INA ANNUAL REPORT 2013 · 2020-01-28 · financial statements for year 2013 96 Notes to the financial statements ina ... , AIESEC Croatiaand BEST ... June 30th, 2020, may be exempted

INA ANNUAL REPORT 2013

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04 INA Group at a glance 06 INA in the community 07 Keyfinancialandoperatingdata 10 LetterfromthePresidentoftheManagementBoard 12 Overviewoftheenvironment

16 ExplorationandProduction 23 Refiningandmarketing 27 Retail 30 Corporateandother

ouR businesses

finanCial and opeRatinG

peRfoRmanCe

finanCial statemens and auditoR’s

RepoRt foR 2013

sustainable development,

health, safetY and enviRonment

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CoRpoRate GoveRnanCe

34 Managementdiscussionandanalysis 35 Summaryof2013results 36 ExplorationandProductionOverview 37 RefiningandMarketing(includingretail)Overview 39 CapitalExpenditure 40 BalanceSheet–INAGroup 43 IncomeStatement–INAGroup 45 CashFlow–INAGroup 45 IntegratedRiskmanagement 47 KeyGroupoperatingdata

52 Sustainabledevelopment(SD) 55 Environmentalperformance–compliance 57 Occupationalhealthandsafety 61 Quality management

68 ManagementBoard 70 ExecutiveDirectors 72 Corporateandshareholdersinformation 73 Expecteddevelopmentandresearch

78 INA-Industrijanafte,d.d.– Independentauditorsreport 80 Consolidatedandunconsolidated financialstatementsforyear2013 96 Notestothefinancialstatements

ina

INA ANNuAl RepoRt 20132 3

INAisamedium-sizedEuropeanoilandgascompany. With a 13,460 employees andGroup EBITDA of HRK 3,672 million INAhas a leading role in Croatian oil and gasbusiness stretching from exploration andproduction,oilprocessing,andoilproductsdistributionactivitiesandastrongpositionintheregionalmotorfuelmarket.Attheendof2013,INAhad251millionboeprovenandprobablehydrocarbonreservesand hydrocarbon production of 40.2 Mboe/dayonyearlyaverage.Itsrefineriesin Rijeka and Sisak have produced a totalof 3.7Mt of refinedproducts in 2013. Asof December 31st 2013, Retail Servicesoperated444petrolstations.

ouR CoRe aCtivitiesin a snapshot Exploration and Production Business Segment is engaged inexploration,developmentandproductionofoilandnaturalgasinCroatiaandabroad.Sinceitsestablishment,INAGrouphasbeeninvolvedinoilfieldoperationsin20foreigncountries.

Refining and Marketing Business Segment’s key competenciesare processing of crude oil as well as production, distributionandsalesofcrudeoilproductsonthedomesticandinternationalmarkets. INAoperatesCroatia’s tworefineries located inRijekaand Sisak. Rijeka Refinery ismedium sized and located on theAdriatic coast, with access to the port for deep-drawing shipsand the pipeline system, while the Sisak Refinery is locatednear the country’s capital, the area with highest consumptionof oil products in the country. The company has continuouslydeveloped its refining system over previous years completing,amongothers,severalkeyprojectslikehydrocrackingcomplexinRijekaandtheIsomerisationunitinSisakRefinery.

Retail Business Segment operates a regional network of 444petrolstations,ofwhich392stations inCroatiawithadditional52 petrol stations in the neighbouring countries: Bosnia andHerzegovina, Slovenia and Montenegro. The extensive retailnetworkdevelopmentandmodernizationproject„BlueConcept”continued in 2013 throughout Croatia on numerous locations.“Blue Concept” project has been initiated to offer top qualityproductstoourcustomers,aswellashigherlevelofservicesonour stations, with significant improvement of site appearance,efficiency and technical conditions including new Retail VisualIdentity.Bytheendof2013altogether160stationshavebeenmodernisedwithinthisproject.AsaresultoftheprojectINAhasthebiggestmodernfillingstationnetworkinCroatia.

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Leadby thebelief that every successful companyhas to knowhowtointegrateeconomic,ecological,andsocialfactorsintoitsbusiness operations, INA implemented those principles in oureverydayactivities,whichiswhywehavemanagedtostay,notonly thebackboneof thenationaleconomy,butalsoareliablepartnertothelocalcommunities.

Amongthemostimportantinvestmentsintothespecificneedsofthelocalcommunitiesin2013wecanhighlightthecontinuationof cooperation with the SOS Children Village Croatia, whosework is supported by INA for years now. In the last year, thishappycooperationwas furtherstrengthenedbytwosignificantdonations,outofwhichonewasrealizedthroughjoinedforcesofINAandoneofthemostrenownedCroatianperformers,Gibonni.Also,inordertosecurethecontinuationofhighereducationforthechildrenwithoutproperparentalcare,INAparticipatedintheproject“Stepintolife”,withinwhichwesupportedfivestudentsbyprovidingthemwithscholarshipsfortheentireperiodofthefive-yearstudyprograms.

As a long-standing friend of the Croatian culture, INA –Industrija nafte, d.d. developed partnership with some of themostsignificantnationalcultural institutions. In2013,wewereespecially proud of the continuation of cooperation with thenationaltheatrehouses.

As the largest Croatian company and one of the leadingcompaniesintheregion,INAistherightpartnerforoneofthebest-rankedteamsintheworld–theCroatiannationalfootballteam.Astheirgeneralsponsor,wewillaccompanythemtotheWorldChampionship2014.

Furthermore, in accordance with its efforts to integrate thesustainable development principles into its operations, INAstartedthe“Energyforthefuture”project,directedtowardstheconstructionof the so called greenfilling station. Thefirst INAfillingstationofthetypewillbebuiltinZagreb,atthelocationoftheexistingStupnik-istokfillingstation.

As a company that bases its development on scientificaccomplishments and modern technologies, INA has alwayssuccessfully cooperated with the academic community, andsupportingstudentsthroughvariousprojectsandinitiativesisaspecialformofthatcooperation.In2013withintheprogram“Beststudentprojects”INAawarded10one-yearscholarshipstothose

studentswhose originalworks of expert or scientific characterwereassessedasthebest.Apartfromthat,in2013wecontinuedthe successful cooperation with three student organisations,eStudent,AIESECCroatiaandBEST,withinwhichweparticipateinmanyprojectsdirectedtowardsstudentpopulation.Studentsthemselves recognise the effort INA continually invests inthe improvements of the student standard and opening thepossibilitiesfortheir furtherprogress.Therefore,theyawardedwith a Gold Index in the category “Participating in studentprojectsorganisedbystudentsandstudentorganisations“.

INA applies the best industry practice in managing its humanresources, which is confirmed by the fact that INA has beenawardedtheCertificateEmployerPartnerforyearsnow.Asoneof themostdesirableemployers in thecountry, INA isan idealplaceforthebeginninganddevelopmentofone’scareers,whichiswhy the fourthGrowwwprogramof hiring interns attractedmany applicants and in September 2013 INA’s team wasstrengthenedwithmorethan50youngtalentswhohavebeenchosenthroughacomplexselectionprocedureamongmorethan2150appliedcandidates.Thenewapprentices,justastheirpeersfrompreviousgenerations,werefacedwithchallengingbusinessobjectives,andadetailedintroductiontoIna’soperationsgiventothemduringtheapprenticeship.

INA’semployeesthemselvesfeeltheneedtobeactivemembersoftheircommunities,whichiswhyINAVolunteersClubsuccessfullycontinuedwith itsvolunteeractions.Asmanyas 16volunteercampaigns have been held, with 178 included volunteersand as many as 1,424 volunteer hours spent. They renovatedkindergartens, schools and children’s homes, made souvenirsin creative workshops, cleaned the environment, cultivatedland, planted flowers. The engagement of INA’s volunteersin local communities will also be continued in the upcomingperiod, and their voluntary investment of their personal time,effort,knowledgeandskills forthegeneralwell-beingwasalsorecognised by local communities, which is all the award theirneed.

ina in the CommunitY KeY finanCial and opeRatinG data

2011 2012 2013 2013/2012

HRKmln HRKmln HRKmln %

Netsalesrevenues 30,028 29,895 27,444 (8)

EBITDA 6,522 4,581 3,672 (20)

EBITDAexcl.specialitems 6,776 4,966 3,799 (23)

Operatingprofit/(loss) 3,039 1,359 (1,570) -

Operatingprofitexcl.specialitems 4,078 2,866 799 (72)

Netfinancialexpenses (663) (292) (246) (16)

Netprofit/lossfortheperiod 1,815 681 (1,508) -

Netprofitfortheperiodexcl.specialitems 2,634 1,887 953 (49)

Operatingcashflow 3,282 3,742 4,543 21

Capitalexpenditureswithone-off 1,545 1,286 2,013 57

Earningspershare

Basicanddilutedearningspershare(kunaspershare) 181.5 68.1 (150.8) -

Netgearing% 38.82 30.83 26.99

KEYEXPLORATIONANDPRODUCTIONDATA 2011 2012 2013 2013/2012%

Grosscrudeoilreserves(MMbbl)2P 90 97 95 (2)

Grossnaturalgasreserves(MMboe)2P 165 153 141 (8)

Totalgrosshydrocarbonreserves(MMboe)2P 278 266 251 (6)

Averagecrudeoilproduction(Mbbl/day) 15.3 12.3 11.6 (6)

Averagecondensateproduction(Mboe/day) 9.9 3.2 2.4 (27)

Averagenaturalgasproduction(Mboe/day) 49.2 33.0 26.2 (21)

Totalhydrocarbonproduction(Mboe/day) 74.4 48.6 40.2 (17)

KEYREFININGANDMARKETINGDATA 2011 2012 2013 2013/2012%

Totalrefinerythroughput(kt) 4,051 4,065 3,707 (9)

Totaloilproductsales(kt) 3,561 3,440 3,467 1

KEYRETAILSERVICESDATA 2011 2012 2013 13/12%

Totalnumberofpetrolstations 456 448 444 (1)

Totalsales(000t) 1,131 1,042 1,019 (2)

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Note: When calculating the values in the tables of this report absolute values were used, which is why there may be some deviations compared to rounded values.


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FTE(numberofemployees)

Operatingresultexcl.specialitems(HRKmln)

Netprofit/(loss)excl.specialitems(HRKmln)

EBITDAexcl.specialitems(HRKmln)Netsalesrevenues(HRKmln)


For INA Group, and for the Croatian economy in its entirety, 2013 has been adifficultandchallengingyear.Itwasmarkedbynegativeeconomictrendsand,byconsequence,withdecreasedpurchasingpoweranddemandonourkeymarkets.

Acknowledging INA’s role as one of the key regional enterprises,we increasedthe investments in 2013 to over 2 billion kunas. This enabled us to secure thesustainability of each of our business segments and indirectly we positivelyinfluencedregionaleconomictrends.

In comparison to2012 investments increasedby57per cent,wheremore than80 per centwas invested in projects in Republic of Croatia. Themain prioritieswereoffshoreexplorationanddevelopmentofdrillingactivities,Pannonianbasinexplorationdrilling, a turnaroundproject inRijekaOil Refineryandan intensiveretailmodernizationprogram.

In2013INAGroupEBITDA(excludingspecialitems)amountedtoHRK3.7billionandnetprofit(excl.specialitems)toHRK953million.TotalnetsalesrevenuesamountedtoHRK27.4billion.TheemployeesandmanagementtogetherhaveimprovedthefinancialpositionoftheGroup,withgearingleveldecreasingfrom31percentto27percentandcuttingdownnetdebtby29percent.Stablefinancialpositionofthecompanyhasbeenensured,yieldinggreatflexibilityforfuturegrowth. Financial results were greatly influenced by external and unexpected factors.ConstantlymonitoringthesituationinSyria,asprescribedbytheInternationalac-counting standardsand inaccordancewithgoodbusinesspractice,weadjustedthe value of our assets taking into consideration long-term political and safetyrisks.With thismore realistic asset evaluation, our operating results have beendecreasedbyHRK1,504billion.Furthermore,consideringtheunfavourablemarketsituationandnegativetrendsoftheEuropeanrefineryscene,wehavedecreased

thevalueofassetsinRefineryandmarketingsegmentbyHRK738billion.Finally,retroactivetaxationrelatedtotherefineries’consumption,additionallyburdenedthebottomlinebyHRK220million.

Havingallstatedinmindanddespiteunfavourablesurroundingswehaveannulledsomenegativetrends.Wehavesignificantlysloweddownthenatural rateofproductiondeclineonoilandgasfields in thecontinentalCroatiathroughimplementingmoderntechnologies.WeareveryproudwiththegrowthofINA’smarketsharetoarespectable73percent–anincreaseofsixpercentincomparisonto2012.

Explorationandproductionofoilandgassegmentwasmarkedbyasignificantinvestmentgrowth,87percentor,inabsoluteamount,HRK1,4billion.WeareespeciallyproudofincreaseddomesticactivitiesinwhichwehaveinvestedalmostHRK1billion.Foreignactivitieswerealsointensified.WeincreasedcapitalinvestmentforalmostHRK209million,andCROSCOinvestmentsamountedtoHRK138.8million.

Businessresultsarelowerincomparisonto2012duetodecreasedhydrocarbonproductionreflectingnaturaldepletionoffieldsandloweraveragerealizedhydrocarbonprices.Wehavebigexpectationfromourkeyonshore

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fielddevelopmentinvestments–theEORprojectinIvanićandŽuticafieldsandMeđimurjeproject.PotentialofMeđimurjeprojectisvast-Weexpecttogetaroundonebillioncubicmetersofgasduringtheperiodoftheproject,whichismorethanonethirdoftotalannualgasquantitiesnecessaryforCroatianconsumers.

Refiningandmarketingsegmenthasbeenmarkedbyincreasedinvestmentsinexistingrefinerycapacities.During2013,KROFTAtreatment,systemofadditionalwastewaterworthoverHRK11million,wasputintooperationinSisakOilRefinery.Thissystemsolvedthemostcriticalreleaseofwastewaterandadditionallyimprovedthewastewaterquality.

InDecember2013wehavereceivedapositiveopinionfromtheMinistryofEnvironmentalandNatureProtectionforEnvironmentalimpactassessmentstudyfortheResidueupgradeprojectattheRijekaOilRefinery.Withthiswehavemetanimportantprerequisiteforthefeasibilitystudynecessarytoreachadecisionabouttheinvestmentproject,whichisestimatedtobeworthoverHRK2,2billion.

CapitalinvestmentsintheRetailsegmentin2013amountedtoHRK221million;whichindicatesanincreasedrealizationincomparisontothepreviousyear.Wehavecontinuedourlargescaleprojectaimedatmodernizingourretailnetwork.In2013wemodernized30petrolstationswhichincreasedatotalnumberofcompletelymodernizedpetrolstationsto160.TotalsalesoffuelsinRetaildroppedby2%comparedto2012,whichisadirectconsequenceofthenegativeeffectsofthestrongeconomiccrisis.

Weareactivelymonitoringthemarkettocaptureprofitableexportopportunitiestocompensatepoordomesticdemand,thereforewehaveincreasedtheexportofmotorfuelsinBosniaandHerzegovinaandsignificantlyreinforcedourpresenceattheSlovenianmarket.

Inaddition,wehavelaunchedapilotproject“Becomeanentrepreneur”aimingtoinvolveentrepreneursinoperatingourpetrolstations.Goaloftheprojectistoachievecompetitiveoperatingcostsandhigherqualityserviceinourretailnetwork.Webelievethattheproject„Becomeanentrepreneur”stronglyencouragesthedevelopmentofenterprises,improvesservicequality,andcreatesoffersatpetrolstationsaccordingtothespecificrequirementsofeachenvironment.

INAGrouphad13.460employeesonDecember31st2013.Allofthemdeservecreditsforsuccessfullycompletedprojectsandalsoformthebasisofourplansforfutureprojects.Throughcontinuousworkontheimprovementofhealthandsafetyofouremployeeswehavereducedthefrequencyoflostworktimeduetoinjury(LTIFindicator)by25percentcomparedto2012.ThisresultisamongthebestintheindustryinEuropeancountries.ThroughtheGrowww2013programmewewelcomed59traineesintoaone-yearinternshipatINAGroup.

HelpingthecommunityinwhichweoperateisoneofthefundamentalpostulatesofINA’scorporatesocialresponsibility.Inthepastyearwesupportedanumberofqualityprojectsinthefieldsofculture,sports,environmentandscienceaswellashumanitarianandsocialactivities.

Wefindgreatsatisfactioninthefactthatwewereabletoconveypartofourcorporateculturetoouremployees.In2011wefoundedtheINAVolunteersclub,aprojectofcorporatevolunteeringinthelocalcommunity.

In2014wewillcontinueworkingonreachingcompany’slong-termgoals.Appropriategrowthoftheshareholder’svalue,satisfyingcustomerneedsandexpectations,aswellasmaintainingsuitablerelationswithoursuppliersarejustsomeofthem.

Raisingthelevelofexpertiseandtrainingouremployeesbyencouragingtheircreativityanduniquenessremaintheprimarytasksevenin2014.

BeingawareofourroleinCroatianandregionaleconomy,wewanttobeconfirmedasareliablepartnerwhostrengthensitsmarketpositioninthedomesticandforeignmarkets,whilealsohelpsthelong-termsustainabledevelopmentatanationalandlocallevel.

IamconvincedthatINAemployeesareaguaranteeofoursuccessintheyearsahead.Withthembyoursidewearesuretoreceivethesupportofthestateandthelocalcommunities.


oveRview of the enviRonment

the Global eConomY: ReCoveRY in developed CountRies, but weaKness in emeRGinG eConomiesGlobal economic growth began recovering in the secondhalf of 2013 with the EU exiting recession, US economicactivity accelerating and the impacts of an extensive stimulusprogrammeinJapanbeginningtobearfruit.Atthesame,astheyearprogressed,therewereincreasingconcernsaboutthestateof emergingmarket economies,which in the aftermath of theglobalfinancialcrisishadbeenthemainstayofeconomicgrowth.CurrencyinstabilityinIndia,Turkey,BrazilandIndonesiaallbeliedconcerns about macroeconomic imbalances, while the extentofthecreditbubble inChinawasaconstant issueraisedwhenconsidering risks to the Chinese economy. An announcementby theUSFederalReserve inMay that theywould likelybeginscaling back the amount of stimulus it provides the domesticeconomy during the year caused jitters in emerging markets.TheUSFederalReservedidindeedbegintoscaleback(taper)in December monthly bond purchases by USD 10 bn. Marketsgenerally reacted positively, taking it as a sign of improvedstrengthintheUSeconomy.Nonetheless,frombothanenergydemandandaglobalgrowthperspective,emergingmarketswillremainthemainsourceofgrowthinthefuture.TheEurozonewasnotwithout itschallenges in2013despiteareturntogrowth.Unemploymentremainsnear12%onaverage(posingamuchgraverprobleminsouthernperipherycountries)andyouthunemploymentissignificantlyhigh.InMarch,Cyprus’economyrequiredabailout.Inaddition,littleprogresshasbeenmade in resolving the issues of the European banking sector’srisks.Asaresult,creditgrowthtoprivateenterprises,especiallysmallandmediumenterprisesremainsweak.Thisisparticularlythe case in SouthernEurope.As2013progressed, the issueofdeflation came more and more into focus, especially in theEurozonewhere inflation figures in 4Q 2013 revealedminimalpricing pressures and an inflation ratewell below the Europe-anCentralBank’s“closebutbelow2%”inflationtarget.TheECBindeedhalvedinterestratesto0.25%inNovemberinresponsetoweakerinflationreadings.

Global oil demand and supplY: stRonGeR GRowthGlobal oil demandessentiallymirrored global economic activity.Thus,astheEUexitedrecessionin2Q2013andtheUSeconomygatheredpace,ariseinOECDoildemandforthefirsttimeafter8consecutivequartersof fallsbecameevident in2Q2013.Bytheendof2013risingOECDoildemandhadseenglobaldemandriselastyearby1.3mb/d.Indeed,wereemergingmarketdemandnotaconstrainingfactor,globaloildemandwouldhaverisenfurther.BrentaveragedUSD108.65in2013whileWTItradedatUSD97/bar-relonaveragelastyearasrisingUSoutputandlogisticsconstraintskeptUSdomesticcrudepriceslowerthanglobalbenchmarkcrudeprices.OntheMediterraneanmarketUralsaveragedUSD108.2/barrel,downfromUSD110.6/barrelin2012.Supply constraints were again a prominent feature of 2013.Towardstheendof2013Libyancrudeoilexportsweresharplyreduced,whileoutagesinSouthSudan,Iraq,Iranandelsewhereconstantlygeneratedupwardpressureonprices.Global supplyoutagesin2013averagedmorethan3.0millionb/d.Atthegloballevel thisoffset thecontinuingexpansionofunconventionaloilsupply,chieflyintheUS,helpingsupportcrudeoilprices.Gasoline crack spreads in Europe have remained weak afterthesummerdrivingseasononacombinationofweakdemandcoupledwithweakexportdemandtotheUSandAfrica.Dieselcrackspreadsweremoresolidin2013,althoughtheydidexhibitweaknesstowardstheendoftheyear.Weakdemand,increasedcompetition from other regions and excess refining capacityinaddition to seasonal factorsall contributed toweak refinerymarginsinEuropeduring2013.

the CRoatian eConomY in 2013: still in ReCessionTheCroatianeconomyremainedinrecessionin2013contracting1%. Throughout 2013 weak domestic demand characterisedeconomic activity with real wages falling, unemploymentrising and credit activity to both households and enterprisescontracting. This was also mirrored in merchandise import

activity,whichrevealedacontractionof5.9%yoytoHRK68.1bn.Asaresultofthisimportcompressioneventheeconomy’sweakexport performance did not prevent the current account fromrecordingasurplusofnearly1%ofGDP.EntryintotheEUinJuly2013provedchallengingformanysectorsoftheeconomywithprocessedfood,shipbuildingandmetalsproductionallrecordingfalls in production and exports.Merchandise exports fell 7.3%yoyin2H2013,whilemerchandiseimportsfell4.0%yoyoverthisperiod (compared to 1.9% for thewhole of 2013). Inflationarypressuressubsidedastheyearprogressed,reflectinglowerfoodandenergypricesaswellasweakdomesticdemand.InDecember2013consumerpriceshadrisenonly0.3%yoy.Fiscalpolicyremainedthemainareaofriskintermsofpolicy.Thebudgetdeficit in2013wasanestimatedEUR1bngreater thaninitiallyprojectedbythegovernmentashealthsectorarrearsandweak revenue dynamics combined to push the deficit to 5.5%ofGDP.Asaresult,bytheendof2013preparationswerewellunderwayforCroatiatocomeundertheEU’sExcessiveDeficitProcedure in an effort to bring the country’s fiscal parametersbelowMaastrichtcriteriathresholdswithinthreeyears.Theon-going recession and deteriorating fiscal position resulted in allthreemajorcreditratingagenciesloweringCroatia’screditratingand/or theoutlook.Monetarypolicy remainedaccommodativethroughout2013withdomesticinterbankrateslow.Thecurrencyweakenedduring2013despitetheeconomyrecordingacurrentaccountsurplus–theneedsofbankstoprovisionforbadloansaswellashighexternaldebtserviceobligationswerethemajordrivers of increased demand for foreign exchange and thus aslightlyweakercurrencyin2013.In this general environment of weak domestic demand, dieseldemand last year held up fairly well, recording slight growth.Meanwhile gasoline demand continued to fall, in line withcontractingprivateconsumption.Therewere again a number of regulatory changes in the fieldofoilandgasexploration,theretailmarketandthegasmarketin Croatia. Towards the end of 2013 preparations were wellunderwayfortheliberalisationoffuelpricesatfillingstations–theliberalisationcameintoeffectduringFebruaryof2014.In2013,theActonexplorationandexploitationofhydrocarbonswasadopted.TheActregulatesthemanagementofhydrocarbons,explorationandexploitationofhydrocarbons,issuingofpermitsfor research and concluding contracts for exploitation, fees,inspection and penalty provisions. The application of the ActshallbedeterminedbytheAgencyandby-laws,theActwillhavea significant impact on INA’s business activities and financialoutcome. In 2013, the Excise Duty Act was adopted which

regulates,amongstotherareas,theexcisetreatmentofenergyproductsandelectricity.Newlegislationcoveringhydrocarbonextractioncameintoeffectin2013,whichwillincreasecertaintyinrespectoftherightsandobligations of concession holders for the extraction of oil andgas inCroatia.Thefirst tendersunderthenewregimehadnotbeen announced during 2013. As the newest member of theEU,CroatiaalsobecameapartytotheEU’sthirdenergyreformpackage. Nonetheless, the government decided to delay theliberalisationofthegasmarkettohouseholdsforafurtherthreeyearsinlate2013.Giventheneedforthegovernmenttoreducethebudgetdeficitnow that Croatia is a party to the Excessive Deficit Procedureand the generally weak domestic demand indicators headinginto2014, the immediateoutlook forGDPgrowth inCroatia ispoor. That implies that the business environment will remainchallenging in 2014, notwithstanding thewelcome recovery intheEU.


ouRbusinesses

16 ExplorationandProduction23 Refiningandmarketing27 Retail30 Corporateandother

ExplorationandProductionBusinessSegmentisengagedinexploration,developmentandproductionofoilandnaturalgasinCroatiaandabroad.Sinceitwasfoundedithasbeeninvolvedinoilfieldoperationsin20foreigncountries,currentlyinAngolaandEgypt.Attheendof2013,INAhad251millionboeprovenandprobablehydrocarbonreserveswithhydrocarbonproductionof40.2boe/day.

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ActivitiesofINAGroupatHayanandAphamiaBlocks,Syria,wereburdenedwithdifficultiesincollectionofSyrianreceivablesandUS/UN/EUrestrictivemeasuresagainstSyrianArabRepublicfrom2011.INAannounced“forcemajeure”onFebruary26th2012,in linewithEU/UNandCroatiaGovernmentsanctions,temporarilysuspending all its business activities in Syria until the “forcemajeure“circumstancesceasetoexist.OnCroatiaonshore,INAintensifiedexplorationactivitiesdespitetheeffectivelackofexplorationconcessionswith5explorationwells drilled in 2013 (4 “conventional” wells and 1 targeting“unconventional” reservoirs)withinexistingminingplots. Fouroutoffivewellsencounteredhydrocarbonsaturationandonlyonecanbeclassifiedasdrywell.OilinflowwastestedononewellinMoslavina regionwhileotherwellswithpositive indicationsareplannedtobetestedinthecourseof2014.

Regarding Croatian unconventional exploration program, start-up of campaign addressing tight gas reservoirs in North Croatiatookplaceinthelastquarterwheretwodifferenttypesoftightreservoirshavebeenaddressed in twoold INAwells. Inoneofthem,reservoirperformancehassignificantlyimproved,howevergasandcondensateratesobtainedaftertreatmentinverticalwelldidnotmeeteconomicproductioncriteria.Itisindicatedthatincasedifferent technology solutionsareapplied (likemulti stagefracksinhorizontalwells)betterresultscouldbeexpected.

KeY aChievements in 2013

CRoatia onshoRe

• Reserves(SPE2P,2013Y/E):174MMboe • Production(2013):25.3mboepd

Regarding Croatian conventional exploration activities,considering4out5wellsindicatedhydrocarbonsaturationasahighexplorationsuccessratio,continuesasahighsuccesstrendfromthepreviousyears.Regarding Croatian unconventional exploration activities, byrealizationofthefirstfrackingcampaignofthetightgasreservoirs,thebenefitswereachievedintermsofbetterdeterminationofthese reservoirs and their potentials. Moreover, these results

will be helpful for further fracking activities planned in theforthcomingyears.In order to achieve planned recovery efficiency, maintainproduction and prolong economic life of mature fields,development activities included numbers of successfulworkoversthatresultedwithlowernaturaldeclineofproductionon mature fields. EOR project activities planned for onsitework on compressor stations and CO2 pipelines on oil fieldsarefinishedaccordingtoschedule.Workoversonwellre-liningin 13 injectionwells are completedwhilewell re-liningworksin the remaining plannedwells follow in 2014. Preparation ofnecessarydocumentationandsettlingofpropertylegalrelationstoobtainnecessarylicenceswereinfocusofMeđimurje,Selec,ĐeletovciZapadandHrastilnicaprojectstoachievenewgasandoilproductionincomingyears.

In the field of unconventional exploration, INA started pilotunconventional operations in theNWCroatiaMeđimurje areawithin Zebanec Mining Plot. Operations included re-openingandtestingofonewellwhichflowedgasandcondensatefromMiocenetightsandstonereservoir.As of the year 2013 end, INA finished operating 2 remainingonshore exploration Licenses; East Slavonia (5,500 sq km) andSouthwest Sava (4,870 sq km). These licences expired on theDecember31st2013.Newtendersforexploration licencesareexpectedduring2014.

CRoatia offshoRe • Reserves(SPE2P,2013Y/E):34.1MMboe • Production(2013):11.9mboepd

RegardingCroatianexplorationNorthAdriaticoffshoreactivities,drillingof twowells targeting thin gas layerswereperformed.Gassaturationwasconfirmedinoneofthemandtheotherwasadrywell.

Througha jointoperating company INAgip, INAandEnihavestartedpreparationsforthedrilling&developmentcampaignofgasfieldsIkaJZ.ExploitationofnaturalgasreservoirsontheIKA JZfield,withadditional infillwells fromexistingplatformlocations, will cushion decline of gas production and bringadditionalgasfromtheAdriaticoffshore.Mentionedactivitiesinclude contracting the jack up drilling rig with INA´s servicecompany Crosco. During the year, developing horizontalwell

hiGhliGhts• Production start-up on Bilogora onshore andIkaB3offshoregasfields• Croatia onshore exploration: five wells drilled, activities on tight gas reservoirs exploration started; Croatia offshore exploration:twowellsdrilled;successratio 60%• In Egypt, INAacquired additional 50%WI in East Yidma Concession and became Operatorwith100%share• SPE2Preservesof251MMboeasofend 2013 • Dailyproductionof40.2mboepdachieved in 2013


IkaB3RHORwasdrilled&equippedandproductionhasstartedup.Drillingandequippingof5doublecompletedwellsonIkaJZ field has started. During the year, jacket of the offshoreproductionplatformwasdesigned,constructedand installed,also sea line Ika A-Ika JZ has been installed. Designing andconstructingdeckfor IkaJZplatformwithprocessequipmentis in progress. Significant work is being done, with Croatianshipyard˝ViktorLenac˝asasubcontractor,inconstructinganoffshoregasplatform.

DevelopmentprogramactivitiesrelatedtoIvanaA/Koptimizationthat is directly connected to theproductionon the Izabelafieldcoveredtheprocurementanddeliveryofboostercompressorunit.

inteRnational ConCessions

a) ANGOLA

• Reserves(SPE2P,2013Y/E):4.68MMboe • Production(2013):1.13mboepd

INA has been involved in E&P activities in Angola since 1980,participatingindevelopmentandproductionactivitiesonthreeconcessions,alllocatedonoffshoreBlock3.INAisanon-operatingpartner with various percentages of participating interest andproductionsharing.

BLOCK3/05Block’s Operator is Sonangol P&P with 25% participating inte-rest. Other partners are: China Sonangol (25%), AJOCO (20%),ENI(12%),Somoil(10%)andNIS(4%).INA’sparticipatinginterestis4%andproductionsharing israngingbetween0.89–3.50%,averaging2.39%in2013.TheblockcoversareasofformerBlocks3/80,3/85and3/91.Thereareeightproductionoilfieldsontheblock:Palanca,Pacassa,Bufalo,ImpalaSE,Impala,Cobo,PambiandOombo.Operationswerefocusedonfacilitiesmaintenancetoimproveperformance.TheBlock’slicensewillexpirein2025.In the forthcoming period several workover activities, drillingcampaignonexistingfieldsaswellasupgradeofsurfacefacilities,willfollow.

BLOCK3/91Oombofield,theonlyproducingfieldintheblock,wastransferredtoBlock3/05onJanuary1st,2013,ineffectterminatingBlock3/91.

BLOCK3/05ABlock’sOperatorisSonangolP&Pwith25%ofparticipatinginterest.Otherpartnersare:ChinaSonangol(25%),AJOCO(20%),ENI(12%),Somoil(10%),andNIS(4%).INA’sparticipatinginterestis4%.TheBlockconsistsoftwooilfieldsunderdevelopment:Caco-GazelaandPunja.FrontEndEngineering&Designactivitieswerecompletedand award recommendations for Engineering, Procurement,Construction and Installation services for Platforms. IntegratedControl Safety System and umbilicals, flowlines & risers werepreparedforbothfields.TheBlock’slicensewillexpirein2030.OnCaco-Gazela development areaonedevelopmentwell is tobedrilledfromanexistingplatformandfirstoilisexpectedattheendof2014.In forthcoming years, drilling campaign, wellhead platformsconstruction and installation will follow also on Punjadevelopmentarea.

b) EGYPT • Reserves(SPE2P,2013Y/E):2.45MMboe • Production(2013):1.88mboepd

INAhasbeeninvolvedinE&PactivitiesinEgyptsince1989.INAholds interests in four development concessions in WesternDesertandoneexplorationconcessioninNileDeltaofEgypt.INAistheoperatoroftheSidiRahmanandRizkDevelopmentLeasesoftheEastYidmaConcession,whileithasnon-operatorstatusinfourotherconcessions(RasQattara,WestAbuGharadig,NorthBahariyaandDisouq).Investmentin2013wasfocusedprimarilyondrillingandworkoveractivities.

DisouqConcessionINAsignedaFarm-InAgreementwithRWEDeatoparticipateasa50%partnerinthelastexplorationcampaignandinanyfuturedevelopmentleaseinDisouqConcessiononNovember11th,2012. RWEDeaasOperatorandINAasPartnerwerecommittedtodrillone exploratory well while additional exploration or appraisalwellwellswere subject to the successof thefirstwell.Helal-1well reached the total depth of 5,466mwith no hydrocarbonsaturationandthewellwaspluggedandabandonedasdryhole.ConcessionlicenceexpiredonDecember23rd,2013.

East Yidma Concession – Sidi Rahman and Rizk DevelopmentLeasesINAistheoperatorwith100%workinginterestand58%interestinproduction.

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In2012INAsignedSaleandPurchaseAgreementwithRWEDeathusacquiringadditional50%interestinEastYidmaConcession.By endorsement of Deed of Assignment in October 2013, INAbecamea100percentoperatoratthisconcession.Sidi Rahmanoil field is in production from2007 and operatedby joint venture company Marina Petroleum Company(MPC). Production start-upofRizkfiledwas inMay2012. Twodevelopment wells were successfully drilled on Sidi Rahmanfield in2013.Workprogramin2014is limitedtodrillingasidetrack borehole of existing well in order to reach hydrocarbonaccumulationinbetterposition.

RasQattaraConcessionTheConcessionconsistsof twooilfields:ZarifandElFaras.Oilproductionstartedin1994onZariffieldand1996onFarasfield.TheOperator is IEOC(EniEgyptianbranch). INAisPartnerwith25%workinginterestand10.825%shareinproduction.Totalsixwellsweredrilledin2013.TwowellsonZariffieldweredrilled back to back. Firstwellwas P&Awhile the secondwellis oil producerwell. Drilling activitieswere continued on Farasfieldandfourwellsweredrilledbacktoback:twooilproducer,onewater injectionwell (originalplannedasoil producer) andonegassourcewellforpowergenerators.Workoveroperationswereperformedonbothfieldsinordertooptimizeproduction.Activities on Faras Gas Power Generation andOHTL Faras andZarif were partially performed. Further drilling and workoveroperationsareplannedonbothZarifandFarasfieldsinordertooptimizeproductionrateoftheseoldfields.

WestAbuGharadigConcessionTheConcessionconsistsoftwooilfields:RamlandRamlSW.Oilproductionstartedin1996.TheoperatorisIEOC.INAispartnerwith25%workinginterestand14.5%shareinproduction.OneoilproducerwellwasdrilledinNovember2013.Workoveroperations were performed in order to decrease naturalproduction decline of the old fields.Workover operations andnewwells are included inWork Program in order to decreasenaturalproductiondeclineoftheoldfields.

NorthBahariyaConcessionTheConcessionconsistsoffiveoilfields(Ferdaus,Gana,Rawda,Ryan, Abrar). The project started in 2004. The operator isSaharaNorthBaharyia;thepartnersareINAandIPR.INAholds20%working interestwhile interest in production is calculatedaccordingtoproductionshareslidingscale.

Seven development wells were successfully drilled in 2013.Fivewellswereputinproductionwhiletwowellswillbeputonstreamin2014.Workoveroperationsincludedfracturingofnewintervalsaswellasperforatingandfracturingsomeofalreadyproducingreservoirs.Drillingandworkoveractivitiesresultedin 16%higher oil production than in 2012.Drilling campaignisplanned tobecontinued in2014with8newdevelopmentwells.

c) SYRIA

• Reserves(SPE2P,2013Y/E):35.8MMboe • Production(2013):0

INAhasbeeninvolvedinE&PactivitiesinSyriasince1998.ThecomplexpoliticalsituationinSyriaaffectedINA’soverallpositionintheAphamiaandHayanprojectsandafterForceMajeurewasannouncedonFebruary26th2012,allactivitiesregardingHayanand Aphamia Blockwere suspended until the “forcemajeure“circumstancesceasetoexist.

APHAMIABLOCKThe Aphamia block is situated in Hama district, to the north-westof theHayanblock.TheAphamiaPSAallowsforan initialexplorationperiodof four years and two furtherextensions tothe initial exploration period of two years each. INA fulfilledcontractualobligationsof the initialexplorationperiodandthefirst extension of initial exploration period. INA has acquired270km23Dseismicanddrilledfourexplorationwells(Jaddua-1drywell,Mudawara-2,Mudawara-3 and Beer As Sib-1 oil andgassuspendedwells).OilandgassaturatedlayersatMudawaraandBeerAs Sib structureshavebeendetermined. The secondand last extension of the exploration phase operations endedon November 11th, 2012. Due to the FM announcement andsuspensionofexplorationactivitiesINAdidnotmanagetofulfilitscommitmenttodrilloneexploratorywellinordertoconfirmthe commerciality of oil saturated layers.Despite the fact thatPSAhasexpired, INAhasnot receivedanycomment fromGPCor Ministry side yet. INA is withholding its right to continueoperationsuponliftingForceMajeure.

HAYANBLOCKINAGroup has been active in SyrianArab Republic since 1998basedonsignedProductionSharingAgreements(PSA).FirstPSAhasbeensignedforHayanblockConcessionin1998andfollowing


thesuccessfulexplorationandappraisal INAhasannouncedsixcommercialdiscoveries(Jihar,AlMahr,Jazal,Palmyra,MustadyraandMazrur)onHayanblockwithsignificantoil,condensateandgas reserves. Joint Venture Company HPC (Hayan PetroleumCompany) was established between INA (Contractor) andGeneral PetroleumCompany,GPC (Company) inorder to carryout petroleum operations on Hayan block. Due to the “forcemajeure”INA’soperatoractivitiesonHayanfieldslastedonly57daysin2012.

PRODUCTIONIn 2013, total Croatian onshore production amounted to 8.6 mboepd crude oil, 2.4 mboepd condensate and 14.3mboepd gas.As a result of INA’s focusedefforts to limitthenatural productiondeclineof existingfields,wemanagedtokeepthenaturaldepletionofdomesticoilfieldsat2%,whiledepletion ratesamounted to4.5% inonshorenaturalgasand7%incondensateproductioncomparedto2012.

In 2013, total Croatian offshore production amounted to 11.9mboepd natural gas. As a result of higher than expectednatural depletion, higherwater cuts, downtime due to drillingactivities on Ika field as well as lower share due to higherinvestments of the partners and Annamaria restitution in theNorthAdriatic Contract Area, this corresponds to decreases of25%comparedto2012.In2013 INA’s shareof production inAngola amounted to1.13mboepd, from one non-operated concession. To improveperformanceoperationswerefocusedonfacilitiesmaintenance.Egyptian production contributed to Group results with aproduction of 1.88 boepd from three non-operated and oneoperatedConcession.Investmentin2013wasfocusedprimarilyondrillingandworkoveractivitiesinordertomaintainproductionperformance of oil fields. INA share of production in was 2%lowerthanproductionin2012duetonaturalproductiondeclineoftheoldoilfields.

OUTLOOK Infurtherthreeyears,planistocontinuewithdrillingexplorationand development wells, 3D seismic acquisition and geologicalstudies,aswellaswithactivitiesonprojectsEORandMeđimurje.Otheronshoreactivitiesarerelatedto intensifyingactivitiesonadditionaldevelopmentofmaturefieldsthroughtheproject4P,application of new reservoir stimulation technologies throughPilot project on the fields Stružec and Privlaka process plantoptimization and well general workovers in order to maintainproductionlevel.Despite the revocation of licenses for exploration in thecontinentalpartofCroatia,INAremainsdedicatedtoitsCroatianexploration. It is currently the only entity with the necessaryequipment, experience, knowledge and projects to accelerateexplorationactivitiesincontinentalCroatia,pendingthedecisionoftheGovernmentregardingnewlicensing.In the near future, main offshore activities are related toexploration and development drilling, geological studies,constructionofexportsealinestoconnectIkaSWplatformwiththeexistingIkaAplatformandtocontinuewiththe2ndphaseoftheboosterunitcompressorinstallationonIvanafield.

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RESERVESBREAKDOWNBYCOUNTRY

MMBOE 1P 2P

2011 2012 2013 2011 2012 2013

Croatiaonshore 160 147 141 190 183 174

Croatiaoffshore 35 21 18 44 38 34

Syria 24 22 22 37 36 36

Egypt 3 2 2 4 3 2

Angola 2 2 2 4 6 5

Total 224 196 186 278 266 251

RESERVESBREAKDOWNBYPRODUCT

Oil 76 74 75 90 97 95

Gas 130 110 99 165 153 141

Condensate+LPG 18 12 11 23 16 15

Total 224 196 186 278 266 251

HYDROCARBONPRODUCTIONBYREGION

Hydrocarbonproduction(Mboe/day) 2011 2012 2013 %

Croatia 50.8 42.1 37.2 -12%

Angola 1.6 1.5 1.1 -24%

Egypt 1.8 1.9 1.9 -1%

Syria 20.3 3.1 0.0 -100%

Total 74.4 48.6 40.2 -17%


Syria

Egypt

Angola

Croatia

Productionbyregion(Mboe/day)

HYDROCARBONPRODUCTIONBYPRODUCTS

Hydrocarbonproduction(Mboe/day)

2011 2012 2013 %

Crudeoil 15.3 12.3 11.6 -6%

Naturalgas 49.2 33.0 26.2 -21%

Condensate 9.9 3.2 2.4 -27%

Total 74.4 48.6 40.2 -17%

Condensate

Naturalgas

Crudeoil

Productionbyproducts

pRiRodni plinGas trading activities are organised through INA’s subsidiaryPrirodni plin which is registered for energy trading, supply ofnaturalgasandagencyservices.Totaldomesticneedsfornaturalgasin2013weresuppliedfromdomesticsources(1,372bcm)andimports(774mcm).Gassalesand purchase agreementwith Eni has been concluded for theperiodfromJanuary1st,2011untilDecember31st,2013.During2013,additionalquantitiesofgaswereimported,basedonshort-termcontractssignedwithotherforeigntraders.

AccordingtotheDecisionoftheGovernment,thepriceatwhichPrirodni plin Ltd delivers gas to suppliers in the public serviceobligation (gas forhouseholdpurposes) is regulated fromMay1st,2012andis2.20HRK/m3,whilethepriceatwhichPrirodniplinLtddeliversgasforindustrialcustomersisbasedonmarketprinciples.

Natural gas is sold to the end customers and suppliers ondistribution systemmainly based on yearly contracts. In 20132.216bcmofnaturalgaswasdeliveredtothecustomers.

www.ina.hr

RefininG and maRKetinG

hiGhliGhts• Strongfocusonzeroaccidentoperationresultedinsafeandsecureoperations,bringingperformanceinlinewithEuropeanindustrybenchmarksbothLTIandLTIF.• StrengthenedmarketpositionbyimprovingsalesofvaluablemotorfuelproductsandincreasingmarketshareoncoremarketsofCroatiaandBosnia–mainlydrivenbysalestoInternationalOilCompaniesonthedomesticmarket.• ExportactivitiesstrengthenedbyswitchingfromspottotermsalesnowdirectlysupplyingtheSlovenianmarket–motethan200ktofmotorfuels.• DirectaccesstoMediterraneanmarketsutilisedbyflexiblyplacingvolumesonseabornetrade.Provenmanagementtacticsofadjustingproductionassetstoreflectmarketrealitiescontinuedwith:→on-demandandblockoperationintherefineries;→INAextendeditscrudebasketbyprocessingdifferentlight/heavy/low-midsulphurcrudeoiltypes.Thedifferentcrudegradesweresourcedfrommultiplesupplyregions-BlackSea,Caspian,MediterraneanandWestAfrica;→processingalternativefeedstock(otherthancrudeoil)tooptimisekeyprocessingunitsandincreasewhiteproductyields.• Efficiencyimprovementinitiativesincludingenergyefficiency,lossmanagement,inventorymanagement,removinglogisticsbottlenecksandstrengtheningsynergiesbetweentherefineriesweresuccessfullycontinued.

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intRoduCtionINA Refining & Marketing Business Division (“INA R&M”)manages two crude oil refineries, lubricants production, acommercial wholesale network and a logistics network forstoring and distributing crude oil derivatives to the market.The refined products are transported by road, sea, rail, riverandpipelineutilizingownedand rentedproductdepots.MainrefineryproductsincludeEUROVqualitygasolineanddiesel,JETfuel,virginnaphtha,benzeneconcentrate,heatingoils,severalgrades of fuel oil, sulphur, bitumen and calcined and green(regular)petroleumcoke.INAhasasignificantdomesticmarketbut also key exportmarkets like Bosnia and Herzegovina andSlovenia,while INA isalsopresent inSerbia,Albania,Hungary,ItalyandtheMediterranean.

RijeKa RefineRYTheRefineryislocatedontheAdriaticseawithaconnectiontotheJadranskinaftovod(“JANAF”,crudeoilpipelinesystem).ThislocationenablesRijekaRefinerytopurchasecrudeoil,feedstockand finished products from the world market and to exportfinishedproductstotheliquidMed(Mediterranean)market.TherefineryisalsoconnectedtootherdepotslocatedontheAdriaticcoast line via rented vessels while an extensive rail networkconnectsittotheinlanddepots.

Duringthemodernisationprogrammewhichwascompletedin2011,threefacilitieswerecompletedwithintheHydrocrackingcomplex - Mild hydrocracking, Hydrogen unit andDesulphurizationplant (Claus) aswell as numerous supportingfacilities and installations. The hydrocracking complexsignificantly increased conversion and the refinery complexity(9.1Nelson Complexity Index, “NCI”). After themodernisationprogramme, Rijeka Refinery is producing only EURO V qualitygasolineanddieselfuels,andcomplieswiththehighEuropeanenvironmental standards. Besides gasoline and diesel fuels,Rijeka Refinery produces JET fuel, virgin naphtha for thepetrochemical industry, benzene concentrate, heatingoils andseveralgradesoffueloils.

sisaK RefineRYSisakRefineryislocatedincentralCroatiainclosevicinityofZagreb,placingitnearthemaincentreoftheCroatianmotorfuelconsumption.TheRefineryhaswellestablishedrailanddepotconnectionstosupplyother local markets in Croatia, as well as those in north-westernBosnia and Herzegovina, north-eastern Slovenia and western and

northernSerbia.TheconnectiontoJANAFcrudeoilpipelinesystemenablesthetransportofcontinentalandseapurchasedcrudetotherefinery.Thelocaloilpipelineisusedtotransportoilandcondensatefromdomesticoilfields inMoslavina,andtheSavaRiver isusedtotransportcrudeoilfromtheSlavonianfields.

Recentinfrastructuralimprovementsincludedtheisomerizationunit, finalised in 2011 as part of the Refinery modernisationprogrammeincreasingtheRefinerycomplexityindexto6.1NCIwhile the coke chamber replacement and closed blow-downsystemprojectsareexpectedtofinishbyH12014.The Refinery is able to produce EURO V diesel and motorgasoline,gasoils,virginnaphtha,benzeneconcentrate,heatingoils,severalgradesoffueloils,bitumenandcalcinedandregularpetroleumcoke.

Competitive advantaGe

INA Downstream operates two refineries within a favourablegeographical position allowing the possibility to optimize andextendthecrudebasketfromtheworldcrudemarket.TheJanafpipelinesystemenablesimportedcrudeoiltobetransportedtothecontinentalRefinery.INA’saccesstotheliquidMediterraneanmarketincreasesthesalespotentialandthepurchasingflexibilityofsemi-finishedproducts. Keycompetitiveadvantagesinclude:• Rijeka Refinery’sMediterranean access and Sisak Refinery’scentralisedlocationenableahighlevelofmarketcoverageandmaximisecrudeselectionandoptimizationpossibilities.• Accesstodomesticcrudeoilandnaturalgassources.• Stronglogisticconnectionsbetweentherefineriesanddepots,including the possibility to transport products by road, rail, sea,riverandpipelinewhichensureflexible,safeandefficientmarketsupply.• Group level synergies and joint optimisation of severalproduction sites, continuously improving refining yields byincreasingtheutilizationofkeyconversionunitsandoptimizingtheuseoffuelcomponents.

