanyrecognisedadecommissioningprovisionfor56oilandgasproductionfields,4non-productionfields,9positivenon-productionwellsand146negativenon-productionwells.

accordingtothecollectiveagreementtheGroupbeartheobligationtopayjubileeawards,retirementandotherbenefitstoemploy-ees.theGroupoperatesdefinedbenefitschemesforqualifyingemployees.undertheschemes,theemployeesareentitledtoanearlyretirementbenefitinthenetamountofHrK8,000.forregularretirement(noearlyretirementbonus),employeesreceiveHrK16,000net,ofwhichHrK8,000representtaxableportion.nootherpost-retirementbenefitsareprovided.jubileeawardsarepaidoutaccordingtothefollowingfixedamountsandanniversarydates:

• HrK2,000for10yearsofcontinuousservice• HrK2,500for15yearsofcontinuousservice• HrK3,000for20yearsofcontinuousservice• HrK3,500for25yearsofcontinuousservice• HrK4,000for30yearsofcontinuousservice• HrK4,500for35yearsofcontinuousservice• HrK5,500for40/45yearsofcontinuousservice.

thenetamountsspecifiedaboveincludethetaxableportion,i.e.theportionsubjecttoallapplicabletaxesandcontributions.inrespectoftheGroup’spersonnelwhoareemployedincroatia,suchsocialpaymentsasarerequiredbytheauthoritiesarepaidbytherespectiveGroupcompanies.thesecontributionsformthebasisofsocialbenefitspayableoutofthecroatiannationalpensionfundtocroatianemployeesupontheirretirement.theactuarialvaluationsofthepresentvalueofthedefinedbenefitobligationwerecarriedoutat31December2012byindependentactuarialexpert.in2012,thecompanymadeaprovisionofHrK46millioninrespectofjubileeawardsandHrK27millionforregularretirementallowance.thepresentvaluesofthedefinedbenefitobligation,therelatedcurrentservicecostandpastservicecostweredeterminedusingtheprojectionmethodbasedonthetotalnumberofemployees.

inaGroup ina,d.d. 31December2012 31December2011 31December2012 31December2011 analysedas:currentliabilities 344 200 284 168non-currentliabilities 2,713 2,715 2,663 2,665 3,057 2,915 2,947 2,833

valuationatKeyassumptionsused: 31December2012 31December2011Discountrate 4.61% 5.50%turnoverrate 3-4% 3-4%mortalitytable Hr200470,00% Hr200470,00%averageexpectedremainingworkinglives(inyears) 16.18 16.06

144

inaGroup ina,d.d. 31December2012 31December2011 31December2012 31December2011costofcurrentperiod 5 8 4 6interest 6 8 4 6actuarial(gains)orlosses (18) (44) (1) (41) (7) (28) 7 (29)

inaGroup ina,d.d. 31December2012 31December2011 31December2012 31December2011 presentvalueofdefinedbenefitobligations 110 117 73 66liabilityrecognisedinthebalancesheet 110 117 73 66 thisamountispresentedinthebalancesheetasfollows: currentliabilities 10 13 6 5non-currentliabilities 100 104 67 61 110 117 73 66

inaGroup ina,d.d. 31December2012 31December2011 31December2012 31December2011at1january 117 145 66 96recognizedcostinthecurrentperiod 5 8 4 6interest 6 8 4 6acturial(gains)orlosses (4) (35) 3 (35)payments (14) (9) (4) (7)at31December 110 117 73 66

inaGroupiina,d.d. 31December2012 31December2011issuedandfullypaid: 10millionshares(HrK900each) 9,000 9,000

theamountsrecognisedinprofitandlossrelatedtoretirementandotheremployeebenefitsareasfollows:

theamountincludedinthestatementoffinancialpositionarisingfromtheGroup’sobligationsinrespectofitsretirementbenefitschemesisasfollows:

thechangeofthepresentvalueofdefinedbenefitobligationmaybeanalysedasfollows:

thecompany’ssharecapitalconsistsof10millionauthorisedandissuedsharesofparvalueHrK900each.Eachsharecarriesonevoteandisentitledtodividends.

33. shARe cApItAl


INA Group combinedreservesat31 foreigncurrency December1993translationreserves otherreserves totalBalanceat1january2011 2,132 (239) 447 2,340movementsduring31December2011 - 276 - 276Balanceat31December2011 2,132 37 447 2,616movementsduring31December2012 - (111) - (111)Balanceat31December2012 2,132 (74) 447 2,505 ina,d.d. combinedreservesat31 December1993 otherreserves totalBalanceat31December2012 1,667 456 2,123Balanceat31December2011 1,667 572 2,239

inaGroupiina,d.d. 31December2012 31December2011 Balanceatbeginningofyear - 27increase/(decrease)arisingonrevaluationofavailable-for-salesecurities(janaf) 16 (34)Deferredtaxeffect (3) 7Balanceattheendofyear 13 -

During2012revaluationreserveonfinancialassetsavailable-for-share(janaf)wasdecreasedtozerowithreferencetothemarketvalueofthesharesquotedonthestockexchangeon31December2012.

the reservesof theGroup includeamounts in respectof accumulated surpluses anddeficits, revaluationsofproperty, plant andequipmentandforeignexchangegainsandlosseswhichhavearisenovermanyyearspriorto1993.forseveralyears,thecroatianeconomywassubjecttohyperinflationand,priorto31December1993,neitherthecompanynortheGrouphadbeensubjecttoaudit. forthesereasons, itwasnotpracticabletoanalysethecompositionofthereservesofthecompanyortheGroupasat31December1993intotheirconstituentparts.

forsubsequentperiods,theresultsofthetransactionsoftheGroup,totheextentthattheyaffectreserves,areaccountedforwithinappropriatereserveaccounts.thereservesoftheGroupasat31December1993werecombinedatthatdate,andareseparatelystatedbelow.

movementsonreservesduringtheyearwereasfollows:

34. RevAluAtIoN ReseRves

35. otheR ReseRves

146

36. RetAINed eARNINGs

37. NoN coNtRollING INteRest

38. RelAted pARty tRANsActIoNs

inaGroup ina,d.d. retainedearnings retainedearnings Balanceat1january2011 1,424 1,556profitfortheyear 1,815 1,967Dividendspaid (480) (480)Balanceat31December2011 2,759 3,043profitfortheyear 681 1,323Effectofpurchaseofnon-controllinginterest (3) -Balanceat31December2012 3,437 4,366

INA Group 31December2012 31December2011Balanceatbeginnigofyear (10) 2Shareofprofit/(loss)fortheyear 6 (12)purchaseofnon-controllinginterest 3 -Balanceatendofyear (1) (10)

thecompanyhasdominantpositionsincroatiainoilandgasexplorationandproduction,oilrefiningandthesaleofgasandpetro-leumproducts.asaresultofthecompany’sstrategicpositionwithinthecroatianeconomy,asubstantialportionofitsbusinessandthebusinessofitssubsidiariesisperformedwiththecroatianGovernment,itsdepartmentsandagencies,andthecompanieswiththerepublicofcroatiabeingtheirmajorityshareholder.

transactionsbetweenthecompanyanditssubsidiaries,whicharerelatedpartiesofthecompany,havebeeneliminatedonGrouplevelconsolidation.Detailsoftransactionsbetweenina,d.d.andtheGroupcompaniesandotherrelatedpartiesaredisclosedbelow.


inaGroup Salesofgoods purchaseofgoods 2012 2011 2012 2011Companiesavailable-for-sale janafd.d.Zagreb 3 4 75 72

Strategicpartner molnyrt. 689 773 734 891

Companiescontrolledbystrategicpartner tifond.o.o. 866 768 6 6Energopetrold.d. 340 486 1 1Kalegranltd. 128 58 1 -intermold.o.o. 61 10 - 1molSlovEnijad.o.o. 33 18 92 87iES-italianaEnergiaeServizis.p.a. 15 13 9 6moltrademineralimpexZrt. - 1 102 1.141Slovnaft,a.s. - - 84 48 CompaniescontrolledbytheState Hrvatskaelektroprivreda 2.617 2.303 161 131petrokemijaKutina 1.679 1.498 1 -croatiaairlines 257 234 - -jadrolinija 165 147 6 5Hrvatskeželjeznice 149 11 67 51podzemnoskladišteplinaokoli 29 26 151 149plinacro 11 21 280 228

Duringtheyear,inaGroupenteredintothefollowingtradetransactionswithrelatedparties:

148

asofstatementoffinancialpositiondate,inaGrouphadthefollowingoutstandingbalanceswithrelatedparties:

loantoandfromrelatedparties:

inaGroup amountsowedbyrelatedpartiesamountsowedtorelatedparties 31December2012 31December2011 31December2012 31December2011Companiesavailable-for-sale janafd.d.Zagreb 1 1 22 25Strategicpartner molnyrt. 79 111 95 67Companiescontrolledbystrategicpartner Energopetrold.d. 70 24 - -tifond.o.o. 32 42 1 1Kalegranltd. 28 9 - -molSlovEnijad.o.o. 2 10 9 9CompaniescontrolledbytheState Hrvatskaelektroprivreda 346 549 8 14petrokemijaKutina 259 190 1 -Hrvatskeželjeznice 78 7 8 5jadrolinija 31 31 1 1croatiaairlines 30 32 - 1podzemnoskladišteplinaokoli 5 2 - 8plinacro 1 1 32 19

inaGroupamountsofloansowedbyrelatedparties amountsofloansowedtorelatedparties 31December2012 31December2011 31December2012 31December2011Strategicpartner molnyrt. - - - 979Companiescontrolledbystrategicpartner Energopetrold.d. 201 326 - -


