1. GENERAL

1. GENERAL (CONTINUED)

2. ACCOUNTING POLICIES

2. ACCOUNTING POLICIES (CONTINUED)

2. ACCOUNTING POLICIES (CONTINUED)

2. ACCOUNTING POLICIES (CONTINUED)

2. ACCOUNTING POLICIES (CONTINUED)

2. ACCOUNTING POLICIES (CONTINUED)

2. ACCOUNTING POLICIES (CONTINUED)

2. ACCOUNTING POLICIES (CONTINUED)

2. ACCOUNTING POLICIES (CONTINUED)

2. ACCOUNTING POLICIES (CONTINUED)

2. ACCOUNTING POLICIES (CONTINUED)

2. ACCOUNTING POLICIES (CONTINUED)

2. ACCOUNTING POLICIES (CONTINUED)

3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (CONTINUED)

3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (CONTINUED)

3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (CONTINUED)

Contract balances

3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (CONTINUED)

3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (CONTINUED)

4. SEGMENT INFORMATION (CONTINUED)

4. SEGMENT INFORMATION (CONTINUED)

4. SEGMENT INFORMATION (CONTINUED)

5. OTHER OPERATING INCOME

7. STAFF COSTS

11. TAXATION (CONTINUED)

12. EARNINGS/(LOSS) PER SHARE

13. INTANGIBLE ASSETS

13. INTANGIBLE ASSETS (CONTINUED)

14. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

14. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

30. PROVISIONS

31. RETIREMENT AND OTHER EMPLOYEE BENEFITS (CONTINUED)

31. RETIREMENT AND OTHER EMPLOYEE BENEFITS (CONTINUED)

32. SHARE CAPITAL

On the regular general shareholders' meeting of INA, d.d. which took place on 18 June 2021 loss for the year 2020 in amount of HRK 933 million is covered from retained earnings of prior years in amount of HRK 692 million and the remaining loss in the amount of HRK 241 million is transferred to the accumulated losses and will be covered in next periods.

On the regular general shareholders' meeting of INA, d.d. which took place on 26 August 2020 profit for the year 2019 in amount of HRK 656 million is distributed to legal reserves in the amount of HRK 33 million, retain earnings in the amount of HRK 92 thousand and dividend payment in the amount of HRK 623 million (i.e. HRK 62.27 per share).

36. NON-CONTROLLING INTEREST

Fair value of financial instruments

Fair value of financial instruments (continued)

Expenditures incurred after property, plant and equipment have been put into operation are normally charged to statement of profit or loss in the period in which the costs are incurred.

a) By business operations

b) By asset type

b) By asset type (continued)

b) By asset type (continued)

b) By asset type (continued)

I) Oil and gas reserves

II) Ownership of land and buildings

III) Collective consumption assets

IV) Carrying value of property, plant and equipment

A risk factor is included in the discount rates considering the individual country risk (see note 3).

V) Internal labour capitalisation

VI) Review of the residual value

VII) Assets classified as held-for-sale

Provision for green rights

Interest rate risk management

Other price risks

INA Group is exposed to equity price risks arising from equity investments. Equity investments are held for strategic rather than trading purposes.

Equity price sensitivity analysis

Credit risk management

INA GROUP and

INA - INDUSTRIJA NAFTE, d.d.

Consolidated and separate

Financial Statements for the year ended

31 December 2021

Together with Independent Auditors' Report

	Page
Responsibility for the Financial Statements	3
Independent Auditors' Report	4
INA Group Consolidated Statement of Profit or Loss	12
INA Group Consolidated Statement of Other Comprehensive Income	13
INA, d.d. Separate Statement of Profit or Loss	14
INA, d.d. Separate Statement of Other Comprehensive Income	15
INA Group Consolidated Statement of Financial Position	16
INA, d.d. Separate Statement of Financial Position	17
INA Group Consolidated Statement of Changes in Equity	18
INA, d.d. Separate Statement of Changes in Equity	19
INA Group Consolidated Statement of Cash Flows	20
INA, d.d. Separate Statement of Cash Flows	21
Notes to Financial Statements	22

Pursuant to the Croatian Accounting Act, the Management Board is responsible for ensuring that financial statements are prepared for each financial year in accordance with International Financial Reporting Standards as adopted by the European Union, ("IFRS"), which give a true and fair view of the state of affairs and results of INA - Industrija nafte, d.d. (˝the Company˝) and its subsidiaries (˝the Group˝) for that period.

After making enquiries, the Management Board has a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, the Management Board continues to adopt the going concern basis in preparing the financial statements.

In preparing consolidated and separate financial statements, the responsibilities of the Management Board include ensuring that:

· suitable accounting policies are selected and then applied consistently;

· judgements and estimates are reasonable and prudent;

· applicable accounting standards are followed and

· the financial statements are prepared on the going concern basis.

The Management Board is responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the financial position of the Company and the Group and must also ensure that the financial statements comply with the Croatian Accounting Act. The Management Board is also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for prevention and detection of fraud and other irregularities.

Signed on behalf of the Company and the Group:

Sándor Fasimon, President of the Management Board of INA, d.d.

Niko Dalić, member of the Management Board Ferenc Zoltán Horváth, member of the Management Board

Barbara Dorić, member of the Management Board Darko Markotić, member of the Management Board

József Farkas Simola, member of the Management Board

INA - Industrija nafte, d.d.

MB: 3586243

OIB: 27759560625

Avenija Većeslava Holjevca 10

10000 Zagreb

Republic of Croatia

16 March 2022

INDEPENDENT AUDITOR’S REPORT

To the Shareholders of INA – Industrija Nafte, d.d.

Report on the audit of the separate and consolidated financial statements

Opinion

We have audited the separate financial statements of INA – Industrija Nafte, d.d. (the Company), and consolidated financial statements of INA – Industrija Nafte, d.d. and it’s subsidiaries (together -the Group), which comprise the separate and consolidated statement of financial position as at 31 December 2021, the separate and consolidated statement of profit or loss and the separate and consolidated statement of other comprehensive income, the separate and consolidated statement of changes in equity and the separate and consolidated statement of cash flows for the year then ended, and notes to the separate and consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying separate and consolidated financial statements give a true and fair view of the separate and consolidated financial position of the Company and the Group as at 31 December 2021 and of their separate and consolidated financial performance and their separate and consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU (IFRS as adopted by the EU).

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the separate and consolidated financial statements section of our report.

We are independent of the Company and the Group in accordance with the International Ethics Standards Board of Accountants’ (IESBA) International Code of Ethics for Professional Accountants, including International Independence Standards (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code.

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

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the separate and consolidated financial statements of the current period. These matters were addressed in the context of our audit of the separate and consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the separate and consolidated financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the separate and consolidated financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying separate and consolidated financial statements.

Key Audit Matter

How we addressed Key Audit Matter

Estimation of hydrocarbon reserves

A description of the key judgements and estimates regarding estimation of hydrocarbon reserves are included in Note 3 Significant accounting judgements and estimates in the separate and consolidated financial statements.

The estimation of hydrocarbon reserves is a significant area of judgement due to the technical uncertainty in assessing quantities and complex contractual arrangements dictating the Company’s and the Group’s share of reportable volumes. Hydrocarbon reserves are also a fundamental indicator of the future potential of the Company’s and the Group’s performance and these estimates affect significant amounts in the separate and consolidated statement of financial position and the separate and consolidated statement of profit or loss. Therefore, we believe that estimation of hydrocarbon reserves is a key audit matter.

Audit procedures included understanding of the process for determination of the hydrocarbon reserves and walkthrough of controls implemented in the process. We also assessed the competence and objectivity of the Company’s and the Group’s technical experts to evaluate whether they are appropriately qualified to carry out the hydrocarbon reserve volumes estimation. We performed specific inquiry to the management of the Company and the Group in respect of consistency of the applied methodology for reserves estimate with previous year.

For the significant changes in reserve volumes we tested whether the appropriate methodology was applied, the assumptions used are reasonable and adequately supported by underlying information provided by the management. We also performed analytical procedures on movements in hydrocarbon reserves during the year and reviewed that all significant changes were approved by the “Reserves and Resources Committee” and are in line with our expectations.

We also assessed on the adequacy of the relevant disclosures in the separate and consolidated financial statements and if these are in line with the requirements of the IFRS as adopted by the EU.

Impairments of the Company’s and the Group’s long lived assets

Impairments of the Company’s and the Group’s long lived assets are disclosed in Note 6 Depreciation, amortization and impairment (net) and in respective notes disclosing the underlying assets in the separate and consolidated financial statements; a description of the accounting policy and key judgements and estimates are included in Note 2 Accounting policies and Note 3 Significant accounting judgements and estimates, respectively.

Movements in oil and gas prices and the recent volatility caused by COVID -19 pandemic, can have a significant effect on the carrying value of the Company’s and the Group's long lived assets including upstream offshore and onshore, refining, retail and service related long lived assets as well as goodwill. A significant and rapid drop in prices also quickly impacts the Company’s and the Group's operations and cash flows.

We performed understanding of the process and walked through the controls designed and operated by the Company and the Group relating to the assessment of the carrying value of respective long lived assets. We examined the methodology used by management to assess the carrying value of respective long lived assets, to evaluate its compliance with accounting standards and consistency of application. For the upstream and retail assets where the impairment indicators were not identified by the Company and the Group, we evaluated the management’s impairment indicators assessment by comparing the assumptions used in prior year to the achieved results in the current year.

Key Audit Matter

How we addressed Key Audit Matter

Impairments of the Company’s and the Group’s long lived assets (continued)

Due to complexity and judgement used in the assessment of impairment indicators and impairment models, impairment of Company’s and Group’s long lived assets is a key audit matter.

We also evaluated the assumptions used in the current year assessment of impairment indicators and tested whether these assumptions are in line with the results achieved in the current year as well as current development in the industry and the Company’s and the Group’s expectations for the key inputs to the impairment models.

In respect of performed impairment tests, we used external data in assessing and corroborating the assumptions used in the impairment analysis, the most significant being future market oil and gas prices and discount rates. We performed audit procedures on the mathematical integrity of the impairment models and sensitivity analysis, tested the appropriateness of discount rates used in the calculation with the assistance of the specialists and performed procedures to assess the completeness of the impairment charges.

We also assessed on the adequacy of the relevant disclosures in the separate and consolidated financial statements and if these are in line with the requirements of the IFRS as adopted by the EU.

Estimation of decommissioning provisions

Provisions associated with decommissioning of the assets are disclosed in Note 30 Provisions to the separate and consolidated financial statements; a description of the accounting policy and key judgements and estimates are included in Note 2 Accounting policies and Note 3 Significant accounting judgements and estimates, respectively.

Audit procedures involved understanding of the mandatory or constructive obligations with respect to the decommissioning of each asset based on the contractual arrangements and relevant local regulation to validate the appropriateness of the cost estimate.

Key Audit Matter

How we addressed Key Audit Matter

Estimation of decommissioning provisions (continued)

Management reviews decommissioning provisions on an annual basis. This review incorporates the effects of any changes in local regulations, management's expected approach to decommissioning, cost estimates and discount rates. Decommission assets are recorded in an amount equal to the estimated provision, which is also amortized as part of the capital asset costs. Any change to the present value of the estimated costs is reflected as an adjustment of the provisions and the decommission assets. If there is no related asset, the change in provision estimate it will charged to the separate and consolidated statement of profit or loss. The calculation of decommissioning provisions requires significant management judgement because of the inherent complexity in estimating future costs and is therefore considered as a key audit matter.

We obtained calculation of decommissioning provision from the Company and the Group and tested that all of the required fields are included in the calculation, tested the appropriateness of discount rates used in the calculation, tested actual expenses that occurred during the current accounting period, inspected that decommissioning provision for the similar types of assets is in line with the expenses occurred in the current accounting period and assessed that the last year of production is aligned with the evaluation of reserves. As a part of our testing, we considered the competence and objectivity of the Company’s and the Group’s experts who produced the cost estimates.

We also assessed on the adequacy of the relevant disclosures in the separate and consolidated financial statements and if these are in line with the requirements of the IFRS as adopted by the EU.

Other information included in the Company’s and the Group’s Annual Report for year 2021

Management is responsible for the other information. Other information consists of the information included in the Company’s and the Group’s 2021 Annual Report which includes the Management report, Corporate Governance Statement and Report on payments to governments other than the separate and consolidated financial statements and our auditor’s report thereon. The Company’s and the Group’s 2021 Annual Report is expected to be made available to us after the date of this auditor’s report.

Our opinion on the separate and consolidated financial statements does not cover the Other information and we will not express any form of assurance conclusion thereon.

In connection with our audit of the separate and consolidated financial statements, our responsibility is to read the other information when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the separate and consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

Responsibilities of management and Audit Committee for the separate and consolidated financial statements

Management is responsible for the preparation and fair presentation of the separate and consolidated financial statements in accordance with IFRS as adopted by the EU, and for such internal control as management determines is necessary to enable the preparation of separate and consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the separate and consolidated financial statements, management is responsible for assessing the Company’s and the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company and the Group or to cease operations, or has no realistic alternative but to do so.

Audit Committee is responsible for overseeing the Company’s and the Group’s financial reporting process.

Auditor’s responsibilities for the audit of the separate and consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the separate and consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these separate and consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

· Identify and assess the risks of material misstatement of the separate and consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s and the Group’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s and the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the separate and consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company and the Group to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the separate and consolidated financial statements, including the disclosures, and whether the separate and consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with Audit Committee, we determine those matters that were of most significance in the audit of the separate and consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

In compliance with Article 10(2) of Regulation (EU) No. 537/2014 of the European Parliament and the Council, we provide the following information in our independent auditor’s report, which is required in addition to the requirements of ISAs:

Appointment of Auditor and Period of Engagement

We were initially appointed as auditors of the Company by the General Meeting of Shareholders on 24 June 2014. Our appointment has been renewed annually by shareholder resolution, with the most recent reappointment on 18 June 2021, representing a total period of uninterrupted engagement appointment of 8 years.

Consistence with Additional Report to Audit Committee

We confirm that our audit opinion on the separate and consolidated financial statements expressed herein is consistent with the additional report to the Audit Committee of the Company, which we issued on 16 March 2022 in accordance with Article 11 of Regulation (EU) No. 537/2014 of the European Parliament and the Council.

Provision of Non-audit Services

We declare that no prohibited non-audit services referred to in Article 5(1) of Regulation (EU) No. 537/2014 of the European Parliament and the Council were provided by us to the Company and its controlled undertakings within the European Union. In addition, there are no other non-audit services which were provided by us to the Company and its controlled undertakings and which have not been disclosed in the separate and consolidated financial statements.

Report based on Delegated Regulation (EU) 2018/815 on supplementing Directive 2004/109/EZ of European parliament and Council related to regulatory technical standard for specification of single electronic reporting format of reporting

Independent report on the compliance of annual separate and consolidated financial statements (further: financial statements) prepared pursuant to Article 462 (5) of the Capital Market Act (Official Gazette 65/18, 17/20 and 83/21) applying the requirements of the Delegated Regulation (EU) 2018 / 815 on establishing of single electronic reporting format for issuers (hereinafter: the ESEF Regulation).

We have conducted a reasonable assurance engagement on whether the financial statements, as contained in the attached electronic file [FILE NAME], are prepared, for the purposes of public disclosure pursuant to Article 462, paragraph 5 of the Capital Market Act, in all material respects in accordance with the requirements of the ESEF Regulation.

Responsibilities of the Management and those charged with governance

Management is responsible for the preparation of the financial statements in accordance with ESEF Regulation. Furthermore, Management is responsible for maintaining an internal control system that reasonably ensures the preparation of financial statements without material non-compliances with ESEF Regulation requirements, whether due to fraud or error.

The Management is also responsible for:

the public disclosure of financial statements in ESEF format
selecting and using XBLR codes in accordance with ESEF regulation

Those charged with governance are responsible for overseeing the preparation of the financial statements in ESEF format as part of the financial reporting process.

Auditor's responsibilities

Our responsibility is to express a conclusion, based on the audit evidence gathered, as to whether the financial statements are free from material non-compliances with the requirements of the ESEF Regulation. We conducted our reasonable assurance engagement in accordance with International Standard for Assurance Engagements ISAE 3000 (revised)- Assurance engagements other than audits or reviews of historical financial information.

Work performed

The nature, timing and extent of the procedures selected depend on the auditor's judgment. Reasonable assurance is a high degree of assurance, however it does not guarantee that the scope of procedures will identify all significant (material) non-compliance with ESEF regulation.

In respect of the subject matter, we have performed the following procedures:

we read the requirements of the ESEF Regulation,
we have gained an understanding of the Company's internal controls relevant to the application of the requirements of the ESEF Regulation,
we have identified and assessed the risks of material non-compliance with the ESEF Regulation due to fraud or error; and
Based on this, devise and implement procedures to respond to the assessed risks and to obtain reasonable assurance for the purpose of expressing our conclusion.

The aim of our procedures was to assess whether:

the financial statements are prepared in the relevant XHTML format,
the information contained in the financial statements required by the ESEF Regulation is marked and all markings meet the following requirements:
the XBRL markup language was used,
the basic taxonomy elements listed in the ESEF Regulation with the closest accounting significance have been used, unless an additional taxonomy element has been created in accordance with Annex IV. ESEF Regulation,
the labeled elements comply with the common labeling rules under the ESEF Regulation.

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

Conclusion

Based on the procedures performed and evidence gathered, the financial statements presented in ESEF format for the year ended on 31 December 2021, contained in the aforementioned attached electronic file and prepared pursuant to Article 462 paragraph 5 of the Capital Market Act prepared for public disclosure, are prepared in all material respects in line with the requirements of Articles 3, 4 and 6 of the ESEF Regulation.

Further to this conclusion as well as opinion contained in part of this report related to accompanying financial statements for the year ended 31 December 2021, we do not express any opinion on the information contained in these presentations or on any other information contained in the aforementioned file.

The partner in charge of the audit resulting in this independent auditor’s report is Berislav Horvat.

Berislav Horvat

President of the Management Board and certified auditor

Ernst & Young d.o.o.

Radnička cesta 50

10000 Zagreb, Republic of Croatia

16 March 2022

		Year ended	Year ended
	Note	31 December 2021	31 December 2020

Revenue from contracts with customers	4	22 400	14 788
Other operating income	5	319	181
Total operating income		22 719	14 969

Changes in inventories of finished products and work in progress		199	(686)
Cost of raw materials and consumables		(8 768)	(5 710)
Depreciation, amortisation and impairment (net)	6	(1 813)	(2 289)
Other material costs		(1 868)	(1 811)
Service costs		(468)	(434)
Staff costs	7	(1 765)	(1 628)
Cost of other goods sold		(6 644)	(3 699)
Impairment charges (net)	8	(81)	(108)
Provision for charges and risks (net)	9	(313)	(188)
Capitalised value of own performance		304	286
Total operating expenses		(21 217)	(16 267)

Profit/(Loss) from operations		1 502	(1 298)

Finance income	10	343	165
Finance costs	10	(249)	(233)
Net profit/(loss) from financial activities		94	(68)

Share of (loss)/profit of joint ventures accounted for using the equity method	16	(9)	94
Profit/(Loss) before tax		1 587	(1 272)
Income tax (expense)/benefit	11	(273)	135
Profit/(Loss) for the year		1 314	(1 137)


Attributable to:
Owners of the Company		1 312	(1 138)
Non-controlling interests		2	1
		1 314	(1 137)

*Earnings/(loss) per share*
Basic and diluted gain/(loss) per share (HRK per share)	12	131,25	(113,82)

The accompanying accounting policies and notes form an integral part of this consolidated statement of profit or loss.

		Year ended	Year ended
	Note	31 December 2021	31 December 2020


Profit/(Loss) for the year		1 314	(1 137)

Other comprehensive income, net of income tax:
Items that will not be reclassified subsequently to profit or loss:
Remeasurement of defined benefit obligation	34	1	2
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translating foreign operations	34	32	(60)
Gain/(loss) on non-current financial assets	33	78	(39)
Other comprehensive gain/(loss), net of income tax		111		(97)
Total comprehensive income/(loss) for the year		1 425		(1 234)


Attributable to:
Owners of the Company		1 423		(1 235)
Non-controlling interests		2		1

The accompanying accounting policies and notes form an integral part of this consolidated statement of other comprehensive income.

		Year ended	Year ended
	Note	31 December 2021	31 December 2020

Revenue from contracts with customers	4	21 691	13 758
Other operating income	5	261	166
Total operating income		21 952	13 924

Changes in inventories of finished products and work in progress		166	(660)
Cost of raw materials and consumables		(8 952)	(5 665)
Depreciation, amortisation and impairment (net)	6	(1 735)	(1 963)
Other material costs		(2 101)	(1 773)
Service costs		(767)	(706)
Staff costs	7	(825)	(752)
Cost of other goods sold		(6 005)	(3 344)
Impairment charges (net)	8	(36)	(80)
Provision for charges and risks (net)	9	(320)	(123)
Capitalised value of own performance		42	28
Total operating expenses		(20 533)	(15 038)

Profit/(Loss) from operations		1 419	(1 114)

Finance income	10	354	175
Finance costs	10	(242)	(202)
Net (loss)/gain from financial activities		112	(27)

Share of (loss)/profit of joint ventures accounted for using the equity method	16	(9)	94
Profit/(Loss) before tax		1 522	(1 047)
Income tax (expense)/benefit	11	(249)	114
Profit/(Loss) for the year		1 273	(933)

The accompanying accounting policies and notes form an integral part of this separate statement of profit or loss.

		Year ended	Year ended
	Note	31 December 2021	31 December 2020


Profit/(Loss) for the year		1 273	(933)

Other comprehensive income, net of income tax:

Items that will not be reclassified subsequently to profit or loss:
Remeasurement of defined benefit obligation	34	(3)	-
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translating foreign operations	34	43	(43)
Gain/(loss) on non-current financial assets	33	78	(39)
Other comprehensive gain/(loss), net of income tax		118	(82)
Total comprehensive income/(loss) for the year		1 391	(1 015)

The accompanying accounting policies and notes form an integral part of this separate statement of other comprehensive income.

ASSETS	Note	31.dec.21	31.dec.20
Non-current assets
Intangible assets	13	449	485
Property, plant and equipment	14	11 429	11 700
Right-of-use asset	28	307	304
Investments in associates and joint venture	16	245	254
Other investments	17	17	17
Long-term receivables	18	835	843
Deferred tax assets	11	949	1 210
Long-term marketable securities		42	-
Non-current financial assets	19	655	560
Total non–current assets		14 928	15 373
Current assets
Inventories	20	2 146	1 624
Trade receivables (net)	21,37	2 007	1 206
Other receivables	22	164	192
Corporate income tax receivables		6	5
Other current assets	23	79	89
Marketable securities		17	78
Cash and cash equivalents	24	2 630	399
		7 049	3 593
Held-for-sale assets		13	30
Total current assets		7 062	3 623
TOTAL ASSETS		21 990	18 996

EQUITY AND LIABILITIES
Capital and reserves
Share capital	32	9 000	9 000
Legal reserves		199	199
Fair value reserves	33	280	202
Other reserves	34	1 562	1 529
Accumulated losses	35	(274)	(1 586)
Equity attributable to owners of the Company		10 767	9 344
Non-controlling interest	36	15	13
TOTAL EQUITY		10 782	9 357
Non–current liabilities
Long-term debts	27	1 983	-
Long-term lease liabilities	28	228	232
Other non-current liabilities	29	29	33
Employee benefit obligation	31	67	64
Provisions	30	3 668	3 696
Deferred tax liabilities	11	15	16
Total non–current liabilities		5 990	4 041
Current liabilities
Bank loans and current portion of long-term debts	25,27	1 145	2 085
Current portion of long-term lease liabilities	28	84	77
Trade payables	26,37	2 143	1 426
Taxes and contributions	26	938	637
Other current liabilities	26	586	1 122
Employee benefit obligation	31	4	4
Provisions	30	318	247
Total current liabilities		5 218	5 598
Total liabilities		11 208	9 639
TOTAL EQUITY AND LIABILITIES		21 990	18 996

The accompanying accounting policies and notes form an integral part of this consolidated statement of financial position.

