ANNUAL REPORT OF NEXE GRUPA FOR YEAR 2010

6 / 72. Biographies of the Members of the Board of Nexe grupa d.d.The Board of Nexe grupa d.d.1. Ivan Ergović, President of the Board, represents the company independently and individually2. Krešimir Dundović, member of the Board for Strategy3. Oto Ostović, member of the Board for Operations and Sale4. Tomislav Rosandić, member of the Board for FinancesIvan Ergović, President of the BoardKrešimir Dundović, member of the Board for StrategyIvan Ergović was born in 1956 in Feričanci (Našice). He finishedMechanical-technical secondary school in Zagreb in 1975. Hegraduated in 1982 from Faculty of Mechanical Engineering andNaval Architecture in Zagreb. He started working as an intern at thecompany Rade Končar - Electrical appliances in Zagreb.In 1983 he began working at Cement factory Našice as amechanical engineer in the Maintenance department. He becameHead of Mechanical maintenance department in 1987, and in 1990former Workers’ council of the Cement factory Našice appointedhim General Manager of the company. From 1995 he was GeneralManager of the Našicecement d.d., i.e. President of the Board since2001. Since July 2003 he has been President of the Board of Nexegrupa d.d. Našice.He is President of Supervisory Board at the company GP „Put” d.d.Sarajevo. From 2001 till 2008 he was a member of Executive Boardof Croatian Employers’ Association, and from 2008 till 2011 hehas been a member of Members’ Council of Croatian Employers’Association. Since February 2011 he is President of the ExecutiveBoard of Croatian Employers’ Association. He is a member of theCouncil for the economy of the President of Croatia.Krešimir Dundović was born in 1968 in Koprivnica. He graduatedin 1993 from Faculty of Mining, Geology and Oil Engineering inZagreb, and he earned his master’s degree in MBA at the Facultyof Economics in Zagreb. In 2000 he finished IEDC - Bled Schoolof Management, General Management Program, and in 2007 hereceived a certificate as Authorized member of supervisory boardsfrom Faculty of Economics in Zagreb and Faculty of Economics inSplit. He is a participant of Orchestrating Winning Performance, IMDLausanne. Before coming into the system of Nexe Grupa, from 1993till 1999 he worked at Ina d.d. Zagreb, and in the period from 1996till 1998 he worked at INAGIP, Milan.He started working in Našicecement in 1999 in Sales department,and then as soon as Department for new activities was founded,he became its director. That department later became Sector forstrategy, analysis and acquisitions.He is member of the Board of Nexe grupa d.d. Našice since 1September 2005, and he was appointed a member of the Boardfor Strategy. He is a member of Supervisory boards at companies GP„Put“ d.d. Sarajevo and Ingram d.d. Srebrenik.

8 / 93. Biographies of the members of the Supervisory Board of Nexe grupa d.d.Supervisory Board of Nexe grupa d.d.1. Željko Perić, President of Supervisory Board2. Željko Lukač, Vice-President of Supervisory Board3. Dr. Nenad Filipović, member of Supervisory BoardŽeljko Perić, President of Supervisory BoardŽeljko Lukač, Vice President of the Supervisory BoardŽeljko Perić was born in 1958. He graduated in 1982 from Facultyof Economics in Zagreb. During his business career he completednumerous professional seminars and trainings at business schools,educational centres and investment banks such as Harvard BusinessSchool, Boston; IMD, Lausanne; IEDC, Bled; Management CentreEurope, Bruxelles; UBS, Zurich, etc.From 1984 till 1990 he worked in Ingra, at realization of complicatedinvestment projects in foreign countries. In the period from 1990 till1992 he worked as senior advisor at Ministry of Foreign Affairs ofthe Republic of Croatia in Department for economic relations withforeign countries. By the middle of 1992 he returned to work in theeconomy and transferred to Hidroelektra d.d., as financial director.In 1993 he went to Pliva to the position of engineering director. In1996 he was promoted to the position of financial director of Pliva.He became a member of the Board of Pliva at the end of 1999. In2002 he became President of Board in Lura d.d. (today Dukat).Early in the year 2005 he founded his own consultant companyCaper d.o.o., specialized in consulting for projects of acquisitions andmergers. Željko Perić is President of Supervisory Boards of Nexe grupad.d. Našice, Našicecement d.d. Našice, and a member of SupervisoryBoards of Atlantic Group d.d., B-Net Croatia and Banco PopolareCroatia. He is a member of Advisory Board of Silkroutefinancials fromLondon and of Programme council of Zagreb School of Economicsand Management.Željko Lukač was born in 1969 in Zagreb. He graduated in 1993 fromUniversity Mary Hardin Baylor in Belton, Texas, USA in marketing andfinances. In 1995 he received his Master’s Degree in MBA at UniversityTexas in Austin. After receiving his Master’s Degree, he co-foundedthe Sherwood Construction company, a company that positioneditself well on the construction market and benefited from rapid realestate market development in the Austin region. In the middle ofthe year 1996 he sold his stake in the company and returned toCroatia, where he joined a leading Croatian insurance companyCroatia osiguranje d.d. In pursuit of faster career advancement inFebruary 1997 he went to the European Bank for Reconstructionand Development where he started working as a financial analyst. Inthe European Bank for Reconstruction and Development he workedas a chief banker in the EBRD Office in Zagreb, and was responsiblefor various loan and equity investment projects in the sectors ofconstruction materials, food processing, tourism and pharmaceuticalindustry.Currently he is working as President of the Board of the companyMetronet Telecommunications Inc., where he is responsible forthe implementation of business plan and coordination of BoardMembers. He is also a director and partner in the company QuaestusPrivate Equity Partners Ltd.. Quaestus Private Equity Partners Ltd. is amanagement company that manages two venture capital investmentfunds with a private offering: Quaestus Private Equity Capital I andII. Investors in funds are only successful Croatian companies andpension funds that have entrusted Quaestus with more than 105million Euros.Mr. Lukač is also vice-president of Supervisory Boards in Nexegrupa d.d. Našice and Našicecement d.d. Našice, he is President ofSupervisory Board in the company Osteon d.d. and a member ofSupervisory Boards in the companies Hospitalija trgovina d.o.o. andLuka Dubrovnik d.d.

12 / 135. Ownership structure of Nexe GrupaCROATIASERBIALuka Tranzit Osijek d.o.o.OsijekEkonex d.o.o. NašiceNašicecement d.d. NašiceNexe doo Novi SadS.C. NEXE Trade S.R.L.RomaniaCROATIASERBIADilj d.o.o. VinkovciIGM Stražilovo dooSremski KarlovciIgma d.o.o. KoprivnicaJelen Do AD, Jelen DoCement-market d.o.o.Našice*Nexe gradnja dooNovi SadFarma Feričanci d.o.o.FeričanciSlavonija IGM d.o.o. NašiceBilokalnik-Drvo d.o.o.KoprivnicaNašička gradnja d.o.o.NašiceOsilovac d.o.o. FeričanciNexe beton doo Novi SadAD Polet IGK Novi BečejPolet - keramika dooNovi BečejFeraVino d.o.o. FeričanciNexe beton d.o.o. NašiceNašički auto centar d.o.o.NašiceGastro - market d.o.o.Našice

NEXE GRUPA D.D. NAŠICEBOSNIA AND HERZEGOVINA SWITZERLAND RUSSIANexe kamen d.o.o. Doboj *Laurus Consulting AG *Zao „Nexe Rus“, Russia*Nexe beton d.o.o.Banja LukaBOSNIA AND HERZEGOVINASLOVENIANexe d.o.o. SarajevoTvornica opeke d.o.o.Sarajevo*Nekse, trgovinacementom d.o.o. Lendava,SloveniaAgregati i betoni „Put“d.o.o. SarajevoGP „Put“ d.d. SarajevoBUSINESS UNITS:KENYAPAKISTANUGANDA*Companies not included in the consolidation

14 / 156. Ownership structure of Nexe grupa d.d.Ownership structure of Nexe grupad.d. Našice as of 31 December 2010Ownership share in percentage7.40%2.54%90.06%Source: Nexe GrupaErgović8,5icecement d.d. Našice7

7.40%2.54%90.06%Number of sharesIvan Ergović8,523,740Našicecement d.d. Našice700,000Nexe grupa d.d. Našice (own shares)240,040TOTAL9,463,780TICKER:NEXE-R-AISIN:HRNEXERA0009NOMINAL VALUE:10.00 HRK

16 / 177. Regional organizational structure of Nexe GrupaWithin Nexe Grupa operate 33 companies that are grouped byregional level: Region of Croatia, Serbia Region, Region of Bosniaand Herzegovina and other markets. In Croatia, the companyNašicecement is extracted from the region due to its importancefor the overall operations of Nexe Grupa, and is located on theNEXE GRUPANAŠICECEMENT D.D.NAŠICEREGION CROATIAREGION SERBIAEkonex d.o.o. NašiceNexe beton d.o.o. NašiceNexe doo Novi SadIgma d.o.o. KoprivnicaNexe beton dooNovi SadDilj d.o.o. VinkovciJelen Do AD, Jelen DoDivision for cement, concrete,aggregates and limestoneSlavonija IGM d.o.o.NašiceCement-market d.o.o.NašiceNašička gradnja d.o.o.NašiceAD Polet IGK Novi BečejIGM Stražilovo dooSremski KarlovciPolet - keramika dooNovi BečejNexe gradnja dooNovi SadDivison for constructionDivision for brick and roof tileNon-core business division

same organizational level as the Regions. Also, non-core businessesare organized at the same organizational level, and within themoperate companies whose main business is not production ofconstruction materials. In the managerial part of Nexe Grupa arethe following companies: Nexe grupa d.d. Našice in Croatia, Nexedoo Novi Sad in Serbia and Nexe d.o.o. Sarajevo in Bosnia andHerzegovina, and within them are organized the central supportand development-technology functions. Nexe gradnja doo NoviSad was founded towards the end of 2010, and its goal is toexpand product offerings and services of Nexe Grupa on theSerbian market.D.D. NAŠICEREGION BOSNIA ANDHERZEGOVINAOTHER MARKETSNON-CORE BUSINESSNexe d.o.o. SarajevoNexe beton d.o.o.Banja LukaAgregati i betoni „Put“d.o.o. SarajevoNexe kamen d.o.o. DobojTvornica opeke d.o.o.SarajevoGP „Put“ d.d. SarajevoS.C. NEXE Trade S.R.L.,RomaniaNekse, trgovina cementomd.o.o. Lendava, SloveniaZao „Nexe Rus“, RussiaLaurus Consulting AGSwitzerlandFeraVino d.o.o. FeričanciOsilovac d.o.o. FeričanciLuka Tranzit Osijek d.o.o.OsijekBilokalnik-Drvo d.o.o.KoprivnicaNašički auto centar d.o.o.NašiceGastro - market d.o.o.NašiceFarma Feričanci d.o.o.Feričanci

18 / 198. Management systemsNexe Grupa as a group of companies engaged in a wide rangeof activities, decided to introduce a certification of managementsystems to support more effective management and to guaranteebetter quality for the products and services offered on the market.Lloyd’s Register Quality Assurance was selected, as a certificationcompany with great reputation in the world for the certification ofmanagement systems.8.1. Quality management systemQuality Management System according to ISO 9001:2008, as a basicsystem on which other management systems can be upgraded, wasintroduced and certified in the following companies of Nexe Grupa:- Nexe grupa d.d. Našice (for the management of the Group),- Našicecement d.d. Našice (development, production and sale ofcement),- Slavonija IGM d.o.o. Našice (development, production and sale ofhollow brick elements),- Dilj d.o.o. Vinkovci (development, production and sale of tilesmade of clay),- Igma d.o.o. Koprivnica (development, production and sale ofprefabricated concrete elements and the production and sale ofnatural aggregates),- Nexe beton d.o.o. Našice (production and delivery of transportconcrete),- AD Polet IGK Novi Bečej (development, production and sale oftiles made of clay),- Polet - keramika doo Novi Bečej (development, production andsales of ceramic tiles),- IGM Stražilovo doo Sremski Karlovci (development, productionand sale of hollow brick elements),- Jelen Do AD, Jelen Do (production activity and sales of lime, stoneand aggregates),- Tvornica opeke d.o.o. Sarajevo (development, production and saleof hollow brick elements).Croatian Society for Quality has recognized the project andthe simultaneous introduction of Quality Management SystemCertification in nine companies of Nexe Grupa in three states, as aspecial achievement, and in 2008 awarded Nexe Grupa d.d. Našicewith Charter for the promotion and implementation of quality inthe Croatian economy in 2008.8.2. Environmental management systemEnvironmental Management System to ISO 14001:2004 has beenintroduced and certified since 2004 in Našicecement d.d. Našice, acompany of Nexe Grupa which has potentially the strongest impactson the environment. Nexe Grupa does not currently intend tocertify environmental management system in other companies, butways of working are, by means of design and implementation ofprocedures and guidelines relating to environmental management(management of air emissions, water emissions, waste), transferredthrough the work of the Sector for the management systems ofNašicecement d.d. Našice to all other companies in Nexe Grupa, inwhich there are possible potential significant impacts on environment.8.3. Health management system andsafety at workHealth management system and safety at work were introducedand certified according to OHSAS 18001:2007 standard inNašicecement d.d. Našice. The principles and the experience gainedby applying this system in Našicecement d.d. Našice, through theDepartment for management systems, are transferred to all thecompanies in Nexe Grupa.8.4. Food safety management systemFood safety management system according to ISO 22000:2005standard was introduced and certified in the following companiesof Nexe Grupa:- FeraVino d.o.o. Feričanci (wine production)- Osilovac d.o.o. Feričanci (milk production)- Gastro-market d.o.o. Našice (preparing and serving meals and drinks).As these companies have a legal obligation to introduce a systemof HACCP, Nexe Grupa has decided to introduce and certify thesystem according to the ISO 22000 standard, which exceeds therequirements of HACCP.Nexe Grupa has a strategy to introduce certified QualityManagement System into all companies that are engaged in theactivity of production of construction materials while in othercompanies it does not have to be certified, but they also have toapply documented procedures related to the management andsupporting processes. Thus, in 2010 was introduced certifiedQuality Management System in Nexe beton d.o.o. Našice, and thispractice will continue in other companies related to the productionof construction materials that have not yet been certified.

9. Management report9.1. Review by regions

20 / 219.1.1. NašicecementIn Croatia, the companyNašicecement is extracted fromthe region due to its importancefor the overall operations of NexeGrupa, and is located on the sameorganizational level as the Regions.