KeY aChievements in 2013R&Mhasmanagedtostrengthenitsmarketpositionbyimprovingwholesale performance and increasing market share both inCroatiaandBosnia.Strongwholesaleofmotor fuelscontinuedbyconcludingtermcontractswithInternationalOilCompaniespresentontheCroatianmarketwhileexportactivitiesalso improvedwithmaterialvolumesdirectlysoldtoKoper.Provenmanagementeffortsofadjustingproductionassetstomarketrealitieswithon-demandandblockoperation,extendingthecrudebasketresultinginahighershare of marketable motor fuels, feedstock selection with moreVacuum Gasoil processing, better inventory management whichreleasedworkingcapitalemployedaswellasdisciplinedcostcontrolsignificantlyimprovedEBITDAcomparedtopreviousyearsbutcouldnotturntheresultsprofitablewiththecurrentassetstructure.Keyachievementsinclude:

hse peRfoRmanCe• Strongfocusonzeroaccidentoperationresultedinsafeandsecureoperations.RefiningandMarketingBDover-performedset targets in termsofwork relatedaccidents, losttime injuryfrequencyperformanceindicatorclosingtheyearat1.2,wellinlinewithEuropeanindustrybenchmarks.

maRKet pResenCe and CommeRCial aCtivities• INAimproveditsmarketpresenceontheCroatianandBosnianmotor fuelmarkets,both intermsofsoldvolumes(morethan 75ktinCroatiaand25ktinBosnia)aswellasmarketshare.Theimprovedperformanceismainlyaresultofthestrongwholesaleperformance of valuable motor fuel products driven by salesto International Oil Companies on the domesticmarket. Termcontracts were also concluded with major customers like HŽ,JadrolinijaandCroatiaAirlines.• Exportactivitiesstrengthenedbyswitchingfromspottotermsales:PetrolinSloveniadirectlysuppliedwithmogasandfueloilcustomersontheMediterraneancontractedontermbasis.TheincreaseofexportsalestoSloveniawasmorethanfivefold,• Direct access toMediterraneanmarkets utilised by flexiblyplacingvolumesonseabornetrade,• Bio diesel blending capacities available which ensure INA’spositiononthesustainabledevelopmentmarketandallowforfurtherproductdifferentiation.

effiCienCY manaGement• Block and on-demand operation mode in Rijeka and Sisakrefineriessuccessfullycontinued,• Proactivecrudeandfeedstockselectiontoincreasetheshareof marketable products - crude basket successfully extendedwith different light/heavy/low-mid sulphur crude oil typessourced from multiple supply regions including Black Sea,Caspian,MediterraneanandWestAfrica,• Efficiency improvement initiatives of increasing energyefficiency,lossmanagement,yieldimprovementcontinued,• Capital projects for installing a new closed blow-downsystem and replacing the coke chamber of the Delayed cokerunit inSisakareunderway.The investmentsserveto increaseassetavailabilityandimprovehealth,safetyandenvironmentalperformanceoftherefinery.

loGistiC and distRibution opeRations• Logistic constraints, especially related to rail manipulation,were improved and in many cases de-bottlenecked (railthroughputincreased).• Inventorymanagementeffortsresultedinimprovedutilizationofstoragecapacityintherefineriesanddepots,andsignificantlydecreased the average inventory level and subsequently theoverallworkingcapitalcost.To keep the pace with European downstream competition,business processes in INA R&M were focused on optimizingoperations throughout the whole value chain. The main goalwastomaintainfullsecurityofmarketsupplyoncoremarketsofCroatiaandBosnia,increaseprofitabilityi.e.reducelosseswithimprovedefficiency,flexibleoperations,disciplinedcostcontrolandbycapturingmarketopportunities.

outlooK INA is focusedon supplying its coremarketswithhighqualityfuels and services at lowest possible cost, at the same timemaintaining its strong position in Croatia and Bosnia INA willcontinuetofocusonsafeandreliableoperations,improvingcostefficiencyandoverallperformance.INAR&Mwilltrytofurtherstrengthenitspositionbyfocusingon:Efficiency and production managementI.) Productionandsalesflexibilityincaseoffavourablespreadsofcertainproducts.Quickdecisionondieselvs.gasolinebasedonexternalenvironmentprojectionscanproduceextravalueinaveryshorttime.

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II.) Increasing white product ratio by refinery on-demandoperation mode and increased utilization of main conversionunits.Extravaluecanbeachievedbycontinuingtoprocessmoresemi-finishedproductsandloweringownconsumption.III.) Initiatives that focus on lowering energy cost and fuellosses by improvingmeasuring equipment. Thefinal goal is tosimultaneously ensure compliance with the environmentallegislationsandtominimizeoperationalcosts.Market presence and commercial operationsIV.) Focusingon termcontracts forbuying rawmaterials andensuring their stable supply. Refinery operations focused onannual tendering and maximizing term contract quantities,providing support for better negotiation position (e.g. usingmonthlyaveragepricing).V.) Increasingmarketshareintheregionbyusingthemarketmakerpositionadvantages.

Optimisation and risk management operationsVI.) GlobalandlocaloptimisationtofurtherutilizeGrouplevelsynergiesandtoproducethemostvaluableproductsinthemostprofitable way. Further widening the crude basket, carefullybalancingtheinventorylevelsandlogisticcostsanddefiningtheon-demandrefinerycapacitieswithoptimisationbothonglobalandlocallevel.VII.) Risk management improvements, including improvedoperationshedgingwithderivativeinstruments.

On a long term horizon, we are planning to further increaselogistic connections between the two refineries to furtherfacilitate INA R&M synergic operations and flexibility. Besidesthe existing asset structure, reaching a decision on a residueupgradeprojectinRijekaRefineryisexpected.

enviRonment

CrudeoilpricesaverageUSD/bbl Eurodieselcrack-spreadaverageUSD/t

Gasolinecrack-spreadaverageUSD/t USD/HRKexchangerateaverage

111.6

176.9

124.3

5.85

2012

2012

2012

2012

2013

2013

2013

2013

108.7

159.4

108.8

5.71

www.ina.hr

Retail

hiGhliGhts• Newvisualidentity“BlueConcept”- furtherfocusonretailnetworkrestructuring andmodernizationprogram

• Establishingabasisforintroductionofa newretailoperationmodel

• Promotionalactivitiesfocusedon customersandservicequality

Ret

ail

INARetailoperatesaretailnetworkof444fillingstations,ofwhich392fillingstationsinCroatia,whiletheremaining52stationsare located in the narrow region – 45 inBosniaandHerzegovina,6 inSloveniaand1inMontenegro.

In the year 2013, INA Group’s Retail segment recorded a 2%decrease in fuel salesvolumescomparedto thepreviousyear,with the most significant drop in demand experienced in thefirst quarter due to very badweather conditions. In addition,fuelsaleswerenegativelyimpactedbythecontinuingeconomiccrisis,risingunemploymentandweakeningpurchasingpower.Withinthestructureoffuelsales,dieselfuelandmotorgasolinedominate, while sales of liquefied petroleum gas makes only3%of the total sales in 2013. In relation to theprevious year,sales of gas oil maintained the same level, while the sales ofmotorgasolineslippedby5%.Salesof liquefiedpetroleumgasdecreasedby4%,however, compared to thepreviousyears,areduction of sales has slowed significantly. Following negativemarket factors, throughput per site in 2013 declined by 1%comparedtothepreviousyear.


During a period from 2010 until 2013, themajor emphasis inretailoperationswasplacedonimplementationofretailnetworkrestructuring and modernization program implementationthrough major investments, with the goal of improvingthe appearance of filling stations, technical conditions andintroducinganewvisualidentity,“BlueConcept”.Fromthestartoftheprogramuntiltheendof2013,some160filling stations weremodernized through knock-down-rebuild(KDR) projects, interior and partial interior refurbishments, aswellasthenewvisualidentity.As a reaction to the global economy recession, extremelynegativebusinessenvironmentandfiercecompetition,inordertoreachourgoalsinincreasingperformanceandprofitability,itwasalsorequiredtoimplementchangesinouroperationmodel.New competitive market situation requires a fast, efficientand prompt reaction and alongside continuousmodernizationof the retail network, it is necessary to make adjustments inmanagingspecificbusinessprocesses relatedto infrastructure,salesandoperations,marketing,aswellasimprovingthevalueproposition.

In the secondhalf of 2013, Retail BDwas strongly focusedonestablishing the basis for development of a new partnershipoperation model of retail sites, i.e. launching a pilot projectthatinvolvedentrepreneursatthefirst20selectedINA’sfillingstations.Thegoalofthispilotprojectistoensuremoreefficient

operationsandadequatemotivationoffillingstationemployeesinprovidinghighqualityservicestothecustomers.Intheaimofreachingthehighestlevelofcustomers’satisfaction,betterqualityofprovided services, aswell as improvementofbusinessresults,therearecontinuoustrainingsoffillingstationstaff, in form of numerous carefully prepared and targetedtrainingsandworkshopswithin theRetailAcademy, formed in2012.Marketingactivitiesheldin2013weredirectedatintroductionof new technical and visual improvements within the retailnetwork,followedbyvariouseventsorganizedforthecustomersatINA’sfillingstations.

Initiatives such as cooperationwith selectedCroatiannationalparks, INALadies’Week, implementationofBikeZone, saleofGibonni’sCDalbumforcharitycontribution,saleoffruitatfillingstations,aswellasdifferentsuccessfulloyaltyprograms(Philips’11, Fiskars/Gerber products) have been additional services,strengtheningtheperceptionandimageofthecompanywithintheyearandcontributingtohigherloyaltyofcustomers.For the purpose of reaching a unique position on themarket,differentiation fromthecompetition,butalso tokeepupwithprinciplesofsustainabledevelopment,RetailBDhaslaunchedaprojectofconstructingasustainablefillingstation,underatitle“EnergyforFuture”,planningaconstructionofaself-sustainable,environmentally friendly and innovative “green filling station”retailfacility.ThefirststationofthistypewillbebuiltinZagreb,on location of the current FS Stupnik east and its completionhasbeenplannedin2014.FillingstationStupnikeastwillbethefirstsustainablestationintheRepublicofCroatia,whichmakesINA the leader in applying the so called green technologieswithin the retail network. With this project, INA will offer toitscustomersandthecommunityaddedvalueaccordingto itsefforts to implement sustainable development principles intoits operations, aswell as to promote environmentally friendlyprojectsthatcontributetoenergyefficiency.

During implementation of the retail network modernizationprogram, special attention has been given to training of theemployeesforsafework,aswellasremediationofcontaminatedsoilandundergroundwaterincaseanyhavebeenfoundduringKDRand/ordisposaloffillingstations,forthepurposeofefficientprevention and control of pollution, as well as reduction ofenvironmentalriskstotheminimalpossiblelevel.

2012LPG 8%

Gasoline 30%

Virginnaphta 2%

Diesel 38%

Jet 3%

Heatingoil 5%

Fueloil 11%

Bitumen 2%

Other 1%

2013LPG 7%

Gasoline 27%

Virgin naphta 1%

Diesel 40%

Kerosene 3%

Heatingoil 5%

Fueloil 12%

Bitumen 2%

Other 3%

3,424(kt)

3,467(kt)

Refined pRoduCt sales bY pRoduCt

numbeR of petRol stations

NUMBEROFPETROLSTATIONS

Numberofpetrolstations 2011 2012 2013

Croatia 404 396 392

B&H 45 45 45

Othermarkets 7 7 7

Total 456 448 444

Ret

ail

Croatia

B&H

Othermarkets444


CoRpoRate and otheR

KeY aChievements – 2013investment & maintenanCe manaGement The main achievement of Investment & MaintenanceManagement Sector in 2013 is related to timely and efficientdeliveryofINAinvestmentprojects.Thetotalvalueofprojectsdelivered by Investment & Maintenance Management Sectorin 2013 is 52% higher than the year before. In the area ofmaintenance management, supervised maintenance costin 2013 was 10% lower than planned, without any influenceon mechanical availability of assets, occupational safety andenvironmentalprotection.

Themainprojectmanagedin2013wereEnhancedOilRecovery(EOR) - surface facilities,Međimurje project,DelayedCoker in

RijekaRefinery, InstallationofDelayedCokerclosedblowdownsystemandCokechamberreplacementinSisakRefinery.The implementation of cost engineering and frame contractsaswellasefforts inpermitmanagementresulted insignificantsavingsinbudgetandtimeduringprojectrealisation.Also,theproject team competencewas increased through training andeducationaswellasrecruitmentofnewemployees.

pRoCuRementTheProcurementSpendOptimization(PSO)projectwasaGrouplevel project thatwas launched in 2010 and finalized in 2013.The project was initiated in order to enhance transparencyand optimize the processes in INA Procurementwith the goalto improve overall efficiency and market competitiveness ofthecompany.Aftersuccessfulconclusionofitslastwave,wave4, the PSO project closed, securing savings in the amount of HRK370mnoverafouryearperiodonacostbaselineofmore

thanHRK4bn.Benefitswerenotonlyachievedthroughsavings,but also process improvement actions, improved marketresearchinordertoincreaseinvolvementofnewvendors,andcutting-edge approaches in procurement like e-procurementwiththeaimtofurtherimprovetransparencyandefficiency.

asset & seRviCes manaGementInthecourseof2013theAssetandServicesManagementSectorperformed a number of initiatives in order to improve andrationalizetheoverallINAbusinessthroughtheoptimumuseofrealproperty,assetmanagementandcosteffectiveoperatingoffacilitiesandequipment.Improvements have been implemented in relation to themanagementandmaintenanceofnon-corefacilitiesinordertorationalise theconsumptionofenergy,whichwasachievedbyperforming certain modifications in the infrastructure systemandestablishingmorefavourablerelationswiththesuppliersofenergy.

In order to adapt to market conditions in the area of realpropertyandtooptimizetheuseofrealproperty,astrategyformanagementofrealpropertyownedbyINAhasbeendeveloped,andactivitieshavebeenperformedwiththeaimofprotectingthe legal interests of INA during the settlement of propertyrights.Inaddition,energycertificationofINAfacilitieshasbeenperformedinaccordancewiththelegalprovisions.

human ResouRCesIn 2013, INA successfully continued with the Growww 2013graduate program and employed 59 young graduates throughthe3rdconsecutiveGrowwwprogram,astrategicemploymentplatformspecificallytargetedatattractinguniversitygraduatesandalsooneof themost recognizedbestpracticeswithin theprofessional community. Due to its strong public presencewithin the frameworkof theEmployerBrandingplatform, INAhas receiveda largenumberof rewards,especially in thepastthree years. In 2013, INA was successfully recertified for theEmployerPartnerCertificateandwasawarded2ndplaceattheannual“1stChoiceEmployer”Survey,aswellastheGoldenIndexAwardforsupportingandparticipatinginstudentprogramsforthe3rdyearinarow.The2013awardbringsthetotalnumberofGoldenIndexAwardsto10,whichisproofthatthededicationand support INA has provided to the student community isrecognizedandhasreachedtheyoungpeoplewhowehopewillbecomeprofessionalsandcolleaguesintheyearstocome.

sustainable development & health safetY and enviRonment Sustainable Development & Health Safety and EnvironmentSectormainfocalpoint in2013weresustainabledevelopmentactions,environmentalprotectionrelatedtoemissionallowancesandLifesavingruleswithinHealthandSafetyarea.In order to improve stakeholder engagement and share andspreadknowledgeonenvironmentalprotectionandsustainabledevelopment,thefirstINAGreenForumwasheldinNovemberin IvanićGrad.TheForumgathered theexperts in thefieldofexploration and production and sustainable development, aswellastherepresentativesofthelocalandacademiccommunity.

outlooKThefocusofINACorporateCentreBusinessFunctionwillremainonefficiencyimprovement,optimizationofbusinessoperations,strengthening and increasing team quality, and individualperformancebyapplyingbestpracticesandstrengthening the“Performancebasedculture”platformand“Employerofchoice”image. Measurable expectations in 2014 include on time andaccurate planning, CAPEX utilization increase, and successfulintegrationofe-Biddingintodailypractice.

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finanCial and opeRatinG peRfoRmanCe

34 Managementdiscussionandanalysis47 KeyGroupoperatingdata


manaGement disCussion and analYsis

summaRY of 2013 ResultsIn2013 INAGroupEBITDAamountedtoHRK3.7billion,whichis a 20% drop compared to 2012. The shrinking EBITDA waslargelydrivenbylowerhydrocarbonproductionintheUpstreamsegmentandslightlydecreasedrealizedhydrocarbonpriceswith3%lowerBrentprice.Althoughthenaturaldeclineofdomesticoilproductionhasbeensuccessfullylimitedwithfocusedeffortsto 2%, gradually down from 9% in 2010, overall hydrocarbonproductionhasseena17%decrease.Gasimportsin2013havebeen lower by 31% but still negative price movement in gastradingcontinuouslyburdensUpstreamoperations.Refining & Marketing performance was impacted by highlypressured European refiningmacro environment. At the sametimeeconomicslowdowninCroatiaandINA’sotherkeymarketsinfluenced the performance in a negative way. Even thoughthe Refining and Marketing segment’s result was significantlyimpactedbyloweravailablequotationsoninternationalmarketswith loweraveragecrackspreadand lowermotorfuelsalesofown retail, the clean CCS EBITDA improved, but remained innegativeterritory.Theimprovingcleanresultwassupportedbystrong domestic wholesale performance with solid growth ofexportsintheneighbouringmarketsandfurtheroptimizationofproductioncapacitiesincludingon-demandrefineriesoperation.Operating cash flowwas in line in a yearly comparison,whilewithexclusionofworkingcapital, cashflowdecreasedby20%whichisinlinewithcompany’soperationalresultmovement.Operating profit excluding special items decreased to a largerextentthanEBITDAexcludingspecialitemsaslineardepreciationwasappliedin2013inordertoreflecttheamortizationoffixedassets in Syria, which impacted EBIT on top of the businessdriversdescribedabove.The Group’s financial position further improved with gearinglevel decreasing from31% to 27%andnet debt amounting toHRK4,761million,a29%decreaserespectivelycomparedto31stDecember2012.Netfinancialexpensesalsodecreasedin2013totheamountofHRK246million,comparedtoHRK292millionin2012.Capitalexpendituresin2013increasedsignificantlycomparedto2012,by57%tothelevelofHRK2,013million,withmorethan80% invested domestically, mainly in the Upstream segment.There are multiple projects aimed at moderating naturalproduction decline underway, including continuation of EOR

projectat Ivanić-ŽuticaandMeđimurjeproject, raising levelofdomesticinvestmentstothelevelofHRK1,655million.Exploration and Production: In 2013, EBITDA reached HRK5,04billion,whichisbyHRK321millionlowerthanlastyeardue to lower average realized hydrocarbon price, lowerhydrocarbon production reflecting natural depletion ofdomesticfields and lower INA share fromblockproductionon Annamaria offshore field. These negative trends weremoderatedbydecreasedlossesofthegastradingoperations(driven by decreased imported natural gas volumes) anddecreased operating expenditures. Constantly monitoringthesituationinSyriaINAhas,inaccordancewithinternationalpracticeandtakingintoconsiderationtheprolongedpoliticalrisk, adjusted the value of its Syrian assets. Impairment ofHRK1,504million inSyria,was recorded in2013whichhasdriven the operating result to the HRK 1,521 million. This

impairment does not have a direct cash effect but it wasappliedinaccordancewithgoodbusinesspracticetoensurefairvaluationofINASyrianassets.

Refining and Marketing (including Retail): The Refining andMarketingsegment’sreported‘clean’CCS-basedEBITDAamountedtoHRK(164)mln,HRK254millionimprovementcomparedto2012result.Positivedrivers,includingimprovedmotorfuelwholesaleperformanceresultinginincreasedmarketshare,increasedexportto Bosnia and Slovenia, continuous optimization of productioncapacities (on-demand refineries operation), aswell as focusedcost control efforts are still affected by high employee costs inRetailandlowerRetailsalesontheotherside.InthesameperiodEBITDAisunderpressureofloweraveragecrackspreads.Corporate and Other: Operating loss of the segment was 3%higher(HRK610million)in2013comparedtothelastyear.

2012 2013 Change13/12%

HRKmln USDmln HRKmln USDmln HRK USD

Netsalesrevenues 29,895 5,109 27,444 4,810 (8) (6)

EBITDA(1) 4,581 783 3,672 644 (20) (18)

EBITDAexcl.specialitems(2) 4,966 849 3,799 666 (23) (22)

Operatingprofit 1,359 232 (1,570) (275) n.a. n.a.

Operatingprofitexcl.specialitems(2) 2,866 490 799 140 (72) (71)

Netfinancialexpenses (292) (50) (246) (43) (16) (14)

Netprofit/lossfortheperiod(3) 681 116 (1,508) (264) n.a. n.a.

Netprofitfortheperiodexcl.specialitems(2) 1,887 322 953 167 (49) (48)

Operatingcashflow 3,742 640 4,543 796 21 24

Earningspershare

Basicanddiluted/(loss)earningspershare

(kunaspershare) 68.1 11.6 (150.8) (26.4) n.a. n.a.

Netgearing% 30.83 26.99

(1) EBITDA = EBIT + Depreciation + Impairment + Provisions

(2) The 2013 EBIT was negatively influenced by HRK 2,369 million special items

(3) INA Group net profit attributable to equity holder

(4) In converting HRK figures into US Dollars, the following average CNB (HNB) rates were used: for Q3 2013 – 5.6928 HRK/USD; Q4 2012 – 5.804 HRK/USD; Q4 2013 – 5.6036 HRK/USD;

Q1-Q4 2012 – 5.8509 HRK/USD; Q1-Q4 2013 – 5.7059 HRK/USD

(5) Starting from 1 January 2013, the reporting of Refining and Marketing segment and Retail segment is merged as Refining and Marketing including Retail segment value chain aligning

the presentation with international industry reporting practice. As a result of this resegmentation, the Group has the following two reporting segments: Upstream and Refining and

Marketing including Retail. Comparative periods have been restated accordingly.

(6) Linear depreciation method was applied starting from 01 January 2013 in order to fairly reflect the amortization of the equipment in Syria

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exploRation and pRoduCtion oveRviewThe Upstream result decline over 2012 reflects (1) lowerhydrocarbonproductionreflectingnaturaldepletionoffieldsinbothonshoreandoffshoreCroatia(excludingSyrianproductionvolumesin2012,thecomparabletotalhydrocarbonproductiondecrease was 11.6%) and (2) decreased average realizedhydrocarbonprices.Thesenegativetrendsweremoderatedby(1)31%lowernaturalgasimportscombinedwithalowerpricedifferentialvisibleinimprovedbutstillnegativecontributionofthegastradingoperationswithPrirodniplinEBITDAlossofHRK775million in 2013 and (2) internal efficiency improvementsresultingindecreasedoperatingexpenditures.Totalnaturalgasproductionwas20.7%lowerthanin2012:• asCroatianoffshorefieldsdecreasedduetonaturaldeclineon North Adriatic, downtime on Ika B platform as per drillingactivities on new development well Ika B3 that was partlycompensated with optimization of well working parametersandacidtreatmentsaswellashigherproductiononAizaLaurabecauseoflowerintensityofmaintenanceworksonthepartner’sside.During2013INAsharefromthetotalblockproductionwaslowerduetohigherinvestmentsofthepartnersonexplorationand developments projects, leading to an average offshorecontribution of around 12 thousand barrel of oil equivalent(mboepd)dailyduring2013,• alsoreflectingtheabsenceofSyrianproductionin2013duetotheearlierannouncementofForceMajeure,andnaturaldeclineandwatercutsonbothonshoreandoffshorefieldsinCroatia.

Crudeoilproductiondeclinedby6%oncorporatelevel:• productionwas foremost impacted by 24.1% lower crudeproductioninAngolamostlyrelatedtogasliftinjectionrelatedproblem,delayedwellworkoveractivitiesandnaturaldecline.• domestic production shrank by 2% in 2013 due to naturaldepletionofthefields• no Syrian crude volumes were recorded in 2013 as theCompanytemporarilysuspendedactivitiesandEgyptianoutputfellby1.4%duetoanaturalproductiondeclineat thematurefieldsonRasQattaraandWestAbuGharadigconcessions.

In theabsenceofparametersneeded forunit-costproductiondepreciation calculationmethod due to ForceMajeure, lineardepreciationmethodwasappliedstartingfromJanuary1st,2013 in order to fairly reflect the amortization of the equipment.Depreciationimpactfor2013wasHRK547million.Additionally,thevalueofitsSyrianassetshasbeenadjustedwithimpairmentofHRK1,504million,nothavingadirectcasheffectbutappliedinaccordancewithgoodbusinesspracticetoensurefairvaluationofINASyrianassets.

Asaresultoftheabovementionednegativetrends,Upstreamsales revenues were 14% lower year-on-year at HRK 10,526million.Undercurrentpracticeandinlinewiththeinternationalaccountingstandards,theCompanyadjustsitsreceivablesthatare 60 days or older. Adjustment of receivables is a recurringprocess generally applicable to all receivables; therefore it isnot considered a one-off item. Accordingly, the Company hasimpaired HRK 98million of its receivables in Egypt thatmeetthesecriteriaduring2013.

RefininG and maRKetinG (inCludinG Retail) oveRview The Refining and Marketing segment’s reported ‘clean’ CCS-basedEBITDAamountedtoHRK(164)mlnsurpassing2012resultbyHRK254million.Management initiativesto improveresultsinclude (1) strong domesticwholesale performance, (2) timelycapturedexportopportunities,(3)diversifiedfeedstockselectionandextending the crudebasket, (4) continuedoptimizationofproductioncapacitiesincludingon-demandrefineriesoperation,(5)stringentcostcontrolresultingin loweroperatingexpensesand(6)lowerownconsumptionandlosses.Effectofthesepositivecontributorswaspartiallymitigatedwith(1)loweravailablequotationsoninternationalmarketsresultingin lower average crack spread, especially lower gasoline andgasoilcrackspreadsand(2)lowermotorfuelsalesofownretailresultinginsegment’sreportedEBITDAexcludingspecial itemsofHRK(342)million,representingadecreasecomparedto2012.The segment operating profit in 2013 excluding special itemsdeclined over the last year by HRK 143million, reaching HRK(1,249)million.Wholesale performance improved increasing sales by 2%compared to the previous year, while transfers to own retaildecreased. Additionally, INA improved its sales position in the

valuecreatingmotorfuelsaleswithhighersales inBosniaandsignificantlyimprovedexporttoSlovenia,strengtheningalsoitsdomestic sales positionwith 8% growth, while sales on otherexportmarkets(whereavailablemarginsarelower)decreased.The yield of profitable motor fuel products further improveddespitelowerrefineryprocessingwhichpredominantlyresultedfrom on-demand refinery operations and increased share ofmorequalitycrudeoilusedinprocessing.

Retail opeRations sales volumeIn 2013, Retail Segment recorded 2% fall in total retail salesvolumescomparedto2012.Thedeclineinsaleswasmainlydrivenbythecontinuingeconomicdownturn,increasedunemploymentandweakeningpurchasingpower.Consequently,throughputpersitein2013was1%lowercomparedtopreviousyear.Inrelationtothepreviousyear,salesvolumesofgasolinedeclinedby5%indicatingadecreaseintheshareofgasolineinfavourofdiesel,whilesalesofgasoilfellby1%duetodecreaseinheatingoilsales.However,excludingheatingoilsales,dieselsaleswerein linewith2012. LPG salesweredownby4%,but in relationto the previous years, negative sales trend decelerated partlydue to installationof fewadditional LPGunits.Negative trendinLPGsalesshouldbeterminateduntiltheendof2014whenasignificantincreaseinthenumberofLPGunitsisexpected.OnDecember31st,2013,INAGroupoperatedanetworkof444stations(392inCroatiaand52abroad,ofwhich45inBosniaandHerzegovina,6inSloveniaand1inMontenegro).

Exploration and Production 2012 2013 Change%

SegmentIFRSresults HRKmln USDmln HRKmln USDmln HRK USD

Netsalesrevenues 12,264 2,096 10,526 1,845 (14.2) (12.0)

EBITDA 5,356 916 5,035 882 (6.0) (3.6)

EBITDAexcl.specialitems* 5,566 952 5,035 882 (9.5) (7.2)

Operatingprofit 3,783 647 1,521 267 (59.8) (58.8)

Operatingprofitexcl.specialitems* 4,471 765 3,025 530 (32.3) (30.6)

CAPEXwithone-off 746 128 1,396 245 87.1 91.8

*Calculated based on total external sales revenue including natural gas selling price as well

Angola

Egypt

Syria

Croatia

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

Condenzate

Naturalgas

Crudeoil

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Refining and Marketing (including Retail) 2012 2013 Change%

SegmentIFRSresults HRKmln USDmln HRKmln USDmln HRK USD

Revenues 20,994 3,588 20,137 3,529 (4.1) (1.6)

EBITDAreported (287) (49) (469) (82) 63.4 67.6

EBITDAexcl.specialitems** (210) (36) (342) (60) 62.9 67.0

CCS-basedR&MEBITDA** (418) (71) (164) (29) (60.8) (59.8)

Operatingprofit/(loss)reported (1,829) (313) (2,114) (370) 15.6 18.5

Operatingprofit/(loss)excl.specialitems** (1,106) (189) (1,249) (219) 12.9 15.8

CCS-basedR&Moperatingloss*** (1,314) (225) (1,055) (185) (19.7) (17.7)

CAPEXandinvestments(w/oacquisition) 457 78 545 96 19.3 22.3

*Refers to Refining & Marketing including retail INA. d.d. and following subsidiaries: INA Maziva, InterIna Ljubljana, INA BH Sarajevo, Holdina Sarajevo, INA Hungary, INA Crna

Gora, INA Beograd, INA Kosovo

**Excluding negative special items (HRK 865 million in 2013)

***As of Q3 2013 applied clean CCS methodology eliminates from EBITDA/operating profit inventory holding gain/loss (i.e.: reflecting actual cost of supply of crude oil and

other major raw materials); impairment on inventories; FX gains/losses on debtors and creditors/operating profit by capturing the results of underlying hedge transactions.

Clean CCS figures of the base periods were modified as well according to the improved methodology

Refined pRoduCt sales bY CountRY

RefineRY pRoduCtion

Capital expendituRe

exploRation and pRoduCtion Capital expendituResExplorationandProductionsegment’sCAPEXin2013amountedtoHRK 1,396million (o/wHRK 2.3million exploration one offopex). Capital investments in Croatia amounted HRK 967.0million, capital investments abroad HRK 290.9 million andCROSCO’s investment HRK 138.8 million. In comparison with2012capitalinvestmentsarehigherintotalforHRK650.6millionor87.2%.InvestmentslevelinCroatiawashigherforHRK442.2mlnand investmentsabroadhigher forHRK208.4mln.HigherCroatia investments level is mainly result of exploration anddevelopment offshore drilling activities, Panon explorationdrilling activities and EOR project activities, CROSCO’sinvestmentswerealsohigher.HigherinvestmentsabroadwereresultofdrillingactivitiesonDisouqconcession,higherlevelofdevelopmentactivitiesonotherconcessionsinEgyptandhigher

investments inAngoladue to activitiesperformed in scopeofmainprojectsonblock3/05.

RefininG and maRKetinG (inCludinG Retail) Capital expendituResCapital expenditures in 2013wereHRK 88million higher thaninthepreviousyearreachingHRK545million.MajorprojectsinR&Mareunderway,TurnaroundinRijekaRefinerycompletedinQ4enablingoperationoftherefineryforcomingyears.NumerousHSE/sustainable projects launched in 2012 as part of RefiningandMarketingincludingRetaildivision’sdevelopmentprogramswerecompletedandfurtherdevelopedin2013.PositiveopinionontheEnvironmentalimpactassessmentstudyfortheResidueupgradeprojectinRijekarefineryreceivedinDecember2013.Realization of retail capital expenditure in 2013 amounted toHRK 221million. Themain reason for such high realization in2013isstillanintensivemodernizationprogram.

2012CRO53%

B&H14%

Slovenia1%

Other32%

2013CRO54%

B&H15%

Slovenia7%

Other24%3,440(kt)

3,467(kt)

2012LPG 7%

Gasoline 32%

Virginnaphtha 2%

Diesel 38%

Kerosene 3%

Heatingoil 5%

Fueloil 12%

Bitumen 1%

Other 1%

2013LPG 6%

Gasoline 33%

Virginnaphtha 1%

Diesel 39%

Kerosene 3%

Heatingoil 6%

Fueloil 13%

Bitumen 1%

Other 2%

3,532(kt)

3,274(kt)

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31Dec2012 31Dec2013 %

Assets

Non-currentassets

Intangibleassets 676 524 (22)

Property,plantandequipment 18,716 15,979 (15)

Goodwill 183 183 0

Investmentsinassociatesandjointventures 34 22 (35)

Otherinvestments 187 169 (10)

Long-termreceivables 202 230 14

Derivativefinancialinstruments 5 3 (40)

Deferredtax 557 1,127 102

Availableforsaleassets 340 330 (3)

Totalnon-currentassets 20,900 18,567 (11)

Currentassets

Inventories 3,352 3,219 (4)

Tradereceivablesnet 2,770 2,564 (7)

Otherreceivables 516 847 64

Derivativefinancialinstruments 2 2 0

Othercurrentassets 30 142 373

Prepaidexpensesandaccruedincome 142 166 17

Cashandcashequivalents 488 402 (18)

Currentassets 7,300 7,342 1

Assetsclassifiedasheldforsale - - n.a.

Totalcurrentassets 7,300 7,342 1

Totalassets 28,200 25,909 (8)

Equityandliabilities

Capitalandreserves

Sharecapital 9,000 9,000 0

Revaluationreserve 13 6 (54)

Otherreserves 2,505 2,284 (9)

Retainedearnings/(Deficit) 3,437 1,586 (54)

Equityattributabletoequityholderoftheparent 14,955 12,876 (14)

Non-controllinginterests (1) (1) 0

Totalequity 14,954 12,875 (14)

balanCe sheet – ina GRoupCondensedConsolidatedStatementofFinancialPosition–INA-GROUPAt31December2012and2013(inHRKmillions)

Non-currentliabilities

Long-termloans 1,161 1,889 63

Othernon-currentliabilities 101 76 (25)

Employeebenefitsobligation 100 135 35

Provisions 2,713 2,754 2

Deferredtaxliability 13 7 (46)

Totalnon-currentliabilities 4,088 4,861 19

Currentliabilities

Bankloansandoverdrafts 1,266 2,975 135

Currentportionoflong-termdebt 4,725 299 (94)

Tradepayables 1,684 2,841 69

Taxesandcontributions 497 749 51

Othercurrentliabilities 596 661 11

Accrualsanddeferredincome 36 126 250

Employeebenefitsobligation 10 11 10

Provisions 344 511 49

Currentliabilities 9,158 8,173 (11)

Liabilitiesdirectlyassociatedwithassetsclassifiedheldforsale - - n.a.

Totalcurrentliabilities 9,158 8,173 (11)

Totalliabilities 13,246 13,034 (2)

Totalequityandliabilities 28,200 25,909 (8)

As at 31st December 2013, INA Group total assets amountedto HRK 25,909 million and were 8% lower compared to 31stDecember2012.

IntheperiodendedDecember31st,2013, INAGroup investedHRK247millionin intangibleassets.Theeffectofdepreciationequals to HRK 30million. Foreign exchange revaluation of oilandgasfieldsdecreasedthenetbookvalue inamountofHRK23million.ImpairmentofintangibleassetsequalsHRK1millionand disposals equal additional HRK 4 million. Impairment ofinvestments equals HRK 343 million. Transfer from tangibleassets increasednetbookvalueof intangibleassets inamountofHRK2million.

IntheperiodendedDecember31st,2013, INAGroup investedHRK1.764millioninproperty,plantandequipment.Reversalofcapitalizeddecommissioningcostsdecreasedthevalueofassetsby HRK 52 million. Foreign exchange revaluation decreasedthe net book value in amount of HRK 164million. The effectofdepreciationreducednetbookvalueofproperty,plantandequipment in amount of HRK 2.231 million. In the absence

of parameters needed for unit-cost production depreciationcalculation method due to Force Majeure, straight-linedepreciation method for surface assets in Syria was appliedstarting from January 1st, 2013, in order to fairly reflect theamortizationoftheequipment.DepreciationimpactofsurfaceassetsinSyriain2013wasHRK547millionandaforeigncurrencyretranslationofdepreciationwasHRK89million.Correctionofprior year depreciation increased net book value of property,plantandequipmentinamountofHRK8million.ImpairmentofassetsequalsHRK2.037millionand impairmentof investmentequalsHRK65million.Decrease of INAGroupnet book valueisalso resultof foreignexchangedifferences in theamountofHRK19million.Transfertointangibleassetsdecreasednetbookvalue in amount ofHRK2million.Disposals of tangible assetsequalHRK14million.AcquisitionofCroplinsubsidiaryincreasednet book value in amount of HRK 19 million, and transfer ofPP&EfromPlinacroadditionallyincreasedNBVinamountofHRK6 million. Correction of prior year eliminations increased INAGroupnetbookvalue inamountofHRK34million.CorrectionofprioryearimpairmentincreasedINAGroupnetbookvalueinamountofHRK16million.

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2012 2013 %

Salesrevenue

a)domestic 19,090 17,531 (8)

b)exports 10,805 9,913 (8)

Totalsalesrevenue 29,895 27,444 (8)

Incomefromownconsumptionofproductsandservices 269 361 34

Otheroperatingincome 313 655 109

Totaloperatingincome 30,477 28,460 (7)

Changesininventoriesoffinishedproductsandworkinprogress 281 (91) n.a.

Costofrawmaterialsandconsumables (15,151) (13,875) (8)

Depreciationandamortization (2,016) (2,261) 12

Othermaterialcosts (1,696) (1,622) (4)

Servicecosts (1,317) (1,249) (5)

Staffcosts (2,636) (2,415) (8)

Costofothergoodssold (5,377) (5,536) 3

Impairmentandcharges(net) (1,063) (2,780) 162

Provisionsforchargesandrisks(net) (143) (201) 41

Operatingexpenses (29,118) (30,030) 3

Profit/(loss)fromoperations 1,359 (1,570) n.a.

Shareintheprofitofassociatedcompanies

Financeincome 177 620 250

Financecosts (469) (866) 85

Netlossfromfinancialactivities (292) (246) (16)

Profit/(loss)beforetax 1,067 (1,816) n.a.

Incometaxexpense (380) 308 n.a.

Profit/(loss)fortheyear 687 (1,508) n.a.

Attributableto

OwnersoftheCompany 681 (1,508) n.a.

Non-controllinginterests 6 - n.a.

687 (1,508) n.a.

Earningspershare

Basicanddilutedearningspershare(kunaspershare) 68.1 (150.8) n.a.

inCome statement – ina GRoupCondensedConsolidatedIncomeStatement–INA-GROUPFortheperiodended31December2012and2013(inHRKmillions)

IssuedcapitalasatDecember31st,2013amountedtoHRK9,000million. Therewas nomovements in the issued capital of theCompanyineitherthecurrentorthepriorfinancialreporting.InventoriesamountedtoHRK3,219million,whichisandecreaseof4%comparedto31December2012,resultoflowercrudeoilinventories.

Tradereceivablesdecreasedby7%totheamountofHRK2,564millionresultingfromlowersalesrevenues, lowerBrent, loweraveragecrackspread,decreasednaturalgassalesvolumes.

As of December 31st, 2013 total liabilities amounted to HRK13,034 million, which is a decrease of 2% compared to theDecember31st,2012.

INAGroup net debt decreased by 29% and amounted to HRK4,761million,asaresultof lowerworkingcapitalcomparedtoDecember31st,2012.Gearingratiodecreasedfrom30.8%asat31December2012,to27.0%asatDecember31st,2013.Tradepayablesincreasedby69%toHRK2,841million,asaresultofhigherliabilitiesforimportedcrudeoil.

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Total sales revenues in 2013 amounted to HRK 27,444millionandwere8%belowthe2012level,primarilytriggeredbylowerBrent, loweraveragecrackspread,decreasednaturalgassalesvolumes.Costs of rawmaterials and consumableswere8%below2012levelsatHRK13,875million,asprocessingofotherrawmaterialvolumeswaslower.Costs of goods sold recorded an increase of 3% toHRK 5.536million resulting from higher import of crude oil productscomparedto2012.

Withinotheroperatingcostsrealizedin2013:• Other material costs were lower by 4% year-on-year at HRK1,622million,• ServicecostsintheamountofHRK1,249millionrecordeda decreaseof5%mainlyduetolowerroyaltyandlowerother non-productionservices,• Depreciationwas 12% higher and amounted to HRK 2,261 millionmainlyduetodepreciationmethodchangeinSyria,• AdjustmentsandprovisionsofHRK2.981million increased 147%mainlyrelatedtoSyrianHayanconcessionandRefining andMarketingassetsimpairment.

Staff costs in the amount HRK 2,415 million were 8% lowercompared to 2012 as a result ofworkforce optimization. StaffcostrepresentscostofnetsalariesintheamountofHRK1,273million,costofemployeeincometaxintheamountofHRK546

million, tax on payroll in the amount of HRK 300million andother payroll related costs in the amount of HRK 296millionfor the twelvemonthperiodendedDecember31st, 2013. ForthetwelvemonthperiodendedDecember31st,2012staffcostincludescostofnetsalariesintheamountofHRK1,309million,cost of employee income tax in the amount HRK 569million,taxonpayrollintheamountHRK330million,andotherpayrollrelatedcostsintheamountHRK428million.Incometaxin2013amountedtoHRK308millioncomparedtotaxexpenseofHRK380millionin2012.Tax costs and deferred taxes during the interim period arecalculatedonthebasisofactualresultsandtheprofittaxrate,20%fortheperiodsendedDecember31st,2013andDecember31st,2012.Netfinancialexpenses in theamountofHRK246millionwererecordedin2013,comparedtonetfinancialexpensesofHRK292millionin2012.

• Net foreign exchange gain was HRK 0.1 million in 2013, compared to HRK 39,6 million net foreign exchange gains recordedin2012relatedtolong-termloans.• InterestpayableamountedtoHRK195millionand interest receivedHRK17millionin2013,comparedtointerestpayable ofHRK192millionandHRK23millioninterestsreceivedin 2012.• OtherfinancialexpensesamountedtoHRK68mln,compared toHRK162mlnin2012.

HRKmln 2012 2013 %

Netcashinflowfromoperatingactivities 3,742 4,543 21

Netcashusedforinvestingactivities (1,118) (2,151) 92

Netcashfromfinancingactivities (2,461) (2,473) 0

Net(decrease)/increaseincashandcashequivalents 163 (81) n.a.

Cash flow – ina GRoupCondensedConsolidatedCashFlowStatement-INAGROUPFortheperiodended31December2012and2013(inHRKmillions)

The operating cash-flow before changes in working capitalamountedtoHRK3,649millionin2013,representingadecreaseofHRK892million,or20%,comparedto2012,mainlyasaresultoflowerEBITDA.

Changes in working capital affected the operating cash flowpositivelybyHRK1,384million,primarilydueto:• IncreaseintradepayablesbyHRK1,599mln• Decrease value of inventories by HRK 88 million partially offsetby• IncreaseinreceivablesbyHRK303million.

Net outflows in investing activities amounted to HRK 2,151million,incomparisonwithHRK1,118millionofoutflowsin2012.

inteGRated RisK manaGementRiskManagementandHedgingPolicyforINAGroupisprovidingtheframeworkunderwhichINAanditsconsolidatedsubsidiariesmanageandmaintaincommodity,foreignexchangeandinterestrateriskatanacceptablelevel.Besidefinancial(market)risks,themostimportantrisksincludethecreditriskandtheliquidityrisk.

a)MarketriskCommodity price risk managementINApurchasescrudeoilonaspotmarketpriceinUSdollars,mostlythrough short-term credit facility arrangements. The requiredquantitiesofgashadbeenpurchasedatapricedenominatedinUSdollarsinaccordanceto3-yearsupplycontractwithItalianENI.DomesticpricesofrefinedproductshadbeendeterminedunderthepricingformulasetoutintheHighestRetailRefinedProductPricingRegulationwhich,toalimitedextent,hadprotectedthe

Groupfromthechangesincrudeandoilproductpricesandtheforeigncurrencyrisk,enablingrefineryproductstobereprisedbi-weekly.INAmayalsousederivativeinstrumentsinmanagingitscommodityexposure.

Foreign currency risk managementManyGrouptransactionsarepricedanddenominatedinforeigncurrency and thus theGroup is exposed to currency risk. TheGrouphasnet longUSDandEUR,andnetshortHRKexposureof operative cash flow position. The Group may use crosscurrencyswapstoadjustthecurrencymixofthedebtportfolio.AsofDecember31st,2013,therewerenoopencrosscurrencytransactions.

Interest rate risk managementINA Group companies use borrowed funds at both fixed andfloating interest rates consequently the Group is exposed totheinterestraterisk.TheGroupdoesnotspeculateoninterestrate developments and primarily chooses floating rates. As ofDecember 31st, 2013 there were no open interest rate swaptransactions.

Other price riskINA is exposed to equity price risks arising from equityinvestmentsheldforstrategicreasonsandnotfortrading.

b)CreditriskSalesofgoodsandserviceswithdeferredpaymentcreatecreditrisk,ariskofnon-paymentandriskthatthecounterpartywilldefaultonitscontractualobligations.Accordingtoexisting“CustomerCreditManagementProcedure”creditworthinessandriskindealingwithcustomersisestimatedbasedoninternalcreditassessmentmodel

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HRKmillion 2012 2013

INAGROUP

Totalimpactofspecialitemsonoperatingprofit (1,507) (2,369)

TotalimpactofspecialitemsonEBITDA (385) (127)

Exploration&Production (688) (1,504)

Incentivemeasures (82) -

Write-off-Aphamia - (215)

Impairmentofassets-Syria - (1,289)

Impairmentofassets (161) -

Angola (273) -

Egypt-extracostofproduction (11) -

Provisions(ENI,litigations,incentives) (43) -

Reversal-IAS36 77 -

Reversalofprovisionsforincentivesandlitigations (196) -

Refining&MarketingincludingRetail (723) (865)

Impairmentofassets (696) (738)

Refinery-taxcase - (127)


Provisions(litigations,incentives) (10) -

Reversalofprovisions(litigations,incentives) 60 -

Revenuesfrominsurance 15 -

Corporatefunctions (96) -


Impairmentofassets (1) -

Reversalofprovisions(litigations,incentives) 21 -

Provisionsforincentives (18) -

Revenuesfrominsurance 1 -

2011 2012 2013 13/12%

Hydrocarbonproduction

Crudeoilproduction(boe/d) 15,285 12,296 11,617 (6)

Croatia 9,106 8,792 8,608 (2)

Syria 2,837 109 0 n.a.

Egypt 1,762 1,909 1,881 (1)

Angola 1,579 1,486 1,128 (24)

Naturalgasproduction(boe/d) 49,170 33,025 26,198 (21)

Croatia-offshore 21,784 15,768 11,897 (25)

Croatia-onshore 13,923 14,978 14,301 (5)

Syria 13,463 2,278 0 n.a.

Condensate(boe/d) 9,912 3,234 2,365 (27)

Croatia 5,958 2,537 2,365 (7)

Syria 3,954 697 0 n.a.

Totalhydrocarbonproduction(boe/d) 74,366 48,555 40,180 (17)

Averagerealisedhydrocarbonprice

Crudeoilandcondensateprice(USD/bbl) 99 96 95 (1)

Averagerealisedgasprice(USD/boe) 71 78 77 (2)

Totalhydrocarbonprice(USD/boe) 78 83 82 (1)

Naturalgastrading-mlncm

Naturalgasimports 876 1,129 774 (31)

Totalnaturalgassales-domesticmarket 3,033 2,631 2,228 (15)

Naturalgaspricedifferentialtoimportprices(HRK/000cm)

Eligiblecustomers’price (380) (285) (463) 62

Tariffcustomers’price (921) (1,248) (898) (28)

Totalprice (510) (536) (596) 11

aswellasusingtheservicesofcreditworthinessagencies.ThereisnosignificantcreditriskexposureofINAGroupthatisnotcoveredwith collateral, other than those to the institutionsandentitiescontrolledbythestateandthe localgovernment,andexposuretowardcustomersundercertainconcessionagreementsabroad.INAtoalimitedextentisalsousingservicesofagenciesfor“outofcourt”collectionofreceivables.

c)LiquidityriskTheGroup’s liquidity risk ismanagedbymaintainingadequatereservesof liquidityandcredit linesby continuousmonitoring

of projected and actual cash flow and due dates for accountreceivablesandpayables.AsofDecember31st,2013theINAGrouphadcontractedshort-term bank credit lines amounting to HRK 1.63 bn, excludingoverdraftsandtradefinancingcredit linesestablishedwiththepurpose tofinance thepurchaseofcrudeoilandoilproducts,andcontractedlong-termcreditlinesamountingtoHRK5.89bn.

d)FairvalueoffinancialinstrumentsThe Group has concluded some long-term sale or purchasecontractsthatcontainembeddedderivativesasdefinedbyIAS39.

appendix IMPACTOFSPECIALITEMSONOPERATINGPROFITANDEBITDAofINAGroup(inHRKmillion)

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ReseRves bReaKdown

RefininG and maRKetinG inCludinG Retail

MMBOE 1P 2P

2011 2012 2013 2011 2012 2013

By country

Croatiaonshore 160 147 141 190 183 174

Croatiaoffshore 35 21 18 44 38 34

Syria 24 22 22 37 36 36

Egypt 3 2 2 4 3 2

Angola 2 2 2 4 6 5

Total 224 196 186 278 266 251

By product

Oil 76 74 75 90 97 95

Gas 130 110 99 165 153 141

Condensate+LPG 18 12 11 23 16 15

Total 224 196 186 278 266 251

2011 2012 2013 13/12%

Refinery processing (kt)

Domesticcrudeoil 399 496 433 (13)

Importedcrudeoil 2,745 2,448 2,427 (1)

Condensate 129 113 96 (15)

Otherfeedstock 777 1,009 750 (26)

Totalrefinerythroughput 4,051 4,065 3,707 (9)

Refinery production (kt)

LPG 214 236 209 (12)

Motorgasoline 877 1,135 1,068 (6)

Diesel 982 1,334 1,268 (5)

Heatingoil 199 181 193 7

Kerosene 118 97 109 12

Naphtha 95 61 27 (55)

Fueloil 545 440 419 (5)

Bitumen 49 26 38 47

Otherproducts* 369 23 (56) n.a.

Total 3,448 3,532 3,274 (7)

Refineryloss 29 26 23 (13)

Ownconsumption 573 507 410 (19)

Totalrefineryproduction 4,051 4,065 3,707 (9)

Refined product sales by country (kt)

Croatia 1,923 1,828 1,877 3

B&H 539 485 509 5

Slovenia 0 38 237 523

Othermarkets 1,100 1,090 844 (23)

Total 3,561 3,440 3,467 1

Refined product sales by product (kt)

LPG 246 259 231 (11)

Motorgasoline 902 981 955 (3)

Diesel 1,247 1,321 1,394 6

Heatingoil 201 154 161 4

Kerosene 116 117 124 6

Naphtha 95 60 30 (51)

Fueloil 537 402 418 4

Bitumen 91 57 57 1

Otherproducts* 127 90 98 8

Total 3,561 3,440 3,467 1

o/wRetailsegmentsales 1,023 1,042 1,019 (2)

*Other products = Benzene-rich cut, liquid sulphur, coke, motor oils. Ind, lubricants, base oils, spindle oil, waxes, blend. gas oil “M”, atmosp. residue, intermediaries and other

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sustainable development, health, safetY and enviRonment (sd&hse)

52 Sustainable Development55 Environmental performance – compliance 57 Occupationalhealthandsafety61 Qualitymanagement


INA, as a company with significant impact to the society andenvironment, is committed toperformbusiness in accordancewithsustainabledevelopmentprinciples,tendingtoabalancedintegration of long-term economic, environmental and socialfactorsintoitsdailybusiness.Accordingly,newINAGroupHSEpolicyemphasizessustainabledevelopment elements, including reducing environmentalfootprintandmaximisingpositiveeffectonsocietyingeneral.2013wasthethirdyearinwhichwehavepublishedsustainabilityreport on INAGroup level, and the seventeenth non-financialreportinarow.Within the HSE part we have focused our actions on HSEManagement system development and finished the revisionof INAGroupHSEPolicy. Thecooperationandcommunicationwithin INA Group as well as with all the other stakeholders,fromstateinstitutionstocustomersandlocalcommunitieswasstrengthened. Special attentionwas paid to ensuring safe andhealthy working conditions and care for the environment byapplyingtheprinciplesofpreventionandrationalmanagement,thuscreatingthefoundationfortheachievementsinsustainabledevelopment.

sustainable development (sd)

As the leading energy company and one of the largest inCroatia, INA is committed to sustainable development andtransparency. For INA sustainable development means thecorporate commitment to the balanced integration of long-termeconomic,environmentalandsocialfactorsintoeverydaybusinessoperations,inordertomaximiselong-termstakeholdervalueandtosafeguard“licencetooperate”.INAissignatoryoftheUNGlobalCompactandisthuscommittedtopromoteandsupporttheGlobalCompact10principlesintheareaofhumanrights,labourrights,environmentandcorruptioncombating.SD activities in INAGroup are coordinated by central SD&HSESector. SD is incorporated inHSEactivitiesand responsibilitiesand SD&HSE organization in business divisions/INA Groupcompanies. INA Group SD working group continued its work,aimingtoensureinvolvementofalltherelevantorganizationalunitsinsustainabledevelopment.