Duringtheyear,ina,d.d.enteredintothefollowingtradetransactionswithrelatedparties:

ina,d.d. Salesofgoodspurchaseofgoods 2012 2011 2012 2011 Foreignrelatedcompanies HoldinaSarajevo 1,552 850 - 2inacrnaGorad.o.opodgorica 139 91 - -interinad.o.o.ljubljana 23 21 - -inaBeogradd.o.oBeograd - 59 - -adriagasmilano - 2 - 1 Domesticrelatedcompanies prirodniplind.o.o.Zagreb 4,872 4,487 741 446osijekpetrold.d. 122 135 - -mazivaZagrebd.o.o.Zagreb 101 119 62 58StSid.o.o.Zagreb 24 15 430 457croscod.o.o. 11 12 239 168topračunovodstvoServisid.o.o. 8 3 54 21Sinacod.o.o.Zagreb 3 4 66 122itrd.o.o.Zagreb 1 2 23 24 Companiesavailable-for-sale janafd.d.Zagreb - 1 75 72

Strategicpartner molnyrt. 371 458 644 823

Companiescontrolledbystrategicpartner tifond.o.o. 866 768 6 6Energopetrold.d. 282 468 1 1intermold.o.o. 61 10 - 1molSlovEnijad.o.o. 31 16 - -iES-italianaEnergiaeServizis.p.a. 15 13 9 6moltrademineralimpexZrt. - - 102 1,141Slovnaft,a.s. - - 84 48

CompaniescontrolledbytheState croatiaairlines 257 234 - -jadrolinija 159 143 6 5Hrvatskeželjeznice 138 2 67 51Hrvatskaelektroprivreda 96 298 158 129petrokemijaKutina 9 - - -

150

asofstatementoffinancialpositiondate,ina,d.d.hadthefollowingoutstandingbalanceswithrelatedparties:

ina,d.d. amountsowedbyrelatedparties 31December2012 31December2011 31December2012 31December2011 Foreignrelatedcompanies HoldinaSarajevo 180 117 12 7inacrnaGorad.o.opodgorica 22 14 1 -inaBeogradd.o.oBeograd 7 10 - -interinad.o.o.ljubljana 5 1 - -interinaltdGuernsey - - - 138interinaltdlondon - - - 20adrigasmilano - - - 1 Domesticrelatedcompanies prirodniplind.o.o.Zagreb 3,132 1,551 35 20osijekpetrold.d. 32 53 1 1mazivaZagrebd.o.o.Zagreb 9 19 10 24StSid.o.o.Zagreb 8 2 179 257croscod.o.o. 1 1 68 57topračunovodstvoServisid.o.o. 1 1 4 3itrd.o.o.Zagreb - - 7 10Sinacod.o.o.Zagreb - - 2 35 Companiesavailable-for-sale janafd.d.Zagreb - - 22 25Strategicpartner molnyrt. 28 34 90 62Companiescontrolledbystrategicpartner tifond.o.o. 32 42 1 1Energopetrold.d. 4 24 - -molSlovEnijad.o.o. 2 2 - -CompaniescontrolledbytheState Hrvatskeželjeznice 69 4 8 5croatiaairlines 30 32 - -jadrolinija 30 31 1 1Hrvatskaelektroprivreda 7 186 8 14


loantoandfromrelatedparties:

productsalesbetweenrelatedpartiesweremadeattheusualpricesoftheGroup,reducedbydiscountsandrebatesdependingoneachparticularrelationship.purchasesofproductsbetweenrelatedpartiesweremadeatmarketprices,includingappropriatedis-countsdependingoneachparticularrelationship.ina,d.d.generallyseekscollateralforoilproductsoldtoitsrelatedparties,dependingonriskexposure,exceptfromcustomerswhoarestatebudgetbeneficiariesorfullyownedbythestate.theliabilitiesoftherelatedpartiestoina,d.d.arepresentednetofimpairmentofforbadanddoubtfulreceivables.compensationofkeymanagementpersonneltheremunerationofdirectorsandothermembersofkeymanagementduringtheyearwereasfollows:

includedaboveistheremunerationtothemanagementBoardmembers,executivedirectorsofthebusinesssegmentsandfunctions,sectordirectors,assistantdirectorsandsecretaryofina,d.d.

ina,d.d. amountsloansowedbyrelatedparties 31December2012 31December2011 31December2012 31December2011 Foreignrelatedcompanies inaBHd.d.Sarajevo 30 30 - -inacrnaGorad.o.opodgorica 15 15 - -interinad.o.o.ljubljana 15 15 - -rotary - 83 - -HoldinaSarajevo - 4 - -adrigasmilano - - 8 8inaHungary - 1 - - Domesticrelatedcompanies prirodniplind.o.o. 700 635 - -croscod.o.o. 582 496 - -osijekpetrold.d 50 50 - -Hostind.o.o. 4 - 4 5StSid.o.o.Zagreb - 20 - -mazivaZagrebd.o.o.Zagreb - - 50 58polybit - - 2 2 Strategicpartner molnyrt. - - - 979 Companiescontrolledbystrategicpartner Energopetrold.d. 201 336 - -

ina,d.d. 31December2012 31December2011 Short-termemployeebenefits 43.6 44.6terminationbonuses 0.6 -total 44.2 44.6

152

independenceStatementswithrespectofrelatedpartieswereprovidedbythefollowingkeyemployeesofthecompany:• SupervisoryBoardmembers(8),• presidentofthemanagementBoard(1),• managementBoardmembers(5),• ExecutiveDirectors(6),• SectorDirectors(30).

theanalysisofthereturnedsignedStatementshasconcludedthat,except inthebelowindividually listedemployees,neithertheemployeesnortheclosefamilymembersofthemanagementofina,d.d.:• heldaninterestinina,d.d.ortheinaGroup,oranyotherbusinessentityoperatingwithina,d.d.ortheinaGroupduring2012inexcessof5percentwhichwouldenablethemtoexercisesignificantinfluenceorcontrolovertheentityduring2012;• wereinvolvedinanyrelated-partytransactionsduring2012.

thefollowingmembersofkeymanagementatina,d.d.reportedtheexistenceofrelatedpartieswithintheinaGroupduring2012:• presidentoftheSupervisoryBoardmr.Sinišapetrović,wasduring2012presidentoftheSupervisoryBoardofcroatiaairlineswhichduring2012realizedcertaintransactionswithina,d.d.andamemberoftheSupervisoryBoardofatlanticGroupwhichrealizedduring2012certaintransactionswithina,d.d.• memberoftheSupervisoryBoard,mr.ferencHorváth, in2012wasamemberoftheBoardofDirectorsofSlovnaft,a.s.,vicepresidentofDirectorsoftvKplc.andpresidentoftheBoardofDirectorsiES-italianaEnergiaeServiciS.p.a.• memberoftheSupervisoryBoard,mr.Györgymosonyi,in2012wasapresidentoftheBoardofDirectorsofmolplc.,apresidentoftheBoardofDirectorsoftvKplc.andpresidentoftheSupervisoryBoardofSlovnaft,a.s.• memberoftheSupervisoryBoard,mr.józsefmolnár,wasduring2012amemberoftheBoardofDirectorsofmolplc.• memberoftheSupervisoryBoard,mr.Szabolcsi.ferenc,wasduring2012amemberoftheSupervisoryBordofSlovnaft,a.s• memberoftheSupervisoryBoard,mr.oszkárvilági,wasduring2012thepresidentoftheBoardofDirectorsofSlovnaft,a.s.andamemberoftheBoardofDirectorsofmolplc.• memberofthemanagementBoard,mr.nikoDalić,wasduring2012arepresentativeofina,d.d.intheEDinaandinagipGeneralassembly• theExecutiveDirectorforfinance,mr.andrásHuszár,wasduring2012thepresidentoftheSupervisoryBoardofsubsidiarytrSd.o.o.,amemberoftheSupervisoryBoardofsubsidiaryStSid.o.o.andamemberoftheSupervisoryBoardofsubsidiarycroScod.o.o.• ExecutiveDirectorforretail,mr.Darkomarkotić,wasduring2012thepresidentofthemanagementBoardoftifond.o.o.until1februaryandamemberoftheSupervisoryBoardoftifond.o.o.after1february2012• ExecutiveDirectorforcorporatecentre,mr.tvrtkoperković,in2012waspresidentofthemanagementBoardofsubsidiaryStSid.o.o.andpresidentoftheSupervisoryBoardofsubsidiaryStSid.o.o.• ExecutiveDirectorforExplorationandproduction,mr.ŽelimirŠikonja,in2012waspresidentoftheSupervisoryBoardofcroscod.o.o.,presidentof theSupervisoryBoardofprirodniplind.o.o.,presidentof themanagementBoardof inaGip,presidentof themanagementBoardofED-ina,amemberofthemanagementBoardofina-naftapliniE&pltd,Guernseyandtheinamajorrepre-sentativeshareholderatHayanpetroleumcompany,Damascus,Syria• ExecutiveDirectorforrefiningandmarketing,mr.arturthernesz,wasduring2012amemberofSupervisoryBoardofStSid.o.o.• ExecutiveDirectorforcorporateprocesses,mr.tomislavthür,wasduring2012amemberoftheSupervisoryBoardofsubsidiaryprirodniplind.o.o.andamemberofthemanagementBoardofED-inad.o.o.• DirectoroftreasurySector,mrs.višnjaBijelić,wasduring2012thepresidentof themanagementBoardofsubsidiarymazivaZagreb,amemberoftheSupervisoryBoardofsubsidiarySinacod.o.o.andamemberoftheSupervisoryBoardofplinarapula• DirectorofrafinerySisak,mr.DamirButković,wasduring2012amemberoftheSupervisoryBoardinKiSiKanad.o.o.,Sisak• DirectorofGeologyandreservoirmanagementSector,mr.miroĐurekovićwasduring2012amemberofthemanagementBoardofsubsidiaryadriagasS.r.l.,milan• DirectorofSouth-EastEuropeE&pSector,mr.laslofarkašvišontaiwasduring2012amemberoftheSupervisoryBoardofcrop-