Našicecement d.d. Našice, with annual capacity of 1 million tons,is on the second place in the Republic of Croatia by the installedcapacity and market share. Našicecement d.d. Našice is presenton the export markets of Bosnia and Herzegovina, Slovenia andHungary. In 2010 Našicecement d.d. Našice celebrated 30 years ofcement production in Našice.Našicecement d.d. Našice has a certificate of quality ISO 9001:2008,a certificate of environmental protection ISO 14001:2004, andBS OHSAS 18001:2007 which includes a health and safetymanagement system, and thus has this system been made whole -an integrated System of quality, environmental, health and safetymanagement.In 2010 significant activities were focused on the development ofnew products, and Našicecement d.d. Našice launched three newtypes of cement: Portland cement CEM I 42,5R, Portland cementwith the addition of slag CEM II/A-S 42,5R and sulphate-resistantcement with low heat hydration CEM III/B 32,5N SR-LH.The product range of Našicecement d.d. Našice consists of thefollowing brands of cement and masonry cement:• Standard, CEM II/B-M (P-S) 32,5R, Portland cement mixed• Specijal, CEM II/A-M (S-V) 42,5N, Portland cement mixed• Premium, CEM I 52,5N, a pure Portland cement• Portland cement CEM I 42,5R• Portland cement with the addition of slag CEM II/A-S 42,5R• Sulphate-resistant cement with low heat hydrationCEM III/B 32,5N SR-LH• Namal, MC5, masonry cement.Standard and Specijal cement are on the market available in bagsof 25 kg and 50 kg, and Namal cement in bags of 45 kg. Becausethe Premium cement is used for the most demanding constructionworks, it is only supplied in bulk directly on site. Other types ofcement are delivered in bulk.9.1.1.1. General information about thecement industryBasic characteristics of the cement industry are the following:• high investments per unit capacity• high consumption of raw materials• high consumption of thermal power per unit of product• high consumption of electric power per unit of product• orientation on just one product without the possibility ofsubstitution• the ability to absorb large quantities of different waste materialsfrom other industriesOn the Croatian market, cement consumption per capita in 2010amounted to 426 kg of cement, and cement consumption declinedby 22% compared to 2009. The total consumption of cement inCroatia in 000 tons, as well as cement consumption per capita peryears is presented in the following diagram.000 tonsCEMENT CONSUMPTION IN CROATIA3,5003,0002,5002,0001,5001,0005000Cement consumption per capitaSource: Croatia Cement9.1.1.2. Control and management ofproduct qualityThe process of quality control and management of product qualitycontinued with regular activities regarding control and productquality assurance. During 2010 continued the certification ofproducts for the Croatian market, for the markets of the Republicof Serbia and the European Union. Towards the end of 2010 beganthe process of certification for the market of Bosnia and Herzegovinawith the new competent authority. In 2010 three new products thatwere introduced to the market were developed: CEM I 42,5R; CEMII/A-S 42,5R; CEM III/B 32,5N SR-LH. In addition to regular activities,continued activities related to the analysis of waste materials.9.1.1.3. Investments in Našicecement1,00090080070060050040030020010002001 2002 2003 2004 2005 2006 2007 2008 2009 2010Total consumption of cementInvestments in Našicecement d.d. Našice in 2010 were 17 millionHRK, and larger part was used for the construction of a plant forreduction of NO x and SO 2, silos for cement, and completion ofphase I of the industrial track.Activities related to capacity expansion in the segment ofproduction, effective production of cement through the substitutionof conventional fuels to alternative sources of energy (waste oil,tires, RDF), compliance with all environmental standards, expansionof infrastructure through the completion of the cement silos andindustrial track in order to meet the increasing demands of customerson the market were all made possible because of the high levels ofinvestment in Našicecement d.d. Našice. In order for production tobe as efficient as possible, it is planned in the energy balance toincrease the existing share of alternative fuels i.e. waste oil and tiresat 10% (from the current 2 - 3%). According to plan alternativefuel RDF (fuel derived from household waste), that will contributeto even more efficient production, will be used. Completion ofthe industrial track will enable cheaper and more environmentallyfriendly transport of supplements, energy-generated products andcement.kg per capita

22 / 23INVESTMENTSEBITDA AND EBITin 000 HRK100,00080,00060,00040,00020,00075,23031,37417,005in 000 HRK400,000350,000300,000250,000200,000150,000100,000264,277217,003238,386191,922131,83090,76102008 2009 2010Našicecement50,00002008 2009 2010Source: Nexe GrupaNote: Nonconsolidated informationEBITDAEBITSource: Nexe GrupaNote: Nonconsolidated information9.1.1.4. Key business indicators inNašicecementin 000 HRKOPERATING INCOME AND EBITDA MARGIN800,000700,000600,000500,000400,000300,000200,000100,0000Operating incomeEBITDA margin598,245534,96544.2% 44.6%378,92434.8%2008 2009 201080%70%60%50%40%30%20%10%0%Source: Nexe GrupaNote: Nonconsolidated information9.1.1.5. Ekonex d.o.o. NašiceEkonex d.o.o. Našice was founded on 1 January 2009. The mainactivity of this company is waste management, and they work oncollection of alternative fuels for the needs of Našicecement d.d.Našice that since 2007 has been using waste tires and waste oil asan alternative source of energy for clinker burning process. Ekonexd.o.o. Našice is actively involved in the work of NGOs dealing withrenewable energy sources - Community of renewable energysources at the Croatian Chamber of Commerce and the WorkingGroup on Renewable Energy Sources of the city of Našice.The Management of Nexe Grupa made towards the end of 2010the strategic decision to adopt a Business Plan of investing inrenewable energy sources in the period from 2011 till 2015 worth90 million Euros, which includes investments in biogas and woodbiomass plants to produce heat and electricity. Specifically, in thenext 5 years, it will be invested in four biogas plants and three woodbiomass plants. The size of biogas plants was targeted at 1.0 MW,and wood biomass plants at 6.5 MW of installed capacity.NETO INCOME AND NET MARGIN160,00050%in 000 HRK140,000120,000100,00080,00060,00040,00020,0000113,40189,44817.4%28,26614.7%6.1%2008 2009 201040%30%20%10%0%Net incomeNet marginSource: Nexe GrupaNote: Nonconsolidated information

9.1.2. Region CroatiaRegion Croatia includes companiesengaged in production of constructionmaterials - brick, tile, concrete,concrete elements and aggregates,and companies whose core business isconstruction and sales of constructionmaterials:• Slavonija IGM d.o.o. Našice• Dilj d.o.o. Vinkovci• Nexe beton d.o.o. Našice• Igma d.o.o. Koprivnica• Našička gradnja d.o.o. Našice• Cement-market d.o.o. Našice

24 / 259.1.2.1. Nexe brickSlavonija IGM d.o.o. Našice is the largest producer of bricks inSlavonia and Baranja, with an annual capacity of 110 million UNF.Slavonija IGM d.o.o. Našice produces classic and thermal program,and is characterized by the quality of raw materials and finishedproducts, and by its orientation towards customer satisfaction andconstantly growing market demand. The company has a certificateof quality ISO 9001:2008.9.1.2.2. Nexe roof tileDilj d.o.o. Vinkovci was founded many years ago, in 1922, andhas been producing tiles. This is a company with a tradition andcontinuity, customer-oriented, that always strives to meet customerexpectations regarding quality and price of their products. Dilj d.o.o.Vinkovci has a certificate of quality ISO 9001:2008.The assortment of the company Dilj d.o.o. Vinkovci was towardsthe end of 2009 completed by large format roof tiles - Oktavijanand Cezar, and they recorded a very impressive market results in2010. In accordance with the requirements of the market in autumn2010 Dilj d.o.o. Vinkovci introduced a new model of roof tile,called Mediteran, whose characteristics are significantly improvedcompared to the previous model.In 2010 the company Dilj d.o.o. Vinkovci, in cooperation with thecompany Kemis-Termoclean d.o.o. Zagreb, carried out a campaigncalled “Replace roof, old for new”. The campaign was aimed atindividuals who on the roofs of their homes and auxiliary facilitieshave asbestos plates. During the campaign individuals were able toarrange free transport of hazardous waste in the form of asbestospanels, and in return they would receive a coupon with which theycould change harmful panels with squares of Nexe roof tiles. Theaim of the campaign was to educate citizens about the dangers ofasbestos and methods of handling asbestos panels.Production program of the company Dilj d.o.o. Vinkovci includesthe following types of roof tiles:• Oktavijan• Cezar• Glinex kontinental• Glinex rustik• Mediteran• Kontinental 104• Special roof tiles.

9.1.2.3. Nexe concreteNexe beton d.o.o. Našice is a leading manufacturer and carrierof fresh concrete in the Republic of Croatia, and they work withfresh concrete as well. In its operations the company complieswith all environmental standards, and holds a certificate of factoryproduction control of concrete. By this certificate Nexe beton d.o.o.Našice became one of the few companies that have establishedquality management system according to the technical regulationsfor concrete structures, which refers to the standard HRN EN 206-1. The year 2010 was marked by the successful introduction andimplementation of Quality Management System according to ISO9001:2008 standard.Nexe beton d.o.o. Našice delivers to its customers all types ofconcrete with compressive strength of C 8/10 C 40/50, and specialconcretes (with different durable properties), lightweight concreteand cement screeds with additives for delayed start of curing andcement stabilization.9.1.2.4. Nexe aggregatesIgma d.o.o. Koprivnica performs the extraction of gravel and sand,and produces concrete and concrete elements.By modern technological methods of processing natural gravel“Botovac”, company Igma d.o.o. Koprivnica produces all kinds ofaggregates intended for sale and distribution to buyers, and forown production of concrete.After a long obtaining of necessary documents, in October 2010the company Igma d.o.o. Koprivnica obtained a concession to beginproduction in the exploitation field Jagnježđe 2. Based on the mainmining project, and on the basis of confirmed reserves and plannedtechnology, the planned time of exploitation and processing on thatexploitation field is 18.6 years. In the equipment and infrastructurehas been invested 9 million HRK, all in order to start production inthe exploitation field Jagnježđe 2.9.1.2.6. Našička gradnja d.o.o. NašiceThe main activity of Našička gradnja d.o.o. Našice are constructionworks in civil engineering and in high-rise building construction.The company is licensed and has the approval for construction - forpublic buildings group A.In the reference list of Našička gradnja d.o.o. Našice there is asignificant number of built facilities for various purposes, amongwhich are residential buildings, commercial-residential buildings,commercial buildings, buildings for manufacturing plants, publicbuildings (schools, sports halls, hospitals, clinics, etc.) and variousobjects in civil engineering.The most important projects in 2010 were residential-commercialbuilding in Harambašićeva Zagreb, Rugvica farm, construction ofan industrial rail track for Našicecement, renovation of residentialbuildings in Lika, and completion of residential-commercial buildingSokolana in Našice. In 2010 Našička gradnja d.o.o. Našice entered incontract to construct the building of the Music Academy in Zagreb.9.1.2.7. Cement-market d.o.o. NašiceCement-market d.o.o. for trade and services (abbreviated CE-MA)is a company that specializes in selling construction materials. Itsrange of products includes products of member companies of NexeGrupa (cement, brick, tile, concrete products, ceramics, doors, etc.),as well as products from other manufacturers (timber, concreteiron, fabric reinforcements, plaster, hydro and thermal insulation aswell as all other building materials). In addition to sales of buildingproducts, CE-MA offers transportation services and unloading ofconstruction material at the building sites, etc. Sales outlets of thecompany CE-MA are in Našice and Koprivnica.9.1.2.5. BetelThe factory Igma d.o.o. Koprivnica annually produces about 60000 tonnes of concrete elements. They are mainly intended for civilengineering because the biggest buyers are public enterprises andlocal governments, whose scope includes the planning of publicspaces and the construction and repair of roads, railways andconstruction of sewer systems, as well as companies that performworks within this field.The company Igma d.o.o. Koprivnica produces also waterproofand reinforced concrete pipes with different wall sections, allin accordance with the requirements of HRN EN 1916 standard,while concrete control panels are produced in accordance withthe requirements of HRN EN 1917 standard. The product range iscompleted with connecting pipes of different profiles and a conicalend.

26 / 279.1.2.8. Investments in Region CroatiaOPERATING INCOME AND EBITDA MARGINThe most significant investments in 2010 in the Region Croatia wererelated to equipment for the production of tile Mediteran (6.6 millionHRK) in the company Dilj d.o.o. Vinkovci, then the investment inthe waterway dredge (4.5 million HRK) in the company Igma d.o.o.Koprivnica, and buying a concrete factory in Zagreb (3.5 millionHRK) owned by the company Nexe beton d.o.o. Našice.in 000 HRKINVESTMENTS160,000140,000120,000100,00080,00060,00040,00020,0000158,18335,3828,4872,2983,6451,53810,141468246Dilj Slavonija IGM Našičkagradnja2008 2009 201021,4228,3514,3825874Nexe beton CE-MA Igma9.1.2.9. Key business indicators in RegionCroatiain 000 HRKOPERATING INCOME220,000200,000180,000160,000140,000120,000100,00080,00060,00040,00020,0000100,54763,54896,62256,68333,79233,062127,427109,40157,515Dilj Slavonija IGM Našičkagradnja2008 2009 2010182,659179,536114,7244,8071,31611,208Source: Nexe GrupaNote: Nonconsolidated information10,45114,32414,966100,63779,18065,737Nexe beton CE-MA IgmaSource: Nexe GrupaNote: Nonconsolidated informationin 000 HRKin 000 HRK800,000700,000600,000500,000400,000300,000200,000100,0000Operating incomeEBITDA margin578,40411.9%479,7812.4%382,6250.0%2008 2009 2010NET INCOME AND NET MARGIN40,00020,000 12,8480-20,000 2.1% -13.2%-40,000-60,000-22.2%-80,000-66,661-100,000-120,000-91,3242008 2009 2010Net incomeNet marginin 000 HRKEBITDA AND EBIT120,000100,00080,00060,00040,00020,0000-20,000-40,000-60,000-80,000-100,00068,64636,71311,56920%18%16%14%12%10%8%6%4%2%0%Source: Nexe GrupaNote: Nonconsolidated information10%5%0%-5%-10%-15%-20%-25%-30%Source: Nexe GrupaNote: Nonconsolidated information-22,72183-41,8882008 2009 2010EBITDAEBITSource: Nexe GrupaNote: Nonconsolidated information

9.1.3. Region SerbiaRegion Serbia includes companiesengaged in manufacturing bricks,tiles, aggregates, lime, concrete andceramic tiles, and companies whosecore business is the construction ofresidential and non-residentialbuildings:• IGM Stražilovo doo Sremski Karlovci• AD Polet IGK, Novi Bečej• Jelen Do AD, Jelen Do• Nexe beton doo Novi Sad• Polet - keramika doo Novi Bečej• Nexe gradnja doo Novi Sad

28 /299.1.3.1. Nexe brickNexe brick in Serbia is produced in a factory IGM Stražilovo dooSremski Karlovci and offers customers a standard and thermalprogram. With the plant capacity of 140 million UNF a year, thecompany IGM Stražilovo doo Sremski Karlovci is the largest brickproducer and the first manufacturer of euro block of large format inSerbia. The company has introduced Quality Management Systemaccording to ISO 9001:2008 standard.9.1.3.2. Nexe roof tileAD Polet IGK Novi Bečej is the producer of Nexe roof tiles in Serbia.The company has a tradition and continuity whose foundationswere laid way back in 1907. Significant investments in the factorymodernization were made towards the end of the last century,and a further impetus to the technological advancement was itsentering into Nexe Grupa in 2003, and thus continued a series ofimportant investments in the modernization of facilities and theintroduction of new products - Ideal roof tiles, special tiles, Glinextrend, Klasik plus.9.1.3.3. Nexe limeJelen Do AD, Jelen Do is a leading lime producer in Serbia, andrepresents one of the leading aggregates’ producers in the country.By entering in the Nexe Grupa in 2003 its capacities in theproduction of stone and lime were increased, and with that JelenDo AD completes the leading position both in technology as wellas by capacity.In 2010 continued activities related to the realization of investmentproject in a new furnace, moisturizing, dust collection system andplant for grinding, sieving and storage of lime. The investment isworth 11.5 million Euros, and completion is expected in autumnof 2011.Lime has a high content of CaO and Ca(OH) 2 , and there are thefollowing types of lime:• unslaked, lime per pc. (0-63 mm, 0-150 mm)• unslaked, grinded lime (0-5 mm)• unslaked, micronized lime (0-90 µm)• hydrated, industrial lime (in bulk)• hydrated lime packed in bags of 25 kg; on pallets with protectivefilm (pallet weight is 1,250 kg).

9.1.3.4. Nexe aggregatesProduction of aggregates in the company Jelen Do AD takes placein a quarry Grabovik whose capacity is 750,000 tons of stone peryear, Bistrica quarry with a capacity of 100,000 tons per year andquarry Suvodo which has been modernized with new crushing plantcapacity of 250 tons of stone per hour, which is the annual capacityof 950,000 tons of stone.The range of stone products in the company Jelen Do AD includes:• stone aggregate (all kinds of fractions and the mixtures)• crushed stone• broken stone• stone filler• stone for sugar refineries and foundries• stone buffer (rubble).Polet - keramika doo Novi Bečej started to appear on the marketunder a single brand Nexe ceramics. Programs of ceramic tiles ofNexe ceramics such as Trend line, Biscotti, Classic, and Sotto providefor customers an option to choose and express their own creativity.9.1.3.7. Investments in Region SerbiaThe most significant investments in 2010 in the Region Serbia wererelated to investments in new production line for lime (6 millionHRK) at the company Jelen Do AD, investment in mobile concreteplant (4 million HRK) and investment in machinery and transportequipment (3 million HRK) in the company Nexe beton doo NoviSad, then investment in production equipment (2 million HRK) inthe company Polet-keramika doo Novi Bečej while in the companyIGM Stražilovo doo Sremski Karlovci were invested 800,000 HRK inconstruction and 700,000 HRK in production equipment.9.1.3.5. Nexe concreteINVESTMENTSIn the concrete market in Serbia, Nexe Grupa is present since2009 when the first factory in Novi Sad was put into operationand started production in Belgrade’s first factory - Nexe beton dooNovi Sad. With the latest equipment to produce fresh concrete,the factories have cement mixer trucks to transport concrete andpumps for installation of concrete. Computer technology dosageof raw materials (cement, aggregates, water and additives) andthe complete laboratory equipment are the confirmation that thefactory can fully meet all the requirements of European standard EN206-1. In addition to internal control, constant monitoring of qualitycontrol of concrete production is done by Institute for materialstesting IMS, Belgrade. Special attention is paid to environmentalprotection.in 000 HRK35,00030,00025,00020,00015,00010,0005,000015,4022,3283,863Polet IGK26,6562,785278IGMStražilovo2008 2009 201012,5887,9558,483Jelen Do4441,047Poletkeramika7,51325,9735,171Nexe betonSource: Nexe GrupaNote: Nonconsolidated informationThe most significant investments in 2010 referred to the assemblyof two additional silos for cement in concrete plant in Novi Sadand the expansion of capacity for storage of fractions at Batajnicaconcrete plant in Belgrade.Nexe beton doo Novi Sad may deliver to its customers the following:- fresh and pumped concrete- concrete with declared properties of durability- cement stabilization- cement screeds9.1.3.6. Nexe ceramicsPolet-keramika doo Novi Bečej produces ceramic tiles for walls andfloors. It annually produces about 2,500,000 m 2 of ceramic tileswith compatible and modern decor, and 800,000 pieces of tileedgings. Nexe ceramics is not only present in the Serbian market,but is also oriented to foreign markets such as Romania, Bosnia andHerzegovina, Macedonia, Montenegro, Croatia and Hungary.From July 2010 the product range of ceramic tiles of the company