Besides that, Corporate Social Responsibility (CSR) Council,established in 2012, participates in internal and externalcommunication on SD related issues, analyses sustainabilityrelated data and information of external evaluations, andsupports, checks and controls sustainability reporting on INAGrouplevel.Sustainable Development Guideline, a document defining thegovernancestructureandmanagementofSDrelatedissues, in2013was implementedinmajor INAGroupcompaniestoo.SDGuideline implementation audits were held in Retail BusinessDivisionandExplorationandproductionBD.INAGroupSustainabilityReportfor2012waspublishedasthe17thannual non-financial report, covering a full range of economic,environmentalandsocialimpactsofINA,d.d.anditssubsidiarieson stakeholders. For the first time the Report was issued inaccordancewithGlobalReportingInitiative3.1GuidelinesandOil

andGasSectorSupplement(GRIG3.1andO&GSS).IncoordinationoftheSD&HSESector,E&PBDwashostofthefirstINAGreenForum,whichwasheldinNovemberinIvanićGrad.TheForumgatheredtheexpertsinthefieldofE&Pandsustainabledevelopment, as well as the representatives of the local andacademiccommunity, inordertoshareandspreadknowledgeonenvironmentalprotectionandsustainabledevelopmentandhelptounderstandEORprojectrelatedprocesses.In 2012 a new INAGroupCodeof Ethicswas adopted, and in2013 all of INA Group employees were informed about itthroughaCodeofEthicsbookletandthepresentationsheldbytheirmanagers.TheCodeisbasedonrespectforfundamentalhuman rights and the ethical principles of integrity, honesty,trust, respect, humanity, tolerance and responsibility. EthicsCommittee, chaired by an external independent expert, hasbeenactivesince2010.

WATERMANAGEMENT

INA,d.d. 2008 2009 2010 2011 2012 2013

Waterwithdrawal(m3) 57,211,935 52,733,518 37,487,634 37,310,332 38,593,890 38,351,069

COD(t) 663.01 402.05 611.74 413.25 238.39 209.13

BOD5(t) 176.90 115.40 152.45 129.52 43.75 60.44

Totalsuspendedsolids(t) 126.19 93.74 105.26 96.38 82.50 79.94

MineralOils(t) 23.88 41,508.00 24.94 41,525.00 15.47 8.40

TotalOilsandGreases(t) 22.28 41,495.00 15,250.00 16.41 8.48 20.34

CO2

CO2t/year 2008 2009 2010 2011 2012 2013

RefineryRijekaSector-Urinj&Mlaka 907,814.60 1,031,072.90 797,798.51 858,141.46 855,237.85 736,478.75

RefinerySisakSector 576,771.90 633,427.90 585,772.84 449,351.96 445,362.80 362,310.70

LogisticsSector - - 301.00 411.43 1,079.17 1,389.40

Exploration&ProductionBD 769,848.45 662,347.07 663,303.53 673,088.09 665,933.12 539,749,15

RetailSMSector 28.21 111.58 144.06 87.69 75.92 47.95

TotalCO2t/year 2,254,63.16 2,326,959.45 2,047,319.94 1,981,080.63 1,967,612.94 1,639,976.19

enviRonmental peRfoRmanCe – indiCatoRs

aiR emissions

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enviRonmental peRfoRmanCe – ComplianCe

SO2,NO2,CO,PARTICULATEMATTER

INA,d.d. 2008 2009 2010 2011 2012 2013

SO2(t) 9,346.30 12,392.37 10,203.24 7,841.89 5,509.44 3,581.27

NO2(t) 6,377.09 3,863.90 4,432.19 4,331.26 4,305.42 3,135.02

CO(t) 821.35 768.56 736.32 880.85 870.38 646.55

Particulatematter(t) 156.32 178.48 176.85 132.80 128.58 102.63

WASTEMANAGEMENT

INA,d.d. 2008 2009 2010 2011 2012 2013

Hazardouswaste(t) 8,298.60 4,062.70 4,545.06 4,417.38 6,985.46 5,573.32

Non-hazardouswaste(t) 7,282.30 8,359.00 8,021.57 6,070.89 12,470.70 9,784.79

TotalINA,d.d. 15,580.90 12,421.70 12,566.60 10,488.20 19,456.16 15,322.11

WASTEMANAGEMENT

2007 2008 2009 2010 2011 2012 2013

Exploration&ProductionBD 3 5 4 6 3 7 3

RijekaRefinerySector-UrinjandMlaka 3 1 4 3 0 3 2

SisakRefinerySector 0 0 0 0 0 1 0

RetailSalesManagementsector 0 1 0 0 0 0 1

LogisticsSector 1 1 0 1 2 1 1

TotalINA,d.d. 7 8 8 10 5 12 7

(Hydrocarbonspillsover1m3)

hYdRoCaRbon spills oveR 1m3

Totalnumberofunforeseenevents/accidentsatINAd.d.fromyearthe2007to2013

The principal activities of the Company and the Group,comprisingoilandgasexploration,production,transportation,refining and distribution, can have inherent effects on theenvironmentintermsofemissionsintosoil,waterandair.Both,the Company and the Group regularly record, monitor andreport on environmental emissions in accordance with theirobligations specified in applicable laws and pay emission feesto the Environmental Protection and Energy Efficiency Fundand water protection fee to the Authority of CroatianWater,specified by law. The environmental effects aremonitored bylocalandnationalgovernmentalenvironmentalauthorities.

a) haRmoniZation of ina business with oRdeRs of ippC diReCtiveIntegrated Pollution Prevention and Control Directive (IPPC)regulates the issue of “environmental permit” and requiresthe use of best available techniques (BAT), by which a highlevel of environmental protection as a whole is achieved (airprotection, water, soil, noise protection, waste management,energy efficiency). Environmental permit regulates the facilityoperation.AlignmentwithBAT requirestimeandconsiderablefinancialinvestmentsoINAinCroatiapre-accessionnegotiationswiththeEUgainedforitsrefineriesinSisakandRijekaatransitionperiodtoachievefullcompliancebyDecember31th,2017.InordertoalignitsexistingtechnologywiththeBAT,INAinitiateda few projects that are in various stages of implementation.During2013Requirementsforobtainingenvironmentalpermitsand Technical-Technological solutions for four INA plants(Fractionation Facilities Ivanic Grad (FFIG), Gas ProcessingFacilitiesMolve (GPFM), in Sisak Refinery (SR), Rijeka Refinery(RR)) were sent to the competent authorities on opinion andestablishing conditions for plants. Public hearings for SR, FFIGandGPFMhavebeensuccessfullyconducted.ForthosefacilitiestheEnvironmentalTermsandBooksofunifiedconditions,whichareanintegralpartoftheenvironmentalpermitweresubmittedtotheMinistryofEnvironmentProtectionandNature(MEPN).

b) haRmoniZation of ina business with leGislation in the domain of GReenhouse Gas emissions manaGementEuropean Union Emissions Trading Scheme, EU ETS, is one ofthefundamentalmechanismsoftheEuropeanUnioninthefightagainstclimatechangewithaviewtomeetingthecommitmentsmade under the Kyoto Protocol. Inside the Scheme, a part ofthe emission allowances (one allowance = 1 tonne of CO2) are

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allocatedtoinstallationsforfreeandtheyareusedto“cover”theemissionsfromthepreviousyear.Iftheinstallationhasashortageof allowances in respect to verified emissions, the rest can beboughtonthemarketthroughauctioning.

From January 1st, 2013, Rijeka Refinery, Sisak Refinery,FractionationFacilitiesIvanićGradandGasProcessingFacilitiesMolveareapartoftheETS.InFebruary,requeststoopenfouroperator holding accounts (one for each installation) in theUnionRegistry,throughwhichemissionallowancestransactionsareperformed,hadbeensubmittedtotheCroatianEnvironmentAgency,andthefirstpurchaseofallowanceshadbeenconductedinDecemberduringwhich75%ofthetotalestimatedshortageofemissionallowanceshadbeenbought(thepriceofoneallowancewas4.99eurosandthetotalpaidamountis905,680.00euros).The Annual Greenhouse Gas Emissions Reports were deliveredfor all four installations to the Croatian Environment Agencyin accordance with the regulations in March. The EuropeanCommissionpublishedanewformforGreenhouseGasEmissionsMonitoringPlansandINAsubmittedPlansforallfourinstallationstotheMinistryofEnvironmentalandNatureProtectioninAugust.

C) haRmonisation of ina’s opeRations with the pRovisions of ReaCh leGislationAccording to the Croatian Law on the Implementation of theRegulation No. 1907/2006 (EC) of the European Parliament andCouncilontheRegistration,Evaluation,AuthorisationandRestrictionofChemicals, INA,d.d.hasregisteredsubstancesbeforedeadline.Thepre-registrationperiodhasendedonDecember31st,2013.The registrationdeadline forCMRorvery toxic substances forfreshormarineorganismsproduced inquantities (R50/53)ofover100 tonnesa year is 30thof June,2014. The registrationdeadline for all substances produced in smaller quantities (1-100t/year)isMay31st,2018.During2013,INA-REACHteamhascollecteddataforatotalof14registrationdossiers(9substancesand5onsiteintermediates),whichwere submitted to European Chemicals Agency (ECHA).Besidesregistration,notificationof8substanceswascompletedinaccordancewiththeCLPRegulationwhichareexemptedfromregistrationobligations.

For 18 substances (14 substances and 4 intermediates) thatINA exported to the territory of the EU, before accession oftheRepublicofCroatiatoEU,transferofallrightsfromMOLtoINAwas completed. Registration dossiers of these substances

wereupdated,duetothepresenceofnewinformation.Afterasuccessful registration under REACH and CLP notification, INAaccomplishedthegoalandisabletomanufacture,store,useandputonthemarketproductsontheEuropeanUnionterritory.

d) haRmoniZation of ina business with pRovisions of leGislation in the aiR pRoteCtion domain From1stJanuary2016thexistingplantswillhavetocomplywithmorestringentELV,asstipulatedbyIndustrialEmissionsDirective(IED).TheprovisionsofthisDirectivehavebeentransposedintoCroatian legislationbyRegulationon limit values for pollutantemissions from stationary sources into the air (OG 117/12). InJanuary 2013 oil refineries in Sisak and Rijeka submitted anApplicationforinclusionofitsexistinglargecombustionplantsintheTransitionalNationalPlan(TNP).LargeCombustionPlantsinvolvedintheTNP,intheperiodfromJanuary1st, in2016tillJune 30th, 2020,may be exempted from compliancewith theELV,iftheymeetcertainconditionsprescribedbytheRegulation.In June 2013 Ministry of Environment Protection and NaturesubmittedtheTNPtotheEuropeanCommissionforapproval.

RegardingcompliancewiththetechnicalenvironmentalstandardsforVolatileOrganicCompound (VOC)emissions resulting fromthestorageanddistributionofpetrol,incomplianceistheentireINA’sretailnetworkaswellastanktruckloadingstationinSisakRefineryareincompliancewithtechnicalstandards.

e) enviRonmental liabilities aCCoRdinG to ias 37Environmental obligations are the obligations of a company torecover pollutions caused by the company’s operations. Theycan be divided into two categories: environmental provisionsand contingencies. At December 31st, 2013, INA, d.d. madeenvironmental provisions in the amount of HRK 304 million,whereas theprovisionsat theGroup levelamounted toHRK318million.ContingenciesattheINAGroupandINA,d.d. levelswereestimatedatHRK651millionandHRK438million,respectively.Theestimateswerenotrecognisedbecausethetimingoftheeventisuncertainandthere isnoevidenceofpollution.Aportionof thecontingenciesmayberecognisedasprovisionsbymovingthetimewindowordeciding toabandon thepresentbusiness locationofINA,d.d.,ordiscontinuingfurtheractivitiesataparticularsite.

oCCupational health and safetY

Theoil industryrequiresahighdegreeofhealthprotectionandsafetyatwork, so theseareamong the topprioritiesandbasicprerequisites for the successful operation of any oil company.INA d.d. has therefore set up an all-encompassing system ofmanagingoccupationalhealthandsafetyatwork,withtheaimtocontinuouslyimprovethelevelofsafetyandregularlymonitorthestatusofemployeehealth.Specialattentionisgiventoadequateemployeetraining,topromoteandensureworkinasafemannerandtominimizetherisksrelatedtotheirdailyworkactivities.In2013therewasnofatalitiesofownstaffinINAoperations.In2013on INAGroup level therewere 44 Lost Time Injuries (LTI)

resultinginlosttimeinjuryfrequency(LTIF)of1.6presentingtheimprovementof24%inrespectto2012.LTIFonINA,d.d.levelwas1.4andtherewere24LTIcases;whichpresentsimprovement,of26%inrespectto2012.INAE&PwiththeLTIFof1.7wasincreasedby88%comparedto2012. In 2013 INA R&M showed significant improvement withLTIFof1.3presentingthe46%betterresultincomparisonto2012andisbelow2012CONCAWEaverageof1.4.RetailhadLTIFof1.0which isbetter than1.9 in2012. Functionalunits recordedLTIFof2.3which ishigherby28%thanLTIFresult in2012. INA,d.d.performancein2005-2013periodisshowninthechartbelow:

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Lookingat the typeof injury,outof24 injuries,36%of themwere“fallsonthesamelevel”and20%were“fallsonthelowerlevel”.AccordingtoCroatianregulationtherewere94injuriesin2013,83ofwereclassifiedaslightinjuries.

ContRaCtoR safetYIn 2013 HSE Appendix was finished. It defines rules on howcontractorsshouldperformwork.Allfuturecontracts(whichareclassifiedasmediumorhighrisk)willcontaintheHSEAppendix.INA also implemented system of collecting working hours ofcontractorsandreportingonauditsconductedovercontractorsworkingonINApremises.9SuppliersForumswereheld,attendedby116suppliers,werethey were introduced with “Life Saving Rules” and Other INArequeststowardsthem67pre-qualificationauditsofcontractorswereconductedbyHSEexperts.Also in 2013, 445 contractor workers have passed specificTrainingforINAlocations.

life savinG RulesAspartofINA’son-goingcommitmenttocreateasafeworkingenvironment for employees and effort to strengthen thecultureofsafety,INAhaveintroducedthe„LifeSavingRules”.These rules arenotnew, they are simple, clear, andachieveexactlywhat theirname implies– save lives. The rulesweredeveloped based on feedback and lesson that Oil and gasindustrylearnedfrompractice.

CampaignofficiallystartedinOctober2013andbytheendoftheyear84%ofINAGroupemployeesweretrainedtocomplywiththem. In2014newprojectsfillbe introduced (“Fallprotectionprogramme”,“LOTOprogramme”)tosupporttheserules.

Road safetYInINA,safetyhasbeenrecognizedasoneofthemostimportantissuessoouractionsaredirectedinawaytomaximizesafetyofouremployees.Toformalizethisstandin2011INAlaunchedSafeDrivingProgramme, followedbySafeDrivingStandard in2012thatprescribesproceduresandrulesconnectedwithsafedriving.Itisprescribedinthedocumentthattheemployerisresponsibleforensuringthatdriversarecompetentandqualified,andthattheemployeristoorganizeregularadditionaltrainingforspecifictargetgroups.In order to take the safe driving to the higher level and becompliant with the Safe Driving Standard, INA expanded itssafe driving programme by contracting services. Total of 509employeestookBasicSafeDrivingtrainingonapolygon,ledbyacertifiedprofessionals.Targetedgroupwasprofessionaldrivers,employeesthatdrivemorethan30,000kilometresyearly,youngdriversandemployeesthatparticipatedintrafficaccident.Alsoasapartofthecontractemployee’sfamilymemberswereprovidedwith40%discountforparticipationinBasicSafeDrivingtraining.The realization of the programme was successful resulting indecreaseofRARfrom2.8in2012to1.9in2013onINAGrouplevelandfrom3.9in2012to2.7in2013onINA,d.d.level.

OneofthegoalsforthenextyearistoexpandProjectonotherINA Group subsidiaries and to additional improve employee’sawareness Additional ECO-driving trainings and trainings forprofessionaldriverswillbearranged.

mediCalY pRoGRammed aCtive vaCation (mpav)In the period from November 4th until December 14th, 2013INAorganizedatendaysMedicalprogrammedactivevacation(MPAO) in Specialized Hospital for Medical RehabilitationKrapinskeToplicefor100employees(4groups).Krapina Spa (thermal baths) is known spa resort, situated in apeacefulandbeautifulvalleysurroundedbypicturesquehillsofCroatianZagorje.

Medical programmed active vacation is intended for INAemployees and it is based on the natural healing factors andmedicalrehabilitationandkinesiologyrecreationcontent.Inarelativelyshortperiodsuchmedicaltreatmentandincludedrecreationalfacilitiescanachievepositivechangesinfunctionaland motor abilities of basic organic systems and thus have apositive effect on maintaining and improving the health ofworkersandthemaintenanceoftheirworkingcapacity.

Uponarrivalanddepartureworkersperformspecializedmedicalexamination,on thebasisofwhichwilldetermine the therapyandtodeterminetheoverallhealthstatus.

fiRe pRoteCtionFirepreventionactivitieswereactively conductedduring2013in all INAd.d. and INAGroupobjects. Significantactivitiesarefocused on coordinating internal regulations, procedures andstandardswith EU standards andbestpractices in thefieldoffireprotectionandfirefightingintheoilandchemicalindustries.Considering that, 8 fire risk assessments weremade, 324 fireprotectionstablesystemsand69systemsforalertofpresenceofflammablegasesandvapourswereexaminedinINAd.d.andINAGroup.As a part of raising the operational preparedness of INAprofessionalFireBrigades,therewasadrillorganizedfor157fire-fighters on a one day professional training in Százhalombatta,certifiedfromJOIFF,withanimportantnoticethatFireBrigadecommanders completed a two day professional training onmentioned training area. All participantswhomet the criteriareceivedthecorrespondingJOIFFCertificate.

ForthepurposesofINAd.d.,5professionalFireBrigadeswereformed in economy and are equipped with the appropriatefire fighting techniques and resources for extinguishing firesand providing services for 22 buildings in INA. Buildings arecategorizedinfirstorsecondfireriskcategory.AsapartoftheFire Brigades, thereweremore than 12.000 fire extinguishersserviced on annual basis, all of them owned by INA d.d. andGroup.

Inordertohaveamoreeffectivefireprotectionandfirefightingsystem,INAconcludedcooperationcontractsfor27publicandvolunteerFireBrigadesnearby INA facilities.Thereare regularfire drills conducted with everyone (4 times per year, whichis about 100 commonfiredrillswith public FireBrigades) andwith prepared scenarios. All fire drills are carried out underthe supervision of the Commander of INA Fire Brigade andin collaboration with departments for fire protection and forimprovementoffiresafetyincategorizedobjectsinINA.

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innovation and awaRds INA,d.d. innovatorsparticipatedatthe International InventionShow INOVA 2013, held in Zagreb. Innovators Ivica Vrščajparticipated with innovation “New pipes design PT-15/PT-16in radiation zone of furnace 301-H-3 – solution of frequentappearance of rupture”, Tomislav Malvić and Karolina Novakwithinnovation“Apparatusformeasuringtheimpermeabilityofinsulatingrockonmethaneandcarbon(IV)oxideaccumulatedin the reservoirs in impermeable basement”. For their workinnovatorswonsilvermedals.INA Group company INA Maziva d.o.o. also presented newproducts“INAUltraStarFE5W–30”(authorsTonćaĆaletaProlić

andKaticaVisković)and“INAOilPourPointDepressant”(authorsKamil Nahal, Amila Čelhasić and Ljiljana Pedišić). Innovatorswon gold medals for their work. Due to observed potentialimprovements of intellectual property process, particularly intheareaofprocessinginnovationproposals,theRegulationonintellectual property at INA, d.d. is revised. INA, d.d. workerscontinuously apply their innovation proposals which can becategorized as: patent (invention), industrial design, technicalimprovement,businessrationalizationorusefulidea.InnovationProposalEvaluationCommitteein2013received10 innovationproposalsofwhich7areresolved,andinthesameyeardecisionsfor18innovationproposals(appliedbefore2013)weremade.Intotal,Committeeaccepted6innovationproposals,and9ofthemisstillinprocessofacceptance.

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QualitYSince the first publishing of international standards of qualitymanagementsystem,atINA,d.d.awarenessabouttheneedforaction in accordancewith these standardswas raised. Severalcertificates accredited by independent certification bodies tothe(core)processesareevidenceofthecompany’soperationsinaccordancewiththerequirementsofthequalitymanagementstandardISO9001.Inearly2000company’sManagementoptedforanewphilosophyofmanagement.It isdevelopedauniquesystem that is basically an integrated business managementsystem,basedoncompanypolicies,laws,rulesandrequirementsofISO9001,ISO14001andOHSAS18001andotherstandardsinlinewithbusinessdecisions.NowINA,d.d.has9certificationintotalaccordingtoISO9001,ISO14001,OHSAS18001andISCC.Since2005weconfirmtheuniquequalitymanagementsystematINA,d.d.levelwhereweharmonizedcertificationcycleatINAGrouplevel.AllINAGroupcompaniesthathavecertificatesweresuccessfullyrecertifiedforsystems:•QualitymanagementaccordingtoISO9001:2008•EnvironmentalmanagementaccordingtoISO14001:2004•Management of health and safety according to OHSAS18001:2007

Those standards define quality management, environmentalprotection, safety at work, health and safety. ISCC Standard(International Sustainability and Carbon Certification) certifiessustainable biofuels, and in 2013 this certificate is extendedto thewhole INA, d.d. Commitmentof INA, d.d.ManagementBoardtocontinuouslyimprovebusinessprocessesandbusinessqualityissupportedbyintroductionofanintegratedinformationsystemSAP2006,andevenin2007theobligationofdevelopinginformation security management system was determined.During2008,inaccordancewithlegalobligation,HACCPsystem(HazardAnalysisandCriticalControlPoints) is implemented inINArestaurants.Weareactiveparticipantsinthedevelopmentofthesesystemsinawayoffullintegrationintoexistingbusinessmanagement system. By integrating business managementsystem, we improved transparent management processes,measurement andpresentationof business results, customersandemployeessatisfaction.

Monitoring the entire system is implemented with externalmonitoringauditsandinternalauditprocess,inaccordancewiththeannualplanning,throughspeciallydevelopedITsupportandcollectingandanalysingdata,andreportingManagementBoardaboutmanagementsystem.DuetothefurtherdevelopmentofourcompanyandotherINAGroupcompanies,wecontinuewithimproving unified documentmanagement system at INA, d.d.andINAGroupcompaniestoenablesuccessfulimplementationofbusinessrules.Publicationofthedocumentsofmanagementsystem at INA, d.d. and INA Group companies operates inaccordancewiththeplannedschedule.InordertoimprovequalitymanagementatINA,d.d.,weconductinternaltrainingforManagement,managementrepresentativesand internal auditors. Furthermore, INA, d.d. quality expertsactivelyparticipateintheworkoftheCroatianSocietyforQuality(CCS), which contribute to the development of good relationswith stakeholders and build the reputation of our company.In theProceedingsof the13thannualCroatianConferenceonQuality2013,professionalpaperispublishedandwell-receivedlecturetitled“Creativityandqualitymanagementsystem”washeld.Also,thisyearrecertificationexternalauditconfirmedcompliancewithcorporatepoliciesandcompliancewiththerequirementsofthestandardsasaprerequisiteforcertificationmaintaining.Highdegreeof customer loyalty and satisfactionwithourproductsandservices,confirmedthatthequalitymanagementsystemisappropriate,effectiveandachievessetgoals.

standaRdisationFormany years INA, d.d. has been developing and improvingstandardization system on corporate level with the aim ofestablishing unique corporate standards. INA, d.d. standardsdefinethespecificationofourproductsandrawmaterials,theelements of the visual identity of the company and prescriberulesandstandardsinthefieldofbusinesscommunication.

Company’spolicyofstandardizationestablishedframeworksandguidelinesforthedevelopmentofINA,d.d.standardsbasedonquality requirementsof internationalandEuropeanstandards.WecontinuouslycooperatewiththeauthoritiesandtheCroatianStandards Institute (CSI) in the preparation and adoption ofregulations and standards in government institutions of TheRepublicofCroatiainareasofinteresttoINA,d.d.WeproposetheharmonizationoflegislationwiththerelevantEUdocuments,inordertoprotectandpromotetheinterestsoftheoilandgasindustryinthedomesticandforeignmarketswhereweoperate,takingintoaccounttheinterestsofallparticipants

INA,d.d.expertsactivelyparticipateintheworkofmorethan36technicalcommittees,7subcommitteesand7workinggroupsatCSI.Atthesecommittees,ourexpertsalsoimprovetheprocessof sustainabledevelopmentofourcompanywhilemaintainingexcellentlinkswithstakeholders,promotingtheinterestsofthecompany in society in a transparent and mutually acceptablemanner.

ReaChINA,d.d.hasexcellentcollaborationwiththeCroatianChamberofEconomyworkinggroupof theREACHRegulation.PursuanttotheprovisionsoftheREACHRegulation,evenbeforeenteringtheCroatianaccessiontotheEuropeanUnion(EU)theINA,d.d.has registered 18 substances, while after entering and by thebeginningofAugust2013successfullyregisteredtheremaining14substancesaswell.Theywerenotregisteredin2010becauseat the time INA, d.d. is not exported those substances to theterritoryoftheEU.Atthesametime,threeintermediatesfilesfrom 2010 is supplemented which are now registered as thesubstance.Also,dossiersfor17substancesregistered2010werecomplemented thus all records were aligned with the latestrequirementsoftheEuropeanChemicalsAgency(ECHA).

intelleCtual pRopeRtYINA, d.d. created, maintains and improve the process ofintellectualpropertymanagementthatrecognizestheauthorityand responsibility for all activities of idea generation product,marketingandsalestoprotecttheresultingintellectualproperty.ProtectionofintellectualpropertyrightsinINAGroupismanagedsince2008.Centralizationofprotected intellectualpropertyatINAGrouplevelprotectedintellectualpropertyoftheINAGroup(Crosco,Proplin,INAMaziva,SinacoandSTSI)becomespartofthe INAbrandandan integralpartofthe intellectualpropertyINA,d.d.Thisapproachallowsusto implementconsistentandeffectiveprotectionofintellectualpropertyrightsatINAGrouplevelandtakeappropriateactionifsuchrightsareviolated,andbringsustothelevelrequiredbythecurrentmarketenvironmentalso.

Protecting intellectualproperty INA,d.d.andother INAGroupcompanies includes the protection of inventions (patents),trade and servicemark (trademark) and the protection of theexternal appearances or looking product (industrial design). Itis implemented in accordancewith theCompany’s IntellectualPropertyManagementStrategybothinCroatiaandabroad,onthemarketswhereINA,d.d.andothercompaniesofINAGrouparealreadypresentorintendstobepresent.

Great attention is given to brand protection (the names ofcompaniesofINAGroup),andprotectionofthelubricantproductrange, visual identity of INA’s petrol stations and all marketrecognisablemarks in order to have the legal basis for takingmeasures against their infringement and abuse. InternationalregistrationofINAnamewasalsoaccomplished,whichensuresprotectionofmentionednamein23countries.InCroatia,thereare64protectedtrademarksand28industrialdesigns.Abroad,INA, d.d. protects 19 trademarks in Slovenia, 17 trademarksin Macedonia, 17 trademarks in Bosnia and Herzegovina, 21trademarks in Serbia, 11 trademarks in Albania, in Kosovo 22trademarks,inMontenegro22trademarks,and9trademarksinHungaryaswellas5industrialdesignsinBosniaandHerzegovina,Slovenia,Serbia,KosovoandMontenegro.

Prevention of possible infringement of protected intellectualrightsofallcompaniesofINAGroupisconductedbycontinuous

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manaGement and supeRvisoRY bodiesINA’smanagementstructureisbasedonatwo-tierboardsystem,comprisingaSupervisoryBoardandaManagementBoard.Withthe General Assembly, these constitute the three mandatoryinternal bodies of INA in accordance with INA’s Articles ofAssociationandtheCompaniesAct.Atameetingheldon10thJune2009, INAManagementBoardappointed ExecutiveDirectors, authorized to operate,manageand supervise the respective business divisions/functions ofthe Company,while each ExecutiveDirector is responsible forthe general operation of the assigned segment towards theManagementBoard.TheSupervisoryBoard is responsible for theappointmentandrecall of Management Board members and supervises theconductofCompany’sbusinesses.PursuanttoINA’sArticlesofAssociation, the Supervisory Board consists of ninemembers,withonememberbeingtheemployees’representative.BasedontheShareholders’AgreementsignedbetweenMOLandCroatianGovernment, five members are delegated by MOL and threeby theCroatianGovernment.TheManagementBoardconsistsofsixmembers.BasedontheShareholders’Agreement, threemembersofaredelegatedbyMOL,includingthePresident,andthreebytheCroatianGovernment.

manaGement boaRdThe list below contains thenamesof currentmembers of theManagementBoardandtheirrespectivepositionsonDecember31st, 2013. The business address for all members of theManagement Board is Avenija V. Holjevca 10, 10000 Zagreb,Croatia.

ZoltánÁldott,PresidentoftheManagementBoardNikoDalić,MemberoftheManagementBoardPálZoltánKara,MemberoftheManagementBoardIvanKrešić,MemberoftheManagementBoardDavorMayer,MemberoftheManagementBoardPéterRatatics,MemberoftheManagementBoard

exeCutive diReCtoRsExecutive Directors are appointed by the decision of theManagement Board. They are authorized and responsible formanagementofoperationsof INA’s individualbusinesssectors

supervisionofpossibleabuseourownidentityonthemarkets.Success of conducted protection is proportional to successfulsupervision and prevention of possible infringement of ourprotectedrights.

Also parts of its intellectual property are employees andtheir knowledge, ideas and skills applied in order to enrichthe Company’s tangible property. Where appropriate, suchintellectualpropertyisprotectedbypatents.We encourage the awareness that knowledge, creativity,innovation and intellectual creativity contribute to companydevelopment. Regulation of area of intellectual property andinnovativeworkconfirmsthatinthecompanyasystemexitsformorethan40yearsthatisconstantlyimproved.

Numerousawardsat innovationexhibitions inthecountryandabroad,andregulatedintellectualpropertyandinnovativeworkissuesconfirmalong-standingcompanytraditionofencouraging

employee inventiveness and creativity ultimately resulting incompany innovativeness and finally, intellectual property thatcanbeprotected.Ouraimistopromotetheimportanceofcompanyandpersonalknow-howthroughintellectualpropertymanagementprocesses.Soweconstantlystrivetomakeabetteruseofouroperationalresources, information and employee knowledge, and asefficientlyaspossiblemanagetheintangiblecompanyassetsastheyarevitalfactorsofourcompetitiveness.Theguidelinesformanagingcorporateknowledgeareanopenandcommunicativecorporate culture, a focus on core activities, encouragementof creativity and transforming employee knowledge into formof corporateproperty that canbeusedandsharedwithin thecompany.Thatwasthegoalbehindsettingupandcontinuouslymaintainingthe Company Knowledge Base, where it is possible to find allrelated to creative work of INA, d.d. employees. CompanyKnowledgeBaseisavailabletoINAIntranetusers.

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(Exploration and Production, Refining and Marketing, Retail,Finance,CorporateCenter,CorporateAffairs).

List of Executive Directors as of 31st December 2013:AndrásHuszár,ExecutiveDirectorinchargeofFinanceDarkoMarkotić,ExecutiveDirectorinchargeofRetailTvrtkoPerković,ExecutiveDirectorinchargeofCorporateCenterŽelimirŠikonja,ExecutiveDirectorinchargeofExplorationandProductionArtur Thernesz, Executive Director in charge of Refining andMarketingTomislavThür,ExecutiveDirectorinchargeofCorporateAffairs

supeRvisoRY boaRdThe list below contains thenamesof currentmembers of theSupervisoryBoardandtheirrespectivepositions(onDecember31st, 2013). The business address for all members of theSupervisory Board is Avenija V. Holjevca 10, 10000 Zagreb,Croatia.

SinišaPetrović,PresidentofSupervisoryBoardSzabolcsI.Ferencz,MemberofSupervisoryBoardFerencHorváth,MemberofSupervisoryBoardBožoMikuš,MemberofSupervisoryBoardJózsefMolnár,MemberofSupervisoryBoardGyörgyMosonyi,VicePresidentofSupervisoryBoardŽeljkoPerić,MemberofSupervisoryBoardMladenProštenik,MemberofSupervisoryBoardOszkárVilági,MemberofSupervisoryBoard

issueR’s audit CommitteeAuditCommitteeisabodyappointedbytheSupervisoryBoard,with the purpose to assist the Supervisory and ManagementBoard in execution of their corporate management tasks,financialreportingandcontrolofcompanyoperations.However,the Audit Committee is an auxiliary body only, and cannotrelinquishtheSupervisoryBoardandtheManagementBoardoftheirresponsibilities.SupervisoryBoardshalldiscusstheReportonAuditCommittee’sactivitiesonceayear.

AuditCommittee’sresponsibilitiesareconnectedto:1.Accountingsegment;2.Externalauditorsegment;3.Financialsegment;4.Risk-managementsegment

In performing its tasks, the Audit Committee is authorisedto oversee the internal processes in INA, request additionalinformation fromtheCompanyor itsauditors,andtoconductinterviewswithemployees.Further,theCommitteeisauthorisedto engage independent consultants at the expense of thecompany.

Members of INA Audit Committee on December 31st, 2013 are:ŽeljkoPerić,ChairmanJózsefMolnár,MemberJózsefSimola,MemberDamirVanđelić,Member

Given the fact that the INA’s shares are listed on a regulatedmarket INA – Industrija nafte, d.d. applies the CorporateGovernance Code, which has been jointly prepared by theCroatianFinancialServicesSupervisoryAgency(hereinafter:theAgency)andtheZagrebStockExchange(Zagrebačkaburzad.d.Zagreb), ineffectasofJanuary1st,2011andpublishedontheInternetpageoftheZagrebStockExchange(http://www.zse.hr).InadditiontotheCorporateGovernanceCode,INAGroupalsoapplies its ownCodeof Ethics,which defines the basic valuesand principles of the conduct of the management and theemployeesofINAGroupregardingtheirattitudetowardswork,associates,businesspartnersandthepublic.TheCodealsosetsforththeobligationsofINAGroupofsecuringappropriateworkconditionsandprofessionaldevelopmenttoemployeesaswellastheavoidanceofunacceptableformsofbehaviour.TheCodecoversabroadareaofbusinessrelationshipsandprocessesandhastobeobservedbyallpersonsactinginthenameandonthebehalfof INAGroup, includingnaturalpersonsor legalentitieswhoareinacontractualrelationshipwithINAGroup(businesspartners, consultants, suppliers, sellersetc.). Thesepersonsorentities canaccess theCodeon the Internetpageof INA,d.d.(http://www.ina.hr).INA,d.d.ingeneralabidestotheprovisionsoftheCorporateGovernanceCode,withexceptionsstatedintheAnnualCorporategovernanceQuestionnairepublishedonINA’swebsite.Someoftheexceptionsareasfollows:•INA,d.d.doesnotpublishnorupdatethelistofshareholders.TheownershipstructureisavailableontheCompany’sInternetpage,whileadetailedlistofshareholdersiskeptbytheCentralDepository&ClearingCompanyInc.which, inaccordancewithlaw,publishesalistofthetenlargestshareholdersonitsInternetpage.• INA, d.d. does not publish data on the Company’s shares

heldbytheManagementorSupervisoryBoardmembersonitsInternet page. Instead all announcements in reference to thesecuritiesheldbyManagementorSupervisoryBoardmemberscanbefoundontheCompany’sInternetpage.•INA,d.d.doesnotprovideproxiestotheCompany’sshareholderswho, for any reason, would not be able to do it themselves,without any additional costs for these shareholders who areobligedtovoteattheGeneralAssemblyinaccordancewiththeinstructionsoftheshareholders.Theshareholderswhoarenotabletovotethemselvesshould,attheirowndiscretion,appointappropriateproxieswhoareobligedtovoteinaccordancewiththeir instructions.TheCompanydidnotreceiveanyrequestofanyshareholderinthisrespect.• The Company sets the terms and formal conditions to theshareholdersfortheirparticipationintheGeneralAssembly inaccordancewiththeCompaniesActandtheCompany’sArticlesof Association, in order to protect the shareholders’ rights inconditionsofalargenumberofshareholders.• The Supervisory Board is not composed of a majority ofindependent members. It is composed of major shareholders

representativesandaworkersrepresentativeinaccordancewithCompanyAct.•Thelong-termsuccessionplanhasnotbeenpublished;however,the existing systems of electing members to the SupervisoryBoard,ManagementBoardanduppermanagementtakeaccountof the continuity in performing supervisory,management andadministrativefunctions.•TheSupervisoryBoardhasnotorganizedaremunerationandbonus committee. As part of the best practice harmonizationprocess,inadditiontotheauditcommittee,INA,d.d.alsoplanstoestablishtheremainingproposedcommittees.• The Company’s bonus policy is part of the internal ruleswhicharepublishedon theCompany’s Internetpage.Dataonremunerations to the Management and Supervisory Boardmembersarepublishedintheannualreportintheirfullamount.Thecurrentinternalregulationsdonotenvisagethepossibilityofpublicannouncementofthesedata.•Theamountsofremunerationspaidtoindependentauditorsfor rendered services have not been published and constitutebusinesssecret.

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Zoltán áldott PresidentoftheManagementBoardZoltánÁldott,PresidentofINAManagementBoardsinceApril1st2010,startedhiscareerin 1990as anassociate inCreditumFinancial Consulting. From1992 to1995heheldvariouspositions inEurocorpFinancialConsulting.He joinedMOL in1995as the leadofPrivatizationDepartment.From1997until1999hewasDirectorofCapitalMarketsDepartmentandfrom1999until2000MrÁldottservedasDirectorofStrategy&Busi-nessDevelopment.FromNovember2000toJune2001,hewastheChiefStrategyOfficerandthenfromJune2001,GroupChiefStrategyOfficer.FromSeptember2004untilJune2011hewastheExecutiveVicePresidentofExploration&ProductionDivisionofMOLGroup.FromOctober2003untilApril2010hewasamemberoftheSupervisoryBoardofINA.HeholdsauniversitydegreefromBudapestUniversityofEconomics.

Niko Dalić MemberoftheManagementBoardBoardinFebruary2011.Hestartedhiscareerin1986asageologistworkingonupstreamprojectsinCroatia.In1996,hewasappointedHeadofbusinessunit,responsibleforEasternSlavoniaandPodravina.From2005to2008,hewasAssistantExecutiveDirectorofNaftaplin,wherehewasinchargeofrunninginternationalprojects.Apartfromthat,hewasalsotheHeadofthestrategyteaminNaftaplinandtheteamforEnergyStrategyoftheRepublicofCroatia,aswellastheIPOteam.Afterthat,from2008to2009,hewastheHeadoftheExplorationSector.AsofJune2009,hehasservedasamemberoftheManagementBoardofEdina,ajointventureofINAandItalianEdison,wherehehasfocusedontheactivitiesintheIzabelafieldinNorthernAdriatic.HegraduatedfromtheZagrebFacultyofScience(Prirodoslovno–matematičkifakultet),wherehelateracquiredhismaster’sdegree.Hepassedhisstateli-

cenceexamattheMinistryofSciencein1996.MrDalićattendedanumberofseminarsandprofessionaltrainingsinCroatiaandabroad.Heisamemberofmanyprofessionalassociations,andhaspublishedseveralpapers.HespenttwotermsinthepositionofthepresidentoftheCroatianGeologicalSociety,andiscurrentlyservingasthechairoftheSupervisoryBoardoftheCroatianGeologicalSociety

Pál Zoltán KaraMemberoftheManagementBoard:Counsel(ChiefLegalCounsel)ofMOLGroup.HestudiedlegalsciencesatELTE(Budapest)andobtainedhis diplomawith „summa cum laude”. Afterwards he became companysecretaryofandprovided legalsupport forprocurementandmarketing inGELightingTungsramCo.untilMay1997.Between1997and2001,hewasHeadofHRandLegalinMETROHoldingHungaryTradeLtd.HejoinedMOLGroupin2001,whenhestartedworkingascounselofMOLPlc.untilJune2006,whenhewasappointedasMOLGroupGeneralCounsel.He is amemberof thePresidiumof theNational (Hungarian) TradeAssociation (OKSZ), MOL Ethics Council and since September 2006, chairman of theSupervisoryBoardoftheNewEuropeFoundation.HewasappointedasamemberoftheManagementBoardofINAinJune2011.

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ivaN krešić MemberoftheManagementBoardIvanKrešićhasbeenappointedmemberofINAManagementBoardinFebruary2011,afterservingastheDirectoroftheRijekaRefinerysince2006.HestartedhiscareerinINA,inRijekabasedLubricantrefinery, as a process engineer.Hewas the headof production from2000 to 2004,whenhewasappointed Director of INA Lubricants Rijeka. In August 2006, hewas appointed Director of RijekaRefinery.MrKrešićgraduatedfromtheFacultyofChemicalEngineeringandTechnology,Zagreb,wherehewontheRector´sAwardforbeststudentpaper.HeacquiredhisMaster´sdegreeattheRochesterInstituteofTechnology,USA,2001.HeholdsMBAcertificate,2003year,fromBledSchoolofManage-ment.Additionally,heattendededucationprogramsinfieldsoffinance,changemanagement,mergersandacquisitionsatLondonBusinessSchool.Mr.KrešićhasbeenamemberoftheSupervisoryBoardofLubricantsZagreb,amemberofINAGroup,from2009until2011,whileheservedasamemberoftheSupervisoryBoardatSTSI,alsoamemberofINAGroup,from2009until2010.

davor MayerMemberoftheManagementBoardDavorMayerhasbeenappointedmemberof INAManagementBoard inFebruary2011.HestartedhiscareerasaninterninINARefineryZagreb(todayMazivaZagreb)andSisakOilRefinery,wherehelaterworkedonINArefineryprocessingoptimizationandthenininternationaltrade.HeservedasthePetroleumProductsWholesaleManagerinOMVfrom1998to2002,whenhetookupapositioninTifon,becomingtheheadoftherepresentativeofficeofGulfOilInternational.From2005to2008,hewastheIndustrialTerritoryManagerforSEEinExxonMobil.HehasbeenworkingagaininTifonsince2008asamemberoftheManagementBoardandwholesales,procurement,logisticsandcardbusinessmanager,and inJune2009heassumedapositionoftheCardBusinessDirector in INA,alongsidehisseatonTifonManagementBoard.HegraduatedfromtheFacultyofChemicalEngineeringandTechnology,andlaterattendedprofessionalseminarsandcourses.HeattendedapostgraduatecourseonmanagementsystemsattheinternationalschoolAchieveGlobalinBrussels,Belgium,from2005to2008.

Péter ratatics MemberoftheManagementBoardPéterRataticsistheVicePresidentforCorporateCentreofMOLGroupandinthisposition, interalia,he isresponsiblefortheMOLGroupHumanResourcesArea.HehasbeenamemberoftheManagement Board of INA since June 2011. He graduated at Corvinus University of Budapest,FacultyofFinancespecializationincapitalmarkets.PéterRataticsstartedhiscareerasGasTradingand Business Development expert in MOL Plc., and then he was appointed Head of ExecutiveBoardAdvisory team in 2009. Between 2009 and 2010 he also acted asHead ofOrganizationalDevelopmentandProcessManagementandin2010-2011asHeadofManagementServices.FromMay2011hehasbeenworkingasDirectorandsinceOctober2012asVicePresidentofCorporateCentreofMOLGroup.AlongsideheisalsoVice-ChairmanoftheSupervisoryBoardofFGSZ(NaturalGasTransmission).


andrás HusZár ExecutiveDirectorinchargeofFinanceAndrasHuszár joined INA in2010as theExecutiveDirector forFinanceFunction,prior towhichhewastheHeadofMOLTreasurysince2001.Overtheyears,hehasheldFinancepositions inprominentcompanies/institutions, from1991to1994atBudapestStockExc-hange,from1994to2001inMatav(DeutscheTelekomGroup).Hegraduatedin1988fromtheUniversityofEconomicSciences,Facultyofeconomicplanningandin1993heearnedaPhDofEconomicScienceattheCorvinusUniversity.HeholdstheCFAInstitute’sCharteredFinancialAnalystdesignationsince1999.

Darko Markotić ExecutiveDirectorinchargeofRetailDarkoMarkotićgraduatedfromtheFacultyofLaw,ZagrebUniversity,in1998.HejoinedINA.in2000wherethroughthevarietyofdifferentorganizationalunitsheperformedmultiplefunctionswithintheCompany.AttheverybeginningofhiscareerinINA,hewasemployedintheLegalSector.InJune2002hetookthepositionofBusinessSecretaryintheOfficeoftheMemberoftheManagementBoardforcoordinatingtheprivatizationofINA.Inlate2003,hewaspromotedtoAssistantSecretaryoftheCompanyandin2005wasappointedCompanySecretaryandheldthatpositionforthreeandahalfyears.In2008hewaselectedasanewmemberoftheINAManagementBoardandafteroneyearonthatposition,in2009hewasappointedasExecutiveDirectorofCorporateServicesBF.SinceOctober2010,heservesastheExecutiveDirectorofRetailBusinessDivision.

tvrtko PerkovićExecutiveDirectorinchargeofCorporateCenterTvrtkoPerkovićwasappointedExecutiveDirectorforCorporateCentreBFinSeptember2012.HebeganhiscareerasaninternatINAin1986intheExploration&ProductionBD,WorkoverandWellservicesFacility,afterwhichheworkedasanoperatingengineertobecometheheadoftheSpecialServicesSectorin1990.From1995until1997,hewastheAssistantDirectoroftheTechnicalServicesSector,whenhetransferredtoCROSCO,d.o.o.tothepositionofDirectoroftheStrategyandDevelopmentSector.In1999and2000hemanagedaprojectfortheimplementationoftheSAPsysteminINAafterwhichhewasappointedtothepositionofDirectoroftheStrategy,HumanResourcesandITSectoratCROSCO,d.o.o.InJuly2009,he returned to INA toperformthe tasksofDirectorof theUpstreamSupportSectorandwasappointedtothepositionofpresidentoftheManagementBoardofSTSI,ltd.in2010,a

positionhehelduntilJuly2012.

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ŽeliMir šikoNja ExecutiveDirectorinchargeofExplorationandProductionMr Želimir Šikonja graduated from the Faculty of Mining, Geology and Petroleum Engineering (MGP),UniversityofZagreb,Croatiain1983.HecompletednumberofcoursesandattendedadditionaleducationthroughProjectManagement,BusinessLeadershipandMiniMBAprograms.HewasappointedDirectoroftheSoutheastEuropeExploration&ProductionSectorinJune2009.Beforethat,from2007hewasAssistantDirectorofINCTforRijekaRefineryModernisationProjects.HisextensiveyearsofprofessionalexperienceweregainedinvariouspositionsmainlywithinINA’sBusinessSegmentExplorationandProductionofoilandgas.From2005to2007hewasInagipGeneralManager,whilefrom2000hewasheadofProductionCoordinationDepartment.Beforethat,from1997to2000hewasFieldDevelopmentSectorDirector.HestartedhiscareerasProductionEngineeronStružecFacilityandafterwardswaschieftechnologistonMolveFacility.

artur tHernesZExecutiveDirectorinchargeofRefiningandMarketingArturTherneszisaninternationallyrenowneddownstreambusinessleaderwithmorethan20yearspractice.HejoinedalocalExxonaffiliatein1993followedbyinternationalassignmentstoHamburg,GermanyforleadingFuelsMarketingplanningactivitiesinESSOCentralEuropecluster.HavingaccomplishedthemergerofEXXONandMobilaffiliates,heservedGeneralManagerofExxonMobilHungary.HewasinvitedtojointhegrowingMOLDownstreamorganization in2005andestablished internationalAsset-,Product-,andRenewablesDevelopmentactivities.Hehasbeenamaincontributortoidentifyingandaccomplishingma-jorinvestmentprogramsinMOLGroup.Maintainingworld-classcapitaldiscipline,hecompletedtheEU-5fuelsprograminHungary,initiatedthetimelyintroductionofrenewablefuelsportfolioinallMOLmarkets,led theModernizationProgramof IES refinery in Italyandcontributed to formingaPowerGenerationsegmentinMOL.HehasbeentakingakeyroleintalentmanagementprogramsandlaunchedaMasterCoursetoprovidebusiness-orientedyoungengineeringgraduatesforthemultinationalgroup.Hespeaks

4languages,holdsanMScdegreeinProcessEngineeringandearnedanMBAinFinancialManagement.InJanuary2012hewasappointedExecutiveDirectorforRefiningandMarketinginINA.

toMislav tHür MemberoftheManagementBoardTomislavThürgraduatedfromtheFacultyofLaw,UniversityofZagrebin1991andgainedhisMaster’sdegreeattheHarvardLawSchoolin1998.MrThürjoinedINAasmemberoftheManagementBoardandDirectorforCorporateProcesses.In2012hewasappointedExecutiveDirectorforCorporateAffairs.BeforejoiningINAhewasGeneralSecretaryofAtlanticGroup.From1992until2001hewasemployedattheCroatianEmbassiesinBernandWashington,andtheCroatianmissionattheUNofficeinGeneva.MrThüralsoservedastheHeadoftheNationalCoordinator’sOfficefortheStabilityPact.HestudiedexecutivemanagementatLondonBusinessSchool,HarvardBusinessSchoolandINSEAD.HeismemberoftheExecutiveBoardoftheCroatianEmployersAssociationandasofFebruary2013PresidentoftheExecutiveBoardoftheEnergyAssociationofHUPwithintheCroatianEmployersAssociation.MrThürisalsomemberoftheNationalCompetitivenessCouncil.