ASSETS	Note	31.dec.21	31.dec.20
Non-current assets

Intangible assets	13	412	415
Property, plant and equipment	14	10 160	10 417
Right-of-use asset	28	438	473
Investment in subsidiaries	15	1 826	1 827
Investments in associates and joint venture	16	245	254
Other investments	17	647	767
Long-term receivables	18	834	850
Deferred tax assets	11	799	1 054
Long-term marketable securities		42	-
Non-current financial assets	19	655	560
Total non–current assets		16 058	16 617
Current assets
Inventories	20	1 913	1 399
Intercompany receivables	37	229	173
Trade receivables (net)	21,37	1 749	866
Other receivables	22	118	155
Other current assets	23	74	98
Marketable securities		17	78
Cash and cash equivalents	24	2 573	351
		6 673	3 120
Assets classified as held for sale		-	7
Total current assets		6 673	3 127
TOTAL ASSETS		22 731	19 744

EQUITY AND LIABILITIES
Capital and reserves
Share capital	32	9 000	9 000
Legal reserves		199	199
Fair value reserves	33	280	202
Other reserves	34	1 211	1 171
Retained earnings/(Accumulated losses)	35	1 032	(241)
TOTAL EQUITY		11 722	10 331
Non–current liabilities
Long-term debts	27	2 112	-
Long-term lease liabilities	28	344	379
Other non-current liabilities	29	28	33
Employee benefit obligation	31	21	17
Provisions	30	3 841	3 862
Total non–current liabilities		6 346	4 291
Current liabilities
Bank loans and current portion of long-term debts	25,27	940	1 873
Current portion of long-term lease liabilities	28	101	100
Intercompany payables	37	281	346
Trade payables	26,37	1 857	1 104
Taxes and contributions	26	809	554
Other current liabilities	26	431	965
Employee benefit obligation	31	1	2
Provisions	30	243	178
Total current liabilities		4 663	5 122
Total liabilities		11 009	9 413
TOTAL EQUITY AND LIABILITIES		22 731	19 744

The accompanying accounting policies and notes form an integral part of this separate statement of financial position.

	Share capital	Legal reserves	Fair value reserves	Other reserves	(Accumulated losses) / Retained earnings	Attributable to equity holders of the parent	Non controlling interest	Total
Balance at 1 January 2020	9 000	166	241	1 590	207	11 204	12	11 216
Transfer	-	-	-	-	(2)	(2)	-	(2)
Transfer to legal reserves from retained earnings	-	33	-	(3)	(30)	-	-	-
Dividend paid	-	-	-	-	(623)	(623)	-	(623)
Subtotal	9 000	199	241	1 587	(448)	10 579	12	10 591
Loss for the year	-	-	-	-	(1 138)	(1 138)	1	(1 137)
Other comprehensive loss, net	-	-	(39)	(58)	-	(97)	-	(97)
Total comprehensive (loss)/gain for the year	-	-	(39)	(58)	(1 138)	(1 235)	1	(1 234)
Balance at 31 December 2020	9 000	199	202	1 529	(1 586)	9 344	13	9 357
Profit for the year	-	-	-	-	1 312	1 312	2	1 314
Other comprehensive income, net	-	-	78	33	-	111	-	111
Total comprehensive gain for the year	-	-	78	33	1 312	1 423	2	1 425
Balance at 31 December 2021	9 000	199	280	1 562	(274)	10 767	15	10 782

The accompanying accounting policies and notes form an integral part of this consolidated statement of changes in equity.

	Share capital	Legal reserves	Fair value reserves	Other reserves	(Accumulated losses) / Retained earnings	Total
Balance at 1 January 2020	9 000	166	241	1 214	1 273	11 894
Transfer to legal reserves from retained earnings	-	33	-	-	(33)	-
Profit brought forward from legal merger	-	-	-	-	75	75
Dividend paid	-	-	-	-	(623)	(623)
Subtotal	9 000	199	241	1 214	692	11 346
Loss for the year	-	-	-	-	(933)	(933)
Other comprehensive loss, net	-	-	(39)	(43)	-	(82)
Total comprehensive loss for the year	-	-	(39)	(43)	(933)	(1 015)
Balance at 31 December 2020	9 000	199	202	1 171	(241)	10 331
Profit for the year	-	-	-	-	1 273	1 273
Other comprehensive income, net	-	-	78	40	-	118
Total comprehensive gain for the year	-	-	78	40	1 273	1 391
Balance at 31 December 2021	9 000	199	280	1 211	1 032	11 722

The accompanying accounting policies and notes form an integral part of this separate statement of changes in equity.

		Year ended	Year ended
	Note	31.dec.21	31.dec.20
Profit/(Loss) for the year		1 314	(1 137)
Adjustments for:
Depreciation, amortisation and impairment of property, plant and equipment and ROU asset (net)		1 813	2 289
Income tax expense/(benefit) recognised in profit and loss		273	(135)
Impairment charges (net)		81	108
Gain on sale of property, plant and equipment		(36)	(11)
Foreign exchange (gain)/loss		(10)	16
Interest expense/(gain) (net)		13	(16)
Share of loss/(profit) of joint ventures accounted for using the equity method		9	(94)
Other finance (income)/expense recognised in profit and loss		(171)	12
Increase/(decrease) in provisions		258	(14)
Decommissioning interests and other provision		74	56
Net loss on derivative financial instruments		288	242
Other non-cash items		-	(3)
		3 906	1 313
Movements in working capital
(Increase)/decrease in inventories		(967)	402
(Increase)/decrease in receivables and prepayments		(1 655)	570
Increase/(decrease) in trade and other payables		2 103	(33)
Cash generated from operations		3 387	2 252
Taxes paid		(22)	(19)
Net cash inflow from operating activities		3 365	2 233
Cash flows used in investing activities
Capital expenditures, exploration and development costs		(1 602)	(1 213)
Payments for intangible assets		(131)	(74)
Proceeds from sale of non-current assets		59	17
(Investment)/proceeds from sale in securities		(42)	39
Dividends received		170	9
Interest received and other financial income		18	39
Loans and other investments (net)		3	6
Net cash used in investing activities		(1 525)	(1 177)

Cash flows from financing activities
Change in long-term borrowings (net)		-	(332)
Change in short-term borrowings (net)		(988)	(685)
Proceeds from bonds issuance		1 983	-
Dividends paid		(585)	(38)
Payment of principal portion of lease liabilities (net)		3	(70)
Interest paid on short-term loans and other interest charges		(13)	(97)
Net cash flows from/(used in) financing activities		400	(1 222)

Net increase/(decrease) in cash and cash equivalents		2 240	(166)
At 1 January		399	606
Effect of foreign exchange rate changes		(9)	(36)
At 31 December	24	2 630	404

Overdrafts		-	(5)
Cash and cash equivalents in statement of financial position		2 630	399

The accompanying accounting policies and notes form an integral part of this consolidated statement of cash flow.

		Year ended	Year ended
	Note	31.dec.21	31.dec.20
(Loss)/Profit for the year		1 273	(933)
Adjustments for:
Depreciation, amortisation and impairment of property, plant and equipment and ROU asset (net)		1 735	1 963
Income tax expense/(benefit) recognised in profit and loss		249	(114)
Impairment charges (net)		36	80
Gain on sale of property plant and equipment		(9)	(10)
Foreign exchange loss		35	21
Interest (gain)/expense (net)		(11)	(38)
Share of loss/(gain) of joint ventures accounted for using the equity method		9	(94)
Other finance income recognised in profit and loss		(215)	(15)
Decrase/(increase) in provision		258	(17)
Decommissioning interests and other provision		78	58
Net loss on derivative financial instruments		288	242
Other non-cash items		(1)	(5)
		3 725	1 138
Movements in working capital
(Increase)/decrease in inventories		(915)	376
(Increase)/decrease in receivables and prepayments		(1 746)	735
Increase in trade and other payables		2 063	128
Cash generated from operations		3 127	2 377
Taxes paid		(10)	(3)
Net cash inflow from operating activities		3 117	2 374

Cash flows used in investing activities
Capital expenditures, exploration and development costs		(1 535)	(1 189)
Payment for intangible assets		(130)	(71)
Proceeds from sale of non-current assets		17	16
(Investment)/proceeds from sale in securities		(42)	39
Dividends received		169	9
Dividends received from subsidiaries		44	-
Interest received and other financial income		43	61
Loans and other investments (net)		134	(19)
Net cash used in investing activities		(1 300)	(1 154)

Cash flows from financing activities
Change in long-term borrowings (net)		-	(332)
Change in short-term borrowings (net)		(950)	(783)
Proceeds from bonds issuance		1 983	-
Dividends paid		(585)	(38)
Payment of principal portion of lease liabilities (net)		(33)	(96)

Interest paid on short-term loans and other interest charges		(13)	(97)
Net cash flows from/(used in) financing activities		402	(1 346)

Net increase/(decrease) in cash and cash equivalents		2 219	(126)
At 1 January		351	502
Effect of foreign exchange rate changes		3	(25)
At 31 December	24	2 573	351

The accompanying accounting policies and notes form an integral part of this separate statement of cash flow.

History and incorporation

INA-Industrija nafte, d.d. was founded on 1 January 1964 through the merger of Naftaplin Zagreb (oil and gas exploration and production company) with the Rijeka Oil Refinery and the Sisak Oil Refinery. Today, INA, d.d. is a medium-sized European oil company with the leading role in Croatian oil business and a strong position in the region in oil and gas exploration, refining and distribution of oil and oil derivatives.

INA-Industrija nafte, d.d. is a joint stock company owned by the Hungarian oil company MOL Nyrt (49.08%), the Republic of Croatia (44.84%) and institutional and private investors (6.08%). On 30 January 2009, MOL Nyrt and the Government of Croatia signed the Amendment to the Shareholders Agreement. Under the Amendment MOL Nyrt delegates five out of the nine members in the Supervisory Board and three out of six members of the Management Board including the President of the Management Board.

The company MOL Nyrt, (Hungary, Oktober huszonharmadika u. 18. Budapest) prepares the consolidated financial statements for the larger Group of companies, in which INA, d.d. and INA Group are included as a MOL Group subsidiaries. The consolidated financial statements of the MOL Group are available on official website: www.molgroup.info.

The ownership structure* of the INA Group as of 31 December 2021 and 31 December 2020:

	31 December 2021		31 December 2020
	Number of shares	Ownership in %	Number of shares	Ownership in %
Zagrebačka banka d.d./Unicreditbank Hungary Zrt, for MOL Nyrt, Hungary	4,908,207	49.08	4,908,207	49.08
Government of the Republic of Croatia	4,483,552	44.84	4,483,552	44.84
Institutional and private investors	608,241	6.08	608,241	6.08
	10,000,000	100	10,000,000	100

*Source: Central Depository & Clearing Company Inc.

Principal activities

Principal activities of INA, d.d. and its subsidiaries (the Group) are:

(i) exploration and production of oil and gas deposits, primarily onshore and offshore within Croatia and other than that INA, d.d has concessions held abroad: Angola and Egypt;

(ii) import of natural gas and sale of imported and domestically produced natural gas to industrial consumers and municipal gas distributors;

(iii) refining and production of oil products through refinery located at Rijeka (Urinj) and Zagreb lubricants plants;

(iv) distribution of fuels and associated products through a chain of 504 service stations in operation as of 31 December 2021 (of which 388 in Croatia and 116 outside Croatia);

(v) trading in petroleum products through a network of foreign subsidiaries and representative offices, principally in Sarajevo, Ljubljana and Podgorica; and

(vi) service activities incidental to onshore and offshore oil extraction through its drilling and oilfield services subsidiary Crosco d.o.o.

The Group has dominant positions in Croatia over oil and gas exploration and production, oil refining, and the sale of gas and petroleum products. INA, d.d. also holds an 11.795% interest in JANAF d.d., the company that owns and operates the Adria pipeline system.

Headquarter of the Group is located in Zagreb, Avenija V. Holjevca 10, Croatia. As at 31 December 2021, there were 9,635 employees at the Group (9,829 as at 31 December 2020). As at 31 December 2021, there were 3,222 employees at INA, d.d. (3,411 as at 31 December 2020).

During 2021, the average number of employees of the INA Group was 9,751 (2020: 10,174 employees), while the average number of employees of INA, d.d. was 3,280 (2020: 3,536 employees).

The Group comprises a number of wholly and partially owned subsidiaries operating largely within the Republic of Croatia . Foreign subsidiaries include a number of trading subsidiaries that generally act as distributors of INA Group products and as representative offices within their local markets.

Supervisory Board, Management Board and Council of Directors at the date of approval of these financial statements

Supervisory Board

Damir Mikuljan	President of the Supervisory Board (since 17 December 2021 until 17 June 2022)
József Molnár	Vice President of the Supervisory Board (since 14 June 2017 until 17 December 2024)
Davor Filipović	Member of the Supervisory Board (since 17 December 2021 until 17 June 2022)
Branimir Škurla	Member of the Supervisory Board (since 17 December 2021 until 17 June 2022)
László Uzsoki	Member of the Supervisory Board (since 14 June 2017 until 17 December 2024)
Zsuzsanna Eva Ortutay	Member of the Supervisory Board (since 18 December 2020 until 17 December 2024)
Gabriel Szabó	Member of the Supervisory Board (since 18 December 2020 until 17 December 2024)
Domokos Szollár	Member of the Supervisory Board (since 18 December 2020 until 17 December 2024)
Jasna Pipunić	Representative of employees in the Supervisory Board (since 5 May 2020 until 5 May 2024)

Management Board

Sándor Fasimon

Niko Dalić

President of the Management Board (since 1 July 2018 until 31 March 2024)

Member of the Management Board (since 1 April 2020 until 31 March 2025)

Barbara Dorić

Darko Markotić

Member of the Management Board (since 1 April 2020 until 31 March 2025)

Ferenc Zoltán Horváth

József Farkas Simola

Member of the Management Board (since 1 February 2021 until 31 March 2024)

Council of Directors

Members of the Council of Directors appointed by the decision of the Management Board:

Zdravka Demeter Bubalo

Gábor Horváth

Nikola Mišetić

Operating Director of Consumer Services and Retail

Chief Financial Officer

Operating Director of Exploration and Production

Goran Pavlović

Goran Pleše

Operating Director of Industrial Services

Operating Director of Rafining and Marketing

The principal accounting policies applied in the preparation of these consolidated and separate financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Presentation of the financial statements

These consolidated and separate financial statements are prepared on the consistent presentation and classification basis. When the presentation or classification of items in the consolidated and separate financial statements is amended, comparative amounts are reclassified unless the reclassification is impracticable.

The Company’s and the Group’s financial statements are prepared in millions of HRK, which is the Company’s functional currency.

Basis of accounting

The Company maintains its accounting records in Croatian language, in Croatian kuna, in accordance with Croatian law and the accounting principles and practices observed by enterprises in Croatia. The accounting records of the Company's subsidiaries in Croatia and abroad are maintained in accordance with the requirements of the respective local jurisdictions.

The Company’s and the Group’s financial statements are prepared under the historical cost convention, modified by the revaluation of certain assets and liabilities under conditions of hyperinflation in the period to 1993 and except for certain financial instruments that are measured at fair values at the end of each reporting period, and in accordance with International Financial Reporting Standards as adopted by European Union (EU) (IFRS).

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would consider those characteristics when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for leasing transactions that are within the scope of IFRS 16, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in IAS 2 or value in use in IAS 36.

Adoption of new and revised International Financial Reporting Standards

Standards and Interpretations effective in the current period

The following new standards and amendments to the existing standards issued by the International Accounting Standards Board (IASB) and interpretations issued by the International Financial Reporting Interpretations Committee and adopted by the EU are effective for the current period:

Adoption of new and revised International Financial Reporting Standards (continued)

Standards and Interpretations effective in the current period (continued)

· Amendment to IFRS 16 Leases Covid 19-Related Rent Concessions, issued on 31 March 2020 (effective date for annual periods beginning on or after 1 April 2021).

· Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2, issued on 27 August 2020 (effective date for annual periods beginning on or after 1 January 2021).

· Amendments to IFRS 4 Insurance Contracts – deferral of IFRS 9, issued on 25 June 2020 (effective date for annual periods beginning on or after 1 January 2021).

The adoption of these Standards and Interpretations had no significant impact on the financial statements of the Company and the Group.

Standards and Interpretations issued by IASB and endorsed by the EU but not yet effective

· Amendments to IFRS 3 Business Combinations; IAS 16 Property, Plant and Equipment; IAS 37 Provisions, Contingent Liabilities and Contingent Assets, all issued on 14 May 2020, (effective date for annual periods beginning on or after 1 January 2022).

· Amendments to Annual Improvements 2018-2020, issued on 14 May 2020, (effective date for annual periods beginning on or after 1 January 2022).

· IFRS 17 Insurance contracts, issued on 18 May 2017; including Amendments to IFRS 17 issued on 25 June 2020, (effective date for annual periods beginning on or after 1 January 2023).

Standards and Interpretations issued by IASB but not yet adopted by the EU

At the date of authorization of these financial statements the following standards, revisions and interpretations were in issue by the International Accounting Standards Board but not yet adopted by the EU. The endorsement might be expected in 2022:

· Amendments to IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current and Classification of Liabilities as Current or Non-current - Deferral of Effective Date, issued on 23 January 2020 and 15 July 2020 respectively (effective date for annual periods beginning on or after 1 January 2023).

· Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies, issued on 12 February 2021 (effective date for annual periods beginning on or after 1 January 2023).

· Amendments to IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates issued on 12 February 2021 (effective date for annual periods beginning on or after 1 January 2023).

· Amendments to IAS 12 Income Taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transactions, issued on 7 May 2021 (effective date for annual periods beginning on or after 1 January 2023).

The Company and the Group does not anticipate that the adoption of these Standards and Interpretations will have a significant impact on the financial statements of the Company and the Group.

2. ACCOUNTING POLICIES (CONTINUED)

Investments in subsidiaries in Parent Company financial statement (INA, d.d.)

In the Company’s financial statements, investments in subsidiaries are accounted for at cost and reduced for impairment.

Basis of consolidated financial statements (INA Group)

The consolidated financial statements incorporate the financial statements of INA, d.d. (the Company) and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has ability to affect those returns through its power over the investee. The Group controls an investee if, and only if, the Group:

· has power over the investee;

· is exposed, or has rights, to variable returns from its involvement with the investee; and

· has the ability to use its power to affect its returns.

When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company's voting rights in an investee are sufficient to give it power, including:

· the size of the Company's holding of voting rights relative to the size and dispersion of holdings of the other vote holders;

· potential voting rights held by the Company, other vote holders or other parties;

· rights arising from other contractual arrangements; and

· any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders' meetings.

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Company gains control until the date when the Company ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group's accounting policies.

All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a loss of a control, is accounted for as equity transaction. If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value.

2. ACCOUNTING POLICIES (CONTINUED)

Basis of consolidated financial statements (INA Group) (continued)

The carrying amounts of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests.

All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary. The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IFRS 9 Financial Instruments or, when applicable, the cost on initial recognition of an investment in an associate.

Legal merger

In a case of legal merger of the companies in the Group, pooling of interest method is applied, balances of company that is merged are carried at net book values to a company, which is legal successor, and no restatements of prior periods are done.

Business combination

Business combinations are accounted for using the acquisition method.

The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IFRS 9 Financial Instruments, is measured at fair value with the changes in fair value recognised in the statement of profit or loss.

Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests and any previous interest held over the net identifiable assets acquired and liabilities assumed). If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in profit or loss.

2. ACCOUNTING POLICIES (CONTINUED)

Business combination (continued)

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit.

Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods.

On disposal of the relevant cash-generating unit, the attribute amount of goodwill is included in the determination of the gain or loss on disposal.

Acquisition of entities under common control

Business combinations arising from transfers of interests in entities that are under the control of the shareholder that ultimately controls the Group are accounted for using pooling of interest accounting at the date of acquisition. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the consolidated financial statements of the parent group. The components of equity of the acquired entities are added to the same components within the Group equity except for issued capital. Consolidated financial statements reflect the results of combining entities from the date of acquisition.

Business combinations under common control are accounted for based on carrying values, with any effects directly recognised in equity.

Investments in associates and joint ventures

An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

A joint venture is a joint arrangement and legal entity whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries.

An investment in an associate or a joint venture is accounted for using the equity method on separate and consolidated financial statements from the date on which the investee becomes an associate or a joint venture. The Company and the Group discontinues the use of the equity method from the date when the investment ceases to be an associate or a joint venture, or when the investment is classified as held for sale.

2. ACCOUNTING POLICIES (CONTINUED)

Interests in joint operations

A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the IFRSs applicable to the particular assets, liabilities, revenues and expenses.

When the Group entity transacts with a joint operation in which a group entity is a joint operator (such as a sale or contribution of assets), the Group is considered to be conducting the transaction with the other parties to the joint operation, and gains and losses resulting from the transactions are recognised in the Group's consolidated financial statements only to the extent of other parties' interests in the joint operation.

When a Group entity transacts with a joint operation in which the Group entity is a joint operator (such as a purchase of assets), the Group does not recognise its share of the gains and losses until it resells those assets to a third party.

Oil and gas properties

Exploration and appraisal costs

Exploration and appraisal costs are accounted for on the successful efforts method. Costs relating to exploration and appraisal drilling are initially capitalised as intangible oil and gas assets pending determination of the commercial viability of the relevant oil and gas properties.

License and data provision costs and costs associated with geological and geophysical activities are charged to the statement of profit or loss in the period in which they are incurred.

If prospects are subsequently deemed unsuccessful on completion of evaluation, the associated costs are charged to the statement of profit or loss in the period. If the prospects are deemed commercially viable, such costs are transferred to oil and gas properties. Management Board reviews the status of such prospects regularly.

Fields under development

Oil and gas field development costs are capitalised as tangible oil and gas assets.

Depreciation

Capitalised exploration and development costs of producing domestic and foreign oil and gas properties are depreciated using a unit of production method, in the proportion of actual production for the period to the total estimated remaining commercial reserves of the field.

Commercial reserves

Commercial reserves are proved developed oil and gas reserves. Changes in the commercial reserves of fields affecting unit of production calculations are dealt with prospectively over the revised remaining reserves. The Group performed reserves determination in accordance with SPE PRMS (Society of Petroleum Engineers Petroleum Resources Management System) guidelines.

2. ACCOUNTING POLICIES (CONTINUED)

Intangible assets

Intangible assets acquired separately are capitalized at cost and intangible assets acquired from a business acquisition are capitalized at fair value as at the date of acquisition. Intangible assets are recognized if it is probable that the future economic benefits that are attributable to the asset will flow to the enterprise and the cost of the asset can be measured reliably. Amortisation is charged on assets with a finite useful life over the best estimate of their useful lives using the straight-line method, except intangible assets on oil and gas fields are charged with a unit of production method. The amortisation period and the amortisation method are reviewed annually at each financial year-end.

Intangible assets are tested for impairment annually either individually or at the cash generating unit level. Research costs are expensed as incurred. Development expenditure incurred on an individual project is carried forward when its future recoverability can reasonably be regarded as assured.

Following the initial recognition of the development expenditure, the cost model is applied requiring the asset to be carried at cost less any accumulated impairment losses. Costs in development stage cannot be amortized. The carrying value of development costs is reviewed for impairment annually when the asset is not yet in use or more frequently when an indicator of impairment arises during the reporting year indicating that the carrying value may not be recoverable.

Property, plant and equipment

Property, plant and equipment are shown at historical cost or valuation less accumulated depreciation and any accumulated impairment loss, except for land, which is stated at cost less any accumulated impairment loss. The initial cost of property, plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes and any directly attributable costs of bringing an asset to its working condition and location for its intended use.

In situations where it can be clearly demonstrated that the expenditures have resulted in an increase in the future economic benefits expected to be obtained from the use of an item of property, plant and equipment beyond its originally assessed standard performance, the expenditures are capitalised as an additional cost of property, plant and equipment. Costs eligible for capitalisation include costs of periodic, planned significant inspections and overhauls necessary for further operation.

The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the statement of profit or loss.

Depreciation, Depletion and Amortisation

Intangible assets and property, plant and equipment in use (excluding oil and gas properties) are depreciated on a straight-line basis on the following basis:

Software 5 years

Buildings 5 - 50 years

Refineries and chemicals manufacturing plants 3 - 15 years

Service stations 30 years

Telecommunication and office equipment 2 - 10 years

The residual values, useful lives and depreciation methods are reviewed at least annually.

Impairment of tangible and intangible assets other than goodwill

At least annually and whenever there is an indication that the assets may be impaired, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately as expenditure, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Leases

The Company and the Group assess contracts to evaluate whether a contract contains a lease or not. That is, lease is a contract (or part of a contract), that conveys the right to use an asset (the underlying asset), for specified period in exchange for consideration.