30 / 319.1.3.8. Key business indicators in RegionSerbiaOPERATING INCOMENET INCOME AND NET MARGINin 000 HRK180,000160,000140,000120,000100,00080,00060,00040,00020,0000138,91059,52076,493Polet IGK32,13229,97129,350IGMStražilovo2008 2009 201079,45468,62670,814Jelen Do60,82265,02110,34928,000PoletkeramikaNexe betonSource: Nexe GrupaNote: Nonconsolidated informationin 000 HRK0-10,000-20,000-30,000-40,000-50,000-60,000Net incomeNet margin-11.8%-34,561-17.2%-46,104-9.0%-29,5822008 2009 20100%-5%-10%-15%-20%-25%-30%Source: Nexe GrupaNote: Nonconsolidated informationOPERATING INCOME AND EBITDA MARGINEBITDA AND EBIT400,00040%80,000in 000 HRK350,000300,000250,000200,000150,000100,00050,000250,497229,28812.8% 12.4%269,67922.4%35%30%25%20%15%10%5%in 000 HRK70,00060,00050,00040,00030,00020,00010,00032,02028,4265,75060,41131,3180Operating incomeEBITDA margin2008 2009 20100%Source: Nexe GrupaNote: Nonconsolidated information0,000-10,000-20,000-2.4782008 2009 2010EBITDAEBITSource: Nexe GrupaNote: Nonconsolidated information

9.1.4. Region Bosnia and HerzegovinaRegion Bosnia and Herzegovina includescompanies engaged in manufacturingbricks, aggregates and concrete, butalso companies whose main activity isbuilding in the field of civil engineering,mining and quarrying:• Tvornica opeke d.o.o. Sarajevo• Agregati i betoni „Put“ d.o.o.Sarajevo• Nexe kamen d.o.o. Doboj• GP „Put“ d.d. Sarajevo• Nexe beton d.o.o. Banja Luka

32 / 339.1.4.1. Nexe brickTvornica opeke d.o.o. Sarajevo is the largest manufacturer of brickproducts in Bosnia and Herzegovina, and range of products consistsof thermal program, the classical block, euro-partition walls andceiling fills. Annual plant capacity is around 100 million UNF.Sales range of Tvornica opeke d.o.o. Sarajevo includes products fromother companies of Nexe Grupa - Dilj d.o.o. Vinkovci and SlavonijaIGM d.o.o. Našice. Apart from selling in Bosnia and Herzegovina,Tvornica opeke d.o.o. Sarajevo exports its products to Croatia.Tvornica opeke d.o.o. Sarajevo has a quality management systemcertificate according to ISO 9001:2008, and is the first factory withinNexe Grupa, which obtained an environmental permission. Thepermission was obtained towards the end of 2010, and prescribesemissions to air, emissions to water, landscaping, noise emission, airquality, monitoring and reporting to authorities.9.1.4.2. Nexe aggregatesAgregati i betoni „Put“ d.o.o. Sarajevo produces aggregates in thequarry Duboki Do. This dolomitic material is suitable for producingall kinds of concrete, and can be used in civil engineering (for dams,particular types of asphalt, etc.). In 2010 the company Agregati ibetoni „Put“ d.o.o. Sarajevo produced more than 150,000 tons ofaggregates, of which about 75% were for internal purposes, andthe rest for the market.9.1.4.3. Nexe concretePart of the company Agregati i betoni „Put“ d.o.o. Sarajevo are twomodern concrete plants, one in Briješće, in Sarajevo, which has thelargest capacity in that canton, and the other one in Tuzla whichin 2010 recorded a significant growth and participated in majorprojects in Tuzla. The company owns concrete mixer trucks, a pumpfor concrete 36 m of length, and a mixer-pump 28 m of length.

9.1.4.4. GP „PUT“ d.d. SarajevoIn the segment of civil engineering, the construction companyGP „Put“ d.d. Sarajevo, worked in 2010 on construction andreconstruction of roads in Kenya, worth almost 67 million Euros.million HRK), then the investments of the company Tvornica opeked.o.o. Sarajevo in production equipment (200,000 HRK), andinvestments of the company Agregati i betoni „Put“ d.o.o. Sarajevoin production equipment in amount of 200,000 HRK.INVESTMENTSDespite the decline in construction activities in Bosnia andHerzegovina, the plant of the company GP „Put“ d.d. Sarajevo inSarajevo has achieved a significant share in the implementationof active projects in Bosnia and Herzegovina. Some of the majorprojects in 2010 were: the reconstruction of major roads inSarajevo, such as Street of Hamdija Čemerlić with replacing ofthe entire infrastructure, Street of Ante Babić, Kasindolska street,Dobrinjska street, and reconstruction of several streets in the Centreof town and the completion of the construction of new sections ofthe longitudinal North.in 000 HRK25,00020,00015,00010,0005,00005,3518,635592Agregati ibetoni “Put”1,669560727Tvornicaopeke3,2135,86517,309GP “Put”5,8394Nexe kamenIn addition, GP „Put“ d.d. Sarajevo was active in constructionand repair of the trunk roads, implemented by JP Direkcija cestaFederacije BiH d.o.o., for the reconstruction of M-5, on the sectionfrom the Šeherćehajin bridge to the Korija tunnel, at the easternexit from Sarajevo. GP „Put“ d.d. Sarajevo has completed theimprovement of the River Bosnia’s bed, on the part of the highwaythat runs through the municipality of Visoko which was one of theconditions, that was set before the Directorate of Highways of theFederation B&H, to obtain the occupancy permit for that sectionof highway. At the end of 2010 rough construction works on thebusiness facility in Branilaca Sarajeva street were completed.GP „Put“ d.d. Sarajevo started the year 2011 having the contractfor the construction of the highway Gorica - Drivuša, the Corridor5c. They got the job in an international tender, against a very strongcompetition, and in collaboration with local construction companies- Euroasfalt, ŽGP, Hidrogradnja within the consortium BH.2008 2009 2010Source: Nexe GrupaNote: Nonconsolidated information9.1.4.7. Key business indicators in RegionBosnia and Herzegovinain 000 HRKOPERATING INCOME250,000200,000150,000100,00050,00027,09222,18622,43345,58768,40783,877194,197121,34382,0039.1.4.5. Nexe stone0Agregati ibetoni “Put”TvornicaopekeGP “Put”The main activities of the company Nexe kamen d.o.o. Doboj aremining and quarrying (except energy producing materials). Withexisting equipment, the annual production capacity is 110 000 m 3of stone materials of all kinds.Nexe kamen d.o.o. Doboj holds the concession for the exploitationof limestone from a deposit Lipac near Doboj, for a period of 24years. In 2010 were continued the activities with the aim of startingproduction in 2011.9.1.4.6. Investments in Region Bosnia andHerzegovinaThe most significant investments in 2010 in the region of Bosniaand Herzegovina were related to the investments of the companyGP “Put” d.d. Sarajevo in machinery and transport equipment forthe construction of a highway in Kenya (11.6 million HRK), andconstruction of a residential-commercial building in Sarajevo (3.5in 000 HRK2008 2009 2010Source: Nexe GrupaNote: Nonconsolidated informationOPERATING INCOME AND EBITDA MARGIN400,000350,000300,000250,000200,000150,000100,00050,0000-50,000-100,000Operating incomeEBITDA margin266,87713.6%211,9366.9%188,313-6.3%2008 2009 201040%35%30%25%20%15%10%5%0%-5%-10%Source: Nexe GrupaNote: Nonconsolidated information

34 / 35NET INCOME AND NET MARGINin 000 HRK0-10,000-20,000-30,000-40,000-50,000-60,000-70,000-2.7%-7,401-6.4%-14,956-27.4%-53,3680%-5%-10%-15%-20%-25%-30%-35%-40%2008 2009 2010Net incomeNet marginSource: Nexe GrupaNote: Nonconsolidated informationEBITDA AND EBIT60,00040,00036,226in 000 HRK20,0000-20,000-40,000-60,00016,464 14,700-5,704 -11,844-32,2842008 2009 2010EBITDAEBITSource: Nexe GrupaNote: Nonconsolidated information

9.1.5. Non-core businessesNon-core businesses includecompanies engaged in production ofwine, agriculture, milk production,selling cars, manufacturing doors,trade and services:• FeraVino d.o.o. Feričanci• Osilovac d.o.o. Feričanci• Luka Tranzit Osijek d.o.o. Osijek• Bilokalnik-Drvo d.o.o. Koprivnica• Našički auto centar d.o.o. Našice• Gastro - market d.o.o. Našice• Farma Feričanci d.o.o. Feričanci

INVESTMENTS30,00025,00023,665in 000 HRK20,00015,00010,0005,0006,5904,7875,6506738941,5443897799,3834,1877,1672,6881,236001,0570FeraVinoNašički autocentarOsilovacLuka TranzitOsijekGastromarketBilokalnik-Drvo2008 2009 2010Source: Nexe GrupaNote: Nonconsolidated information9.1.5.8. Key business indicators inNon-core businessesOPERATING INCOMENET INCOME AND NET MARGINin 000 HRK70,00060,00050,00040,00030,00020,00010,000014,26412,35312,912FeraVino5,9885,9745,0752008 2009 201053,92142,30538,509Našički autocentar31,29030,36124,107Osilovac22,70519,78316,739Luka TranzitOsijek53,70542,43219,205GastromarketBilokalnik-DrvoSource: Nexe GrupaNote: Nonconsolidated informationin 000 HRK10,0000-10,000-20,000-30,000-40,000-50,000-60,000-70,000-80,000-90,000-100,000Net incomeNet margin-26,551-13.5%-13,940-7.3%-49,719-36.5%2008 2009 20105%0%-5%-10%-15%-20%-25%-30%-35%-40%-45%-50%Source: Nexe GrupaNote: Nonconsolidated informationEBITDA AND EBITOPERATING INCOME AND EBITDA MARGIN0-5,000in 000 HRK200,000150,000100,00050,0000-50,000-100,000-150,000-200,000181,873153,208116,547-6.1%-12.3%-18.2%2008 2009 201020%15%10%5%0%-5%-10%-15%-20%in 000 HRK-10,000-15,000-20,000-25,000-30,000-35,000-11,026-18,901-22,594-21,215-31,475-33,3152008 2009 2010Operating incomeEBITDA marginSource: Nexe GrupaNote: Nonconsolidated informationEBITDAEBITSource: Nexe GrupaNote: Nonconsolidated information

40 / 419.3. Review by divisions9.3.2. Division for brick and roof tile9.3.1. Division for cement, concrete,aggregates and limein 000 HRKOPERATING INCOME AND EBITDA MARGIN1,200,0001,000,000800,000600,000400,000200,000030.4% 31.3%988,088894,90722.7%681,0692008 2009 201035%30%25%20%15%10%5%0%in 000 HRKOPERATING INCOME AND EBITDA MARGIN500,000450,000400,000350,000300,000250,000200,000150,000100,00050,0000384,31117.8%Operating incomeEBITDA margin330,384401,2572.5% 12.9%2008 2009 201025%20%15%10%5%0%Source: Nexe GrupaNote: Nonconsolidated informationOperating incomeEBITDA marginSource: Nexe GrupaNote: Nonconsolidated informationNET INCOME AND NET MARGINNET INCOME AND NET MARGINin 000 HRK200,000175,000150,000125,000100,00075,00050,00025,0000-25,000-50,000119,36775,08311.1%7.6% -1.5%-12,6092008 2009 201040%35%30%25%20%15%10%5%0%-5%-10%in 000 HRK0-20,000-40,000-60,000-80,000-100,000-120,000-8.7%-37,189-19.3%-29.0%-84,744-106,8392008 2009 20100%-5%-10%-15%-20%-25%-30%-35%Net incomeNet marginSource: Nexe GrupaNote: Nonconsolidated informationNet incomeNet marginSource: Nexe GrupaNote: Nonconsolidated informationEBITDA AND EBITEBITDA AND EBIT350,000300,000300,586280,39280,00060,00068,41851,601in 000 HRK250,000200,000150,000100,000231,433210,435154,34388,639in 000 HRK40,00020,0000-20,00023,3408,187-5,19350,00002008 2009 2010-40,000-60,000-43,3472008 2009 2010EBITDAEBITSource: Nexe GrupaNote: Nonconsolidated informationEBITDAEBITSource: Nexe GrupaNote: Nonconsolidated information

9.3.3. Division constructionOPERATING INCOME AND EBITDA MARGINin 000 HRK350,000300,000250,000200,000150,000100,00050,0000-50,000-100,000-150,000-200,000-250,000321,624230,744139,51810.0%1.9%-17.5%2008 2009 201035%30%25%20%15%10%5%0%-5%-10%-15%-20%-25%Operating incomeEBITDA marginSource: Nexe GrupaNote: Nonconsolidated informationNET INCOME AND NET MARGINin 000 HRK10,0000-10,000-20,000-30,000-40,000-50,000-60,0002,109 -6,5730.6%-2.6%-33.4%-49,6072008 2009 201010%0%-10%-20%-30%-40%-50%Net incomeNet marginSource: Nexe GrupaNote: Nonconsolidated informationin 000 HRKEBITDA AND EBIT40,00030,00020,00010,0000-10,000-20,000-30,00032,16521,1574,492-6,102-24,401in mil. HRKOPERATING INCOME BY PRODUCT600500400300200100497425299350257323151121115190196157269207130665776-40,000EBITDAEBIT-34,5942008 2009 2010Source: Nexe GrupaNote: Nonconsolidated information0CementBricks, tiles,ceramics2008 2009 2010Aggregates,lime andconcreteelementsConcrete Construction OtheracitivitiesSource: Nexe GrupaNote: Nonconsolidated information

42 / 43OPERATING INCOME BY PRODUCT IN 2009Aggregates, limeand concreteelements 9.6%Bricks, tilesand ceramics20.3%Concrete 15.5%Construction16.4%Other activities4.5%Cement 33.7%Source: Nexe GrupaNote: Nonconsolidated informationOPERATING INCOME BY PRODUCT IN 2010Aggregates, lime andconcrete elements10.4%Bricks, tilesand ceramics29.4%Concrete 14.3%Construction11.8%Other activities6.9%Cement 27.2%Source: Nexe GrupaNote: Nonconsolidated informationOPERATING INCOME BY REGION1,2001,0001,026860800670in mil. HRK60040020024220217811811319113788610Region Croatia Region Serbia Region B&H Other markets2008 2009 2010Source: Nexe GrupaNote: Nonconsolidated information

OPERATING INCOME BY REGION IN 2009Region Serbia16.0%Region B&H8.9%Region Croatia68.1%Other markets7.0%Source: Nexe GrupaNote: Nonconsolidated informationOPERATING INCOME BY REGION IN 2010Region Serbia16.2%Region Croatia60.9%Region B&H17.4%Other markets5.6%Source: Nexe GrupaNote: Nonconsolidated informationOPERATING INCOME BY PRODUCT GROUP AND MARKETS IN 201029% 7% 14% 28% 12% 11%3%18%21%58%Other marketsRegion B&HRegion SerbiaRegion CroatiaCementand NamalAggregatesand limeConcreteandconreteelementsBricks,roof tilesandceramicsConstructionbusinessOtherNexe GrupaSource: Nexe GrupaNote: Nonconsolidated information