CoRpoRate and shaReholdeRs infoRmation

expeCted development and ReseaRCh

INAwasfoundedonJanuary1st,1964whentheoperationsofNaftaplin(oilandgasexplorationandproduction)weremergedwith those of the refineries of Rijeka and Sisak. In 1990 INAbecameastateownedenterprise.In 1993, INA became a joint stock company (“d.d.”), its sharecapital divided into 10,000,000 ordinary shares. The nominalvalue of one share was HRK 900.00. Each INA ordinary sharecarriesonevoteandashareinthedividend.In 2003, MOL Rt (MOL) acquired 25% plus one share of INA.Throughacquisitionof25%plusoneshare,MOLbecameINA’sstrategic partner and INA has become part of an integratedregional partnership in the oil and gas industry consisting ofMOL,INA,SlovnaftandTVK.Twoyears later, in2005,7%of INAsharesweretransferredtotheCroatianHomeland IndependenceWarVeteransandTheirFamilyMembers’Fund.

INA-Industrijanafte,d.d.wasofficiallylistedattheZagrebStockExchangeonNovember30th,2006.ThetradinginINA’ssharesofficiallystartedat11:15onDecember1st,2006.ThetickerforINAsharesisINA-R-A.INAsharesarealsotradedontheLondonStockExchange,wherethetickerforINAsharesisHINA.In2007,CroatianGovernmentdecidedtosell7%ofINAshares(700,000shares)tothecurrentandformerINAemployees.OnJuly14th,2008,MOLHungarianOilandGasPublicLimited

CompanysentaletterofintenttotheCroatianFinancialServicesSupervisionAgency announcing a voluntary offer to take overall the shares not held byMOL or the Republic of Croatia. InSeptember 2008, the Croatian Financial Services SupervisionAgency published a decision in the Official Gazette 102/08approving the publication of theMOL’s offer to take over thepublicjointstockcompanyINA.Followingthetakeoveroffer,thetotalnumberofordinarybearersharesheldbyMOLis4,715,538,accountingfor47.15538%ofthetotalsharecapital,RepublicofCroatia held 4,483,552 shares, while private and institutionalinvestorsheld800.910shares.

On December 2nd, 2010 MOL Plc. offered to INA’s privateand institutional shareholders to purchase the total of un-encumbered and fully paid off INA ordinary shares, bearingthesymbol INA-R-A,each innominalvalueofHRK900for theprice of HRK 2,800 per share. Validity period of this offer isfromDecember15th,2010toJanuary14th,2011.Followingthetakeoveroffer,MOL’s stakewas 4,725,620, or 47.26%of sharecapitaloftheCompany.As of December 31st, 2013 INA’s shareholders’ structure is asfollows:• MOL4,908,207shares–49.08%• RepublicofCroatia4,483,552shares–44.84%• Institutionalandprivateinvestors–608,241shares–6.08%.

The external environment in which INA operates is stillextremelychallenging.Apoordomesticeconomicclimate,on-goingrecessioninmajorregionalmarketsresultingindecreasingdemand in INA’s key markets (Croatia, BIH, Slovenia), thesituation in Syria which remains unfavourable, together withchanges in the regulatory environment, adversely influencedINA sbusinessperformance.INAmanagement’staskistosecurethesustainabledevelopmentofthecompany,whileatthesametimecreatingvalueforitsshareholders.

TheExplorationandProductionBusinessDivisionwillcontinuetoputemphasisonstabilizingandincreasingproductionlevelsby developing existing and potential new projects in orderto diversify its current portfolio. The company is expendingsignificant effort to proactively invest into both explorationand development activities to cushion the natural productiondecline,upgradeitsportfoliowithprojectsofdifferentlifetimephasesandtoachieveasustainablereservereplacementbaseinthestrategicperiod.

Croatianonshoreandoffshoredevelopmentwillremaininfocustodelivermid-termgrowthaswellasseekingfurtherlicenseswhentheyareissuedbyCroatianGovernment.Croatiandevelopmentand growth activities are focused on drilling activities in thePannonianbasin,3Dseismicacquisitionandgeologicalstudies,finishing the first phase of the EOR project and beginning thesecond phase together with the continuation of activities onMeđimurjeandotheronshoreprojects.Otheronshoreactivitiesarerelatedtointensifyingactivitiesonadditionaldevelopmentofmaturefieldsthroughthe4PprojectandapplicationofnewreservoirstimulationtechnologiesthroughaPilotprojectinthefieldsStružecandPrivlakainordertomaintainproductionlevels.Offshoreprojectsaremostly related todevelopmentactivitiesofprojectsIkaSW,IzabelaBlockandtheIvanaA/Koptimizationproject.DevelopmentactivitieswillcontinueinEgyptandAngolatoenhancethecontributionfromtheseregionstoINA’soverallhydrocarbonproductionplans.

There are no signs indicating that pressures on the Europeanrefinerybusinesswilldiminish,ratherpressurewillcontinueandintensify.ThereforemaximizingtheefficiencyoftheRefiningandMarketingBDwillcontinuetobeinfocusinthefollowingyears.

In order to minimize the short term loss generation of theRefiningandMarketingBD,refineryoperationsaresettoadjust

processing capacity utilization to market realities. The focusremainsonefficiency improvementswithemphasisongreaterflexibility, diversification of energy sources and decrease ofown energy consumption. The management of INA remainscommittedtosatisfyingfueldemandandachievingthehighestpossiblemarketsharebothondomesticandkeyexportmarketsinaprofitableway.

Despitedemanddecreases in INA’skeymarkets, INAmanagedtoincreaseitssalesofoilderivatesinCroatia,SloveniaandBIH,thusincreasingitsmarketshares.FurtherimprovementsinRetailBDshallbetakenwithcontinuingefforttoensureINA’sstrongleadership position in keymarkets even in challengingmarketconditions. Continuation of the retail network restructuringand modernization program through major investments inknock-down-rebuilds, internal reconstructions, partial internalreconstructionandnewretailvisual identity remains themainfocusof theRetailBD.Thegoal is set toachievesustainabilityand increase retail competitiveness by improving operationalefficiency and the current cost structure. Improvement of theretailoperationmodelbeganat20filling stations through thelaunchofapilotprojectforinvolvingentrepreneurs-“BecomeanEntrepreneur!”.Theentrepreneurshipmodelasanoperationalefficiencyprojectisassumingroll-outatadditionalfillingstationsin2014.

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sHareHolders inforMation

Corporate addressINA-Industrijanafte,d.d.Av.VećeslavaHoljevca1010000ZagrebPhone:+38516450000Web:www.ina.hr

Central depository and clearing company Inc.Heinzelova62a10000ZagrebPhone:+38514607300Web:www.skdd.hr

Zagreb Stock ExchangeIvanaLučića2a10000ZagrebPhone:+38514686800Web:www.zse.hr

London Stock Exchange plc.10PaternosterSquareLondonEC4M7LSPhone:+44(0)2077971000Web:www.londonstockexchange.com

AnnouncementsThecompanypublishesitsannouncementsatINA’swebsite:www.ina.hr,atZagrebStockExchange’swebsite:www.zse.hr,andatCroatiannewsagency’swebsitewww.hina.hr

Investor RelationsŠubićeva2910000ZagrebPhone:+38514592718Fax:+38516452444E-mail:[email protected]


finanCial statements



PursuanttotheCroatianAccountingLaw,theManagementBoardisresponsibleforensuringthatfinancialstatementsarepreparedforeachfinancialyearinaccordancewithInternationalFinancialReportingStandards(„IFRS”)asadoptedbytheEuropeanUnion,whichgiveatrueandfairviewofthestateofaffairsandresultsofINA-IndustrijaNafte,d.d.(˝theCompany˝)anditssubsidiaries(˝theGroup˝)forthatperiod.Aftermaking enquiries, theManagement Board has a reasonable expectation that the Company and the Group have adequateresourcestocontinueinoperationalexistencefortheforeseeablefuture.Forthisreason,theManagementBoardcontinuestoadoptthegoingconcernbasisinpreparingthefinancialstatements.In preparing those consolidated and unconsolidated financial statements, the responsibilities of theManagement Board includeensuringthat:• suitableaccountingpoliciesareselectedandthenappliedconsistently;• judgementsandestimatesarereasonableandprudent;• applicableaccountingstandardsarefollowed,subjecttoanymaterialdeparturesdisclosedandexplainedinthefinancialstatements;and• thefinancial statementsarepreparedon thegoingconcernbasisunless it is inappropriate topresumethat theCompanywillcontinueinbusiness.TheManagementBoardisresponsibleforkeepingproperaccountingrecords,whichdisclosewithreasonableaccuracyatanytimethefinancialpositionoftheCompanyandGroupandmustalsoensurethatthefinancialstatementscomplywiththeCroatianAccount-ingLaw.TheManagementBoardisalsoresponsibleforsafeguardingtheassetsoftheCompanyandtheGroupandhencefortakingreasonablestepsforthepreventionanddetectionoffraudandotherirregularities.

SignedonbehalfoftheGroup: Zoltán Sándor Áldott, the President of the Management Board of INA, d.d. INA-IndustrijaNafte,d.d. AvenijaVećeslavaHoljevca10 10000Zagreb RepublicofCroatia 19March2014

ResponsibilitY foR the finanCial statements

To the Shareholders of INA - Industrija Nafte, d.d.We have audited the accompanying consolidated and unconsolidated financial statements of INA - Industrija Nafte, d.d. (“theCompany”) and its subsidiaries (“the Group”), set out on pages 4 to 137, which comprise the consolidated and unconsolidatedstatementsoffinancialpositionasof31December2013,theconsolidatedandunconsolidatedincomestatements,consolidatedandunconsolidatedstatementsofcomprehensiveincome,consolidatedandunconsolidatedstatementsofcashflowandconsolidatedandunconsolidatedstatementsofchangesinequityfortheyearthenended,andasummaryofsignificantaccountingpoliciesandotherexplanatorynotes.

Management’s Responsibility for the Financial StatementsManagementisresponsibleforthepreparationandfairpresentationofthesefinancialstatementsinaccordancewithInternationalFi-nancialReportingStandards,asadoptedbytheEuropeanUnion,andforsuchinternalcontrolasManagementdeterminesisnecessarytoenablethepreparationofconsolidatedandunconsolidatedfinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.

Auditor’s ResponsibilityOurresponsibilityistoexpressanopiniononthesefinancialstatementsbasedonouraudit.WeconductedourauditinaccordancewithInternationalStandardsonAuditing.Thosestandardsrequirethatwecomplywithethicalrequirementsandplanandperformtheaudittoobtainreasonableassurancewhetherthefinancialstatementsarefreefrommaterialmisstatement.Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancialstatements.Theproceduresselecteddependontheauditor’sjudgment,includingtheassessmentoftherisksofmaterialmisstatementofthefinancialstatements,whetherduetofraudorerror.Inmakingthoseriskassessments,theauditorconsidersinternalcontrolrelevanttotheCompany’sandtheGroup’spreparationandfairpresentationofthefinancialstatementsinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheCompany’sandtheGroup’sinternalcontrol.Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationofthefinancialstatements.Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion. OpinionInouropinion,thefinancialstatementspresentfairly,inallmaterialaspects,thefinancialpositionoftheCompanyandtheGroupasof31December2013,andtheirfinancialperformanceandcashflowsfortheyearthenendedinaccordancewithInternationalFinancialReportingStandardsasadoptedbytheEuropeanUnion.

Emphasis of matter

Political situation in SyriaWedrawattentiontoNote3tothefinancialstatementswhichdescribetheuncertaintyrelatedtothecurrentpoliticalsituationinSyria,wheretheINAGrouphasassetsofHRK2,335millionandliabilitiesofHRK1millioninthestatementoffinancialpositionat31December2013.Ouropinionisnotqualifiedinrespectofthismatter.

Deloitted.o.o.

Branislav Vrtačnik, President of the Board and Certified Auditor Zagreb,RepublicofCroatia 19March2014

independent auditoRs’ RepoRt


ina - industRija nafte, d.d.ina GRoup Consolidated inCome statement foR the YeaR ended 31 deCembeR 2013 (all amounts are presented in hRK millions)

Yearended Yearended

Note 31December2013 31December2012

Salesrevenue

a)domestic 17,531 19,090

b)exports 9,913 10,805

Totalsalesrevenue 4 27,444 29,895

Incomefromownconsumptionofproductsandservices 361 269


Totaloperatingincome 28,312 30,477

Changesininventoriesoffinishedproductsandworkinprogress (91) 281

Costofrawmaterialsandconsumables (13,727) (15,151)

Depreciationandamortisation 6 (2,261) (2,016)

Othermaterialcosts (1,622) (1,696)

Servicecosts (1,249) (1,317)

Staffcosts 7 (2,415) (2,636)

Costofothergoodssold (5,536) (5,377)

Impairmentcharges(net) 8 (2,780) (1,063)

Provisionforchargesandrisks(net) 9 (201) (143)

Operatingexpenses (29,882) (29,118)

(Loss)/profitfromoperations (1,570) 1,359


Financecosts 11 (459) (469)

Netlossfromfinancialactivities (246) (292)

(Loss)/profitbeforetax (1,816) 1,067

Incometaxbenefit/(expense) 12 308 (380)

(Loss)/profitfortheyear (1,508) 687

Attributableto:

OwnersoftheCompany (1,508) 681

Non-controllinginterests - 6

(1,508) 687

Earningspershare

Basicanddiluted(loss)/earningspershare(kunaspershare) 13 (150.8) 68.1

SignedonbehalfoftheGroupon19March2014by:

AndrásHuszár ZoltánSándorÁldott

ExecutiveDirectorforFinance PresidentoftheManagementBoard

Theaccompanyingaccountingpoliciesandnotesformanintegralpartofthisconsolidatedstatementofcomprehensiveincome.

Yearended Yearended



Othercomprehensiveincome,netofincometax:

Itemsthatwillnotbereclassifiedsubsequentlytoprofitorloss:

Remeasurementofdefinedbenefitobligation 32 (11) -

Itemsthatmaybereclassifiedsubsequentlytoprofitorloss:

Exchangedifferencesontranslatingforeignoperations (210) (111)

(Loss)/gainonavailable-for-salefinancialassets 34 (7) 13

Othercomprehensiveloss,netofincometax (228) (98)

Totalcomprehensive(loss)/incomefortheyear (1,736) 589

Attributableto:

OwnersoftheCompany (1,736) 583

Non-controllinginterests - 6


ina - industRija nafte, d.d.ina, d.d. unConsolidated inCome statementfoR the YeaR ended 31 deCembeR 2013(all amounts are presented in hRK millions)

Yearended Yearended


Salesrevenue

a)domestic 15,558 17,188

b)exports 8,324 9,216

Totalsalesrevenue 4 23,882 26,404

Incomefromownconsumptionofproductsandservices - 2


Totaloperatingincome 24,378 26,816

Changesininventoriesoffinishedproductsandworkinprogress (71) 181

Costofrawmaterialsandconsumables (14,105) (15,628)

Depreciationandamortisation 6 (2,101) (1,835)

Othermaterialcosts (1,394) (1,536)

Servicecosts (1,074) (1,186)

Staffcosts 7 (1,472) (1,617)

Costofothergoodssold (2,210) (1,324)

Impairmentandcharges(net) 8 (3,637) (1,967)

Provisionforchargesandrisks(net) 9 (146) (132)

Operatingexpenses (26,210) (25,044)

(Loss)/profitfromoperations (1,832) 1,772


Financecosts 11 (547) (505)

Netlossfromfinancialactivities (135) (103)

(Loss)/profitbeforetax (1,967) 1,669

Incometaxbenefit/(expense) 12 334 (346)

(Loss)/profitfortheyear (1,633) 1,323

Earningspershare

Basicanddiluted(loss)/earningspershare(kunaspershare) 13 (163.3) 132.3

Yearended Yearended




Theaccompanyingaccountingpoliciesandnotesformanintegralpartofthisunconsolidatedstatementofcomprehensiveincome.



Othercomprehensiveincome,netofincometax:

Itemsthatwillnotbereclassifiedsubsequentlytoprofitorloss:

Remeasurementofdefinedbenefitobligation 32 (9) -

Itemsthatmaybereclassifiedsubsequentlytoprofitorloss:

Exchangedifferencesontranslatingforeignoperations (181) (116)

(Loss)/gainonavailable-for-salefinancialassets 34 (7) 13

Othercomprehensiveloss,netofincometax (197) (103)

Totalcomprehensive(loss)/incomefortheyear (1,830) 1,220


ina - industRija nafte, d.d.ina GRoup Consolidated statement of finanCial position at 31 deCembeR 2013(all amounts are presented in hRK millions)




Theaccompanyingaccountingpoliciesandnotesformanintegralpartofthisconsolidatedstatementoffinancialposition.

ASSETS Note 31December2013 31December2012

Non-currentassets

Intangibleassets 14 524 676

Property,plantandequipment 15 15,979 18,716

Goodwill 16 183 183

Investmentsinassociatesandjointoperations 18 22 34

Otherinvestments 19 169 187

Long-termreceivablesandotherassets 20 230 202



Available-for-saleassets 21 330 340

Totalnon–currentassets 18,567 20,900

Currentassets

Inventories 22 3,219 3,352

Tradereceivables,net 23 2,564 2,770



Othercurrentassets 142 30

Prepaidexpensesandaccruedincome 166 142

Cashandcashequivalents 25 402 488

Totalcurrentassets 7,342 7,300

TOTALASSETS 25,909 28,200

ina - industRija nafte, d.d.ina GRoup Consolidated statement of finanCial position (Continued) at 31 deCembeR 2013(all amounts are presented in hRK millions)




Theaccompanyingaccountingpoliciesandnotesformanintegralpartofthisconsolidatedstatementoffinancialposition.

EQUITYANDLIABILITIES Note 31December2013 31December2012

Capitalandreserves

Sharecapital 33 9,000 9,000

Revaluationreserve 34 6 13

Otherreserves 35 2,284 2,505

Retainedearnings 36 1,586 3,437

EquityattributabletoownersoftheCompany 12,876 14,955

Non-controllinginterests 37 (1) (1)

TOTALEQUITY 12,875 14,954

Non–currentliabilities

Long-termloans 29 1,889 1,161

Othernon-currentliabilities 30 76 101

Employeebenefitobligation 32 135 100

Provisions 31 2,754 2,713

Deferredtaxliabilities 7 13

Totalnon–currentliabilities 4,861 4,088

Currentliabilities

“Bankloansandoverdrafts” 26 2,975 1,266

Currentportionoflong-termloans 26 299 4,725

Tradepayables 27 2,841 1,684






Totalcurrentliabilities 8,173 9,158

Totalliabilities 13,034 13,246

TOTALEQUITYANDLIABILITIES 25,909 28,200


ina - industRija nafte, d.d.ina, d.d. unConsolidated statement of finanCial position at 31 deCembeR 2013(all amounts are presented in hRK millions)




Theaccompanyingaccountingpoliciesandnotesformanintegralpartofthisunconsolidatedstatementoffinancialposition.

ASSETS Note 31December2013 31December2012

Non-currentassets

Intangibleassets 14 522 671

Property,plantandequipment 15 14,340 17,063

Investmentinsubsidiaries 17 1,127 1,161

Investmentsinassociatesandjointoperations 18 22 34

Otherinvestments 19 795 798

Long-termreceivables 20 239 210


Available-for-saleassets 21 330 340

Totalnon–currentassets 18,451 20,771

Currentassets

Inventories 22 2,526 2,485

Intercompanyreceivables 1,677 2,226

Tradereceivables,net 23 1,291 1,103


Othercurrentassets 150 83

“Prepaidexpensesandaccruedincome” 98 79

Cashandcashequivalents 25 252 270

Totalcurrentassets 6,721 6,674

TOTALASSETS 25,172 27,445

ina - industRija nafte, d.d.ina, d.d. unConsolidated statement of finanCial position (Continued) at 31 deCembeR 2013(all amounts are presented in hRK millions)




Theaccompanyingaccountingpoliciesandnotesformanintegralpartofthisunconsolidatedstatementoffinancialposition.

EQUITYANDLIABILITIES Note 31December2013 31December2012

Capitalandreserves

Sharecapital 33 9,000 9,000

Revaluationreserve 34 6 13

Otherreserves 35 1,933 2,123

Retainedearnings 36 2,390 4,366

TOTALEQUITY 13,329 15,502

Non–currentliabilities

Longtermloans 29 1,826 1,053

Othernon-currentliabilities 30 65 71


Provisions 31 2,707 2,663

Totalnon–currentliabilities 4,696 3,854

Currentliabilities

Bankloansandoverdrafts 26 2,764 1,057

Currentportionoflong-termloans 26 255 4,648

Intercompanypayables 569 383

Tradepayables 27 2,144 964






Totalcurrentliabilities 7,147 8,089

Totalliabilities 11,843 11,943

TOTALEQUITYANDLIABILITIES 25,172 27,445


ina - industRija nafte, d.d.ina GRoup Consolidated statement of ChanGes in eQuitY foR the YeaR ended 31 deCembeR 2013(all amounts are presented in hRK millions)




Theaccompanyingaccountingpoliciesandnotesformanintegralpartofthisconsolidatedstatementofchangesinequity.

Balanceat1January2012 9,000 2,616 - 2,759 14,375 (10) 14,365

Profitfortheyear - - - 681 681 6 687

Purchaseofnon-controllinginterest - - - (3) (3) 3 -

Othercomprehensiveloss,net - (111) 13 - (98) - (98)

Totalcomprehensiveincomefortheyear - (111) 13 678 580 9 589

Balanceat31December2012 9,000 2,505 13 3,437 14,955 (1) 14,954

Lossfortheyear - - - (1,508) (1,508) - (1,508)

Othercomprehensiveloss,net - (221) (7) - (228) - (228)

Totalcomprehensivelossfortheyear - (221) (7) (1,508) (1,736) - (1,736)

Dividendpaid - - - (343) (343) - (343)

Balanceat31December2013 9,000 2,284 6 1,586 12,876 (1) 12,875

Share capital

Other reserves

Revaluationreserves

Retainedearnings

Attributabletoequityholdersofthe parent

Non controlling

interest

Total

ina - industRija nafte, d.d.ina, d.d. unConsolidated statement of ChanGes in eQuitY foR the YeaR ended 31 deCembeR 2013(all amounts are presented in hRK millions)




Theaccompanyingaccountingpoliciesandnotesformanintegralpartofthisunconsolidatedstatementofchangesinequity.

Balanceat1January2012 9,000 2,239 - 3,043 14,282

Profitfortheyear - - - 1,323 1,323

Othercomprehensiveloss,net - (116) 13 - (103)

Totalcomprehensiveincomefortheyear - (116) 13 1,323 1,220

Balanceat31December2012 9,000 2,123 13 4,366 15,502

Lossfortheyear - - - (1,633) (1,633)

Othercomprehensiveloss,net - (190) (7) - (197)

Totalcomprehensivelossfortheyear - (190) (7) (1,633) (1,830)

Dividendpaid - - - (343) (343)

Balanceat31December2013 9,000 1,933 6 2,390 13,329

Share capital

Other reserves

Revaluationreserves

Retainedearnings

Total


ina - industRija nafte, d.d.ina GRoup Consolidated statement of Cash flowsfoR the YeaR ended 31 deCembeR 2013(all amounts are presented in hRK millions)

Yearended Yearended



Adjustmentsfor:

Depreciationandamortisation 2,261 2,016

Incometax(benefit)/expenserecognisedinincomestatement (308) 380

Impairmentcharges 3,046 1,281

Reversalofimpairment (266) (218)

Gainonsaleofproperty,plantandequipment (4) (36)

Foreignexchange(gain)/loss (35) 44

Interestexpense(net) 128 123

Otherfinanceexpenserecognisedinincomestatement 88 98

Increaseinprovisions 199 136

Decommisioninginterestsandotherprovision 82 115

Othernon-cashitems (38) (85)

3,645 4,541

Movementsinworkingcapital

Decreaseininventories 88 190

(Increase)/decreaseinreceivablesandprepayments (303) 379

Increase/(decrease)intradeandotherpayables 1,599 (120)

Cashgeneratedfromoperations 5,029 4,990

Taxespaid (490) (1,248)

Netcashinflowfromoperatingactivities 4,539 3,742

Cashflowsusedininvestingactivities

Paymentsforproperty,plantandequipment (1,854) (1,190)

Paymentsforintangibleassets (248) (99)

Proceedsfromsaleofnon-currentassets 14 9

Paymentsfromacquisitionofsubsidiaries (7) -

Dividendsreceivedfromcompaniesclassifiedasavailable-for-saleandfromothercompanies 3 1

Interestreceivedandotherfinancialincome 25 19

Investmentsandloanstothirdparties,net (80) 142

Netcashusedforinvestingactivities (2,147) (1,118) SignedonbehalfoftheGroupon19March2014by:



Theaccompanyingaccountingpoliciesandnotesformanintegralpartofthisconsolidatedstatementofcashflow.

Yearended Yearended


Cashflowsfromfinancingactivities

Additionallong-termborrowings 6,160 318

Repaymentoflong-termborrowings (9,878) (1,934)

Additionalshort-termborrowings 15,086 15,280

Repaymentofshort-termborrowings (13,386) (15,936)

Dividendspaid (343) -

Interestpaidonlong-termloans (88) (93)

Interestpaidonshort-termloansandotherinancingcharges (24) (96)

Netcashusedinfinancingactivities (2,473) (2,461)

Net(decrease)/increaseincashandcashequivalents (81) 163

At 1 January 488 337

Effectofforeignexchangeratechanges (5) (12)

At31December 25 402 488


ina - industRija nafte, d.d.ina, d.d. unConsolidated statement of Cash flowsfoR the YeaR ended 31 deCembeR 2013(all amounts are presented in hRK millions)

Yearended Yearended



Adjustmentsfor:

Depreciationandamortisation 2,101 1,835

Incometax(benefit)/expenserecognisedinincomestatement (334) 346

Impairmentcharges 4,732 2,156

Reversalofimpairment (1,095) (189)

Gainonsaleofpropertyplantandequipment (5) (6)

Foreignexchangeloss/(gain) 12 (29)

Interestincome,net (110) (16)

Otherfinanceexpense/(income)recognisedinincomestatement 7 (4)

Increaseinprovisions 172 121

Decommisioninginterests 80 113

Othernon-cashitems 2 3

3,929 5,653

Movementsinworkingcapital

(Increase)/decreaseininventories (122) 413

Increaseinreceivablesandprepayments (787) (873)

Increase/(decrease)intradeandotherpayables 1,395 (247)

Cashgeneratedfromoperations 4,415 4,946

Taxespaid (357) (1,244)

Netcashinflowfromoperatingactivities 4,058 3,702

Cashflowsusedininvestingactivities

Paymentforproperty,plantandequipment (1,689) (1,048)

Paymentforintangibleassets (245) (147)

Proceedsfromsaleofnon-currentassets 5 6

Aquisitionforinvestmentsinsubsidiaries,associatesandjointventuresandothercompanies (10) (16)

Dividendsreceivedfromcompaniesclassifiedasavailable-for-saleandfromothercompanies 3 1

Paymentsreceivedfromsubsidiaries 39 33

Interestreceivedandotherfinancialincome 97 96

Investmentsandloans,net 14 (43)

Netcashusedininvestingactivities (1,786) (1,118)




Theaccompanyingaccountingpoliciesandnotesformanintegralpartofthisunconsolidatedstatementofcashflow.

Yearended Yearended


Cashflowsfromfinancingactivities

Additionallong-termborrowings 6,160 168

Repaymentoflong-termborrowings (9,798) (1,808)

Additionalshort-termborrowings 15,060 14,894

Repaymentofshort-termborrowings (13,240) (15,612)

Dividendspaid (343) -

Interestpaidonlong-termloans (79) (82)

Otherlong-termliabilities,net (7) (36)

“Interestpaidonshorttermloansandotherfinancingcharges” (40) (52)

Netcashusedinfinancingactivities (2,287) (2,528)

“Netincrease/(decrease)incashandcashequivalents” (15) 56

At 1 January 270 229

Effectofforeignexchangeratechanges (3) (15)

At31December 25 252 270


1. GeneRal histoRY and inCoRpoRation

INAwasfoundedon1January1964throughthemergerofNaftaplinZagreb(oilandgasexplorationandproductioncompany)withtheRijekaOilRefineryandtheSisakOilRefinery.Today,INA,d.d.isamedium-sizedEuropeanoilcompanywiththeleadingroleinCroatianoilbusinessandastrongpositionintheregioninoilandgasexploration,refininganddistributionofoilandoilderivatives.INA-Industrija nafte, d.d. Zagreb is a joint stock company owned by theHungarian oil companyMOL (49.08%), the Republic ofCroatia(44.84%)andinstitutionalandprivateinvestors(6.08%).On30January2009MOLandtheGovernmentofCroatiasignedtheAmendmenttotheShareholdersAgreement.UndertheAmendmentMOLdelegatesfiveoutoftheninemembersintheSupervisoryBoardandthreeoutofsixmembersoftheManagementBoardincludingthePresident.In1993INA,d.d.becameajointstockcompanyandin200325%+1sharewassoldtoMOLNyrt.Twoyearslater,in20057%ofINA,d.d.shares(700,000)weretransferredtotheCroatianHomelandIndependenceWarVeteransandTheirFamilyMember´s.Theinitialpublicofferingof17%ofINA,d.d.shareswassuccessfullylaunchedinNovember2006.From1December2006theshareswere listedontheZagrebStockExchangeandtheLondonStockExchangewherethetrading inglobaldepositaryreceipts (GDRs)started.TheinitialofferofINA’sshareshadcausedgreatinterestofprivateandinstitutionalinvestorsinCroatia,andthedemandwasoversubscribed.In2007anadditional7%ofsharesweresoldtoemployeesandformeremployees.

Theownershipstructure*oftheINAGroupasof31December2013and2012:

ina - industRija nafte, d.d.notes to the finanCial statements foR the YeaR ended 31 deCembeR 2013(all amounts are presented in hRK millions)

31December2013 31December2012

Numberofshares Ownershipin% Numberofshares Ownershipin%

Zagrebačkabankad.d./UnicreditbankHungary

Zrt,forMOLNyrt,Hungary 4,908,207 49.08 4,908,207 49.08

GovernmentoftheRepublicofCroatia 4,483,552 44.84 4,483,552 44.84

Institutionalandprivateinvestors 608,241 6.08 608,241 6.08

10,000,000 100 10,000,000 100

*Source:CentralDepository&ClearingCompanyInc.

pRinCipal aCtivities

PrincipalactivitiesofINA,d.d.anditssubsidiaries(Group)are:(i) explorationandproductionofoilandgasdeposits,primarilyonshoreandoffshorewithinCroatia;otherlicenceinterestsareheld (ii) inabroad;AngolaandEgypt;(iii) importofnaturalgasandsaleofimportedanddomesticallyproducednaturalgastoindustrialconsumersandmunicipalgas distributors;(iv) refiningandproductionofoilproductsthroughrefinerieslocatedatRijeka(Urinj)andSisak,andZagreblubricantsplants;(v) distributionoffuelsandassociatedproductsthroughachainof444retailoutletsinoperationasof31December2013(ofwhich 392inCroatiaand52outsideCroatia).Intensivemodernizationandrevitalizationofretailnetworkhasstartedin2010;(vi) tradinginpetroleumproductsthroughanetworkofforeignsubsidiariesandrepresentativeoffices,principallyinLjubljanaand Sarajevo;and(vii) serviceactivitiesincidentaltoon-shoreandoff-shoreoilextractionthroughitsdrillingandoilfieldservicessubsidiaryCroscod.o.o.

TheGrouphasdominantpositionsinCroatiaoveroilandgasexplorationandproduction,oilrefining,andthemarketingofgasandpetroleumproducts.INA,d.d.alsoholdsan11.795%interestinJANAFd.d.,thecompanythatownsandoperatestheAdriapipelinesystem.TheheadquartersoftheGrouparelocatedinZagreb,AvenijaV.Holjevca10,Croatia.Asat31December2013therewere13,460personsemployedattheGroup(13,854asat31December2012).Asat31December2013therewere8,517personsemployedatINA,d.d.(8,712asat31December2012).TheGroupcomprisesanumberofwhollyandpartiallyownedsubsidiariesoperatinglargelywithintheRepublicofCroatia.Foreignsubsidiaries include a numberof trading subsidiarieswhich generally act as distributors of INAGroupproducts, suppliers of rawmaterials,arrangersoffinanceandasrepresentativeofficeswithintheirlocalmarkets.

Directors,ManagementandSupervisoryBoard

SupervisoryBoardfrom24May2011until10April2012DavorŠtern ChairmanGyörgyMosonyi DeputychairmanJózsefMolnár MemberoftheSupervisoryBoardÁbelGalácz MemberoftheSupervisoryBoardDamirVanđelić MemberoftheSupervisoryBoardGordanaSekulić MemberoftheSupervisoryBoardOszkárVilági MemberoftheSupervisoryBoardJózsefSimola MemberoftheSupervisoryBoardMajaRilović RepresentativeofemployeesintheSupervisoryBoard SupervisoryBoardfrom11April2012until17December2012DavorŠtern ChairmanGyörgyMosonyi DeputychairmanJózsefMolnár MemberoftheSupervisoryBoardSzabolcsI.Ferencz MemberoftheSupervisoryBoardDamirVanđelić MemberoftheSupervisoryBoardGordanaSekulić MemberoftheSupervisoryBoardOszkárVilági MemberoftheSupervisoryBoardFerencHorváth MemberoftheSupervisoryBoardMajaRilović RepresentativeofemployeesintheSupervisoryBoard

SupervisoryBoardsince18December2012SinišaPetrović ChairmanGyörgyMosonyi DeputychairmanJózsefMolnár MemberoftheSupervisoryBoardSzabolcsI.Ferencz MemberoftheSupervisoryBoardŽeljkoPerić MemberoftheSupervisoryBoardMladenProštenik MemberoftheSupervisoryBoardOszkárVilági MemberoftheSupervisoryBoardFerencHorváth MemberoftheSupervisoryBoardBožoMikuš* RepresentativeofemployeesintheSupervisoryBoard**BožoMikušparticipatesintheSupervisoryBoardfrom18December2012pursuanttotheWorkersCouncilDecisionon21September2011.


ManagementBoard

ManagementBoardsince9June2011ZoltánSándorÁldott PresidentoftheManagementBoardPálZoltánKara MemberoftheManagementBoardPéterRatatics MemberoftheManagementBoardNikoDalić MemberoftheManagementBoardDavorMayer MemberoftheManagementBoardIvanKrešić MemberoftheManagementBoard

ExecutiveBoard

ExecutiveBoardappointedbythedecisionoftheManagementBoardfrom8November2011until31August2012ŽelimirŠikonja ExecutiveDirectorofExplorationandProductionArturThernesz ExecutiveDirectorinchargeofRefiningandMarketingDarkoMarkotić ExecutiveDirectorinchargeofRetailAndrásHuszár ExecutiveDirectorinchargeofFinanceBerislavGašo ExecutiveDirectorinchargeofCorporateServicesTomislavThür ExecutiveDirectorinchargeofCorporateProcesses

ExecutiveBoardappointedbythedecisionoftheManagementBoardsince1September2012ŽelimirŠikonja ExecutiveDirectorofExplorationandProductionArturThernesz ExecutiveDirectorinchargeofRefiningandMarketingDarkoMarkotić ExecutiveDirectorinchargeofRetailAndrásHuszár ExecutiveDirectorinchargeofFinanceTvrtkoPerković ExecutiveDirectorinchargeofCorporateCentreTomislavThür ExecutiveDirectorinchargeofCorporateAffairs

Secretarysince18June2008NivesTroha,BLL SecretaryofINA,d.d.

2. aCCountinG poliCies Theprincipalaccountingpoliciesappliedinthepreparationoftheseconsolidatedandunconsolidatedfinancialstatementsaresetoutbelow.Thesepolicieshavebeenconsistentlyappliedtoalltheyearspresented,unlessotherwisestated.

pResentation of the finanCial statementsThese consolidatedandunconsolidatedfinancial statementsarepreparedon the consistentpresentationand classificationbasis.Whenthepresentationorclassificationofitemsintheconsolidatedandunconsolidatedfinancialstatementsisamended,comparativeamountsarereclassifiedunlessthereclassificationisimpracticable.TheCompany´sandtheGroup´sfinancialstatementsarepreparedinmillionsofHRK.

basis of aCCountinG TheCompanymaintainsitsaccountingrecordsinCroatianlanguage,inCroatiankunaandinaccordancewithCroatianlawandtheaccountingprinciplesandpracticesobservedbyenterprisesinCroatia.TheaccountingrecordsoftheCompany’ssubsidiariesinCroatiaandabroadaremaintainedinaccordancewiththerequirementsoftherespectivelocaljurisdictions.TheCompany’sandGroup’sfinancialstatementsarepreparedunderthehistoricalcostconvention,modifiedbytherevaluationofcertainassetsandliabilitiesunderconditionsofhyperinflationintheperiodto1993andexceptforcertainfinancialinstrumentsthataremeasuredatfairvaluesattheendofeachreportingperiod,andinaccordancewithInternationalFinancialReportingStandardsaspublishedbytheInternationalAccountingStandardsBoard,andtheCroatianlaw.Historicalcostisgenerallybasedonthefairvalueoftheconsiderationgiveninexchangeforgoodsandservices.Fairvalueisthepricethatwouldbereceivedtosellanassetorpaidtotransferaliabilityinanorderlytransactionbetweenmarketparticipantsatthemeasurementdate,regardlessofwhetherthatpriceisdirectlyobservableorestimatedusinganothervaluationtechnique.Inestimatingthefairvalueofanassetoraliability,theGrouptakesintoaccountthecharacteristicsoftheassetorliabilityifmarketparticipantswouldtakethosecharacteristicsintoaccountwhenpricingtheassetorliabilityatthemeasurementdate.Fairvalueformeasurementand/ordisclosurepurposesintheseconsolidatedfinancialstatementsisdeterminedonsuchabasis,exceptforleasingtransactionsthatarewithinthescopeofIAS17,andmeasurementsthathavesomesimilaritiestofairvaluebutarenotfairvalue,suchasnetrealisablevalueinIAS2orvalueinuseinIAS36.Inaddition, forfinancial reportingpurposes, fairvaluemeasurementsarecategorised intoLevel1,2or3basedonthedegreetowhichtheinputstothefairvaluemeasurementsareobservableandthesignificanceoftheinputstothefairvaluemeasurementinitsentirety,whicharedescribedasfollows:• Level1inputsarequotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilitiesthattheentitycanaccessatthe measurementdate;• Level2inputsareinputs,otherthanquotedpricesincludedwithinLevel1,thatareobservablefortheassetorliability,either directlyorindirectly;and• Level3inputsareunobservableinputsfortheassetorliability. adoption of new and Revised inteRnational finanCial RepoRtinG standaRds StandardsandInterpretationseffectiveinthecurrentperiodThefollowingnewstandardsandamendmentstotheexistingstandardsissuedbytheInternationalAccountingStandardsBoardandinterpretationsissuedbytheInternationalFinancialReportingInterpretationsCommitteeandadoptedbytheEuropeanUnionareeffectiveforthecurrentperiod:• IFRS13FairValueMeasurement,adoptedbytheEUon11December2012,(effectiveforannualperiodsbeginningonorafter 1January2013).


• AmendmentstoIFRS1First-timeAdoptionofIFRS–SevereHyperinflationandRemovalofFixedDatesforFirst-timeAdopters, adoptedbytheEUon11December2012(effectiveforannualperiodsbeginningonorafter1January2013).

• AmendmentstoIFRS1First-timeAdoptionofIFRS–GovernmentLoans,adoptedbytheEUon4March2013,amendmentsfor governmentloanwithabelowmarketrateofinterestwhentransitioningtoIFRS(effectiveforannualperiodsbeginningonorafter 1January2013).

• AmendmentstoIFRS7FinancialInstruments:Disclosures-OffsettingFinancialAssetsandFinancialLiabilities,adoptedbytheEU on13December2012(effectiveforannualperiodsbeginningonorafter1January2013).

• AmendmentstoIAS1Presentationoffinancialstatements–PresentationofItemsofOtherComprehensiveIncome,adoptedby theEUon5June2012(effectiveforannualperiodsbeginningonorafter1July2012).

• AmendmentstoIAS12IncomeTaxes–DeferredTax:RecoveryofUnderlyingAssets,adoptedbytheEUon11December2012 (effectiveforannualperiodsbeginningonorafter1January2013).

• AmendmentstoIAS19EmployeeBenefits–ImprovementstotheAccountingforPost-employmentBenefits,adoptedbytheEU on5June2012(effectiveforannualperiodsbeginningonorafter1January2013).

• AmendmentstovariousstandardsImprovementstoIFRSs(2012)resultingfromtheannualimprovementprojectofIFRSpublished on17May2012(IFRS1,IAS1,IAS16,IAS32,IAS34)primarilywithaviewtoremovinginconsistenciesandclarifyingwording, adoptedbytheEUon27March2013(amendmentsaretobeappliedforannualperiodsbeginningonorafter1January2013).

• IFRIC20StrippingCostsintheProductionPhaseofaSurfaceMine,adoptedbytheEUon11December2012(effectiveforannual periodsbeginningonorafter1January2013).

TheadoptionoftheseamendmentstotheexistingstandardsandinterpretationshasnotledtoanysignificantchangesintheINAGroupaccountingpolicies.Thedescriptionofthesignificantchangesofstandardsissetbelow. IFRS13FairValueMeasurementTheGrouphasapplied IFRS13 for thefirsttime in thecurrentyear. IFRS13establishesasinglesourceofguidance for fairvaluemeasurementsanddisclosuresaboutfairvaluemeasurements.ThescopeofIFRS13isbroad;thefairvaluemeasurementrequirementsofIFRS13applytobothfinancialinstrumentitemsandnon-financialinstrumentitemsforwhichotherIFRSsrequireorpermitfairvaluemeasurementsanddisclosuresaboutfairvaluemeasurements.

IFRS13definesfairvalueasthepricethatwouldbereceivedtosellanassetorpaidtotransferaliabilityinanorderlytransactionintheprincipal(ormostadvantageous)marketatthemeasurementdateundercurrentmarketconditions.FairvalueunderIFRS13isanexitpriceregardlessofwhetherthatpriceisdirectlyobservableorestimatedusinganothervaluationtechnique.Also,IFRS13includesextensivedisclosurerequirements.

IFRS13requiresprospectiveapplicationfrom1January2013.Inaddition,specifictransitionalprovisionsweregiventoentitiessuchthattheyneednotapplythedisclosurerequirementssetoutintheStandardincomparativeinformationprovidedforperiodsbeforetheinitialapplicationoftheStandard.Inaccordancewiththesetransitionalprovisions,theGrouphasnotmadeanynewdisclosuresrequiredby IFRS13. Theapplicationof IFRS13hasnothadanymaterial impacton theamounts recognized in the consolidatedfinancialstatements.

AmendmentstoIAS1PresentationofItemsofOtherComprehensiveIncomeTheGrouphasapplied theamendments to IAS1Presentationof ItemsofOtherComprehensive Income for thefirsttime in thecurrentyear.Theamendmentsintroducenewterminology,whoseuseisnotmandatory,forthestatementofcomprehensiveincomeand incomestatement.Under theamendments to IAS1, the ‘statementofcomprehensive income’ is renamedas the ‘statementofprofitorlossandothercomprehensiveincome’andthe‘incomestatement’isrenamedasthe‘statementofprofitorloss’.TheamendmentstoIAS1retaintheoptiontopresentprofitorlossandothercomprehensiveincomeineitherasinglestatementorintwoseparatebutconsecutivestatements.However,theamendmentstoIAS1requireitemsofothercomprehensiveincometobegroupedintotwocategoriesintheothercomprehensiveincomesection:(a)itemsthatwillnotbereclassifiedsubsequentlytoprofitorlossand(b)itemsthatmaybereclassifiedsubsequentlytoprofitorlosswhenspecificconditionsaremet.Incometaxonitemsofothercomprehensiveincomeisrequiredtobeallocatedonthesamebasis–theamendmentsdonotchangetheoptiontopresentitemsofothercomprehensiveincomeeitherbeforetaxornetoftax.Theamendmentshavebeenappliedretrospectively,andhencethepresentationofitemsofothercomprehensiveincomehasbeenmodifiedtoreflectthechanges.Otherthantheabovementionedpresentationchanges,theapplicationoftheamendmentstoIAS1doesnotresultinanyimpactonprofitorloss,othercomprehensiveincomeandtotalcomprehensiveincome.

IAS19EmployeeBenefits(asrevisedin2011)Inthecurrentyear,theGrouphasappliedIAS19EmployeeBenefits(asrevisedin2011)andtherelatedconsequentialamendmentsforthefirsttime.

IAS19(asrevisedin2011)changestheaccountingfordefinedbenefitplansandterminationbenefits.Themostsignificantchangerelates to theaccounting for changes indefinedbenefitobligationsandplanassets. Theamendments require the recognitionofchangesindefinedbenefitobligationsandinthefairvalueofplanassetswhentheyoccur,andhenceeliminatethe‘corridorapproach’permittedunderthepreviousversionofIAS19andacceleratetherecognitionofpastservicecosts.Allactuarialgainsandlossesarerecognizedimmediatelythroughothercomprehensiveincome.Inaddition,IAS19(asrevisedin2011)introducescertainchangesinthepresentationofthedefinedbenefitcostincludingmoreextensivedisclosures.Specifictransitionalprovisionsareapplicabletofirst-timeapplicationofIAS19(asrevisedin2011).TheeffectwasnotsignificantsotheINAGroupdidnotrestatepreviousperiod(seenote32).

StandardsandInterpretationsissuedbyIASBandadoptedbytheEUbutnotyeteffective

Atthedateofauthorisationofthesefinancialstatementsthefollowingstandards,revisionsandinterpretationsadoptedbytheEUwereinissuebutnotyeteffective:

• IFRS10ConsolidatedFinancialStatements,adoptedbytheEUon11December2012,supersedesthepreviousversionofIAS27 (2008)ConsolidatedandSeparateFinancialStatements,(effectiveforannualperiodsbeginningonorafter1January2014).

• IFRS11JointArrangements,adoptedbytheEUon11December2012,supersededIAS31InterestsinJointVentures(effectivefor annualperiodsbeginningonorafter1January2014).

• IFRS12DisclosureofInterestsinOtherEntities,adoptedbytheEUon11December2012,(effectiveforannualperiodsbeginning onorafter1January2014).

• IAS27SeparateFinancialStatements(revisedin2011),adoptedbytheEUon11December2012,consolidationrequirements previouslyformingpartofIAS27(2008)havebeenrevisedandarenowcontainedinIFRS10ConsolidatedFinancialStatements, (effectivedateofIAS27(asamendedin2011)forannualperiodsbeginningonorafter1January2014).


• IAS28 (revised in2011) Investments inAssociatesand JointVenturesadoptedby theEUon11December2012.Thisversion supersedesIAS28(2003)InvestmentsinAssociates(effectivedateofIAS28(asamendedin2011)forannualperiodsbeginning onorafter1January2014).

• AmendmentstoIFRS10ConsolidatedFinancialStatements,IFRS11JointArrangementsandIFRS12DisclosuresofInterestsin Other Entities – TransitionGuidance, adopted by the EU on 4 April 2013 (effective for annual periods beginning on or after 1January2014). • AmendmentstoIFRS10ConsolidatedFinancialStatements,IFRS12DisclosuresofInterestsinOtherEntitiesandIAS27(revised in2011)SeparateFinancial Statements– InvestmentEntities,adoptedby theEUon20November2013 (effective forannual periodsbeginningonorafter1January2014).

• AmendmentstoIAS32Financialinstruments:presentation–OffsettingFinancialAssetsandFinancialLiabilities,adoptedbythe EUon13December2012(effectiveforannualperiodsbeginningonorafter1January2014).

• AmendmentstoIAS36Impairmentofassets-RecoverableAmountDisclosuresforNon-FinancialAssets,adoptedbytheEUon 19December2013(effectiveforannualperiodsbeginningonorafter1January2014).

• AmendmentstoIAS39FinancialInstruments:RecognitionandMeasurement–NovationofDerivativesandContinuationofHedge Accounting,adoptedbytheEUon19December2013(effectiveforannualperiodsbeginningonorafter1January2014).

Inthecurrentyear,theGrouphasappliedanumberofnewandrevisedIFRSonconsolidation,jointarrangements,associatesanddisclosuresIFRSsissuedbytheInternationalAccountingStandardsBoardandadoptedbyEU,butnotyeteffective.Inthecurrentyear,theGrouphasappliedforthefirsttimeIFRS10,IFRS11,IFRS12,IAS27(asrevisedin2011)andIAS28(asrevisedin2011)togetherwiththeamendmentstoIFRS10,IFRS11andIFRS12regardingthetransitionalguidancethatisnotyeteffectiveinEU.ThedirectorsanticipatethattheapplicationoftheseamendmentstoIAS32andIFRS7mayresultinmoredisclosuresbeingmadewithregardtooffsettingfinancialassetsandfinancialliabilitiesinthefuture.TheimpactoftheapplicationofthesestandardsthatINAGroupappliedearlierissetoutbelow:

ImpactoftheapplicationofIFRS10IFRS10replacesthepartsofIAS27ConsolidatedandSeparateFinancialStatements.IFRS10changesthedefinitionofcontrolsuchthataninvestorhascontroloveraninvesteewhen:a)ithaspowerovertheinvestee,b)itisexposed,orhasrights,tovariablereturnsfromitsinvolvementwiththeinvesteeandc)hastheabilitytouseitspowertoaffectitsreturns.

Allthreeofthesecriteriamustbemetforaninvestortohavecontroloveraninvestee.Previously,controlwasdefinedasthepowertogovernthefinancialandoperatingpoliciesofanentitysoastoobtainbenefitsfromitsactivities.IFRS10containsadditionalguidancethatclarifieswhenaninvestorhasacontrolovertheentity.SinceINAGroupinitsportfoliodoesnotholdasubsidiarywithownershipinterestlessthan50%inwhichpossesscontrol,theapplicationofIFRS10hashadnoimpactonthedisclosuresorontheamountsrecognisedintheconsolidatedfinancialstatements. ImpactoftheapplicationofIFRS11IFRS11replacesIAS31InterestsinJointVentures,andtheguidancecontainedinarelatedinterpretation,SIC-13JointlyControlledEntities–Non-MonetaryContributionsbyVenturers,hasbeenincorporatedinIAS28(asrevisedin2011).IFRS11dealswithhow

ajointarrangementofwhichtwoormorepartieshavejointcontrolshouldbeclassifiedandaccountedfor.UnderIFRS11,thereareonly two typesof joint arrangements – joint operations and joint ventures. The classificationof joint arrangementsunderIFRS11isdeterminedbasedontherightsandobligationsofpartiestothejointarrangementsbyconsideringthestructure,thelegalformofthearrangements,thecontractualtermsagreedbythepartiestothearrangement,and,whenrelevant,otherfactsandcircumstances.Ajointoperationisajointarrangementwherebythepartiesthathavejointcontrolofthearrangement(i.e.jointoperators)haverightstotheassets,andobligationsfortheliabilities,relatingtothearrangement.Ajointventureisajointarrangementwherebythepartiesthathavejointcontrolofthearrangement(i.e.jointventurers)haverightstothenetassetsofthearrangement.Previously,IAS31contemplatedthreetypesofjointarrangements:jointlycontrolledentities,jointlycontrolledoperationsandjointlycontrolledassets.TheclassificationofjointarrangementsunderIAS31wasprimarilydeterminedbasedonthelegalformofthearrangement(e.g.ajointarrangementthatwasestablishedthroughaseparateentitywasaccountedforasajointlycontrolledentity).The initial and subsequent accounting of joint ventures and joint operations is different. Investments in joint ventures areaccountedforusingtheequitymethod(proportionateconsolidationisnolongerallowed).Investmentsinjointoperationsareaccounted for such thateach jointoperator recognizes itsassets (including its shareofanyassets jointlyheld), its liabilities(including its shareofany liabilities incurred jointly), its revenue (including its shareof revenue fromthesaleof theoutputbythejointoperation)anditsexpenses(includingitsshareofanyexpensesincurredjointly).Eachjointoperatoraccountsfortheassetsandliabilities,aswellasrevenuesandexpenses,relatingtoitsinterestinthejointoperationinaccordancewiththeapplicableStandards.TheapplicationofIFRS11hadnomaterialimpactonthedisclosuresorontheamountsrecognizedintheconsolidatedfinancialstatements.