The Company and the Group as a lessee

The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. There are two key aspects:

1. Right-of-use assets

The Company and the Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received.

Leases (continued)

Right-of-use assets are depreciated on straight-line basis over the shorter of the lease term and the estimated useful lives of the assets as presented in Property, plant and equipment. If ownership of the leased asset transfers to the Company and the Group at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset. Right-of-use assets are presented as separate line in the statement of financial position.

The right-of-use assets are also subject to impairment. Refer to the accounting policies depreciation shall be calculated as for Property, plant and equipment in accordance with IAS 16.

2. Lease liabilities

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees.

Variable lease payments that do not depend on an index or a rate are recognised as expenses in the period in which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset. Lease liabilities are presented as separated lines in the statement of financial position.

Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less). A lease that contains a purchase option cannot be classified as a short-term lease. The Company and the Group apply recognition exemption to office equipment lease that is considered as low value. Lease payments on short-term leases and leases of low value assets are recognised as expense on a straight-line basis over the lease term.

Group as a lessor

Leases in which the Group does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. Rental income arising is accounted for on a straight-line basis over the lease terms and is included in other operating income in the statement of profit or loss due to its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned.

Receivables from customers

Trade receivables are carried at amortised cost less impairment. Receivables from customers are shown in amounts identified in the invoices issued to the customers in accordance with the agreement, order, delivery note and other documents which serves as basis for invoicing, decreased with impairment of receivables.

Accrued revenues are recorded at the end of reporting period for delivered goods or services if they have not been invoiced yet.

The Group recognises an allowance for forward-looking expected credit loss (ECL) for all debt instruments not held at fair value through profit or loss and contract assets.

Expected credit loss model is used for calculation of impairment of receivables. The expected credit losses are required to be measured through a loss allowance at an amount equal to full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of the financial instrument).

According to the impairment policy, following events are considered as objective evidence on impairment:

· legal claim against the customer;

· default of the issuer;

· total or partial release of claim;

· claim is under external connection;

· >180 days overdue;

· disappearance of an active market.

The calculation of loss rate:

· in case of performing third party items under simplified approach, loss rates are used to calculate the expected credit loss on these items at initial recognition;

· the loss rate is the arithmetic average of the yearly historical loss rates of the last three years. Upon calculating the historical loss rate for a given year, only receivables originated in given year are considered in the calculation;

· this average of yearly historical loss rates is adjusted by the forward-looking macroeconomic element.

Receivables that are a subject of a court process (court dispute, bankruptcy, liquidation) are written off from accounting records.

Inventories

Inventories comprise purchased goods and goods held for resale, finished products and unfinished products in the process of production (work-in-progress), semi-finished products, as well as materials and products to be used in the production process.

Inventories as short-term assets are valued and stated separately: inventories of crude oil and other raw materials, inventories of spare parts, inventories of small inventory items, car tires and packaging material,inventories of work in progress, inventories of finished goods, inventories of merchandise.

2. ACCOUNTING POLICIES (CONTINUED)

Inventories (continued)

Inventories are measured at the lower of cost or net realizable value.

The cost of inventories includes all the costs of purchase and conversion and all other expenses that were incurred to have the inventories get to their present location and condition. The weighted average cost method is applied to inventory cost.

Cost of purchase

The cost of purchase of inventories comprise the purchase price, import duties and other taxes (other than those subsequently recoverable by the entity from the tax authorities), transport, material handling and other costs directly attributable to the acquisition of finished goods, materials and services. Trade discounts, rebates and other similar items are deducted in determining the costs of purchase.

Cost of conversion

The cost of conversion of inventories includes the costs directly related to production units, such as direct labour costs. They also include a systematic allocation of fixed and variable production overheads that are incurred in converting materials into finished goods. Fixed production overheads are those indirect costs of production that remain relatively constant regardless of the volume of production, such as the depreciation and maintenance of factory buildings and equipment, and the costs of factory management and administration. Variable production overheads are those indirect costs of production that vary directly or nearly directly, with the volume of production, such as indirect materials and indirect labour.

Net realizable value

Net realizable value is calculated as 98.32% of expected sales price and it is based on the most reliable evidence available at the time the estimates are made.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and bank, and demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. Used capitalisation rate for 2021 was 0,81% and for 2020, it was 1%.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

Foreign currencies

The individual financial statements of each Company and the Group entity are prepared in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in Croatian kuna (HRK), which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.

In the financial statements of the individual Group entities, transactions in currencies other than the entity’s functional currency are translated to the functional currency of entity at the rates of exchange prevailing on the dates of the transactions.

At each statement of financial position date, monetary items denominated in foreign currencies are retranslated to the functional currency of the entity at the rates prevailing on the statement of financial position date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences are recognised in profit or loss in the period in which they arise except for:

· exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings;

· exchange differences on transactions entered into in order to hedge certain foreign currency risks;

· exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on disposal or partial disposal of the net investment.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations (including comparatives) are expressed in Croatian kuna using exchange rates prevailing on the statement of financial position date. Income and expense items (including comparatives) are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising from year-end translation, if any, are classified as equity and transferred to the Group’s other reserve. Such translation differences are recognised in profit or loss in the period in which the foreign operation is disposed of.

The foreign concessions of INA, d.d. meet the definition of foreign operation and are treated as such.

Business activities of INA, d.d. in Egypt and Angola are carried out with a significant degree of autonomy so the functional currency is US dollar (USD) except on gas field Isabella, (located in international waters in the North Adriatic Sea) where the functional currency is euro (EUR). The total revenue of a foreign operation (from the sale of crude oil and natural gas) is denominated in that currency (USD or EUR), as most of the costs. Capital expenditures are planned and presented in dollars or euros. Although they are not separate legal entities, they meet the definition of a foreign operation in accordance with IAS 21.

In the case of a partial disposal that does not result in the Group losing control over a subsidiary that includes a foreign operation, the proportionate share of accumulated exchange differences is re-attributed to non-controlling interests and are not recognised in profit or loss. For all other partial disposals, the proportionate share of the accumulated exchange differences is reclassified to profit or loss.

Foreign currencies (continued)

Goodwill and fair value adjustments on identifiable assets and liabilities acquired arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising are recognised in other comprehensive income.

Retirement Benefit and Jubilee Costs

For defined benefit plans for retirement and jubilee awards, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at each annual reporting period.

Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding interest), is reflected immediately in the statement of financial position with a charge or credit recognised in other comprehensive income in the period in which they occur. Remeasurement recognised in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss. Past service cost is recognised in profit or loss in the period of a plan amendment.

Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorised as follows:

· service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);

· net interest income or expense; and

· remeasurement.

The Group presents the first two components of defined benefit costs in profit or loss in the line item. Curtailment gains and losses are accounted for as past service costs.

The retirement benefit obligation recognised in the consolidated statement of financial position represents the actual deficit or surplus in the Group’s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans. A liability for a termination benefit is recognised when the entity can no longer withdraw the offer of the termination benefit or when the entity recognises any related restructuring costs.

Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The current tax liability is based on taxable profit for the year. Taxable profit differs from accounting profit for the period because it does not include items of income or expense that are taxable or deductible in other years, as well as items that are never taxable or deductible. The current tax liability is calculated using tax rates that have been enacted or substantively enacted by the statement of financial position date.

Deferred tax

Deferred tax is amount of corporate income tax which will result in taxable or deductible amounts in determining taxable profit in future periods and based on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.

Deferred tax is calculated using tax rates that have been enacted or applicable by the end of the reporting year and are expected to apply in period in which temporary differences are expected to be compensate or settled.

Deferred tax assets are recognised where it is probable that assets will be realised in the future. At each date of Statement of financial position, the Company re-assesses deferred tax assets and recognizes it up to the amount of taxable profit that will probably be available for utilization of temporary differences on which deferred tax assets were posted.

Deferred taxes are calculated on temporary differences which occurred based on investments in subsidiaries and associated companies, except in case when the Group can make impact on reversal of the temporary difference and when is probable that temporary difference will not be reversed in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same Tax Authorities.

Current and deferred tax for the period

Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively. Where current tax and deferred tax arises from the accounting for a business acquisition, the tax effect is included in the business combination accounting.

Financial assets

Initial measurement of financial instruments

Financial assets are divided into two main categories, those measured at amortized cost and those measured at fair value. Fair value measurement is further divided into fair value through profit and loss (FVTPL) and fair value through other comprehensive income (FVTOCI).

Subsequent measurement of financial assets

Financial assets are classified in four categories:

Financial assets at amortized cost (debt instruments)

A debt instrument that meets the following two conditions is measured at amortized cost:

· Business model test: The financial asset is held to collect the contractual cash flows (rather than to sell the instrument prior to its contractual maturity to realize its fair value changes); and

· Cash flow characteristics test: The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets at fair value through other comprehensive income (debt instruments)

A debt instrument that meets the following two conditions must be measured at FVTOCI unless the asset is designated at FVTPL under the fair value option:

· Business model test: The financial asset is held within a business model with the objective of both holding to collect contractual cash flows and selling; and

· Cash flow characteristics test: The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

The Company and the Group invest only in government bonds and quoted debt securities with a very low credit risk. When the asset is derecognised or reclassified, changes in fair value previously recognised in other comprehensive income and accumulated in equity are reclassified to profit and loss.

Financial assets at fair value through profit or loss (debt instruments)

All other debt instruments must be measured at FVTPL (including derivatives).

Financial assets (continued)

Subsequent measurement of financial assets (continued)

Financial assets designated at fair value through other comprehensive income (equity instruments)

Upon initial recognition, the Company and Group can elect to classify irrevocably its equity investments as equity instruments designated at FVTOCI when they meet the definition of equity under IAS 32 Financial Instruments: Presentation and are not held for trading. The classification is determined on an instrument-by-instrument basis.

The Company and the Group elected to classify its listed equity investments under this category (see note 40).

Derecognition of financial assets

The basic premise for the derecognition model is to determine whether the asset under consideration for derecognition is:

· an asset in its entirety;

· specifically identified cash flows from an asset (or a group of similar financial assets);

· fully proportionate (pro rata) share of the cash flows from an asset (or a group of similar financial assets); or

· fully proportionate (pro rata) share of specifically identified cash flows from a financial asset (or a group of similar financial assets).

Once the asset under consideration for derecognition has been determined, an assessment is made as to whether the asset has been transferred, and if so, whether the transfer of that asset is subsequently eligible for derecognition.

Impairment

The impairment model is based on the premise of providing for expected losses.

General approach

With the exception of purchased or originated credit impaired financial assets, expected credit losses are measured through a loss allowance at an amount equal to:

· the 12-month expected credit losses (expected credit losses that result from those default events on the financial instrument that are possible within 12 months after the reporting date);

· or full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of the financial instrument).

A loss allowance for full lifetime expected credit losses is required for a financial instrument if the credit risk of that financial instrument has increased significantly since initial recognition, as well as to contract assets or trade receivables that do not constitute a financing transaction in accordance with IFRS 15.

Financial assets (continued)

Simplified approach

The Company and the Group apply the simplified approach for the following financial assets: trade receivables, IFRS 15 contract assets and lease receivables. For all other financial instruments, general approach is applied.

Independently of the two approaches mentioned above, the impairment method stayed the same under the new standard in case of financial assets where there is an objective evidence on impairment. These are required to be assessed on a case-by-case basis. The maximum amount of impairment accounted for by the Company and Group is 100% of unsecured part of the financial asset.

Financial liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Company’s and the Group’s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts and derivative financial instruments.

Subsequent measurement

The measurement of financial liabilities depends on their classification.

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Company and the Group that are not designated as hedging instruments in hedge relationships as defined by IFRS 9. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. The Company and the Group do not have financial liabilities at fair value through profit or loss.

Loans and borrowings

This is the category most relevant to the Company and the Group. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost. Gains and losses are recognised in profit or loss when the liabilities are derecognised.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs.

Financial liabilities (continued)

Derecognition of financial liabilities

A financial liability is removed from the statement of financial position when, and only when, it is extinguished, that is, when the obligation specified in the contract is either discharged or cancelled or expires.

Where there has been an exchange between an existing borrower and lender of debt instruments with substantially different terms, or there has been a substantial modification of the terms of an existing financial liability, this transaction is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. A gain or loss from extinguishment of the original financial liability is recognized in profit or loss.

The Company and the Group do not have any financial instrument whose classification has changed as a result of applying IFRS 9 and does not have any instrument that the Company and the Group designated upon initial recognition as at fair value through profit or loss in order to reduce a measurement or recognition inconsistency.

Impairment is only accounted for trade receivables. No impairment is recognised on the remaining financial instruments based on materiality, history and expectations.

Segmental information

IFRS 8 Operating segments requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their performance.

Provisions for decommissioning and other obligations

Provisions are recognised when the Company and the Group have a present obligation (legal or constructive) as a result of a past event and it is probable (i.e. more likely than not) that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When the effect of discounting is material, the amount of the provision is the present value of the expenditures expected to be required to settle the obligation, determined using the discount factor, which is calculated as CPI (Consumer Price Index), and real interest rate. When discounting is used, the reversal of such discounting in each year is recognised as a financial expense and the carrying amount of the provision increases in each year to reflect the passage of time.

Provision relating to the decommissioning and removal of assets, such as an oil and gas production facility are initially treated as part of the cost of the related property, plant and equipment. Subsequent adjustments to the provision arising from changes in estimates as decommissioning costs, reserves and production of oil and gas, risk free interest such as discount rate and inflation rate are also treated as an adjustment to the cost of the property, plant and equipment and thus dealt with prospectively in the statement of profit or loss through future depreciation of the asset. Any change to the present value of the estimated costs is reflected as an adjustment of the provisions and the decommission assets.

Liability for emission is not recognized until the amount of actual emission reaches the amount of quota allocated free of charge. This approach is due to the fact that allocated emission allowances are not recorded as intangibles, their asset value is zero. When actual emission exceeds the amount of emission rights granted, provision should be made for the exceeding emission allowances. In case a company covers its liability by forward derivative deals which are kept off-balance, provision for the quantity covered by these deals is calculated using forward rates of the derivative deals. For any residual excess, the current fair value at the reporting date is used.

It also means that it is not possible to record a provision earlier than the date when emissions reach the amount of allowances granted, nor is it possible to spread the expected shortfall through the calendar years.

Settlement with Government is carried out by offsetting the purchased rights with the provision recorded for the exceeding emissions. Penalty will be accounted for if the shortfall is not covered by purchased quotas.

Provision should be calculated for each installation separately and recorded on emitting segment.

Revenue from Contracts with Customers

Under IFRS 15 the Company and the Group recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company and Group expect to be entitled in exchange for those goods or services. This core principle is delivered in a five-step model framework.

The Company and the Group consider whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated.

In determining the transaction price, the Company and the Group consider the effects of variable consideration, the existence of significant financing components, noncash consideration and consideration payable to the customer.

Presentation and disclosure

Contracts with customers are presented in statement of financial position as a contract liability, a contract asset, or a receivable, depending on the relationship between the performance of the Company and the Group and the customer's payment.

A contract liability is presented in the statement of financial position where a customer has paid an amount of consideration prior to the performing by transferring the related good or service to the customer.

Where the Company and the Group have performed the obligation by transferring a good or service to the customer and the customer has not yet paid the related consideration, a contract asset or a receivable is presented in the statement of financial position, depending on the nature of right to consideration. A contract asset is recognised when the Company’s and the Group’s right to consideration is conditional on something other than the passage of time, for example future performance of the Company and the Group. A receivable is recognised when the Company’s and the Group’s right to consideration is unconditional except for the passage of time.

Company’s and Group’s sales contracts generally comprise of only one performance obligation with the exception of loyalty points programme. As such, the Company and the Group do not disclose information about the allocation of the transaction price.

Excise duties

Excise duty is part of amounts collected on behalf of third parties and is excluded from revenues.

2. ACCOUNTING POLICIES (CONTINUED)

Revenue from Contracts with Customers (continued)

Construction – maintenance and service contracts

For each performance obligation satisfied over time, the Company and the Group recognizes revenue over time by measuring the progress towards complete satisfaction of that performance obligation. Management elected to use input method of calculating progress (costs incurred to date) in revenue recognition from construction contracts.

Loyalty points programme

The Company and the Group have the INA Loyalty Programme, Loyalty Points, which allows customers to accumulate points and reach certain status. Each status achived enables customer to receive certain benefits. The Loyalty Points give rise to a separate performance obligation as they provide a material right to the customer.

A portion of the transaction price is allocated to the loyalty points awarded to customers based on relative stand-alone selling price and recognised as a contract liability until the benefits are used. Revenue is recognised upon usage of benefits by the customer.

When estimating the stand-alone selling price of the loyalty points, Company and the Group conside the likelihood that the customer will use the benefit. The Company and the Group updates its estimates of the benefits that will be used by the customers at lease once a year and any adjustments to the contract liability balance are charged against revenue.

Government grants

Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.

When the Company and the Group receives grants of non-monetary assets, the asset and the grant are recorded at nominal amounts and released to profit or loss over the expected useful life of the asset, based on the pattern of consumption of the benefits of the underlying asset by equal annual instalments. The Group has chosen to present grants related to income to be deducted with related expense in the statement of profit or loss.

3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

Critical judgements and estimates in applying accounting policies

In the application of the accounting policies, which are described in note 2, Management made certain judgements and estimates that had a significant impact on the amounts reported in the financial statements (irrespective of the underlying estimates).

The preparation of financial statements in conformity with International Financial Reporting Standards, as adopted by EU requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses and disclosure of contingencies. The significant areas of estimation used in the preparation of the accompanying financial statements relate to employee benefits, impairment of assets, determination of fair values of assets and liabilities, estimated decommissioning costs, environmental provision and provision for legal cases as well as carrying value of investments and given loans to subsidiaries and contract balances. Future events may occur which will cause the assumptions used in arriving at the estimates to change. The effect of any changes in estimates will be recorded in the financial statements when determinable.

These judgements and estimates are provided in detail in the accompanying notes. However, the critical judgements and estimates relate to the following areas:

Consequences of certain legal actions

The Group is involved in number of litigations arisen from the regular course of business. If there is a present obligation as a result of a past event (taking into account all available evidence, including the opinion of law experts) for which it is probable that outflow of resources will be required to settle the obligation and if a reliable estimate can be made of the amount of the obligation, provisions are recorded (see note 30).

Carrying value of property, plant and equipment

The impairment calculation requires the estimate of the value in use of the cash generating units. Value in use is measured using the discounted cash flow projections. The most significant variables in determining cash flows are expected oil and gas prices, production volumes, operating and capital expenditures, discount rates, period of cash flow projections, as well as assumptions and judgments used in determining cash receipts and payments. At INA Group impairment of assets was recognized in the amount of HRK 14 million, while at INA, d.d. impairment of assets is not recognized as of 31 December 2021 (2020: INA Group HRK 490 million and INA, d.d. HRK 353 million).

Carrying value of goodwill

In 2021 impairment of goodwill was HRK 30 million (2020: HRK 94 million). The carrying amount of goodwill amounted to HRK 28 million as of 31 December 2021 (2020: HRK 58 million) (see note 13).

Carrying value of intangible exploration and appraisal assets

The carrying amount of intangible exploration and appraisal assets amounted to HRK 237 million as of 31 December 2021 and HRK 209 million as of 31 December 2020 (see note 13). At INA Group and INA, d.d. write-off of negative wells are recognized in amount of HRK 40 million at 31 December 2021 (2020: HRK 1 million at INA Group and INA, d.d.).

3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (CONTINUED)

Critical judgements and estimates in applying accounting policies (continued)

Carrying value of production oil and gas assets

The carrying amount of production oil and gas assets amounted to HRK 3,512 million as of 31 December 2021 (2020: HRK 3,956 million) (see note 14). As of 31 December 2021, write-off of negative wells is recognized in amount of HRK 73 million (2020: HRK 57 million) and did not recognize impairment of production oil and gas assets (2020: HRK 94 million impairment and asset impairment reversals for HRK 96 million).

Carrying value of Refining and Marketing assets

The carrying amount of Refining and Marketing assets amounted to HRK 6,528 as of 31 December 2021 (2020: HRK 6,278 million). Refining and Marketing in respect of Consumer services and retail recorded value adjustment of tangible asset under construction in amount of HRK 9 million (2020: HRK 295 million).

Key assumptions used

Refining and Marketing

INA’s management conducted an analysis of potential impairment triggers, in order to identify whether the key value drivers of the business (market demand, crack spreads, oil price) turned considerably to the worse and whether there have been significant changes in business operation which could disrupt future cash flows.

The analysis concluded that no triggering event for impairment test was identified for Refineries and Marketing.

Exploration and Production

The estimate of the future price of hydrocarbons, as a key value indicator for the Oil and Gas Exploration and Production assets, has significantly improved compared to the reporting period last year.

The Management Board performed identification and assessment of indicators in accordance with IAS 36. Within Exploration and Production area, two fields - Annamaria (NACA cash generating unit) and Žutica - were identified with negative revision of the remaining 2P reserves above 1 MMboe which is considered as materiality threshold on asset level. Impairment test for those two fields was prepared, showing that there is no need to impair the assets.

Investments in Syria

Since 1998 INA, d.d. has had six (6) commercial discoveries on the Hayan Block (Jihar, Al Mahr, Jazal, Palmyra, Mustadira and Mazrur) with significant oil, gas and condensate reserves. INA, d.d. temporarily suspended all business activities in Syria on 26 February 2012 by announcing Force Majeure to comply with the relevant sanctions of the US and the EU.

Current situation

Main production activities have been taken over by Hayan Petroleum Company’s local workforce, which INA, d.d. considers illegal.

Company has assessed situation in Syria and identified no material change compared to previous years. EU sanctions remain in place and the political situation has not changed significantly either for the better of worse from INA’s investment perspective. Therefore, no triggering event for asset impairment was identified in 2021.

In line with the Petroleum Resources Management System (PRMS) rules, and the fact that Syrian assets are under Force Majeure and INA, d.d. has no control for a period of almost 8 years, the reserves are shifted from 2P to 2C category in 2017. No changes in 2021.

Critical judgements and estimates in applying accounting policies (continued)

Key assumptions used (continued)

Political developments in Egypt

Concerning the INA, d.d. operations in Egypt the key uncertainty of business is the timing of receivables collection.

Hence, during 2021, and due to improved hydrocarbon prices environment after markets’ relative stabilization, INA, d.d. managed to collect previously impaired receivables in the amount of HRK 61 million. At 31 December 2021 gross book value of Egyptian General Petroleum Corporation receivables amounted to HRK 135 million with no receivables older than 6 months.

Quantification and determination of the decommissioning obligations for oil and gas properties

Decommissioning costs are uncertain and cost estimates can vary in response to many factors, including changes to legal and regulatory requirements, new technologies becoming available and experience of decommissioning other assets. The expected timing, scope, expenditure and risk profile may also change. Therefore, significant estimates and assumptions are made in determining decommissioning provisions. The provision estimate requires significant management judgement and is reviewed on annual basis.

Management makes estimates of future expenditure in connection with decommissioning obligations using prices by reference to prior similar activities, as well as other assumptions like the estimated effects of any changes in local regulations, management's expected approach to decommissioning, cost estimates and discount rates. Furthermore, the time determined for the cash flows reflects the current estimates of priorities, technical equipment requirements and urgency of the obligations. The obligation with respect to the decommissioning provision for oil and gas properties amounted to HRK 3,068 million at INA Group and INA, d.d. HRK 3,273 million as at 31 December 2021 (31 December 2020: INA Group HRK 3,146 and INA, d.d. HRK 3,369) (see note 30).

The level of provisioning for environmental obligations

The applicable regulations, specifically the environmental protection legislation, do not specify the exact scope of activities or technology to be applied in provision based environmental liabilities. Provisions are recognised when the Group has a present obligation (legal or constructive) because of a past event and it is probable (i.e. more likely than not) that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

Generally, the timing of provisions coincides with the commitment to a formal plan of action or, if earlier, on divestment or on closure of inactive sites. In determining the level of provisions for environmental obligations, the management relies on prior experience and their own interpretation of the related legislation. Where the liability will not be settled for a number of years, the amount recognized is the present value of the estimated future expenditure. At 31 December 2021 INA Group recognized environmental provision and provision for green rights in the amount of HRK 464 million (2020: HRK 327 million) and INA, d.d in the amount of HRK 461 million (2020: HRK 323 million) (see note 30), which covers investigation to determine the extent of contamination at specific site, treatment of accumulated waste generated by former activity, preliminary site investigation with corresponding laboratory analyses, soil excavation and replacement during the reconstruction of service stations and provision for emission quotas. It does not cover the cost of remediation in lack of detailed National regulations.