lind.o.o.,amemberoftheSupervisoryBoardofplinarapulad.o.o.,amemberoftheSupervisoryBoardofGeopodravinad.o.o.andamemberoftheSupervisoryBoardofStSid.o.o.• DirectorofinternationalExplorationandproductionSector,mr.jánosláslófehér,during2012wasamemberofthemanagementBoardof inagip,d.o.o.,amemberofthemanagementBoardofsubsidiaryadriagasS.r.l.milanandrepresentativeshareholderatHayanpetroleumcompany,Damascus,Syria• DirectorofnetworkDevelopmentandassetmanagementSector,mr.DavorKnez,wasduring2012thepresidentoftheSupervi-soryBoardofsubsidiarypetroljurdanid.d.• DirectorofaccountingandtaxSector,mr.ratkomarković,during2012wasadirectorofsubsidiarytopraČunovoDStvoSErviSid.o.o.• DirectoroftheassetandServicemanagementDivision,mr.ivannovaković,during2012wasthedirectorofsubsidiaryitrd.o.o.andamemberoftheSupervisoryBoardofsubsidiaryHoStind.o.o.• DirectoroflegalaffairsSectors,mrs.martinaperićBlaić,during2012wasamemberoftheSupervisoryBoardofEnergopetrold.d.,Sarajevo• DirectorforSustainableDevelopment,oHSandEnvironmentalprotectionSector,mrs.adrijanapetrović,during2012wasamem-beroftheSupervisoryBoardofsubsidiarySinacod.o.o.• DirectorofinvestmentandmaintenancemanagementSector,mr.josefStoppacher,during2012wasamemberoftheSupervisoryBoardofcroSco-naftniservisid.o.o.• DirectorofprocurementSector,mr.GyörgySzűcs,during2012wasthepresidentoftheSupervisoryBoardofina-Sol.• DirectoroflubricantsSector,mr.andrejŠolaja,during2012wasadirectorofsubsidiarymazivad.o.o.

Otherrelatedpartytransactionsthecompanyisthemajorcustomerofprirodniplind.o.o.,withthecompanyasitssoleowner(note17),presentedconsolidated2012revenueintheamountofHrK7,487million(2011:HrK6,889million),ofwhichHrK741million(2011:HrK446million)weregeneratedfromsaletoina,d.d.thecompanyisthemajorcustomerofcrosconaftniServisid.o.o.anditssubsidiaries.thecroscod.o.o.,withthecompanyasitssoleowner(note17),presentedconsolidatedfor2012revenueintheamountofHrK1,513million(2011:HrK1,253million),ofwhichHrK239million(2010:HrK168million)weregeneratedfromsaleoftechnologicalservicestoina,d.d. thecompanyisalsothemajorcustomerofStSid.o.o.,whichiswhollyownedsubsidiary,(note17),presentedconsolidatedrevenueintheamountofHrK482millionfor2012(2011:HrK520million),ofwhichHrK430million(2011:HrK457million)weregeneratedfromsaletoina,d.d.thecompanyisalsothemajorcustomerofmazivaZagrebd.o.o.,whichiswhollyownedsubsidiary,(note17),presentedconsolidated2012revenueintheamountofHrK213million(2011:HrK214million),ofwhichHrK62million(2011:HrK58million)weregener-atedfromsaletoina,d.d.thecompanyremainsthecustomerofcompanyjanafd.d.,inwhichithasaholdingof11,795%(note21).During2012,approxi-matelyHrK60millionofjanaf’stotalrevenueintheamountofHrK456millionaccountforsalesrevenueinrespectofina,d.d.asuserofthepipelinesystemofjanafd.d.(2011:HrK67millionoutofHrK440milliontotalrevenue).

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thecompanyandtheGrouphaveanumberofcontinuingoperationalandfinancialcommitmentsinthenormalcourseoftheirbusi-nessesincluding:- investmentinrefiningassetstocomplywithnewstandardsforfuels- exploratorydrillingandwellcommitmentsabroad,- explorationanddevelopmentcommitmentsarisingunderproductionsharingagreements,- guarantees,performancebondsandlettersofcreditwithcroatianandforeignbanks,- completionoftheconstructionofcertainassets.

InvestmentinrefiningassetsDuring2005,a temporary investmentunit for themodernisationof refineryoperationswasestablishedbaseduponacompany’smanagementdecision.thecompanyiscommittedtoaprogrammeofcapitalinvestmentinitsrefineriesinordertoenablethemtocontinuetoproducefuelswhichcomplywithincreasinglystringentenvironmentalstandards(intermsoftherefineryproductquality)ontheEuropeanmarket.themodernisationofrefineriesshouldincludetheincreasinglystricterenvironmentalprotectionrequire-mentsapplicabletothefuelproductionprocess.thetasksoftheinvestmentunitanditsteamsincludemanagingmodernisationprojectsattheSisakandrijekarefineries.theulti-mateobjectiveoftheprogrammeistomeettheEuropeanqualitystandardsapplicabletorefineryproductsuntilspecifiedeffectivedates.theconstructionofnewplantsandthemodernisationoftheexistingoneswillsignificantlyimprovetheproductquality.forthepurposesoftheimplementationoftherefinerymodernisationproject,225contractswereconcludedwithvendorsandreal-isedHrK3.78billionasat31December2012. InvestmentincontractareasofNorthAdriaticactivityofbringingtheproductionofnaturalgasreservesinthegeographicareaofnorthadriatic,mostlywithintheepicontinentalshelfofrepublicofcroatia,istakingplacethroughproductionSharingagreements(pSa)whichinahassignedwithforeigncompa-niesintheso-calledcontractareas:• ina,d.d.andEnicroatiaB.v.havecloseddowninthe1996and1997productionSharingagreementsincontractareasaiza-lauraandivana,andrealizationofthepartnershiptakesplacethroughajointoperatingcompanyinagipwithinterests50:50,• ina,d.d.andEDiSonintErnationalS.p.a.havecloseddowninthe2002productionSharingagreementinthecontractareaizabela&iris/iva.partnershipwiththeEDiSontakesplacethroughtheoperatingcompanyEDinawithinterests:Edison50%andina50%.Whenizabelagasfieldwillalsobeinproduction,inthenorthadriaticareaatotalof18productionplatformsand1compressorplat-formswithatotalof46productionwellswillbeinstalled.untilnow,inthecontractareasnorthadriaticandaiza-laura,ina,d.d.hasinvestedincapitalconstructionofminingfacilitiesandplantsHrK4.3billion,whileofthetotalgainedreservesina´ssharewillrangeabout70%oftheproducedgas,whichisfurtherplacedonthecroatiangasmarket.ontheizabelagasfieldalldevelopmentactivitiesarecompletedduring2010andizabelaSouthplatformisreadyforproductionstartsince23may2010,whileizabelanorthplatformsince13july2010.finaltechnicalcommitteeinspectionhasbeenperformedbycroatianministryofEconomyinDecember2011andoperatinglicenseisissuedinmay2012.DuringSeptember2012Ex-agencyandcroatianregisterofShippingperformedregularannualsurveysofplatformsandextendedallSafetycertificates.althoughtechnicallyready,inthismomentplatformsstillarenotintheproduction,duetostillongoingnegotiationsbetweenina,d.d.andEdison.onceproductionstarts,ina’sshareofproductionfromtheizabelagasfieldwillbeapproximately45%.on31December2012inagiphadinbothcontractareas175activecontractsamountingintotaltoHrK691.7million.theremainingcommitmentsunderthesecontractsat31December2012amountedtoHrK442.3million.fortheneedofthedevelopmentoftheizabelagasfieldfrom1january2008until31December2012,Edinahasconcluded80(27arestillactive)contractsamountingintotaltoEur140.3millionfromwhichEur138.5millionhasbeencarriedouton31December2012.

39. coMMItMeNts


InvestmentsinSyriaSince1998ina,d.d.hashadsix(6)commercialdiscoveriesontheHayanBlock(jihar,almahr,jazal,palmyra,mustadiraandmazrur)withsignificantoil,gasandcondensatereserves.