ImpactoftheapplicationofIFRS12IFRS12isanewdisclosurestandardandisapplicabletoentitiesthathaveinterestsinsubsidiaries, jointarrangements,associatesand/orunconsolidatedstructuredentities. Ingeneral, theapplicationof IFRS12hasresulted inmoreextensivedisclosures in theconsolidatedfinancialstatements(pleaseseenote18and19).

StandardsandInterpretationsissuedbyIASBbutnotyetadoptedbytheEU

Atthedateofauthorisationofthesefinancialstatementsthefollowingstandards,revisionsandinterpretationswereinissuebytheInternationalAccountingStandardsBoardbutnotyetadoptedbytheEU:

• IFRS 9 Financial Instruments,asamendedin2010,(effectivedatewasnotyetdetermined). • Amendments to IAS 19 Employee Benefits-DefinedBenefitPlans:EmployeeContributions(effectiveforannualperiodsbeginning onorafter1July2014).

• Amendments to various standards Improvements to IFRSs (cycle 2010-2012)resultingfromtheannualimprovementprojectof IFRS(IFRS2,IFRS3,IFRS8,IFRS13,IAS16,IAS24andIAS38)primarilywithaviewtoremovinginconsistenciesandclarifying wording(amendmentsaretobeappliedforannualperiodsbeginningonorafter1July2014).

• Amendments to various standards Improvements to IFRSs (cycle 2011-2013)resultingfromtheannualimprovementprojectof IFRS(IFRS1,IFRS3,IFRS13andIAS40)primarilywithaviewtoremovinginconsistenciesandclarifyingwording(amendmentsare tobeappliedforannualperiodsbeginningonorafter1July2014).

• IFRIC 21 Levies, issued inMay2013,providesguidanceonwhentorecognizea liability fora levy imposedbyagovernment, (effectivedateforannualperiodsbeginningonorafter1January2014).


Management anticipates that the adoption of IFRS 9 Financial instruments will have a significant impact on measurement anddisclosureoffinancialinstruments.AlsothedirectorsanticipatethatIFRIC21willhavenomaterialeffecttotheGroup’sfinancialstatements.

basis of paRent CompanY finanCial statement (ina, d.d.)TheunconsolidatedfinancialstatementsoftheCompanyrepresentaggregateamountsoftheCompany’sassets,liabilities,capitalandprovisions,andoftheresultsfortheperiodthenendedofthedivisionswhichcomprisedtheCompany.Allinter-divisionaltransactionsandbalancesareeliminated.IntheCompany’sfinancialstatementsinvestmentsinsubsidiariesarestatedatcostlessimpairment.

basis of Consolidated finanCial statements (ina GRoup)TheconsolidatedfinancialstatementsincorporatethefinancialstatementsofINA,d.d.(theCompany)andentitiescontrolledbytheCompany(itssubsidiaries)madeupto31Decembereachyear.ControlisachievedwhentheCompany:• haspowerovertheinvestee;• isexposed,orhasrights,tovariablereturnsfromitsinvolvementwiththeinvestee;and• hastheabilitytouseitspowertoaffectitsreturns.WhentheCompanyhaslessthanamajorityofthevotingrightsofaninvestee,ithaspowerovertheinvesteewhenthevotingrightsaresufficienttogiveitthepracticalabilitytodirecttherelevantactivitiesoftheinvesteeunilaterally.TheCompanyconsidersallrelevantfactsandcircumstancesinassessingwhetherornottheCompany’svotingrightsinaninvesteearesufficienttogiveitpower,including:• thesizeoftheCompany’sholdingofvotingrightsrelativetothesizeanddispersionofholdingsoftheothervoteholders;• potentialvotingrightsheldbytheCompany,othervoteholdersorotherparties;• rightsarisingfromothercontractualarrangementsand• anyadditional factsandcircumstances that indicate that theCompanyhas,ordoesnothave, the currentability todirect therelevantactivitiesatthetimethatdecisionsneedtobemade,includingvotingpatternsatpreviousshareholders’meetings.

Consolidationofa subsidiarybeginswhentheCompanyobtainscontrolover thesubsidiaryandceaseswhentheCompany losescontrolofthesubsidiary.Specifically,incomeandexpensesofasubsidiaryacquiredordisposedofduringtheyearareincludedintheconsolidatedstatementofprofitorlossandothercomprehensiveincomefromthedatetheCompanygainscontroluntilthedatewhentheCompanyceasestocontrolthesubsidiary.Profitor lossandeachcomponentofothercomprehensive incomeareattributedtotheownersoftheCompanyandtothenon-controllinginterests.TotalcomprehensiveincomeofsubsidiariesisattributedtotheownersoftheCompanyandtothenon-controllinginterestsevenifthisresultsinthenon-controllinginterestshavingadeficitbalance.

Whennecessary,adjustmentsaremadetothefinancialstatementsofsubsidiariestobringtheiraccountingpoliciesintolinewiththeGroup’saccountingpolicies.Allintragroupassetsandliabilities,equity,income,expensesandcashflowsrelatingtotransactionsbetweenmembersoftheGroupareeliminatedinfullonconsolidation. Changes intheGroup’sownership interests insubsidiariesthatdonotresult intheGroup losingcontroloverthesubsidiariesareaccountedforasequitytransactions.ThecarryingamountsoftheGroup’s interestsandthenon-controllinginterestsareadjustedtoreflectthechangesintheirrelativeinterestsinthesubsidiaries.Anydifferencebetweentheamountbywhichthenon-controllinginterestsareadjustedandthefairvalueoftheconsiderationpaidorreceivedisrecogniseddirectlyinequityandattributedtoownersoftheCompany.WhentheGrouplosescontrolofasubsidiary,theprofitorlossondisposaliscalculatedasthedifferencebetween(i)theaggregateofthefairvalueoftheconsiderationreceivedandthefairvalueofanyretainedinterestand(ii)thepreviouscarryingamountofthe

assets(includinggoodwill),andliabilitiesofthesubsidiaryandanynon-controllinginterests.AllamountspreviouslyrecognisedinothercomprehensiveincomeinrelationtothatsubsidiaryareaccountedforasiftheGrouphaddirectlydisposedoftherelatedassetsorliabilitiesofthesubsidiary(i.e.reclassifiedtoprofitorlossortransferredtoanothercategoryofequityasspecified/permittedbyapplicableIFRSs).ThefairvalueofanyinvestmentretainedintheformersubsidiaryatthedatewhencontrolislostisregardedasthefairvalueoninitialrecognitionforsubsequentaccountingunderIAS39FinancialInstruments:RecognitionandMeasurementor,whenapplicable,thecostoninitialrecognitionofaninvestmentinanassociateorajointlycontrolledentity.

business CombinationAcquisitionsof subsidiaries andbusinesses areaccounted forusing theacquisitionmethod. The consideration foreachacquisition ismeasuredattheaggregateofthefairvalues(atthedateofexchange)ofassetsgiven,liabilitiesincurredorassumed,andequityinstrumentsissuedbytheGroupinexchangeforcontroloftheacquiree.Acquisition-relatedcostsarerecognisedinprofitorlossasincurred.Attheacquisitiondate,theidentifiableassetsacquiredandtheliabilitiesassumedarerecognisedattheirfairvalue,exceptthat:• deferredtaxassetsorliabilities,andassetsorliabilitiesrelatedtoemployeebenefitarrangementsarerecognisedandmeasuredin accordancewithIAS12IncomeTaxesandIAS19respectively;• liabilitiesorequityinstrumentsrelatedtoshare-basedpaymentarrangementsoftheacquireeorshare-basedpaymentarrangements oftheGroupenteredintotoreplaceshare-basedpaymentarrangementsoftheacquireearemeasuredinaccordancewithIFRS2 attheacquisitiondate;and• assets (or disposal groups) that are classified asheld for sale in accordancewith IFRS5Non-currentAssetsHeld for Sale and DiscontinuedOperationsaremeasuredinaccordancewiththatStandard.

Goodwillismeasuredastheexcessofthesumoftheconsiderationtransferred,theamountofanynon-controllinginterestsintheacquiree, and the fair valueof the acquirer’s previously held equity interest in the acquireeover thenetof the acquisition-dateamountsoftheidentifiableassetsacquiredandtheliabilitiesassumed.If,afterreassessment,thenetoftheacquisition-dateamountsof the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of anynon-controllinginterestsintheacquireeandthefairvalueoftheacquirer’spreviouslyheldinterestintheacquiree,theexcessarerecognisedimmediatelyinprofitorlossasabargainpurchasegain. Non-controllingintereststhatarepresentownershipinterestsandentitletheirholderstoaproportionateshareoftheentity’snetassetsintheeventofliquidationmaybeinitiallymeasuredeitheratfairvalueoratthenon-controllinginterests’proportionateshareoftherecognisedamountsoftheacquiree’sidentifiablenetassets.Thechoiceofmeasurementbasisismadeonatransaction-by-transactionbasis.Othertypesofnon-controllinginterestsaremeasuredatfairvalueor,whenapplicable,onthebasisspecifiedinanotherIFRS.WhentheconsiderationtransferredbytheGroupinabusinesscombinationincludesassetsorliabilitiesresultingfromacontingentconsideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part oftheconsideration transferred inabusinesscombination.Changes in the fairvalueof thecontingentconsideration thatqualifyasmeasurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurementperiodadjustmentsareadjustmentsthatarisefromadditionalinformationobtainedduringthe‘measurementperiod’(whichcannotexceedoneyearfromtheacquisitiondate)aboutfactsandcircumstancesthatexistedattheacquisitiondate.Thesubsequentaccountingforchangesinthefairvalueofthecontingentconsiderationthatdonotqualifyasmeasurementperiodadjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity isremeasuredatsubsequentreportingdatesanditssubsequentsettlementisaccountedforwithinequity.ContingentconsiderationthatisclassifiedasanassetoraliabilityisremeasuredatsubsequentreportingdatesinaccordancewithIAS39Financial instruments: Recognition and Measurement,orIAS37Provisions, Contingent Liabilities and Contingent Assets,asappropriate,withthecorrespondinggainorlossbeingrecognisedinprofitorloss.Whenabusinesscombinationisachievedinstages,theGroup’spreviouslyheldequityinterestintheacquireeisremeasuredtoitsacquisition-datefairvalueandtheresultinggainorloss,ifany,isrecognisedinprofitorloss.Amountsarisingfrominterestsinthe


acquireepriortotheacquisitiondatethathavepreviouslybeenrecognisedinothercomprehensiveincomearereclassifiedtoprofitorlosswheresuchtreatmentwouldbeappropriateifthatinterestweredisposedof.Iftheinitialaccountingforabusinesscombinationisincompletebytheendofthereportingperiodinwhichthecombinationoccurs,theGroupreportsprovisionalamountsfortheitemsforwhichtheaccountingisincomplete.Thoseprovisionalamountsareadjustedduringthemeasurementperiod,oradditionalassetsorliabilitiesarerecognised,toreflectnewinformationobtainedaboutfactsandcircumstancesthatexistedattheacquisitiondatethat,ifknown,wouldhaveaffectedtheamountsrecognisedatthatdate.

GoodwillGoodwill arising fromanacquisitionof abusiness is carriedat cost asestablishedat thedateof acquisitionof thebusiness lessaccumulatedimpairmentlosses.Forthepurposesofimpairmenttesting,goodwillisallocatedtoeachoftheGroup’scash-generatingunits(orgroupsofcash-generatingunits)thatisexpectedtobenefitfromthesynergiesofthecombination.Acash-generatingunit towhichgoodwillhasbeenallocated is tested for impairmentannually,ormore frequentlywhen there isindicationthattheunitmaybeimpaired.Iftherecoverableamountofthecash-generatingunitislessthanitscarryingamount,theimpairmentlossisallocatedfirsttoreducethecarryingamountofanygoodwillallocatedtotheunitandthentotheotherassetsoftheunitproratabasedonthecarryingamountofeachassetintheunit. Anyimpairmentlossforgoodwillisrecogniseddirectlyinprofitorloss.Animpairmentlossrecognisedforgoodwillisnotreversedinsubsequentperiods.Ondisposaloftherelevantcash-generatingunit,theattributeamountofgoodwillisincludedinthedeterminationoftheprofitorlossondisposal.

investments in assoCiates and joint ventuResAnassociateisanentityoverwhichtheGrouphassignificantinfluence.Significantinfluenceisthepowertoparticipateinthefinancialandoperatingpolicydecisionsoftheinvesteebutisnotcontrolorjointcontroloverthosepolicies.Ajointventureisajointarrangementwherebythepartiesthathavejointcontrolofthearrangementhaverightstothenetassetsofthejointarrangement.Jointcontrolisthecontractuallyagreedsharingofcontrolofanarrangement,whichexistsonlywhendecisionsabouttherelevantactivitiesrequireunanimousconsentofthepartiessharingcontrol.

Theresultsandassetsandliabilitiesofassociatesareincorporatedinthesefinancialstatementsusingtheequitymethodofaccount-ingexceptwhentheinvestmentisclassifiedasheldforsale,inwhichcaseitisaccountedforinaccordancewithIFRS5Non-currentAssetsHeldforSaleandDiscontinuedOperations.Undertheequitymethod,aninvestmentinanassociateorajointventureisinitiallyrecognisedintheconsolidatedstatementoffinancialpositionatcostandadjustedthereaftertorecognisetheGroup’sshareoftheprofitorlossandothercomprehensiveincomeoftheassociateorjointventure.WhentheGroup’sshareoflossesofanassociateorajointventureexceedstheGroup’sinterestinthatassociateorjointventure(whichincludesanylong-termintereststhat,insubstance,formpartoftheGroup’snet investment intheassociateor jointventure),theGroupdiscontinuesrecognising itsshareoffurtherlosses.Additional losses are recognisedonly to theextent that theGrouphas incurred legalor constructiveobligationsormadepaymentsonbehalfoftheassociateorjointventure.

An investment in an associateor a joint venture is accounted for using theequitymethod from thedateonwhich the investeebecomesanassociateorajointventure.Onacquisitionoftheinvestmentinanassociateorajointventure,anyexcessofthecostoftheinvestmentovertheGroup’sshareofthenetfairvalueoftheidentifiableassetsandliabilitiesoftheinvesteeisrecognisedasgoodwill,whichisincludedwithinthecarryingamountoftheinvestment.AnyexcessoftheGroup’sshareofthenetfairvalueoftheidentifiableassetsandliabilitiesoverthecostoftheinvestment,afterreassessment,isrecognisedimmediatelyinprofitorlossintheperiodinwhichtheinvestmentisacquired.

TherequirementsofIAS39areappliedtodeterminewhetheritisnecessarytorecogniseanyimpairmentlosswithrespecttotheGroup’sinvestmentinanassociateandjointventure.Whennecessary,theentirecarryingamountoftheinvestment(includinggood-will)istestedforimpairmentinaccordancewithIAS36ImpairmentofAssetsasasingleassetbycomparingitsrecoverableamount(higherofvalueinuseandfairvaluelesscoststosell)withitscarryingamount.Anyimpairmentlossrecognisedformspartofthecarryingamountoftheinvestment.AnyreversalofthatimpairmentlossisrecognisedinaccordancewithIAS36totheextentthattherecoverableamountoftheinvestmentsubsequentlyincreases.TheGroupdiscontinuestheuseoftheequitymethodfromthedatewhentheinvestmentceasestobeanassociateorajointventure,orwhentheinvestmentisclassifiedasheldforsale.WhentheGroupretainsaninterestintheformerassociateorjointventureandtheretainedinterestisafinancialasset,theGroupmeasurestheretainedinterestatfairvalueatthatdateandthefairvalueisregardedasitsfairvalueoninitialrecognitioninaccordancewithIAS39.Thedifferencebetweenthecarryingamountoftheassociateorjointventureatthedatetheequitymethodwasdiscontinued,andthefairvalueofanyretainedinterestandanyproceedsfromdisposingofapartinterestintheassociateorjointventureisincludedinthedeterminationofthegainorlossondisposaloftheassociateorjointventure.Inaddition,theGroupaccountsforallamountspreviouslyrecognisedinothercomprehensiveincomeinrelationtothatassociateorjointventureonthesamebasisaswouldberequiredifthatassociateorjointventurehaddirectlydisposedoftherelatedassetsorliabilities.Therefore,ifagainorlosspreviouslyrecognisedinothercomprehensiveincomebythatassociateorjointventurewouldbereclassifiedtoprofitorlossonthedisposaloftherelatedassetsorliabilities,theGroupreclassifiesthegainorlossfromequitytoprofitorloss(asareclassificationadjustment)whentheequitymethodisdiscontinued.TheGroupcontinuestousetheequitymethodwhenaninvestmentinanassociatebecomesaninvestmentinajointventureoraninvestmentinajointventurebecomesaninvestmentinanassociate.Thereisnoremeasurementtofairvalueuponsuchchangesinownershipinterests.WhentheGroupreducesitsownershipinterestinanassociateorajointventurebuttheGroupcontinuestousetheequitymethod,theGroupreclassifiestoprofitorlosstheproportionofthegainorlossthathadpreviouslybeenrecognisedinothercomprehensiveincomerelatingtothatreductioninownershipinterestifthatgainorlosswouldbereclassifiedtoprofitorlossonthedisposaloftherelatedassetsorliabilities.Whenagroupentitytransactswithitsassociateorajointventure,profitsandlossesresultingfromthetransactionswiththeassociateorajointventureoftheGroup,arerecognisedintheGroup’consolidatedfinancialstatementsonlytotheextentofinterestsintheassociateorajointventurethatarenotrelatedtotheGroup.TheCompany’sandtheGroup’sproportionofdevelopmentexpenditureincurredthroughexplorationandproductionjointventurearrangementsareincludedwithinproperty,plantandequipment-oilandgasproperties.

inteRests in joint opeRationsAjointoperationisajointarrangementwherebythepartiesthathavejointcontrolofthearrangementhaverightstotheassets,andobligationsfortheliabilities,relatingtothearrangement.Jointcontrolisthecontractuallyagreedsharingofcontrolofanarrangement,whichexistsonlywhendecisionsabouttherelevantactivitiesrequireunanimousconsentofthepartiessharingcontrol.WhenaGroupentityundertakesitsactivitiesunderjointoperations,theGroupasajointoperatorrecognisesinrelationtoitsinterestinajointoperation:• itsassets,includingitsshareofanyassetsheldjointly;• itsliabilities,includingitsshareofanyliabilitiesincurredjointly;• itsrevenuefromthesaleofitsshareoftheoutputarisingfromthejointoperation;• itsshareoftherevenuefromthesaleoftheoutputbythejointoperation;and• itsexpenses,includingitsshareofanyexpensesincurredjointly.

TheGroupaccountsfortheassets,liabilities,revenuesandexpensesrelatingtoitsinterestinajointoperationinaccordancewiththeIFRSsapplicabletotheparticularassets,liabilities,revenuesandexpenses.WhenaGroupentitytransactswitha jointoperationinwhichagroupentity isa jointoperator(suchasasaleorcontributionof


assets),theGroupisconsideredtobeconductingthetransactionwiththeotherpartiestothejointoperation,andgainsandlossesresultingfromthetransactionsarerecognisedintheGroup’sconsolidatedfinancialstatementsonlytotheextentofotherparties’interestsinthejointoperation.WhenaGroupentitytransactswithajointoperationinwhichaGroupentityisajointoperator(suchasapurchaseofassets),theGroupdoesnotrecogniseitsshareofthegainsandlossesuntilitresellsthoseassetstoathirdparty.

oil and Gas pRopeRties

ExplorationandappraisalcostsExplorationandappraisalcostsareaccountedforonthesuccessfuleffortsbasis.Costsrelatingtoexplorationandappraisaldrillingareinitiallycapitalisedasintangibleoilandgasassetspendingdeterminationofthecommercialviabilityoftherelevantoilandgasproperties.Licenseanddataprovisioncostsandcostsassociatedwithgeologicalandgeophysicalactivitiesarechargedtotheincomestatementperiodinwhichtheyareincurred.Ifprospectsaresubsequentlydeemedtobeunsuccessfuloncompletionofevaluation,theassociatedcostsarechargedtotheincomestatementintheperiod.Iftheprospectsaredeemedtobecommerciallyviable,suchcostsaretransferredtooilandgasproperties.Thestatusofsuchprospectsisreviewedregularlybymanagement.

FieldsunderdevelopmentOilandgasfielddevelopmentcostsarecapitalisedastangibleoilandgasassets.DepreciationCapitalisedexplorationanddevelopmentcostsofproducingdomesticandforeignoilandgaspropertiesaredepreciatedusingaunitofproductionmethod,intheproportionofactualproductionfortheperiodtothetotalestimatedremainingcommercialreservesofthefield.

CommercialreservesCommercialreservesarenetproveddevelopedoilandgasreserves.Changesinthecommercialreservesoffieldsaffectingunitofproductioncalculationsaredealtwithprospectivelyovertherevisedremainingreserves.UpstreamperformedreservesdeterminationinaccordancewithSPEPRMS(SocietyofPetroleumEngineersPetroleumResourcesManagementSystem)guidelines. pRopeRtY, plant and eQuipment Property,plantandequipmentareshownathistoricalcostorvaluationlessaccumulateddepreciationandanyaccumulatedimpairmentloss,exceptforland,whichisstatedatcost.Property,plantandequipmentinuse(excludingoilandgasproperties)aredepreciatedonastraight-linebasisonthefollowingbasis:

Software 5 yearsBuildings 5-50 yearsRefineriesandchemicalsmanufacturingplants 3-15 yearsPetrolservicestations 30 yearsTelecommunicationandofficeequipment 2-10 years

Theestimatedusefullives,residualvaluesanddepreciationmethodarereviewedateachyearend,withtheeffectofanychangesinestimateaccountedforonaprospectivebasis.

Theinitialcostofproperty,plantandequipmentcomprisesitspurchaseprice,includingimportdutiesandnon-refundablepurchasetaxesandanydirectlyattributablecostsofbringinganassettoitsworkingconditionandlocationforitsintendeduse.

Expendituresincurredafterproperty,plantandequipmenthavebeenputintooperationarenormallychargedtoincomestatementintheperiodinwhichthecostsareincurred.

Insituationswhereitcanbeclearlydemonstratedthattheexpenditureshaveresultedinanincreaseinthefutureeconomicbenefitsexpectedtobeobtainedfromtheuseofanitemofproperty,plantandequipmentbeyonditsoriginallyassessedstandardperfor-mance,theexpendituresarecapitalisedasanadditionalcostofproperty,plantandequipment.Costseligibleforcapitalisationincludecostsofperiodic,plannedsignificantinspectionsandoverhaulsnecessaryforfurtheroperation.

Thegainorlossarisingonthedisposalorretirementofanitemofproperty,plantandequipmentisdeterminedasthedifferencebetweenthesalesproceedsandthecarryingamountoftheassetandisrecognisedintheincomestatement.

impaiRment of tanGible and intanGible assets otheR than GoodwillAt the end of each reporting period, theGroup reviews the carrying amounts of its tangible and intangible assets to determinewhether there isany indication that thoseassetshave sufferedan impairment loss. If any such indicationexists, the recoverableamountoftheassetisestimatedinordertodeterminetheextentoftheimpairmentloss(ifany).Whereitisnotpossibletoestimatetherecoverableamountofanindividualasset,theGroupestimatestherecoverableamountofthecash-generatingunittowhichtheassetbelongs.Whereareasonableandconsistentbasisofallocationcanbeidentified,corporateassetsarealsoallocatedtoindividualcash-generatingunits,orotherwise theyareallocated to the smallestgroupof cash-generatingunits forwhicha reasonableandconsistentallocationbasiscanbeidentified.

Intangibleassetswithindefiniteusefullivesandintangibleassetsnotyetavailableforusearetestedforimpairmentatleastannually,andwheneverthereisanindicationthattheassetmaybeimpaired.Recoverableamountisthehigheroffairvaluelesscoststosellandvalueinuse.Inassessingvalueinuse,theestimatedfuturecashflowsarediscountedtotheirpresentvalueusingapre-taxdiscountratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheassetforwhichtheestimatesoffuturecashflowshavenotbeenadjusted. Iftherecoverableamountofanasset(orcash-generatingunit)isestimatedtobelessthanitscarryingamount,thecarryingamountoftheasset(orcash-generatingunit)isreducedtoitsrecoverableamount.Animpairmentlossisrecognisedimmediatelyasexpenditure,unlesstherelevantassetiscarriedatarevaluedamount,inwhichcasetheimpairmentlossistreatedasarevaluationdecrease.Whenan impairment losssubsequently reverses, thecarryingamountof theasset (oracash-generatingunit) is increasedto therevisedestimateof itsrecoverableamount,butsothatthe increasedcarryingamountdoesnotexceedthecarryingamountthatwouldhavebeendeterminedhadnoimpairmentlossbeenrecognisedfortheasset(orcash-generatingunit)inprioryears.Areversalofanimpairmentlossisrecognisedimmediatelyinprofitorloss,unlesstherelevantassetiscarriedatarevaluedamount,inwhichcasethereversaloftheimpairmentlossistreatedasarevaluationincrease.

finanCe and opeRatinG leases Thedeterminationwhetheranarrangementcontainsorisaleasedependsonthesubstanceofthearrangementatinceptiondate.Iffulfilmentofthearrangementdependsontheuseofaspecificassetorconveystherighttousetheasset,itisdeemedtocontainaleaseelementandarerecordedaccordingly.Finance leases,whichtransfertotheGroupsubstantiallyall therisksandbenefits incidentaltoownershipofthe leased item,arecapitalizedattheinceptionoftheleaseatthefairvalueoftheleasedpropertyor,iflower,atthepresentvalueoftheminimumleasepayments.Minimumleasepaymentsareapportionedbetweenthefinancechargesandreductionoftheoutstanding liability.Thefinancechargeshallbeallocatedtoeachperiodduringtheleasetermsoastoproduceaconstantperiodicrateofinterestontheremainingbalanceoftheliability.Financechargesarechargeddirectlyagainstincome.Capitalizedleasedassetsaredepreciatedovertheshorteroftheestimatedusefullifeoftheassetortheleaseterm.


Initialdirectcosts incurred innegotiatingaoperating leaseareaddedto thecarryingamountof the leasedassetandrecognizedovertheleasetermonthesamebasesastheleaseincome.Leaseswherethelessorretainssubstantiallyalltherisksandbenefitsofownershipoftheassetareclassifiedasoperatingleases.Operatingleasepaymentsarerecognizedasanexpenseintheincomestatementonastraightlinebasisovertheleaseterm.

ReCeivables fRom CustomeRs Receivablesfromcustomersareshowninamountsidentifiedintheinvoicesissuedtothecustomersinaccordancewiththeagreement,order,deliverynoteandotherdocumentswhichservesasbasisforinvoicing,decreasedwithimpairmentofreceivables.TheaccountingpoliciesadoptedbytheCompany,definingandrecording impairmentofshort-termreceivables forwhichthere isuncertaintythatreceivableswillbechargedinaccordancewiththeoriginalcontractualterms,isbasedonthefollowingprocedures:• estimateofrecoverabilityofaccountsreceivablewithindividualapproachtotheCompany’sstrategiccustomers;• impairmentofothershort-termreceivablesthatexceed60daysfromthematuritydate. Company records impairmentondoubtfuldebtbasedon theestimateof recoverabilityof receivablewith individualapproach totheCompany’sstrategiccustomersandimpairmentofallshort-termreceivableswhicharenotincludedintheindividualestimate,regardlessoftheirfinancialamountbutinamountofduedoubtfuldebtthatexceeds60daysfromthematuritydate.Adequateimpairmentforestimatednon-refundableamountisrecognizedinprofitorlosswhenthereisobjectiveevidencethattheassetsshouldbereduced.

inventoRies Inventoriesofcrudeoil,finishedandsemi-finishedproductsandnaturalgasarevaluedasfollows:- Crudeoiliscarriedattheweightedaveragecostortheproductioncost.Iffinishedi.e.refinedproductsareimpaired,acalculation isusedtoreducethecrudeoilreservebyanaliquotsharetoitsnetrecoverableamount.- Finishedproductsarevaluedatthelowerofcostor96.5%offutureaveragesalesprice,whichapproximatesthenetrecoverable amount.- Semi-finishedproductsaremeasuredusingacalculationmethod,bywhichtheyareimpairedtotheextentthatfinishedproducts onthebasisofactualinventoriesattheperiod-endareimpairedi.e.thatthecalculationshowsthattheirnetrealisablevaluemay notberecovered,byapplyingtheimpairmentpercentagetoeachindividualsemi-finishedproductonstockattheperiod-end.- Importednaturalgasheldinundergroundstorageisvaluedatthelowerofcost,basedonthepriceofimportedgasatyear-end includingtransportcosts,andweightedaveragesalespricebasedonyear-endprices.- Domesticnaturalgasheldinundergroundstorageisvaluedatthelowerofweightedaveragesalespriceandcost.- Otherinventories,whichcomprisemainlyspareparts,materialsandsupplies,arevaluedatthelowerofcostorvaluationandnet realisablevalue,lessanyprovisionforslow-movingandobsoleteitems.

Cash and Cash eQuivalents Cashandcashequivalentscomprisecashonhandandbank,anddemanddepositsandothershort-termhighlyliquidinvestmentsthatarereadilyconvertibletoaknownamountofcashandaresubjecttoaninsignificantriskofchangesinvalue. boRRowinG Costs Borrowingcostsdirectlyattributabletotheacquisition,constructionorproductionofqualifyingassets,whichareassetsthatnecessarilytakeasubstantialperiodoftimetogetreadyfortheirintendeduseorsale,areaddedtothecostofthoseassets,untilsuchtimeastheassetsaresubstantiallyreadyfortheirintendeduseorsale.Investment incomeearnedon the temporary investmentof specificborrowingspending theirexpenditureonqualifyingassets isdeductedfromtheborrowingcostseligibleforcapitalisation.Allotherborrowingcostsarerecognisedinprofitorlossintheperiodinwhichtheyareincurred.

foReiGn CuRRenCies TheindividualfinancialstatementsofeachCompanyandtheGroupentityarepresentedinthecurrencyoftheprimaryeconomicenvironment inwhich theentityoperates (its functional currency). For thepurposeof theconsolidatedfinancial statements, theresultsandfinancialpositionofeachentityareexpressedinCroatiankunas(HRK),whichisthefunctionalcurrencyoftheCompany,andthepresentationcurrencyfortheconsolidatedfinancialstatements.

In preparing the financial statements of the individual Group entities, transactions in currencies other than the entity’sfunctionalcurrency(foreigncurrencies)aretranslatedtothefunctionalcurrencyofentityattheratesofexchangeprevailingonthedatesofthetransactions.Ateachstatementoffinancialpositiondate,monetaryitemsdenominatedinforeigncurrenciesare retranslated to the functional currencyof theentityat the ratesprevailingon thestatementoffinancialpositiondate.Non-monetaryitemscarriedatfairvaluethataredenominatedinforeigncurrenciesareretranslatedattheratesprevailingonthedatewhenthefairvaluewasdetermined.Non-monetaryitemsthataremeasuredintermsofhistoricalcostinaforeigncurrencyarenotretranslated.

Exchangedifferencesarerecognisedinprofitorlossintheperiodinwhichtheyariseexceptfor:• exchangedifferencesonforeigncurrencyborrowingsrelatingtoassetsunderconstructionforfutureproductiveuse,whichare includedinthecostofthoseassetswhentheyareregardedasanadjustmenttointerestcostsonthoseforeigncurrencyborrowings;• exchangedifferencesontransactionsenteredintoinordertohedgecertainforeigncurrencyrisks;• exchangedifferencesonmonetaryitemsreceivablefromorpayabletoaforeignoperationforwhichsettlementisneitherplanned norlikelytooccur(thereforeformingpartofthenetinvestmentintheforeignoperation),whicharerecognisedinitiallyinother comprehensiveincomeandreclassifiedfromequitytoprofitorlossondisposalorpartialdisposalofthenetinvestment.

Forthepurposeofpresentingconsolidatedfinancialstatements,theassetsandliabilitiesoftheGroup’sforeignoperations(includingcomparatives)areexpressedinCroatiankunausingexchangeratesprevailingonthestatementoffinancialpositiondate.Incomeandexpenseitems(includingcomparatives)aretranslatedattheaverageexchangeratesfortheperiod,unlessexchangeratesfluctuatedsignificantlyduringthatperiod,inwhichcasetheexchangeratesatthedatesofthetransactionsareused.Exchangedifferencesarisingfromyear-endtranslation,ifany,areclassifiedasequityandtransferredtotheGroup’stranslationreserve.Suchtranslationdifferencesarerecognisedinprofitorlossintheperiodinwhichtheforeignoperationisdisposedof.TheforeignconcessionsofINA,d.d.meetsthedefinitionofforeignoperationandaretreatedassuch. Onthedisposalofaforeignoperation(i.e.adisposaloftheGroup’sentireinterestinaforeignoperation,oradisposalinvolvinglossofcontroloverasubsidiarythatincludesaforeignoperation,adisposalinvolvinglossofjointcontroloverajointlycontrolledentitythatincludesaforeignoperation,oradisposalinvolvinglossofsignificantinfluenceoveranassociatethatincludesaforeignoperation),alloftheexchangedifferencesaccumulated inequity inrespectofthatoperationattributabletotheownersoftheCompanyarereclassifiedtoprofitorloss.

InthecaseofapartialdisposalthatdoesnotresultintheGrouplosingcontroloverasubsidiarythatincludesaforeignoperation,theproportionateshareofaccumulatedexchangedifferencesarere-attributedtonon-controllinginterestsandarenotrecognisedinprofitorloss.Forallotherpartialdisposals(i.e.reductionsintheGroup’sownershipinterestinassociatesorjointlycontrolledentitiesthatdonotresult intheGrouplosingsignificant influenceor jointcontrol),theproportionateshareoftheaccumulatedexchangedifferencesisreclassifiedtoprofitorloss.

Goodwillandfairvalueadjustmentsonidentifiableassetsandliabilitiesacquiredarisingontheacquisitionofaforeignoperationaretreatedasassetsandliabilitiesoftheforeignoperationandtranslatedattherateofexchangeprevailingattheendofeachreportingperiod.Exchangedifferencesarisingarerecognisedinequity.


RetiRement benefit and jubilee Costs Fordefinedbenefitplansforretirementandjubileeawards,thecostofprovidingbenefitsisdeterminedusingtheprojectedunitcreditmethod,withactuarialvaluationsbeingcarriedoutateachannualreportingperiod.Remeasurement,comprisingactuarialgainsandlosses,theeffectofthechangestotheassetceiling(ifapplicable)andthereturnonplanassets(excludinginterest),isreflectedimmediatelyinthestatementoffinancialpositionwithachargeorcreditrecognisedinothercomprehensive income in theperiod inwhich theyoccur.Remeasurement recognised inothercomprehensive income isreflectedimmediatelyinretainedearningsandwillnotbereclassifiedtoprofitorloss.Pastservicecostisrecognisedinprofitorlossintheperiodofaplanamendment.Netinterestiscalculatedbyapplyingthediscountrateatthebeginningoftheperiodtothenetdefinedbenefitliabilityorasset.Definedbenefitcostsarecategorisedasfollows:• servicecost(includingcurrentservicecost,pastservicecost,aswellasgainsandlossesoncurtailmentsandsettlements);• netinterestexpenseorincome;and• remeasurement.TheGrouppresentsthefirsttwocomponentsofdefinedbenefitcostsinprofitorlossinthelineitem.Curtailmentgainsandlossesareaccountedforaspastservicecosts.TheretirementbenefitobligationrecognisedintheconsolidatedstatementoffinancialpositionrepresentstheactualdeficitorsurplusintheGroup’sdefinedbenefitplans.Anysurplusresultingfromthiscalculationislimitedtothepresentvalueofanyeconomicbenefitsavailableintheformofrefundsfromtheplansorreductionsinfuturecontributionstotheplans.Aliabilityforaterminationbenefitisrecognisedattheearlierofwhentheentitycannolongerwithdrawtheofferoftheterminationbenefitandwhentheentityrecognisesanyrelatedrestructuringcosts. taxation Thetaxexpenserepresentsthesumofthetaxcurrentlypayableanddeferredtax.

Current tax Thetaxcurrentlypayable isbasedontaxableprofit for theyear.Taxableprofitdiffers fromprofitas reported in theconsolidatedincomestatementbecauseofitemsofincomeorexpensethataretaxableordeductibleinotheryearsanditfurtherexcludesitemsthatarenevertaxableordeductible.TheCompany’sandtheGroup’sliabilityforcurrenttaxiscalculatedusingtaxratesthathavebeenenactedorsubstantivelyenactedbythestatementoffinancialpositiondate.

DeferredtaxDeferredtaxisrecognisedondifferencesbetweenthecarryingamountsofassetsandliabilitiesinthefinancialstatementsandthecorrespondingtaxbasesusedinthecomputationoftaxableprofitandareaccountedforusingthestatementoffinancialpositionliabilitymethod.Deferredtax liabilitiesaregenerally recognised forall taxable temporarydifferences,anddeferredtaxassetsaregenerallyrecognisedforalldeductibletemporarydifferencestotheextentthat it isprobablethattaxableprofitswillbeavailableagainstwhichthosedeductibletemporarydifferencescanbeutilised.Suchdeferredtaxassetsandliabilitiesarenotrecognised ifthetemporarydifferencearisesfromtheinitialrecognition(otherthaninabusinesscombination)ofotherassetsandliabilitiesinatransactionthataffectsneitherthetaxableprofitnortheaccountingprofit.Inaddition,deferredtaxliabilitiesarenotrecognisedifthetemporarydifferencearisesfromtheinitialrecognitionofgoodwill.Deferredtaxliabilitiesarerecognisedonthebasisoftaxabletemporarydifferencesoninvestmentsinsubsidiariesandassociatesandjointventures.Deferredtaxliabilitiesarerecognisedfortaxabletemporarydifferencesassociatedwithinvestmentsinsubsidiariesandassociates,andinterestsinjointventures,exceptwheretheGroupisabletocontrolthereversalofthetemporarydifferenceanditisprobablethatthetemporarydifferencewillnotreverseintheforeseeablefuture.Thecarryingamountofdeferredtaxassetsisreviewedateachstatementoffinancialpositiondateandreducedtotheextentthatitisnolongerprobablethatsufficienttaxableprofitswillbeavailabletoallowallorpartoftheassettoberecovered.Deferredtaxassetsandliabilitiesaremeasuredatthetaxratesthatareexpectedtoapplyintheperiodinwhichtheliabilityissettled

ortheassetrealised,basedontaxlawsthathavebeenenactedorsubstantivelyenactedbythestatementoffinancialpositiondate.ThemeasurementofdeferredtaxliabilitiesandassetsreflectsthetaxconsequencesthatwouldfollowfromthemannerinwhichtheCompanyexpects,atthereportingdate,torecoverorsettlethecarryingamountofitsassetsandliabilities.DeferredtaxassetsandliabilitiesareoffsetwhenthereisalegallyenforceablerighttosetoffcurrenttaxassetsagainstcurrenttaxliabilitiesandwhentheyrelatetoincometaxesleviedbythesametaxationauthorityandtheINA,d.d.andtheGroupintendtosettleitscurrenttaxassetsandliabilities.

CurrentanddeferredtaxfortheperiodCurrentanddeferredtaxarerecognisedinprofitorloss,exceptwhentheyrelatetoitemsthatarerecognisedinothercomprehensiveincomeordirectlyinequity,inwhichcase,thecurrentanddeferredtaxarealsorecognisedinothercomprehensiveincomeordirectlyinequity respectively.Wherecurrent taxanddeferred taxarises from theaccounting forabusinessacquiaition, the taxeffect isincludedintheaccountingforthebusinesscombination.

finanCial assetsAllfinancialassetsarerecognisedandderecognisedonatradedatebasiswherethepurchaseorsaleofaninvestmentisunderacontract.Thecontracttermsrequiredeliveryofthefinancialassetswithinthetimeframeestablishedbythemarketconcerned,andareinitiallymeasuredatfairvalue,netoftransactioncosts,exceptforthosefinancialassetsclassifiedasatfairvaluethroughprofitorloss,whichareinitiallymeasuredatfairvalue.Financialassetsareclassifiedintoavailable-for-sale(AFS)financialassetsandloansandreceivables.Theclassificationdependsonthenatureandpurposeofthefinancialassetsandisdeterminedatthetimeofinitialrecognition.

EffectiveinterestmethodTheeffectiveinterestmethodisamethodofcalculatingtheamortisedcostofadebtinstrumentsandofallocatinginterestincomeover the relevantperiod. Theeffective interest rate is the rate that exactlydiscountsestimated future cash receipts through theexpectedlifeofthedebtinstruments,orashorterperiodtothenetcarryingamountoninitialrecognition.Incomeisrecognisedonaneffectiveinterestbasisfordebtinstruments.

AFSfinancialassetsListedsharesheldbytheCompanyandGroupthataretradedinanactivemarketareclassifiedasbeingAFSandarestatedatfairvalue.Fairvalueisdeterminedinthemannerdescribedinnote41.Gainsandlossesarisingfromchangesinfairvaluearerecognisedinothercomprehensiveincomeandaccumulatedintheinvestmentsrevaluationreservedirectlyinterestcalculatedusingtheeffectiveinterestmethodandforeignexchangegainsand lossesonmonetaryassets,whicharerecogniseddirectly inprofitor loss.Wheretheinvestmentisdisposedoforisdeterminedtobeimpaired,thecumulativegainorlosspreviouslyrecognisedintheinvestmentsrevaluationreserveisincludedinprofitorlossfortheperiod.DividendsonAFSequityinstrumentsarerecognisedinprofitorlosswhentheGroup’srighttoreceivepaymentsisestablished.ThefairvalueofAFSmonetaryassetsdenominatedinaforeigncurrencyisdeterminedinthatforeigncurrencyandtranslatedatthespotrateatthestatementoffinancialpositiondate.Theforeignexchangegainsandlossesthatarerecognizedinprofitandlossaredeterminedbasedontheamortizedcostofthemonetaryassets.Otherforeignexchangegainsandlossesarerecognizedinothercomprehensiveincome.

LoansandreceivablesTradereceivables, loans,andotherreceivablesthathavefixedordeterminablepaymentsthatarenotquotedinanactivemarketareclassifiedas‘loansandreceivables’.Loansandreceivablesaremeasuredatamortisedcostusingtheeffectiveinterestmethodlessanyimpairment.Interestincomeisrecognisedbyapplyingtheeffectiveinterestrate,exceptforshort-termreceivableswhentherecognitionofinterestwouldbeimmaterial.


ImpairmentoffinancialassetsFinancialassetsareassessedforindicatorsofimpairmentateachstatementoffinancialpositiondate.Financialassetsareimpairedwhenthereisobjectiveevidencethat,asaresultofoneormoreeventsthatoccurredaftertheinitialrecognitionofthefinancialasset,theestimatedfuturecashflowsoftheinvestmenthavebeenaffected.Forfinancialassetscarriedatamortisedcost,theamountoftheimpairmentisthedifferencebetweentheasset’scarryingamountandthepresentvalueofestimatedfuturecashflows,discountedattheoriginaleffectiveinterestrate.

Thecarryingamountofthefinancialassetisreducedbytheimpairmentlossdirectlyforallfinancialassetswiththeexceptionoftradereceivableswherethecarryingamountisreducedthroughtheuseofanallowanceaccount.Whenatradereceivableisuncollectible,it iswrittenoffagainst the allowanceaccount. Subsequent recoveriesof amountspreviouslywrittenoffare credited against theallowanceaccount.Changesinthecarryingamountoftheallowanceaccountarerecognisedinprofitorloss.WhenanAFSfinancialassetisconsideredtobeimpaired,cumulativegainsorlossespreviouslyrecognizedinothercomprehensiveincomearereclassifiedtoprofitorlossintheperiod.

With the exception of AFS equity instruments, if in a subsequent period, the amount of the impairment loss decreases and thedecreasecanberelatedobjectivelytoaneventoccurringaftertheimpairmentwasrecognised,thepreviouslyrecognisedimpairmentlossisreversedthroughprofitorlosstotheextentthatthecarryingamountoftheinvestmentatthedatetheimpairmentisreverseddoesnotexceedwhattheamortisedcostwouldhavebeenhadtheimpairmentnotbeenrecognised.InrespectofAFSequitysecurities,anyincreaseinfairvaluesubsequenttoanimpairmentlossisrecognisedinothercomprehensiveincomeandaccumulatedundertheheadingofinvestmentsrevaluationreserve.

InvestmentsInvestmentsinimmaterialnon-consolidatedcompaniesaregenerallyrecordedatcostlessprovisionforanyimpairment.

finanCial liabilities and eQuitY instRuments ClassificationasdebtorequityDebt and equity instruments issued by theGroup are classified as either financial liabilities or as equity in accordancewith thesubstanceofthecontractualarrangementsandthedefinitionsofafinancialliabilityandanequityinstrument.

EquityinstrumentsAnequityinstrumentisanycontractthatevidencesaresidualinterestintheassetsofanentityafterdeductingallofitsliabilities.EquityinstrumentsissuedbytheGrouparerecognisedattheproceedsreceived,netofdirectissuecosts.RepurchaseoftheCompany’sownequityinstrumentsisrecognisedanddeducteddirectlyinequity.Nogainorlossisrecognisedinprofitorlossonthepurchase,sale,issueorcancellationoftheCompany’sownequityinstruments. FinancialliabilitiesFinancialliabilitiesareclassifiedaseitherfinancialliabilities‘atFVTPL’(Fairvaluethroughprofitandloss)or‘otherfinancialliabilities’.FinancialliabilitiesatFVTPLFinancialliabilitiesareclassifiedasatFVTPLwhenthefinancialliabilityiseitherheldfortradingoritisdesignatedasatFVTPL.Afinancialliabilityisclassifiedasheldfortradingif:• ithasbeenacquiredprincipallyforthepurposeofrepurchasingitinthenearterm;or• oninitialrecognitionitispartofaportfolioofidentifiedfinancialinstrumentsthattheGroupmanagestogetherandhasarecent actualpatternofshort-termprofit-taking;or• itisaderivativethatisnotdesignatedandeffectiveasahedginginstrument.

AfinancialliabilityotherthanafinancialliabilityheldfortradingmaybedesignatedasatFVTPLuponinitialrecognitionif:• suchdesignationeliminatesorsignificantlyreducesameasurementorrecognitioninconsistencythatwouldotherwisearise;or• thefinancialliabilityformspartofaGroupoffinancialassetsorfinancialliabilitiesorboth,whichismanagedanditsperformanceis evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and informationaboutthegroupingisprovidedinternallyonthatbasis;or• it forms part of a contract containing one ormore embedded derivatives, and IAS 39 Financial Instruments: Recognition and Measurementpermitstheentirecombinedcontract(assetorliability)tobedesignatedasatFVTPL.FinancialliabilitiesatFVTPLarestatedatfairvalue,withanygainsorlossesarisingonremeasurementrecognisedinprofitorloss.Thenetgainorlossrecognisedinprofitorlossincorporatesanyinterestpaidanddividendsonthefinancialliabilityandisincludedinthe‘othergainsandlosses’lineitemintheconsolidatedstatementofcomprehensiveincome.

OtherfinancialliabilitiesOtherfinancialliabilities(includingborrowingsandtradepayables)aresubsequentlymeasuredatamortisedcostusingtheeffectiveinterestmethod.Theeffectiveinterestmethodisamethodofcalculatingtheamortisedcostofafinancialliabilityandofallocatinginterestexpenseovertherelevantperiod.Theeffectiveinterestrateistheratethatexactlydiscountsestimatedfuturecashpayments(includingallfeesandpointspaidorreceivedthatforman integralpartoftheeffective interestrate,transactioncostsandotherpremiumsordiscounts)throughtheexpectedlifeofthefinancialliability,or(whereappropriate)ashorterperiod,tothenetcarryingamountoninitialrecognition. DerecognitionoffinancialliabilitiesTheGroupderecognisesfinancialliabilitieswhen,andonlywhen,theGroup’sobligationsaredischarged,cancelledortheyexpire.Thedifferencebetweenthecarryingamountofthefinancialliabilityderecognisedandtheconsiderationpaidandpayableisrecognisedinprofitorloss.

deRivative finanCial instRumentsTheGroupentersintoavarietyofderivativefinancialinstrumentsinordertomanagewithexposurechangeinchangingofcommodityprices.Derivativesareinitiallyrecognisedatfairvalueatthedatethederivativecontractsareenteredintoandaresubsequentlyremeasuredtotheirfairvalueattheendofeachreportingperiod.Theresultinggainorlossisrecognisedinprofitorlossimmediatelyunlessthederivativeisdesignatedandeffectiveasahedginginstrument,inwhicheventthetimingoftherecognitioninprofitorlossdependsonthenatureofthehedgerelationship.

hedGinGTheGroupdesignatescertainhedginginstrumentsasfairvaluehedges.Attheinceptionofahedgerelationship,theGroupformallydesignatesanddocumentsthehedgerelationshiptowhichtheGroupwishestoapplyhedgeaccountingandtheriskmanagementobjectiveandstrategyforundertakingthehedge.Thedocumentationincludes identificationof the hedging instrument, the hedged itemor transaction, the nature of the risk being hedged andhowtheentitywillassess thehedging instrument’seffectiveness inoffsettingtheexposure tochanges in thehedged item’s fairvalueattributabletothehedgedrisk.Suchhedgesareexpectedtobehighlyeffectiveinachievingoffsettingchangesinfairvalueandareassessedonanon-goingbasistodeterminethattheyactuallyhavebeenhighlyeffectivethroughoutthefinancialreportingperiodsforwhichtheyweredesignated.Hedgeswhichmeetthestrictcriteriaforhedgeaccountingareaccountedforasfollows:

FairvaluehedgesFairvaluehedgesarehedgesoftheGroup’sexposuretochangesinthefairvalueofarecognizedassetorliabilityoranunrecognized


firmcommitment,oranidentifiedportionofsuchanasset,liabilityorfirmcommitment,thatisattributabletoaparticularriskthatcouldaffecttheincomestatement.Forfairvaluehedges,thecarryingamountofthehedgeditemisadjustedforgainsandlossesattributabletotheriskbeinghedged,thederivativeisremeasuredatfairvalueandgainsandlossesfrombotharetakentotheincomestatement.Forfairvaluehedgesrelatingtoitemscarriedatamortisedcost,theadjustmenttocarryingvalueisamortisedthroughtheincomestatementovertheremainingtermtomaturity.Anyadjustmenttothecarryingamountofahedgedfinancialinstrumentforwhichtheeffectiveinterestmethodisusedisamortisedtotheincomestatement.Amortisationmaybeginassoonasanadjustmentexistsandshallbeginnolaterthanwhenthehedgeditemceasestobeadjustedforchangesinitsfairvalueattributabletotheriskbeinghedged.Whenanunrecognizedfirmcommitmentisdesignatedasahedgeditem,thesubsequentcumulativechangeinthefairvalueofthefirmcommitmentattributabletothehedgedriskisrecognizedasanassetorliabilitywithacorrespondinggainorlossrecognizedintheincomestatement.Thechangesinthefairvalueofthehedginginstrumentarealsorecognizedintheincomestatement.