3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (CONTINUED)

Critical judgements and estimates in applying accounting policies (continued)

Availability of taxable profit on which the deferred tax assets can be recognized

A deferred tax asset for unused tax losses carried forward is recognized to the extent to which taxable profit is likely to be available, respectively to the extent of the available taxable temporary differences of the same Tax Authorities, which will result in taxable amounts for which unused tax losses can be used before its expiration.

Management believes that deferred tax asset recognized is recoverable. At 31 December 2021 the carrying amount of deferred tax assets of the INA Group amounted to HRK 949 million (2020: HRK 1,210 million) and deferred tax liabilities amounted to HRK 15 million at 31 December 2021 (2020: HRK 16 million). At 31 December 2021 the carrying amount of deferred tax assets of INA, d.d. amounted to HRK 799 million, (31 December 2020: HRK 1,054 million respectively) (see note 11). If the Group was able to recognise all unrecognised deferred tax assets, profit and equity would have increased by HRK 16 million at 31 December 2021 (31 December 2020: HRK 19 million).

Actuarial estimates used determining the retirement bonuses

The cost of defined benefits is determined using actuarial estimates. Actuarial estimates involve assumptions of discount rates, future salary increases and the mortality or fluctuation rates. Because of the long-term nature of those plans, there is uncertainty surrounding those estimates. Provisions for retirement bonuses and jubilee awards for INA Group amounted to HRK 71 million as at 31 December 2021 (31 December 2020: HRK 68 million), and INA, d.d. amounted to HRK 22 million as at 31 December 2021 (31 December 2020: HRK 19 million) (see note 31).

Useful life of the assets

The INA Group and INA, d.d. review the estimated useful lives of property, plant and equipment at the end of each reporting period. Estimation of useful life is considered to be a significant accounting estimation that effects on the change in depreciation rates. The new review of asset useful life at the end of 2021 had no significant changes compared to the previous estimate.

Lease term duration estimates

The Company and the Group has applied judgement to determine the lease term for all lease contracts that include renewal or termination options. The assessment of whether the Company or Group is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and leased assets recognised. A change in the scope of a lease includes adding or terminating the right to use one or more underlying assets or shortening the contractual lease term. A lease payment holiday or lease payment reduction caused by COVID-19 alone is a change in consideration for a lease and is not, a change in the scope of a lease.

Critical judgements and estimates in applying accounting policies (continued)

Estimates of incremental borrowing rate for lease contracts

The Company and the Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The incremental borrowing rate is the rate of interest that the company would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The incremental borrowing rate therefore reflects what the company ‘would have to pay’, which requires estimation when no observable rates are available (such as for subsidiaries that do not enter into financing transactions) or when they need to be adjusted to reflect the terms and conditions of the lease.

The Group estimates the incremental borrowing rate using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates (such as the subsidiary’s stand-alone credit rating). INA, d.d and INA Group review the estimated borrowing rates on quarterly basis.

Hydrocarbon reserves

Exploration and development projects involve many uncertainties and business risks that may give rise to significant expenditures. Exploration and development projects of the Company and the Group may be delayed or unsuccessful for many various reasons, including budgeted cost overrun, geological issues, difficulties in meeting the requirements of competent bodies, lacks of equipment and technical problems. These projects, particularly those pertaining to the wells in continental areas or other demanding terrain, often require deployment of new and advanced technologies, the development, purchase and installation of which may be expensive and that may not operate as expected.

Oil and natural gas exploration and drilling activities are subject to a wide range of inherent risks, including the risk of eruption, deposit damage, loss of control over the wells, perforation, craters, fire and natural disasters.

The Company and the Group estimate and report hydrocarbon reserves in line with the principles contained in the SPE Petroleum Resources Management Reporting System (PRMS) framework. Estimation of hydrocarbon reserves is a significant area of judgement due to the technical uncertainty in assessing quantities and complex contractual arrangements dictating the Company’s and the Group’s share of reportable volumes.

As the economic assumptions used may change and as additional geological information is obtained during the operation of a field, estimates of recoverable reserves may change. Such changes may affect the Company’s and the Group’s reported financial position and results, which include:

· The carrying value of exploration and evaluation assets; oil and gas properties; property, plant and equipment; and goodwill may be affected due to changes in estimated future cash flows;

· Depreciation and amortization charges in the statement of profit or loss and other comprehensive income may change where such charges are determined using the Units of Production (UOP) method, or where the useful life of the related assets change;

· Provisions for decommissioning may require revision where changes to the reserve estimates affect expectations about when such activities will occur and the associated cost of these activities;

· The recognition and carrying value of deferred tax assets may change due to changes in the judgments regarding the existence of such assets and in estimates of the likely recovery of such assets.

As part of standard practice, resources and reserves level were assessed at the year end. Within the most relevant profiles, no fields with negative reserves change above materiality threshold have been identified. In line with industry practice, the Proven and Probable (2P) level of reserves is considered the basis for determining management's best estimate of future cash flows.

Critical judgements and estimates in applying accounting policies (continued)

Carrying value of investments and given loans to subsidiaries (INA, d.d.)

The carrying amount of the investment in subsidiaries amounts to HRK 1,826 million as at 31 December 2021 and HRK 1,827 million as at 31 December 2020. The carrying amount of loans given to subsidiaries amounts to HRK 662 million as at 31 December 2021 and HRK 793 million at 31 December 2020.

Due to the significance exposure to subsidiaries (calculated as the sum of carrying value of investment and given loans, net) the existence of impairment indicators requires significant Management judgment in determining the appropriate approach for testing impairment.

	INA Group		INA, d.d.
	2021	2020	2021	2020

Trade receivables	2,007	1,206	1,749	866
Contract liabilities	11	22	-	-

Trade receivables are non-interest bearing and are generally on terms of 3 to 30 days.

Contract assets are initially recognised for revenue earned from construction services as receipt of consideration is conditional on successful completion of construction. Upon completion of construction services and acceptance by the customer, the amounts recognised as contract assets are reclassified to trade receivables.

Contract liabilities include short-term advances received for construction services in amount of HRK 11 million in 2021 as well as HRK 22 million in 2020. The remaining performance obligations are expected to be recognised in following year.

Contract assets and contract liabilities are not presented in separate line in statement of financial position because they are not considered to be significant for the Company and the Group. Contract assets are presented in line other current asset while contract liabilities are presented in line other current liabilities in statement of financial position.

Performance obligations

Revenue from the sale and transportation of crude oil, natural gas, petroleum products and other merchandise is recognised when the customer obtains control of the goods, which is normally when title passes to the customer and the customer takes the physical possession, based on the contractual terms of the agreements.

Sales agreements mainly represent one performance obligation and the Company and the Group principally satisfies its performance obligations at a point in time.

Reclassification position of profit and loss

The reclassification is performed in accordance with new INA Group Accounting policies and procedures and the comparable periods restated.

If the items in the consolidated and separate financial statements are amended, all comparative amounts are reclassified.

INA Group and INA, d.d. adjusted its classification between operating income and operating expense lines to align with MOL Group reporting practice, line Capitalised value of own performance was reclassified to Operating expenses in amount of HRK 286 million at INA Group, while in amount of HRK 28 million at INA, d.d. in 2020.

Additionally, at INA Group utilization of provisions in amount of HRK 197 million in 2020 was reclassified to the same line as realized costs (HRK 63 million in Other material cost, HRK 31 million in Service costs and HRK 103 million in Staff costs). At INA, d.d. utilization of provisions in amount of HRK 134 million in 2020 was reclassified to the same line as realized costs (HRK 61 million in Other material cost, HRK 22 million in Service costs and HRK 51 million in Staff costs).

The effect of reclassification of account of profit and loss and statement of financial position are as follows:

INA Group
	31 December 2020 before reclassification	Reclassification	31 December 2020 reclassified

Other material costs	(1,874)	63	(1,811)
Service costs	(465)	31	(434)
Staff costs	(1,731)	103	(1,628)
Provision for charges and risks (net)	9	(197)	(188)
Total	(4,061)	-	(4,061)


Operating income
Capitalised value of own performance	286	(286)	-
Operating expenses
Capitalised value of own performance	-	286	286
Total	286	-	286

Reclassification position of profit and loss (continued)

INA, d.d.
	31 December 2020 before reclassification	Reclassification	31 December 2020 reclassified

Other material costs	(1,834)	61	(1,773)
Service costs	(728)	22	(706)
Staff costs	(803)	51	(752)
Provision for charges and risks (net)	11	(134)	(123)
Total	(3,354)	-	(3,354)


Operating income
Capitalised value of own performance	28	(28)	-
Operating expenses
Capitalised value of own performance	-	28	28
Total	28	-	28

4. SEGMENT INFORMATION

The INA Group operates through three core business segments. The strategic business segments offer different products and services. Reporting segments, which in INA Group represent business operations, have been defined along value chain standard for the oil companies:

· Exploration and Production - exploration, production and selling of crude oil;

· Refining and Marketing - crude oil processing, wholesale of refinery products, selling of natural gas, selling of fuels and commercial goods in retail stations and logistics; and

· Corporate and other - in addition to the core segments above, the operations of INA Group provides services for core activities.

Information regarding the results of each reportable segment is included below. Profit from operations is used to measure performance, as management believes that such information is the most relevant in evaluating the result of certain segments. However, Group financing (including finance costs and finance income) and income taxes are managed on Group basis and are not relevant to making business decisions at the level of business segments.

Intersegment transfer represents the effect of unrealized profit arising in respect of transfers of inventories from Exploration and Production to Refining and Marketing. Evaluation of inventories of domestic crude, finished and semi-finished products in Refining and Marketing is based on the transfer price from Exploration and Production to Refining and Marketing. Elimination of unrealized profit (difference between transfer price and cost of domestic crude) is performed through intersegment transfer. For segmental reporting purposes, the transferor segment records a profit immediately at the point of transfer. However, at the Company level profit is only reported when the related third party sale has taken place.

The following table presents information on revenues and expenditures of INA Group operations for 2021:

31 December 2021	Exploration and Production	Refining and Marketing	Corporate and other	Intersegment transfers and consolidation adjustments	Total
Sales to external customers	365	21,827	208	-	22,400
Intersegment sales	3,512	85	1,138	(4,735)	-
Total revenue	3,877	21,912	1,346	(4,735)	22,400
Operating expenses, net of other operating income	(2,309)	(21,389)	(1,645)	4,445	(20,898)
Profit/(loss) from operations	1,568	523	(299)	(290)	1,502
Net finance gain					94
Share of net loss of joint ventures accounted for using the equity method					(9)
Profit before tax					1,587
Income tax expense					(273)
Profit for the year					1,314

The following table presents information on revenues and expenditures of INA Group operations for 2020:

31 December 2020	Exploration and Production	Refining and Marketing	Corporate and other	Intersegment transfers and consolidation adjustments	Total
Sales to external customers	210	14,083	495	-	14,788
Intersegment sales	1,978	70	1,048	(3,096)	-
Total revenue	2,188	14,153	1,543	(3,096)	14,788
Operating expenses, net of other operating income	(1,968)	(15,384)	(2,015)	3,281	(16,086)
Profit/(loss) from operations	220	(1,231)	(472)	185	(1,298)
Net finance loss					(68)
Share of net profit of joint ventures accounted for using the equity method					94
Loss before tax					(1,272)
Income tax benefit					135
Loss for the year					(1,137)

The following table presents information of financial position of INA Group operations for 2021:

31 December 2021 Assets and liabilities	Exploration and Production	Refining and Marketing	Corporate and other	Intersegment transfers and consolidation adjustments	Total
Intangible assets	245	22	182	-	449
Property, plant and equipment	4,182	6,676	1,082	(511)	11,429
Right-of-use asset	8	273	29	(3)	307
Investments in associates and joint venture	-	245	-	-	245
Inventories	214	2,125	180	(373)	2,146
Trade receivables, net	146	1,822	265	(226)	2,007
Not allocated assets					5,407
Total assets					21,990
Trade payables	300	1,751	318	(226)	2,143
Not allocated liabilities					9,065
Total liabilities					11,208
Other segment information
Property, plant and equipment	541	903	54	(23)	1,475
Intangible assets	67	1	55	-	123
Capital expenditure:	608	904	109	(23)	1,598
Depreciation, amortisation (net)	745	717	180	(2)	1,640
Impairment of tangible and intangible assets (net)	114	13	46	-	173
Impairment charges (net)*	(40)	63	57	1	81

The following table presents information of financial position of INA Group operations for 2020:

31 December 2020 Assets and liabilities	Exploration and Production	Refining and Marketing	Corporate and other	Intersegment transfers and consolidation adjustments	Total
Intangible assets	229	44	212	-	485
Property, plant and equipment	4,592	6,417	1,177	(486)	11,700
Right-of-use asset	11	257	41	(5)	304
Investments in associates and joint venture	-	254	-	-	254
Inventories	166	1,343	220	(105)	1,624
Trade receivables, net	116	944	334	(188)	1,206
Not allocated assets					3,423
Total assets					18,996

Trade payables	196	1,064	353	(187)	1,426
Not allocated liabilities					8,213
Total liabilities					9,639
Other segment information
Property, plant and equipment	426	747	64	(24)	1,213
Intangible assets	16	1	52	-	69
Capital expenditure:	442	748	116	(24)	1,282
Depreciation, amortisation (net)	739	783	279	(2)	1,799
Impairment of tangible and intangible assets (net)	54	295	141	-	490
Impairment charges (net)*	22	58	24	4	108

* See note 8

BY GEOGRAPHICAL
INA Group
31 December 2021	Republic of Croatia	Bosnia and Herzegovina	Egypt	Syria	Other countries	Total
Intangible assets	357	6	37	-	49	449
Property, plant and equipment	10,257	414	136	262	360	11,429
Right-of-use asset	292	9	-	-	6	307
Investments in associates and joint venture	245	-	-	-	-	245
Inventories	2,030	73	-	-	43	2,146
Trade receivables, net	1,351	122	151	-	383	2,007
Not allocated assets						5,407
Total assets						21,990
Other segment information
Property, plant and equipment	1,296	12	129	-	38	1,475
Intangible assets	88	-	35	-	-	123
Capital expenditure:	1,384	12	164	-	38	1,598

INA Group
31 December 2020	Republic of Croatia	Bosnia and Herzegovina	Egypt	Syria	Other countries	Total
Intangible assets	397	9	-	-	79	485
Property, plant and equipment	10,408	468	130	242	452	11,700
Right-of-use asset	285	12	-	-	7	304
Investments in associates and joint venture	-	-	-	-	254	254
Inventories	1,461	50	9	-	104	1,624
Trade receivables, net	823	-	114	-	269	1,206
Not allocated assets						3,423
Total assets						18,996
Other segment information
Property, plant and equipment	1,092	13	82	-	26	1,213
Intangible assets	69	-	-	-	-	69
Capital expenditure:	1,161	13	82	-	26	1,282

4. SEGMENT INFORMATION (CONTINUED)

INA Group

	*Revenues from external customers*
	2021	2020
Republic of Croatia	13,250	8,819
Bosnia and Hercegovina	2,706	1,834
Hungary	2,041	1,618
Switzerland	794	695
Great Britain	715	204
Malta	408	-
Singapur	393	-
Montenegro	341	257
Italy	337	282
Japan	313	-
Other countries	1,102	1,079
	22,400	14,788

INA, d.d.
	*Revenues from external customers*
	2021	2020
Republic of Croatia	13,187	8,630
Bosnia and Hercegovina	2,340	1,419
Hungary	1,797	1,434
Switzerland	793	695
Great Britain	715	204
Malta	408	3
Singapore	393	48
Montenegro	375	270
Italy	337	282
Japan	313	-
Other countries	1,033	773
	21,691	13,758

Information about major customers

In 2021 and 2020 there was no single third party customer that would contribute to 10% or more of the Company and the Group’s revenue.

	INA Group		INA, d.d.
	2021	2020	2021	2020
Income from rental activities	58	52	62	56
Profit from sale of assets	53	21	15	12
Income from collected damage claims	40	1	40	1
Income from contractual penalties	38	4	37	3
Surpluses	25	18	23	16
Commission fee and charges	21	17	19	16
Payment in kind	11	10	9	9
Income from sediment reduction	10	15	10	15
Rebates and returns	10	5	10	5
Other	53	38	36	33
Total	319	181	261	166

6. DEPRECIATION, AMORTISATION AND IMPAIRMENT (NET)

	INA Group		INA, d.d.
	2021	2020	2021	2020
Depreciation of property, plant and equipment (note 14 b)	1,498	1,572	1,449	1,464
Amortisation of right -of-use asset	84	76	104	98
Amortisation of intangible assets (note 13)	58	45	57	43
Impairment of tangible and intangible assets (net) (note 13 and 14)	165	588	120	355
Write-off PP&E, net	8	8	5	3
	1,813	2,289	1,735	1,963

	INA Group		INA, d.d.
	2021	2020	2021	2020

Net payroll	945	950	442		437
Tax and contributions for pensions and health insurance	541	557	280		288
Other payroll related costs	279	121	103		27

	1,765	1,628	825		752

INA Group has not used government grants during 2021.

During 2020 INA Group has met the criteria for Croatian Government’s job preservation measures for mitigation the effects of special circumstances caused by COVID-19. At INA Group total amount of HRK 23 million was paid out as employment protection measures, while at INA, d.d. amount of HRK 20 million was paid out.

INA, d.d., IMS d.o.o. and Hostin d.o.o. are the entities within INA Group that have used the government grant. The amount paid out as employment protection measures was deducted from the staff cost.

INA Group and INA, d.d. employs the following number of employees, the majority of whom work within the Republic of Croatia:

	INA Group		INA, d.d.
	2021	2020	2021	2020
	Number of employees	Number of employees	Number of employees	Number of employees
Refining and Marketing	5,673	5,801	1,750	1,916
Corporate and other	2,975	3,076	486	544
Exploration and Production	987	952	986	951

	9,635	9,829	3,222	3,411

8. IMPAIRMENT CHARGES (NET)

	INA Group		INA, d.d.
	2021	2020	2021	2020

Impairment of inventory, net	114	83	69	65
Impairment of trade receivables, net	(54)	10	(54)	10
Other impairment, net	21	15	21	5
	81	108	36	80

*see note 3

9. PROVISIONS FOR CHARGES AND RISKS (NET)

	INA Group		INA, d.d.
	2021	2020	2021	2020

Provision for emission rights	185	28	185	28
Provision for decommissioning charges	88	-	93	-
Provision for renewable energy	25	15	25	15
Provision for taxation	15	-	-	-
Provision for retirement and jubilee benefits	6	2	1	-
Provision for incentives	4	124	4	69
(Reversal of provision)/provision for legal claims	(15)	11	7	7
Reversal of provision for environmental liabilities	(5)	(8)	(5)	(7)
Other provisions	10	16	10	11
	313	188	320	123

10. FINANCE INCOME AND FINANCE COST

	INA Group		INA, d.d.
	2021	2020	2021	2020
Dividends received	170	9	213	34
Foreign exchange gains from trade receivables and payables	134	69	86	29
Foreign exchange gains from loans and cash	22	59	12	58
Interest received and other financial income	17	28	43	53
Reversal of impairment from investment	-	-	-	1
Finance income	343	165	354	175

Interest expense	83	71	89	77
Foreign exchange losses from loans and cash	64	41	57	38
Foreign exchange losses from trade receivables and payables	61	103	56	71
Fees on bank loans	25	18	25	18
Foreign exchange losses from provisions	21	-	20	-
Capitalized borrowing costs	(12)	(7)	(12)	(7)
Interest lease for right-of-use asset	4	4	3	3
Other financial costs	3	3	4	2
Finance costs	249	233	242	202


Net gain/(loss) from financial activities	94	(68)	112	(27)

11. TAXATION

	INA Group		INA, d.d.
	2021	2020	2021	2020

Deferred tax charge related to origination and reversal of temporary differences	242	(166)	239	(117)
Current tax expense	31	31	10	3
Income tax expense/(benefit)	273	(135)	249	(114)

Corporate income tax on profit generated in Croatia is determined by applying the rate of 18% to the tax base determined in accordance with the tax regulation prevailing in Croatia.

The income tax, determined on the basis of the accounting profit, is assessed as follows:

	INA Group		INA, d.d.
	2021	2020	2021	2020

Profit/(Loss) before tax	1,587	(1,272)	1,522	(1,047)
Expense tax calculated at 18%	286	(229)	274	(188)
Tax effect of previous years	9	11	-	-
Adjustment of deferred tax assets as a result of new estimation of utilization	5	93	11	99
Income tax expense of entities operating in other jurisdictions	8	4	10	3
Tax effect of permanent differences, net	(35)	(14)	(46)	(28)
Income tax expense/(benefit)	273	(135)	249	(114)

Deferred tax assets and liabilities are determined by applying tax rates to be implemented in the period when the asset is realized or the liability is settled, based on tax rates (and tax regulation) that have been enacted or put into effect at the end of the reporting period.

Movements in deferred tax assets are set out in the following table:

11. TAXATION (CONTINUED)

INA Group	Impairment of current assets	Impairment of tangible and intangible assets	Reversal of depreciation for impaired asset	Other provisions	Impairment of financial investments	Tax losses	Deferred taxes on fair value	Total
Balance at 1 January 2020	50	1,314	(723)	146	56	184	(7)	1,020
Charge directly to equity	-	-	-	-	8	-	-	8
Reversal of temporary differences	(4)	(19)	(75)	(36)	-	(128)	-	(262)
Origination of temporary differences	10	131	-	34	23	230	-	428
Balance at 31 December 2020	56	1,426	(798)	144	87	286	(7)	1,194
Charge directly to equity	-	-	-	-	(17)	-	-	(17)
Reversal of temporary differences	(8)	(32)	(60)	(38)	(2)	(263)	-	(403)
Origination of temporary differences	12	42	-	87	14	5	-	160
Balance at 31 December 2021	60	1,436	(858)	193	82	28	(7)	934

State aid measures

INA Group and INA, d.d. has not used government grants during 2021.

During 2020 INA Group used the measure of deferral of payment of tax liabilities due in the period from 1 April 2020 until 20 June 2020. The deferral of payment was granted for a period of three months from the statutory due dates of each individual tax liability. The measures were applied to personal income tax and contributions, corporation income tax and tourist bord membership. Total amount of deferred payments was HRK 105 million. Companies that used the measure are INA, d.d., Crosco, naftni servisi d.o.o., STSI, Integrirani tehnički servisi d.o.o., Hostin d.o.o., INA Maloprodajni servisi d.o.o., Petrol d.d., Plavi tim d.o.o. and INA Vatrogasni servisi d.o.o.

Furthermore, the measure of deferral of VAT payment for the amount of due tax liability that is higher than the amount for which taxpayer would be responsible in case that taxpayer calculated the value added tax in accordance with the gradual taxation according to the collected fees, and the measures of reporting for VAT arising on import as accounting categories. The effect of the measures is not relevant due to the temporary nature of these measures. Companies that used the measures were as follow: INA, d.d., Crosco, naftni servisi d.o.o., STSI, Integrirani tehnički servisi d.o.o., INA Maloprodajni servisi d.o.o. and Hostin d.o.o. Crosco, naftni servisi d.o.o. used the measure of partial deferred tax liabilities write-off in the amount of HRK 8 million.

INA, d.d.	Impairment of current assets	Impairment of tangible and intangible assets	Reversal of depreciation for impaired asset	Other provisions	Impairment of financial investments	Tax losses	Total
Balance at 1 January 2020	44	1,311	(723)	129	1	167	929
Charge directly to equity	-	-	-	-	8	-	8
Reversal of temporary differences	(3)	(18)	(75)	(28)	-	(126)	(250)
Origination of temporary differences	8	113	-	27	6	213	367
Balance at 31 December 2020	49	1,406	(798)	128	15	254	1,054
Charge directly to equity	-	-	-	1	(17)	-	(16)
Reversal of temporary differences	(7)	(17)	(60)	(31)	(2)	(248)	(365)
Origination of temporary differences	7	41	-	76	2	-	126
Balance at 31 December 2021	49	1,430	(858)	174	(2)	6	799

	INA Group
	31 December 2021	31 December 2020

Basic and diluted earnings/(loss) per share (HRK per share)	131.25	(113.82)


Earnings	INA Group
	31 December 2021	31 December 2020
Earnings/(Loss) used in the calculation of total basic earnings per share	1,312	(1,138)
	1,312	(1,138)


Number of shares	INA Group
	31 December 2021	31 December 2020
	Number of shares	Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings per share (in millions)	10	10

On 18 June 2021 regular Shareholders' Assembly of INA, d.d. was held and there was no decision on dividend approved.