Currentsituationoil,condensate,gasandlpGproductioninSyria isstillongoing.Expatriates(ina)working inHayanpetroleumcompany(Hpc)onHpcHayanandHayanfieldsandinHpcDamascusheadquartershavenotbeenworkinginSyriasince25january2012,andthemainproductionactivitieshavebeentakenoverbyHpc’slocalworkforce,whichina,d.d.considersillegal(seenote3). ina,d.d. istheoperatorattheaphamiaexploratoryblock.ina,d.d.hasacquired270km23Dseismicanddrilledtwoexplorationwells.oilsaturatedlayersatmudawaraandBeerasSibstructureshavebeendetermined.totalcapitalexpendituresamounttoap-proximatelytouSD65million.thesecondandlastextensionoftheexplorationphaseendedon11november2012,withanon-ful-filledcommitmenttodrilloneexploratorywellinordertoconfirmthecommercialityofoilsaturatedlayers,iftheforcemajeurewasnotdeclared.inregardstothismatter,ina,d.d.hasnotreceivedanycommentfromGpcorministrysideyet.

“Takeorpay“contractStartingfrom1january2011prirodniplind.o.o.concludedanewimportcontractwithEniGas&powerforprocurementofapp2.25bcmofnaturalgasuntil31December2013.asof1january2013futureobligationsamounttoapproximatelyHrK1.8billionuntilthecontractexpiry(31December2013).alongwithlongtermcontractwithEniGas&power,anothercontractwassignedwithmEtandGEoplinregardingnaturalgasimportuntil1october2013.asof1january2013futureobligationsamounttoapproximatelyHrK625.29millionuntilthecontractexpiry.

GasTransportationContractthecompanyconcludedtransportationagreementstoensuredeliveriesofthegastothedestinationpoint(fcacroatianborder).validitiesoftransportationcontractsare,until2015forSloveniaanduntil2017foraustria.thesecontractsarealsotransferredontoEniGas&powerandGasconnectaustriabutthetransportationcostisreimbursedbyprirodniplin.additionally,withinexistingcontractforprocurementofnatu-ralgasfromEniGas&power,thereisanobligationofpaymentfortransportforsupplyroutethroughHungaryinperiodfor2,5years(entryatcroatianborderatDonjimiholjacfrom1july2011until31December2013),whichismonthlyamountstoapproximatelyHrK10.4million.thefuturetransportationcontractedcommitmentsapproximateinamounttoHrK970millionuntil2017.

GassalesContractsGrouphadfollowingnaturalgassalecontractsfrom1october2012i.e.from1january2012totheexpiryoftheunderlyingcontract:1. long-termcontractbetweenprirodniplind.o.o.andHEpd.d.Zagreb(long-termcontractistransferredtoprirodniplind.o.o.)a) contractperiod:from1january1996until1january2016b) Salesrevenuefrom1januaryuntil31December2012:HrK2.1billionc) contractedsupplyquantity:1.919.268.000m3from1january2013until1january2016d) Estimatedrevenuefortheremainingperiod:HrK5.5billion 2. contractbetweenprirodniplind.o.o.andpetrokemijad.d.Kutinaa) contractperiod:from1january2012until31December2013b) Salesrevenuefrom1januaryuntil31December2012:HrK1.6billionc) contractedsupplyquantity:523.200.000m3from1january2013until31December2013d) Estimatedrevenuefortheremainingperiod:HrK1.4billion3.contractsbetweenprirodniplind.o.o.andtariff-basedcustomers(distributors-procurement)a) contractperiod:from1october2012until30September2013b) Salesrevenue1januaryuntil31December2012:HrK1.4billion:c) contractedsupplyquantity:466.653.913m3from1january2013until30September2013d) Estimatedrevenuefortheremainingperiod:HrK1.03billion

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4. contractsprirodniplind.o.o.–othertariff-basedcustomers–distributors-salesa) contractperiod:from1october2012until30September2013b) Salesrevenuefrom1january2012until31December2012:HrK1.01billionc) contractedsupplyquantity:142.184.183m3from1january2013until30September2013d) Estimatedrevenuefortheremainingperiod:HrK427million

5.contractsprirodniplind.o.o.–othertariff-basedcustomersa) contractperiod:from1october2012until30September2013(rafineries,viroandSladoranauntil30September2014)b) Salesrevenuefrom1januaryuntil31December2012:HrK1.01billionc) contractedsupplyquantity:601.891.833m3from1December2013until30September2014d) Estimatedrevenuefortheremainingperiod:HrK1.5billion

Watersellingcontracts1. Highqualityprocesswatera) contractedsupplyquantity:2,209,000m³in2012.b)Salesrevenuefrom1januaryuntil31December2012:4.5millionHrKc)contractperiod:2012d)Estimatedrevenuefor2013:4.4millionHrK2. Geothermalwatera) contractedsupplyquantity:422,000m³in2012.b)Salesrevenuefrom1januaryuntil31December2012:2.5millionHrKc)contractperiod:2012d)Estimatedrevenuefor2013theperiod:2.2millionHrK


EnvironmentalmatterstheprincipalactivitiesofthecompanyandtheGroup,comprisingoilandgasexploration,production,transportation,refininganddistribution,canhaveinherenteffectsontheenvironmentintermsofemissionsintosoil,waterandair.Both,thecompanyandtheGroupregularlyrecord,monitorandreportonenvironmentalemissionsinaccordancewiththeirobligationsspecifiedinapplicablelawsandpayemissionfeestotheEnvironmentalprotectionandEnergyEfficiencyfundspecifiedbylaw.theenvironmentaleffectsaremonitoredbylocalandnationalgovernmentalenvironmentalauthorities.

Harmonisation of INA’s operations with the IPPC DirectivethetranspositionoftheippcDirectiveincroatiahasbeenaccomplishedbytheDecreeonDeterminingintegratedEnvironmentalpro-tectionconditions(officialGazetteno.114/08).toalignitsoperationswiththeDecreerequirementsina,d.d.hasprepareddetailedstatusanalysesandsurveysonharmonisationforthesitesEthane,centralGasStationmolveandtheSisakandrijekarefineries.inordertoverifypreparedreports,during2012thecontractwasmadewithanauthorizedcompanyEcoina.additionally,in2012re-questtoobtainingintegratedenvironmentalprotectionrequirementsarecommittedtoministryofEnvironmentandnatureforalloftheselocations.aseriesofprojectsatvariousimplementationstagesareunderwaytomeettherequirementsensuringalignmentoftheexistingtechnologywiththeBestavailabletechniques(Bat).insimplewords,theippcDirectiverequiresmeetingtheregulatoryrequirementsapplicabletosoil,water,noise,wastemanagementandincreasingenergyefficiency.apartfromlargeinvestments,thetimeandthepaceofprogressrequiredtoachievecompliancewiththeippcDirectivearealsokeyelements,whichiswhyina,d.d.requestedatransitionperioduntilfullcomplianceuntil2017,whichhasbeenapproved.

Alignment of INA’s operations with the greenhouse gas emission (GHG) legislationintheyear2012,severalnewlegislationsinthedomainofairprotectionhasbeenissued,butairprotectionact(oG130/11)stillremainsthemaindocument.after1january2013,rijekarefinery,Sisakrefinery,EtanplantandcentralGasStationmolvewillbeincludedintheEuropeanEmissiontradingSystem(EuEtS),andauctioningwillbeginwithcroatia’saccessiontotheEuropeanunion.inmay2012methodologyreport,BaselineDatareport,verificationreportandrequestforfreeallocationofemissionallowanceshavebeensubmittedtotheministryofEnvironmentalandnatureprotectionforallfourina’sinstallations.allthesereportswerealsodeliveredtotheEuropeancommissionbytheministryandarebeingreviewed.updatedrijekaandSisakrefineryGreenhousegasmonitoringplansweresubmittedtotheministryinjulyduetonewprocessunitswhichwereconstructed,toensuremodernstandardsforcrudeoilprocessingandproductionofmotorfuelsinaccordancewiththerequirementsofcroatianandEuropean standards (Eurov). inrijekarefinery integratedHydrocracking complexwas constructed(includes Hydrocracking process unit, Hydrodesulfurization, Hydrogen productionunit and Sulphur removal unit), while in Sisakrefinery,isomerisationunitwasconstructed.GreenhouseGasmonitoringplansforEtanplantandcGSmolvehavebeenupdatedaswell,inaccordancewiththerecommendations/instructionsoftheverifier,andweresubmittedtotheministryinnovember2012.an-nualco2emissionsreportforallfourina’sinstallationsarepreparedandwillbeverifiedandsubmittedtothecroatianEnvironmentagencyuponthereceiptoftheupdatedgreenhousegasespermit.

Alignment of INA’s operations with the air protection legislationina,d.d.hasbudgetedfundsforthepurposeofcompliancewiththecroatianairprotectionregulationsoverthenextseveralyears.theseincludeprimarilymeasurestobringemissionsofairpollutantsfromstationarysourcesandtechnicalenvironmentalprotectionstandardsapplicabletoemissionsofvolatileorganiccompounds(voc)duringpetrolstorageanddistributioninlinewiththerequire-ments.asoftheendof2012,380petrolstationswerereconciledwiththerequirementsoftheDecreeonEnvironmentalprotectionStandardsintheareaofvolatileorganiccompoundsfrompetrolStorageandDistribution(officialGazetteno.135/06),whichisal-mosttheentireretailnetworkofina,d.d.petrolstations.ina,d.d.hassubstantiallymettherequirementstoalignitsemissionsfromlargecombustionplants,arequirementsetoutintheDecreeonpollutantEmissionsfromStationarySources,bybringingnaturalgasasanenergysourcetothecombustionplants.