TheGroupdiscontinuesfairvaluehedgeaccountingifthehedginginstrumentexpiresorissold,terminatedorexercised,thehedgenolongermeetsthecriteriaforhedgeaccountingortheGrouprevokesthedesignation.

embedded deRivatives Derivativesembeddedinotherfinancialinstrumentsorotherhostcontractsaretreatedasseparatederivativeswhentheirrisksandcharacteristicsarenotcloselyrelatedtothoseofthehostcontractsandthehostcontractsarenotmeasuredatfairvaluewithchangesinfairvaluerecognisedinprofitorloss.Anembeddedderivativeispresentedasanon-currentassetoranon-currentliabilityiftheremainingmaturityofthehybridinstrumenttowhichtheembeddedderivativerelatesismorethan12monthsanditisnotexpectedtoberealisedorsettledwithin12months.Otherembeddedderivativesarepresentedascurrentassetsorcurrentliabilities.Intheordinarycourseofbusiness,theCompanyandGrouphaveenteredintocertainlong-term,foreigncurrencysupplyandsalescontractswhich,underIAS39,includeembeddedderivatives.Anembeddedderivativeisacomponentofacontractwhichhastheeffectthatthecashflowsarisingunderthecontractvary,inpart,inasimilarwaytoastandalonederivative.IAS39requiresthatsuchembeddedderivativesareseparatedfromthehostcontractsandaccountedforasderivativescarriedatfairvalue,withchangesinfairvaluebeingchargedorcreditedtotheincomestatement.Thefairvalueofembeddedforwardforeignexchangecontractsisdeterminedbyreferencetospotmarketforeigncurrencyratesatthestatementoffinancialpositiondate,becausethereisnoactiveforwardmarket inthecountries involvedincontracts.Thefairvalueofanembeddedinflationindexswapisdeterminedbythereferencetothecumulativeinflationindexdifferentialbetweenthecontractedinflationescalatorandinflationinthecountrywherethecontractisexecuted.Thelong-termeffectsoftheseembeddedderivativesarediscountedusingadiscountratesimilartotheinterestrateongovernmentbonds.

SegmentalinformationIFRS8Operatingsegmentsrequiresoperatingsegmentstobeidentifiedonthebasisof internalreportsaboutcomponentsoftheGroupthatareregularlyreviewedbythechiefoperatingdecisionmakerinordertoallocateresourcestothesegmentsandtoassesstheirperformance. pRovisions foR deCommissioninG and otheR obliGations ProvisionsarerecognisedwhentheGrouphasapresentobligation(legalorconstructive)asaresultofapasteventanditisprobable(i.e.morelikelythannot)thatanoutflowofresourceswillberequiredtosettletheobligation,andareliableestimatecanbemadeoftheamountoftheobligation.Theamountrecognisedasaprovisionisthebestestimateoftheconsiderationrequiredtosettlethepresentobligationattheendofthereportingperiod,takingintoaccounttherisksanduncertaintiessurroundingtheobligation.Whentheeffectofdiscountingismaterial,theamountoftheprovisionisthepresentvalueoftheexpendituresexpectedtoberequiredto

settletheobligation,determinedusingtheestimatedriskfreeinterestrateasthediscountrate.Whendiscountingisused,thereversalofsuchdiscountingineachyearisrecognisedasafinancialexpenseandthecarryingamountoftheprovisionincreasesineachyeartoreflectthepassageoftime.Provisionrelatingtothedecommissioningandremovalofassets,suchasanoilandgasproductionfacilityareinitiallytreatedaspartofthecostoftherelatedproperty,plantandequipment.Subsequentadjustmentstotheprovisionarisingfromchangesinestimatesasdecommissioningcosts,reservesandproductionofoilandgas,riskfreeinterestsuchasdiscountrateandinflationrarearealsotreatedasanadjustmenttothecostoftheproperty,plantandequipmentandthusdealtwithprospectivelyintheincomestatementthroughfuturedepreciationoftheasset.

Revenue ReCoGnitionRevenueismeasuredatthefairvalueoftheconsiderationreceivedorreceivable.Revenueisreducedforcustomerreturns,rebatesandothersimilarallowances.

SaleofgoodsRevenuefromthesaleofgoodsisrecognisedwhenallthefollowingconditionsaresatisfied:- theGrouphastransferredtothebuyerthesignificantrisksandrewardsofownershipofthegoods;- theGroupretainsneithercontinuingmanagerialinvolvementtothedegreeusuallyassociatedwithownershipnoreffectivecontrol overthegoodssold;- theamountofrevenuecanbemeasuredreliably;- itisprobablethattheeconomicbenefitsassociatedwiththetransactionwillflowtotheentity;and- thecostsincurredortobeincurredinrespectofthetransactioncanbemeasuredreliably.Salesofgoodsthatresultinawardcreditsforcustomersareaccountedforasmultipleelementrevenuetransactions.Theconsiderationallocatedtotheawardcreditsismeasuredbyreferencetotheirfairvalue,theamountforwhichtheawardcreditscouldbesoldseparately.TheGrouphasnotincludedextensivedisclosureregardingtheloyaltyprogrammeastheamountsarenotsignificant.

RenderingofservicesRevenue froma contract to provide services is recognisedby reference to the stageof completionof the contract. The stageofcompletionofthecontractisdeterminedasfollows:- installationfeesarerecognisedbyreferencetothestageofcompletionoftheinstallation,determinedastheproportionofthetotal timeexpectedtoinstallthathaselapsedatthestatementoffinancialpositiondate;- servicingfeesincludedinthepriceofproductssoldarerecognisedbyreferencetotheproportionofthetotalcostofprovidingthe servicingfortheproductsoldand- revenuefromtimeandmaterialcontractsisrecognisedatthecontractualratesaslabourhoursaredeliveredanddirectexpenses areincurred.

DividendandinterestrevenueDividendrevenuefrom investments is recognisedwhentheshareholder’s right toreceivepaymenthasbeenestablished. Interestrevenue is recognisedwhen it isprobable that theeconomicbenefitswill flow to theGroupand theamountof revenuecanbemeasuredreliably.Interestrevenueisaccruedonatimebasis,byreferencetotheprincipaloutstandingandattheeffectiveinterestrateapplicable,whichistheratethatexactlydiscountsestimatedfuturecashreceiptsthroughtheexpectedlifeofthefinancialassettothatasset’snetcarryingamountoninitialrecognition.


3. siGnifiCant aCCountinG judGements and estimates use of estimates in the pRepaRation of finanCial statements ThepreparationoffinancialstatementsinconformitywithInternationalReportingFinancialStandards,aspublishedbytheInterna-tionalAccountingStandardsBoardrequiresmanagementtomakeestimatesandassumptionsthataffectthereportedamountsofassets,liabilities,incomeandexpensesanddisclosureofcontingencies.Thesignificantareasofestimationusedinthepreparationoftheaccompanyingfinancialstatementsrelatetoemployeebenefits,impairmentofassets,determinationoffairvaluesofassetsandliabilitiesandestimateddecommissioningcosts.Futureeventsmayoccurwhichwillcausetheassumptionsusedinarrivingattheestimatestochange.Theeffectofanychangesinestimateswillberecordedinthefinancialstatementswhendeterminable.

CRitiCal judGements in applYinG aCCountinG poliCiesIntheapplicationoftheaccountingpolicies,whicharedescribedinnote2,managementmadecertainjudgementsthathadasignificantimpactontheamountsreportedinthefinancialstatements(irrespectiveoftheunderlyingestimatesreferredtobelow).Thesejudgementsareprovidedindetailintheaccompanyingnotes.However,thecriticaljudgementsrelatetothefollowingareas:

ReclassificationofpartofotheroperatingincomeandservicecostsIn2013INAGroupreclassifiedincomeandexpenseofforeignexchangedifferencesrelatingtocustomersandsuppliersfromoperatingactivitiestofinancingactivities.Theeffectofsuchreclassificationisasfollows:

INAGroup INA,d.d.

31December2013 31December2012 31December2013 31December2012

Reclassificationofotheroperatingincome (24) (40) (6) (9)

Reclassificationonfinanceincome 24 40 6 9

Reclassificationofservicecosts 59 43 31 18

Reclassificationoffinancecosts (59) (43) (31) (18)

Total - - - -

QuantificationanddeterminationofthedecommissioningobligationsforoilandgaspropertiesDecommissioning costs are uncertain and cost estimates can vary in response to many factors, including changes to legal andregulatory requirements, new technologies becoming available and experience of decommissioning other assets. The expectedtiming,scope,expenditureandriskprofilemayalsochange.Thereforesignificantestimatesandassumptionsaremadeindeterminingdecommissioningprovisions.Managementmakesestimatesoffutureexpenditureinconnectionwithenvironmentalanddecommissioningobligationsusingpricesbyreferencetopriorsimilaractivities,aswellasotherassumptions.Furthermore,thetimedeterminedforthecashflowsreflectsthecurrentestimatesofpriorities,technicalequipmentrequirementsandurgencyoftheobligations.TheobligationwithrespecttothedecommissionprovisionforoilandgaspropertiesamountedtoHRK2,360millionasat31December2013(31December2012HRK2,345million)(seenote31). ThelevelofprovisioningforenvironmentalobligationsThe applicable regulations, specifically the environmental protection legislation, do not specify the exact scope of activities or

technologytobeapplied.ProvisionsarerecognisedwhentheGrouphasapresentobligation(legalorconstructive)asaresultofapasteventanditisprobable(i.e.morelikelythannot)thatanoutflowofresourceswillberequiredtosettletheobligation,andareliableestimatecanbemadeoftheamountoftheobligation.Generally,thetimingoftheseprovisionscoincideswiththecommitmenttoaformalplanofactionor,ifearlier,ondivestmentoronclosureofinactivesites.Indeterminingthelevelofprovisionsforenvironmentalobligationsanddecommissioningofoilandgasproperties,themana-gementreliesonpriorexperienceandtheirowninterpretationoftherelatedlegislation.Wheretheliabilitywillnotbesettledforanumberofyears,theamountrecognizedisthepresentvalueoftheestimatedfutureexpenditure.At31December2013INAGrouprecognizedenvironmentalprovisioninamountHRK301million(2012:HRK309million)(seenote31),whichcoverstreatmentofaccumulatedwastegeneratedbyformeractivity,soilexcavationandreplacementduringthereconstructionoffillingstationsandinvestigationtodeterminetheextentofthecontaminations.ItdoesnotcoverthecostofremediationinlackofdetailedNationalregulations.

Carryingvalueofnon-currentassets,includinggoodwillTheimpairmentcalculationrequirestheestimateofthevalueinuseofthecashgeneratingunits.Valueinuseismeasuredusingthediscountedcashflowprojections.Themostsignificantvariablesindeterminingcashflowsarediscountrates,timevalues,theperiodofcashflowprojections,aswellasassumptionsandjudgmentsusedindeterminingcashreceiptsandexpenditure.TheimpairmentreportedintheconsolidatedincomestatementamountedtoHRK2,038millionin2013(2012:HRK624million).

CarryingvalueofgoodwillTherewasnoimpairmentofgoodwillin2013and2012(seenote16).ThecarryingamountofgoodwillamountedtoHRK183millionasof31December2013and2012respectively(seenote16).CarryingvalueofintangibleexplorationandappraisalassetsThecarryingamountofintangibleexplorationandappraisalassetsamountedtoHRK378millionasof31December2013andHRK558million2012(seenote14).InINAGrouptheimpairmentreportedinamountofHRK343millionin2013(2012:HRK126million)(seenote14).

CarryingvalueofproductionoilandgasassetsThecarryingamountofproductionoilandgasassetsamountedtoHRK5,414millionasof31December2013andHRK8,075million2012 (seenote15). In INAGroupthe impairment reported inamountofHRK1,340million in2013while in2012thereversalofimpairmentwasreportedinamountedtoHRK14million.(seenote15).

Carryingvalueofproperty,plantandequipmentinrefineriesThecarryingamountofproperty,plantandequipmentinrefineriesamountedtoHRK4,365millionasof31December2013andHRK5,133millionin2012.Asaconsequenceoftheunfavourableeconomicenvironment,theimpairmentofrefineriesreportedinamountofHRK679millionin2013andHRK663millionin2012.

AvailabilityoftaxableprofitagainstwhichthedeferredtaxassetscanbeutilisedAdeferred taxasset is recognized forunused tax lossesonly to theextent that it isprobable that the related taxbenefitwillberealiseagainstfuturetaxableprofits.Determiningtheamountofdeferredtaxesthatcanberecognisedrequiresasignificantlevelofjudgement,whichisbasedontheprobablequantificationofthetimeandleveloffuturetaxableprofits,togetherwiththefuturetaxplanningstrategy.At31December2013thecarryingamountofdeferredtaxassetsoftheINAGroupamountedtoHRK1,127million(2012:HRK557million)anddeferredtax liabilitiesamountedHRK7million (2012:HRK13million),while thecarryingamountofdeferredtaxassetsofINA,d.d.amountedtoHRK1,076million,(31December2012:HRK494millionrespectively)(seenote12).ActuarialestimatesusedindeterminingtheretirementbonusesThecostofdefinedbenefitsisdeterminedusingactuarialestimates.Actuarialestimatesinvolveassumptionsofdiscountrates,futuresalaryincreasesandthemortalityorfluctuationrates.Becauseofthelong-termnatureofthoseplans,thereisuncertaintysurrounding


thoseestimates.ProvisionsforretirementbonusesandjubileeawardsforINAGroupamountedtoHRK146millionasat31December2013(31December2012:HRK110million),andINA,d.d.amountedtoHRK105millionasat31December2013(31December2012HRK73million)(seenote32).

ConsequencesofcertainlegalactionsINAGroupmembersareinvolvedinnumberoflitigationsarisenfromtheregularcourseofbusiness.Ifthereisapresentobligationasaresultofapastevent(takingintoaccountallavailableevidence,includingtheopinionoflawexperts)forwhichisprobablethatoutflowofresourceswillberequiredtosettletheobligationandifareliableestimatecanbemadeoftheamountoftheobligation,provisionsarerecorded(seenote31).

UsefullifeoftheassetsTheINAGroupandINA,d.d.reviewtheestimatedusefullivesofproperty,plantandequipmentattheendofeachreportingperiod.Estimationofusefullifeisconsideredtobeasignificantaccountingestimationthateffectsonthechangeindepreciationrates.Thenewestimationofassetusefullifeattheendof2013hadnosignificantchangescomparedtothepreviousestimate. ExplorationanddevelopmentWellexplorationanddevelopmentprojectsinvolvemanyuncertaintiesandbusinessrisksthatmaygiverisetosignificantexpenditure.ExplorationanddevelopmentprojectsoftheINAGroupmaybedelayedorunsuccessfulformanyvariousreasons,includingbudgetedcost overrun, geological issues, difficulties inmeeting the requirements of competent bodies, lacks of equipment and technicalproblems.Theseprojects,particularlythosepertainingtothewells incontinentalareasorotherdemandingterrain,oftenrequiredeploymentofnewandadvancedtechnologies,thedevelopment,purchaseandinstallationofwhichmaybeexpensiveandthatmaynotoperateasexpected.

Oilandnaturalgasexplorationanddrillingactivitiesaresubjecttoawiderangeofinherentrisks,includingtheriskoferuption,depositdamage,lossofcontroloverthewells,perforation,craters,fireandnaturaldisasters.INAGroupoilandnaturalgasexplorationanddevelopmentexpenditureareaccountedforusingthesuccessfuleffortsmethod.Inaccordancewiththatmethodthelicenseanddataprovisioncostsandcostsassociatedwithgeologicalandgeophysicalactivitiesarechargedtotheincomestatementperiodinwhichtheyareincurred.

impaiRment of non-CuRRent assets and CuRRent assets in sYRiaConsequent to thepolitical turmoil started in2011and the sanctionsposedbyUSandEUonSyria, treatmentof revenues fromoperationsthereinrequiresjudgement.HavingassessedtheprobabilityofreceivingeconomicbenefitsfromsalesactivitiesinGroup’sSyrianoperations,includingcounterpartyriskassociatedwithGPC,theSyrianNationalOilCompany,themanagementdecidedthatcriteriasetout in IAS18–RevenueRecognitionwerenotmetfromearly2011.Therefore,beginningfromthisdate,revenuewasrecognizedonlyifcashhasbeenreceivedfromGPCthoughuntil26February2012INAregularlyissuedinvoices,thelastinvoicebeingissuedforFebruary2012.August2011wasthelastmonthforwhichINAinvoiceswerepaidinfull.INA’sunrecordedrevenuesuntilFebruary2012accumulatetoapproximatelyUSD372.5million.

On22February2012CroatiaadoptedEU/UNsanctionstowardsSyrianArabRepublic,henceINAd.d.declaredForceMajeureasfrom26February2012.BydeclaringForceMajeure,INA,d.d.suspendedallitspetroleumactivitiesinHayanandAphamiablocksasperProductionSharingAgreement(Hayan/Aphamia)andrecalledallitslocalandexpatriateemployees.HencetheproductioninHayanBlockisstillongoing,theGrouphasnotrecognisedproductionvolumessincetheannouncementofForceMajeure.Duetoinadequateoperatingconditionandlackofregularmaintenancethephysicaldeteriorationofsurfacefacilitiesisreflectedindepreciationchargecalculatedbasedonanaverageresidualusefullifeof3.5years.Depreciationchargefor2013wasrecognisedinamountofHRK547million.

SincetheannouncementofForceMajeurenorevenuehasbeenaccountedfor.ThesecircumstancesalsogaverisetoanimpairmentindicatorwithrespecttotheGroup’sSyrianassets.TheGroupperformedanimpairmenttestonitsSyriannon-currentassetsofHayanBlock, being a separate cash generatingunit (seeNote15). Such impairment calculation requires anestimateof the recoverableamountofthecashgeneratingunit,thatis,thehigheroffairvaluelesscoststosellandvalueinuse.Valueinusehasbeendeterminedonthebasisofdiscountedestimatedfuturenetcashflowsandofmultiplescenarioswithrespecttoreturntonormalproduction.Themostsignificantvariables indeterminingcashflowsarediscountrates,theperiodforwhichcashflowprojectionsaremade,probabilitiesrelatingtodifferentscenariosaswellastheassumptionsandestimatesusedtodeterminetheamountandtimingofcashinflowsandoutflows,includingcrudeoilandnaturalgasprices(consideringthepriceformulaesetoutintherespectiveProductionSharingAgreement),theincrementalrebuildingcosts,operatingexpensesandfutureannualproductionvolumes.Whilesuchcashflowsreflectthemanagement’sbestestimateforthefuture,theseestimatesareexposedtoanincreaseduncertaintyasaresultofthepolitical,securityandeconomicconditionsinSyria.ThepossibleimpactsofmultipleprobabilityweightedsettlementscenariosonGroup’soperationinSyriarepresenting:a) Havaria:thepropertiesaresubjecttophysicaldamageasaresultoftargetedoraccidentalattacks.b) Returntooperation:aftercrisissettlementsandfullorpartialremovalsofsanctionstheGroupexpectstoreturntooperations within3to10year.c) Noreturn:theGroupisdisabledreturningatallandtheassetsarelost.

ForestimationoffutureproductionvolumestheproveddevelopedreservesderivedfrombusinessplanspriortoForceMajeurewereused.Asset-specificdiscountrateswerederivedfromtheUSD-basedweightedaveragecostofcapitalandareadjustedforproject-specificrisks,asapplicable.Thediscountrateappliedwas17.5%(seenote15).Basedonmultiple-scenarioDCFcalculationstheGrouphasrecordedimpairmentinamountofHRK1,239milliononassetsinHayanBlockandHRK50millionofimpairmentofothercurrentassets.OnthebasisoftechnicalinformationavailablepriortoForceMajeureandofuncertaintiesoverthepossibledateofreturntooperationtheGroupalsorecordedimpairmentontheSyrianAphamiaBlockrelatedtotheprioryears’drillingsinamountofHRK215million.

PoliticaldevelopmentsinEgyptINAstartedwithexplorationactivitiesinEgyptin1989,asapartner,andin1997asanoperator,whenaBranchofficewasestablishedinCairo.Oilproduction,asresultofexplorationactivities,startedin1994.INAGrouphasashareofproductiononRasQattaraandWestAbuGharadigConcessionsoperatedbyIEOC,ontheNorthBahariyaConcessionoperatedbySaharaOilandGas,andonEastYidmaConcessionoperatedbyINA.ConcessionAgreementsforpetroleumexplorationandexploitationrightswerecontractedbetweenTheArabRepublicofEgypt,theEgyptiannationalpetroleumcompanyEGPCandpartners.ProducedoilissoldtoEGPCasperthecontract.AtthemomentpoliticaluncertaintyremainshighandEgypt’soutlookremainsbleak.DependingontheoverallpoliticalsituationinEgypt,adverseeffectsarepossible,suchasonthenetinvestmentincomeoftheINAGroupinEgypt,whichcouldthenhaveanadverseimpactonthefutureoperatingresultsoftheINAGroup.Currentlythecompanyrecords100%impairmentonthereceivablesfromEGPCoverduebymorethan60days.


4. seGment infoRmationTheINAGroupoperatesthroughthreecorebusinesssegments.Thestrategicbusinesssegmentsofferdifferentproductsandservices.Reportingsegments,whichisinINAGrouprepresentbusinessdivision(BD),havebeendefinedalongvaluechainstandardfortheoilcompanies:• BDExplorationandProductionofOilandGas–exploration,productionandsellingofcrudeoilandnaturalgas;• BDRefiningandMarketing–crudeoilprocessing,wholesaleofrefineryproducts,sellingoffuelsandcommercialgoodsinretailstationsandlogistics;and• Businessfunction-inadditiontothecorebusinesssegmentsinabove,theoperationsoftheINAGroupincludesegmentBusinessfunctionwhichprovidesservicesforcoreactivities.Startingfrom1January2013,BDRetail,whichincludessellingoffuelsandcommercialgoodsinretailstationsandlogistics,wasforsegmentreportingpurposesmergedtoBDRefiningandMarketing.Comparativedatawasrestatedtobecomparablewithcurrentyearandtoreflectchange.Informationregardingtheresultsofeachreportablesegmentis includedbelow.Profitfromoperationsisusedtomeasureperfor-manceasmanagementbelievesthatsuch information isthemostrelevant inevaluatingtheresultofcertainsegments.However,Groupfinancing(includingfinancecostsandfinanceincome)andincometaxesaremanagedonGroupbasisandarenotrelevanttomakingbusinessdecisionsatthelevelofbusinesssegments.Intersegment transfer represents the effect of unrealized profit arising in respect of transfers of inventories fromBD ExplorationandProductionofOilandGastoBDRefiningandMarketing.Evaluationofinventoriesofdomesticcrude,finishedandsemi-finishedproductsinBDRefiningandMarketingisbasedonthetransferpricefromBDExplorationandProductiontoBDRefiningandMar-keting.Through intersegmenttransfer isperformedeliminationofunrealizedprofit (differencebetweentransferpriceandcostofdomesticcrude).For segmental reporting purposes the transferor segment records a profit immediately at the point of transfer. However, at thecompanylevelprofitisonlyreportedwhentherelatedthirdpartysalehastakenplace.

BYBUSINESS

INA Group

Explorationandproduction

Refiningandmarketing

Corporate andother

Intersegmenttransfersandconsolidationadjustments

Total

2013

Salestoexternalcustomers 7,293 20,084 67 - 27,444

Inter-segmentsales 3,233 53 604 (3,890) -

Totalrevenue 10,526 20,137 671 (3,890) 27,444

Operatingexpenses,netofotheroperatingincome (9,005) (22,251) (1,281) 3,523 (29,014)

Lossfromoperations 1,521 (2,114) (610) (367) (1,570)

Netfinanceloss (246)

Lossbeforetax (1,816)

Incometaxbenefit 308

Lossfortheyear (1,508)



Corporate andother


Total

2012

Salestoexternalcustomers 8,886 20,960 49 - 29,895

Inter-segmentsales 3,378 34 549 (3,961) -

Totalrevenue 12,264 20,994 598 (3,961) 29,895

Operatingexpenses,netofotheroperatingincome (8,481) (22,823) (1,193) 3,961 (28,536)

Profitfromoperations 3,783 (1,829) (595) - 1,359

Netfinanceloss (292)

Profitbeforetax 1,067

Incometaxexpense (380)

Profitfortheyear 687

INA Group

31December2013

Assetsandliabilities

Property,plantandequipment 9,733 5,589 674 (17) 15,979

Intangibleassets 390 16 118 - 524

“Investmentsinassociatesandjointventures“ 22 - - - 22

Inventories 698 2,779 109 (367) 3,219

Tradereceivables,net 1,213 1,432 223 (304) 2,564

Notallocatedassets 3,601

Totalassets 25,909

Tradepayables 945 1,949 251 (304) 2,841

Notallocatedliabilities 10,193

Totalliabilities 13,034

Othersegmentinformation

Capitalexpenditure: 1,394 545 72 - 2,011

Property,plantandequipment 1,197 540 27 - 1,764


Depreciationandamortisation 1,521 645 95 - 2,261

ImpairmentlossesPP&E,netrecognizedinprofitandloss 1,300 738 - - 2,038

Otherimpairmentlosses,netrecognizedinprofitandloss 600 167 8 (33) 742

Totalimpairmentcharges,net* 1,900 905 8 (33) 2,780

*seenote8




Corporate andother


Total

INA Group

31December2012

Assetsandliabilities

Property,plantandequipment 11,571 6,475 695 (25) 18,716


Investmentsinassociatesandjointventures 34 - - - 34

Inventories 1,610 2,278 139 (675) 3,352

Tradereceivables,net 1,748 1,039 217 (234) 2,770


Totalassets 28,200

Tradepayables 832 909 248 (305) 1,684

Notallocatedliabilities 11,562

Totalliabilities 13,246


Capitalexpenditure: 690 457 83 - 1,230

Property,plantandequipment 648 449 34 - 1,131


Depreciationandamortisation 1,192 720 104 - 2,016

Impairmentlosses/(income)PP&E,netrecognizedinprofitandloss (38) 662 - - 624

Otherimpairmentlosses,netrecognizedinprofitandloss 243 193 3 - 439

Totalimpairmentcharges/(income),net* 205 855 3 - 1,063

RepublicofCroatia

BYGEOGRAPHICAL Syria Other countries

Total

INA Group

31December2013

Property,plantandequipment 12,321 2,213 1,445 15,979

Intangibleassets 385 105 34 524

Investmentsinassociatesandjointventures 22 - - 22

Inventories 3,010 17 192 3,219

Tradereceivables,net 1,604 - 960 2,564


Totalassets 25,909


Capitalexpenditure: 1,659 - 352 2,011

Property,plantandequipment 1,522 - 242 1,764

Intangibleassets 137 - 110 247

31December2012

Property,plantandequipment 13,269 4,200 1,247 18,716


Investmentsinassociatesandjointventures 34 - - 34

Inventories 3,206 21 125 3,352

Tradereceivables,net 1,958 4 808 2,770


Totalassets 28,200


Capitalexpenditure: 998 56 176 1,230

Property,plantandequipment 935 50 146 1,131


*seenote8


Revenuesfromexternalcustomers

2013 2012

INA Group

RepublicofCroatia 17,531 19,090

Switzerland 2,180 2,796

BosniaandHercegovina 2,936 2,650

UnitedKingdom 414 293

Syria - 30

Othercountries 4,383 5,036

27,444 29,895

Revenuesfromexternalcustomers

2013 2012

INA,d.d.

RepublicofCroatia 15,558 17,188

Switzerland 2,180 2,796

BosniaandHercegovina 47 2,504

UnitedKingdom 414 293

Syria - -

Othercountries 5,683 3,623

23,882 26,404

INAGroup INA,d.d.

2013 2012 2013 2012

Incomefromcontractualpenalties 180 - 35 -

Surpluses 92 107 76 66

Incomefromcollecteddamageclaims 52 17 52 16

Incomefromrentalactivities 44 45 37 38

Incomefromsaleofassets 23 43 19 36

Penaltyinterestfromcustomers 22 36 196 60

Other 94 65 81 194

Total 507 313 496 410

5. otheR opeRatinG inCome

INAGroup INA,d.d.

2013 2012 2013 2012

Depreciationofproperty,plantandequipment(note15b) 2,231 1,968 2,074 1,789

Amortisationofintangibleassets(note14) 30 48 27 46

2,261 2,016 2,101 1,835

INAGroup INA,d.d.

2013 2012 2013 2012

Netpayroll 1,272 1,309 786 807

Taxandcontributionsforpensionsandhealthinsurance 846 899 553 584

Otherpayrollrelatedcosts 297 428 133 226

2,415 2,636 1,472 1,617

INAGroup INA,d.d.

2013 2012 2013 2012

numberofemployees numberofemployees

Explorationandproduction 4,219 4,302 1,469 1,492

Retail 3,541 3,547 3,085 3,085

Refiningandmarketing 3,038 3,139 2,636 2,705

Corporatefunction 2,662 2,866 1,327 1,430

13,460 13,854 8,517 8,712

6. depReCiation and amoRtisation

7. staff Costs

INAGroupandINA,d.d.employedthefollowingnumberofemployees,themajorityofwhomworkwithintheRepublicofCroatia:Information about major customersNosinglecustomercontributed10%ormoretotheGroup’srevenueineither2013or2012.


INAGroup INA,d.d.

2013 2012 2013 2012

ImpairmentofPP&Eandintangibleassets,net* 2,038 624 2,032 624

Writte-offPP&Eandintangibles,net 427 166 413 160

Impairmentoftradereceivables,net 208 110 1,064 1,063

Impairmentofinventory,net 39 150 67 109

Impairmentofloansgiven,net - 2 - 2

Otherimpairment,net 68 11 61 9

2,780 1,063 3,637 1,967

INAGroup INA,d.d.

2013 2012 2013 2012

Provisionforcontractualliabilitiesfortaxonoilprofit 9 155 9 155

Provisionforcontractualliabilitiesfortaxation 44 35 44 35

(Incomefromreleasedprovision)/provisionforunusedholidays (6) 6 (3) 4

(Incomefromreleasedprovision)/provisionforenviromentalliabilities (26) 5 (25) 4

Provision/(incomefromreleasedprovision)forlegalclaims 34 (30) 39 (32)

“Provision/(incomefromreleasedprovision)forincentives” 20 (22) 30 (37)

Provisionforemployeesbenefits 52 - 28 -

Provision/(incomefromreleasedprovision)forretirementandjubileebenefits 17 (14) 18 4

Provisionforexpectedliabilities 49 8 - (1)

Provisionforemmisionrights 10 - 10 -

Incomefromreleasedprovisionforinventories (2) - (4) -

201 143 146 132

8. impaiRment ChaRGes (net)

9. pRovisions foR ChaRGes and RisKs (net)

INAGroup INA,d.d.

2013 2012 2013 2012

Foreignexchangegainsfromloansandcash 102 75 74 60

Positivefairvalueofembeddedderivatives 63 35 44 35

Foreignexchangegainsfromtradereceivablesandpayables 24 40 6 9

Interestreceivedandotherfinancialincome 21 26 246 264

Incomefromdividends 3 1 3 1

Dividendreceivedfromsubsidiaries - - 39 33

213 177 412 402

INAGroup INA,d.d.

2013 2012 2013 2012

Otherinterestexpense 137 164 203 144

Interestforlong-termloans 102 104 94 92

Otherfinancialcosts 97 62 161 183

Foreignexchangelossesfromloansandcash 67 32 62 22

Foreignexchangelossesfromtradereceivablesandpayables 59 43 31 18

Negativefairvalueofembeddedderivatives 11 74 11 56

Capitalizedborrowingcosts (14) (10) (15) (10)

459 469 547 505

10. finanCe inCome

11. finanCe Costs

*seenote15


INAGroup INA,d.d.

2013 2012 2013 2012

Currenttaxexpense 263 263 243 252

Deferredtax(income)/chargerelatedtooriginationand

reversaloftemporarydifferences (571) 117 (577) 94

Incometax(benefit)/expense (308) 380 (334) 346

INAGroup INA,d.d.

2013 2012 2013 2012

(Loss)/profitbeforetax (1,816) 1,067 (1,967) 1,669

(Benefit)/expensetaxcalculatedat20% (363) 213 (393) 334

Effectofunusedtaxlossesnotrecognizedasdefferedtaxassetsand

recognitionofdefferedtaxassetspreviouslynotrecognised (52) 257 (5) 47

Effectofdifferenttaxratesofentitiesoperatinginotherjurisdictions 2 22 3 22

Taxeffectofpermanentdifferencesandeffectonunrecogniseddeferredtaxassets (135) (45) (179) 10

Taxeffectofpreviousyears 240 (67) 240 (67)

Incometax(benefit)/expense (308) 380 (334) 346

12. taxation

TaxonprofitgeneratedinCroatiaisdeterminedbyapplyingtherateof20percent,bothin2013and2012,onpre-taxprofitfortheyear.Incometaxesarerecordedonthebasisofestimatedtaxableincomeinaccordancewiththefiscallawsprevailinginthecountryinwhichtheyoriginate.INA,d.d.issubjecttocorporateincometaxonitstaxableprofitsinCroatia.

Theincometax,determinedonthebasisoftheaccountingprofit,isassessedasfollows:

In2013,INA,d.d.recognisedHRK240milliontaxeffectsofprioryear.OfthisamountHRK147millionwasrecognisedonthebasisoffinalIncometaxformandHRK93millionisrelatedtoTaxfindingofMinistryoffinanceaftertaxsupervisionfor2008and2009.

Movementsindeferredtaxassetsaresetoutinthefollowingtable:

Reversalofdepreciationforimpairedasset

Impairmentoftangibleand

intangibleassets

Impairmentofcurrentassets

Other provisions

Impairment offinancialinvestments

Taxlosses

Total

INA Group

Balanceat1January2012 280 268 (99) 76 91 46 662

Chargedirectlytoequity - - - - (1) - (1)

Reversaloftemporarydifferences (244) (29) (28) (8) (8) (32) (349)

Originationoftemporarydifferences 4 151 - 53 16 8 232

Balanceat31December2012 40 390 (127) 121 98 22 544

Chargedirectlytoequity - - - 3 2 - 5

Reversaloftemporarydifferences (5) (11) (26) (18) (4) (10) (74)


Balanceat31December2013 36 814 (153) 151 131 141 1,120

INA,d.d.

Balanceat1January2012 270 277 (99) 66 78 - 592

Chargedirectlytoequity - - - - (3) - (3)

Reversaloftemporarydifferences (243) (26) (28) (2) (6) - (305)

Originationoftemporarydifferences 2 144 - 49 15 - 210

Balanceat31December2012 29 395 (127) 113 84 - 494

Chargedirectlytoequity - - - 2 2 - 4

Reversaloftemporarydifferences (4) (10) (26) (13) (4) - (57)


Balanceat31December2013 26 820 (153) 136 118 129 1,076


INAGroup INA,d.d.


Basicanddiluted(loss)/earningspershare(inHRK) (150.8) 68.1 (163.3) 132.3

Earnings

(Loss)/earningsusedinthecalculationoftotalbasic

earningspershare (1,508) 681 (1,633) 1,323

(1,508) 681 (1,633) 1,323

Numberofshares

Weightedaveragenumberofordinarysharesforthe

purposesofbasicearningspershare(inmillions) 10 10 10 10

13. eaRninGs peR shaRe 14. intanGible assets

On17 July2013,approveddividendamounted to34.36kunasper share (totaldividendHRK343million). In2012, therewasnodividendapproved.

SoftwareCapitalisedformationexpenses

Oilandgasproperties

Patents,Liciencesandotherrights

Intengibleassetsunder

construction

Total

INA Group

Balanceat1January2012 774 1 62 17 26 880

Additions 40 - - - 59 99

Amortisation - (1) (39) (8) - (48)

Foreingexchangetranslationofforeignoperations (13) - - - - (13)

Impairment (126) - - (1) - (127)

Other - - 42 5 (47) -

Transfertoproperty,plantandequipment (117) - 4 2 (4) (115)

Balanceat31December2012 558 - 69 15 34 676

Additions 186 - - - 61 247

Amortisation - - (25) (5) - (30)


Impairment (343) - (1) - - (344)

Disposals - - - (4) - (4)

Transfer - - 51 3 (54) -

Transfertoproperty,plantandequipment - - 5 - (3) 2


INA,d.d.

Balanceat1January2012 774 1 61 14 26 876

Additions 40 - - - 57 97

Amortisation - (1) (39) (6) - (46)


Impairment (126) - - (1) - (127)

Other - - - (1) - (1)

Transfertoproperty,plantandequipment (117) - 4 2 (4) (115)


Additions 186 - - - 57 243

Amortisation - - (24) (3) - (27)


Impairment (343) - (1) - - (344)

Transfer - - 50 - (50) -

Transfertoproperty,plantandequipment - - 5 - (3) 2



At31December2013INAGroupimpairmentofintangibleassetsamountstoHRK344million,consistingofimpairmentofdrywellcostsinamountofHRK343millionandimpairmentinsegmentRefiningandmarketinginamountofHRK1million.Impairmentofdrywellcostsconsistsof:Syria(AphamiaHRK215million),Egypt(DisouqHRK100million),NorthernAdriatic(IvanaHRK27million),Hungary(Zalata)andIran(Moghan2)intotalamountofHRK1million.

At31December2012INAGroupimpairmentofintangibleassetsamountstoHRK127million.ItconsistsofimpairmentofwellsinamountofHRK126million:Egypt,EastYidmaHRK77million(drywellcosts),Iran,Moghan2HRK26million(contractexpired)andHungary,ZalataHRK23million.Additionally,itisHRK1millionimpairmentintheBDRefineryandMarketing

15. pRopeRtY, plant and eQuipment

INA Group

Balanceat1January2012

Cost 39,214 19,121 2,091 60,426

Accumulateddepreciation 26,840 11,724 1,568 40,132

Netbookvalue 12,374 7,397 523 20,294

Balanceat31December2012

Cost 38,895 19,516 2,928 61,339


Netbookvalue 11,567 6,457 692 18,716


Cost 39,793 19,940 3,001 62,734


Netbookvalue 9,729 5,578 672 15,979

INA,d.d.

Balanceat1January2012

Cost 35,176 18,474 923 54,573

Accumulateddepreciation 24,052 11,261 705 36,018

Netbookvalue 11,124 7,213 218 18,555


Cost 34,797 18,873 1,762 55,432


Netbookvalue 10,357 6,291 415 17,063


Cost 35,640 19,320 1,867 56,827


Netbookvalue 8,496 5,424 420 14,340

OtherRefiningandmarketing

Oilandgasexplorationand

production

Total

a)Bybusinesssegment

b) Byassettype

Plantandmachinery

Landandbuildings

Oilandgasproperties

Vehiclesandofficeequipment

CollectiveConsumption

assets

Assetsunder

construction

Total

INA Group

Cost

Balanceat1January2012 30,887 10,839 13,862 1,773 41 3,024 60,426

Additions - - - - - 1,131 1,131

Changeincapitaliseddecommissioningcosts (117) - - - - - (117)

Foreignexchangetranslationofforeignoperations (90) - - - - - (90)

Assetsputinuse 226 252 1,095 73 - (1,646) -

Disposals (1) (12) (49) (25) - (41) (128)

Transferfromintangibleassets - - 3 - - 112 115

Transfer - - - - - (33) (33)

Othermovements - 2 85 (54) - 2 35

Balanceat31December2012 30,905 11,081 14,996 1,767 41 2,549 61,339

Additions - - - - - 1,764 1,764



AcquisitonofsubsidiaryCroplin - 49 - - - - 49

Assetsputinuse 262 583 (108) 164 - (901) -

Disposals (1) (19) (121) (23) (2) (40) (206)

Transferfromintangibleassets - - 3 - - (5) (2)

Transfer - (10) 96 (86) - - -

Othermovements - 13 (90) 51 - 32 6



Plantandmachinery

Plantandmachinery

Landandbuildings

Landandbuildings

Oilandgasproperties

Oilandgasproperties




assets

CollectiveConsump-tionassets

Assetsunder

construction

Assetsunder

construction

Total Total

INA Group

Accumulateddepreciation

Balanceat1January2012 21,864 7,010 9,585 1,558 32 83 40,132

Chargefortheyear 982 280 612 93 1 - 1,968

Reversalofdecommissioningdepreciationforaprioryear (1) - - - - - (1)

Impairment(net) (14) 131 495 35 - 8 655

Transfers - 3 (34) (2) - - (33)

Disposals (1) (8) (47) (24) - (41) (121)

Write-off - - - - - - -

Othermovements - 17 45 (40) - 1 23

Balanceat31December2012 22,830 7,433 10,656 1,620 33 51 42,623

Chargefortheyear 1,375 225 536 95 - - 2,231

Reversalofdecommissioningdepreciationforaprioryear (8) (11) - (5) - - (24)

AcquisitonofsubsidiaryCroplin - 24 - - - - 24

Impairment(net) 1,340 220 469 48 - 25 2,102

Transfers - 113 (59) (54) - -

Disposals (1) (9) (119) (22) (1) (40) (192)

Othermovements - (28) (32) 52 (1) - (9)


INA Group

Carrying amount

Balanceat31December2013 5,414 3,730 3,325 139 8 3,363 15,979


INA,d.d.

Cost

Balanceat1January2012 30,887 9,222 10,463 1,116 30 2,855 54,573

Additions - - - - - 1,046 1,046



Transfertointangibleassets - - 3 - - 112 115

Transferfrominventories - (13) - - - - (13)

Assetsputinuse 226 236 906 63 - (1,431) -

Disposals (1) (3) (30) (7) - (41) (82)


Additions - - - - - 1,651 1,651



MergerofSinacod.o.o. - 37 97 9 - - 143

Transferfromintangibleassets - - 3 - - (5) (2)

Assetsputinuse 261 237 219 84 - (801) -

Transfers - 335 (410) 75 - - -

Disposals - (18) (111) (10) (2) (40) (181)



Plantandmachinery

Landandbuildings

Oilandgasproperties



assets

Assetsunder

construction

Total

INA,d.d.

Accumulateddepreciation

Balanceat1January2012 21,864 5,781 7,417 844 29 83 36,018

Chargefortheyear 982 211 531 65 - - 1,789

Reversalofdepreciationofdecommissioning

fromaprioryear (1) - - - - - (1)

Transferfrominventories - (10) - - - - (10)

Impairment(net) (14) 132 494 35 - 8 655

Transfer - 15 (18) 2 - - (1)

Disposals (1) (3) (31) (5) - (41) (81)

Balanceat31December2012 22,830 6,126 8,393 941 29 50 38,369

Chargefortheyear 1,375 187 436 76 - - 2,074

Reversalofdepreciationofdecommissioning

fromaprioryear (8) - - - - - (8)

Impairment(net) 1,340 214 468 48 - 25 2,095

Transfers - 112 (143) 31 - - -

MergerofSinacod.o.o. - 24 95 8 - - 127

Disposals (1) (8) (111) (9) (1) (40) (170)


INA,d.d.

Carrying amount

Balanceat31December2013 5,414 3,378 2,002 235 - 3,311 14,340


I) OilandgasreservesTheabilityofINAGroupandINA,d.d.torealisethenetbookvalueofoilandgasproperties(seeb)above)inthefutureisdependentupontheextenttowhichcommerciallyrecoverableoilandgasreservesareavailable.During2013ExplorationandProductionsegmentperformedassessmentofthequantitiesoftheCompany’sremainingproveddevelopedoilandgasreserveswhichwerecommerciallyrecoverable.

II)OwnershipoflandandbuildingsDuetopoliticaldevelopmentsinCroatiasince1990,certainlocalmunicipallandregistershavenotbeenfullyestablished.TheCompanyisintheprocessofregisteringofownership,throughthelocalcourtsinCroatia.Untilthedateofissuingofthesefinancialstatements,noclaimshavebeenmadeagainsttheCompanyconcerningitstitletotheseassets.

III)CollectiveconsumptionassetsCollectiveconsumptionassetsprincipallycomprisedomesticresidentialandholidayaccommodationfortheworkforceoftheCompanyandsomeofitssubsidiaries.

IV)Carryingvalueofrefiningandretailproperty,plantandequipmentAt31December2013thenetbookvaluesoftheGroup’sproperty,plantandequipmentinExplorationandProductionBDwasHRK9,729million(31December2012:HRK11,567million).At31December2013thenetbookvaluesoftheGroup’sproperty,plantandequipmentinRefiningandMarketingBDwasHRK5,578million(31December2012:HRK6,457million).At31December2013thenetbookvaluesoftheGroup’sproperty,plantandequipmentinCorporateandothersegmentwasHRK672million(31December2012:HRK692million).TheManagementBoardhasassessedthecarryingvaluesofitsExplorationandProductionBDandRefining&MarketingBDassetswithreferencetothediscountedestimatedfuturenetcashflowsfromtherefiningandwholesalebusiness,inaccordancewiththerequirementsofIAS36.ThetotalnetimpairmentchargeofINAGroupisHRK2,102millionin2013(2012:HRK655million).

• ExplorationandProductionBDrecordedanimpairmentofproperty,plantandequipmentinamountofHRK1,300millionin2013, comparedtoreversalofimpairmentinamountofHRK38millionin2012.• RefineryandMarketingBDrecordedan impairmentofproperty,plantandequipment inamountofHRK738million in2013, comparedtoimpairmentinamountofHRK661millionin2012.• ImpairmentchargestoinvestmentswasrecordedinamountofHRK65millionin2013,comparedtoHRK32millionin2012.

At31December2013 impairmentcharges to investments inamountofHRK65million refers to impairmentofdomesticwells inamountofHRK39millioninExploration&ProductionBD(Antunovac1HRK18millionandKrunoslavljeHRK21million),equipmentinamountofHRK26millioninRefinery&MarketingBD.

At31December2012 impairmentcharges to investments inamountofHRK32million refers to impairmentofdomesticwells inamountofHRK24millioninExploration&ProductionBD(Patkovec1HRK13millionandBokšić-KlokočevacHRK4millionarethemost significantamounts) and impairment in amountofHRK8million inRefineryandMarketingBD (closingof gas stationsandexpirationofconcessionatVrboskolocation).

Discountratesusedinthecurrentassessmentin2013andfor2012areassetsspecificandareasfollows:Exploration and Production 2013 2012Croatia 10.65% 10.54%Syria 17.50% 17.50%Egypt,Angola 14.50% 14.50%

Refining and Marketing Croatia 10.55% 10.44%BosniaandHerzegovina 12.84% 13.62%Ariskfactorisincludedthediscountratesconsideringtheriskofeachcountry(seenote3).

V)ReviewoftheresidualvalueTheGrouphasreviewedtheresidualvaluefordepreciationpurposestoreflectthechanges inthedefinitionoftheresidualvalueprovidedinIAS36,andnoneedforanyadjustmenttotheresidualvaluesrelatedtothecurrentorpriorperiodshasbeenestablished.


INA Group

2013 2012

Cost 296 296

Accumulatedimpairmentlosses (113) (113)

183 183

2013 2012

Cost

Balanceatthebeginningofyear 296 296

Balanceattheendofyear 296 296

Accumulatedimpairmentlosses

Balanceatthebeginningofyear (113) (113)

Impairmentlossesrecognisedintheyear - -

Balanceattheendofyear (113) (113)

2013 1January2012 31December2013

InvestmentofCrosco,d.o.o.inRotaryZrt.Hungary 183 183

Total 183 183

2012 1January2012 31December2012

InvestmentofCrosco,d.o.o.inRotaryZrt.Hungary 183 183

Total 183 183

INA,d.d.


Investmentsinsubsidiaries 1,127 1,161

INA,d.d.

2013 2012

Investmentsinsubsidiariesat1January 1,161 1,033

STSId.o.oZagreb-additionalcapitalizationbytransferingPP&E - 89

CROSCOd.o.o.-additionalcapitalizationbytransferingPP&E - 58

SINACOd.o.o.-mergerintoINA,d.d. (28) -

CROPLINd.o.o.-purchaseofthe50%businessinterest 9 -

CROPLINd.o.o.-transferfromassociatestosubsidiaries 37 -

INAHUNGARY-liquidation,removalfrombusinessbooks (5) -

INAMALOPRODAJNISERVISId.o.o.-sharecapital 1 -

Othersubsidiaries-impairment (48) (19)

Totalasof31December 1,127 1,161

16. Goodwill 17. investments in subsidiaRies

On28March2007,pursuanttheagreemententeredintobytheGovernmentoftheFederationofBosniaandHerzegovinaandtheINA-MOLConsortium,INAGroupinvestedHRK132millionintheacquisitionofEnergopetrold.d.,Sarajevoandbecame,togetherwithMOL,amajorshareholderoftheinvestee(INA,d.d.andMOLNyrt.holdanequityshareof33.5%each).During2013and2012goodwillrelatingtothecompanyRotaryZrt.wastestedforimpairmentandtestshowedthattheimpairmentisnotrequired.

Therecoverableamountofthiscash-generatingunitisdeterminedbasedonavalueinusecalculationwhichusescashflowprojectionsbasedonfinancialbudgetsapprovedbythedirectorscoveringafive-yearperiod,andadiscountrateof9.97%perannum(2012:10.39%perannum).