44 / 4510. Development strategyNexe Grupa, with its development strategy, continuously sets thehighest standards to meet the expectations of its customers throughnew products and services. The company tries to produce productsthat meet the needs of all segments of the markets in which NexeGrupa is present, taking into account local particular needs.The growth strategy and cost efficiency through alternative energysources, according to the principles of sustainable development andcorporate social responsibility are the leading principles of Nexe Grupa.The Group achieves growth through acquisitions, by opening newfacilities, renewing old facilities, by introduction of new products,entering in new concrete and brick markets, and strengthening of newdistribution channels.Expectations in 2011 are based primarily on the current situation in themarkets where Nexe Grupa is present. The focus will be on optimizingoperations through more efficient use of cheaper fuels (coal andpetroleum coke), and increasing the share of alternative fuels in totalenergy balance, the use of industrial track in cement works, which willenable cheaper transport of additives and customization of productionto the needs of customers in markets in this region. In 2011 will beginconstruction of a biogas plant, which will expand the business andopen new opportunities.One of the major obstacles to the above mentioned opportunities is theilliquidity of the market, which is a result of the macroeconomic impacton the economy as a whole. Exchange rate risk i.e. exchange stabilityhas also an impact on the business. Large differences in the exchangerate of financial expenditures of Nexe Grupa member companiesare particularly emphasized in companies whose business income isbased on the export of goods and / or have significant amounts ofcredit obligations related to foreign currency. This problem is presentespecially in Serbia where the RSD to EUR exchange rate in 2010 wasdevalued by more than 10%. The growth of exchange rate is closelyassociated with the growth of inflation rate in the country, resulting ina decline of the purchasing power of the population.With regard to the growing problem of insolvency of the economicsystem, we have reduced our expectations for 2011 on maintainingthe existing level of activity, so there is no significant growth in terms ofincome and investment. Special attention will be paid to the costs, andtheir maximum rationalization, as well as to management of liquidityi.e. cash flows.In 2011 it is expected that the situation will be stabilized in Croatia,with regard to political and economic developments that will happen,and national infrastructure projects that were stopped in the last 2UKRAINEAUSTRIAHUNGARYROMANIASLOVENIACROATIAConcreteBrickTileCementLimePrefabricated productsAggregatesKey marketsNew marketsBOSNIA ANDHERZEGOVINASERBIAMONTENEGRO KOSOVOMACEDONIABULGARIA

years will begin again. We also expect positive effects on the economydue to the completion of negotiations for EU accession, which willcreate a new perspective.In Bosnia and Herzegovina market decline is similar to that in Croatia,but it is an interesting market on a long-term because of growing needsof infrastructure construction. Serbia, however, has better prospectsand believes that it will quickly emerge from the crisis. Specifically, thepolicy of the Government of the Republic of Serbia, the arrangementwith the International Monetary Fund, announced major infrastructuralprojects, announced projects to encourage housing through subsidizedinterest rates for housing loans - all this give a dose of optimism andwe see opportunity for growth. In the Republic of Serbia we expect anincrease in placements of stone and aggregates for the constructionof Corridor 10, which opens the possibility for an increase in sales ofstone. By opening a new cement plant in Belgrade in 2011, we wish tostrengthen our position in the concrete market in Serbia. By openinga new production line for lime in the company Jelen Do AD we willincrease supply of industrial lime. With starting of production in Doboj,and through the planned government infrastructure investments inCroatia, Serbia and Bosnia and Herzegovina, we expect sales growth ofaggregates. With the contract work for the construction of a highwayin Kenya, and by winning the tender for construction of a sectionof the corridor C5, we set in motion the growth in the area of civilengineering. Completing the new range of products (large format tiles)in 2010, we want to continue with the positive growth trend in 2011in all markets in the region. In the segment of ceramic tiles with thenew design we want to expand the existing assortment.In 2011 it is expected that the activities on the implementation of newERP - integrated software solutions will continue to support businessprocesses at company level and at level of the whole Nexe Grupa,which began in mid-September 2008. In the first half of 2011 it isplanned the implementation in companies Dilj d.o.o. Vinkovci, Nexebeton d.o.o. Našice and Našička gradnja d.o.o. Našice, while in thesecond half of 2011 in the companies FeraVino d.o.o. Feričanci andOsilovac d.o.o. Feričanci.One of the significant investments in 2011 will be completion of thefirst stage of the industrial track in Našicecement d.d. Našice and thebeginning of its II. phase, the reconstruction of furnace in a raw materialkiln and coal dosing, construction of a concrete plant in Belgrade bythe company Nexe beton doo Novi Sad, completion of investmentin new production line for lime in Jelen Do AD, the beginning ofconstruction of biogas plant in the company Osilovac d.o.o. Feričanci,and replacement of gas burners for solid fuel (petroleum coke) inTvornica opeke d.o.o. Sarajevo.

46 /4711. Business risks11.1. Industry riskThe construction materials industry is dependent on the developmentof construction in general, which is directly connected with thegeneral state of the economy. Within each market in the region inwhich Nexe Grupa operates, construction is cyclical and dependenton the construction of residential and commercial properties, theinvestments in the public sector and the government investmentsin infrastructure projects. Growth in construction market is stronglylinked to GDP growth in the corresponding geographic market.Also, the financial results of Nexe Grupa are strongly dependenton the movement of GDP in the countries in which Nexe Grupaoperates. The construction markets are also influenced by othermacroeconomic factors, such as demographic factors, movementsin interest rates on long-term debt and the availability of financing,consumption and policies of monetary authorities and the state,which are beyond the control of Nexe Grupa.The current weak global economic environment has led to asignificant decline in the construction sector in general. If globalconstruction markets continue to decline, or if there is no recoveryfrom such conditions or that recovery is very slow, it could havean adverse effect on operations, financial position and operatingresults of Nexe Grupa.Government policy, when it comes to developing transportinfrastructure, construction in the public sector and housingconstruction, has a significant impact on demand for products ofNexe Grupa and, consequently, on its profitability. The income ofNexe Grupa depends in part on current or expected subvention,including those that are part of public programs for economicrecovery in the construction sector to be implemented or areplanned to be implemented in several markets of Nexe Grupa suchas Croatia, Serbia, Bosnia and Herzegovina, Hungary, Romania andSlovenia. The demand for construction materials of Nexe Grupa willbe lower than expected, if the government spending will be reducedor if the government will withdraw from a construction subventionprogram. Cuts in state spending could reduce the funds availablefor spending on products of Nexe Grupa, which could have a crucialand adverse effect on sales and profits of Nexe Grupa.Nexe Grupa is focused on increasing its market share of buildingmaterials in Croatia, Serbia, Bosnia and Herzegovina, Hungary,Romania and Slovenia. This expansion depends on economicgrowth in these countries, as well as the ability of Nexe Grupa toadapt and be flexible in a highly competitive market.11.2. Competition riskThe markets where Nexe Grupa operates are regional marketsthat are dominated by mostly regional and local factors ofcompetitiveness. These factors include in particular the number ofcompetitors in a given market, the degree of vertical integrationof these competitors and their pricing policies, developmentof regional demand and capacity, availability and cost of rawmaterials, the impact of other costs, the possible entry of additionalcompetitors in the market, or changes in the conditions ofcompetition through increased imports, or the first admission to themarket by competitors. Consequently, the prices that Nexe Grupacould charge their customers are not likely to differ from the pricesof other manufacturers of these products in the same markets. Inaddition, profitability of Nexe Grupa is principally dependent onthe level of demand for such construction materials and services ingeneral as well as the ability to control its effectiveness and costs.Prices in these markets are subject to change in response to relativelysmall changes in supply and demand, general economic conditionsand other market conditions that are not under the control of NexeGrupa. As a result, Nexe Grupa in the future can be faced withfalling prices, margins or sales.In addition, these factors are often subject to different events in themarkets where Nexe Grupa operates. Individual regional and localfactors of competition could be changed in the future, tighteningthe competition significantly in certain regions or countries. Theentry of new competitors or the growth of imports of constructionmaterials in markets where Nexe Grupa operates could lead tooversupply in these regions, and perhaps the overcapacity of thosemarkets, which would result in a products’ price drop.To maintain and further strengthen its market position, Nexe Gruparelies on current investments in the areas of development andproduction, and on its distribution network and services.11.3. Environmental riskPossible legal measures, that will with high fees and measures“discourage” the production, represent the environmental risk.This leads to overloading of the already burdened economy and ofthe companies of Nexe Grupa which are liable to obtaining Permitsfor emission of greenhouse gases, and integrated environmentalprotection. Requirements for environmental protection arelarger and larger, and significant funds are invested to meet allrequirements to a maximum degree.Našicecement d.d. Našice owns the certificate of environmentalprotection ISO 14001:2004 and health and safety certificationBS OHSAS 18001:2007. Environmental policy and health andsafety policy of Našicecement d.d. Našice shows the company’scommitment to sustainable development and continualimprovement of its processes and reducing the negative impacts,both environmental and on health and safety of employees.Našicecement d.d. Našice is one of the signatories of the Statementon Sustainable Development. Areas that include the statement arefollowing:• climate protection• responsible use of energy and raw materials• reduction of emissions• health and safety at work• cooperation with local community• development of corporate social responsibility• biodiversity conservation

11.4. Technological riskBy constant investment in new technology, monitoring global trendsin the use of various additives to produce finished products, andreplacing existing energy sources with alternative fuels, companiesof Nexe Grupa use these measures to actively protect and managethe technological risk that is present in the building materialsindustry.11.5. Management and human riskProfessional, experienced and motivated management at allhierarchical levels, is one of the prerequisites for the achievementof strategy and business objectives of Nexe Grupa. Special attentionis paid to employee training which is of great importance for theirpersonal growth and development of Nexe Grupa as a whole. Byimplementation of the project Focused development of professionalsand managers whose goal, according to the strategic businessobjectives of Nexe Grupa, is to prepare in advance for futurechallenges a group of young professionals and managers, who havedemonstrated potential and readiness for personal development forpotential jobs of a higher level of complexity, minimized the risk ofdeparture of key managers, which eventually could have a negativeimpact on the business of Nexe Grupa.

48 / 4912. Human resourcesAt the end of 2010 in Nexe Grupa there were 3,494 employees,of which 1,735 in Croatia, 841 in Serbia, 302 in Bosnia andHerzegovina, and 616 employees in foreign plants of GP Put” d.d.”Sarajevo (Kenya, Pakistan, Uganda). The downward trend in thenumber of employees in 2010 was slowed compared to 2009, anddecreased by 2.64%. Downsizing is the result of optimization andadaptation to economic and market conditions.REVIEW OF EMPLOYEES BY COUNTRIESSerbia24%Croatia50%Bosnia and Herzegovina(including Kenya, Ugandaand Pakistan)26%Source: Nexe GrupaLike a few years earlier, in 2010 continued the trend of increasingeducational levels of employees, primarily by increasing the participationof highly educated professionals. It is a logical sequence of constantinvestment in new technologies that require highly educated employees,ready for continuous learning and development. Investment in learningand development is one of the strategic directions of Nexe Grupa whichprovides satisfaction and loyalty of employees on one side, and thecompetitive strength of Nexe Grupa on the other side.QUALIFICATION STRUCTURE OF NEXE GRUPA AS OF 31 DECEMBER35%30%25%19.8%20.0%27.2%27.4%30.7%30.2%20%15%10%5%4.1%3.5%3.1%2.8%4.5%4.7%10.0%10.7%0.6%0.7%200920100%NOS, ES SS S HS SSQ CD UD M.S., DRSource: Nexe GrupaAGE STRUCTURE OF NEXE GRUPA AS OF 31 DECEMBER35%30%25%20%15%10%5%0.8%0.6%4.7%4.5%9.6%8.2%11.5%11.6%9.9%10.0%14.9%13.5%22.3%21.3%19.0%20.1%6.4%8.9%0.9%1.3%200920100%Under 20 20-25 26-30 31-35 36-40 41-45 46-50 51-55 56-60 61 and +Source: Nexe Grupa

13. Social responsibility13.1. Environmental protectionMost of the activities concerning environmental protection in 2010 wererelated to the preparation of documentation for obtaining Environmentalpermits in:• Republic of Croatia for companies Našicecement d.d. Našice, SlavonijaIGM d.o.o. Našice and Dilj d.o.o. Vinkovci• Republic of Serbia for companies Jelen Do AD, Jelen Do, IGM Stražilovodoo Sremski Karlovci, AD Polet IGK Novi Bečej and Polet - keramika dooNovi Bečej• Bosnia and Herzegovina for the company Tvornica opeke d.o.o. Sarajevo.All requests are submitted to authorities within deadlines.Towards the end of 2010 the company Tvornica opeke d.o.o. Sarajevoreceived an environmental license, by which is regulated the overall work ofthe factory and its impact on the environment. For the purpose of obtainingthis permit the company has made a plan for improvement that is requiredto be implemented in the coming period of validity of the permit, so thatafter the expiration of the permit the company could extend the same.The permit regulates air emissions, emissions to water, landscaping, noiseemission, air quality, monitoring and reporting to the ministry. It representsa milestone in the way of doing business because the loss of this permitmeans the loss of license for operation of the company.In Croatia, a plan for monitoring greenhouse gas emissions as a basis forobtaining permits for greenhouse gases has been made. This Plan wasmade for the companies Našicecement d.d. Našice, Slavonija IGM d.o.o.Našice and Dilj d.o.o. Vinkovci.At Našicecement d.d. Našice in July 2010 was conducted recertification ofthe environmental management system to ISO 14001:2004 and are carriedout regular activities on the measurement of emissions to air and water,air quality and waste management activities. Nine different inspectionssuccessfully did a coordinated inspection. A study was made on theenvironmental impact of using alternative fuels and raw materials in clinkerproduction line I - LPK at location of the factory Našicecement d.d. Našice.The company Polet - keramika doo Novi Bečej completed an investment in anew dedusting system atomizer Dorst. Dust emissions are now within limits.In Tvornica opeke d.o.o. Sarajevo activities were started to improve anddesign the plant site. Until now there were completed a series of works, andsome are in the final stage. They are:• making of the project - technical documentation for planned activities• construction of sanitary and precipitation sewer complex, with thenecessary equipment for purification and pre-cleaning• building a fence around the factory complex• construction of outdoor lighting on the factory complex.The value of these activities is 632,154 KM.13.2. Sponsorships and donationsDespite difficult business conditions, Nexe Grupa in 2010 continued tomeet its obligations of active contribution to the community in which itoperates through various forms of assistance.Nexe Grupa funded projects in cultural, scientific, educational andhumanitarian segment, different events, environmental projects andprojects related to sustainable development. In 2010 in these projects wereinvested nearly 8 million HRK.The Group continued to sponsor and invest in the handball through theHandball club Nexe from Našice and through annual contracts with theCroatian, Bosnian and Serbian Handball Associations.

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NEXE GRUPA d.d.and Subsidiaries, NašiceConsolidated Financial StatementsFor the year ended 31 December 2010together with the Independent Auditor’s ReportContentsPageResponsibility of the Board for the Consolidated Financial Statements ......................... 52Independent Auditor’s Report .................................................................................... 53Consolidated Statement of Comprehensive Income .................................................... 54Consolidated Statement of Financial Position ............................................................. 55Consolidated Statement of Changes in Equity ............................................................ 56Consolidated Cash Flow Statement ............................................................................ 57Notes to the Consolidated Financial Statements ................................................... 58 - 98Approval of Consolidated Financial Statements ........................................................... 99

52 / 53Responsibility of the Board for the Consolidated Financial StatementsPursuant to the Croatian Accounting Law (Official Gazette 109/07),the Management Board is responsible for ensuring that financialstatements are prepared in accordance with the requirements ofInternational Financial Reporting Standards applicable in EuropeanUnion so as to give a true and fair view of the financial positionand results of the Group Nexe grupa d.d., Našice (hereinafter: theGroup) for that period.The Board has a reasonable expectation that the Group has adequateresources to continue in operational existence for the foreseeablefuture. For this reason, the Management Board continues to adoptthe going concern basis in preparing the financial statements.In preparing those financial statements, the responsibilities of theManagement Board include ensuring that:• suitable accounting policies are selected and then appliedconsistently;• judgments and estimates are reasonable and prudent;• applicable accounting standards are followed, subject to anymaterial departures disclosed and explained in the financialstatements; and• the financial statements are prepared on the going concernbasis unless it is inappropriate to presume that the Group willcontinue in business.The Management Board is responsible for keeping properaccounting records, which disclose with reasonable accuracy atany time the financial position of the Group and must also ensurethat the financial statements comply with the Croatian AccountingLaw (Official Gazette 109/07). The Management Board is alsoresponsible for safeguarding the assets of the Group and hence fortaking reasonable steps for the prevention and detection of fraudand other irregularities.Signed on behalf of the Management Board:Ivan Ergović,President of the BoardTomislav Rosandić,Member of the BoardNexe grupa d.d., NašiceB. Radića 20031500 NašiceRepublic of CroatiaNašice, 4 March 2011

Independent Auditor’s ReportTo the Shareholders and ManagementBoard of the company and Group NexeGrupa d.d. NašiceWe have audited the accompanying consolidated financialstatements of Nexe grupa d.d., Našice (hereinafter: the Company),and its subsidiaries (hereinafter: the Group), which comprise theconsolidated statement of financial position as at 31 December2010, the consolidated statement of comprehensive income, theconsolidated statement of changes in equity and consolidatedcash flow statement for the year then ended, and a summary ofsignificant accounting policies and other explanatory notes aspresented on pages 54 to 99.Management’s Responsibility for thefinancial statementsOpinionIn our opinion, consolidated financial statements give true and fairview, in all material respects, of the financial position of the Groupas at 31 December 2010 and the results of its operations, cash flowsand changes in equity for the year then ended in accordance withInternational Financial Reporting Standards applicable in EuropeanUnion.Grant Thornton revizija d.o.o.Koranska 16, 10000 ZagrebZagreb, 4 March 2011Martina ButkovićCertified auditorManagement is responsible for the preparation and fair presentationof these financial statements in accordance with the InternationalFinancial Reporting Standards applicable in European Union. Thisresponsibility includes: designing, implementing and maintaininginternal controls relevant to the preparation and fair presentationof financial statements that are free from material misstatement,whether due to fraud or error; selecting and applying appropriateaccounting policies; and making accounting estimates that arereasonable in the given circumstances.Auditor’s ResponsibilityOur responsibility is to express an opinion on these financialstatements based on our audit. We conducted our audit inaccordance with International Standards on Auditing. Thosestandards require that we comply with ethical requirements and planand perform the audit as to obtain reasonable assurance whetherthe financial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidenceabout the amounts and disclosures in the financial statements. Theprocedures selected depend on the auditor’s judgment, includingthe assessment of the risks of material misstatement of the financialstatements, whether due to fraud or error. In making those riskassessments, the auditor considers internal controls relevant to theentity’s preparation and fair presentation of the financial statementsin order to design audit procedures that are appropriate in the givencircumstances, but not for the purpose of expressing an opinionon the effectiveness of the entity’s internal controls. An audit alsoincludes evaluating the appropriateness of accounting policiesused and the reasonableness of accounting estimates made by themanagement, as well as evaluating the overall presentation of thefinancial statements.We believe that the audit evidence we have obtained is sufficientand appropriate to provide a basis for our audit opinion.Grant Thornton revizija d.o.o. Koranska 16, Zagreb, Commercialcourt in Zagreb, Registration number: 080642448; Giro account:2500009-1101268790 at Hypo Alpe-Adria-Bank d.d. Zagreb;Equity capital: 20.000,00 HRK paid in full; Management Boardmembers: M.Butković, S.Dušić, I.SmiljanMember of Grant Thornton International Ltd. network