40. coNtINGeNt lIABIlItIes

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Harmonisation of INA’s operations with the REACH pursuanttothecroatianlawontheimplementationoftheregulationno.1907/2006(Ec)oftheEuropeanparliamentandcouncilontheregistration,Evaluation,authorisationandrestrictionofchemicals,ina,d.d.hasregistered14substancesand4semi-finishedproductstobeabletoexporttheproductstoEumarkets.SincecroatiaisstillnotanEumember,theregistrationhasbeeneffectedthroughmolastheonlyrepresentative.ina,d.d.willregisteralltheremainingproductsandsemi-finishedproductsoncecroatiabecomesanEumember.asthedateofjoiningtheEuhasalreadybeendetermined,sohavealsothepre-registrationandregistrationdeadlinesincroatia.theperiodfornotificationaccordingtotheclpregulationisfrom1julyto1august2013.thepre-registrationperiodrunsfrom1july2013until31December2013.theregistrationdeadlineforcmrorhighlytoxicsubstancesforfreshormarineorganismsproducedinquantities(r50/53)ofover100tonnesayearis30june2014.theregistrationdeadlineforallsubstancespro-ducedinsmallerquantities(1-100t/year)is31may2018.During2013,ina,d.d.willnotified,pre-registerandregister6substances,14intermediatesand3substancesthatarebothmaterialandintermediate.

Environmental provisions Environmental obligations are theobligations of a company to recover pollutions causedby the company’s operations. they canbedivided intotwocategories:environmentalprovisionsandcontingencies.at31December2012, ina,d.d.madeenvironmentalprovisionsintheamountofHrK295million,whereastheprovisionsattheGrouplevelamountedtoHrK309million.contingenciesattheinaGroupandina,d.d.levelswereestimatedatHrK661millionandHrK631million,respectively.theestimateswerenotrecognisedbecausethetimingoftheeventisuncertainandthereisnoevidenceofpollution.aportionofthecontingenciesmayberecognisedasprovisionsbymovingthetimewindowordecidingtoabandonthepresentbusinesslocationofina,d.d.,ordiscontin-uingfurtheractivitiesataparticularsite.

LitigationsEDiSonintErnationalS.p.aarbitrationprocedurein2002,EDiSonintErnationalS.p.a.andina,d.d.concludedtheproductionSharingagreementforthecontractareaoftherepublicofcroatiaoffshoreadriaticSea,izabelaandiris/ivablocks(agreement).EDiSonintErnationalS.p.a.initiatedthearbitrationprocedureon29june2011bydeliveringthenoticeofarbitration.initsclaimEDi-SonintErnationalS.p.a.statesthatina.d.d.essentiallydidnotadheretotheagreement,i.e.thatitbreachedtheobligationsarisingfromtheagreement,andEdisonisconsequentlyseekingtheamountofEur110.5million.on19july2011ina,d.d.provideditsresponsetothenoticeofarbitrationandalsosetoutitscounterclaim.theseatofarbitrationisvien-na,republicofaustriaandthearbitrationprocedureisbeingconductedinlinewiththeuncitralarbitrationrules2010.followingtheconstitutionofanarbitraltribunaltoheartheclaim,EDiSonfileditsStatementofclaimon20february2012.on25may2012, ina, d.d. submitted its Statement ofDefence and counterclaim. further,written submissionswere being exchanged and verbalhearingwasheldinDecember2012invienna.thehearingwasfollowedbyanotherroundofwrittensubmissionsandthejudgmentofthearbitraltribunalispending.EDiSonseeks,interalia,damagesintheamountofEur108milliontogetherwithvariableratecroatianlegaldefaultinterestasfrom20february2012untilfullpaymentismade.managementbelieves,basedonlegaladvice,thatnolosseswillbeincurred,sonoprovisionhasbeenrecognizedasof31December2012.

Ministry of Finance Tax Inspection on20february2012ina,d.d.receivedfromthefinancialpoliceattheministryoffinanceareportonthefindingsinconnectionwiththesupervisionoflegality,correctnessandtimelinessofthecalculation,declarationandpaymentofbudgetaryrevenuefortheperiod1january2008until31December2009.theinspectioncoveredvalue-addedtaxandcorporateincometaxfortheperiod1january2008-31December2009.accordingtothefindingsreport,thecompanyhasbeenimposedadditionaltaxliabilitiesaswellaslate-paymentinterestfortheperiodfrom2008to2009.thetotaladditionalliabilityamountedtoapproximatelyHrK131million.ina,d.d.hasfiledacomplaintagainstthereportwithinthelegallyprescribeddeadlineandhaschallengedallthefindingsidentifiedinthereportpreparedbythefinancialpoliceoftheministryoffinanceaswellasalltheadditionallyimposedliabilities.on28june2012ina,d.d.receivedthetaxresolutionfromtheministryoffinance,taxauthoritywhotookoverthecasefromthefinancepolice.thepotentialtaxliabilityandlatepenaltyinterestdeterminedbythetaxresolutionwasdecreasedcomparedtotheinitialliabilities


determinedinthereportandamountstoapproximatelyHrK124million.27july2012withintheprescribeddeadlineina,d.d.hasfiledtheappealagainstthetaxresolutionbutuntilnowdidnotreceivetaxresolutionfromsecondinstance.firstinstanceoftaxauthorityhasnotforwardedanappealtosecondinstance;howeveritwillcarryoutadditionaltaxinspectionactivities.managementbelieves,basedonlegaladvice,thatnolosseswillbeincurred,sonoprovisionhasbeenrecognizedasof31December2012.

GWDF Partnership München and GWDF Limited CyprustheplaintiffGWDfpartnership,GesellschaftBürgerlichenrechts,andGWDflimitedcyprusclaimscompensationagainstina,d.d.Zagrebandina-naftaplininamountofHrK59millionfordamageincurredowingtothelossofrightsresultingfromthejointventureagreementmadewiththecompanySaknavtobi,andwhichallegedlyoccurredbyvirtueofthedefendant’sbehaviour,i.eduetoitswithdrawalfromnegotiationsbywhichitshouldhavebecomeapartyofthejointbusinessventure.ina,d.d.filedinSeptember2007theanswertotheclaim,inwhichboth,thefoundationandtheamountoftheclaimstatementarebeingcontestedintheirentire-ty,statingamongsttheotherthatthedefendantsabandonedthenegotiationsbecauseofabusinessdecision,andthatexactlytheplaintiffswerethosewhohadbeennegotiatingcontrarytotheprincipleofconsciousnessandfairness.furthermore,ina,d.d.filedtheobjectiontothelackoflitigationcapacityasregardsGWDfpartnership,theobjectiontothemisdirectedpassivepersonalityinrelationtoina,d.d.,statingalsothatthecourtisnotcompetentasregardsGWDflimitedcyprus.thecourtoffirstinstancemustfirstofalldecideonthelawapplicabletothislegaldisputeaswellaswhetheritiscompetentornotinthiscase.uptonowseveralhearingswereheldduringtheyears2008,2009andin2010,anditwasdiscussedupontheproceduralissues(capacityofparties,jurisdictionandcompetentlaw).thelasthearingheldon8february2011,afterthepartiesrepeatedtheirstandpoints,thecourtdecidedtorequestfromtheGermanrepublicandtherepublicofcyprusbydiplomaticwaysthetextofthelawrelevantformakingdecisionsinthiscase.managementbelieves,basedonlegaladvice,thatnolosseswillbeincurred,sonoprovisionhasbeenrecognizedasof31December2012.

Ljubljanska bankatheclaimsfromplaintiffljuBljanSKaBanKa,ljubljana,Sloveniaagainstina,d.d.inamountofHrK61millionhavearisenfromtwocontractsof1982ontheuseofshort-termforeigncurrencyloanabroadwhichwereconcludedbetweenina-rafinerijanafterijekaandljubljanskabanka-osnovnabankaZagreb.theclaimsofljubljanskabankaintheconcerneddisputerefertodefaultinterestdebtarisingfromthelegallybindingdecisionoftheDistrictEconomiccourt(thepredecessorofcommercialcourt)inZagrebwhichwasrenderedintheearliercourtprocedureconduct-edonthesame,above-stated,legalgrounds.theprocedurewasinitiatedbymotionforexecutionwhichwasfiledbyljubljanskabankaon13September1995.thecommercialcourtinZagrebrenderedtheDecisiononexecution,howeverina,d.d.filedanobjectionagainstthedecisionregardingthestatuteoflimitations,themeritsandtheamountoftheclaims,sotheprocedurewascontinuedasacivilprocedureinitiatedbyalawsuit.inaobjectedregardingtheprematurityoflawsuit,sinceaprocedureisalreadybeingconductedonthesamelegalgroundsfortheunlawfulnessofexecutionwhichhasinthemeantimebeenendedbyalegallyeffectivedecision,withtheplaintiffrequestingforaretrial.inaisalsoobjectinginrelationtotheplaintiff’scapacitytosue.thecommercialcourtrenderedtheDecisionof24november2008wherebyitdismissedthelawsuit.theplaintifflodgedanappealagainsttheafore-stateddecision,whichwasadoptedbytheHighcommercialcourtandreturnedtothecourtoffirstinstanceforaretrial.Duringtheretrial,theplaintiffbyitsapplicationof3may2010,alongwiththeabove-statedobjections,alsofiledaclaimpre-clusion(resiudicata)objectionwithreferencetotheabove-statedprocedurefinalizedbyalegallyeffectivedecision.thecourtoffirstinstancefoundthattheclaimpreclusionisapplicableand,byitsDecisionof29September2010,againdismissedtheplaintiff’slawsuit.pursuanttotheplaintiff’sappeal,theHighcommercialcourtinZagrebrenderedDecisionwherebytheabove-stat-edDecisionofthecommercialcourtinZagrebof29September2010wasasserted.theplaintiffhasappliedforareview.theoutcomeoftheprocedureisstilluncertainduetothecomplexityofthelegalmatter(claimsforaltereddefaultinterest),howeveritisnowmoreprobablethattheSupremecourtwilltakethesamestandpointastheHighcommercialcourt.managementbelieves,basedonlegaladvice,thatnolosseswillbeincurred,sonoprovisionhasbeenrecognizedasof31December2012.