PursuanttotheSalesContract, INA,d.d.purchasedfromE.ONHungariaZrt.a50percentequityshare inCroplind.o.o. forHRK9million.Thechangeofthecompany’sownershipwasregisteredattheCommercialCourtinZagrebon3September2013,whenINA,d.d.effectivelybecamethesoleownerofCroplind.o.o.(seenote42).TheINAGroupconsolidatesCroplind.o.o.fromthatdate.On2January2013theCommercialCourtinZagrebenteredthemergerofSINACOd.o.o.,asecuritycompanyfromSisak,intoINA-Industrijanafte,d.d.intothecourtregister.TheinvestmentinSINACOd.o.o.intheamountofHRK28millionandtherelatedimpairmentintheamountofHRK19millionwereclosedagainsttheequitycomponentsandtheactuallosstransferredtotheaccountsofINA,d.d.PursuanttotheagreementontheconsiderationspayabletothesmallshareholdersofINAOsijekPetrold.d.OsijekintheamountofHRK331thousand,thesharesofthesmallshareholders,representing2.67percentoftheequityshare,weretransferredtoINA,d.d.BasedonthedecisionoftheCommercialCourtinOsijekof28March2013,INA,d.d.becametheonlyregisteredshareholderofINAOsijekPetrol.

TheliquidationofINAHUNGARYwasfinalised,andthecessationofthecompanywasenteredintheCourtRegisterinBudapeston27May2013.Uponthenotificationoftheevent,thecompanywasderecognisedfromtheaccountsofINA,d.d.Theentireinvestmentinthatcompany,whichamountedtoHRK5million,waswrittenoff.ThefundsremittedtoINA,d.d.aspartoftheliquidation,whichamountedtoHRK4million,wererecognisedasfinancialincome.UndertheMemorandumofAssociationof10April2013, INA,d.d.establishedINAMALOPRODAJNISERVISId.o.o.,aretailservicecompany,withtheinitialsharecapitalofHRK1millioncontributedincashandINA,d.d.asthesolefounder.INAMaloprodajniservisid.o.o.wasregisteredattheCommercialCourtinZagrebon24April2013.Thefollowingimpairmentswererecordedin2013:INA-OsijekPetrold.d.-HRK331thousand; ITRd.o.o.,Zagreb-HRK24million;InterinaLjubljanad.o.o.-HRK5million;INAKosovod.o.o.,Priština-HRK1million;andINACrnaGorad.o.o.-HRK17million).


TheCompanyhasthefollowingprincipalsubsidiaries(*subsidiaryowneddirectlybytheCompany):

COMPOSITIONOFTHEGROUP

Thenameofsubsidiaries Principalactivity Placeofincorporation Proportionof andoperation ownership interestand votingpowerheld bytheGroup

31December 2013 2012 Oilfieldservices *CroscoNaftniServisid.o.o. Oilfieldservices Croatia 100% 100%CroscoInternationalLimited Oilfieldservices Guernsey 100% 100%CroscoB.V. Oilfieldservices Netherland 100% 100%NordicShippingLtd Leaseofdrillingplatforms MarshallIslands 100% 100%SeaHorseShippingInc Leaseofdrillingplatforms MarshallIslands 100% 100%CroscoInternationald.o.o. Oilfieldservices Slovenia 100% 100%RotaryZrt. Oilfieldservices Hungary 100% 100%CroscoS.A.DEC.V. Oilfieldservices Mexico 100% 100%CroscoInternationald.o.o. Oilfieldservices BosniaandHerzegovina 100% 100%MideastIntegratedDrilling&WellServicesCompanyLLC Oilfieldservices Oman 49% 49%CorteCrosd.o.o. Distributionofanti-corrosion products Croatia 60% 60% Oilexplorationandproduction *INANaftaplinInternationalExplorationandProductionLtd Oilexplorationandproduction Guernsey 100% 100% Tourism *Hostind.o.o.Zagreb Tourism Croatia 100% 100% Ancillaryservices *STSIintegriranitehničkiservisid.o.o.Technicalservices Croatia 100% 100%*Sinacod.o.o. Security Croatia - 100%*ITRd.o.o., Carrental Croatia 100% 100%*Topračunovodstvoservisid.o.o. Accountingservices Croatia 100% 100% Productionandtrading *INAMazivad.o.o. Productionandlubricants trading Croatia 100% 100%

Tradingandfinance *Interinad.o.o. Foreigntrading Slovenia 100% 100%*INABHd.d. Foreigntrading BosniaandHerzegovina 100% 100%*Interinad.o.o. Foreigntrading Macedonia 100% 100%*INAHungaryKft. Foreigntrading Hungary - 100%*Holdina(Guernsey)Ltd,(inliquidation) Foreigntrading Guernsey 100% 100%InterIna(Guernsey)Ltd Foreigntrading Guernsey - 100%Holdina(Cyprus)Ltd Foreigntrading Cyprus - 100%*Holdinad.o.o. Foreigntrading BosniaandHerzegovina 100% 100%*INAd.o.o. Foreigntrading Serbia 100% 100%*INAKosovod.o.o. Foreigntrading Kosovo 100% 100%*AdriagasS.r.l. Pipelineprojectcompany Italy 100% 100%*INACrnaGorad.o.o. Foreigntrading Montenegro 100% 100%*Prirodniplind.o.o. Trading Croatia 100% 100%*INABLd.o.o. Trading BosniaandHerzegovina 100% 100%*Petrold.d. Trading Croatia 83% 83%*INA-OsijekPetrold.d. Trading Croatia 100% 97%

*Polybitd.o.o.Rijeka Oilproductionandtrading Croatia 100% 100%(inliquidation)*Croplind.o.o. Productionofgas,distribution(fromSeptember2013) networkofgasfuels 100% 50% *INAMaloprodajniservisid.o.o. Tradeagencyinthedomestic(fromApril2013) andforeignmarket 100% -

Croplind.o.o.hasownershipinterestasof9.1%inEnergod.o.o.Rijekaandasof40%inPlinaraIstočneSlavonijed.o.o.Vinkovci.


INAGroup INA,d.d.


Investmentsinassociatesandjointoperations 22 34 22 34

22 34 22 34

INAGroup INA,d.d.

Nameofcompany Activity Proportion 31December2013 31December2012 31December2013 31December2012

ofownership

Croplind.o.o.Zagreb Gastrading 50% 12 12

SOL-INAd.o.o. Industrialgas 37.2% 22 22 22 22

production

ENERGOPETROLd.d., Retail

SarajevoBIH (oilandlubricants) 33.5% 0 0 0 0

22 34 22 34

INAGroupandINA,d.d.

Nameofcompany Activity Placeofincorporationandoperation 31December

2013 2012

HayanPetroleumCompany 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,developmentandhydrocarbon

production Zagreb,Croatia 50% 50%

Belvedered.d. Hoteltrade Dubrovnik,Croatia 32% 32%

MarinaPetroleumCompany Explorationandproductionoperator Cairo,Egypt 25% 25%

31December2013

Energopetrol ED-INA INAgip Total

Placeofbusiness BosniaandHerzegovina Croatia Croatia

Percentageofinterests 33.33% 50.00% 50.00%

Currentassets 55 17 265 337

Non-currentassets 265 - - 265

Currentliabilities 74 5 195 274

Non-currentliabilities 478 - - 478

Revenue 661 38 971 1,670

Lossfortheyear (45) - - (45)

Totalcomprehensivelossfortheyear (45) - - (45)

Group’shareofloss (15) - - (15)

Net(liabilities)/assetsofassociates (232) 12 70 (150)

Group´sshareofnetassets - - - -

Investmentsinassociates 132 - - 132

Impairment (132) - - (132)

Carryingamountoftheinterest - - - -

31December2012

Placeofbusiness BosniaandHerzegovina Croatia Croatia

Percentageofinterests 33.33% 50.00% 50.00%

Currentassets 56 10 69 135

Non-currentassets 248 - - 248


Non-currentliabilities 406 - 1 407

Revenue 761 36 220 1,017

Lossfortheyear (108) - - (108)

Totalcomprehensivelossfortheyear (108) - - (108)

Group’shareofloss (36) - - (36)

Netassets/(liabilities)ofassociates (164) 5 (27) (186)

Group´sshareofnetassets - - - -

Investmentsinassociates 132 - - 132

Impairment (132) - - (132)

Carryingamountoftheinterest,net - - - -

18. investments in assoCiates and joint opeRations

INA,d.d.acquired50%ofequityintheentityCroplind.o.o.fromE.ONHungariaZrt.forHRK9million.Followingtheacquisitionof100%ownership,atotalinvestmentamountingtoHRK46millionandimpairmentofinvestmentsintheamountofHRK25millionwastransferredfrominvestmentsinassociatestoinvestmentsandjointoperationsinsubsidiaries.Otherinvestmentsinassociatesandjointoperationsareasfollows:

Summarisedfinancial information inrespectofeachof theGroup’smaterialassociatesand jointoperations issetoutbelow.Thesummarised financial information below represents amounts shown in the associate’s and joint operations financial statementspreparedinaccordancewithIFRS.


Thefollowingtablesummarises,inaggregate,thefinancialinformationofallnotindividuallymaterialassociatesandjoinoperationsinwhichGrouphasinterests:

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.becametheownerof11,974shares(0.97%),withatotalnominalvalueofHRK1million.

INAGroupandINA,d.d.


Aggregatecarryingamountoftheinterestsintheseassociates 22 34

TheGroup’sshareofprofitfrominterestinnotindividuallymaterialassociates 2 1

19. otheR investments

INAGroup INA,d.d.


Long-termloanstoEnergopertol 138 155 138 155

Otherlong-termloans - - 626 612

Deposits 25 25 25 25

Financialassetsatfairvaluethroughprofitorloss 6 7 6 6

169 187 795 798

Priorto1996,theCompanyhadsoldapartmentsitownedtoitsemployeesasprovidedbythelawsoftheRepublicofCroatia.Thepropertiesweregenerallysoldoncredit,andtherelatedhousingreceivablesarerepayableonmonthlyinstalmentsoverperiodsof20-35years.TheamountspayabletoCroatianstate,accountingfor65%ofthevalueofsoldapartmentsareincludedinothernon-currentliabilities(seenote30).Thereceivablesaresecuredwithmortgageoverthesoldapartments.Theprincipleispresentedinthereceivableamounts.Theamountsdonotincludetheinterestportion.

20. lonG-teRm ReCeivables

INAGroup 31December2013 31December2012

Receivablesforapartmentssold 105 115

Prepaymentsforintangibleassets 64 62

Prepaymentsforproperty,plantandequipment 61 25

230 202

INA,d.d. 31December2013 31December2012

Receivablesforapartmentssold 104 114

Prepaymentsforintangibleassets 64 62

Prepaymentsforproperty,plantandequipment 60 22

Long-termreceivablesfromrelatedparty 11 11

Otherlong-termreceivables - 1

239 210


Equityinstrumentsavailable-for-sale

INAGroupandINA,d.d.

NameoftheCompany %shareholdingheld

byINA,d.d. Activity 31December

2013 2012

JadranskiNaftovodd.d. 11.795% Pipelineownershipandoperations 321 321

OMVSloveniad.o.o.,Koper 7.75% Oiltrading 31 31

Plinarad.o.o.Pula 49.00% Distributionandoiltrading 17 17

HOCBjelolasicad.o.o.Ogulin 7.17% Operationsofsportsfacilities 5 5

BINA-FINCOMd.d.Zagreb 5.00% Constructionofhighwaysandother

roads,airfieldsairports 12 12

Totalcost 386 386

Fairvalueadjustment (56) (46)

330 340

Asdiscussedinnote38,asubstantialportionofthetradingincomeofJANAFd.d.isderivedfromINA,d.d.ThevalueoftheequityshareinJANAFwasreportedbyreferencetothemarketvalueofthesharesasquotedontheZagrebStockExchangeasof31December2013.ThenetbookvalueoftheequityinvestmentinJANAFdecreasedbyHRK9millioncomparedtothebalanceasof31December2012duetodecreaseinthemarketvalueoftheJANAFsharesontheZagrebStockExchange.Themarketvalueoftheshares(118,855shares)asof31December2013amountedtoHRK2,290.00pershare(31December2012:HRK2,370pershareasof).ByDecisionoftheAssemblyofHOCBjelolasicad.o.o.Ogulin,thesharecapitalofthatcompanywasreducedon13June2012tocoverthecompany’slosses.Basedonthesharecapitaldecrease,thebusinessstakeofINA,d.d.inHOCBjelolasicawasreducedbyHRK1millionbutcontinuestorepresent7.17%oftheinvestee’ssharecapital.In2013theimpairmentoninvestmentforentityBjelolasicad.o.o.OgulinwasrecordedinamountofHRK1million.

Asof31December2013,inventoriesweremeasuredatthelowerofcostornetrealizablevalue.

CrudeoilandnaturalgaspricesCrudeoil,naturalgasandrefineryproductdemandandpricesdependonavarietyofvariousfactorsbeyondthecontroloftheINAGroup,including:• globalandregionaleconomicandpoliticaldevelopments,particularlyintheMiddleEast;• theabilityofinternationaloilcartelsandoil-producingnationstoinfluenceproductionlevelsandprices;• actionstakenbygovernments;• thelevelofconsumerdemand;• thepriceandavailabilityofalternativeproducts;and• weatherconditions.Historically,internationalcrudeoilandnaturalgaspriceshavefluctuatedtoasignificantextent.AsignificantchangeinthecrudeoilandnaturalgaspricesmayhaveasignificantimpactontheoperatingresultsoftheINAGroup.LowercrudeoilandnaturalgaspricesmayreducethequantitiesofoilandnaturalgasthattheINAGroupcouldproduceintermsofeconomicallyjustifiedproduction,thatis,itcanreduceeconomicjustificationoftheprojectsthatareplannedoralreadyunderway.

21. available-foR-sale assets

23. tRade ReCeivables, net

22. inventoRies INAGroup INA,d.d.


Refinedproducts 956 889 881 815

Workinprogress 875 1,031 872 1,030

Crudeoil 436 320 436 320

Gasinventories 387 571 - -

Raw material 267 241 188 159

Spareparts,materialsandsupplies 237 226 94 92

Merchandise 61 74 55 69

3,219 3,352 2,526 2,485

INAGroup INA,d.d.


Tradereceivables 3,488 3,539 1,820 1,568

Impairmentoftradereceivables (924) (769) (529) (465)

2,564 2,770 1,291 1,103

INAGroup INA,d.d.


less30days 81 210 14 72

31-60days 23 81 15 45

61+days 122 164 - 61

226 455 29 178

Belowisanageinganalysisoftradereceivablesthatarepastduebutnotimpaired:

Tradereceivablesarecarriedatamortisedcostlessimpairment.Accordingtotheimpairmentpolicy,allreceivablesfromthestrategiccustomersofINA,d.d.areassessedonindividualbasis.Allotheroutstandingreceivablesduebeyond60daysareimpaired.

Impairmentoftradereceivables:


INAGroup INA,d.d.


Balanceatbeginningoftheyear 769 675 465 403

Impairmentlossesrecognisedonreceivables 381 252 254 191

Amountswrittenoffasuncollectible (53) (16) (36) -

Reversalofimpairmentonamountsrecovered (173) (142) (154) (129)

Balanceatendoftheyear 924 769 529 465

INAGroup INA,d.d.


lessthan60days 24 2 - -

61-120days 58 2 54 -

121-180days 58 58 39 40

181-365days 205 156 139 137

366+days 579 551 297 288

924 769 529 465

Theageinganalysisofimpairedtradereceivables:

Impairmentoftradereceivables:

CashandcashequivalentscompriseofcashheldbytheGroupandshort-termbankdepositsupto3monthsmaturity.Thecarryingamountoftheseassetsapproximatestheirfairvalue.

Themost significant short-term loans as at 31December2013are credit facilitieswith thefirst class bankswith thepurposeoffinancingpurchasesofcrudeoilandpetroleumproducts(‘’tradefinance’’)andframeworkagreementsconcludedwithdomesticbanksforgrantingloans,issuingbankguarantiesandopeningletterofcredits.Short-termloansarecontractedasmulticurrencylineswithvariableinterestrates.INA,d.d.loansareunsecuredandmajorityofthemdoesnotcontainfinancialcovenants.InordertosecureINAGroupsubsidiariesshort–termcreditfacilities,INA,d.d.issuedcorporateguarantees.

24. otheR ReCeivables

25. Cash and Cash eQuivalents

26. banK loans and oveRdRafts and CuRRent poRtion of lonG-teRm loans

INAGroup INA,d.d.


Taxprepayments 681 347 625 309

Prepaymentreceivables 69 58 21 22

Interestreceivables 18 18 18 18

Other 79 93 63 79

847 516 727 428

INAGroup INA,d.d.


Cashinthebank 304 316 184 125

Depositsuntilthreemonths 64 110 37 86

Cashonhand 4 3 - -

Other 30 59 31 59

402 488 252 270

INAGroup INA,d.d.


Currentportionoflong-termloans(note29) 299 4,725 255 4,648

Overdraftsandshort-termloans 2,975 1,266 2,764 1,057

3,274 5,991 3,019 5,705

UnsecuredbankloansinUSD 1,684 730 1,651 700

UnsecuredbankloansinEUR 1,132 392 1,097 357

UnsecuredbankloansinHRK 159 144 16 -

2,975 1,266 2,764 1,057


Themanagementconsiderthatthecarryingamountoftradepayablesapproximatestheirfairvalues.

Long-termloansaredenominatedinavarietyofforeigncurrenciesandaresubjecttoarangeofinterestrates.Long-termloansofINA,d.d.areunsecuredandthemajorityoftheseloanscontainfinancialcovenants.INAGroupsubsidiarieslong-termloansareinsomecasessecuredbybillsofexchange,debenturesorthroughcorporateguarantees.

TheoutstandingloansoftheGroupareanalysedasfollows:

27. tRade paYables, taxes and ContRibutions and otheR CuRRent liabilities

29. lonG-teRm loans

28. aCCRuals and defeRRed inCome

INAGroup INA,d.d.


Tradepayables 2,841 1,684 2,144 964

Payrollandother 600 583 334 325

Productionandsalesandothertaxespayable 672 411 542 334

Payrolltaxesandcontributions 77 86 48 51

Negativefairvalueofhedgecommoditytransactions 54 - 54 -

Embeddedderivativefinancialliabilities 7 10 - -

Negativefairvalueofderivatives - 3 - 3

4,251 2,777 3,122 1,677

INAGroup INA,d.d.


Accruedexpenses 72 - 4 -

Accruedinterest–long-termloans 29 25 29 24

Other 25 11 7 10

126 36 40 34

Objectiveoftheloan Loancurrency 31December2013 31December2012

Generalcorporatepurpose USD,EUR 1,035 4,385

Projectfinancing USD,EUR 1,046 1,316

2,081 5,701

Duewithinoneyear (255) (4,648)

Totallong-termloansINA,d.d. 1,826 1,053

Loan(equipment) - -

Otherlongtermloans EUR,USD,HUF,HRK 107 185

107 185

Duewithinoneyear (44) (77)

Totallong-termloansINAGroup 1,889 1,161

INA,d.d. Weightedaverageinterestrate


% %

BankloansinEUR 4.18 1.05 1,484 3,519

BankloansinUSD 3.75 1.84 649 2,258

BankloansinHUF 6.98 9.78 49 69

BankloansinHRK 5.10 5.02 6 40

Total 2,188 5,886

Payablewithinoneyear (299) (4,725)

Totallong-termloans 1,889 1,161


INA,d.d. Weightedaverageinterestrate


% %

BankloansinEUR 3.80 1.05 1,481 3,515

BankloansinUSD 4.18 1.75 600 2,186

Total 2,081 5,701

Payablewithinoneyear (255) (4,648)

Totallong-termloans 1,826 1,053

Thematurityoftheloansmaybesummarisedasfollows:

Themovementinlong-termloansduringtheyearissummarizedasfollows:

INAGroup INA,d.d.


Currentportionoflong-termdebt 299 4,725 255 4,648

Payablewithinonetotwoyears 294 364 252 261

Payablewithintwotothreeyears 1,331 264 1,312 263

Payablewithinthreetofouryears 263 265 262 264

Payablewithinfourtofiveyears 1 268 - 265

Total 2,188 5,886 2,081 5,701

INAGroup INA,d.d.

Balanceat31December2012 5,886 5,701

Payablewithinoneyear(includedwithinbankloansandoverdrafts–note26) 4,725 4,648

Payableaftermorethanoneyear 1,161 1,053

Balanceat1January2013 5,886 5,701

Newborrowingsraised 6,160 6,160

Amountsrepaid (9,877) (9,798)

Foreignexchangelosses 19 18


Payablewithinoneyear(includedwithinbankloansandoverdrafts–note26) 299 255

Payableaftermorethanoneyear 1,889 1,826

Theprincipallong-termloansoutstandingat31December2013andloanssignedduring2013wereasfollows:

PrivrednabankaZagrebTheremaininglong-termdebtofINA,d.d.towardsPrivrednabankaZagrebamountstoHRK2millionandrepresentsadebtundertheRefinancedBondsAgreementfortheissueofAPIbondsanditisdormant.

EBRDIn2010,INA,d.d.signedlong-termloanagreementwithEBRDintheamountofEUR160millionwithalternativewithdrawalinUSD.ThepurposeoftheloanisfinalizationofthefirstphaseofthemodernizationofSisakandRijekarefineries.

ICFDEBTPOOLLLPIn2010,INA,d.d.signedlong-termloanagreementwithICFDEBTPOOLLLPintheamountofEUR50million.ThepurposeoftheloanistofinancethecompletionofthefirstphaseofthemodernisationofSisakandRijekarefineries.

THEBANKOFTOKYO-MITSUBISHIUFJ,LTD.In2013INA,d.d.signedlong-termmulti-currencyrevolvingcreditfacilityagreementforgeneralcorporatepurposeswithaconsortiumofbanksintheamountofUSD400million.TheAgentisBTMU.Maturityofthecreditfacilityis3yearswithanoptionfor1+1yearextension.

MOLGroupIn2013INA,d.d.signedanintragrouplong-termmulti-currencyrevolvingloanagreementforgeneralcorporatepurposesprovidedfromMOLGroupbywhichintragroupfinancinghasbeenincreasedfromUSD200milliontoUSD300million.

Compliance with loan agreements During2013INAGroupandINA,d.drepaidalloftheirliabilitiesinrespectofloans(principal,interestandfees)onatimelybasis,andtherewerenoinstancesofdefaultordelinquency.


INAGroup INA,d.d.


LiabilitiestoGovernmentforsoldapartments 57 63 57 63

Liabilitiesforderivativesfinancialinstruments 11 30 - -

Deferredincomeforsoldapartments 8 8 8 8

76 101 65 71

30. otheR non-CuRRent liabilities

31. pRovisions

Thelong-termpayabletothegovernmentrelatestoobligationarisingonthesaleofhousingunitstoemployeesunderthegovernmentprogram(note20).Accordingtothelawregulatinghousingsales,65%oftheproceedsfromthesaleofapartmentstoemployeeswerepayabletothestateatsuchtimeastheproceedswerecollectedbytheCompany.Accordingtothelaw,INA,d.d.hasnoliabilitytoremitthefundsunlessanduntiltheyarecollectedfromtheemployee.

TheenvironmentalprovisionrecordedbyINAGroupisHRK301millionon31December2013(31December2012:HRK309million).Theenvironmentalprovisioncoverstreatmentofaccumulatedwastegeneratedbyformeractivity,soilexcavationandreplacementduringthereconstructionoffillingstationsandinvestigationtodeterminetheextentofthecontaminations.ItdoesnotcoverthecostofremediationinlackofdetailedNationalregulations.

Decommissioning chargesAsof31December2013,theCompanyrecognisedadecommissioningprovisionfor56oilandgasproductionfields,3non-productionfields,8positivenon-productionwellsand144negativenon-productionwells.Asof31December2012,theCompanyrecognisedadecommissioningprovisionfor56oilandgasproductionfields,4non-productionfields,8positivenon-productionwellsand145negativenon-productionwells.

Environmental provision

Environmental provision

Decommission-

ingCharges

Decommission-

ingCharges

Legal

claims

Legal

claims

Redundancy

costs

Redundancy

costs

Costofunused

holiday

Costofunused

holiday

Provission

foremployee

benefits

Provission

foremployee

benefits

Taxobligation

claimsof

Holdina

Sarajevo Other

Other

Total

Total

INA Group

Balanceat1January2012 292 2,373 91 44 62 21 - 32 2,915

Chargefortheyear - - 13 22 67 - - 202 304

Effectofchangeinestimates 11 (117) 2 - - 2 - - (102)

Interest 12 97 - - - - - - 109

Provisionutilisedduringtheyear (6) (8) (44) (44) (62) - - (5) (169)

Balanceat31December2012 309 2,345 62 22 67 23 - 229 3,057

Chargefortheyear 10 - 54 42 60 - 66 93 325

Effectofchangeinestimates (17) (52) - - - 59 (7) - (17)

Interest 8 68 - - - - - - 76

Provisionutilisedduringtheyear (9) (1) (20) (22) (66) (2) (14) (42) (176)

Balanceat31December2013 301 2,360 96 42 61 80 45 280 3,265

INA,d.d.

Balanceat1January2012 279 2,373 74 37 43 - 27 2,833

Chargefortheyear - - 10 - 47 - 193 250

Effectofchangeinestimates 11 (117) - - - - - (106)

Interest 11 96 - - - - - 107

Provisionutilisedduringtheyear (6) (7) (42) (37) (43) - (2) (137)

Balanceat31December2012 295 2,345 42 - 47 - 218 2,947

Chargefortheyear 10 - 54 31 44 27 88 254

Effectofchangeinestimates (17) (52) - - - - - (69)

Interest 8 68 - - - - - 76

Provisionutilisedduringtheyear (8) (1) (15) - (47) - (40) (111)

Balanceat31December2013 288 2,360 81 31 44 27 266 3,097

INAGroup INA,d.d.


Analysedas:


Non-currentliabilities 2,754 2,713 2,707 2,663

3,265 3,057 3,097 2,947


32. RetiRement and otheR emploYee benefits

AccordingtotheCollectiveAgreementtheGroupbeartheobligationtopayjubileeawards,retirementandotherbenefitstoemployees.TheGroupoperatesdefinedbenefitschemesforqualifyingemployees.Undertheschemes,theemployeesareentitledtoanearlyretirementbenefitinthenetamountofHRK8,000.Forregularretirement(noearlyretirementbonus),employeesreceiveHRK16,000net, ofwhichHRK8,000 represent taxable portion.Noother post-retirement benefits are provided. Jubilee awards are paid outaccordingtothefollowingfixedamountsandanniversarydates:

• HRK2,500for10yearsofcontinuousservice• HRK3,000for15yearsofcontinuousservice• HRK3,500for20yearsofcontinuousservice• HRK4,000for25yearsofcontinuousservice• HRK4,500for30yearsofcontinuousservice• HRK5,000for35yearsofcontinuousservice• HRK6,000for40/45yearsofcontinuousservice.

Thenetamountsspecifiedaboveincludethetaxableportion,i.e.theportionsubjecttoallapplicabletaxesandcontributions.InrespectoftheGroup’spersonnelwhoareemployedinCroatia,suchsocialpaymentsasarerequiredbytheauthoritiesarepaidbytherespectiveGroupcompanies.ThesecontributionsformthebasisofsocialbenefitspayableoutoftheCroatiannationalpensionfundtoCroatianemployeesupontheirretirement.Theactuarialvaluationsofthepresentvalueofthedefinedbenefitobligationwerecarriedoutat31December2013byindependentactuarialexpert.In2013,theCompanymadeaprovisionofHRK59millioninrespectofjubileeawardsandHRK47millionforregularretirementallowance.Thepresentvaluesofthedefinedbenefitobligation,therelatedcurrentservicecostandpastservicecostweredeterminedusingtheprojectionmethodbasedonthetotalnumberofemployees.

Actuarialestimateswerederivedbasedonthefollowingkeyassumptions:

TheamountincludedinthestatementoffinancialpositionarisingfromtheGroup’sobligationsinrespectofitsretirementbenefitschemesisasfollows:

Valuationat


Discountrate 5.4% 4.6%

Turnoverrate 1.65% 3-4%

Averagelongevityatretirementageforcurrentpensioners(years)*

males 13.5 13.5

females 16.9 16.9

Averagelongevityatretirementageforcurrentemployees(futurepensioners)(years)*

males 13.5 13.5

females 16.9 16.9

Mortalitytable HR200470,00% HR200470,00%

Theamountsrecognisedincomprehensiveincomerelatedtoretirementandotheremployeebenefitsareasfollows:

INAGroup INA,d.d.


Servicecost:

Costofcurrentperiod 7 5 4 4

Interest 5 6 4 4

Componentsofdefinedbenefitcostsrecognizedinprofitandloss: 12 11 8 8

Remeasurementofthenetdefinedbenefitliability:

Actuarialgainsandlossesarisingfromchangesin

demographicassumptions 20 (8) 20 -

Actuarialgainsandlossesarisingfromchangesinfinancialassumptions (8) 15 (7) 7

Actuarialgainsandlossesarisingfromexperienceadjustments 12 (11) 10 (7)

Pastservicecost,includinglosses/(gains)oncurtailments (4) (14) (4) -

Componentsofdefinedbenefitcostsrecognisedinprofitandloss

accountandothercomprehensiveincome: 20 (18) 19 -

Total 32 (7) 27 8

INAGroup INA,d.d.


Presentvalueofdefinedbenefitobligations 146 110 105 73

Liabilityrecognisedinthebalancesheet 146 110 105 73

Thisamountispresentedinthebalancesheetasfollows:


Non-currentliabilities 135 100 98 67

146 110 105 73


Thechangeofthepresentvalueofdefinedbenefitobligationmaybeanalysedasfollows:

BasedonRevisedIAS19,unrecognizedpastservicecostinamountofHRK13millioninINAGroupandinamountofHRK11millioninINA,d.d.wasrecognisedasliabilityandthesameamountdecreasedforHRK2millionofdeferredtaxassetswasrecognizedthroughothercomprehensiveincome.

At 31 December 2011, because of the significant and permanent impairment of the value of JANAF shares, the cumulative lossrecognisedwithintherevaluationreservewastransferredtoexpensesandincludedintheincomestatement.In2012,therevaluationreservewasincreasedbecausethemarketvaluei.e.thepricequotedforthosesharesonthestockexchangeat31December2012increased.In2013thepriceoftheJANAFsharesonthestockexchangefell,andthesurpluspreviouslycreditedtotherevaluationreserveswasreduced.

TheCompany’ssharecapitalconsistsof10millionauthorisedandissuedsharesofparvalueHRK900each.Eachsharecarriesonevoteandisentitledtodividends.

INAGroup INA,d.d.

2013 2012 2013 2012

At 1 January 110 117 73 66

Pastservicecostrecognisedinothercomprehensiveincome 13 - 11 -

Costofcurrentperiod 7 5 4 4

Interest 5 6 4 4

Actuarial(gains)orlosses

Actuarialgainsandlossesarisingfromchangesindemographicassumptions 20 (8) 20 -

Actuarialgainsandlossesarisingfromchangesinfinancialassumptions (8) 15 (7) 7

Actuarialgainsandlossesarisingfromexperienceadjustments 12 (11) 10 (7)

Pastservicecost,includinglosses/(gains)oncurtailments (4) - (4) -

Benefitpaid (9) (14) (6) (1)

Closingdefinedbenefitobligation 146 110 105 73

INAGroupandINA,d.d.


Issuedandfullypaid:

10millionshares(HRK900each) 9,000 9,000

INAGroupandINA,d.d.


Balanceatbeginningofyear 13 -

(Decrease)/increasearisingonrevaluationofavailable-for-salesecurities(Janaf) (9) 16

Deferredtaxeffect 2 (3)

Balanceattheendofyear 6 13

33. shaRe Capital

34. Revaluation ReseRves

The reservesof theGroup includeamounts in respectof accumulated surplusesanddeficits, revaluationsofproperty,plantandequipmentandforeignexchangegainsandlosseswhichhavearisenovermanyyearspriorto1993.Forseveralyears,theCroatianeconomywassubjecttohyperinflationand,priorto31December1993,neithertheCompanynortheGrouphadbeensubjecttoaudit.Forthesereasons,itwasnotpracticabletoanalysethecompositionofthereservesoftheCompanyortheGroupasat31December1993intotheirconstituentparts.Forsubsequentperiods,theresultsofthetransactionsoftheGroup,totheextentthattheyaffectreserves,areaccountedforwithinappropriatereserveaccounts.ThereservesoftheGroupasat31December1993werecombinedatthatdate,andareseparatelystatedbelow.

Movementsonreservesduringtheyearwereasfollows:

35. otheR ReseRves


36. Retained eaRninGs

37. non-ContRollinG inteRest

38. Related paRtY tRansaCtions

INAGroup INA,d.d.

Retainedearnings Retainedearnings

Balanceat1January2012 2,759 3,043

Profitfortheyear 681 1,323

Effectofpurchaseofnon-controllinginterest (3) -


Lossfortheyear (1,508) (1,633)

Dividendspaid (343) (343)


INA Group


Balanceatbeginnigofyear (1) (10)

Shareofprofitfortheyear - 6

Purchaseofnon-controllinginterest - 3

Balanceatendofyear (1) (1)

INA Group

Combinedreservesat Foreigncurrency

31December1993 translationreserves Otherreserves Total

Balanceat1January2012 2,132 37 447 2,616

Movementsduring31December2012 - (111) - (111)

Balanceat31December2012 2,132 (74) 447 2,505

Movementsduring31December2013 - (221) - (221)

Balanceat31December2013 2,132 (295) 447 2,284

INA,d.d.

Combinedreservesat

31December1993 Otherreserves Total

Balanceat31December2013 1,667 266 1,933

Balanceat31December2012 1,667 456 2,123

ThecompanyhasdominantpositionsinCroatiainoilandgasexplorationandproduction,oilrefiningandthesaleofgasandpetroleumproducts.AsaresultoftheCompany’sstrategicpositionwithintheCroatianeconomy,asubstantialportionofitsbusinessandthebusinessofitssubsidiariesisperformedwiththeCroatianGovernment,itsdepartmentsandagencies,andthecompanieswiththeRepublicofCroatiabeingtheirmajorityshareholder.

TransactionsbetweentheCompanyanditssubsidiaries,whicharerelatedpartiesoftheCompany,havebeeneliminatedonGrouplevelconsolidation.DetailsoftransactionsbetweenINA,d.d.andtheGroupcompaniesandotherrelatedpartiesaredisclosedbelow.

Duringtheyear,INAGroupenteredintothefollowingtradetransactionswithrelatedparties:

INAGroup SalesofgoodsPurchaseofgoods

2013 2012 2013 2012

Companiesavailable-for-sale

JANAFd.d.Zagreb 3 3 86 75

Strategic partner

MOLNyrt. 427 689 709 734

Companiescontrolledbystrategicpartner

Tifond.o.o. 835 866 65 6

Energopetrold.d. 535 340 1 1

KalegranLtd. 129 128 3 1

MOLCommodityTradingKft. 115 - - -

Slovnaft,a.s. 101 - 82 84

MOLSLOVENIJAd.o.o. 41 33 85 92

MOLSrbiad.o.o. 5 61 - -

IES-ItalianaEnergiaeServizis.p.a. 2 15 5 9

CompaniescontrolledbytheState

Hrvatskaelektroprivreda 2,024 2,617 181 161

PetrokemijaKutina 1,253 1,679 1 1

CroatiaAirlines 226 257 - -

Jadrolinija 183 165 7 6

Hrvatskeželjeznice 138 149 69 67

HANDA 112 105 189 -

PodzemnoskladišteplinaOkoli 65 29 151 151

Plinacro 9 11 215 280


Asofstatementoffinancialpositiondate,INAGrouphadthefollowingoutstandingbalanceswithrelatedparties:

INAGroup AmountsowedbyrelatedpartiesAmountsowedtorelatedparties



JANAFd.d.Zagreb - 1 46 22

Strategic partner

MOLNyrt. 83 79 43 95


Energopetrold.d. 50 70 - -


Tifond.o.o. 36 36 2 1

KalegranLtd. 31 28 - -

MOLSLOVENIJAd.o.o. 4 2 9 9

IES-ItalianaEnergiaeServizis.p.a. - - 2 1


PetrokemijaKutina 167 259 - 1

Hrvatskaelektroprivreda 159 346 16 8




HANDA 15 3 121 14

PodzemnoskladišteplinaOkoli 14 5 15 8

Plinacro - 1 20 32

INAGroup AmountsowedbyrelatedpartiesAmountsowedtorelatedparties


Strategic partner

MOLGroupFinanceSA - - 611 -



Loantoandfromrelatedparties:

INA,d.d.hasbeenprovidedloansatratescomparabletothosethatprevailinarm’slengthtransactions.Theloansfromtheultimatecontrollingpartyareunsecured.

Duringtheyear,INA,d.d.enteredintothefollowingtradetransactionswithrelatedparties:

INA,d.d. Salesofgoods Purchaseofgoods

2013 2012 2013 2012

Relatedcompanies

Prirodniplind.o.o.Zagreb 4,541 4,872 722 741

HoldinaSarajevo 2,521 1,552 - -

OsijekPetrold.d. 102 122 - -

INACrnaGorad.o.oPodgorica 80 139 - -

STSId.o.o.Zagreb 28 24 533 430

INAMazivad.o.o. 20 101 65 62

Interinad.o.o.Ljubljana 16 23 - -

Croscod.o.o. 12 11 284 239

INABeogradd.o.oBeograd 1 - - -

TOPRačunovodstvoServisid.o.o. 8 8 50 54

ITRd.o.o.Zagreb 1 1 21 23


JANAFd.d.Zagreb 3 - 86 75

Strategic partner

MOLNyrt. 159 371 598 644


Tifond.o.o. 833 866 65 6

MOLCommodityTradingKFt 115 - - -


MOLSLOVENIJAd.o.o. 39 31 - -

Energopetrold.d. 20 282 1 1

MOLSrbiad.o.o. 5 61 - -

IES-ItalianaEnergiaeServizis.p.a. 2 15 5 9





HANDA 112 105 189 -


PetrokemijaKutina 1 9 - -

PodzemnoskladišteplinaOkoli 1 2 - -


Asofstatementoffinancialpositiondate,INA,d.d.hadthefollowingoutstandingbalanceswithrelatedparties:

INAd.d.Amountsowedbyrelatedparties Amountsowedtorelatedparties

31December2013. 31December2012. 31December2013. 31December2012.

Foreignrelated

Prirodniplind.o.o.Zagreb 3,531 3,132 105 35

HoldinaSarajevo 227 180 21 12

OsijekPetrold.d. 15 32 1 1

INABeogradd.o.o.Beograd 7 7

STSId.o.o.Zagreb 6 8 196 179

INACrnaGorad.o.o.Podgorica 6 22 1 1

Interinad.o.o.Ljubljana 2 5

Croscod.o.o. 2 1 101 68

TOPRačunovodstvoServisid.o.o. 2 1 4

MazivaZagrebd.o.o.Zagreb 1 9 7 10

ITRd.o.o.Zagreb 4 7

Companiesavailableforsale 46 22

JANAFd.d.Zagreb

Strategic partner

MOLNyrt. 38 28 34 90


Tifond.o.o. 36 32 2 1

MOLSLOVENIJAd.o.o. 4 2

Energopetrold.d. 1 4




CroatiaAirlines 20 30

HANDA 15 3 121 14


TheliabilitiesoftherelatedpartiestoINA,d.d.arepresentednetofimpairmentofbadanddoubtfulreceivables.

In2013INA,d.d.recognisedimpairmentonreceivablesfromrelatedpartiesintheamountofHRK1,872million,whileincomefromcollectionofimpairedreceivablesfromrelatedpartiesamountedtoHRK922million.

Loantoandfromrelatedparties:

Product salesbetweenrelatedpartiesweremadeat theusualpricesof theGroup, reducedbydiscountsand rebatesdependingoneachparticularrelationship.Purchasesofproductsbetweenrelatedpartiesweremadeatmarketprices, includingappropriatediscountsdependingoneachparticularrelationship.INA,d.d.generallyseekscollateralforoilproductsoldtoitsrelatedparties,dependingonriskexposure,exceptfromcustomerswhoarestatebudgetbeneficiariesorfullyownedbythestate.

Compensation of key management personnelTheremunerationofdirectorsandothermembersofkeymanagementduringtheyearwereasfollows:

INA,d.d. AmountsowedbyrelatedpartiesAmountsowedtorelatedparties


Relatedcompanies

Croscod.o.o. 626 582 - -

Prirodniplind.o.o. 555 700 - -

OsijekPetrold.d. 81 50 - -

INABHd.d.Sarajevo 29 30 - -

INACrnaGorad.o.oPodgorica 23 15 - -

Interinad.o.o.Ljubljana 21 15 - -

ITR 12 - - -

AdrigasMilano - - 8 8

Hostind.o.o. - 4 5 4

STSId.o.o.Zagreb - - 73 -

MazivaZagrebd.o.o.Zagreb - - 45 50

Polybit - - 2 2

Strategic partner

MOLGroupFinanceSA - - 611 -



INA,d.d.


Short-termemployeebenefits 44.7 43.6

Terminationbonuses 2.6 0.6

Total 47.3 44.2


IncludedaboveistheremunerationtotheManagementBoardMembers,executivedirectorsofthebusinesssegmentsandfunctions,sectordirectors,assistantdirectorsandsecretaryofINA,d.d.

IndependenceStatementswithrespectofrelatedpartieswereprovidedbythefollowingkeyemployeesoftheINA,d.d.:• SupervisoryBoardMembers(9),• PresidentoftheManagementBoard(1),• ManagementBoardMembers(5),• ExecutiveDirectors(6),• SectorDirectors(31).

TheanalysisofthereturnedsignedStatementshasconcludedthat,except inthebelowindividually listedemployees,neithertheemployeesnortheclosefamilymembersofthemanagementofINA,d.d.:• heldaninterestinINA,d.d.ortheINAGroup,oranyotherbusinessentityoperatingwithINA,d.d.ortheINAGroupduring2013 inexcessof5percentwhichwouldenablethemtoexercisesignificantinfluenceorcontrolovertheentityduring2013;• wereinvolvedinanyrelated-partytransactionsduring2013.

ThefollowingmembersofkeymanagementatINA,d.d.reportedtheexistenceofrelatedpartieswithintheINAGroupduring2013:• MemberoftheSupervisoryBoard,Mr.FerencHorváth, in2013wasaVicePresidentofRefiningandMarketinginMOLPlc.,a memberoftheBoardofDirectorsofSlovnaft,a.s.,amemberoftheBoardofDirectorsofTVKPlc.andpresidentoftheBoardof DirectorsIES-ItalianaEnergiaeServiciS.p.A.• MemberoftheSupervisoryBoard,Mr.GyörgyMosonyi,in2013wasapresidentoftheBoardofDirectorsofMOLPlc.,apresident oftheBoardofDirectorsofTVKPlc.andpresidentoftheSupervisoryBoardofSlovnaft,a.s.• MemberoftheSupervisoryBoard,Mr.JózsefMolnár,wasduring2013GroupChiefExecutiveOfficerofMOLPlc.• MemberoftheSupervisoryBoard,Mr.SzabolcsI.Ferenc,wasduring2013amemberoftheSupervisoryBordofSlovnaft,a.s.,• MemberoftheSupervisoryBoard,Mr.OszkárVilági,wasduring2013thepresidentoftheBoardofDirectorsofSlovnaft,a.s.and amemberoftheBoardofDirectorsofMOLPlc.• MemberoftheManagementBoard,Mr.NikoDalić,wasduring2013arepresentativeofINA,d.d.intheED-INAandINAgipGeneral Assembly• TheExecutiveDirectorforFinance,Mr.AndrásHuszár,wasduring2013thepresidentoftheSupervisoryBoardofsubsidiaryTRS d.o.o.,amemberoftheSupervisoryBoardofsubsidiarySTSId.o.o.,amemberoftheSupervisoryBoardofsubsidiaryCROSCO d.o.o.andamemberoftheSupervisoryBoardofsubsidiaryPrirodniplind.o.o.• ExecutiveDirectorforRetail,Mr.DarkoMarkotić,wasduring2013thepresidentoftheSupervisoryBoardofsubsidiaryINABH,d.d.• Executive Director for Corporate Centre, Mr. Tvrtko Perković, in 2013 was president of the Supervisory Board of subsidiary STSId.o.o.• ExecutiveDirectorforExplorationandProduction,Mr.ŽelimirŠikonja,in2013waspresidentoftheSupervisoryBoardofsubsidiary Croscod.o.o.,presidentoftheSupervisoryBoardofsubsidiaryPrirodniplind.o.o.,presidentoftheManagementBoardofINAgip, d.o.o.,presidentoftheManagementBoardofED-INA,amemberoftheManagementBoardofINA-NAFTAPLINIE&PLtd,Guernsey andtheINAmajorrepresentativeshareholderatHayanPetroleumCompany,Damascus,Syria• ExecutiveDirectorforCorporateProcesses,Mr.TomislavThür,wasduring2013amemberoftheSupervisoryBoardofsubsidiary Prirodniplind.o.o.• DirectorofGeologyandEngineeringSector,Mr.JerkoJelić-Balta,wasduring2013thepresidentofManagementBoardofsubsidiary AdriagasS.r.l.,Milan• DirectorofTreasurySector,Mrs.VišnjaBijelić,wasduring2013thepresidentoftheManagementBoardofsubsidiaryINAMaziva d.o.o.andamemberoftheSupervisoryBoardofPlinaraPula• DirectorofSouth-EastEuropeE&PSector,Mr.LasloFarkašVišontaiwasduring2013amemberoftheSupervisoryBoardofPlinara

Pulad.o.o.,amemberoftheSupervisoryBoardofGeopodravinad.o.o.andamemberoftheSupervisoryBoardofsubsidiarySTSI d.o.o.andamemberoftheSupervisoryBoardofPIS,d.o.o.• DirectorofNetworkDevelopmentandAssetManagementSector,Mr.DavorKnez,wasduring2013thepresidentoftheSupervisory BoardofsubsidiaryPetrolJurdanid.d.andamemberoftheSupervisoryBoardofKrajinaPetrol,a.d.• DirectorofAccountingandTaxSector,Mrs.NivesKompare,during2013wasamemberoftheSupervisoryBoardofsubsidiaryTOP RAČUNOVODSTVOSERVISId.o.o.• DirectorofRetailSalesandMarketingSector,Mr.DavorPeruško,during2013wasthepresidentofManagementBoardofsubsidiary INAmaloprodajniservisi,d.o.o.• DirectorofE&DBusinessSupportSector,Mrs.DianaPrpićwasamemberoftheManagementBoardofsubsidiaryAdriagasS.r.l.Milan• DirectorofHumanReouurcesSector,Mrs.VladimiraSenčarPerkov,during2013wasamemberofSupervisoryBoardofsubsidiary INAmaloprodajniservisi,d.o.o.• DirectorofInvestmentandMaintenanceManagementSector,Mr.JosefStoppacher,during2013wasamemberoftheSupervisory BoardofsubsidiaryCROSCOd.o.o.• DirectorofProcurementSector,Mr.GyörgySzűcs,during2013wasamemberoftheSupervisoryBoardofINA-SOL.• DirectorofLubricantsSector,Mr.AndrejŠolaja,during2013wasthepresidentofManagementBoardofsubsidiaryMazivad.o.o.• DirectorofInternationalExplorationandProductionSector,Mrs.DavorkaTancer,during2013wasadirectorofsubsidiaryPrirodni plind.o.o.Moreover,thehusbandofMs.Tancer,Mr.AdonisTancer,duringthe2013,wastheowner/directorofanentityIMI Instromontinženjering,d.o.o.,whichhasmadeabusinessrelationshipwithINAGroupsubsidiarySTSI,d.o.o.

ThefollowingmembersofkeymanagementreportedtheexistenceofrelatedpartieswithintheINAGroupduring2013:• PresidentoftheSupervisoryBoardatINAMaziva,d.o.o.,Mr.TomislavCrnković,in2013wasapresidentoftheSupervisoryBoard INA-OsijekPetrol• DirectorofsubsidiaryITR,Mr.IvanNovaković,during2013wasthepresidentofManagementBoardofsubsidiarySTSI,d.o.o.• DirectorofsubsidiaryCrosco,d.o.o.,Mr.DragutinDomitrović,during2013wasthepresidentofSupervisoryBoardofsubsidiary RotaryZrt.• MemberofManagementBoardofsubsidiaryCrosco,d.o.o.,Mr.TiborGozdan(until31December2013),during2013wasameaner ofManagementBoardofsubsidiaryRotaryZrt.• DirectorofsubsidiaryINTERINA,d.o.o.Ljubljana,Mr.MladenIvković,during2013wasamemberofSupervisoryBoardofsubsidiary INA-Osijekpetrol,d.d.anddirectorofsubsidiaryPetrol,d.d.• Director of subsidiary INA BH, d.d.,Mr. Zoran Dautović, during 2013was amember of Supervisory Board of subsidiary INA MALOPRODAJNISERVISI,d.d.• AmemberofSupervisoryBoardofINABH,d.d.Sarajevo,Mr.LászlóBartha,during2013wasthepresidentofManagementBoard ofsubsidiaryHOLDINA,d.o.o.,SarajevoandexecutivedirectorforretailofassociateENERGOPETROL,d.d.,Sarajevo• A member of Supervisory Board of INA BH, d.d. Sarajevo, Mr. Miroslav Polak, during 2013 was the director of associate ENERGOPETROL,d.d.,Sarajevo• AmemberofManagementBoardofHOLDINA,d.o.o..Sarajevo,Mr.DamirSokolović,during2013wastheexecutivedirectorfor financeofassociateENERGOPETROL,d.d.,Sarajevo• Director of subsidiary CROSCO INTERNATIONAL, d.o.o.,Mr.Mato Šimović, during 2013was a director of subsidiary CROSCO International,d.o.o.Tuzla.• AmemberofManagementBoardofsubsidiraySEAHORSESHIPPINGINC.,Mrs.BeataCziganyneBauerwasamemberofSupervisory BoardofsubsidiaryNORDICSHIPPINGLIMITED.• President of the Supervisory Board of CROSCO INTERNATIONAL LIMITED, Guernsey, Mr. Bojan Prokopec was during 2013 a member of theManagement Board of INAMALOPRODAJNI SERVISI, d.d., president of the Supervisory Board of subsidiary INA–OsijekPetrol,d.d.,PresidentoftheSupervisoryBoardofsubsidiaryPetrol,d.d.andamemberoftheSupervisoryBoardof associateENERGOPETROL,d.d.,Sarajevo.


Other related party transactionsTheCompanyisthemajorcustomerofPrirodniPlind.o.o.,withtheCompanyasitssoleowner(note17),presentedconsolidated2013revenueintheamountofHRK6,053million(2012:HRK7,487million),ofwhichHRK722million(2012:HRK741million)weregeneratedfromsaletoINA,d.d.