54 / 55Consolidated Statement of Comprehensive IncomeFor the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and SubsidiariesNote 2010 2009Operating incomeSales revenue 4 1,099,171 1,262,571Other operating income 5 87,320 74,9401,186,491 1,337,511Operating expensesRaw materials, consumables and energy used 6 (623,924) (631,603)Staff costs 7 (248,040) (257,940)Depreciation and amortisation 14,15 (140,099) (133,492)Other operating expenses 8 (220,005) (194,977)(1,232,068) (1,218,012)(Loss) / profit from operations (45,577) 119,499Restructuring costs 9 - (15,459)Financial income and expensesFinancial income 10 67,985 127,886Financial expenses 10 (196,081) (220,346)Net financial result (128,096) (92,460)Share of profit of associates 2,173 -(Loss) / profit before tax (171,500) 11,580Income tax expense 11 (9,546) (31,429)(Loss) after tax (181,046) (19,849)Non-controlling interest 27 10,699 2,938(Loss) attributable to equity holders of the Parent (170,347) (16,911)Other comprehensive income / (loss)Available-for-sale financial assets 13,983 10,778Exchange differences-foreign operations (7,368) (26,773)Other comprehensive income / (loss) 6,615 (15,995)Total comprehensive income for the year attributable to: (174,431) (35,844)Owners of the Company (162,327) (30,675)Non-controlling interest (12,104) (5,169)Basic (loss) per share (in HRK) 12 (18.00) (35.74)Diluted (loss) per share (in HRK) 12 (19.15) (38.62)The accompanying notes are an integral part of these consolidatedfinancial statements.

Consolidated Statement of Financial PositionAs at 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and SubsidiariesASSETS Note 2010 2009Non-current assetsIntangible assets 14 18,239 14,112Property, plant and equipment 15 1,556,743 1,546,236Financial assets available for sale 16 86,355 175,229Investments in subsidiaries 17 1,505 1,992Investment in associate 18 44,065 42,819Receivables for given loans and deposits 19 7,398 9,678Goodwill 20 14,108 14,108Deferred tax asset 11 3,746 1,6651,732,159 1,805,839Current assetsInventories 21 403,976 349,804Trade and other receivables 22 567,621 548,791Loan receivables and other financial assets 23 48,449 128,611Cash and cash equivalents 24 42,132 16,629Prepaid expenses and accrued income 28,396 29,550Assets held for sale 14,477 8,2621,105,051 1,081,647TOTAL ASSETS 2,837,210 2,887,486Capital and reservesShare capital 25 94,638 94,638Treasury shares 25 (97,728) (97,728)Revaluation of financial instruments 26 13,339 (882)Reserves 26 86,071 85,734Retained earnings and current period result 25 461,673 656,444Foreign exchange differences (51,100) (45,023)Equity attributable to equity holders of the Parent 506,893 693,183Non-controlling interests 27 37,180 49,284544,073 742,467LIABILITIESLong-term loans, leases and bonds 28 438,238 976,441Long-term provisions 29 22,519 20,702Deferred tax liability 11 21,370 22,080482,127 1,019,223Current liabilitiesTrade and other payables 30 443,079 321,892Short-term borrowings and current portion of long-term borrowings 31 1,352,186 791,107Accrued expenses and deferred income 15,745 12,7971,811,010 1,125,796TOTAL EQUITY AND LIABILITES 2,837,210 2,887,486The accompanying notes are an integral part of these consolidatedfinancial statements.

56 / 57Consolidated Statement of Changes in EquityFor the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and SubsidiariesEquityRetainedRevaluationForeign attributable NoncontrollingShare Treasuryearningsof financial Reservesexchange to equitycapital sharesand currentinstrumentsdifferences holders of the interestperiod resultParentTotalBalance as at31 December 200894,638 (10,228) (13,075) 74,404 685,994 (20,478) 811,255 54,626 865,881Current year loss - - - - (16,911) - (16,911) (2,938) (19,849)Reclassification toprofit or loss- - 2,926 - - - 2,926 - 2,926Current year gains(losses)- - 7,852 (243) 243 - 7,852 - 7,852Foreign exchangedifferences- - - - 3 (24,545) (24,542) (2,231) (26,773)Othercomprehensive- - 10,778 (243) (16,665) (24,545) (30,675) (5,169) (35,844)incomeAcquisition oftreasury shares- (87,500) - - - - (87,500) - (87.500)Distribution of 2009profit- - - 12,885 (12,885) - - - -Non-controllinginterests share- - - 103 - - 103 (173) (70)acquisitionBalance as at31 December 200994,638 (97,728) (2,297) 87,149 656,444 (45,023) 693,183 49,284 742,467Corrections ofopening balance- - 1,415 (1,415) - - - - -Balance as at 31December 200994,638 (97,728) (882) 85,734 656,444 (45,023) 693,183 49,284 742,467Current year loss - - - - (170,347) - (170,347) (10,699) (181,046)Reclassification toprofit or loss- - 4,477 - - - 4,477 - 4,477Current year gains(losses)- - 9,506 - - - 9,506 - 9,506Foreign exchangedifferences- - 114 - - (6,077) (5,963) (1,405) (7,368)Othercomprehensive- - 14,097 - (170,347) (6,077) (162,327) (12,104) (174,431)incomeRevaluation reserves - - - - (566) - (566) - (566)Transfer to reserves - - - 337 (337) - - - -Bilokalnik-Drvo d.o.o.entering into- - 124 - (23,512) - (23,388) - (23,388)consolidationNexe trade s.r.l.entering into- - - - (9) - (9) - (9)consolidationBalance as at31 December 201094,638 (97,728) 13,339 86,071 461,673 (51,100) 506,893 37,180 544,073The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Cash Flow StatementFor the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and SubsidiariesOperating activities2010 2009(Loss) / profit before taxation (171,500) 11,580Adjusted for:Depreciation and amortization 140,099 133,492Net book value of disposed tangible and intangible non-currentassets8,606 24,310(Decrease) / increase of allowance for loan receivables (335) 6,790Increase in allowance for trade receivables and other financialassets41,551 9,594Share of profit of associate (2,173) -Provisions for risks 801 1,076Foreign exchange differences and other adjustments (8,723) 18,691Net cash flows from operations before working capitalchanges8,326 205,533(Increase) of inventories (38,622) (15,429)(Increase) of receivables from customers (39,775) (25,099)(Increase) / decrease of other short-term receivables (12,883) 4,426Increase / (decrease) of liabilities towards suppliers 60,885 (44,990)Increase / (decrease) of other short-term liabilities 61,483 (35,764)Net cash flows from operations 39,414 88,677Income tax paid (11,284) (1,488)Net cash flows from operating activities 28,130 87,189Investing activitiesPurchases of tangible and intangible asset (94,770) (165,487)Decrease / (increase) of shares 1,110 (1,146)Decrease / (increase) of loans and other receivables 11,899 (7,177)Decrease of assets available for sale 102,692 30,916Acquisition of treasury shares - (87,500)Net cash from / (used in) investing activities 20,931 (230,394)Financial activities(Decrease) / increase of loans and leases including interests (23,558) 136,413Net cash (used in) / generated from financing activities (23,558) 136,413Net increase / (decrease) in cash and cash equivalents 25,503 (6,792)Cash and cash equivalents at the beginning of the year 16,629 23,421Cash and cash equivalents at the end of the year 42,132 16,629The accompanying notes are an integral part of these consolidatedfinancial statements.

58 / 59Notes the Consolidated Financial StatementsFor the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and Subsidiaries1. GENERALNexe Grupa has headquarters in Našice, Braće Radića 200. TheGroup operates on international market as the manufacturer ofcement, construction material and other products, and as providerof certain services.The Group consists of:Parent Company:• Nexe grupa d.d., Našice - a holding company.Subsidiaries:• Našicecement d.d., Našice, Croatia - cement production;• Luka Tranzit Osijek d.o.o., Osijek, Croatia - port and warehousingactivities and trade;• Ekonex d.o.o. Našice, Croatia - collection of hazardous waste;• Nexe d.o.o. Novi Sad, Serbia - management and trade;• Nexe kamen d.o.o. Doboj, Bosnia and Herzegovina - excavationof minerals and stone.Sub-subsidiaries:Entities in Croatia:• Našička gradnja d.o.o., Našice - final construction and installationworks, wholesale of non-agricultural products, retail trade offurniture and other household products, electrical appliances, ironproducts, paints and glass;• Slavonija IGM d.o.o., Našice - production of bricks, roofing tiles,ceramic products, extraction of clay and kaolin, final constructionworks;• Feravino d.o.o., Feričanci - vine production, home and gardenplants, fruit and vegetable processing and preservation,manufacturing of beverages;• Osilovac d.o.o., Feričanci - agriculture, livestock breeding, fishery,export and import of food products;• Farma Feričanci d.o.o., Feričanci - stock breeding for milk andaccretion;• Gastro-market d.o.o., Našice - restaurants, canteens and preparedfood supplying, buildings cleansing;• Dilj IGM d.o.o., Vinkovci - production of bricks and roofing tiles;• Našički autocentar d.o.o., Našice - automobile and spare partstrade, automobile maintenance;• Nexe beton d.o.o., Našice - concrete production;• Cement market d.o.o., Našice - retail trade;• Igma d.o.o., Koprivnica - pebble and sand excavation;• Bilokalnik-Drvo d.o.o., Koprivnica - woodwork production andproduction of doors.Entities in Bosnia and Herzegovina:• GP Put d.d., Sarajevo - building and similar activities (GP Put hasregistered business units in Kenya, Uganda and Pakistan);• Agregati i betoni d.o.o., Sarajevo - concrete production;• Tvornica opeke d.o.o., Sarajevo - brick production;• Nexe d.o.o., Sarajevo - management and trade.Entities in Serbia:• Polet a.d., Novi Bečej - production of bricks, roofing - tiles, ceramicproducts, extraction of clay and kaolin;• Polet keramika d.o.o., Novi Bečej - production of tiles;• Jelen Do a.d., Jelen Do - stone mine, stone processing and limeproduction;• Stražilovo IGM d.o.o., Sremski Karlovci - brick production;• Nexe beton d.o.o., Novi Sad - production of concrete.Entities in Romania:• S.C. Nexe Trade s.r.l., Dumbravita, Romania - intermediation intrade of construction materials.Group entities that are not consolidated:• NC Betoni d.o.o. Zagreb, Croatia - production and distribution ofconcrete;• Nexe Kamen d.o.o. Trenkovo, Croatia - stone production;• Kraljev vrt d.o.o. Perušić, Croatia - production of constructionmaterials; construction and trade,• Nekse d.o.o. Lendava, Slovenia - cement trade;• Nexe beton d.o.o. Banja Luka, Bosnia and Herzegovina - concreteproduction;• Z.a.o. Nexe Rus, Dobrjatino, Vladimirska county, Russia -production of concrete, limestone and plaster;• Laurus Consulting AG, Switzerland - financial and other services;• Nexe gradnja d.o.o. Novi Sad, Serbia - construction of residentialand non-residential buildings.Nexe gradnja d.o.o. Novi Sad, Serbia has been founded in November2010 by Našička gradnja d.o.o. Našice.As at 31 December 2010 the Group had 3,494 employees, out ofwhich in Croatia 1,735, Bosnia and Herzegovina 917, Serbia 841and Romania 1 employees. As at 31 December 2009 the Grouphad 3,404 employees (out of which in Croatia 1,621, Bosnia andHerzegovina 948 and Serbia 835 employees).The consolidated financial statements are expressed in thousandsof Croatian kunas.Management Board:• Ivan Ergović, President of the Board,• Krešimir Dundović, Member of the Board,• Tomislav Rosandić, Member of the Board,• Oto Ostović, Member of the Board.Each member of the Board represents the Company solely andindependently.Supervisory Board:• Željko Perić, President from November 2009, Member from June2009 until November 2009• Željko Lukač, Deputy President• Nenad Filipović, Member from November 2009• Darko Marinac, President until November 2009• Ivan Gerovac, Member until May 2009.

Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and Subsidiaries2. SUMMARY OF SIGNIFICANTACCOUNTING POLICIESBasis of presentationStatement of complianceFinancial statements of the Company and the Group are preparedin accordance with International Financial Reporting Standardsapplicable in the European Union.Accounting policies have not been changed during the reportingperiod compared to the previous year.The financial statements have been prepared on the historical costbasis, except for certain financial instruments that are stated at fairvalue.The accounting policies have been applied consistently, except asdisclosed otherwise. The financial statements have been preparedunder accrual principle on a going concern basis.The financial statements are presented in thousands of Croatiankuna (‘000 HRK) as a reporting and measurement currency. As at31 December 2010 exchange rate for 1 USD and 1 EUR was 5.57HRK i.e. 7.39 HRK (31 December 2009: 5.09 HRK i.e. 7.31 HRK).Standards, Amendments and Interpretations issued by IASB,adopted by the Croatian Board and effectiveThe Group has adopted new and revised Standards andInterpretations in the current period. The application of the revisedStandards has not materially affected financial position and resultsof the Group’s operations and comparative information has beendisclosed as required. Adoption of revised Standards had no effecton the equity as at 1 January 2010.• IFRS 1 First-time Adoption of IFRS, cost of an investment at firstapplication - revised (effective for annual periods beginningon or after 1 January 2010),• IFRS 2 Share based payment - revised (effective for annualperiods beginning on or after 1 January 2010),• IFRS 7 Financial Instruments: Disclosures (effective for annualperiods beginning on or after 1 January 2010),• IAS 1 Presentation of Financial Statements - revised (effectivefor annual periods beginning on or after 1 January 2010),• IAS 16 Property, Plant and Equipment - revised ( effective forannual periods beginning on or after 1 January 2010),• IAS 18 Revenue (effective for annual periods beginning on orafter 1 January 2010),• IAS 19 Employee Benefits - revised (effective for annual periodsbeginning on or after 1 January 2010),• IAS 20 Accounting for Government Grants and Disclosure ofGovernment Assistance - revised (effective for annual periodsbeginning on or after 1 January 2010),• IAS 23 Borrowing costs - revised (effective for annual periodsbeginning on or after 1 January 2010),• IAS 27 Consolidated and Separate Financial Statements -Cost of an investment at first application (effective for annualperiods beginning on or after 1 January 2010),• IAS 28 Investments in Associates - revised (effective for annualperiods beginning on or after 1 January 2010),• IAS 29 Financial Reporting in Hyperinflationary Economies -revised (effective for annual periods beginning on or after 1January 2010),• IAS 31 Interests in Joint Ventures - revised (effective for annualperiods beginning on or after 1 January 2010),• IAS 32 Financial Instruments: Presentation and IAS 1 PuttableFinancial Instruments and Obligations Arising on Liquidation -revised (effective for annual periods beginning on or after 1January 2010),• IAS 36 Impairment of Assets - revised (effective for annualperiods beginning on or after 1 January 2010),• IAS 38 Intangible Assets - revised (effective for annual periodsbeginning on or after 1 January 2010),• IAS 39 Financial Instruments: Recognition and Measurements- revised (effective for annual periods beginning on or after 1January 2010),• IAS 40 Investment Property - revised (effective for annualperiods beginning on or after 1 January 2010),• IAS 41 Agriculture - revised (effective for annual periodsbeginning on or after 1 January 2010),• IFRIC 15 Agreements for the Construction of Real Estate(effective for annual periods beginning on or after 1 January2010),• IFRIC 16 Hedges of a Net Investment in a Foreign Operation(effective for annual periods beginning on or after 1 January2010),• IFRIC 17 Distributions of Non-cash Assets to Owners (effectivefor annual periods beginning on or after 1 January 2010),• IFRIC 18 Transfers of Assets from Customers (effective forannual periods beginning on or after 1 January 2010),• IFRS 3 Business Combinations - revised (effective for annualperiods beginning on or after 1 January 2010),• IFRS 5 Non-current Assets Held for Sale and DiscontinuedOperations - revised (effective for annual periods beginningon or after 1 January 2010),• IAS 27 Consolidated and Separate Financial Statements(effective for annual periods beginning on or after 1 January2010),• IAS 28 Investments in Associates - revised based on IFRSimprovements (effective for annual periods beginning on orafter 1 January 2010),• IAS 31 Interests in Joint Ventures - revised based on IFRS 3amendment (effective for annual periods beginning on orafter 1 January 2010),• IAS 39 Financial Instruments: Recognition and Measurement:Eligible Hedge items (effective for annual periods beginningon or after 1 January 2010).