Gearing ratiotheprimaryobjectiveoftheGroupinmanagingitscapitaltoensuregoodcapitalratiosinordertosupportallbusinessactivitiesandmaximizethevaluetoallshareholdersthroughoptimizationoftheratiobetweenthedebtandequity.thecapitalstructureoftheGroupconsistsofdebtpartwhichincludesborrowingsasdetailedinnotes26and29offsetbycashandbankbalances (socallednetdebt)andshareholderequitycomprisingof issuedcapital, reserves, retainedearningsandnon-con-trollinginterestsasdetailedinnotes33to36.capitalstructureoftheGroupisreviewedquarterly.asapartofthereview,thecostofcapitalisconsideredandrisksassociatedwitheachclassofcapital.internally,maximumgearingratiooftheGroupisdetermined.thegearingratioattheendofthereportingperiodwasasfollows.

Debtisdefinedaslong–termandshort-termborrowingsandcreditlines(excludingderivativesandfinancialguaranteecontracts),asdescribedinnotes26and29.totalequityincludescapital,reservesoftheGroupthataremanagedascapital,andnon-controllinginterests.

Categories of financial instruments

41. fINANcIAl INstRuMeNts ANd RIsK MANAGeMeNt

inaGroup ina,d.d. 31December2012 31December2011 31December2012 31December2011Debt: 7,152 9,452 6,758 9,157longtermloans 1,161 5,630 1,053 5,556Shorttermloans 1,266 1,918 1,057 1,784currentportionoflong-termborrowings 4,725 1,904 4,648 1,817

cashandcashequivalents (488) (337) (270) (229)netdebt 6,664 9,115 6,488 8,928Equity 14,954 14,365 15,502 14,282Equityandnetdebt 21,618 23,480 21,990 23,210

Gearingratio 31% 39% 30% 38%

inaGroup ina,d.d. 31December2012 31December2011 31December2012 31December2011financialassets cash and cashequivalents 488 337 270 229financialassetsdesignatedasatfairvaluethroughprofitandloss 7 - 6 5Embeddedderivativefinancialinstruments 7 7 - -loansandreceivables 3,727 4,364 4,896 4,979available-for-salefinancialassets 340 325 340 325positivefairvalueofderivatives 6 48 6 48 financialliabilitiesamortisedcost 8,836 11,484 8,105 10,932Embeddedderivativefinancialinstruments 40 22 - 3negativefairvalueofderivatives 3 32 3 32

162

Financial risk management objectives inaGroupincourseofbusinesscontinuouslydeterminesandmonitorsfinancialrisks.theriskmanagementandHedgingpolicyforinaGroupprovidestheframeworkunderwhichina,d.d.anditsconsolidatedsubsidiariesmanageandmaintaincommodity,foreignexchangeandinterestrateriskatanacceptablelevel,allowingina,d.d.toachieveitsstrategicobjectiveswhileprotectingthefuturefinancialstabilityandflexibilityofinaGroup.ina,d.d.integratesandmeasuresallfinancialrisksoninaGrouplevelinthefinancialriskmodelusingmontecarlosimulation,whileseniormanagementreviewsregularlythefinancialriskreports.Bytakingthisgeneralapproach,ina,d.d.assumesthebusinessactivitiesasawell-balancedintegratedportfolioanddoesnothedgeindividualelementsofitsexposuretofinancialrisksinanormalcourseofbusiness.therefore,ina,d.d.activelymanagesitsfinancialriskexposureforthefollowingpurposes:

•corporatelevel–maintainingfinancialratios,coveringexposuretosignificantmonetarytransactions,etc;•businesssegmentlevel–decreasingtheexposuretomarketpricesfluctuationincaseofdeviationsfromthenormalcourseofbusi-ness(e.g.plannedregularshutdownofrefineryunitsforthepurposeofoverhaul)

ina,d.d.treasurySectorcarriesoutfinanceactivitiesofina,d.d.andco-ordinatesfinanceoperationsofinaGroupondomesticandinternationalfinancialmarkets,monitorsandmanagesthefinancialrisksrelatedtotheoperationsofinaGroup.themostsignificantrisks,togetherwithmethodsusedformanagementoftheserisksaredescribedbelow.

inaGroupusedderivativefinancialinstrumentstoaverylimitedextentinordertomanagethefinancialrisks.Derivativefinancialinstrumentsusedbyina,d.d.forthepurposeofhedgingoffinancialrisksareregulatedbysigninganiSDa(internationalSwapsandDerivativesassociation)agreementwithcounterparties.inaGroupdoesnotusederivativefinancialinstrumentsforspeculativepur-poses. MarketriskCommodity price risk management (price risk) thevolatilityofcrudeoilandgaspricesistheprevailingelementinthebusinessenvironmentofinaGroup.inaGroupbuyscrudeoilmostlythroughshort-termarrangementsinuSdollarsatthespotmarketprice.inaGroupalsoimportsasignificantportionofnaturalgastocoveritsrequirementsatthepricedenominatedinuSdollars,whichisrevisesonaquarterlybasis,inaccordancewithformulainthree-yearcontractforsupplysignedwiththeitaliancompanyEni.inadditiontoexplorationandproduction,andrefineryoperations,oneofthemaincoreactivitiesofina,d.d.aremarketingandsaleofrefineryproductsandnaturalgas.theformulafordeterminingthecrudeproductsprices,specifiedbytheHighestretailrefinedproductpricingregulation,toalimitedextentisprotectingtheGroupfromthechangesinthecrudeoilandcrudeproductsprices,andforeignexchangerisk,enablingtherefineryproductstoberepricedeverytwoweeks,withcertainlimitations,dependingonthemarketpricesandfluctuationsintheexchangerateofthecroatiankunaagainsttheuSdollars.

ina,d.d.mayusecommodityhedgingtransactionsonlyforthepurposeofachievingtheabove-mentionedobjectivesoncorporateandbusinesssegmentslevel.ina,d.d.canuseswapandoptioninstruments.in2012ina,d.d.enteredintoshort-termcommodityswaptransactionstohedgeitsexposureonchangesininventorylevels,changesinpricingperiodsandfixedpricecontracts.thetrans-actionswereinitiatedtoreduceexposurestopotentialfluctuationsinpricesovertheperiodofdecreasinginventoriesattherefiner-ies,aswellastomatchthepricingperiodofpurchasedcrudeoilandcrudeproductswiththecrudeoilprocessingandrefineryproductretailpricingperiods.thesetransactionswerehedgingtransactionsanddonotqualifyforhedgeaccountingtreatmentunderifrS.at31December2012positivefairvalueofcommodityderivativesamountedtoHrK6million,whilenegativefairvaluefromsuchtransactionsamountedtoHrK3million(seenote27).

Foreign currency risk management as inaGroupoperatesboth incroatiaandabroad,manyof its transactionsaredenominatedandexecuted in foreigncurrencies,henceina,d.d.isexposedtoexchangeraterisks.theinaGrouphasanetlonguSDandEur,andanetshortHrKoperatingcashflowposition.Generally,theGroupmanagesitscur-


rencyriskusingnaturalhedging,whichisbasedontheprinciplethatthecombinationofcurrenciesinthedebtportfolioshouldreflectthecurrencypositionoftheGroup’sfreecashflow.furthermore,inordertoavoidexcessiveexposurestofluctuationsintheforeignexchangeratewithrespecttoasinglecurrency(i.e.uSD),ina,d.d.appliesaportfolio-basedapproachwhileselectingthecurrencymixfor itsdebtportfolio. inaddition,theapplicableHighestretailrefinedproductpricingregulationallowspassingapartoftheeffectsarisingfromunfavorablefluctuationsinforeignexchangeratesontothedomesticmarket.ina,d.d.mayuseacross-currencyswaptoadjustitscurrencymixinthedebtportfolio.at31December2012therewerenooutstand-ingcross-currencytransactions.