On 26 August 2020 Regular Shareholders’ Assembly of INA, d.d. was held and decision on dividend pay-out in amount of HRK 623 million was voted (HRK 62.27 per share). The dividend payout in the amount of HRK 62.27 per share has been carried out on 25 September 2020 to all shareholders, except for the two largest owners, who agreed that their respective part of the dividend is paid out until 15 January 2021, in order to support Company cash flow.

INA Group	Oil and gas properties	Software	Patents, Licences and other rights	Intangible assets under construction	Goodwill	Total
Balance at 1 January 2020	245	105	66	67	152	635
Additions	13	-	-	56	-	69
Amortisation	-	(42)	(3)	-	-	(45)
Foreign exchange translation of foreign operations	(2)	-	-	-	-	(2)
Disposal and impairment	(1)	-	(1)	-	(94)	(96)
Emission allowances (net)	-	-	(32)	-	-	(32)
Transfer	(46)	13	1	(12)	-	(44)
Balance at 31 December 2020	209	76	31	111	58	485
Additions	66	-	-	57	-	123
Amortisation	-	(55)	(3)	-	-	(58)
Foreign exchange translation of foreign operations	2	-	-	-	-	2
Disposal and impairment	(40)	-	-	-	(30)	(70)
Emission allowances (net)	-	-	(20)	-	-	(20)
Transfer	-	63	8	(84)	-	(13)
Balance at 31 December 2021	237	84	16	84	28	449

At 31 December 2021 INA Group and INA, d.d. Exploration and Production recorded write-off of negative wells on intangible assets in the amount of HRK 40 million (2020: HRK 1 million).

INA, d.d.	Oil and gas properties	Software	Patents, Licences and other rights	Intangible assets under construction	Total
Balance at 1 January 2020	196	104	56	64	420
Additions	13	-	-	54	67
Amortisation	-	(42)	(1)	-	(43)
Foreign exchange translation of foreign operations	(2)	-	-	-	(2)
Disposal and impairment	(1)	-	-	-	(1)
Emission allowances (net)	-	-	(32)	-	(32)
Transfer	(46)	13	2	(12)	(43)
Effect of merger of subsidiary	49	-	-	-	49
Balance at 31 December 2020	209	75	25	106	415
Additions	66	-	-	56	122
Amortisation	-	(54)	(3)	-	(57)
Foreign exchange translation of foreign operations	2	-	-	-	2
Disposal and impairment	(40)	-	-	-	(40)
Emission allowances (net)	-	-	(20)	-	(20)
Transfer	-	63	8	(81)	(10)
Other	-	1	-	(1)	-
Balance at 31 December 2021	237	85	10	80	412

13. INTANGIBLE ASSETS (CONTINUED)

Goodwill

Investment of Crosco, d.o.o. in Rotary Zrt. Hungary
	INA Group
	31 December 2021	31 December 2020
Cost	202	202
Accumulated impairment losses	(174)	(144)
Net book value	28	58

At the end of 2021 goodwill relating to the company Rotary Zrt. was tested for impairment and the test showed that the impairment of HRK 30 million was required due to the extraordinary circumstances in the market of oil and petroleum products.

The recoverable amount of Rotary Zrt. business as at 31 December 2021 has been determined based on a value in use calculation using cash flow projections from financial budgets approved by Company management covering a five-year period. The discount rate applied to cash flow projections is 6.6% (2020 is 8.1%) and cash flows beyond the five-year period are prepared taking into consideration utilization days of Rotary’s assets, average daily rates based on past experience and future predictions in the projected period. The growth rates are based on industry growth forecasts and Upstream segment assumptions, where for this particular case no long-term growth rate is foreseen in line with expectations. Expenses are determined also in relation to the utilization of the assets.

The calculation of Rotary's net present value is most sensitive to the following assumptions:

· Daily rates

· Utilization

· Discount rates

· Employee cost.

Change in the estimates of these premises would influence the net present value (NPV) of the CGU, having an impact on the amount of impairment recognized in relation to Rotary's net realisable value. Sensitivity analysis of the key assumptions used in impairment test shows the following effects:

· +/-1% alteration in daily rate indicates HRK 9 million difference in NPV

· +/-1% alteration of utilisation indicates HRK 2 million difference in NPV

· 1% increase in the discount rate indicates HRK 12 million decrease, 1% decrease results in HRK 16 million increase in the NPV

· +/-1% alteration of employee costs indicates HRK 9 million difference in NPV.

Forecast daily rate prices and utilization days are based on management’s estimates and available market data. Discount rates represent the current market assessment of the risks specific to Rotary Zrt., taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates.

14. PROPERTY, PLANT AND EQUIPMENT

INA Group	Exploration and Production	Refining and Marketing	Corporate and other	Total

Balance at 31 December 2020
Cost	45,757	23,987	5,931	75,675
Accumulated depreciation	41,416	17,709	4,850	63,975
Net book value	4,341	6,278	1,081	11,700

Balance at 31 December 2021
Cost	46,104	24,774	5,609	76,487
Accumulated depreciation	42,190	18,246	4,622	65,058
Net book value	3,914	6,528	987	11,429


INA, d.d.	Exploration and Production	Refining and Marketing	Corporate and other	Total

Balance at 31 December 2020
Cost	46,157	22,650	1,885	70,692
Accumulated depreciation	41,642	17,017	1,616	60,275
Net book value	4,515	5,633	269	10,417

Balance at 31 December 2021
Cost	46,491	23,437	1,895	71,823
Accumulated depreciation	42,460	17,551	1,652	61,663
Net book value	4,031	5,886	243	10,160

INA Group	Oil and gas properties	Land and buildings	Plant and machinery	Vehicles and office equipment	Collective Consumption assets	Assets under construction	Total
At cost
Balance at 1 January 2020	41,903	13,065	15,291	2,548	44	2,261	75,112
Additions	384	-	-	-	-	829	1,213
Change in capitalised decommissioning costs	21	-	-	-	-	-	21
Assets put in use, Transfer	1,003	263	427	178	-	(1,871)	-
Transfer to assets-held-for-sale	-	(40)	(142)	(6)	-	-	(188)
Transfer from intangible asset	81	2	2	-	-	(6)	79
Disposals	(2)	(46)	(148)	(32)	-	(2)	(230)
Currency translation, FX of foreign operations	(36)	(209)	(73)	(14)	-	-	(332)
Other	-	-	2	(2)	-	-	-
Balance at 31 December 2020	43,354	13,035	15,359	2,672	44	1,211	75,675
Additions	515	-	-	-	-	960	1,475
Change in capitalised decommissioning costs	(134)	-	-	-	-	-	(134)
Assets put in use, Transfer	2	132	356	82	-	(559)	13
Transfer to assets-held-for-sale	-	(4)	-	(1)	-	-	(5)
Disposals	(76)	(78)	(343)	(27)	-	(45)	(569)
Currency translation, FX of foreign operations	37	-	2	-	-	-	39
Other movements	-	(9)	10	(8)	-	-	(7)
Balance at 31 December 2021	43,698	13,076	15,384	2,718	44	1,567	76,487

14. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

INA Group Accumulated depreciation	Oil and gas properties	Land and buildings	Plant and machinery	Vehicles and office equipment	Collective Consumption assets	Assets under construction	Total
Balance at 1 January 2020	38,630	9,527	11,915	2,244	40	189	62,545
Charge for the year	721	197	578	76	-	-	1,572
Impairment	151	105	322	3	-	5	586
Reversal of impairment	(96)	-	-	-	-	-	(96)
Transfer to assets-held-for-sale	-	(30)	(127)	(5)	-	-	(162)
Transfer	(10)	24	(46)	26	-	42	36
Disposals	(1)	(39)	(143)	(32)	-	-	(215)
Currency translation, FX of foreign operations	-	(184)	(108)	(2)	-	-	(294)
Other	3	-	1	(1)	-	-	3
Balance at 31 December 2020	39,398	9,600	12,392	2,309	40	236	63,975
Charge for the year	743	233	432	90	-	-	1,498
Change in capitalised decommissioning costs	46	-	-	-	-	-	46
Impairment	73	-	14	-	-	9	96
Transfer to assets-held-for-sale	-	(1)	-	-	(1)	-	(2)
Transfer	-	22	-	-	-	(22)	-
Disposals	(74)	(63)	(343)	(41)	-	(42)	(563)
Currency translation, FX of foreign operations	-	(1)	20	(1)	-	-	18
Other movements	-	(5)	(4)	(1)	-	-	(10)
Balance at 31 December 2021	40,186	9,785	12,511	2,356	39	181	65,058

14. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

INA Group	Oil and gas properties	Land and buildings	Plant and machinery	Vehicles and office equipment	Collective Consumption assets	Assets under construction	Total

Carrying amount
Balance at 31 December 2021	3,512	3,291	2,873	362	5	1,386	11,429
Balance at 31 December 2020	3,956	3,435	2,967	363	4	975	11,700

14. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

b) By asset type (continued)

INA, d.d.	Oil and gas properties	Land and buildings	Plant and machinery	Vehicles and office equipment	Collective Consumption assets	Assets under construction	Total
At cost
Balance at 1 January 2020	36,470	10,622	12,213	2,009	42	2,582	63,938
Additions	380	-	-	-	-	792	1,172
Change in capitalised decommissioning costs	25	-	-	-	-	-	25
Foreign exchange translation of foreign operations	(37)	-	-	-	-	-	(37)
Share capital increase of subsidiary	-	(2)	-	-	-	-	(2)
Assets put in use	1,059	238	412	171	-	(1,802)	78
Disposals	(2)	(35)	(19)	(32)	-	(3)	(91)
Effect of merger of subsidiary	5,607	-	32	-	-	-	5,639
Other	-	(30)	-	-	-	-	(30)
Balance at 31 December 2020	43,502	10,793	12,638	2,148	42	1,569	70,692
Additions	515	-	-	-	-	920	1,435
Change in capitalised decommissioning costs	(163)	-	-	-	-	-	(163)
Foreign exchange translation of foreign operations	37	-	-	-	-	-	37
Share capital increase of subsidiary	-	(1)	-	-	-	-	(1)
Assets put in use, Transfer	2	105	350	71	-	(518)	10
Disposals	(76)	(3)	(57)	(14)	-	(45)	(195)
Effect of merger of subsidiary	-	11	-	-	-	-	11
Other movements	-	(1)	-	(1)	(1)	-	(3)
Balance at 31 December 2021	43,817	10,904	12,931	2,204	41	1,926	71,823

14. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

b) By asset type (continued)

INA, d.d.	Oil and gas properties	Land and buildings	Plant and machinery	Vehicles and office equipment	Collective Consumption assets	Assets under construction	Total
Accumulated depreciation
Balance at 1 January 2020	33,210	7,792	10,000	1,746	39	191	52,978
Charge for the year	707	186	497	74	-	-	1,464
Impairment	151	74	217	1	-	5	448
Reversal of impairment	(96)	-	-	-	-	-	(96)
Recapitalization of subsidiary	-	(2)	-	-	-	-	(2)
Transfers	(14)	28	(49)	28	-	42	35
Disposals	(1)	(30)	(19)	(32)	-	-	(82)
Effect of merge of subsidiary	5,516	-	32	-	-	-	5,548
Other	5	(23)	-	-	-	-	(18)
Balance at 31 December 2020	39,478	8,025	10,678	1,817	39	238	60,275
Charge for the year	758	174	442	75	-	-	1,449
Change in capitalised decommissioning costs	39	-	-	-	-	-	39
Impairment	73	-	-	-	-	9	82
Recapitalization of subsidiary	-	(1)	-	-	-	-	(1)
Transfers	1	22	-	(1)	1	(23)	-
Disposals	(74)	(2)	(58)	(14)	-	(42)	(190)
Effect of merge of subsidiary	-	10	-	-	-	-	10
Other movements	-	-	1	(1)	(1)	-	(1)
Balance at 31 December 2021	40,275	8,228	11,063	1,876	39	182	61,663

INA, d.d.	Oil and gas properties	Land and buildings	Plant and machinery	Vehicles and office equipment	Collective Consumption assets	Assets under construction	Total
Carrying amount
Balance at 31 December 2021	3,542	2,676	1,868	328	2	1,744	10,160
Balance at 31 December 2020	4,024	2,768	1,960	331	3	1,331	10,417

The ability of INA Group and INA, d.d. to realise the net book value of oil and gas properties (see 14b above) in the future is dependent upon the extent to which commercially recoverable oil and gas reserves are available. During 2021, Exploration and Production performed assessment of the quantities of the Company’s remaining proved and probable developed oil and gas reserves which were commercially recoverable.

Due to political developments in Croatia since 1990, certain local municipal land registers have not been fully established. The Company is in the process of registering of ownership, through the local courts in Croatia. Until the date of issuing of these financial statements, no claims have been made against the Company concerning its title to these assets.

Collective consumption assets refers to domestic residential accommodation for the workforce of the Company and some of its subsidiaries.

14. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

The Management Board performed identification and assessment of indicators in accordance with IAS 36. Impairment test was performed on assets where indicators of impairment have been identified.

The total net impairment charge of INA Group in 2021 is HRK 14 million and the value adjustment HRK 82 million, while in INA, d.d. only value adjustment in the amount of HRK 82 million was recognized. (2020: INA Group HRK 494 million, INA, d.d. 350 million).

a) Within Exploration and Production area, two fields - Annamaria (NACA cash generating unit) and Žutica - were identified with negative revision of the remaining 2P reserves above 1 MMboe which is considered as materiality threshold on asset level. Impairment test for those two fields was prepared, showing that there is no need to impair the assets as their production profiles are still sizeable and fields generate NPV above the net book value. Oil and gas price assumptions used in the value in use models used for impairment testing were the following: 50 to 90 USD / barrel and 16 to 27 EUR/MWh for gas for the years from 2020 to 2050.

Based on external environment outlook, stable operation and general improvement of economic activity compared to COVID-impacted year 2020, need for impairment of property, plant and equipment was not identified within the process of assessment of indicators and impairment testing, therefore no impairment or reversal of impairment was recorded in 2021.

Exploration and Production recorded write-off of negative wells on tangible assets in amount of HRK 73 million (Bunjani 1 - HRK 34 million, Đeletovci 2 - HRK 25 million, Velika Ciglena 2 – HRK 12 million, Ostalo – HRK 2 million) (2020: HRK 57 million).

b) Refining and Marketing in respect of Consumer services and retail recorded value adjustment of tangible asset under construction in amount of HRK 9 million ( 2020: HRK 295 million)

c) Corporate and other recorded impairment of Crosco d.o.o. assets in the amount of HRK 8 million and Rotary in the amount of HRK 6 million (2020: HRK 140 million).

Discount rates used in the current assessment in 2021 and for 2020 are assets specific and are as follows:

Exploration and Production	December 2021	December 2020
Croatia	7.2%	8.1%

14. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Capitalised internal labour are all direct costs of labor that can be identified or associated with and are properly allocable to the construction, modification, or installation of specific items of capital assets and, as such can be amortized. In 2021 INA Group capitalised internal labour in amount of HRK 29 million (2020: HRK 27 million). In 2021 INA, d.d. capitalised labour in amounts of HRK 29 million (2020: HRK 27 million).

The Group has reviewed the residual value for depreciation purposes to reflect the changes in the definition of the residual value provided in IAS 16 and no need for any adjustment to the residual values related to the current or prior periods has been established. Useful life of decommissioning assets has been adjusted to reflect the economic life of fields.

Management expects that sales transactions will be closed within the following twelve months.

	INA Group		INA, d.d.
	31 December 2021	31 December 2020	31 December 2021	31 December 2020

Held-for-sale assets
Property, plant and equipment	13	30	-	7
Assets classified held-for-sale	13	30	-	7

15. INVESTMENTS IN SUBSIDIARIES (in separate financial statement of INA, d.d.)

	INA, d.d.
	31 December 2021	31 December 2020

Investments in subsidiaries	1,826	1,827




	INA, d.d.
	31 December 2021	31 December 2020

Investments in subsidiaries at 1 January	1,827	2,089
Petrol Rijeka - merger to INA d.d.	(4)	-
Holdina Sarajevo d.o.o. - share capital increase	3	2
INA Adria - merger to INA, d.d.	-	(264)
Balance at 31 December 2021	1,826	1,827

The following portfolio changes were recorded in 2021:

Based on the decision of the Commercial Court dated 2 January 2021 INA, d.d. recorded the merger of Petrol Jurdani d.d.

On 1 December 2021 INA, d.d. increase the share capital in the Holdina Sarajevo d.o.o. by registering ownership of one property. INA, d.d. derecognised investment in amount HRK 100 thousand, while Holdina Sarajevo increased capital share in amount of HRK 3 million. The difference of HRK 3 million was recognized within other operating income.

The following portfolio changes were recorded in 2020:

Based on the decision of the Commercial Court dated 2 January 2020 INA, d.d. recorded the merger of INA Jadran d.o.o.

Based on the decision of the Commercial Court from 1 September 2020 INA, d.d. recorded the merger of INA Adria d.o.o. Net share in books of INA, d.d. at the time of the merger in amounted HRK 265 million and were netted with retained earnings transferred in the books of INA, d.d. Netted efect of transaction is HRK 75 million.

On 7 October 2020 INA, d.d. increase the share capital in the Holdina Sarajevo d.o.o. by registering ownership of one property.

In the books of INA d.d. assets in amount HRK 0.2 million were derecognised, while the share in Holdina Sarajevo was increased by an estimated value of HRK 2.2 million. The difference of HRK 2 million was recognized within other operating income.

The following are subsidiaries in which the Company has a share (* subsidiary directly owned by the Company):

15. INVESTMENTS IN SUBSIDIARIES (in separate financial statement of INA, d.d.) (CONTINUED)

	Composition of the Group

The name of subsidiary	Principal activity	Place of incorporation and operation	Proportion of ownership interest and voting power held by the Group
			31 December 2021	31 December 2020

Oilfield services
CROSCO, naftni servisi d.o.o.	Oilfield services	Croatia	100%	100%
Crosco B.V.	Oilfield services	Netherland	100%	100%
NORDIC SHIPPING LIMITED	Lease of drilling platforms	Marshall Islands	100%	100%
SEA HORSE SHIPPING Inc	Lease of drilling platforms	Marshall Islands	100%	100%
Rotary Zrt.	Oilfield services	Hungary	100%	100%
CROSCO UKRAINE LLC.	Oilfield services	Ukraine	100%	100%
Crosco S.A. DE C.V.	Oilfield services	Mexico	99.90%	99.90%
ROTARY D&WS S.R.L.	Oilfield services	Romania	100%	100%

Tourism
*Hostin d.o.o.	Asset management, tourism	Croatia	100%	100%

Ancillary services
STSI Integrirani tehnički servisi d.o.o.	Technical services	Croatia	100%	100%
*Top Računovodstvo Servisi d.o.o.	Accounting services	Croatia	100%	100%
Plavi tim d.o.o.	Informatics service	Croatia	100%	100%
*INA Vatrogasni Servisi d.o.o.	Firefighting	Croatia	100%	100%
*INA Industrijski Servisi d.o.o.	Holding company	Croatia	100%	100%

Production and trading
*INA MAZIVA d.o.o.	Production and lubricants trading	Croatia	100%	100%

Trading
*INA Slovenija d.o.o. Ljubljana	Foreign trading	Slovenia	100%	100%
*INA BH d.d. Sarajevo	Foreign trading	Bosnia and Herzegovina	100%	100%
*Holdina d.o.o. Sarajevo	Foreign trading	Bosnia and Herzegovina	100%	100%
*INA d.o.o. Beograd	Foreign trading	Serbia	100%	100%
*INA Kosovo d.o.o.	Foreign trading	Kosovo	100%	100%
*Adriagas S.r.l. Milano	Pipeline project company	Italy	100%	100%
*INA Crna Gora d.o.o. Podgorica	Foreign trading	Montenegro	100%	100%
*PETROL d.d.	Trading	Croatia	-	100%
*CROPLIN d.o.o.	Production of gas, distribution network of gas fuels	Croatia	100%	100%
*INA Maloprodajni servisi d.o.o.	Trade agency in the domestic and foreign market	Croatia	100%	100%
*ENERGOPETROL d.d.	Retail (oil and lubricant)	Bosnia and Herzegovina	88.66%	88.66%
*INA BL d.o.o. Banja Luka	Trading	Bosnia and Herzegovina	100%	100%

15. INVESTMENTS IN SUBSIDIARIES (in separate financial statement of INA, d.d.) (CONTINUED)

At 31 December 2021 and 31 December 2020 Croplin d.o.o. had 9.1% ownership in Energo d.o.o. Rijeka and 40% ownership in Plinara Istočne Slavonije d.o.o. Vinkovci.

16. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

	INA Group		INA, d.d.
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
Investments in associates and joint ventures	245	254	245	254
	245	254	245	254

The Company has interests in other entities as follows:

			INA Group and INA, d.d.
Name of company	Activity	Place of incorporation and operation	31 December 2021	31 December 2020

Hayan Petroleum Company*	Operating company (oil exploration, development and production)	Damascus, Syria	50%	50%
ED INA d.o.o. Zagreb*	Research, development and hydrocarbon production	Zagreb, Croatia	50%	50%
Marina Petroleum Company *	Exploration and production oil operator	Cairo, Egypt	50%	50%
TERRA MINERALNA GNOJIVA d.o.o.	Purchase and sale of goods	Zagreb, Croatia	50%	50%
Belvedere d.d.	Hotel trade	Dubrovnik, Croatia	31.80%	31.80%
ELEKTROMETAL d.d	Installing and mounting works, production of fire-proof elements, gas distribution	Bjelovar, Hrvatska	30.75%	30.75%

*investments that are joint operations in INA, d.d. and INA Group

16. INVESTMENTS IN ASSOCIATES AND JOINT VENTURE (CONTINUED)

Non-material associates and joint operations are as follows: Hayan Petroleum Company, Belvedere d.d., ED - INA d.o.o. Zagreb, Marina Petroleum Company and ELEKTROMETAL d.d.

The following table summarises, in aggregate, the financial information of all individually non-material associates and joint ventures in which the Group has interests:

	INA Group and INA, d.d.
	31 December 2021	31 December 2020

Aggregate carrying amount of the interests in these associates and joint ventures	-	-
The Group's share of profit from interest in non individually material associates and joint ventures	-	-
The Group's share of other comprehensive income	-	-
The Group's share of total comprehensive income	-	-

In 2021, by equity method INA, d.d. recorded a share of loss in the amount of HRK 9 million (2020: a share of profit HRK 94 milion) presented in the line Share of profit of joint ventures accounted for using the equity method of Statement of Profit and Loss.

Based on the decision of the Commercial Court from 7 October 2020 the company Terra mineralna gnojiva d.o.o. was recapitalized in the amount of HRK 100 thousand.

16. INVESTMENTS IN ASSOCIATES AND JOINT VENTURE (CONTINUED)


Summarised statements of financial position and comprehensive income of Terra mineralna gnojiva d.o.o. - consolidated (INA, d.d. share 50%)

Place of business	Zagreb, Republic of Croatia	Zagreb, Republic of Croatia
	2021*	2020*
Non-current assets	616	589
Current assets	902	894
Non-current liabilities	(115)	(206)
Current liabilities	(749)	(590)
Net assets	654	687

Group's share of assets	178	187
Goodwill	67	67
Carrying amount of the investment	245	254

Total operating income	1,521	1,423
Profit from operations	17	330
Net profit	(33)	346
Net profit attributable to Terra mineralna gnojiva d.o.o. after non-controlling interest	(18)	188
INA, d.d. share of profit (50%)	(9)	94
INA Group share of profit	(9)	94
* based on the latest available information from September

17. OTHER INVESTMENTS

	INA Group		INA, d.d.
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
Financial assets at fair value through profit or loss	10	10	8	8
Deposits	7	7	7	7
Long-term loans given to subsidiaries	-	-	632	752
	17	17	647	767

In total, the amount of long-term loans relates to given loans to subsidiaries (see note 37).