TheCompanyisthemajorcustomerofCroscoNaftniServisid.o.o.anditssubsidiaries.TheCroscod.o.o.,withtheCompanyasitssoleowner(note17),presentedconsolidatedfor2013revenueintheamountofHRK923million(2012:HRK872million),ofwhichHRK284million(2012:HRK244million)weregeneratedfromsaleoftechnologicalservicestoINA,d.d.TheCompanyisalsothemajorcustomerofSTSId.o.o.,whichiswhollyownedsubsidiary,(note17),presentedconsolidatedrevenueintheamountofHRK589millionfor2013(2012:HRK482million),ofwhichHRK552million(2012:HRK445million)weregeneratedfromsaletoINA,d.d.

TheCompanyisalsothemajorcustomerofINAMazivad.o.o.,whichiswhollyownedsubsidiary,(note17),presentedconsolidated2013revenueintheamountofHRK218million(2012:HRK213million),ofwhichHRK61million(2012:HRK54million)weregeneratedfromsaletoINA,d.d.

TheCompanyremainsthecustomerofcompanyJANAFd.d.,inwhichithasaholdingof11,795%(Note21).During2013,approximatelyHRK86millionofJANAF’stotalrevenueintheamountofHRK452millionaccountforsalesrevenueinrespectofINA,d.d.asuserofthepipelinesystemofJANAFd.d.(2012:HRK75millionoutofHRK456milliontotalrevenue).

39. Commitments

TheCompanyandtheGrouphaveanumberofcontinuingoperationalandfinancialcommitmentsinthenormalcourseoftheirbusi-nessesincluding:- explorationanddevelopmentcommitmentsarisingunderproductionsharingagreements,- exploratorydrillingandwellcommitmentsabroad,- gastransportationcontractandgassellingcontract- guarantees,performancebondsandlettersofcreditwithCroatianandforeignbanks,- completionoftheconstructionofcertainassets. Investment in contract areas of North Adriatic

ActivityofbringingtheproductionofnaturalgasreservesinthegeographicareaofNorthAdriatic,mostlywithintheepicontinentalshelfofRepublicofCroatia,istakingplacethroughProductionSharingAgreements(PSA)whichINAhassignedwithforeigncompaniesintheso-calledcontractareas:• INA,d.d.andENICroatiaB.V.havecloseddownin1996and1997ProductionSharingAgreementsincontractareasAiza-LauraandIvana,andrealizationofthepartnershiptakesplacethroughajointoperatingcompanyINAgipwithinterests50:50,• INA,d.d.andEDISONINTERNATIONALS.p.A.havecloseddowninthe2002ProductionSharingAgreementinthecontractareaIzabela&Iris/Iva.PartnershipwithEDISONtakesplacethroughtheoperatingcompanyED-INAwithshareholding:50%:50%.

When Izabelagasfieldwillalsobe inproduction, in theNorthAdriaticAreaatotalof18productionplatformsand1compressorplatformswithatotalof46productionwellswillbeinstalled.

Untilnow,inthecontractareasNorthAdriaticandAiza-Laura,INA,d.d.hasinvestedincapitalconstructionofminingfacilitiesandplantsHRK4.8billion,whileofthetotalgainedreservesINA´ssharewillrangeabout63%oftheproducedgas,whichisfurtherplacedontheCroatiangasmarket.OntheIzabelagasfieldalldevelopmentactivitiesarecompletedduring2010andIzabelaSouthplatformisreadyforproductionstartsinceMay2010,whileIzabelaNorthplatformsinceJuly2010.Althoughtechnicallyready,inthismomentplatformsstillarenotintheproduction,duetostillongoingnegotiationsbetweenINA,d.d.andEdison.Onceproductionstarts,INA’sshareofproductionfromtheIzabelagasfieldwillbeapproximately45%.On31December2013INAgiphadinbothcontractareas237activecontractsamountingintotaltoHRK1,417million.Theremainingcommitmentsunderthesecontractson31December2013amountedtoHRK735million.FortheneedofthedevelopmentoftheIzabelagasfieldfrom1January2008until31December2013,ED-INAhasconcluded83(28arestillactive)contractsamountingintotaltoEUR141millionfromwhichEUR139millionhasbeencarriedouton31December2013.

Investments in SyriaSince1998INA,d.d.hashadsix(6)commercialdiscoveriesontheHayanBlock(Jihar,AlMahr,Jazal,Palmyra,MustadiraandMazrur)withsignificantoil,gasandcondensatereserves.

Current situation Oil,condensate,gasandLPGproductioninSyria isstillongoing.Expatriates(INA)workinginHayanPetroleumCompany(HPC)onHPCHayanandHayanfieldsandinHPCDamascusheadquartershavenotbeenworkinginSyriasince25January2013,andthemainproductionactivitieshavebeentakenoverbyHPC’slocalworkforce,whichINA,d.d.considersillegal(seenote3).

INA,d.d. is theoperatorattheAphamiaexploratoryblock. INA,d.d.hasacquired270km23Dseismiconthebasisofwhichtwoexplorationwellswere drilled.Oil saturated layers atMudawara andBeerAs Sib structures have been determined. Total capitalexpendituresamounttoapproximatelytoUSD65million.Thesecondandlastextensionoftheexplorationphaseendedon11Novem-ber2013,withanon-fulfilledcommitmenttodrilloneexploratorywellinordertoconfirmthecommercialityofoilsaturatedlayers,iftheForceMajeurewasnotdeclared.Inregardstothismatter,INA,d.d.hasnotreceivedanycommentfromGPCorMinistrysideyet.

“Take or pay“ contractOn20December2013Prirodniplind.o.o.signedanadditionalcontractwithMETInternationalAGregardingnaturalgasimportuntil1May2014.Asof31December2013futureobligationsamounttoapproximatelyHRK150millionuntilthecontractexpiry.

Gas Transportation ContractThefuturegastransportationcontractedcommitmentswithGEOPLINd.o.o.until2016,whereaswithGasConnectAustriaandENISpA.until2018inamountofapproximatelyHRK484.83million.

Gas sales ContractsGrouphadfollowingnaturalgassalecontractsfrom1October2013,i.e.from1January2012totheexpiryoftheunderlyingcontract:1. Long-termcontractbetweenPrirodniplind.o.o.andHEPd.d.Zagreb(long-termcontractistransferredtoPrirodniplind.o.o.) a) Contractperiod:from1January1996until30September2014 b) Salesrevenuefrom1Januaryuntil31December2013:HRK1.6billion c) Contractedsupplyquantity:146,500,000m3from1January2014until30September2014 d) Estimatedrevenuefortheremainingperiod:HRK365million

2. ContractbetweenPrirodniplind.o.o.andPetrokemijad.d.Kutina a) Contractperiod:from1January2012until30September2015


40. ContinGent liabilities b) Salesrevenuefrom1Januaryuntil31December2013:HRK1.2billion c) Contractedsupplyquantity:458,100,000m3from1January2014until30September2015 d) Estimatedrevenuefortheremainingperiod:HRK1.1billion

3.ContractsbetweenPrirodniplind.o.o.andtariff-basedcustomers(distributors-procurement) a) Contractperiod:from1October2013until31March2014 b) Salesrevenue1Januaryuntil31December2013:HRK1.6billion c) Contractedsupplyquantity:357,477,468m3from1January2014until31March2014 d)Estimatedrevenuefortheremainingperiod:HRK786million

4. ContractsPrirodniplind.o.o.–othertariff-basedcustomers–distributors-sales a) Contractperiod:from1October2013until30September2014;onecustomeruntil30September2015 b) Salesrevenuefrom1January2013until31December2013:HRK544million c) Contractedsupplyquantity:92,797,843m3from1January2014until30September2015 d) Estimatedrevenuefortheremainingperiod:HRK240million

5.ContractsPrirodniplind.o.o.–othertariff-basedcustomers a) Contractperiod:from1October2013until30September2014(onecustomeruntil31until31December2014) b) Salesrevenuefrom1January2013until31December2013:HRK881million c) Contractedsupplyquantity:280,207,159m3from1January2014until31December2014 d) Estimatedrevenuefortheremainingperiod:HRK677million

Water selling contracts 1. Highqualityprocesswater a) Contractedsupplyquantity:2,263,000m³in2013. b) Salesrevenuein2013:3.6HRK c) Contractperiod:2014 d) Estimatedrevenuefor2014:4.4millionHRK

2. Geothermalwater a) Contractedsupplyquantity:410,000m³in2013 b) Salesrevenuefromin2013:2.6millionHRK c) Contractperiod:2014 d) Estimatedrevenuefor2013theperiod:2.1millionHRK

EnvironmentalmattersTheprincipalactivitiesoftheCompanyandtheGroup,comprisingoilandgasexploration,production,transportation,refininganddistribution,canhaveinherenteffectsontheenvironmentintermsofemissionsintosoil,waterandair.Both,theCompanyandtheGroupregularlyrecord,monitorandreportonenvironmentalemissionsinaccordancewiththeirobligationsspecifiedinapplicablelawsandpayemissionfeestotheEnvironmentalProtectionandEnergyEfficiencyFundandwaterprotectionfeetotheAuthorityof CroatianWater, specified by law. The environmental effects aremonitored by local and national governmental environmentalauthorities.

Harmonisation of INA’s operations with the IPPC DirectiveIntegratedPollutionPreventionandControlDirective(IPPC)regulatestheissueof“environmentalpermit”andrequirestheuseofbestavailabletechniques(BAT),bywhichahighlevelofenvironmentalprotectionasawholeisachieved(airprotection,water,soil,noiseprotection,wastemanagement,energyefficiency).Environmentalpermitregulatesthefacilityoperation.AlignmentwithBATrequirestimeandconsiderablefinancialinvestmentsoINAinCroatiapre-accessionnegotiationswiththeEUgainedforitsrefineriesinSisakandRijekaatransitionperiodtoachievefullcomplianceby31December2017.InordertoalignitsexistingtechnologywiththeBAT,INA,d.d.initiatedafewprojectsthatareinvariousstagesofimplementation.During 2013 Requirements for obtaining environmental permits and Technical-Technological solutions for four INA, d.d. plants(FractionationFacilitiesIvanićGrad(FFIG),GasProcessingFacilitiesMolve(GPFM),inSisakRefinery(SR),RijekaRefinery(RR))weresenttothecompetentauthoritiesonopinionandestablishingconditionsforplants.PublichearingsforSR,FFIGandGPFMhavebeensuccessfullyconducted.ForthosefacilitiestheEnvironmentalTermsandBooksofunifiedconditions,whichareanintegralpartoftheenvironmentalpermitweresubmittedtotheMinistryofEnvironmentProtectionandNature(MEPN).InDecember2013theMinistryofEnvironmentalandNatureProtections issuedaDecisionacceptingtheconstructionofthecokecomplexattheRijekaRefinery,includingabirthandtheportofUrinj2,whichalsoenabledthecontinuationoftheprocessofobtainingtheenvironmentalpermitfortheRijekaRefinery.

Alignment of INA’s operations with the greenhouse gas emission (GHG) legislationEuropeanUnionEmissionsTradingScheme,EUETS,isoneofthefundamentalmechanismsoftheEuropeanUnioninthefightagainstclimatechangewithaviewtomeetingthecommitmentsmadeundertheKyotoProtocol.InsidetheScheme,apartoftheemissionallowances(oneallowance=1tonneofCO2)areallocatedtoinstallationsforfreeandtheyareusedto“cover”theemissionsfromthepreviousyear.Iftheinstallationhasashortageofallowancesinrespecttoverifiedemissions,therestmustbeboughtonthemarketthroughauctioning.From1January2013,RijekaRefinery,SisakRefinery,FractionationFacilitiesIvanićGradandGasProcessingFacilitiesMolveareapartoftheETS.InFebruary,requeststoopenfouroperatorholdingaccounts(oneforeachinstallation)intheUnionRegistry,throughwhichemissionallowancestransactionsareperformed,hadbeensubmittedtotheCroatianEnvironmentAgency,andthefirstpurchaseofallowanceshadbeenconductedinDecember2013duringwhich75%ofthetotalestimatedshortageofemissionallowanceshadbeenbought(thepriceofoneallowancewas4.99eurosandthetotalpaidamountis905,680EUR).The Annual Greenhouse Gas Emissions Reports were delivered for all four installations to the Croatian Environment Agency inaccordancewith the regulations inMarch2013.TheEuropeanCommissionpublishedanew form forGreenhouseGasEmissionsMonitoringPlansandINAsubmittedPlansforallfourinstallationstotheMinistryofEnvironmentalandNatureProtectioninAugust.

Alignment of INA’s operations with the air protection legislationFrom1January2016existingplantswillhavetocomplywithmorestringentELV,asstipulatedbyIndustrialEmissionsDirective(IED).TheprovisionsofthisDirectivehavebeentransposedintoCroatianlegislationbyRegulationonlimitvaluesforpollutantemissionsfrom


stationarysourcesintotheair(OG117/12).InJanuary2013oilrefineriesinSisakandRijekasubmittedanApplicationforinclusionofitsexistinglargecombustionplantsintheTransitionalNationalPlan(TNP).LargeCombustionPlantsinvolvedintheTNP,intheperiodfrom1Januaryin2016until30June2020,maybeexemptedfromcompliancewiththeELV,iftheymeetcertainconditionsprescribedbytheRegulation.InJune2013MinistryofEnvironmentProtectionandNaturesubmittedtheTNPtotheEuropeanCommissionforapproval.RegardingcompliancewiththetechnicalenvironmentalstandardsforVolatileOrganicCompound(VOC)emissionsresultingfromthestorageanddistributionofpetrol,incomplianceistheentireINA’sretailnetworkaswellastanktruckloadingstationinSisakRefineryareincompliancewithtechnicalstandards.InthenextfewyearsitisplannedHRK540millionforfullcompliancewiththetechnicalenvironmentalstandardsforVOC’s.

Harmonisation of INA’s operations with the REACH AccordingtotheCroatianLawontheImplementationoftheRegulationNo.1907/2006(EC)oftheEuropeanParliamentandCouncilontheRegistration,Evaluation,AuthorisationandRestrictionofChemicals,INA,d.d.hasregisteredsubstancesbeforedeadline.Thepre-registrationperiodhasendedon31December2013.TheregistrationdeadlineforCMRorverytoxicsubstancesforfreshormarineorganismsproducedinquantities(R50/53)ofover100tonnesayearis30June2014.Theregistrationdeadlineforallsubstancesproducedinsmallerquantities(1-100t/year)is31May2018.During2013,INA-REACHteamhascollecteddataforatotalof14registrationdossiers(9substancesand5onsiteintermediates),whichweresubmitted toEuropeanChemicalsAgency (ECHA).Besides registration,notificationof8 substanceswascompleted inaccordancewiththeCLPRegulationwhichisexemptedfromregistrationobligations.For18substances(14substancesand4intermediates)thatINAexportedtotheterritoryoftheEU,beforeaccessionoftheRepublicofCroatiatoEU,transferofallrightsfromMOLtoINAwascompleted.Registrationdossiersofthesesubstanceswereupdated,duetothepresenceofnewinformation.AfterasuccessfulregistrationunderREACHandCLPnotification,INAaccomplishedthegoalandisabletomanufacture,store,useandputonthemarketproductsontheEuropeanUnionterritory.

Environmental provisions Environmental obligations are theobligationsof a company to recoverpollutions causedby the company’s operations. They canbedividedintotwocategories:environmentalprovisionsandcontingencies.At31December2013, INA,d.d.madeenvironmentalprovisionsintheamountofHRK288million,whereastheprovisionsattheGrouplevelamountedtoHRK301million.Contingenciesat the INAGroup and INA, d.d. levelswere estimated atHRK651million andHRK438million, respectively. The estimateswerenotrecognisedbecausethetimingoftheevent isuncertainandthere isnoevidenceofpollution.AportionofthecontingenciesmayberecognisedasprovisionsbymovingthetimewindowordecidingtoabandonthepresentbusinesslocationofINA,d.d.,ordiscontinuingfurtheractivitiesataparticularsite.

LitigationGWDF Partnership München and GWDF Limited CyprusTheplaintiffGWDFPartnership,GesellschaftBürgerlichenRechts,andGWDFLimitedCyprusclaimscompensationagainstINA,d.d.ZagrebandINA-NaftaplininamountofHRK59millionfordamageincurredowingtothelossofrightsresultingfromtheJointVentureAgreementmadewiththecompanySaknavtobi,andwhichallegedlyoccurredbyvirtueofthedefendant’sbehaviour,i.eduetoitswithdrawalfromnegotiationsbywhichitshouldhavebecomeapartyofthejointbusinessventure.INA,d.d.filedinSeptember2007theanswertotheclaim,inwhichboth,thefoundationandtheamountoftheclaimstatementarebeingcontestedintheirentirety,stating amongst theother that thedefendants abandoned thenegotiationsbecauseof a business decision, and that exactly theplaintiffswerethosewhohadbeennegotiatingcontrarytotheprincipleofconsciousnessandfairness.Furthermore,INA,d.d.filedtheobjectiontothelackoflitigationcapacityasregardsGWDFPartnership,theobjectiontothemisdirectedpassivepersonalityinrelationtoINA,d.d.,statingalsothatthecourtisnotcompetentasregardsGWDFLimitedCyprus.Thecourtoffirstinstancemustfirstofalldecideonthelawapplicabletothislegaldisputeaswellaswhetheritiscompetentornot

inthiscase.Uptonowseveralhearingswereheldduringtheyears2008,2009andin2010,anditwasdiscussedupontheproceduralissues(capacityofparties,jurisdictionandcompetentlaw).Thelasthearingheldon8February2011,afterthepartiesrepeatedtheirstandpoints,thecourtdecidedtorequestfromtheGermanRepublicandtheRepublicofCyprusbydiplomaticwaysthetextofthelawrelevantformakingdecisionsinthiscase.ThestatusofINA,d.d.hasnotchangedevenafterthehearingheldon8February2011,deliveryofthegoverninglawshallforsurebelastingforacertaintime,andonlyatthehearingstobedeterminedfollowingtheacquisitionofthegoverninglawwillbeclearinwhichdirectiontheproceedingswillbecontinued.Managementbelieves,basedonlegaladvice,thatnolosseswillbeincurred,sonoprovisionhasbeenrecognizedasof31December2013.

OTF On27August2013, INA,d.d.received informationfromtheSecretariatofthePermanentArbitrationCourt,CroatianChamberofCommerce,thatOTFFovallalkozoZrt.,Hungary(OTF)hassubmittedaStatementofClaimagainstINA,d.d.In itsStatementofClaimOTFseeks from INA,d.d. thepaymentof theamountof thePerformanceGuaranteestatingthat itwasfraudulently,unlawfullyandunjustifiablyactivatedbyINA,d.d.,paymentofadditionalcostsbasedonthesocalled“changeorder”claimsandothercostsrelatedtotheprojectpaidbyOTFduetoreasonssolelyattributabletoINA,d.d.aswellascompensationofdamagecausedtoOTFbyINA’sdelayedpaymentandotheractionsinthetotalamountofEUR9million.On11October2013INA,d.d.submittedadetailedAnswertotheStatementofClaimwithinthesetdeadline.INA,d.d.initsAnswertotheStatementofClaim,statesthatOTFhasprovidedanincompleteandamisleadingdescriptionofthenatureandcircumstancesof thedispute.Firstofall INA,d.d. isclaiming that thedelayof theprojectwasattributablesolely to reasons forwhichOTFwasresponsibleforbyvirtueoftheContractconcludedamongtheParties. ThisargumentationINA,d.d.alsobasesonthenatureoftheLumpSumTurnKeyContractthatthePartiesconcludedandthefactthatOTFundertookthesoleresponsibilityfordetailedengineeringanddesignoftheproject,theprocurementoftheentireequipmentandnecessarymaterialsandfinallytheconstructionwitharesponsibilitytodelivertoINA,d.d.afullyfunctioningplant,whatOTFfailedtodo.Further,INA,d.d.claimsthatFEEDSTOCKwasnotthereasonforthemalfunctioningoftheplantnorwasitcausedbyINAsoperationalpersonnel.ItisINAspointofviewthatthemalfunctionsoftheplantweretheresultofpoordesignandconstructionoftheplantthatbeingthesoleresponsibilityofOTF.InrelationtotheactivationofthebankguaranteeINAsclaimsareinlinewithitsargumentationthatbyactivatingthebankguaranteeandcollectingtheamountofEUR4millionINA,d.d.collecteddamagessufferedduringtheshutdownscausedbyplantdeficienciesandalsoothercostssufferedbyINA,d.d.duetoOTFsbreachofcontract.AlthoughwearestillintheinitialphaseofthearbitralproceedingssomeissuessuchastheproceduralrulesandthedirectioninwhichtheTribunalwishestotakethearbitrationhavebeenclarifiedaftertheteleconferenceheldon13December2013,includingdeadlinesfornextroundofwrittensubmissions.Ontheotherhand,atthispointthepositionofthePartiesregardingthemeritsofthedisputeisstilldifficulttoevaluateduetothefactthattherewasonlyoneroundofwrittensubmissions.OTF’sStatementofClaimhasbeendesignedandsubmittedinanimpreciselyandbrieflymannerwithoutanyexcesselaboratingonfactsorcallinguponevidencesoitisexpectedthatOTFwillsubmititsfullyelaboratedandevidentiarysupportedReplytotheAnswertotheStatementofClaiminthissecondroundofsubmissions,until31January2014,ifithasanydesiretostrengthenitspositioninthisarbitralproceedings.Managementbelieves,basedonlegaladvice,thatnolosseswillbeincurred,sonoprovisionhasbeenrecognizedasof31December2013.

Ljubljanska bankaTheclaimsfromplaintiffLJUBLJANSKABANKA,Ljubljana,SloveniaagainstINA,d.d.inamountofHRK61millionhavearisenfromtwocontractsof1982ontheuseofshort-termforeigncurrencyloanabroadwhichwereconcludedbetweenINA-RafinerijanafteRijeka


andLjubljanskabanka-OsnovnabankaZagreb.TheclaimsofLjubljanskabankaintheconcerneddisputerefertodefaultinterestdebtarisingfromthelegallybindingdecisionoftheDistrictEconomicCourt(thepredecessorofCommercialCourt)inZagrebwhichwasrenderedintheearliercourtprocedureconductedonthesame,above-stated,legalgrounds.TheprocedurewasinitiatedbymotionforexecutionwhichwasfiledbyLjubljanskabankaon13September1995.TheCommercialCourtinZagrebrenderedtheDecisiononexecution,howeverINA,d.d.filedanobjectionagainstthedecisionregardingthestatuteoflimitations,themeritsandtheamountoftheclaims,sotheprocedurewascontinuedasacivilprocedureinitiatedbyalawsuit.INA,d.d.objectedregardingtheprematurityoflawsuit,sinceaprocedureisalreadybeingconductedonthesamelegalgroundsfortheunlawfulnessofexecutionwhichhasinthemeantimebeenendedbyalegallyeffectivedecision,withtheplaintiffrequestingforaretrial.INAisalsoobjectinginrelationtotheplaintiff’scapacitytosue.

TheCommercialCourtrenderedtheDecisionof24November2008wherebyitdismissedthelawsuit.Theplaintifflodgedanappealagainsttheafore-stateddecision,whichwasadoptedbytheHighCommercialCourtandreturnedtothecourtoffirstinstanceforaretrial.Duringtheretrial,theplaintiffbyitsapplicationof3May2010,alongwiththeabove-statedobjections,alsofiledaclaimpreclusion(resiudicata)objectionwithreferencetotheabove-statedprocedurefinalizedbyalegallyeffectivedecision.Thecourtoffirstinstancefoundthattheclaimpreclusionisapplicableand,byitsDecisionof29September2010,againdismissedtheplaintiff’slawsuit.Pursuanttotheplaintiff’sappeal,theHighCommercialCourtinZagrebrenderedDecisionwherebytheabove-statedDecisionoftheCommercialCourtinZagrebof29September2010wasasserted.Theplaintiffhasappliedforareview.Theoutcomeoftheprocedureisstilluncertainduetothecomplexityofthelegalmatter(claimsforaltereddefaultinterest),howeveritisnowmoreprobablethattheSupremeCourtwilltakethesamestandpointastheHighCommercialCourt.Managementbelieves,basedonlegaladvice,thatnolosseswillbeincurred,sonoprovisionhasbeenrecognizedasof31December2013.Supremecourthasn’tdecidedonreviewtothisdate,solegalactionsweren’ttakenduring2013.

Gearing ratioTheprimaryobjectiveoftheGroupinmanagingitscapitaltoensuregoodcapitalratiosinordertosupportallbusinessactivitiesandmaximizethevaluetoallshareholdersthroughoptimizationoftheratiobetweenthedebtandequity.

ThecapitalstructureoftheGroupconsistsofdebtpartwhichincludesborrowingsasdetailedinnotes26and29offsetbycashandbankbalances(socallednetdebt)andshareholderequitycomprisingofissuedcapital,reserves,retainedearningsandnon-controllinginterestsasdetailedinnotes33to37.CapitalstructureoftheINAGroupisreviewedquarterly.Asapartofthereview,thecostofcapitalisconsideredandrisksassociatedwitheachclassofcapital.Internally,maximumgearingratiooftheGroupisdetermined.Thegearingratioattheendofthereportingperiodwasasfollows.

41. finanCial instRuments and RisK manaGement

INAGroup INA,d.d.


Debt: 5,163 7,152 4,845 6,758

Longtermloans 1,889 1,161 1,826 1,053

Shorttermloans 2,975 1,266 2,764 1,057

Currentportionoflong-termborrowings 299 4,725 255 4,648

Cashandcashequivalents (402) (488) (252) (270)

Netdebt 4,761 6,664 4,593 6,488

Equity 12,875 14,954 13,329 15,502

Equityandnetdebt 17,636 21,618 17,922 21,990

Gearingratio 27% 31% 26% 30%

INAGroup INA,d.d.


Financialassets

Cashandcashequivalents 402 488 252 270

Financialassetsdesignatedasatfairvaluethroughprofitandloss 6 7 6 6

Embeddedderivativefinancialinstruments 5 7 - -

Loansandreceivables 3,826 3,651 4,260 4,855

Available-for-salefinancialassets 330 340 330 340

Positivefairvalueofderivatives 29 6 29 6

Financialliabilities

Amortisedcost 8,004 8,836 7,558 8,104

Embeddedderivativefinancialinstruments 18 40 - -


Debtisdefinedaslong–termandshort-termborrowingsandcreditlines(excludingderivativesandfinancialguaranteecontracts),asdescribedinnotes26and29.Total equity includes capital, reserves, retained earnings or transferred loss and non-controlling interests of the Group that aremanagedascapital.

Categories of financial instruments


Financial risk management objectives INAGroupincourseofbusinesscontinuouslymonitorsandmanagesfinancialrisks.TheRiskManagementandHedgingPolicyforINAGroupprovidestheframeworkunderwhichINA,d.d.anditsconsolidatedsubsidiariesmanageandmaintaincommodity,foreignexchangeandinterestrateriskatanacceptablelevel,allowingINA,d.d.toachieveitsstrategicobjectiveswhileprotectingthefuturefinancialstabilityandflexibilityofINAGroup.INA,d.d.integratesandmeasuresfinancialrisksonINAGrouplevelinthefinancialriskmodelusingMonteCarlosimulation,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.DerivativefinancialinstrumentsareregulatedbysigninganISDA(InternationalSwapsandDerivativesAssociation)Agreementwithcounterparties.INAGroupdoesnotusederivativefinancialinstrumentsforspeculativepurposes.

Market risk

Commoditypriceriskmanagement(pricerisk)ThevolatilityofcrudeoilandgaspricesistheprevailingelementinthebusinessenvironmentofINAGroup.INAGroupbuyscrudeoilmostlythroughshort-termarrangementsinUSdollarsatthecurrentspotmarketprice.In2013,INAGrouphadimportedatportionofnaturalatthepricedenominatedinUSdollars,whichisrevisesonaquarterlybasis,inaccordancewithformulainthree-yearcontractforsupplysignedwiththeItaliancompanyENI.Inadditiontoexplorationandproduction,andrefineryoperations,oneofthemaincoreactivitiesofINA,d.d.aremarketingandsaleofrefineryproductsandnaturalgas.Theformulafordeterminingthecrudeproductspricesin2013,specifiedbytheHighestRetailRefinedProductPricingRegulation,toalimitedextenthadprotectedtheGroupfromthechangesinthecrudeoilandcrudeproductsprices,andforeignexchangeriskenablingtherefineryproductstoberepricedeverytwoweeks,withcertainlimitations,dependingonthemarketpricesandfluctuationsintheexchangerateoftheCroatiankunaagainsttheUSdollars.INA,d.d.mayusecommodityhedgingtransactionsonlyforthepurposeofachievingtheabove-mentionedobjectivesoncorporateandbusinesssegmentslevel.INA,d.d.canuseswapandoptioninstruments.In2013INA,d.d.enteredintoshort-termcommodityswaptransactionstohedgeitsexposureonchangesininventorylevels,changesinpricingperiodsandfixedpricecontracts.Thetransactionswereinitiatedtoreduceexposurestopotentialfluctuationsinpricesovertheperiodofdecreasinginventoriesattherefineries,aswellastomatchthepricingperiodofpurchasedcrudeoilandcrudeproductswiththecrudeoilprocessingandrefineryproductretailpricingperiods.ThesetransactionswerehedgingtransactionsanddonotqualifyforhedgeaccountingtreatmentunderIFRS.At31December2013positivefairvalueofcommodityderivativesamountedtoHRK54million,whilenegativefairvaluefromsuchtransactionsamountedtoHRK54million(seeNote27).

Foreign currency risk management AsINAGroupoperatesbothinCroatiaandabroad,manyofitstransactionsaredenominatedandexecutedinforeigncurrencies,hen-ceINA,d.d.isexposedtoexchangeraterisks.The INAGrouphasanet longUSDandEUR,andanetshortHRKoperatingcashflowposition.Generally, theGroupmanages its

currencyriskusingnaturalhedging,whichisbasedontheprinciplethatthecombinationofcurrenciesinthedebtportfolioshouldreflectthecurrencypositionoftheGroup’sfreecashflow.Furthermore,inordertoavoidexcessiveexposurestofluctuationsintheforeignexchangeratewithrespecttoasinglecurrency(i.e.USD), INA,d.d.appliesaportfolio-basedapproachwhileselectingthecurrencymixforitsdebtportfolio.Inaddition,theHighestRetailRefinedProductPricingRegulationapplicablein2013hadallowedtransferringallowspassingapartof theeffectsarising fromunfavorablefluctuations in foreignexchangeratesontothedomesticmarket.INA,d.d.mayuseacross-currencyswaptoadjustitscurrencymixinthedebtportfolio.At31December2013therewerenooutstandingcross-currencytransactions.

ThecarryingamountsoftheCompany’sforeigncurrencydenominatedmonetaryassetsandmonetaryliabilitiesatthereportingdateareasfollows:

Foreign currency sensitivity analysisINAGroupismainlyexposedtothecurrencyriskrelatedtochangeofCroatiankunaexchangerateagainstUSdollar,duetothefactthatcrudeoilandnaturalgastradingontheinternationalmarketismostlyperformedbasedonUSD.Inaddition,theGroupisexposedtofluctuationsoftheexchangerateofCroatiankunaagainstEUR,asapartofitsdebtportfolioisdenominatedinEUR.

Thefollowingtabledetails theCompany’ssensitivity toa10%strengthening inCroatiankuna in2013(in2012:10%)against therelevantforeigncurrenciesThesensitivityratesusedrepresentmanagement’sassessmentofthereasonablypossiblechangeinforeignexchangerates.Thesensitivityanalysisincludesmonetaryassetsandliabilitiesinforeigncurrencies.Thesensitivityanalysisincludesonlyoutstandingforeigncurrencydenominatedmonetaryitemsandadjuststheirtranslationattheperiodendforachangeinforeigncurrencyratesexpressedaspercentage.AnegativenumberbelowindicatesadecreaseinprofitwhereCroatiankunachangesagainsttherelevantcurrencybythepercentagespecifiedabove.ForthesamechangeofCroatiankunaversustherelevantcurrencyintheoppositedirection,therewouldbeanequalandoppositeimpactontheprofit.

Liabilities Assets


INA Group

CurrencyUSD 3,674 3,574 1,836 1,609

CurrencyEUR 3,140 4,263 715 633

6,814 7,837 2,551 2,242

INA,d.d.

CurrencyUSD 3,387 3,167 1,747 1,437

CurrencyEUR 2,810 4,044 623 491

6,197 7,211 2,370 1,928


CurrencyUSDImpact CurrencyEURImpact


INA Group

Loss (184) (196) (243) (363)

(184) (196) (243) (363)

INA,d.d.

Loss (164) (173) (219) (355)

(164) (173) (219) (355)

Theexposureonthe10%fluctuationintheexchangeratesforthecurrenciespresentedaboveismostlyattributabletotheoutstandingliabilitiestowardssuppliersandborrowingsdenominatedinUSdollars(USD)andeuros(EUR).

Interest rate risk management TheINAGroupisexposedtointerestrateriskasentitiesintheINAGroupborrowfundsatbothfixedandfloatinginterestrates.MostoftheINAGroup’sborrowingsarecontractedwithfloatinginterestrates.Asanenergycompany,theGroupdoesnotspeculateonfluctuationsininterestrates,andthereforeprimarilychoosesfloatinginterestrates.However,incertaininstrumentsandcertainmacroenvironment,theselectionoffixedinterestratecanbemorefavorable.INA,d.d.inaccordancewiththeRiskManagementandHedgingPolicyforINAGroup,canuseinterestrateswaptransactionsinordertomanagetherelativelevelofexposuretointerestrateriskoncashflowsrelatedtoborrowingswithfloatinginterestrates.Asof31December2013therewerenooutstandinginterestrateswaptransactions.

Interest rate risk analysisThesensitivityanalysisbelowhasbeendeterminedbasedontheexposureto interestratesatthestatementoffinancialpositiondate.Forfloatingrateliabilities,theanalysisispreparedassumingtheamountofliabilityoutstandingatthebalancesheetdatewasoutstandingforthewholeyear.A50or200basispointincreaseordecreaseisusedwhenreportinginterestrateriskinternally,andrepresentsmanagement’sassessmentofthereasonablypossiblechangeininterestrates.Iftheinterestrateswouldbe200basispointshigher/lowerandallothervariableswereheldconstant,thechangesininterestexpenseofINAGroupandINA,d.d.wouldbeaspresentedbelow.Becauseofthedecreaseintotaldebt,theexposuretoapotentialchangeintheinterestratesonprofitshasalsodecreased.

Ifinterestrateswouldbe200basispointshigher/lower,theprofitoftheINAGroupasof31December2013wouldbedecreased/increasedbyHRK98.4million,whilethedecrease/increasewouldamounttoHRK24.6millionwithachangeof50basispoints,(2012:decrease/increasebyHRK136.7millionhadtheinterestratesbeen200basispointshigher/lower,andbyHRK34millionhadtheinterestratesbeen50basispointshigher/lower),andin2013theprofitoftheINA,d.d.woulddecrease/increasebyHRK92.1million

INAGroup INA,d.d.


Short-terminterestexpensechange 59.3 25.3 55.0 21.1

Long-terminterestexpensechange 39.1 111.4 37.1 107.7

Totalchange: 98.4 136.7 92.1 128.8

ifinterestrateshadbeen200basispointshigher/lower,whilethedecrease/increasewouldamounttoHRK23millionwithachangeof50basispoints(2012:decrease/increasebyHRK128.8millionhadtheinterestratesbeen200basispointshigher/lower,andbyHRK32millionhadtheinterestratesbeen50basispointshigher/lower).

Other price risks TheINAGroupisexposedtoequitypricerisksarisingfromequityinvestments.Equityinvestmentsareheldforstrategicratherthantradingpurposes.

Equity price sensitivity analysis Thesensitivityanalysesbelowhavebeendeterminedbasedontheexposuretoequitypricerisksatthereportingdate.Ifequitypriceshadbeen10%higher: • netprofit fortheyearended31December2013wouldhavebeenunaffectedastheequity investmentsareclassifiedas available-for-sale;and • otherequityreservesofINA,d.d.wouldincreasebyHRK27millionasaresultofthechangesinfairvalueofavailable-for-sale shares.Ifequitypriceshadbeen10%lower,therewouldbeanequalandoppositeimpactonequity.Impairmentoffinancialassetsavailable-for-saleisrecordedattherevaluationreserve.INA,d.d.holds118,855shares(listedonstockexchange)inJANAF,whichisrepresenting11.795%theshareequityofthecompany.AccordingtoIAS39,thedecreasinginthefairvalueoffinancialassetsavailable-for-salearerecognizeddirectlyinequityandifthereisobjectiveevidenceofimpairmentofassets,thecumulativelossthatisrecognizeddirectlyinequitywillremovefromequitytoincomestatement.DuetoadecreaseofJANAFinthestockexchange,thecumulativelossinamountofHRK7millionisrecognisedinequityat31Dec-ember2013.TheGroup’ssensitivitytoequitypriceshasnotchangedsignificantlyfromtheprioryear.

Credit risk management Sales of products and serviceswith deferredpayment gives rise to credit risk, risk of default or non-performanceof contractualobligationsby theGroupcustomers.Overduereceivableshaveanadverseeffecton the liquidityof theGroup,whereas impairedoverduereceivableshaveanegativeimpactonthefinancialresultsoftheGroupaswell.UnderthecurrentlyvalidCreditRiskMana-gementProcedure,themeasuresaretakenasaprecautionagainsttheriskofdefault.Counterparties(customers)areclassifiedintoriskgroupsbyreferencetotheirfinancialindicatorsandthetradingrecordswithINAGroup,andappropriatemeasurestoprovideprotectionagainstcreditriskaretakenforeachgroup.Theinformationusedtoclassifythecounterparties(customers)intotheriskgroupsisderivedfromtheofficialfinancialstatementsobtainedfromindependentratingagencies.Theexposureandthecreditratingsofcounterparties(customers)arecontinuouslymonitoredandcreditexposureiscontrolledbycreditlimitsthatarereviewedatleastonanannualbasis.Wheneverpossible,Groupcollectscollaterals(paymentsecurityinstruments)fromcustomersinordertominimizeriskofcollectionofpaymentsarisingfromcontractualliabilitiesofcustomers.TheexposureoftheGroupandthecreditratingsofitscounterpartiesarecontinuouslymonitoredtomitigatetheriskofdefault.

TheINAGrouptransactswithalargenumberofcounterpartiesfromvariousindustriesandofvarioussize.Aportionofgoodssoldwithdeferredpaymentincludesgovernmentinstitutionsandcustomersownedbythestateandlocalself-governmentsthatdonotprovideanypaymentsecurity instruments.Asregardsothercustomers, thecollaterals theyprovidearemainlydebentures,beingthemostfrequentlyusedpaymentsecurityinstrumentontheCroatianmarket,andbankguaranteesandmortgages,whereasfromforeigncustomersaremostlyobtainedlettersofcredit,andtoalesserextentcorporateguaranteesandexceptionallybillsofexchange.ThereisnosignificantcreditriskexposureoftheGroupthatisnotcoveredwithcollateral,otherthanthosetotheabove-mentionedinstitutionsandentitiescontrolledbythestate,localself-government,andthosearisingfromcertainforeignconcessionagreements.


Liquidity risk management ResponsibilityforliquidityriskmanagementrestswiththeManagementBoard,whichhasbuiltanappropriateliquidityriskmanage-mentframeworkforthemanagementoftheGroup’sshort,mediumandlong-termfundingandliquiditymanagementrequirements.TheGroupmanagesliquidityriskbymaintainingadequatereservesandcreditfacilities,bycontinuouslymonitoringofforecastedandactualcashflowsandduedatesofaccountreceivablesandpayables.ThepolicyofINAGroupistoensuresufficientexternalfundingsourcesinordertoachievethesufficientlevelofavailableframecreditlinesensuringtheliquidityofINAGroupaswellasinvestmentneeds.Asof31December2013INAGrouphadcontractedshorttermbankcredit linesamountingtoHRK1.63billion(CNBmiddlerate),excludingoverdraftsandtradefinancingcreditlinesestablishedwiththepurposetofinancethepurchaseofcrudeoilandoilproducts,andcontractedlongtermcreditlinesamountingtoHRK5.89billion(CNBmiddlerate).Basedoninternationalpractice,INA,d.d.hascontractedshorttermcreditfacilities(‘’tradefinance’’)withfirstclassbankinggroupsforfinancingcrudeoilandoilproductspurchase.Asof31December2013INAGrouphadcontractedshorttermcreditfacilitiesforfinancingcrudeoilandoilproductspurchaseamountingtoUSD1.186million.FordetailsofthemainexternalsourcesoffundingforINAGroupseeNote26and29.Withthepurposeofdiversificationoffundingsourcesandinordertoensuresufficientliquidityandfinancialstabilitylevel,INA,d.d.isinconstantnegotiationswithothercreditorsaswell.

Liquidity and interest risk tables ThefollowingtablesdetailtheremainingcontractualmaturityforfinancialliabilitiesofINA,d.d.andoftheGroupattheperiodend.Analyseshavebeendrawnupbasedontheundiscountedcashflowsbasedontheearliestdateonwhichthepaymentcanberequired.Thetablesincludebothinterestandprincipalcashflows.

Non-interestbearingliabilitiesofINA,d.d.dueinaperiodoflessthanonemonthconsistmainlyoftradeaccountspayableintheamountofHRK1,864millionin2013(2012:HRK621million).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: • thefairvalueoffinancialassetsandfinancialliabilitieswithstandardtermsandconditionsandtradedonactiveliquidmarketsis determinedwithreferencetoquotedmarketprices; • thefairvalueofotherfinancialassetsandfinancialliabilities(excludingderivativeinstruments)isdeterminedinaccordancewith generallyacceptedpricingmodelsbasedondiscountedcashflowanalysisusingpricesfromobservablecurrentmarkettransactions anddealerquotesforsimilarinstruments. • thefairvaluesofderivativeinstrumentsarecalculatedusingquotedprices.Wheresuchpricesarenotavailable,adiscountedcash flowanalysisisperformedusingtheapplicableyieldcurveforthedurationoftheinstrumentsfornon-optionalderivatives,and optionpricingmodelsforoptionalderivatives.Foreigncurrencyforwardcontractsaremeasuredusingquotedforwardexchange ratesandyieldcurvesderivedfromquotedinterestratesmatchingmaturitiesofthecontracts.Interestrateswapsaremeasured atthepresentvalueoffuturecashflowsestimatedanddiscountedbasedontheapplicableyieldcurvesderivedfromquoted interestrates.

Fair value measurements recognized in the statement of financial position Thefollowingtableprovidesananalysisoffinancial instrumentsthataremeasuredsubsequentto initialrecognitionat fairvalue,groupedintoLevels1to3basedonthedegreetowhichthefairvalueisobservable: • Level1fairvaluemeasurementsarethosederivedfromquotedprices(unadjusted)inactivemarketsforidenticalassetsor liabilities; • Level2fairvaluemeasurementsarethosederivedfrominputsotherthanquotedpricesincludedwithinLevel1thatareobservable fortheassetorliability,eitherdirectly(i.e.asprices)orindirectly(i.e.derivedfromprices);and • Level3fairvaluemeasurementsarethosederivedfromvaluationtechniquesthatincludeinputsfortheassetorliabilitythatare notbasedonobservablemarketdata(unobservableinputs).

INA Group

Lessthan1month 1-12months 1-5years 5+years Total

31December2013

Non-interestbearing 2,474 1,164 38 28 3,704

Interestbearing 2,357 1,014 2,009 - 5,380

4,831 2,178 2,047 28 9,084

31December2012



2,202 6,179 1,330 38 9,749

INA,d.d.

Lessthan1month 1-12months 1-5years 5+years Total

31December2013


Interestbearing 2,364 878 1,942 - 5,184

4,360 1,899 1,970 28 8,257

31December2012

Non-interestbearing 946 699 33 38 1,716


2,022 5,454 1,191 38 8,705


INAGROUP 31December2013

Level1 Level2 Level3 Total

Financialassetsatfairvalue

Financialassetsavailable-for-sale 272 - 58 330

Embeddedderivativefinancialassets - 5 - 5

Positivefairvalueofderivatives - 29 - 29

Positivefairvalueofhedgecommoditytransactions - 25 - 25

Financialliabilitiesatfairvalue

Embeddedderivativefinancialliabilities - 18 - 18

Negativefairvalueofhedgecommoditytransactions - 54 - 54

31December2012




Embeddedderivativefinancialassets - 7 - 7





INAGroupandINA,d.d.

31December2013 Financialassetsavailable-for-sale Total

Fairvalueat1January 58 58

Fairvalueat31December 58 58

INA,d.d. 31December2013





Positivefairvalueofhedgecommoditytransactions - 25 - 25


Negativefairvalueofhedgecommoditytransactions - 54 - 54

31December2012








Therewerenotransfersbetweenlevels1and2duringtheyear.

ReconciliationofLevel3fairvaluemeasurementsoffinancialassets:

(a) Financialinstrumentsinlevel1ThefairvalueoffinancialinstrumentsincludedinLevel1compriseJANAFsharesequityinvestmentsclassifiedasavailableforsaleandisbasedonquotedmarketpricesatthebalancesheetdate.Amarketisregardedasactiveifquotedpricesarereadilyandregularlyavailable.

(b) Financialinstrumentsinlevel2andlevel3Thefairvalueoffinancialinstrumentsthatarenottradedinanactivemarketisdeterminedbyusingvaluationtechniques.Specificvaluationtechniquesusedtovaluefinancialinstrumentsinclude:• The fairvalueofhedgecommodity transactions iscalculatedonthebasisofactualhistoricquotations fromPlattsandmarket forwardquotationsoftheunderlyingcommodities.• Thefairvalueofforwardforeignexchangecontractshasbeendeterminedonthebasisofexchangerateseffectiveatthestatement offinancialpositiondateandanembeddedderivativehasbeendeterminedasthedifferencebetweenthecumulativeinflation indexofthecontractedinflationescalationindexandtheinflationrateinthecountryofcontractexecution.

Thesevaluationtechniquesmaximisetheuseofobservablemarketdatawhereitisavailableandrelyaslittleaspossibleonentityspecificestimates.Ifallsignificantinputsrequiredtofairvalueaninstrumentareobservable,theinstrumentisincludedinlevel2.Ifoneormoreofthesignificantinputsisnotbasedonobservablemarketdata,theinstrumentisincludedinLevel3.

Derivative financial instruments UnderIAS39FinancialInstruments:RecognitionandMeasurementderivativefinancialinstrumentsarecarriedinthestatementoffinancialpositionatfairvalue,withthefairvaluechangesbeingreportedthroughprofitorloss.TheGrouphasconcludedcertainlong-termcontractsthatcontainembeddedderivativesasdefinedbyIAS39.Anembeddedderivativeisacomponentofanon-derivativehostcontract,withtheeffectthatsomeofthecashflowsofthecombinedinstrumentvaryinawaysimilartoastand-alonederivative.AsrequiredbyIAS39,suchembeddedderivativeinstrumentsshouldbeseparatedfromthehostcontractandaccountedforasaderivativecarriedatfairvalue,withchangesinfairvaluerecognisedinprofitorloss.Thefairvalueofforeignexchangeforwardcontractshasbeendeterminedonthebasisofexchangerateseffectiveatthestatementoffinancialpositiondate. The value of the embedded instrument to replace the inflation index has beendetermined as the difference between thecumulativeinflationindexofthecontractedinflationescalationindexandtheinflationrateinthecountryofcontractexecution.Anylong-termeffectoftheembeddedderivativeshasbeendiscountedatadiscountratesimilartotheinterestrateonGovernmentbonds. Managementsconsiderthatthecarryingamountsoffinancialassetsandfinancialliabilitiesrecognisedintheconsolidatedfinancialstatementsareapproximatetheirfairvalues.Thefairvaluesofembeddedderivatives included inthestatementoffinancialpositionandthenetmovement intheyear,areasfollows:


INA Group


Fairvalueat1January (33) (15)

Financiallossrelatingtothenetchangeinfairvalueintheyear 20 (18)

Fairvalueat31December (13) (33)

Analysedas:

Currentportion (5) (8)

Non-currentportion (8) (25)

(13) (33)

Headquarters Principalactivity Dateofacquisition Proportionof Consideration

shares transferred

Croplind.o.o. Zagreb,R.Croatia Productionofgas, 3September2013 50% 9

distributionnetwork

ofgasfuels

Carryingamount Fairvalueadjustment Fairvalueonacquisition

Currentassets

Cashandcashequivalents 2 - 2

Tradeandotherrecivables 3 - 3

Othercurrentassets 7 - 7

Prepaidexpensesandaccruedincome 1 - 1

Non-currentassets

Property,plantandequipment 27 (9) 18

Investmentsinassociatesandjointventures 6 (6) -

Investmentsinothercompanies 24 (24) -

70 (39) 31

Carryingamount Fairvalueadjustment Fairvalueonacquisition

Goodwillarisingonacquisition

Considerationtransferred 31

Less:fairvalueofidentifiablenetassetsacquired (31)

“Goodwillarisingonacquisition“ -

Netcashoutflowonacquisitionofsubsidiaries

Considerationpaidincash 9

Less:cashandcashequivalentbalancesacquired (2)

7

42. business Combination 43. subseQuent events

44. appRoval of the finanCial statements

PursuanttothePurchaseAgreementINA,d.d.acquires50%ofequityintheentityCroplind.o.o.fromE.ONHungariaZrt.forHRK9million.At3September2013CommercialCourtinZagrebchangestheownership,andINA,d.d.becomesthesoleshareholderofCroplind.o.o.Followingtheacquisitionof100%ownership,atotalinvestmentamountingtoHRK46millionandimpairmentofinvestmentsintheamountofHRK25millionistransferredfrominvestmentsinassociatestoinvestmentsinsubsidiaries.

Decision of the Croatian Ministry of Economy concerning obligatory natural gas saleApackageof resolutions related to INA’sobligationondelivering thegasproduced inCroatiaunder regulatedprice,put forwardbytheMinistryofEconomy,hasbeenadoptedon27February2014.ThisdecisionobligesINAtoselltheportionofitsnaturalgasproduction for household supplies to state-owned companyHEP as thewholesalemarket supplier, also introducing distributors’purchaseobligationfromHEP.SofarINA(throughPrirodniplin)received2.2000HRK/m3forsalesinthehouseholdsegmentwhilenowINAshallreceive1.7058HRK/m3fortherespectivevolumes.Accordingtothenewregulation-onalike-for-likebasis,takingintoaccountadjustmentsincostitemsINA,d.d.willhavetotransfer,dependingonthenaturalgasquantities,fromHRK250–350millionfromitsownrevenuestoHEP,annually.

MOL notificationOn28February2014INAreceivedaletterfromMOLaskingtheco-operationoftheManagementBoardinorganizingadataroomaspartofastandardthirdpartyduediligenceprocedurerelatedtothepreparationforitspotentialsaleofitsshareholdinginINAthroughitsmandatedadvisors.

ThesefinancialstatementswereapprovedbytheManagementBoardandauthorisedforissueon19March2014.SignedonbehalfoftheCompanyon19March2014by:




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