Foreign currency sensitivity analysisinaGroupismainlyexposedtothecurrencyriskrelatedtochangeofcroatiankunaexchangerateagainstuSdollar,duetothefactthatcrudeoilandnaturalgastradingontheinternationalmarketismostlyperformedbasedonuSD.inaddition,theGroupisexposedtofluctuationsoftheexchangerateofcroatiankunaagainstEur,asapartofitsdebtportfolioisdenominatedinEur.thefollowingtabledetailsthecompany’ssensitivitytoa10%strengtheningincroatiankunain2012(in2011:10%)againsttherel-evantforeigncurrenciesthesensitivityratesusedrepresentmanagement’sassessmentofthereasonablypossiblechangeinforeignexchangerates.thesensitivityanalysis includesonlyoutstandingforeigncurrencydenominatedmonetary itemsandadjuststheirtranslationattheperiodendforachangeinforeigncurrencyratesexpressedaspercentage.thesensitivityanalysisincludesmone-taryassetsandliabilitiesinforeigncurrencies.anegativenumberbelowindicatesadecreaseinprofitwherecroatiankunachangesagainsttherelevantcurrencybythepercentagespecifiedabove.forthesamechangeofcroatiankunaversustherelevantcurrencyintheoppositedirection,therewouldbeanequalandoppositeimpactontheprofit.

theexposureonthe10%fluctuationintheexchangeratesforthecurrenciespresentedaboveismostlyattributabletotheoutstand-ingliabilitiestowardssuppliersandborrowingsdenominatedinuSdollars(uSD)andeuros(Eur).

inaGroup liabilities assets 31December2012 31December2011 31December2012 31December2011currencyuSD 3,574 4,359 1,609 582currencyEur 4,263 5,384 633 444 7,837 9,743 2,242 1,026

ina,d.d. liabilities assets 31December2012 31December2011 31December2012 31December2011currencyuSD 3,167 4,452 1,437 530currencyEur 4,044 5,286 491 934 7,211 9,738 1,928 1,464

inaGroup currencyuSDimpact currencyEurimpact 31December2012 31December2011 31December2012 31December2011loss (196) (378) (363) (494) (196) (378) (363) (494)

ina,d.d. currencyuSDimpact currencyEurimpact 31December2012 31December2011 31December2012 31December2011loss (173) (392) (355) (435) (173) (392) (355) (435)

164

Interest rate risk management asanenergycompany,theGroupdoesnotspeculateonfluctuationsininterestrates,andthereforeprimarilychoosesfloatinginter-estrates.However,incertaininstrumentsandcertainmacroenvironment,theselectionoffixedinterestratecanbemorefavorable.ina,d.d.inaccordancewiththeriskmanagementandHedgingpolicyforinaGroup,canuseinterestrateswaptransactionsinordertomanagetherelativelevelofexposuretointerestrateriskoncashflowsrelatedtoborrowingswithfloatinginterestrates.asof31December2012therewerenooutstandinginterestrateswaptransactions.

Interest rate risk analysisthesensitivityanalysisbelowhasbeendeterminedbasedontheexposureto interestratesatthestatementoffinancialpositiondate.forfloatingrateliabilities,theanalysisispreparedassumingtheamountofliabilityoutstandingatthebalancesheetdatewasoutstandingforthewholeyear.a50or200basispointincreaseordecreaseisusedwhenreportinginterestrateriskinternally,andrepresentsmanagement’sassessmentofthereasonablypossiblechangeininterestrates.iftheinterestrateswouldbe200basispointshigher/lowerandallothervariableswereheldconstant,thechangesininterestexpenseofinaGroupandina,d.d.wouldbeaspresentedbelow.Becauseofthedecreaseintotaldebt,theexposuretoapotentialchangeintheinterestratesonprofitshasalsodecreased.

ifinterestrateswouldbe200basispointshigher/lower,theprofitoftheinaGroupasof31December2012wouldbedecreased/increasedbyHrK136.7million,whilethedecrease/increasewouldamounttoHrK34millionwithachangeof50basispoints,(2011:decrease/increasebyHrK181millionhadtheinterestratesbeen200basispointshigher/lower,andbyHrK45millionhadtheinter-estratesbeen50basispointshigher/lower),andin2012theprofitoftheina,d.d.woulddecrease/increasebyHrK128.8millionifinterestrateshadbeen200basispointshigher/lower,whilethedecrease/increasewouldamounttoHrK32millionwithachangeof50basispoints(2011:decrease/increasebyHrK176millionhadtheinterestratesbeen200basispointshigher/lower,andbyHrK44millionhadtheinterestratesbeen50basispointshigher/lower).

OtherpriceriskstheinaGroupisexposedtoequitypricerisksarisingfromequityinvestments.Equityinvestmentsareheldforstrategicratherthantradingpurposes.

Equity price sensitivity analysis thesensitivityanalysesbelowhavebeendeterminedbasedontheexposuretoequitypricerisksatthereportingdate.ifequitypriceshadbeen10%higher:• netprofitfortheyearended31December2012wouldhavebeenunaffectedastheequityinvestmentsareclassifiedasavaila-ble-for-sale;and• otherequityreservesofina,d.d.wouldincreasebyHrK28millionasaresultofthechangesinfairvalueofavailable-for-saleshares.ifequitypriceshadbeen10%lower,therewouldbeanequalandoppositeimpactonequity.impairmentoffinancialassetsavailable-for-saleisrecordedattherevaluationreserve.ina,d.d.holds118,855shares(listedonstockexchange)injanaf,whichisrepresenting11.795%theshareequityofthecompany.

inaGroup ina,d.d. 31December2012 31December2011 31December2012 31December2011Short-terminterestexpensechange 25.3 38 21.1 36long-terminterestexpensechange 111.4 143 107.7 140totalchange: 136.7 181 128.8 176


additional,theimpairmentofnetassetsofthecompanyplinarad.o.o.,pulaisalsorecordedontherevaluationreserve.accordingtoiaS39,thedecreasinginthefairvalueoffinancialassetsavailable-for-salearerecognizeddirectlyinequityandifthereisobjectiveevidenceofimpairmentofassets,thecumulativelossthatisrecognizeddirectlyinequitywillremovefromequitytoincomestatement.Duetoasignificantdecreaseofjanafinthestockexchange,inamountofHrK55millionandimpairmentofplinarad.o.o.pulainamountofHrK2million,thecumulativelosseslossrecogniseddirectlyinequitywastransferredfromtoprofitorlossat31December2011.theGroup’ssensitivitytoequitypriceshasnotchangedsignificantlyfromtheprioryear.

Credit risk management Salesofproductsandserviceswithdeferredpaymentgivesrisetocreditrisk,riskofdefaultornon-performanceofcontractualobli-gationsbytheGroupcustomers.overduereceivableshaveanadverseeffectontheliquidityoftheGroup,whereasimpairedoverduereceivableshaveanegativeimpactonthefinancialresultsoftheGroupaswell.underthecurrentlyvalid“creditriskmanagementprocedure“,themeasuresaretakenasaprecautionagainsttheriskofdefault.counterparties(customers)areclassified intoriskgroupsbyreferencetotheirfinancialindicatorsandthetradingrecordswithinaGroup,andappropriatemeasurestoprovideprotec-tionagainstcreditriskaretakenforeachgroup.theinformationusedtoclassifythecounterparties(customers)intotheriskgroupsisderivedfromtheofficialfinancialstatementsobtainedfromindependentratingagencies.theexposureandthecreditratingsofcounterparties(customers)arecontinuouslymonitoredandcreditexposureiscontrolledbycreditlimitsthatarereviewedatleastonanannualbasis.Wheneverpossible,Groupcollectscollaterals(paymentsecurityinstruments)fromcustomersinordertominimizeriskofcollectionofpaymentsarisingfromcontractualliabilitiesofcustomers.theexposureoftheGroupandthecreditratingsofitscounterpartiesarecontinuouslymonitoredtomitigatetheriskofdefault.

theinaGrouptransactswithalargenumberofcounterpartiesfromvariousindustriesandofvarioussize.aportionofgoodssoldwithdeferredpaymentincludesgovernmentinstitutionsandcustomersownedbythestateandlocalself-governmentsthatdonotprovideanypaymentsecurityinstruments.asregardsothercustomers,thecollateralstheyprovidearemainlydebentures,beingthemostfrequentlyusedpaymentsecurityinstrumentonthecroatianmarket,andbankguaranteesandmortgages,whereasfromfor-eigncustomersaremostlyobtainedlettersofcredit,andtoalesserextentcorporateguaranteesandexceptionallybillsofexchange.thereisnosignificantcreditriskexposureoftheGroupthatisnotcoveredwithcollateral,otherthanthosetotheabove-mentionedinstitutionsandentitiescontrolledbythestate,localself-government,andthosearisingfromcertainforeignconcessionagreements.

Liquidity risk management ultimate responsibility for liquidity riskmanagement restswith themanagementBoard,which has built an appropriate liquidityriskmanagementframeworkforthemanagementoftheGroup’sshort,mediumandlong-termfundingandliquiditymanagementrequirements.theGroupmanagesliquidityriskbymaintainingadequatereservesandcreditfacilities,bycontinuouslymonitoringofforecastedandactualcashflowsandduedatesofaccountreceivablesandpayables.thepolicyofinaGroupistoensuresufficientexternalfundingsourcesinordertoachievethesufficientlevelofavailableframecreditlinesensuringtheliquidityofinaGroupaswellasinvestmentneeds.asof31December2012inaGrouphadcontractedshorttermbankcreditlinesamountingtoHrK1.99billion(cnBmiddlerate),ex-cludingoverdraftsandtradefinancingcreditlinesestablishedwiththepurposetofinancethepurchaseofcrudeoilandoilproducts,andcontractedlongtermcreditlinesamountingtoHrK7.42billion(cnBmiddlerate).themainexternalsourcesoffundingforinaGroupare:• Syndicatedmulti-currencyrevolvingloan,agentBlB,intheamountofuSD747.51million• contractsonloanforfinancingofprojectsintheamountofEur210million-withEBrD(Eur160million)andicfDebtpool(Eur50million)• multi-currencyrevolvingcreditfacilityintheamountofuSD200millionwithmolplc.• clubdealrevolvingloan,agentpBZ,intheamountofEur139million• frameworkrevolvingcreditlinesattheGrouplevelandtradefinancecreditlinesestablishedwiththepurposetofinancethepur-chaseofcrudeoilandoilproductforina,d.d.