18. LONG-TERM RECEIVABLES AND OTHER ASSETS

INA Group	31 December 2021	31 December 2020
Receivables from long-term contracts	517	461
Prepayments for property, plant and equipment	281	336
Receivables for apartments sold	19	28
Prepayments for intangible assets	10	18
Other long-term receivables	8	-
	835	843

INA, d.d.	31 December 2021	31 December 2020
Receivables from long-term contracts	517	461
Prepayments for property, plant and equipment	279	334
Receivables for apartments sold	19	28
Prepayments for intangible assets	10	18
Long-term receivables from related party	9	9
	834	850

Prior to 1996, the Company sold apartments it owned to its employees as provided by the laws of the Republic of Croatia. The properties were generally sold on credit and the related housing receivables are repayable on monthly instalments over periods of 20-35 years. The amounts payable to Croatian state, accounting for 65% of the value of sold apartments, are included in other non-current liabilities (see note 29). The receivables are secured with mortgage over the sold apartments. The principle is presented in the receivable amounts. The amounts do not include the interest portion.

19. NON-CURRENT FINANCIAL ASSETS

Equity instruments

			INA Group and INA, d.d.
Name of the Company	Activity	Place of incorporation and operation	31 December 2021	31 December 2020
Jadranski Naftovod d.d.	Pipeline ownership and operations	Zagreb, Croatia	11.795%	11.795%
OMV Slovenia d.o.o. Koper	Oil trading	Koper, Slovenia	7.75%	7.75%
Plinara d.o.o. Pula	Distribution and oil trading	Pula, Croatia	49.00%	49.00%
BINA-FINCOM d.d. Zagreb	Construction of highways and other roads, airfields airports	Zagreb, Croatia	5.00%	5.00%
HOC Bjelolasica d.o.o. Ogulin	Operations of sports facilities	Ogulin, Croatia	7.17%	7.17%

			2021	2020
Balance at the beginning of the year Jadranski Naftovod d.d.			511	559
Remeasurement recognition in OCI, gross of income tax			95	(48)
Balance at the end of the year Jadranski Naftovod d.d.			606	511
Other investments			49	49
Balance at the end of the year non-current financial assets			655	560

As explained in note 37, a substantial portion of the trading income of JANAF d.d. is derived from INA, d.d.

The value of equity share in JANAF was reported by reference to the market value of a share as quoted on the Zagreb Stock Exchange as of 31 December 2021. The net book value of the equity investment in JANAF increased by HRK 95 million compared to the balance as of 31 December 2020 due to increase in the market value of the JANAF shares on Zagreb Stock Exchange. The market value of the shares (118,855 shares) as of 31 December 2021 amounted to HRK 5,100 per share (31 December 2020: HRK 4,300 per share).

INA, d.d. and MOL Plc reached an agreement to acquire OMV’s 92.25% stake in OMV Slovenija d.o.o. The transaction includes 120 service stations across Slovenia and the wholesale business of the acquired company as well. INA, d.d. already holds a 7.75% stake in OMV Slovenija d.o.o. and in line with the agreement with MOL signed on 14 September 2021 INA, d.d. shall increase its share from the current 7.75% to 33%. The transaction is subject to closing the competition authorities' clearance, expected in 2022.

20. INVENTORIES

	INA Group		INA, d.d.
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
Merchandise	636	326	588	275
Refined products	530	459	457	419
Crude oil	380	251	380	252
Work in progress	286	221	284	219
Raw material	175	195	124	150
Spare parts, materials and supplies	139	172	80	84
	2,146	1,624	1,913	1,399

Inventories are measured at the lower of cost or net realizable value.

During 2021 no value adjustment was recognized for refined products and work in progress for INA Group and INA, d.d. was recognized (2020: reversal of impairment in amount of HRK 6 million).

During 2021, HRK 9 million was recognized as reversal of impairment for merchandise for INA Group and INA, d.d. (2020: HRK 3 million was recognized impairment for merchandise for INA Group and INA, d.d.). This impairment and reversal impairment of merchandise is recognized in Cost of other goods sold line within consolidated and separate statement of profit or loss.

21. TRADE RECEIVABLES, NET

	INA Group		INA, d.d.
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
Trade receivables	2,375	1,662	1,989	1,164
Impairment of trade receivables	(368)	(456)	(240)	(298)
	2,007	1,206	1,749	866

Receivables classified as performing are impaired by using the expected credit loss (ECL) rate. The effect of impairment losses using ECL for performing receivables of 0.13 % is HRK 2 million in 2021 (2020: ECL: 0.04%).

Impairment of trade receivables:

	INA Group		INA, d.d.
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
Balance at beginning of the year	456	472	298	302
Impairment losses recognised on receivables	12	65	10	64
Amounts written off as uncollectible	(43)	(18)	(11)	(10)
Reversal of impairment on amounts recovered	(57)	(63)	(57)	(58)
Balance at end of the year	368	456	240	298

Trade receivables, net balance of INA Group above also includes related party receivables of HRK 409 million as of 31 December 2021 (2020: HRK 151 million) with related party entities out of INA Group (see note 37).

22. OTHER RECEIVABLES

	INA Group		INA, d.d.
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
Margining receivables	48	70	48	70
Tax prepayments	41	31	9	9
Foreign concessions receivables	35	33	35	33
Prepayment receivables	8	15	7	14
Other receivables	32	43	19	29
	164	192	118	155

23. OTHER CURRENT ASSET

	INA Group		INA, d.d.
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
Prepayments for customs, duties and other charges	50	40	23	16
Positive fair value of derivatives	11	26	11	26
Other short-term receivables	4	3	1	1
Short-term loans and deposits	2	2	9	20
Accrued income	1	5	1	5
Current portion of long-terms loans	-	-	22	20
Other	11	13	7	10
	79	89	74	98

24. CASH AND CASH EQUIVALENTS

Cash comprises cash on hand and demand deposits.

Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Demand deposits are placed within financial institutions that can be withdrawn on demand, without prior notice being required or a penalty being charged.

Short-term deposits are allocated up to three months, however in case needed, they can be withdrawn on demand as well without penalty being charged.

	INA Group		INA, d.d.
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
Demand deposit	1,184	366	1,135	324
Deposits until three months	1,389	2	1,389	-
Cash on hand	57	31	49	27
Cash and cash equivalents in statement of financial position	2,630	399	2,573	351
Overdrafts	-	5	-	-
Cash and cash equivalents in statement of cash flows	2,630	404	2,573	351

25. CURENT PORTIO OF LONG-TERM DEBTS AND BANK LOANS

	INA Group		INA, d.d.
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
Bank loans	1,143	2,085	938	1,873
Short-term corporate bond issuance	2	-	2	-
	1,145	2,085	940	1,873

	INA Group		INA, d.d.
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
Unsecured bank loans in USD	498	557	498	557
Unsecured bank loans in EUR	481	1,107	440	1,066
Unsecured bank loans in HRK	153	402	-	250
Unsecured bank loans in HUF	11	19	-	-
Unsecured corporate bond issuance in HRK	2	-	2	-
	1,145	2,085	940	1,873

The most significant short-term loans as at 31 December 2021 are credit facilities for the financing of crude oil and petroleum products purchase (‘’trade finance’’) concluded with the first class banks, framework agreements for granting loans, issuing bank guarantees and opening letters of credits concluded with domestic banks, as well as short-term credit lines with foreign creditors.

Short-term loans are contracted as multicurrency lines with variable interest rates. INA, d.d. short-term loans are unsecured and do not contain financial covenants.

In order to secure INA Group subsidiaries short – term credit facilities, INA, d.d. issued corporate guarantees.

26. TRADE PAYABLES, TAXES AND CONTRIBUTIONS AND OTHER CURRENT LIABILITIES

	INA Group		INA, d.d.
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
Trade payables	2,143	1,426	1,857	1,104
Production and sales and other taxes payable	895	595	788	534
Accrued bonuses	162	128	98	85
Payroll payables	151	139	104	94
Advance payments	68	36	62	26
Negative fair value of derivatives	64	116	64	116
Payroll taxes and contributions	43	42	21	20
Mining fee	42	19	42	19
Liabilities for received deposits and sureties for tender	21	12	17	11
Accrued unused holiday	14	12	3	4
Contract liabilities	11	22	-	-
Dividend payables	-	585	-	585
Other	53	53	41	25
	3,667	3,185	3,097	2,623

The management considers that the carrying amount of trade payables approximates their fair values.

Trade payables includes payables with related party entities out of INA Group in the amount of HRK 151 million as of 31 December 2021 (2020: HRK 181 million) (see note 37).

Accruals for unused holiday is determined based on actual data (number of employees, unused days, payroll) taken into calculation.

Auditor's fee charged for the audit service of INA Group amounts to HRK 3.4 million for 2021 (2020: HRK 3 million). In 2021 the auditor provided non-audit service referring to agreed upon procedures report on accounts and records of Sahara North Bahariya in amount of HRK 0.2 million.

27. LONG-TERM DEBTS

Long-term loans can be utilized in different foreign currencies and are subject to different interest rates. Long-term loans of INA, d.d. are unsecured and contain financial covenants which are fulfilled.

		INA Group		INA, d.d.
Purpose of the debts	Debt currency	31 December 2021	31 December 2020	31 December 2021	31 December 2020

Corporate bond issuance	HRK	1,983	-	1,983	-
Intercompany loans	HRK	-	-	129	-
Total long-term debts		1,983	-	2,112	-
Due within one year		-	-	-	-
Total long-term debts		1,983	-	2,112

The outstanding debt of the Group is analysed as follows:

INA Group	Weighted average interest rate	Weighted average interest rate
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
	%	%
Corporate bond issuance in HRK	0.88	-	1,983	-
Total			1,983	-
Payable within one year			-	-
Total long-term debts			1,983	-

27. LONG-TERM DEBTS (CONTINUED)

INA, d.d.	Weighted average interest rate	Weighted average interest rate
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
	%	%
Corporate bond issuance in HRK	0.88	-	1,983	-
Intercompany loans in HRK	1.50	-	129	-
Total			2,112	-
Payable within one year			-	-
Total long-term debts			2,112	-

The maturity of the debts may be summarised as follows:

	INA Group		INA, d.d.
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
Current portion of long-term debt	-	-	-	-
Payable within one to two years	-	-	129	-
Payable within two to three years	-	-	-	-
Payable within three to four years	-	-	-	-
Payable within four to five years	1,983	-	1,983	-
Payable over five years	-	-	-	-
Total	1,983	-	2,112	-

The movement in long-term debts during the year is summarized as follows:

	INA Group	INA, d.d.
Balance at 1 January 2020	335	335
New borrowings	644	644
Amounts repaid	(976)	(976)
Foreign exchange losses	(3)	(3)
Balance at 31 December 2020	-	-
Balance at 1 January 2021	-	-

Corporate bond issuance	1,983	1,983
New borrowings	637	1,011
Amounts repaid	(633)	(878)
Foreign exchange losses	(4)	(4)
Balance at 31 December 2021	1,983	2,112

27. LONG-TERM DEBTS (CONTINUED)

CORPORATE BONDS

In December 2021 INA, d.d. issued corporate bonds in the amount of HRK 2 billion at issue price of 99.445%, with coupon of 0.875% p.a. and semi-annual interest payment, and final maturity on 6 December 2026. The purpose of the bonds is financing of general corporate purposes, investments, potential acquisitions and partial refinancing of existing debts.

The principal long-term loans outstanding at 31 December 2021 were as follows:

ING BANK N.V., LONDON BRANCH

In 2018 INA, d.d. signed a long-term multi-currency revolving credit facility agreement for general corporate purposes in the amount of USD 300 million. Lenders are banking groups represented by both international and domestic banks. The Agent is ING Bank N.V., London Branch. Maturity of the credit facility is 3 years with an option for 1+1 year extension. First extension option was executed in 2019, extending the final maturity of the loan in the amount of USD 300 million for one year. Second extension option was executed in 2020, extending the final maturity of the loan in the amount of USD 255 million until 2023. As at 31 December 2021 the loan was not utilized.

Reconciliation of liabilities arising from financing activities

The table below details changes in the liabilities arising from financial activities, including both cash and noncash changes, and for which the INA Group and INA, d.d. assess to be materially significant. Liabilities arising from financial activities are those for which cash flows were, or future cash flows will be, classifies in the consolidated and standalone statements of cash flows as cash flows from financial activities.

INA Group
	1 January 2021	Cash flow	Foreign exchange movement	Changes in fair values	Other	31 December 2021
Short-term loans	2,085	(988)	46	-	2	1,145
Long-term loans	-	4	(4)	-	-	-
Proceeds from bonds issuance	-	1,983	-	-	-	1,983
Repayment of lease liabilities	309	3	-	-	-	312
Dividend payable	585	(585)	-	-	-	-
Derivatives	116	(28)	-	(16)	-	72
Total liabilities	3,095	389	42	(16)	2	3,512
INA, d.d.
	1 January 2021	Cash flow	Foreign exchange movement	Changes in fair values	Other	31 December 2021
Short-term loans	1,873	(988)	53	-	2	940
Loans from related parties	131	(97)	-	-	-	34
Long-term loans	-	4	(4)	-	-	-
Proceeds from bonds issuance	-	1,983	-	-	-	1,983
Repayment of lease liabilities	479	(34)	-	-	-	445
Dividend payable	585	(585)	-	-	-	-
Derivatives	116	(28)	-	(16)	-	72
Total liabilities	3,184	255	49	(16)	2	3,474

27. LONG-TERM DEBTS (CONTINUED)

INA Group
	1 January 2020	Cash flow	Foreign exchange movement	Changes in fair values	Other	31 December 2020
Short-term loans	3,160	(1,012)	(50)	-	(13)	2,085
Repayment of lease liabilities	344	(35)	-	-	-	309
Dividend payable	623	(38)	-	-	-	585
Derivatives	61	27	-	28	-	116
Total liabilities	4,188	(1,058)	(50)	28	(13)	3,095
INA, d.d.
	1 January 2020	Cash flow	Foreign exchange movement	Changes in fair values	Other	31 December 2020
Short-term loans	2,935	(1,012)	(50)	-	-	1,873
Loans from related parties	282	(151)	-	-	-	131
Repayment of lease liabilities	531	(52)	-	-	-	479
Dividend payable	623	(38)	-	-	-	585
Derivatives	61	27	-	28	-	116
Total liabilities	4,432	(1,226)	(50)	28	-	3,184

Compliance with loan agreements

During 2021, as well as in 2020 INA Group members and INA, d.d repaid all of their liabilities in respect of the loans (principal, interest and fees) on a timely basis, without any delays or defaults.

28. LEASES

As a lessee

As a lessee, the Company and the Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under IFRS 16, the Company and the Group recognise the right-of-use assets and lease liabilities for all leases except low-value leases and short-term leases.

The Company and the Group have lease contracts for various items of plant, machinery, vehicles and other equipment used in its operations. Leases of plant and machinery generally have lease terms between 2 and 20 years, while motor vehicles generally have lease terms up to 5 years. The obligations under its leases are secured by the lessor’s title to the leased assets. Generally, the Company and the Group are restricted from assigning and subleasing the leased assets. Several lease contracts include extension options and variable lease payments. The Company and the Group also have certain leases of machinery with lease terms of 12 months or less and leases of office equipment with low value. However, the Company and the Group have elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term leases. The Company and the Group recognise the lease payments associated with these leases as expense on a straight-line basis over the lease term.

28. LEASES (CONTINUED)

The Company and the Group present right-of-use assets from leases in separate line item of statement of financial position. The recognised right-of-use assets relate to the following types of assets and the movements during the period:

INA GROUP	Land and buildings	Vehicles	Plant and machinery, office equipment and other	Total
Balance at 1 January 2020	100	190	52	342
Additions in period due to new contracts	27	13	(2)	38
Depreciation for the period	(13)	(45)	(14)	(72)
Other decreasing (i.e. impairment, termination)	-	(3)	(1)	(4)
Balance at 31 December 2020	114	155	35	304
Additions in period due to new contracts	64	2	25	91
Depreciation for the period	(16)	(47)	(21)	(84)
Other decreasing (i.e. impairment, termination)	(1)	(3)	-	(4)
Balance at 31 December 2021	161	107	39	307

INA, d.d.	Land and buildings	Vehicles	Plant and machinery, office equipment and other	Total
Balance at 1 January 2020	318	154	57	529
Additions in period due to new contracts	32	13	(2)	43
Depreciation for the period	(41)	(39)	(18)	(98)
Other decreasing (i.e. impairment, termination)	(1)	-	-	(1)
Balance at 31 December 2020	308	128	37	473
Additions in period due to new contracts	47	-	25	72
Depreciation for the period	(43)	(40)	(21)	(104)
Other decreasing (i.e. impairment, termination)	-	(1)	(2)	(3)
Balance at 31 December 2021	312	87	39	438

Lease liabilities

Maturity analysis contractual undiscounted cash flow as at 31 December 2021 and 31 December 2020:

	INA Group		INA, d.d.
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
Analysed as:
Liabilities within 1 year	87	81	106	104
Liabilities between 1-5 years	156	185	251	282
Liabilities over 5 years	84	54	105	109
Total undiscounted liabilities	327	320	462	495

28. LEASES (CONTINUED)

Total carrying amounts of lease liabilities (including under interest bearing loans and borrowings) in the statement of financial position:

	INA Group		INA, d.d.
	2021	2020	2021	2020
Lease liabilities at 1 January	309	344	479	531
Additions	85	37	71	42
Accretion of interest	4	4	5	5
Payments	(86)	(74)	(110)	(101)
Foreign exchange difference	-	(2)	-	2
Lease liabilities at 31 December	312	309	445	479
Analysed as:
Current liabilities for lease	84	77	101	100
Non-current liabilities for lease	228	232	344	379

The following are the amounts recognised in the profit and loss:

	INA Group		INA, d.d.
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
Expenses for the period relating to short-term leases or leases of low-value assets	75	74	65	62
Depreciation of right -of-use asset	84	76	104	98
Interest expense of lease for right-of-use asset	4	4	5	5
	163	154	174	165

29. OTHER NON-CURRENT LIABILITIES

	INA Group		INA, d.d.
	31 December 2021	31 December 2020	31 December 2021	31 December 2020

Liabilities to Government for sold apartments	10	15	10	15
Deferred income for sold apartments	1	2	1	2
Other long-term liabilities	18	16	17	16
	29	33	28	33

The long-term payable to the government relates to obligation arising on the sale of housing units to employees under the government program (see note 18). According to the law, 65% of the proceeds from the sale of apartments to employees were payable to the state when the proceeds were collected by the Company and the Group. According to the law, INA, d.d. has no liability to remit the funds unless until they are collected.

INA Group	Decommissioning charges	Environmental provision	Legal claims	Renewable energy provision	Redundancy costs	Other	Total
Balance at 1 January 2020	3,086	361	112	12	16	308	3,895
Charge for the year	-	55	14	14	143	25	251
Effect of change in estimates	16	-	-	-	-	-	16
Unwinding of discount	45	6	-	-	-	-	51
Provision utilised/reversed during the year	(1)	(95)	(22)	(11)	(114)	(27)	(270)
Balance at 31 December 2020	3,146	327	104	15	45	306	3,943
Charge for the year	-	196	(9)	25	17	57	286
Effect of change in estimates	(134)	(16)	-	-	(13)	(12)	(175)
Unwinding of discount	64	4	-	-	-	5	73
Provision during the year	(8)	(47)	(7)	(14)	(38)	(27)	(141)
Balance at 31 December 2021	3,068	464	88	26	11	329	3,986

30. PROVISIONS (CONTINUED)

INA, d.d.	Decommissioning charges	Environmental provision	Legal claims	Renewable energy provision	Redundancy costs	Other	Total
Balance at 1 January 2020	3,301	356	7	12	10	304	3,990
Charge for the year	-	50	8	14	77	15	164
Effect of change in estimates	21	(7)	-	-	-	(20)	(6)
Unwinding of discount	48	6	-	-	-	5	59
Provision utilised/reversed during the year	(1)	(82)	(12)	(12)	(56)	(4)	(167)
Balance at 31 December 2020	3,369	323	3	14	31	300	4,040
Charge for the year	-	196	7	26	16	17	262
Effect of change in estimates	(156)	(16)	-	-	(12)	14	(170)
Unwinding of discount	69	4	-	-	-	5	78
Provision during the year	(9)	(46)	(3)	(14)	(30)	(24)	(126)
Balance at 31 December 2021	3,273	461	7	26	5	312	4,084

	INA Group		INA, d.d.
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
Analysed as:
Current liabilities	318	247	243	178
Non-current liabilities	3,668	3,696	3,841	3,862
	3,986	3,943	4,084	4,040

30. PROVISIONS (CONTINUED)

Decommissioning charges

The Company and the Group record provisions at present value of estimated future costs of abandoning oil and gas production facilities estimated at the end of production. The estimate of provisions is based on the applicable legal regulations, technology and price levels. Decommission assets are created in an amount equal to the estimated provision, which is also amortized as part of the capital asset costs. Any change to the present value of the estimated costs is reflected as an adjustment of the provisions and the decommission assets. In case there is no related asset, the change in provision estimate is charged to profit and loss statement.

As of 31 December 2021, INA, d.d. recognised a decommissioning provision for 45 oil and gas production fields, 6 non-production fields, 10 positive non-production fields and 356 dry non-production wells. As of 31 December 2020, INA, d.d. recognised a decommissioning provision for 45 oil and gas production fields, 7 non-production fields, 10 positive non-production fields and 357 dry non-production wells.

Environmental provision

The environmental provision recorded by INA Group is HRK 464 million as of 31 December 2021 (31 December 2020: HRK 327 million). The environmental provision covers treatment of accumulated waste generated by former activity, soil excavation and replacement during the reconstruction of service stations and comprehensive investigation to determine the extent of the soil and groundwater contaminations.

Provision for green rights

Liability for emission is not recognized until the amount of actual emission reaches the amount of quota allocated free of charge. This approach is due to the fact that allocated emission allowances are not recorded as intangibles, their asset value is zero. When actual emission exceeds the amount of emission rights granted, provision should be made for the exceeding emission allowances. In case a company covers its liability by forward derivative deals which are kept off-balance, provision for the quantity covered by these deals is calculated using forward rates of the derivative deals. For any residual excess, the current fair value at the reporting date.

It also means that it is not possible to record a provision earlier then the date when emissions reach the amount of allowances granted, nor is it possible to spread the expected shortfall through the calendar years.

Settlement with Government is carried out by offsetting the purchased rights with the provision recorded for the exceeding emissions. Penalty will be accounted for if the shortfall is not covered by purchased quotas.

Provision should be calculated for each installation separately and recorded on emitting segment.

Legal claims

Provisions for legal claims are based on the legal counsel and management estimate, taking into consideration claim value and probability that outflow of resources will be required to settle the obligation.

Renewable energy provision

Renewable energy provision relates to projection of renewable energy targets compliance cost which is defined by the Act on biofuels for transport and further regulated by Regulation on special environmental fee. It is special environmental fee that is coming from mentioned regulations and consist of renewable energy and greenhouse gas savings partial unfulfillment of the targets.

30. PROVISIONS (CONTINUED)

Other provisions

Other provisions of INA, d.d. in amount of HRK 311 million relate to provision for contractual liability for investments in Iran of HRK 274 million initially recognized in 2012. INA, d.d. is committed to spending certain resources by Production Agreement. Since Iran activities have been discontinued, the difference between contractual liability and actual funds spent was recognized as provisions. Remaining amount relates to provision for Sisak Refinery conservation, sediment and non-pumpable inventories in the total amount of HRK 37 million.

31. RETIREMENT AND OTHER EMPLOYEE BENEFITS

According to the Collective Agreement, the Group bears the obligation to pay jubilee awards, retirement and other benefits to employees. The Group operates defined benefit schemes for qualifying employees. Under the schemes, the employees are entitled to an early retirement benefit in the net amount of HRK 20,000 of which HRK 12,000 represent taxable portion. No other post-retirement benefits are provided. Jubilee awards are paid out according to Collective Agreement in the following fixed amounts and anniversary dates for total service in the Company and the Group:

Anniversary of continuous services - years	10	15	20	25	30	35	40 and every 5 more years
Fixed amounts - HRK	1,500	2,000	2,500	3,000	3,500	4,000	5,000

The net amounts specified above, in terms of tax regulations are non-taxable. Defined amounts of jubilee awards are effective for Collective Agreement signed in 2021.

The actuarial valuations of the present value of the defined benefit obligation were carried out at 31 December 2021 and 2020 by independent actuarial expert. In 2021, the Company made a provision of HRK 12 million in respect of jubilee awards and HRK 10 million for regular retirement allowance, whereas in 2020 Company made provision in respect of jubilee awards in amount of HRK 13 million and for regular retirement HRK 7 million.

The present values of the defined benefit obligation, the related current service cost and past service cost were determined using the projection method based on the total number of employees.

Actuarial estimates were derived based on the following key assumptions:

	Valuation at
	31 December 2021	31 December 2020

Discount rate	1.68%	1.05%
Average longevity at retirement age for current pensioners (years)
males	16.70	15.55
females	19.00	19.09
Average longevity at retirement age for current employees (future pensioners) (years)
males	16.70	15.55
females	19.00	19.09

The amounts recognised in other comprehensive income related to retirement and other employee benefits are as follows:

	INA Group		INA, d.d.
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
Service cost:
Cost of current period	6	3	-	1
Components of defined benefit costs recognized in profit and loss:	6	3	-	1

Remeasurement of the net defined benefit liability:
Actuarial gains and losses arising from changes in demographic assumptions	(4)	5	-	5
Actuarial gains and losses arising from experience adjustments	5	(10)	3	(6)
Components of defined benefit costs recognised in profit and loss account and other comprehensive income:	1	(5)	3	(1)
Total	7	(2)	3	-

The change of the present value of defined benefit obligation may be analysed as follows:

	INA Group		INA, d.d.
	2021	2020		2021	2020
At 1 January	68	77		19	22
Cost of current period	6	3		-	1
Actuarial (gains) or losses
Actuarial gains and losses arising from changes in demographic assumptions	(4)	5		-	5
Actuarial gains and losses arising from experience adjustments	5	(10)		3	(6)
Benefit paid	(4)	(7)		-	(3)
Closing defined benefit obligation	71	68		22	19

	INA Group and INA, d.d.

	31 December 2021	31 December 2020
Issued and fully paid:
10 million shares (HRK 900 each)	9,000	9,000

The Company’s share capital consists of 10 million authorised and issued shares of par value HRK 900 each. Each share carries one vote and is entitled to dividends.

33. FAIR VALUE RESERVES

	INA Group and INA, d.d.
	31 December 2021	31 December 2020
Balance at the beginning of the year	202	241
Increase/(decrease) arising on revaluation of long-term financial asset (Janaf)	95	(48)
Deferred tax effect	(17)	9
Balance at the end of the year	280	202

In 2021, increase of fair value reserves was recorded due to increase of JANAF shares, while in 2020, decrease of fair value reserves was recorded due to decrease of JANAF shares.

34. OTHER RESERVES

The amount of combined reserves of the Company and the Group includes amounts in respect of accumulated surpluses and deficits, revaluations of property, plant and equipment and foreign exchange gains and losses which have arisen over many years prior to 1993. For several years, the Croatian economy was subject to hyperinflation and, prior to 31 December 1993, neither the Company nor the Group had been subject to audit. For these reasons, it was not practicable to analyse the composition of the reserves of the Company or the Group as at 31 December 1993 into their constituent parts.

Movements on reserves during the year were as follows:

INA Group	Combined reserves at 31 December 1993	Foreign currency translation reserves	Reserve of defined benefit obligation	Other reserves	Total

Balance at 1 January 2020	492	600	51	447	1,590
Movements during 2020	-	(60)	2	(3)	(61)
Balance at 31 December 2020	492	540	53	444	1,529
Movements during 2021	-	32	1	-	33
Balance at 31 December 2021	492	572	54	444	1,562


INA, d.d.	Combined reserves at 31 December 1993	Foreign currency translation reserves	Reserve of defined benefit obligation	Other reserves	Total

Balance at 1 January 2020	27	859	43	285	1,214
Movements during 2020	-	(43)	-	-	(43)
Balance at 31 December 2020	27	816	43	285	1,171
Movements during 2021	-	43	(3)	-	40
Balance at 31 December 2021	27	859	40	285	1,211

35. RETAINED EARNINGS

	INA Group	INA, d.d.
	Retained earnings / (Accumulated losses)	Retained earnings / (Accumulated losses)

Balance at 1 January 2020	207	1,273
Transfer	(2)	-
Transfer to legal reserves from retained earnings	(30)	(33)
Profit brought forward from legal merger	-	75
Loss for the year	(1,138)	(933)
Dividend paid	(623)	(623)
Balance at 31 December 2020	(1,586)	(241)
Profit for the year	1,312	1,273
Balance at 31 December 2021	(274)	1,032

	INA Group
	31 December 2021	31 December 2020
Balance at the beginning of the year	13	12
Share of profit for the year	2	1
Balance at the end of the year	15	13

36. NON-CONTROLLING INTEREST (CONTINUED)

Proportion of equity interest of Energopetrol d.d.:



Proportion of equity interest of Energopetrol d.d. held by non-controlling interests:

Name	Country of incorporation and operation	2021	2020
Government of the Federation of Bosnia and Herzegovina	Federation of Bosnia and Herzegovina	7.61%	7.61%
Small shareholders		3.73%	3.73%

The table below is presenting financial information for subsidiary Energopetrol d.d. that has non-controlling interests that are material to INA Group. The amounts disclosed for Energopetrol d.d. are before intercompany eliminations.

	31 December 2021	31 December 2020

	Energopetrol d.d.	Energopetrol d.d.
Non-current assets	193	205
Non-current liabilities	53	75
Current assets	53	45
Current liabilities	123	121
Operating income after the acquisition date	429	321
Gain for the period after the acquisition date	17	8
Total comprehensive gain for the period after the acquisition date	17	8

37. RELATED PARTY TRANSACTIONS

The company has dominant positions in Croatia in oil and gas exploration and production, oil refining and the sale of gas and petroleum products. As a result of the Company’s strategic position within the Croatian economy, a substantial portion of its business and the business of its subsidiaries is performed with the Croatian Government, its departments and agencies, and the companies with the Republic of Croatia being their majority shareholder.

Transactions between INA, d.d and its subsidiaries, which are related parties of the Company, have been eliminated on Group level consolidation. Details of transactions between INA, d.d. and the Group companies and other related parties are disclosed below.

37. RELATED PARTY TRANSACTIONS (CONTINUED)

During the year, INA Group entered into the following trade transactions with related parties:

INA Group	Sales of goods and services			Purchase of goods and services
	31 December 2021	31 December 2020	31 December 2021		31 December 2020
Share in company as non-current financial assets
JANAF d.d. Zagreb	5	5	70		59
Governing company
MOL Nyrt.	1,881	1,508	1,146		800
Companies controlled by governing company
Tifon d.o.o.	623	380	7		9
MOL Serbia d.o.o.	187	5	-		-
MOL Slovenija d.o.o.	45	32	-		11
MOL Petrochemicals Co. Ltd.	34	57	9		8
SLOVNAFT, a.s.	9	-	232		120
Petrolszolg Kft.	3	-	-		-
MOL-LUB Kft.	1	1	1		2
MOL Norge AS	1	1	-		-
MOL Commodity Trading Kft.	-	42	22		13
Geoinform Kft.	-	1	1		-
MOL Azerbaijan Ltd.	-	-	882		662
IES - Italiana Energia e Servizi S.p.A	-	-	12		-

As of statement of financial position date, INA Group had the following outstanding balances with related parties:

INA Group	Amounts owed by related parties		Amounts owed to related parties
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
Share in company as non-current financial assets
JANAF d.d. Zagreb	1	-	4	2
Governing company
MOL Nyrt.	253	67	79	88
Companies controlled by governing company
Tifon d.o.o.	71	5	2	3
MOL Commodity Trading Kft.	54	75	54	80
MOL Serbia d.o.o.	24	-	-	-
MOL Slovenija d.o.o.	3	1	3	-
SLOVNAFT, a.s.	2	-	7	3
Petrolszolg Kft.	1	-	-	-
MOL Petrochemicals Co. Ltd.	-	2	1	3
MOL Norge AS	-	1	-	-
MOL Fleet Solutions Kft	-	-	3	-
Geoinform Kft.	-	-	1	-
IES - Italiana Energia e Servizi S.p.A	-	-	-	1
MOL Austria GmbH	-	-	-	1

37. RELATED PARTY TRANSACTIONS (CONTINUED)

INA, d.d. has provided loans at rates comparable to those that prevail in arm's length transactions. The loans from the ultimate controlling party are unsecured.

During the year, INA, d.d. entered into the following trade transactions with related parties:

INA, d.d.	Sales of goods and services		Purchase of goods and services
	31 December 2021	31 December 2020	31 December 2021	31 December 2020

Related companies
Holdina d.o.o. Sarajevo	2,274	1,404	2	-
INA Crna Gora d.o.o. Podgorica	350	254	-	-
INA Slovenija d.o.o. Ljubljana	114	69	-	-
STSI, Integrirani tehnički servisi d.o.o.	25	23	438	442
Plavi tim d.o.o.	13	13	89	84
CROSCO, naftni servisi d.o.o.	11	10	295	212
INA Maloprodajni servisi d.o.o.	8	7	325	306
INA MAZIVA d.o.o.	4	4	55	62
Top Računovodstvo Servisi d.o.o.	3	4	39	37
INA Vatrogasni Servisi d.o.o.	3	3	78	79
Hostin d.o.o.	1	1	-	-
INA Adria B.V.	-	3	-	-
Adriagas S.r.l. Milano	-	-	2	2
INA d.o.o. Banja Luka	-	-	1	1
INA Kosovo d.o.o.	-	-	1	-
Share in company as non-current financial assets
JANAF d.d. Zagreb	1	1	69	59
Governing company
MOL Nyrt.	1,761	1,334	1,076	714
Companies controlled by governing company
Tifon d.o.o.	621	379	7	9
MOL Serbia d.o.o.	187	5	-	-
MOL Slovenija d.o.o.	40	26	-	-
MOL Petrochemicals Co. Ltd.	34	57	7	5
SLOVNAFT, a.s.	9	-	228	118
MOL Norge AS	1	1	-	-
MOL Commodity Trading Kft.	-	43	22	13
MOL Azerbaijan Ltd.	-	-	882	662
IES - Italiana Energia e Servizi S.p.A	-	-	12	7

37. RELATED PARTY TRANSACTIONS (CONTINUED)

As of statement of financial position date, INA, d.d. had the following outstanding balances with related parties:

INA, d.d.	Amounts owed by related parties		Amounts owed to related parties
	31 December 2021	31 December 2020	31 December 2021	31 December 2020

Related companies
Holdina d.o.o. Sarajevo	151	115	2	-
INA Crna Gora d.o.o. Podgorica	48	33	-	-
INA Slovenija d.o.o. Ljubljana	13	7	-	-
INA Beograd d.o.o.	9	8	-	-
STSI, Integrirani tehnički servisi d.o.o.	4	5	104	104
Plavi tim d.o.o.	3	3	22	22
CROSCO, naftni servisi d.o.o.	2	3	55	28
INA MAZIVA d.o.o.	2	2	12	11
INA Maloprodajni servisi d.o.o.	1	1	37	43
Top Računovodstvo Servisi d.o.o.	-	1	4	1
INA Vatrogasni Servisi d.o.o.	-	-	11	5
Adriagas S.r.l. Milano	-	-	-	1
Share in company as non-current financial assets
JANAF d.d. Zagreb	-	-	4	3
Governing company
MOL Nyrt.	225	30	62	64
Companies controlled by governing company
Tifon d.o.o.	71	5	2	3
MOL Commodity Trading Kft.	54	75	54	80
MOL Serbia d.o.o.	24	-	-	-
MOL Slovenija d.o.o.	3	-	3	1
SLOVNAFT, a.s.	2	-	7	2
MOL Petrochemicals Co. Ltd.	-	2	-	2
MOL Norge AS	-	1	-	-
Geoinform Kft.	-	-	-	-
IES - Italiana Energia e Servizi S.p.A	-	-	-	1

Receivables of INA, d.d. are presented net of impairment of bad and doubtful receivables.

In 2021 and 2020 INA, d.d. has not recognised impairment on receivables from related parties.

37. RELATED PARTY TRANSACTIONS (CONTINUED)

Loan to and from related parties:

INA, d.d.	Amounts of loans owed by related parties		Amounts of loans owed to related parties
	31 December 2021	31 December 2020	31 December 2021	31 December 2020

Related companies
Hostin d.o.o.	385	405	-	-
INA Crna Gora d.o.o. Podgorica	135	140	-	-
CROSCO, naftni servisi d.o.o.	85	132	-	-
Energopetrol d.d.	33	60	-	-
INA Slovenija d.o.o. Ljubljana	18	19	-	-
INA MAZIVA d.o.o.	8	-	-	35
Holdina d.o.o. Sarajevo	-	19	-	-
STSI, Integrirani tehnički servisi d.o.o.	-	19	8	-
INA BH d.d., Sarajevo	-	2	-	-
INA Industrijski Servisi d.o.o.	-	-	59	15
INA Maloprodajni servisi d.o.o.	-	-	31	25
INA Vatrogasni Servisi d.o.o.	-	-	26	26
Plavi tim d.o.o.	-	-	14	5
Adriagas S.r.l. Milano	-	-	12	12
Top Računovodstvo Servisi d.o.o.	-	-	8	9
Croplin d.o.o.	-	-	5	3
Petrol d.d.	-	-	-	1

Hedge transactions with related parties:

Deposits until three months with related parties:

Product sales and purchases between related parties were made at the usual prices of the Group, reduced by discounts and rebates depending on each particular relationship.

For oil products sales to related parties, INA, d.d. does not require payment security instruments, except in case of sales on foreign markets, in order to be compliant with the Foreign Exchange Act.

37. RELATED PARTY TRANSACTIONS (CONTINUED)

Compensation of key management personnel

The remuneration of directors and other members of key management during the year were as follows:

	INA, d.d.
	31 December 2021	31 December 2020

Short-term employee benefits	44	30
Termination bonuses	7	1
Total	51	31

The amount included above refers to the remuneration of the Management Board Members and directors of second and third level organizational units.

A number of key managements in INA, d.d. or their related parties, hold positions in other companies of INA Group that result in them having control or significant influence over these companies.

38. COMMITMENTS

The Company and the Group have a number of continuing operational and financial commitments in the normal course of their businesses including:

l exploration and development commitments arising under production sharing agreements;

l exploratory drilling and well commitments abroad;

l take or pay contract, gas transportation contract and gas selling contract;

l guarantees, performance bonds and letters of credit with Croatian and foreign banks;

l completion of the construction of certain assets.

38. COMMITMENTS (CONTINUED)

Gas Transportation contracts

At 31 December 2021 the future gas transportation contracted commitments with LNG Hrvatska, PPD Vukovar and Met Austria until 1 January 2023 amount to HRK 37 million, from 1 January 2023 until 1 January 2027 amount to HRK 56 million, from 1 January 2027 until 31 December 2039 amount to HRK 181 million.

At 31 December 2020 the future gas transportation contracted commitments with PPD Vukovar and Met Austria until 1 October 2021 amount to approximately HRK 27 million in total.

Gas purchase contract obligations (Take or pay)

INA, d.d concluded a Gas Purchase Obligation (Take or pay). The obligation refers to one-year natural gas import contract signed for gas year. Through this contract INA, d.d. will procure the quantities of gas needed to cover the gap in the sales. At 31 December 2021, the future contractual obligations for natural gas concluded with Met Austria until 1 January 2023 amount to HRK 366 million.

At 31 December 2020, the future contractual obligations for natural gas concluded with Met Austria until 1 October 2021 amount to HRK 73 million.

Lease contracts

The Group has various lease contracts that have not yet commenced as at 31 December 2021. The future lease payments under non-cancellable lease contracts outside INA Group are as follows:

	INA Group		INA, d.d.
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
within 1 year	16	32	14	22
between 1 - 5 years	32	56	31	37
	48	88	45	59

Out of the outstanding operating lease liabilities as of 31 December 2021 HRK 45 million were contracted by INA, d.d., while for 31 December 2020 HRK 59 million were contracted by INA, d.d.

Guarantees

The Group has guaranteed the performance under the respective contract. The total value of guarantees undertaken to third parties is contractually HRK 286 million, which is the maximum amount the Group is exposed to. In the event of default, the terms of the contract contain a maximum compensation payment to the unrelated party. Based on expectations at the end of the reporting period, the Group considers that no liability is expected to arise. The contractual maturity is based on the earliest date on which the Group may be required to pay.

39. CONTINGENT LIABILITIES

Environmental matters

The principal activities of the Company and the Group, comprising oil and gas exploration, production, transportation, refining and distribution, can have inherent effects on the environment in terms of emissions into soil, water and air. Both, the Company and the Group regularly record, monitor and report on environmental emissions in accordance with their obligations specified in applicable laws.

Safeguarding the environment is one of the biggest imperatives of our time. Businesses across every size, geography and sectors are rising up to the challenge and setting the pace through ambitious commitments and actions to reduce their environmental footprint and integrate sustainability into their core operations. In a changing regulatory environment, the impact on the business must be continuously assessed in order to identify the most cost effective measures for complying with increasingly stringent legal requirements. By implementing such measures in production and refining, we are reducing our impact on the environment. At the same time, we are improving reporting obligations, implementation and enforcement of environmental regulation at every organizational level.

In 2021 Environmental permit is obtained for Rijeka Refinery and integrated SOx and NOx emission management (bubble concept), complying with one emission limit value for SOx and one for NOx instead of harmonizing each emission sources individually, have been implemented. Also, Fractionation Facility Ivanić Grad obtained a revised Environmental permit where no changes compared to previous one is requested. For remaining 2 INA’s facilities, revision of environmental permits is still in progress. Baseline reports for refineries have also been prepared in phases as required by the competent authority.

European Union Emissions Trading System, EU ETS, is one of the fundamental mechanisms of the European Union in the fight against climate change. Inside the System, a part of the emission allowances (one allowance = 1 tonne of CO2) are allocated to installations for free and they are used to "cover" the emissions from the previous year. If the installation has a shortage of allowances in respect to verified emissions, the rest must be bought on the market through auctioning. To achieve the EU's overall greenhouse gas emissions reduction target for 2030, the organization units covered by the EU ETS must reduce their emissions. All four INA's ETS installations conducted preparation for the 4^th EU ETS Trading Phase, which is valid for the period 2021 until 2030. Free allocated emission allowances are reduced due to historical activity level decrease and application of more stringent benchmarks for refinery products. Also, in 4^th EU ETS Trading Phase, EUA price is expected to be increased.

The Company and the Group continued to implement best available techniques, invest in renewable energy sources (two smaller solar power plants have been installed) and energy efficiency projects. Also, with the decision to invest in Rijeka Refinery Upgrade project (DCU complex), the refinery business will be more profitable and sustainable in the long term.

Environmental provisions

Environmental obligations are the obligations of a company to recover pollutions caused by the company's operations. They can be divided into two categories: environmental provisions and contingencies. Liabilities for environmental costs are recognised when environmental assessments or clean-ups are probable, and the amount recognised is the best estimate of the expenditure required. In case of long-term liability, the present value of the estimated future expenditure is recognised. Typical provision based actions are soil and groundwater pollution assessment, remediation, monitoring actions in order to control the long-term compliance and re-cultivation of old waste storage depots. Provision based environmental liabilities are audited in every quarter.

39. CONTINGENT LIABILITIES (CONTINUED)

Environmental matters (continued)

Environmental provisions (continued)

At 31 December 2021, INA, d.d. made environmental provisions in the amount of HRK 267 million, whereas the provisions at the Group level amounted to HRK 464 million, while at 31 December 2020, INA, d.d. made environmental provisions in the amount of HRK 323 million, whereas the provisions at the Group level amounted to HRK 327 million.

At 31 December 2021, contingencies at INA, d.d. was estimated at HRK 335 million and for INA Group level was estimated at HRK 536 million, while at 31 December 2020 contingencies at INA, d.d. was estimated at HRK 340 million and for INA Group level was estimated at HRK 542 million. The estimates were not recognised because the timing of the event is uncertain and there is no evidence of pollution.

Litigation

The Group is exposed to various legal claims. The following claims are considered as contingencies and no provision is recognised in the financial statements in their respect.

GWDF

In the dispute initiated by GWDF Partnership Gesellschaft Bürgerlicher Rechts and GWDF Limited, Cyprus against INA-Industrija nafte, d.d. and INA-Naftaplin International Exploration, Channel Islands, before the Commercial Court in Zagreb, the plaintiffs claim compensation for damage in the amount of app HRK 60 million incurred due to ungrounded termination of negotiations. On 10 March 2016 the judgment was rendered and the plaintiff’s claim was dismissed in its entirety. On 18 March 2016 the plaintiff filed an appeal against the judgment of the court of first instance. In its judgment rendered on 7 November 2018, the High Commercial Court of the Republic of Croatia rejected the plaintiff’s appeal and confirmed the judgement of the court of first instance. Therefore, the proceedings are concluded with a judgment that is final and binding. On 10 January 2019 the plaintiffs filed a petition with the Supreme Court of the Republic of Croatia for extraordinary legal remedy (revision) against the final and binding judgment of the High Commercial Court. On 23 September 2019 the Commercial Court in Zagreb delivered a copy of the aforementioned plaintiff's revision to the defendants which, subsequently, filled their reply to the revision on 3rd October 2019. There were no changes since then, waiting for Supreme Court’s ruling.

EKO MEDIA d.o.o.

In September 2012 INA, d.d. entered into an agreement with company EKO MEDIA d.o.o. EKO MEDIA failed to regularly comply with its obligations. INA, d.d. terminated the agreement with EKO MEDIA d.o.o. at the beginning of 2014. On 19 December 2014 EKO MEDIA d.o.o. filed a lawsuit against INA, d.d. in which EKO MEDIA d.o.o. specified its claim in the amount of HRK 106 million. INA, d.d. filed its official reply to such EKO MEDIA’s lawsuit and filed a counterclaim for the return of unjust enrichment and asked for the issuance of interim measure for prohibition of use of advertising boards. The first instance procedure is in progress and the court expert for finances delivered his opinion in which he determined the amount of the claim towards EKO MEDIA at the moment of termination of the agreement. A financial expert conducted an evaluation in relation to the circumstance of lost profit. Since bankruptcy proceeding has been initiated against the company EKO MEDIA d.o.o., INA has submitted a claim in the bankruptcy proceeding, while the litigation had to be formally stopped and then continued against EKO MEDIA d.o.o. – in bankruptcy, all resulting in the first instance proceeding being still in progress.

39. CONTINGENT LIABILITIES (CONTINUED)

Litigation (continued)

Belvedere cases (CLEOSTONE claim included)

In 2005 INA, d.d. and Belvedere d.d. concluded the Loan agreement on notarial insurance of the claim by establishing lien over the real estate of Belvedere d.d. for the purpose of ensuring loan repayment. Since the loan was not repaid, INA, d.d. initiated the procedure of real estate sale, and the real estate was sold to company Vila Larus d.o.o., whereby INA, d.d. collected HRK 24 million on behalf of principle amount and contractual interest rate.

The plaintiff initiated the proceeding to proclaim the real estate sale and purchase agreement as null and void, as well as the proceeding to cancel the enforceability clause on the Fiduciary Agreement. The first instance proceeding for the annulment of the agreement on the sale and purchase of real estate has been finalized in favour of INA, d.d. and upon an appeal filed by the plaintiff, the first instance decision became legally binding after the High Commercial Court of the Republic of Croatia rejected the appeal and confirmed the judgment. The Supreme Court of the Republic of Croatia has also rejected the plaintiff`s review.

Belvedere – HRK 24 million, 018-11/17

The plaintiff has filed a claim with the Commercial Court in Zagreb, seeking reimbursement of funds received for the sale of “Hotel Belvedere”, claiming that the sale of the real estate, encumbered by INA’s liens – fiduciary, is illegal. The plaintiff alleges that INA, d.d. had no right to collect its claims by selling the real estate, because the plaintiff was in crisis at the moment of loan placement, so the loan was actually a loan substituting the capital which is settled in a bankruptcy proceeding as a lower payment priority claim. It is also stated that the notary public violated other legal regulations. The response to the claim has been submitted, in which the plaintiff’s allegations have been contested, i.e. that the loan was not actually a loan substituting the capital. A preparatory hearing was held, as well as hearings at which witnesses were heard. The first instance court reached a judgment in favour of the plaintiff, against which an appeal was lodged. Based on INA`s appeal, the appellate court reversed the judgement and rejected the plaintiff`s request. The Plaintiff filed a request for granting a second instance appeal.