166

in2007ina,d.d.signeditsmostsignificantcreditfacilityintheamountofuSD1billion,originallywithmaturityof5yearswithpossi-bilityforprolongationuptomaximum2years,withthepriorapprovalofthelenders.During2012ina,d.d.hasrepaidthefirsttrancheofasyndicatedloanintheamountofuSD252.5million.inSeptember2010,ina,d.d.signedalongtermloancontractwithEBrD,intheamountofEur160millionandwithicfDebtpoolintheamountofEur50millionforthefinanceofrefinerymodernizationprogramme.During2012multi-currencyrevolvingcreditfacilityintheamountofuSD200millionforgeneralcorporatepurposessignedwithmolplc.

in2012ina,d.d.signedclubdealrevolvingcreditfacilityintheamountofEur139million,withmaturityof3yearswithpossibilityforprolongationupto2years,withthepriorapprovalofthelenders.inaccordancewiththestandardinternationalpracticesforcrudeoilandoilproductspurchasesina,d.d.hascontractedshort-termcreditfacilities(“tradefinancing”)withfirstclasscommercialbankgroups.asof31December2012theavailablecreditlinesforpur-chaseofcrudeoilandderivativeswereuSD980million.todiversifythesourcesoffinancingandtoensuresufficientliquiditylevelaswellasfinancialstabilityofthecompany,ina,d.d.ininvolvedinnegotiationswithotherpotentialcreditorsonaconstantbasis.liquidityandinterestrisktablesthefollowingtablesdetailtheremainingcontractualmaturityforfinancialliabilitiesofina,d.d.andoftheGroupattheperiodend.analyseshavebeendrawnupbasedontheundiscountedcashflowsbasedontheearliestdateonwhichthepaymentcanberequired.thetablesincludebothinterestandprincipalcashflows.

INA Group lessthan1month 1-12months 1-5years 5+years total31December2012 non-interestbearing 1,114 1,202 63 38 2,417interestbearing 1,088 4,977 1,267 - 7,332 2,202 6,179 1,330 38 9,74931December2011 non-interestbearing 53 2,273 68 58 2,452interestbearing 644 3,329 5,571 281 9,825 697 5,602 5,639 339 12,277ina,d.d. lessthan1month 1-12months 1-5years 5+years total31December2012 non-interestbearing 946 699 33 38 1,716interestbearing 1,076 4,755 1,158 - 6,989 2,022 5,454 1,191 38 8,70531December2011 non-interestbearing 707 1,216 48 58 2,029interestbearing 643 3,181 5,496 278 9,598 1,350 4,397 5,544 336 11,627

non-interestbearingliabilitiesofina,d.d.dueinaperiodoflessthanonemonthconsistmainlyoftradeaccountspayableintheamountofHrK621millionin2012(2011:HrK615million).includedinnon-interestbearingliabilitiesofina,d.d.dueinaperiodofoverfiveyearsare,liabilitiestoGovernmentforsoldflatsanddeferredincomeforsoldflats.interestbearingliabilitiesincludeshort-termandlong-termborrowings.


Fair value of financial instrumentsValuation techniques and assumptions applied for the purposes of measuring fair valuethefairvaluesoffinancialassetsandfinancialliabilitiesaredeterminedasfollows:• thefairvalueoffinancialassetsandfinancialliabilitieswithstandardtermsandconditionsandtradedonactiveliquidmarketsisdeterminedwithreferencetoquotedmarketprices;• thefairvalueofotherfinancialassetsandfinancialliabilities(excludingderivativeinstruments)isdeterminedinaccordancewithgenerallyacceptedpricingmodelsbasedondiscountedcashflowanalysisusingpricesfromobservablecurrentmarkettransactionsanddealerquotesforsimilarinstruments.• thefairvaluesofderivativeinstrumentsarecalculatedusingquotedprices.Wheresuchpricesarenotavailable,adiscountedcashflowanalysisisperformedusingtheapplicableyieldcurveforthedurationoftheinstrumentsfornon-optionalderivatives,andoptionpricingmodelsforoptionalderivatives.foreigncurrencyforwardcontractsaremeasuredusingquotedforwardexchangeratesandyieldcurvesderivedfromquotedinterestratesmatchingmaturitiesofthecontracts.interestrateswapsaremeasuredatthepresentvalueoffuturecashflowsestimatedanddiscountedbasedontheapplicableyieldcurvesderivedfromquotedinterestrates.

Fair value measurements recognised in the statement of financial position thefollowingtableprovidesananalysisoffinancial instrumentsthataremeasuredsubsequentto initialrecognitionat fairvalue,groupedintolevels1to3basedonthedegreetowhichthefairvalueisobservable:• level1fairvaluemeasurementsarethosederivedfromquotedprices(unadjusted)inactivemarketsforidenticalassetsorliabil-ities;• level2fairvaluemeasurementsarethosederivedfrominputsotherthanquotedpricesincludedwithinlevel1thatareobserva-blefortheassetorliability,eitherdirectly(i.e.asprices)orindirectly(i.e.derivedfromprices);and• level3fairvaluemeasurementsarethosederivedfromvaluationtechniquesthatincludeinputsfortheassetorliabilitythatarenotbasedonobservablemarketdata(unobservableinputs).

inaGroup 31December2012 level1 level2 level3 totalfinancialassetsatfairvalue financialassetsavailable-for-sale 282 - 58 340Embeddedderivativefinancialassets - 7 - 7positivefairvalueofderivatives - 6 - 6 financialliabilitiesatfairvalue Derivativefinancialliabilities - 40 - 40negativefairvalueofderivatives - 3 - 3 31December2011 level1 level2 level3 totalfinancialassetsatfairvalue financialassetsavailable-for-sale 265 - 60 325Embeddedderivativefinancialassets - 7 - 7positivefairvalueofderivatives - 48 - 48 financialliabilitiesatfairvalue negativefairvaluederivative - 22 - 22negativefairvalueofderivatives - 32 - 32

168

inaGroupandina,d.d. 31December2012 financialassetsavailable-for-sale totalopeningbalance 60 60impairment (2) (2)closingbalance 58 58

ina,d.d. 31December2012 level1 level2 level3 totalfinancialassetsatfairvalue financialassetsavailable-for-sale 282 - 58 340positivefairvalueofderivatives - 6 - 6 financialliabilitiesatfairvalue negativefairvalueofderivatives - 3 - 3 31December2011 level1 level2 level3 totalfinancialassetsatfairvalue financialassetsavailable-for-sale 265 - 60 325positivefairvalueofderivatives - 48 - 48 financialliabilitiesatfairvalue Embeddedderivativefinancialliabilities - 3 - 3negativefairvalueofderivatives - 32 - 32

reconciliationoflevel3fairvaluemeasurementsoffinancialassets:

Derivative financial instruments underiaS39financialinstruments:recognitionandmeasurementderivativefinancialinstrumentsarecarriedinthestatementoffinancialpositionatfairvalue,withthefairvaluechangesbeingreportedthroughprofitorloss.theGrouphasconcludedcertainlong-termcontractsthatcontainembeddedderivativesasdefinedbyiaS39.anembeddedderiv-ativeisacomponentofanon-derivativehostcontract,withtheeffectthatsomeofthecashflowsofthecombinedinstrumentvaryinawaysimilartoastand-alonederivative.asrequiredbyiaS39,suchembeddedderivativeinstrumentsshouldbeseparatedfromthehostcontractandaccountedforasaderivativecarriedatfairvalue,withchangesinfairvaluerecognisedinprofitorloss.thefairvalueofforeign-exchangeforwardcontractshasbeendeterminedonthebasisofexchangerateseffectiveatthestatementoffinancialpositiondate.thevalueoftheembeddedinstrumenttoreplacetheinflationindexhasbeendeterminedasthedifferencebetweenthecumulativeinflationindexofthecontractedinflationescalationindexandtheinflationrateinthecountryofcontractexecution.anylong-termeffectoftheembeddedderivativeshasbeendiscountedatadiscountratesimilartotheinterestrateonGovernmentbonds.managementsconsiderthatthecarryingamountsoffinancialassetsandfinancialliabilitiesrecognisedintheconsolidatedfinancialstatementsareapproximatetheirfairvalues.thefairvaluesofembeddedderivatives included inthestatementoffinancialpositionandthenetmovement intheyear,areasfollows:


INA Group 31December2012 31December2011 fairvalueat1january (15) (2)financiallossrelatingtothenetchangeinfairvalueintheyear (18) (13)fairvalueat31December (33) (15)

analysedas: currentportion (33) (15)non-currentportion - - (33) (15)

42. AppRovAl of the fINANcIAl stAteMeNts

thesefinancialstatementswereapprovedbythemanagementBoardandauthorisedforissueon12march2013.Signedonbehalfofthecompanyon12march2013by:


ina annual report 2012 3 · ina annual report 2012 11 ment, i.e. increased from hrk 106 million to...

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