Belvedere – HRK 220 million, 018-14/17

The plaintiff has filed a claim with the Commercial Court in Zagreb, seeking reimbursement of damages, claiming that INA, d.d. has caused damage to the plaintiff by selling its real estate encumbered by INA’s liens – fiduciary, whereby the plaintiff was prevented from continuing its business operations.

The plaintiff claims that the damage is evident from the fact that the loan was actually a loan substituting the capital which is settled in a bankruptcy proceeding as a lower payment priority claim. INA, d.d. submitted its response to the lawsuit in which it contested all the plaintiff’s allegations, both in relation to the grounds and the amount and stated that the collection of the concerned claims was in any case insured by a separate satisfaction right, granting the creditor in bankruptcy the right to a separate settlement. The court granted a stay at the first hearing until the proceeding 018-11/17 is finished.

39. CONTINGENT LIABILITIES (CONTINUED)

Litigation (continued)

RSG Europe Service Limited - INA and Manšped d.o.o., NŠ-13/21, HRK 21 million

The lawsuit was filed on 4 August 2021 with the Commercial Court in Rijeka. The plaintiff, as the insurer of the shipowner of ship FIDELITY, is seeking damages for the total amount paid under settlements concluded with the Republic of Croatia, the Istria County and other legal and natural persons due to damage caused to them by spillage of fuel from ship FIDELITY into the sea in the Raša Bay on 22 June 2018. It is stated in the lawsuit that INA, d.d. as the concessionaire for fuel supply in the Raša Port and MANŠPED d.o.o. as its subcontractor (carrier) caused damage because INA hired MANŠPED as its subcontractor which neither had the concession or concession approval to perform these services, nor authorized and professional (trained) personnel who would be able to deliver fuel for ship FIDELITY, whereby they allegedly, during the delivery of bunker marine oil (fuel), violated the provisions of the Ordinance and committed the described damage, which was determined in the Report of the Port Authority of Pula of 20 July 2018.

The response to the lawsuit was filed on 17 December 2021 with the Commercial Court in Rijeka. The response to the lawsuit contests the lawsuit in its entirety because the factual situation indicates the responsibility of the ship's crew, i.e. of the plaintiff's policy holder. The preparatory hearing has been scheduled for 31 March 2022.

Labour procedure against Energopetrol d.d.

At Municipal Court in Sarajevo, 449 plaintiffs filed labour lawsuits against Energopetrol for which, depending on the prospect of success as well as the legal basis of the claim, Energopetrol reserved amounts of 10% and 30% respectively of the total claim.

The plaintiffs claim a total of HRK 80 million in principle, HRK 63 million in taxes and contributions, and HRK 14 million in statutory default interest. The lawsuits were filed in period 2018 untill 2019, and the plaintiffs are seeking payment of salary differences in line with the Branch Collective Agreement and payment based on discrimination for the workers who did not file lawsuits for the period 2014 till 2020.

In cases number 65 0 Rs 704245 18 Rs (387 plaintiffs) and 65 0 Rs 704589 18 Rs (1 plaintiff), first instance verdicts were handed down in favour of Energopetrol and appealed by the plaintiffs.

In the remaining 2 cases, which were suspended until the end of the "103" case, we expect that the Court will continue the proceedings since the Cantonal Court in Sarajevo passed a verdict in the "103" case in favour of Energopetrol.

MOL Plc. and INA vs Federation of the Bosnia and Herzegovina (FBIH)

MOL Plc. and INA, d.d. are involved inarbitration with the FBIH, in front of ICC Zürich.

INA/MOL claim:

INA and MOL claim arises out of the alleged breach of representations and warranties under the Recapitalization Agreement signed with FBIH, with regard to Energopetrol's alleged (non-)compliance with employment laws of FBiH. The amount in dispute, according to the Terms of Reference dated 20 April 2020 is EUR 22 million (plus ancillary claims such as claims for legal interest and legal costs). Still as of 31 March 2020, court proceedings are pending in an amount of EUR 27 million in relation to which Claimant maintains a relief for a declaratory decision.

39. CONTINGENT LIABILITIES (CONTINUED)

Litigation (continued)

MOL Plc. and INA vs Federation of the Bosnia and Herzegovina (FBIH) (continued)

FBIH counterclaim:

FBIH claims INA, d.d. and MOL did not perform their investment obligations in Energopetrol, according to the Recapitalization Agreement.

FBIH request the court to order MOL/INA "to jointly and severally make investments in the amount of BAM 93 million (in the alternative EUR 47 million) into Energopetrol d.d. Sarajevo, i.e. (i) ensure the provision of funds in the corresponding amount including, without limitation, loans, investment in kind and other financial devices which shall be reflected in the liabilities and/or equity side of the balance sheet of Energopetrol d.d. Sarajevo (all without diluting Respondent's shareholding in Energopetrol d.d. Sarajevo) and (ii) ensure the application of these funds to projects and purposes set forth in Article XII of the Recapitalization Agreement and Appendix 16 (Investment Plan) of the Recapitalization Agreement within 365 days as of the date the arbitral award is issued".

FBIH also claims INA and MOL " jointly and severally pay Respondent (FBIH) BAM 31 million (in the alternative EUR 16 million) plus interest of 5 % per annum as of 28 March 2010 until full and final payment thereof" and there is a rather unsubstantiated other counterclaim of BAM 30 million (EUR 15 million) plus interest of 5% per annum as of 30 March 2010 until full and final payment thereof.

Evidentary hearing took place on the week of 22 November 2021, in Zürich. The tribunal will likely decide about the next steps of the arbitration proceedings after evaluation of the submission of the parties made prior to (and at ) the hearing in the first phase of the bifurcated procedure. It is not to be excluded that a separate decision will be rendered by the tribunal either on the legal grounds of (some or all of) the counterclaims raised by Respondent or on the method and instructions to the parties for further submissions in the second phase of the procedure, in the evidentiary phase for the quantum (the claim and counterclaim respectively).

40. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Gearing ratio

The primary objective of INA Group in managing its capital is to ensure good capital ratios in order to support all business activities and maximize the value to all shareholders through optimization of the ratio between the debt and equity.

The capital structure of INA Group consists of debt part which includes borrowings as detailed in notes 25 and 27 offset by cash and bank balances as well as short-term marketable securities (so-called net debt) and shareholder equity comprising of issued capital, reserves, retained earnings and non-controlling interests as detailed in notes 35 and 36.

Capital structure of the INA Group is reviewed quarterly. As a part of the review, the cost of capital is considered and risks are associated with each class of capital. Internally, maximum gearing ratio of INA Group is determined.

The gearing ratio at the end of the reporting period was as follows:

	INA Group		INA, d.d.
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
Debt:	3,128	2,085	2,923	1,873
Bonds issuance	1,983	-	1,983	-
Short-term loans	1,145	2,085	940	1,873
Short-term marketable securities	(17)	(78)	(17)	(78)
Cash and cash equivalents	(2,630)	(399)	(2,573)	(351)
Net debt	481	1,608	333	1,444

Equity	10,782	9,357	11,722	10,331
Equity and net debt	11,263	10,965	12,055	11,775

Gearing ratio	4%	15%	3%	12%

Debt is defined as short-term borrowings and credit lines (excluding derivatives and financial guarantee contracts), as described in notes 25 and 27.

Total equity includes capital, reserves, retained earnings or transferred loss and non-controlling interests of the Group that are managed as capital.

40. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)

Categories of financial instruments

	Carrying amount
	INA Group		INA, d.d.
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
Financial assets
Cash and cash equivalents	2,630	399	2,573	351
Loans and receivables	3,098	2,342	3,420	2,733
Non-current financial assets	655	560	655	560
Positive fair value of derivatives	11	26	11	26
Marketable securities	60	78	59	78
Financial assets designated as at fair value through profit and loss	9	9	8	8

Financial liabilities
Bonds issuance	1,983	-	1,983	-
Loans and borrowings	1,145	2,085	1,069	1,873
Lease liabilities	312	309	445	479
Trade payables	2,143	1,426	2,138	1,450
Negative fair value of derivatives	64	116	64	116

Financial risk management objectives

INA Group continuously monitors and manages financial risks. In accordance with internal procedures INA, d.d. and its consolidated subsidiaries manage and maintain commodity, foreign exchange and interest rate risk at an acceptable level, allowing to achieve its strategic objectives while protecting the future financial stability and flexibility of INA Group. INA, d.d. integrates financial risks using scenario and sensitivity analyses, which can include changes in a single quotation, but also significant changes in external environment as well, as was the case in 2021 and 2020. Analysis of financial risks allows quantification of their effects on INA Group's overall business activities and selection of appropriate measures in order to minimize negative effects. Senior management regularly reviews the financial risk reports.

By taking this general approach, INA, d.d. assumes the business activities as a well-balanced integrated portfolio and does not hedge individual elements of its exposure to financial risks in a normal course of business. Therefore, INA, d.d. actively manages its financial risk exposure for the following purposes:

l corporate level – maintaining financial ratios, covering exposure to significant monetary transactions, etc.;

l business operations level – decreasing the exposure to market prices fluctuation in case of deviations from the normal course of business (e.g. planned regular shutdown of refinery units for the purpose of overhaul).

INA, d.d. Treasury carries out finance activities of INA, d.d., coordinates finance operations of INA Group on domestic and international financial markets, monitors and manages the financial risks related to the operations of INA Group. The most significant risks, together with methods used for management of these risks are described below.

INA Group used derivative financial instruments to a very limited extent in order to manage financial risks. Derivative financial instruments are regulated by signing an ISDA (International Swaps and Derivatives Association) Agreement with counterparties. INA Group does not use derivative financial instruments for speculative purposes.

40. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)

Market risk

Commodity price risk management

The volatility of crude oil and gas prices is the prevailing element in the business environment of INA Group. INA Group buys crude oil mostly through short-term arrangements in USD at the current spot market price. Necessary natural gas quantities in 2021 INA Group imported in EUR based on spot price.

In addition to exploration and production, and refinery operations, one of the main core activities of INA, d.d. are marketing and sale of refinery products and natural gas. Prices of crude products were determined weekly based on market principles, which enables quicker responses to market prices fluctuations.

In accordance with internal procedures, for the purpose of hedging financial risk exposure on corporate and business operations level, INA, d.d. may use forward, swap and option instruments. In 2021, INA, d.d. entered into short-term swap transactions to hedge its exposure to changes in inventory levels, changes in pricing periods, crack spreads and fixed price contracts.. The transactions were initiated to reduce exposures to potential fluctuations in prices over the period of decreasing inventories at the refineries, as well as to match the pricing period of purchased crude oil and crude products with the crude oil processing and refinery product retail pricing periods.

At 31 December 2021 and 31 December 2020, there is no fair value based on hedged transaction related to the price of the goods.

Foreign currency risk management

As INA Group operates both in Croatia and abroad, many of its transactions are denominated and executed in foreign currencies, hence INA, d.d. is exposed to exchange rate risks.

INA Group has a net long USD and EUR, and a net short HRK operating cash flow position. Generally, INA Group manages its currency risk using natural hedging, which is based on the principle that the combination of currencies in the debt portfolio should reflect the currency position of INA Group's free cash flow. Furthermore, in order to avoid excessive exposures to fluctuations in the foreign exchange rate with respect to a single currency (i.e. USD), INA, d.d. applies a portfolio-based approach while selecting the currency mix for its debt portfolio.

INA, d.d. may use a cross-currency swap to adjust its currency mix in the debt portfolio. At 31 December 2021 and 31 December 2020 there were no outstanding cross-currency transactions.

40. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)

The carrying amounts of INA Group and INA, d.d. foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows:

INA Group
	Liabilities		Assets
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
Currency EUR	1,167	1,566	1,678	490
Currency USD	1,161	1,027	803	613
	2,328	2,593	2,481	1,103
INA, d.d.
	Liabilities		Assets
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
Currency EUR	1,073	1,290	2,000	740
Currency USD	1,137	1,007	726	579
	2,210	2,297	2,726	1,319

Foreign currency sensitivity analysis

INA Group is mainly exposed to currency risk related to change of HRK exchange rate against USD and EUR, due to the fact that crude oil and natural gas trading on international markets and INA Group’s debt portfolio are denominated in the mentioned currencies.

The following table details sensitivity of INA Group’s and INA, d.d. to a 10% weakening of HRK at 31 December 2021 (same sensitivity rate used for preceding period) against the relevant foreign currencies. The sensitivity rates used represent management’s assessment of the usual change in foreign exchange rates. The sensitivity analysis includes monetary assets and liabilities in foreign currencies. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a change in foreign currency rates expressed as percentage. A negative number below indicates a decrease in profit where HRK changes against the relevant currency by the percentage specified above. For the same change of HRK versus the relevant currency in the opposite direction, there would be an equal and opposite impact on the profit.

INA Group
	Currency USD Impact		Currency EUR Impact
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
Profit/(Loss)	(36)	(41)	51	(108)
	(36)	(41)	51	(108)
INA, d.d.
	Currency USD Impact		Currency EUR Impact
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
Profit/(Loss)	(41)	(43)	93	(55)
	(41)	(43)	93	(55)

The exposure on the 10% fluctuation in the exchange rates for the currencies presented above is mostly attributable to the outstanding liabilities towards suppliers and borrowings denominated in USD and EUR.

40. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)

INA Group is exposed to interest rate risk, since entities in INA Group generally borrow funds at floating interest rates.

INA Group does not speculate on fluctuations in interest rates, and therefore primarily chooses floating interest rates. However, in certain instruments and certain macro environment, there is a possibility of selecting a fixed interest rate and utilization of longer interest periods. For example, in December 2021 INA, d.d. issued bonds with fixed coupon rate.

INA, d.d. in accordance with internal procedures can use interest rate swap transactions in order to manage the relative level of exposure to interest rate risk on cash flows related to borrowings with floating interest rates. As of 31 December 2021 there were no outstanding interest rate swap transactions.

Interest rate risk analysis

The sensitivity analysis below has been determined based on the exposure to interest rates at the statement of financial position date. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at the balance sheet date was outstanding for the whole year. A 50 or 200 basis point increase or decrease is used when reporting interest rate risk internally and represents management’s assessment of the reasonably possible change in interest rates.

If the interest rates would be 200 basis points higher/lower and all other variables were held constant, the changes in interest expense of INA Group and INA, d.d. would be as presented below.

	INA Group		INA, d.d.
	31 December 2021	31 December 2020	31 December 2021	31 December 2020
Short-term interest expense change	23	42	19	37
Total change:	23	42	19	37

If interest rates would be 200 basis points higher, INA Group’s interest expenses in 2021 would increase by HRK 23 million, while with a change of 50 basis points the increase would be HRK 6 million (in 2020: increase by HRK 42 million had the interest rated been 200 basis points higher, and by HRK 10 million had the interest rates been 50 basis points higher).

At the same time INA, d.d.’s interest expenses in 2021 would increase by HRK 19 million if interest rates had been 200 basis points higher, while the increase would be HRK 5 million with a change of 50 basis points (2020: increase by HRK 37 million had the interest rates been 200 basis points higher, and by HRK 9 million had the interest rates been 50 basis points higher). Equivalent decrease of interest rates would result in decreased interest expenses by equal amounts.

40. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)

The sensitivity analyses below have been determined based on the exposure to equity price risks at the reporting date.

If equity prices had been 10% higher:

l net profit for the year ended at 31 December 2021 would have been unaffected as the equity investments are classified as non-current financial assets; and

l other equity reserves of INA, d.d. would increase by HRK 61 million as a result of the changes in fair value of non-current financial assets.

If equity prices had been 10% lower, there would be an equal and opposite impact on equity.

Sales of products and services with deferred payment gives rise to credit risk, risk of default or non-performance of contractual obligations by INA Group customers. Overdue receivables have negative impact on the liquidity of INA Group, whereas impaired overdue receivables have a negative impact on the financial results of INA Group as well. Under currently valid internal procedures, measures are taken as a precaution against the risk of default. Customers are classified into risk groups by reference to their financial indicators and the trading records with INA Group, and appropriate measures to provide protection against credit risk are taken for each group. The information used to classify the customers into risk groups is mainly derived from the official financial statements and is obtained from independent rating agencies. The exposure and the credit ratings of customers are continuously monitored and credit exposure is controlled by credit limits that are reviewed at least on an annual basis. In 2021, credit risk management was under additional scrutiny, taking into account the potential decrease of market liquidity caused by the COVID-19 pandemic. Whenever possible, INA Group collects collaterals (payment security instruments) from customers in order to minimize the risk of collection of receivables arising from contractual liabilities of customers.

The exposure of INA Group and the credit ratings of its customers are continuously monitored to mitigate the risk of default (see note 21).

INA Group transacts with a large number of customers from various industries and of various size. A portion of goods sold with a deferred payment term includes government institutions and customers owned by the state and local self-governments that do not provide any collaterals. Regarding other customers, provided collaterals are mainly debentures, being the most frequently used payment security instrument on the Croatian market. Bank guarantees and credit insurance are used as well, whereas from foreign customers letters of credit are mostly obtained, and to a lesser extent bank and corporate guarantees and exceptionally bills of exchange.

There is no significant credit risk exposure of INA Group that is not covered with collateral, other than those to the above-mentioned institutions and entities controlled by the state, local self-government, and those arising from certain foreign concession agreements.

40. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)

Liquidity risk management

Responsibility for liquidity risk management rests with the Management Board, which has built an appropriate liquidity risk management framework for the management of INA Group’s short and long-term funding and liquidity management requirements. INA Group manages liquidity risk by maintaining and utilizing adequate reserves and credit facilities with monitoring of due dates of receivables and liabilities. On operative level within INA Group, liquidtiy optimization is additionally achieved throug cash pooling.

The policy of INA Group is to ensure sufficient external funding sources in order to achieve the sufficient level of available frame credit lines ensuring the liquidity of INA Group as well as investment needs.

As of 31 December 2021, INA Group had contracted and available short-term credit lines amounting to HRK 3,620 million (CNB middle rate), excluding overdrafts and trade financing credit lines established with the purpose to finance the purchase of crude oil and oil products.

As of 31 December 2021, INA Group has contracted and available long-term credit lines amounting to HRK 1,993 million (CNB middle rate).

Based on business needs and industry practice, INA, d.d. has contracted short-term credit facilities (’trade finance’’) with first class banking groups for financing crude oil and oil products purchase. As of 31 December 2021, INA Group had contracted and available short-term credit facilities for financing crude oil and oil products purchase amounting to HRK 6,610 million (CNB middle rate).

For details of the main external sources of funding for INA Group, see note 25 and 27.

With the purpose of diversification of funding sources and in order to ensure sufficient liquidity and financial stability level, INA, d.d. is continuously considering different funding opportunities with other creditors as well and in December 2021, INA, d.d. issued HRK 2 billion bonds with a 5-year maturity and fixed coupon rate.

40. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)

Liquidity risk management (continued)

Liquidity and interest risk tables

The following tables detail the remaining contractual maturity for financial liabilities of INA Group and INA, d.d. and at the period end. Analyses have been drawn up based on the undiscounted cash flows based on the earliest date on which the payment can be required. The tables include both principal and interest cash flows.

INA Group
	Less than 1 month	1 - 12 months	1 - 5 years	5+ years	Total
31 December 2021
Non-interest bearing	1,918	816	24	-	2,758
Interest bearing	568	661	2,133	79	3,441
	2,486	1,477	2,157	79	6,199
31 December 2020
Non-interest bearing	2,126	427	28	1	2,582
Interest bearing	1,034	1,129	178	53	2,394
	3,160	1,556	206	54	4,976


INA, d.d.
	Less than 1 month	1 - 12 months	1 - 5 years	5+ years	Total
31 December 2021
Non-interest bearing	1,927	613	24	-	2,564
Interest bearing	569	504	2,355	102	3,530
	2,496	1,117	2,379	102	6,094
31 December 2020
Non-interest bearing	1,958	420	27	1	2,406
Interest bearing	1,036	1,067	272	107	2,482
	2,994	1,487	299	108	4,888

Non-interest bearing liabilities of INA, d.d. due in a period of less than one month consist mainly of trade payables in the amount of HRK 1,857 million in 2021 (2020: HRK 1,104 million).

Included in non-interest bearing liabilities of INA, d.d. due in a period of over five years are, liabilities to Government for sold flats and deferred income for sold flats.

Interest bearing liabilities include short-term borrowings, long-term borrowings and leases.

40. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)

Valuation techniques and assumptions applied for the purposes of measuring fair value

The fair values of financial assets and financial liabilities are determined as follows:

· the fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets is determined with reference to quoted market prices;

· the fair value of other financial assets and financial liabilities is determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions and dealer quotes for similar instruments;

· the fair values of derivative instruments are calculated using quoted prices. Where such prices are not available, a discounted cash flow analysis is performed using the applicable yield curve for the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives. Foreign currency forward contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest rates matching maturities of the contracts. Interest rate swaps are measured at the present value of future cash flows estimated and discounted based on the applicable yield curves derived from quoted interest rates.

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

· Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

· Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

· Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

40. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)

INA Group and INA, d.d.

Expense from hedge transactions -net effect

31 December 2021

31 December 2020

Companies controlled by governing company

MOL Commodity Trading Kft.

Fair value measurements recognized in the statement of financial position

INA GROUP and INA, d.d.
			31 December 2021
	Level 1	Level 2	Level 3	Total
*Financial assets at fair value*
Non-current financial assets	606	-	-	606
Marketable securities	59	-	-	59
Positive fair value of derivatives	-	11	-	11
*Financial liabilities at fair value*
Corporate bonds issunace	-	1,983	-	1,983
Negative fair value of derivatives	-	64	-	64

			31 December 2020
	Level 1	Level 2	Level 3	Total
*Financial assets at fair value*
Non-current financial assets	511	-	-	511
Marketable securities	78	-	-	78
Positive fair value of derivatives	-	97	-	97
*Financial liabilities at fair value*
Negative fair value of derivatives	-	116	-	116

There were no transfers between levels 1 and 2 during the year.

· Financial instruments in level 1

The fair value of financial instruments included in Level 1 comprise JANAF shares equity investments classified as non-current financial assets and marketable securities that are based on quoted market prices. A market is considered as active if quoted prices are current and regularly available.

· Financial instruments in level 2 and level 3

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques.

Specific valuation techniques used to value financial instruments include:

· The fair value of hedge commodity transactions is calculated based on actual historic quotations from Platts and market forward quotations of the underlying commodities.

· The fair value of forward foreign exchange contracts has been determined based on exchange rates effective at the statement of financial position date and an embedded derivative has been determined as the difference between the cumulative inflation index of the contracted inflation escalation index and the inflation rate in the country of contract execution.

These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

41. SUBSEQUENT EVENTS

INA awarded new exploration concession in Egypt

INA, d.d. was awarded an exploration license for the East Bir El-Nus concession (Block WD-8), located in Egypt’s Western Desert. This is a follow-up to INA's activities on this key foreign market for the company in terms of oil and gas exploration and production.

INA, d.d. enters the new exploration license as a 50% partner, while the remaining 50% is held by Energean, which will also be the operator. In the coming period, Energean and INA, d.d. will finalize the license agreement with the Egyptian Government and the Egyptian national oil company, and before it enters into force it will have to be confirmed by the Egyptian Parliament.

In their bid, INA, d.d. and Energean committed to conduct a 180km² 2D seismic survey and a 200km² 3D seismic survey, followed by at least two exploration wells.

Russia – Ukraine conflict

Management is continuously investigating and assessing the possible effects of the current geopolitical situation, international sanctions and other possible limitations on the supply chain and business activities of INA Group, driven by the Russia’s invasion of Ukraine that commenced on 24 February 2022.

INA Group exposure to Russia and Ukraine does not require any adjustments to these financial statements as at 31 December 2021, and is not expected to jeopardize the business continuity of the Group.

42. APPROVAL OF THE FINANCIAL STATEMENTS

These financial statements were approved by the Management Board and authorised for issue on 16 March 2022.

Signed on behalf of the Company and the Group on 16 March 2022 by:

Sándor Fasimon, President of the Management Board of INA, d.d.

Niko Dalić, member of the Management Board Ferenc Zoltán Horváth, member of the Management Board

Barbara Dorić, member of the Management Board Darko Markotić, member of the Management Board

József Farkas Simola, member of the Management Board