60 / 61Notes the Consolidated Financial StatementsFor the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and SubsidiariesStandards, Interpretations and Amendments to existingstandards that are not yet effectiveAt the date of authorisation of these financial statements, certainnew standards, amendments and interpretations to existingstandards have been published but are not yet effective for the yearended 31 December 2010:• 2010 IFRS Improvements (most of those improvements areeffective for annual periods beginning on or after 1 July 2010or 1 January 2011),• IFRS 9 Financial Instruments - effective for annual periodsbeginning on or after 1 January 2013,• IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments(effective for annual periods beginning on or after 1 July 2010),• IFRS 9 Financial Instruments (effective for annual periodsbeginning on or after 1 January 2013),• Amendments to IAS 24 Related party Disclosures (as revisedin 2009) (effective for annual periods beginning on or after 1January 2011).Management anticipates that all of the relevant interpretations andstandards will be adopted in the financial statements of the Groupfor the first period beginning after their effective date and that theiradoption should not have a material impact on the Group’s financialstatements in the year of first application.a) Basis of consolidationThe consolidated financial statements incorporate the financialstatements of the Company and entities controlled by the Company(subsidiaries). Control is achieved where the Company has thepower to govern the financial and operating policies of an entity toobtain benefits from its activities.The results of subsidiaries acquired or disposed of during theyear are included in the consolidated income statement from theeffective date of acquisition or up to the effective date of disposal,as appropriate.Where necessary, adjustments are made to the financial statementsof subsidies to bring their accounting policies in line with thoseused by other members of the Group. All intra-group transactions,balances, income and expenses are eliminated on consolidation.Non-controlling interests in the net assets of consolidatedsubsidiaries are identified separately from the Group’s equity herein.Non-controlling interests consist of the amount of those interests atthe date of the original business combination in line with IFRS 3 andthe non-controlling ’s share of changes in equity since the date ofthe combination.Companies under control that are consolidated:Name of subsidiaryCountry ofincorporationPortion ofownership interestPortion of votingpower heldPrincipal activityNašicecement d.d. Croatia 91.55 100.00 Cement productionLuka Tranzit d.o.o. Croatia 81.85 81.85 Port activities, sand excavationDilj IGM d.o.o. Croatia 98.98 100.00 Brick and tile productionSlavonija IGM d.o.o. Croatia 77.62 91.35 Brick productionIgma d.o.o. Croatia 100.00 100.00 Pebbles and sand excavationNašička gradnja d.o.o. Croatia 100.00 100.00 ConstructionFeravino d.o.o. Croatia 100.00 100.00 Vine production and tradeOsilovac d.o.o. Croatia 98.07 98.07 Crop and LivestockFarma Feričanci d.o.o. Croatia 98.07 98.07 LivestockNašički autocentar d.o.o. Croatia 96.32 96.32 Car trade and servicingGastro market d.o.o. Croatia 100.00 100.00 Restaurant serviceNexe beton d.o.o. Croatia 96.35 100.00 Concrete productionCement market d.o.o. Croatia 77.62 91.35 Sale of construction productsEkonex d.o.o. Croatia 100.00 100.00 Collection of hazardous wasteBilokalnik-Drvo d.o.o. Croatia 100.00 100.00Woodwork production andproduction of doorsPolet a.d. Serbia 92.86 92.86 Tiles productionPolet keramika doo Serbia 92.86 92.86 Tiles productionJelen Do a.d. Serbia 87.95 87.95 Production of binding materialsStražilovo IGM doo Serbia 100.00 100.00 Brick productionNexe beton doo Novi Sad Serbia 100.00 100.00 Concrete productionNexe doo Novi Sad Serbia 100.00 100.00 ManagementGP Put d.d. Bosnia and Herzegovina 72.53 72.53 ConstructionTvornica opeke d.o.o. Sarajevo Bosnia and Herzegovina 100.00 100.00 Brick productionAgregati i betoni d.o.o. Bosnia and Herzegovina 100.00 100.00Concrete production and productionof similar productsNexe d.o.o. Sarajevo Bosnia and Herzegovina 100.00 100.00 ManagementNexe kamen d.o.o. Bosnia and Herzegovina 100.00 100.00 Stone excavation and tradeNexe Trade s.r.l. Romania 95.24 95.24 Sale of construction products

Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and SubsidiariesNexe Trade s.r.l. and Bilokalnik-Drvo d.o.o. have been consolidatedin the financial statements for the year ended 31 December 2010,Bilokalnik-Drvo d.o.o. has not been consolidated in 2009 as itwas classified as asset held for sale while Nexe Trade s.r.l. was notsignificant to the Group. Comparative information of the Group for2009 does not include results of Bilokalnik-Drvo d.o.o. for the yearended 31 December 2009 as follows:Statement of Financial Position of Bilokalnik-Drvo d.o.o. as at 31 December 20092009 2009Non-current assetsCapital and reservesIntangible assets 438 Share capital 33,385Property, plant and equipment 94,207 Loss brought forward (56,773)Receivables for given loans and deposits 1,075 (23,388)Deferred tax asset 157 Liabilities95,877 Long-term loans 25,507Current assets Long-term provisions 1,015Inventories 21,766 Total long term liabilities 26,522Receivables from related parties 111Other receivables 14,607 Current liabilitiesCash and cash equivalents 706 Liabilities to related parties 77,31937,190 Liabilities to financial institutions 20,497Total short term liabilities 32,117129,933TOTAL ASSETS 133,067 TOTAL EQUITY AND LIABILITIES 133,067

62 / 63Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and SubsidiariesStatement of Other Comprehensive income / (loss) of Bilokalnik-Drvo d.o.o. for 2009Operating income2009Income and expenses fromGroup transactions- 2009Sales revenue 42,432 (2,485)Other operating income 24,205 -Operating expenses66,637 (2,485)Raw materials, consumables and energy used (32,160) 1,801Staff costs (16,308) -Depreciation and amortisation (4,547) -Other operating expenses (17,129) -(70,144) 1,801Loss from operations (3,507) (684)Financial income 1,052 -Financial expenses (8,884) 3,770Net financial result (7,832) 3,770Loss before tax (11,339) 3,086Income tax expense - -(Loss) after tax (11,339) 3,086Other comprehensive incomeAvailable-for-sale financial assets 7 -Total comprehensive (loss) (11,332) 3,086Companies under control that are not consolidated:Name of subsidiaryCountry ofincorporationPortion of ownershipinterestPortion of votingpower heldPrincipal activityNC Betoni d.o.o. Zagreb Croatia 100.00 100.00 Production and distribution of concreteKraljev vrt d.o.o. Perušić Croatia 77.62 91.35Production of construction materials;construction and tradeNexe kamen d.o.o. Trenkovo Croatia 100.00 100.00 Stone productionNexe gradnja d.o.o. Novi Sad Serbia 100.00 100.00Construction of residential and nonresidentialbuildingsNekse d.o.o. Lendava Slovenia 100.00 100.00 Cement tradeNexe beton d.o.o. Banja LukaBosnia andHerzegovina100.00 100.00 Concrete productionZ.a.o. Nexe Rus, Dobrjatino Russia 99.00 99.00Production of concrete, limestone andplasterLaurus Consulting AG Switzerland 100.00 100.00 Financial and other servicesCompanies that are not consolidated were not active in 2010 and are not significant to the Group.

Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and Subsidiariesb) Business combinationThe acquisition of subsidiaries is accounted for using the purchasemethod. The cost of the acquisition is measured at the aggregateof the fair values, at the date of exchange, of assets given, liabilitiesincurred or assumed, and equity instruments issued by the Groupin exchange for control of the acquiree, plus any costs directlyattributable to the business combination. The acquiree’s identifiableassets, liabilities and contingent liabilities that meet the conditionsfor recognition under IFRS 3 are recognised at their fair values atthe acquisition date, when full control over the acquiree is acquired.c) GoodwillGoodwill acquired through business combinations is initiallymeasured at cost being the excess of the cost of the businesscombination over the Group’s share in the net fair value of theacquiree’s identifiable assets, liabilities and contingent liabilities.After initial recognition, goodwill is measured at cost lessaccumulated impairment losses. For the purpose of impairmenttesting, the carrying amount of goodwill is tested to determinewhether there is any indication that those assets have suffered animpairment loss. The test is done annually or more frequently ifthere are some new circumstances that indicate that the carryingamount could be impaired.d) Revenue recognitionRevenue is recognised when it is probable that the economicbenefits associated with the transaction will flow to the Groupand the amount of the revenue can be measured reliably. Sales arerecognised, net of sales taxes and discounts, when delivery of goodsor rendering of a service has taken place and the transfer of risksand rewards has been completed.e) Construction contractsWhen the outcome of a construction contract can be estimatedreliably, contract revenue and contract costs associated with theconstruction contract shall be recognised as revenue and expensesrespectively by reference to the stage of completion of the contractactivity at the end of the reporting period. The stage of completionof a contract is determined by the proportion that contract costsincurred for work performed to date bear to the estimated totalcontract costs. Variations in contract work, claims and incentivepayments are included to the extent that they are agreed with thecustomer. When the outcome of a construction contract cannot beestimated reliably revenue shall be recognised only to the extentof contract costs incurred that it is probable will be recoverableand contract costs shall be recognised as an expense in the periodin which they are incurred. An expected loss on the constructioncontract shall be recognised as an expense immediately.f) Financial revenues and expensesFinancial revenues and expenses comprise interests on loanscalculated by using the effective interest rate method, receivablesfor interests on investments, revenues from dividends, gains andlosses from exchange rate differences, gains and losses fromfinancial assets at fair value through the income statement.Financial expenses comprise interests on loans, changes of fairvalue of financial assets at fair value through the income statement,impairment losses of financial assets and foreign exchange losses.Borrowing costs that are not directly attributable to the acquisition,construction or production of a qualifying asset are recognized inthe income statement using the effective interest rate method,otherwise they are capitalized.g) Foreign currenciesTransactions in currencies other than Croatian kuna are recorded atthe rates of exchange prevailing on the dates of the transactions.At each balance sheet date, monetary assets and liabilities thatare denominated in foreign currencies are retranslated at themid exchange rate of the Croatian National Bank prevailing onthe balance sheet date. Gains and losses arising on exchange areincluded in net profit or loss for the period, except for those on nonmonetaryassets, which are reported directly in equity.As at 31 December exchange rate was as follows:31 December 201031 December 2009EUR 1= HRK 7.385173EUR 1= HRK 7.306199USD 1= HRK 5.568252USD 1= HRK 5.089300h) Retirement and other employee benefitsThe Group has no defined post-retirement benefit plans for itsemployees or management in Croatia or abroad. Accordingly, noprovisions for those charges have been made.Legal pension and health insurance contributions are paid on behalfof the Group’s employees. This obligation applies to all staff hiredbased on employment contract. The contributions are paid at acertain percentage determined based on gross salary.Contributions for employees in Croatia are calculated and paid asfollows:2010 2009Pension fund contribution 20% 20%Health insurance 15% 15%Employment fund contribution 1.7% 1.7%Injuries at work 0.5% 0.5%Above mentioned liabilities for pension insurance are beingdeducted from the employee gross salary while other contributionsare calculated on the employer’s behalf.Contributions to defined contribution retirement benefit plans arerecognised as an expense when employees have rendered serviceentitling them to the contributions (see note 7).Interest revenues are recognized in the income statement onan accrual basis using the effective interest rate. Dividends arerecognized in the income statement at the date when the Group’sright to receive payment is established.

64 / 65Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and SubsidiariesThe Group provides employees with jubilee and one-off retirementbenefits. The obligation and costs of these benefits are determinedusing a projected unit credit method. The Projected Unit CreditMethod considers each period of service as giving rise to anadditional unit of benefit entitlement and measures each unitseparately to build up the final obligation. The pension obligation ismeasured at the present value of estimated future cash flows usinga discount rate that is similar to the interest rate on governmentbonds where the currency and terms of the government bonds areconsistent with the currency and estimated terms of the benefitobligation.i) TaxationIncome tax expense represents the sum of the tax currently payableand deferred tax.The tax currently payable is based on the taxable profit for the yearin accordance with the Croatian regulations. Taxable profit differsfrom net profit as reported in the income statement because itexcludes items of income or expense that are taxable or deductiblein other years and it further excludes items that are not taxable ordeductible. The Group’s liability for current tax is calculated usingtax rates that have been enacted or substantively enacted at thebalance sheet date.Deferred tax is the tax expected to be payable or recoverable ondifferences between the carrying amount of assets and liabilities inthe financial statements and the corresponding tax basis used inthe computation of taxable profit, and is accounted for using thebalance sheet liability method. Deferred tax liabilities are generallyrecognised for all taxable temporary differences and deferred taxassets are recognised to the extent that it is probable that taxableprofits will be available against which deductible temporarydifferences can be utilised.Deferred tax liabilities are recognised for taxable temporarydifferences arisen on investments in subsidiaries and associates orjoint ventures, unless the Group is not able to control the reversalof temporary differences and if it is probable that the temporarydifference will not be reversed in the foreseeable future.The carrying amount of deferred tax assets is reviewed at eachbalance sheet date and reduced to the extent that it is no longerprobable that sufficient taxable profit will be available to allow all orpart of the asset to be recovered. Deferred tax is calculated at thetax rates that are expected to apply in the period when the liabilityis settled or the asset realised. Deferred tax is charged or creditedin the income statement, except when it relates to items chargedor credited directly to equity, in which case the deferred tax is alsodealt with in equity.Deferred tax assets and liabilities are offset when they relate toincome taxes levied by the same taxation authority and the Grouphas the ability and intention to settle its current tax asset and liabilityon a net basis.j) Property, plant and equipmentProperty, plant and equipment are stated at cost less accumulateddepreciation (except for land) and any recognised impairment loss.Cost includes the purchase price and all costs directly linked tobringing the asset into working condition for intended purpose.Subsequent expenditures relating to an item of property, plant andequipment are added to the carrying amount of the asset whenit is probable that additional future economic benefits will flowto the Group because of the subsequent expenditure and whenthose expenditures improve the condition of the asset beyond itsoriginally assessed standard of performance. All other subsequentexpenditures are recognized as an expense in the period when theyare incurred.Small assets under 3,500 kuna are expensed at the time they areput into use.The cost of a self-constructed asset includes cost of material, directlabour and other costs linked to bringing the asset into workingcondition, as well as dismantling, removal and restoring costs.Gains or losses on the retirement or disposal of fixed assets areincluded in the income statement in the period when they occur.Properties in the course of construction are carried at cost, lessimpairment loss, if any.Depreciation commences when the assets are ready for theirintended use. Assets under construction are not depreciated.Depreciation is calculated based on the estimated useful lives of theapplicable assets which are as follows:2010 2009Buildings 2.5%-10% 2.5%-10%Production machinery andequipment5%-15% 5%-15%Other equipment 10%-25% 10%-25%Cars 25% 25%Depreciation is calculated for each asset on a straight line basisthroughout the estimated useful life of the asset until that asset isfully depreciated.Impairment of tangible and intangible assets excluding goodwillAt each balance sheet date, the Group reviews the carrying amountof its tangible and intangible assets to determine whether there isany indication that those assets have suffered an impairment loss.If any such indication exists, the recoverable amount of the asset isestimated in order to determine the extent of the impairment loss(if any). Where it is not possible to estimate the recoverable amountof the individual asset, the Group estimates the recoverable amountof the cash-generating unit to which that asset belongs. Wherea reasonable and consistent basis of allocation can be identified,corporate assets are also allocated to individual cash-generatingunits, or otherwise they are allocated to the smallest Company’scash-generating units for which a reasonable and consistentallocation basis can be identified.Intangible assets with indefinite useful lives and intangible assetsnot yet available for use are tested for impairment annually, andwhenever there is an indication that the asset may be impaired.

Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and SubsidiariesRecoverable amount is higher of fair value less costs to sell and valuein use.In assessing value in use, the estimated future cash flows arediscounted to their present value using a pre-tax discount rate thatreflects current market assessments of the time value of money andthe risks specific to the asset.If the recoverable amount of an asset (or cash-generating unit) isestimated to be less than its carrying amount, the carrying amountof the asset (or cash-generating unit) is reduced to its recoverableamount. An impairment loss is recognized immediately in profit orloss, unless the relevant asset is carried at a revaluated amount, inwhich case the impairment loss is treated as a revaluation decrease.Where an impairment loss subsequently reverses, the carryingamount of the asset (cash-generating unit) is increased to therevised estimate of its recoverable amount, but so that the increasedcarrying amount does not exceed the carrying amount that wouldhave been determined had no impairment loss been recognisedfor the asset (cash-generating unit) in prior years. A reversal of animpairment loss is recognised as income immediately, unless therelevant asset is carried at a revalued amount, in which case thereversal of the impairment loss is treated as a revaluation increase.k) Investments in subsidiaries and affiliated legal entitiesSubsidiarySubsidiary is the company in which the Company has control,direct or indirect, over its business activities. Control exists whenthe Company has a power to govern the financial and operatingactivities of the subsidiary so as to obtain benefits from its businessactivities. Investments in subsidiaries are recognized at cost.AssociateAssociates are companies in which the Company has a significantinfluence, but does not have a control. Significant influence is apower to participate in the financial and operating policy decisionsof the associate, but does not represent control or joint control overthose policies. Investments in associates are accounted for using theequity method.l) Long-term assets held for saleLong-term asset (or disposal group) is classified as held for saleif its caring amount will be recovered principally through a saletransaction rather than through continuing use. For this to be case,the asset (or disposal group) must be available for immediate salein its present condition. The sale should be expected qualify forrecognition as a completed sale within one year from the date ofclassification.Long-term asset (or disposal group) classified as held for sale ismeasured at the lower of its carrying amount and fair value lesscosts to sell.m) InventoriesInventories are stated at the lower of cost and net realisable value.Costs of inventories comprise all purchase costs, costs of conversionand other costs incurred in bringing the inventories to theirpresent location and condition. Where applicable, cost comprisesdirect labour costs and those overheads that have been incurredin bringing the inventories to their present location and condition.Cost is calculated using the FIFO method. Small inventory is fullydepreciated when put into use. Net realisable value represents theestimated selling price less all estimated costs of completion andcosts to be incurred in marketing, selling and distribution.Value adjustment of inventories is made upon estimation ofthe value decrease of inventories on item-by-item basis if thoseinventories are damaged, if they have become wholly or partiallyobsolete, or if their selling prices have declined.n) LeasesLeases are classified as finance leases whenever the terms of thelease transfer substantially all the risks and rewards of ownership tothe lessee. All other leases are classified as operating leases.The Group as lessorAmounts due from lessees under finance leases are recorded asreceivables at the amount of the Group’s net investment in theleases. Finance lease income is allocated to accounting periods soas to reflect a constant periodic rate of return on the Group’s netinvestment outstanding in respect of the leases. Rental income fromoperating leases is recognised on a straight-line basis over the termof the relevant lease.The Group as lesseeAssets held under finance leases are initially recognised as assetsof the Group at their fair value at the inception of the lease or, iflower, at the present value of the minimum lease payments. Thecorresponding liability to the lessor is included in the balance sheetas a finance lease obligation. Lease payments are apportionedbetween finance charges and reduction of the lease obligation soas to achieve a constant rate of interest on the remaining balanceof the liability. Finance charges are charged directly to profit or loss.Operating lease payments are recognised as an expense on astraight-line basis over the lease term.o) Short-term receivablesReceivables represent the right to collect determined amounts fromcustomers or other debtors with regard to the Group’s operations.Receivables are reported in the total amount and decreased by theprovisions for doubtful and bad debts. Bad debt provisions are madewhen collection of a part or a total of this receivable is uncertainbased on the Management’s estimation.p) Cash and cash equivalentsCash and cash equivalents consist of deposits, cash at banks andsimilar institutions and cash on hand. This position includes cashimmediately available and utilizable and is characterized by theabsence of collection risk.q) Received loansInterest-bearing bank loans and overdrafts are recorded on the basisof received amounts, decreased for direct costs of their approval.Financial costs, including premium paid on the settlement orwithdrawals are recorded on accrual basis and are added to thecarrying value of the instrument, to the extent to which they areun-settled in the period in which they occurred.

66 / 67Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and Subsidiariesr) ProvisionsA provision is recognised when, and only when, the Group hasa present obligation (legal or constructive) as a result of a pastevent and it is probable that an outflow of resources embodyingeconomic benefits will be required to settle the obligation, and areliable estimate can be made of the amount of the obligation.The amount recognized as a provision is the best estimated ofthe consideration required to settle the present obligation at thebalance sheet date, taking into account the risks and uncertaintiessurrounding the obligation. Where a provision is measured usingthe cash flows estimated to settle the present obligation, its carryingamount is the present value of those cash flows. When discountingis used, the increase in provision reflecting the passage of time isrecognised as interest expense.When some or all of the economic benefits required to settlea provision are expected to be recovered from a third party, thereceivable is recognized as an asset if it is virtually certain thatreimbursement will be received and the amount of the receivablecan be measured reliably.s) Earnings per shareThe Group discloses basic earnings per share for ordinary shares.The basic earnings per share are calculated by dividing net profitor loss for the year attributable to ordinary equity holders by theweighted average number of ordinary shares outstanding duringthe year.t) DividendsDividends are recognized in the Statement of changes in equity andare shown as a liability in the period in which they are approved bythe Company’s shareholders.u) ContingenciesContingent liabilities are not recognised in the financial statements.They are disclosed unless the possibility of an outflow of resourcesembodying economic benefits is remote.v) Subsequent eventsPost-year-end events that provide additional information about theGroup’s position at the balance sheet date (adjusting events) arereflected in the financial statements. Post-year-end events that arenot adjusting events are disclosed in the notes when material.w) ComparativesWhere necessary, comparative figures have been adjusted toconform to the presentation in the current year.x) Financial assetsInvestments are recognized and derecognized on a trade datewhere the purchase or sale of an investment is under a contractwhose terms require delivery of the investment within the timeframeestablished by the market concerned, and are initially measured atfair value, plus transaction costs, except for those financial assetsclassified as at fair value through profit or loss, which are initiallymeasured at fair value.Financial assets are classified into following categories: “financialassets at fair value through profit or loss”, “investments held tomaturity, “available-for-sale financial assets”, loans, and receivables.The classification depends on the nature and purpose of the financialasset and is determined at the time of initial recognition.Effective interest rate methodThe effective interest rate method is a method of calculating theamortised cost of a financial asset and allocating interest incomeover the relevant period. The effective interest rate is the ratethat exactly discounts estimated future cash receipts (including allfees on points paid or received that form an integral part of theeffective interest rate, transaction costs and other premiums ordiscounts) through the expected life of the financial asset, or, whereappropriate, a shorter period.Income from instruments classified as “investments held tomaturity“, “available-for-sale financial assets” or “loans andreceivables” are recognized according to the effective interestmethod.Financial assets at fair value through profit or lossFinancial asset is classified at fair value through profit and losswhen either the asset is held for trading, or it is designated at fairvalue through profit and loss. Financial asset is classified as held fortrading if:• it has been acquired principally for the purpose of selling in thenear future; or• it is a part of an identified portfolio of financial instruments thatthe Group manages together and has a recent actual pattern ofshort-term profit-taking; or• it is a derivative that is not designated and effective as a hedginginstrument.A financial asset other than a financial asset held for trading maybe designated as at fair value through profit and loss upon initialrecognition if:• such designation eliminates or significantly reduces a measurementor recognition inconsistency that would otherwise arise; or• the financial asset forms part of a group of financial assets orfinancial liabilities or both, which is managed and its performanceis evaluated on a fair value basis, in accordance with the Group’sdocumented risk management or investment strategy, andinformation about the grouping is provided internally on thatbasis; or• it forms part of a contract containing one or more embeddedderivatives, and IAS 39 “Financial Instruments: Recognition andMeasurement” permits the entire combined contract to bedesignated as at fair value through profit and loss.Financial assets at fair value through profit and loss are stated atfair value, with any resultant gain or loss recognised in profit orloss. The net gain or loss recognized in profit or loss incorporatesany dividend or interest method less any impairment, with revenuerecognized on an effective yield basis.

Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and SubsidiariesFinancial assets “held-to-maturity“Bills of exchange, bonds and debentures with fixed or determinablepayments and fixed maturity dates that the Group has the positiveintent and ability to hold to maturity are classified as held-tomaturityinvestments. Held-to-maturity investments are recordedat amortised cost using the effective interest method less anyimpairment, with revenue recognised on an effective yield basis.Financial assets “available for sale”Unlisted shares and listed redeemable bonds held by the Group thatare traded in an active market are classified as being available for saleand are stated at fair value. Gains and losses arising from changesin fair value are recognised directly in equity in the investmentsrevaluation reserve with the exception of impairment losses, interestcalculated using the effective interest method and foreign exchangegains and losses on monetary assets, which are recognised directly inprofit or loss. Where the investment is disposed of or is determinedto be impaired, the cumulative gain or loss previously recognised inthe investments revaluation reserve is included in profit or loss forthe period.Dividends on available for sale equity instruments are recognised inprofit or loss when the Company’s right to receive the dividends isestablished.The fair value of available for sale financial assets denominatedin a foreign currency is determined in that foreign currency andtranslated at the spot rate at the balance sheet date. The changein fair value attributable to translation differences that result from achange in amortised cost of the asset is recognised in profit or loss,and other changes are recognised in equity.Loans and receivablesTrade receivables, loans, and other receivables that have fixed ordeterminable payments that are not quoted in an active marketare classified as loans and receivables. Loans and receivables aremeasured at amortised cost using the effective interest method,less any impairment. Interest income is recognised by applying theeffective interest rate, except for short-term receivables when therecognition of interest would be immaterial.Impairment of financial assetsFinancial assets, other than those at fair value through profit andloss, are assessed for indicators of impairment at each balance sheetdate. Financial assets are impaired where there is objective evidencethat, as a result of one or more events that occurred after the initialrecognition of the financial asset, the estimated future cash flows ofthe investment have been impacted.For unlisted shares classified as AFS a significant or prolongeddecline in the fair value of the security below its cost is consideredto be objective evidence of impairment.For all other financial assets, including redeemable bonds classifiedas “available for sale” and finance lease receivables, objectiveevidence of impairment could include:• significant financial difficulty of the issuer or counterparty; or• default or delinquency in interest or principal payments; or• it becoming probable that the borrower will enter bankruptcy orfinancial re-organisation.For certain categories of financial asset, such as trade receivables,assets that are assessed not to be impaired individually aresubsequently assessed for impairment on a collective basis. Objectiveevidence of impairment for a portfolio of receivables could includethe Group’s past experience of collecting payments, an increase inthe number of delayed payments in the portfolio past the averagecredit period of 60 days, as well as observable changes in national orlocal economic conditions that correlate with default on receivables.For financial assets carried at amortised cost, the amount of theimpairment is the difference between the asset’s carrying amountand the present value of estimated future cash flows, discounted atthe financial asset’s original effective interest rate.The carrying amount of the financial asset is reduced by theimpairment loss directly for all financial assets with the exceptionof trade receivables, where the carrying amount is reduced throughthe use of an allowance account. When a trade receivable isconsidered uncollectible, it is written off against the allowanceaccount. Subsequent recoveries of amounts previously written offare credited against the allowance account. Changes in the carryingamount of the allowance account are recognised in profit or loss.With the exception of “available for sale” equity instruments, if, ina subsequent period, the amount of the impairment loss decreasesand the decrease can be related objectively to an event occurringafter the impairment was recognised, the previously recognisedimpairment loss is reversed through profit or loss to the extent thatthe carrying amount of the investment at the date the impairment isreversed does not exceed what the amortised cost would have beenhad the impairment not been recognised.In respect of “available for sale” equity securities, impairmentlosses previously recognised through profit or loss are not reversedthrough profit or loss. Any increase in fair value subsequent to animpairment loss is recognised directly in equity.Derecognition of financial assetsThe Group derecognises a financial asset only when the contractualrights to the cash flows from the asset expire; or it transfers thefinancial asset and substantially all the risks and rewards of ownershipof the asset to another entity. If the Group neither transfers norretains substantially all the risks and rewards of ownership andcontinues to control the transferred asset, the Group recognises itsretained interest in the asset and an associated liability for amountsit may have to pay. If the Group retains substantially all the risksand reward ownership of a transferred financial asset, the Groupcontinues for recognise the financial asset and also recognises acollateralised borrowing for the proceeds received.

68 / 69Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and Subsidiariesy) Financial liabilities and equity instruments issued by theGroupClassification as debt or equityDebt and equity instruments are classified either as financial liabilitiesor as equity in accordance with the substance of the contractualarrangement.Equity instrumentsAn equity instrument is any contract that evidences a residualinterest in the assets of an entity after deducting all of its liabilities.Equity instruments issued by the Group are recorded at the proceedsreceived, net of direct issue costs.Compound instrumentsThe component parts of compound instruments issued by the Groupare classified separately as financial liabilities and equity accordingto the substance of the contractual arrangement. At the date ofissue, the fair value of the liability component is estimated usingthe prevailing market interest rate for a similar non-convertibleinstrument. This amount is recorded as a liability on an amortisedcost basis using the effective interest method until extinguishedupon conversion or at the instrument’s maturity date. The equitycomponent is determined by deducting the amount of the liabilitycomponent from the fair value of the compound instrument as awhole. This is recognised and included in equity, net of income taxeffects, and is not subsequently remeasured.Share capitala. Ordinary sharesDirect costs related to issuance of ordinary shares are recognized asa decrease of equity.b. Treasury sharesAmount of compensation paid for reacquiring own shares, includingdirect costs related to acquisition, is recognized as a decrease ofequity. Own equity instruments which are reacquired (treasuryshares) are recognized at cost and deducted from equity.Financial guarantee contract liabilitiesFinancial guarantee contract liabilities are measured initially at theirfair values and are subsequently measured at the higher of:• the amount of the obligation under the contract, as determinedin accordance with IAS 37 Provisions, Contingent Liabilities andContingent Assets; and• the amount initially recognised less, where appropriate, cumulativeamortisation recognised in accordance with the revenue recognitionpolicies (dividend and interest revenue).designed as “at fair value through profit and loss”.Financial liability is classified as “held for trading” if:• it has been incurred principally for the purpose of repurchasing inthe near future; or• it is a part of an identified portfolio of financial instruments thatthe Group manages together and has a recent actual pattern ofshort-term profit-taking; or• it is a derivative that is not designated and effective as a hedginginstrument.A financial liability other than a financial liability held for trading maybe designated as at fair value through profit and loss upon initialrecognition if:• such designation eliminates or significantly reduces a measurementor recognition inconsistency that would otherwise arise; or• the financial liability forms part of a group of financial assets orfinancial liabilities or both, which is managed and its performanceis evaluated on a fair value basis, in accordance with the Group’sdocumented risk management or investment strategy, andinformation about the grouping is provided internally on thatbasis; or• it forms part of a contract containing one or more embeddedderivatives, and IAS 39 Financial Instruments: Recognition andMeasurement permits the entire combined contract (asset orliability) to be designated as at fair value through profit and loss.Financial liabilities at fair value through profit and loss are stated atfair value, with any resultant gain or loss recognised in profit or loss.The net gain or loss recognised in profit or loss incorporates anyinterest paid on the financial liability.Other financial liabilitiesOther financial liabilities, including borrowings are initially measuredat fair value, net of transaction costs.Other financial liabilities are subsequently measured at amortisedcost using the effective interest method, with interest expenserecognised on an effective yield basis.The effective interest method is a method of calculating theamortised cost of a financial liability and of allocating interestexpense over the relevant period. The effective interest rate is therate that exactly discounts estimated future cash payments throughthe expected life of the financial liability, or, where appropriate, ashorter period.Derecognition of financial liabilitiesThe Group derecognises financial liabilities when, and only when,the Group’s obligations are discharged, cancelled or they expire.Financial liabilitiesFinancial liabilities are classified as either financial liabilities at “fairvalue through profit and loss” or “other financial liabilities”.Financial liabilities “at fair value through profit and loss”Financial liabilities are classified as “at fair value through profit andloss” where the financial liability is either held for trading or it is

Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and Subsidiaries3. CRITICAL ACCOUNTING JUDGEMENTSAND ESTIMATESIn the application of the Group’s accounting policies, described innote 2, the Management Board is required to make judgements,estimates and assumptions about the carrying amounts of assetsand liabilities that are not readily apparent from other sources.The estimates and associated assumptions are based on historicalexperience and other factors that are considered to be relevant.Actual results may differ from these estimates.The estimates and underlying assumptions are reviewed on an ongoingbasis. Revisions to accounting estimates are recognised in theperiod in which the estimate is revised if the revision affects onlythat period or in the period of the revision and future periods if therevision affects both current and future periods.3.1 Key sources of estimation uncertaintyThe following are the key assumptions concerning the future, andother key sources of estimation uncertainty at the balance sheetdate, that have a significant risk of causing a material adjustmentto the carrying amounts of assets and liabilities within the nextfinancial year:Useful lives of property, plant and equipmentAs described in note 2, the Group reviews the estimated usefullives of property, plant and equipment at the end of each annualreporting period.2010 2009Buildings 10-40 10-40Production machinery andequipment6.6-20 6.6-20Other equipment 4-10 4-10Vehicles 4 4calculation of the value in use, using the estimated future cash flowsfrom the approved financial budgets for the five year period.Key assumptions used by the Management to estimate future cashflows in the impairment tests of cash-generating units are as flows:• assumptions of future market movements based on the historicand future market changes, as well as estimated increase of grossdomestic product (Unicredit Quarterly report 4/2010, MMF) andplanned future investments presented by the Government ofRepublic of Croatia• planned growth rate after planning period is 2% p.a.• free cash flows that cash-generating units will generate have beendiscounted to present value using the return rate that representsrelative risk of investment, i.e. the time value of money• this return, known as weighted average cost of capital (WACC),has been calculated based on the weighted required returnon interest bearing debt and equity in the ratio that reflectstheir estimated percentage in the expected capital structure.Weighted average cost of capital has been calculated for eachcash-generating unit and is ranging from 7.20% to 11.61%depending on the business line of the cash-generating unit, thecountry in which it operates and capital structure.Other estimatesOther areas of estimation used in the preparation of theaccompanying financial statements relate to employee benefits andprovisions for potential litigation losses.Fair value of financial assets and other financial instrumentsAs described in note 22, the Management Board uses theirjudgement estimating impairment of trade and other receivables.Valuation techniques commonly used by market practitioners areapplied, which are based on a discounted cash flow analysis basedon prior experience of the Group in collecting amounts receivable.Details of the assumptions used and of the results of sensitivityanalyses regarding these assumptions are provided in note 22.Impairment test of property, plant and equipment, intangibleassets and goodwillDue to the significant fall of investment activities and personalconsumption on Croatian and surrounding markets as well as dueto the receivables collection problems, the Group faced significantfall of business activities and worsened solvency. The ManagementBoard has assessed that the indicators of impairment of long livedtangible and intangible assets exist and has accordingly conductedimpairment tests of long lived tangible and intangible assets andgoodwill. Recoverable amount of assets has been determined forthe cash-generating unit to which the asset belongs based on the

70 / 71Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and Subsidiaries4. SALES REVENUE2010 2009Sales revenues - Republic of Croatia 549,837 746,333Sales revenues - Serbia 188,815 140,574Sales revenues - Bosnia and Herzegovina 55,449 152,155Other foreign sales 190,393 116,204Sale of goods in transit 77,687 61,474Revenue from transportation services 36,990 45,8311,099,171 1,262,571Out of the total sales revenue in 2010, revenues from construction contracts amount to 116.4 million kuna (in 2009: 170.6 million kuna). In thesame period cost arising from construction contracts amount to 119.8 million kuna (in 2009: 170.7 million kuna).5. OTHER OPERATING INCOME2010 2009Income from sale of goods and raw materials 44,075 13,003Collected trade receivables that were value adjusted 12,177 18,970Income from subsidies, grants and recourses from the State 9,501 10,373Collection of damages from insurance 3,972 2,193Income from reversal of provisions and reversed accrued expenses 3,982 2,589Income from sale of tangible assets 1,625 568Income from previous years 1,003 4,348Collected other receivables that were value adjusted 616 -Collected bill of exchange receivables that were value adjusted 593 -Income from decrease of liabilities 530 808Inventory surpluses 220 150Collected loan receivables that were value adjusted - 599Other operating income 9,026 21,33987,320 74,940

Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and Subsidiaries6. RAW MATERIALS, CONSUMABLES AND ENERGY USED2010 2009Energy 276,204 277,953Materials 176,035 152,872Cost of goods sold 94,547 90,792Services of co-operants 45,688 85,607Maintenance 21,277 24,520Transport services 18,812 27,242Other services 13,971 4,514Change in stocks of finished goods and work in progress (22,610) (31,897)623,924 631,6037. STAFF COSTS2010 2009Wages and salaries 152,761 158,437Taxes and contributions 95,279 99,503248,040 257,9408. OTHER OPERATING EXPENSES2010 2009Value adjustments of accounts receivable 40,799 32,476Compensations to employees 26,618 25,747Non production services 19,591 12,642Other services 17,716 16,564Rental costs 15,216 14,777Advertizing and promotion expenses 13,708 13,176Bank charges 9,169 8,900Insurance premiums 8,302 6,829Other taxes and contributions 5,888 5,701Postage and telecommunication services 5,256 5,889Fees for waste management 5,115 2,456Provisions for risks and other accrued expenses 5,095 7,892Mineral resource exploitation fee 4,614 2,028

72 / 73Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and SubsidiariesRepresentation expenses 4,051 5,352VAT split expenses 2,190 -Net book value of disposed assets 1,863 2,434Compensations to Supervisory Board Members 1,806 2,791Trans-shipment expenses 1,721 2,640Audit expenses 1,616 1,434Value adjustment of inventories 1,107 -Value adjustment of bill of exchange receivables 609 5,221Write off of unadjusted trade receivables 592 2,033Value adjustment of receivables for advances 474 -Value adjustment of other receivables - 616Value adjustment of loan receivables - 2,168Other expenses 26,889 15,211220,005 194,9779. RESTRUCTURING COSTSRestructuring costs in 2009 related to severance payments paid to employees as a result of undertaken reorganization. The largest part of paidseverance payments related to 78 employees of Dilj d.o.o. in the amount of 6,882 thousand kuna and to 45 production employees of Našicecementd.d. in the amount of 6,788 thousand kuna.10. FINANANCIAL INCOME AND EXPENSES2010 2009Financial incomeForeign exchange gains 25,661 25,544Income from forward/spot transactions 18,682 44,071Income from sale of bonds, coupons and discounts on bonds 12,491 13,600Interest income on loans 4,203 5,056Penalty charges 3,930 14,013Income from investments 1,705 19,949Income from sale of shares and business shares 567 4,101Interest income on bank account 230 119Interest income on deposits 171 797Other financial income 345 63667,985 127,886Financial expensesForeign exchange losses (52,412) (45,737)Interest expense on bank loans (47,080) (47,168)Interest expense - bonds (31,582) (31,097)Expenses from forward/spot transactions and interest rate swap (21,851) (49,377)Penalty charges (11,909) (4,787)

Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and SubsidiariesRepo interest and expenses from transactions with bonds (10,876) (25,725)Discount on issued commercial bills (9,607) (4,624)Interest expense - leases (4,973) (6,324)Expenses from sale of shares (3,098) (2,332)Interest expenses on borrowings (777) (2,507)Interests on bank overdrafts (183) (621)Other financial expenses (1,733) (47)(196,081) (220,346)Net financial result (128,096) (92,460)Income from investments in 2009 include 16,808 thousand kuna i.e. CHF 3,476 thousand, incurred in the liquidation process of subsidiary BinaTrading AG, that relate to 95% of retained earnings and net profit of that subsidiary (5% of retained profit and net profit has to be paid to the TaxAuthorities in Switzerland as a withholding tax in the liquidation process).11. INCOME TAX EXPENSETax on profits earned in each country where entities of the Group operate is calculated by applying the effective tax rate to assessed taxable profitsfor the year. Applicable tax rates are as follows:• Croatia - 20% (2009: 20%)• Bosna and Herzegovina - 10% (2009: 10%)• Serbia - 10% (2009: 10%)• Romania - 16% (2009: 16%)Profit distribution is additionally taxable in Bosnia and Herzegovina and Serbia.The reconciliation of the income tax is as follows:2010 2009Current taxes 8,333 31,525Deferred taxes 1,213 (96)Income tax expense 9,546 31,429Adjustments of deferred tax assets are as follows:2010 2009Balance as at 1 January 1,665 1,761Deferred tax assets / Bilokalnik-Drvo d.o.o. 158 -Recognition of deferred tax assets 1,923 (96)Balance as at 31 December 3,746 1,665

74 / 75Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and SubsidiariesDeferred tax asset has arisen from tax non-deductible provisions for jubilee awards and regular retirement benefits and unused vacation days accruals.The reconciliation of the income tax and the profit of the Group is as follows:2010 2009Profit before tax (171,500) 11,580Tax calculated applying domestic tax rates to profits in respective countries (25,662) 8,157The impact of costs and revenues that are not recognized for tax purposes 815 8,083Effect of current year tax loss 34,393 15,189Income tax 9,546 31,429Reconciliation of deferred tax liability is as follows:2010Recognised profit / (loss) in theincome statement2009Recognised profit / (loss) in theincome statementProperty, plant and equipment 3,452 (2,073) 5,525 4,732Other 17,918 1,363 16,555 5,55021,370 (710) 22,080 10,282Deferred tax liability on property, plant and equipment relates largely to Serbian companies that disclose deferred tax liability in line with thelocal accounting practice as an effect of the difference between the carrying amounts of tangible assets in the financial statements and theircorresponding book value for calculation of depreciation for tax purposes at a rate of 10%, being an applicable income tax rate in Serbia.Due to uncertainty of recoverability of transferred tax losses of Group companies, the Group has not recognised deferred tax assets arising fromthose losses as at the balance sheet date. Unrecognised deferred tax assets expire as follows:2010 20092010 - 2062011 2,732 1,3552012 2,689 1,6412013 5,492 1,0772014 17,099 16,2792015 and later 40,745 7,09968,757 27,657

Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and Subsidiaries12. BASIC AND DILUTED (LOSS) PER SHAREHRK per share2010 2009HRK per shareBasic (loss) per shareFrom continuing operations (18.00) (35.74)Total basic (loss) per share (18.00) (35.74)Diluted (loss) per shareFrom continuing operations (19.15) (38.62)Total diluted (loss) per share (19.15) (38.62)Basic (loss) per shareLoss and weighted average number of ordinary shares used in the calculation of basic (loss) per share are as follows:2010 2009(Loss) for the year attributable to equity holders of the parent (170,347) (16,911)(Loss) used in the calculation of total basic (loss) per share (170,347) (16,911)(Loss) used in the calculation of basic (loss) per share from continuing operations (170,347) (16,911)Weighted average number of ordinary shares used for the calculation of basic (loss)per share (all measures)2010 20099,463,780 473,189Diluted (loss) per shareLoss used in the calculation of all diluted (losses) per share measures is the same as the one used for the equivalent basic (loss) per share.The weighted average number of ordinary shares used for the purposes of calculating diluted (loss) per share reconciles to the weighted averagenumber of ordinary shares used in the calculation of basic (loss) per share as follows:2010 2009Weighted average number of ordinary shares used in thecalculation of basic (loss) per share9,463,780 473,189Weighted average number of treasury shares (566,067) (35,335)Weighted average number of ordinary shares used in thecalculation of diluted (loss) per share (all measures)8,897,713 437,854700,000 shares owned by the subsidiary Našicecement d.d. in the period from 1 January to 8 June 2010 and from 20 to 31 December 2010 havebeen included in the calculation of weighted average number of ordinary shares.

76 / 77Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and Subsidiaries13. SEGMENT INFORMATIONThe Management has defined business segments based on thereports that are used for making strategic decisions.The Management views the business from the aspect of geographicalarea and from the aspect of product (business). At the Group level,management is organized in a way that certain business segmentsare organized as management units, regardless of the geographicregion in which they operate. In reaching strategic decisions theManagement considers product aspect as being more importantand accordingly defines reporting segments on that basis.Reporting segments based on the product (business) aspect earnincome from the following:• Cement production,• Brick, tiles and ceramics production,• Concrete production,• Aggregates, lime and concrete elements production,• Construction, and• Other activities that represent a smaller portion of the Group’sactivities (viniculture and wine growing, cattle breeding, transportand sale of cars, catering and restaurant services, etc.)Geographic segments: The Group operates in the Republic ofCroatia and in the neighbouring countries. The headquarters of theGroup and the majority of its activities are done in the Republicof Croatia. Other geographic regions of the Group include Serbia,Bosnia and Herzegovina, Romania and part of business of thecompany GP Put, Bosnia and Herzegovina is being performed inKenya, Pakistan and Uganda.The Management of the Group uses EBITDA for assessing businessresults of operating segments. EBITDA excludes margins onintersegment sales. EBITDA excludes certain other income, cost ofgoods sold (where the sale of merchandize does not represent themain business activity), value adjustments of loans and receivables,reductions for returns of previously value adjusted amounts,penalties, provisions for risks and other expenses and reductionsfor reversed amounts and certain other business expenses. EBITDAalso excludes financial income and expenses, depreciation andamortization, share of associate’s profit and corporate income taxexpense.

Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and Subsidiariesa) Business segments2010 CementBrick, tiles andceramicsAggregates, limeand concreteelementsConcreteConstructionOtheractivitiesEliminationsConsolidatedSegment gross revenue- Group sales 80,133 77,677 21,746 7,725 9,916 113,020 (310,217) -- external sales 298,913 323,008 114,583 157,397 129,590 75,680 - 1,099,171Total sales 379,046 400,685 136,329 165,122 139,506 188,700 (310,217) 1,099,171EBITDA 133,110 54,333 15,477 7,384 (24,407) (47,141) - 138,756Financial income 33,593 22,899 8,185 2,079 2,836 79,639 (81,246) 67,985Financial expenses 42,920 83,477 14,258 9,102 11,038 116,532 (81,246) 196,081Share of profit ofassociate- - - - - 996 1,177 2,173Result before tax 36,406 (85,553) (10,470) (30,665) (51,297) (44,883) 14,962 (171,500)Income tax 8,187 (809) (4) (303) (1,689) 1,172 2,992 9,546Result after tax 28,219 (84,744) (10,466) (30,362) (49,608) (46,055) 11,970 (181,046)Total assets 1,764,001 974,655259,085 268,900 310,190 1,557,494 (2,297,115) 2,837,210Total liabilities 815,686 744,858 169,590 254,418 279,875 1,306,957 (1,278,247) 2,293,137Non-controlling interest - - - - - - 37,180 37,180Net assets without noncontrollinginterests948,315 229,797 89,495 14,482 30,015 250,837 (1,056,048) 506,893

78 / 79Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and Subsidiariesa) Business segments (continued)2010 CementOther informationBrick, tilesand ceramicsAggregates, limeand concreteelementsConcreteConstructionOtheractivitiesEliminationsConsolidatedDepreciation 41,165 56,794 10,562 13,978 10,193 13,517 (6,110) 140,099Purchases of property, plantand equipment17,005 16,090 19,691 10,145 7,555 25,868 - 96,354Non-cash expenses, otherthan depreciation10,801 9,950 4,183 9,833 6,883 4,835 - 46,485Interest income- Group income 21,395 476 464 9 - 35,974 (58,318) -- external income 1,652 543 2,160 650 686 2,843 - 8,534Interest expense- Group income 24,646 12,711 1,249 1,651 6,001 12,060 (58,318) -- external income 14,563 19,888 3,886 2,771 4,751 50,645 - 96,504

Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and Subsidiariesa) Business segments (continued)2009 CementSegment grossrevenueBrick,tiles andceramicsAggregates,lime andconcreteelementsConcreteConstructionOtheractivitiesEliminationsConsolidated- Group sales 109,322 73,030 26,804 16,302 23,092 120,714 (369,264) -- external sales 425,102 256,790 120,641 195,709 207,177 57,152 - 1,262,571Total sales 534,424 329,820 147,445 212,011 230,269 177,866 (369,264) 1,262,571EBITDA 237,770 10,774 24,257 19,228 4,403 (34,087) - 262,345Financial income 35,719 21,172 6,318 3,305 11,339 122,012 (71,979) 127,886Financial expenses 55,914 58,403 11,897 6,607 13,067 137,555 (63,097) 220,346Result before tax 113,619 (106,856) 1,052 (14,836) (1,762) 136 20,227 11,580Income tax 24,227 (17) 348 177 863 280 5,551 31,429Result after tax 89,392 (106,839) 704 (15,013) (2,625) (144) 14,676 (19,849)Total assets 1,633,193 1,008,562 227,493 267,828 284,042 1,464,651 (1,998,283) 2,887,486Total liabilities 712,648 683,643 121,779 230,841 208,376 1,192,359 (1,004,627) 2,145,019Non-controllinginterest- - - - - - 49,284 49,284Net assets withoutnon-controllinginterests920,545 324,919 105,714 36,987 75,666 272,292 (1,042,940) 693,183

80 / 81Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and Subsidiariesa) Business segments (continued)2009 CementOther informationBrick, tilesand ceramicsAggregates,lime andconcreteelementsConcreteConstructionOtheractivitiesEliminationsConsolidatedDepreciation 46,488 51,534 11,032 12,438 10,594 9,709 (8,303) 133,492Purchases of property,plant and equipment31,374 45,152 9,275 42,958 6,333 30,395 - 165,487Non-cash expenses,other thandepreciation12,843 15,625 1,971 10,364 1,353 2,327 - 44,483Interest income- Group income 7,710 1,586 - 38 - 30,070 (39,404) -- external income 11,982 713 2,013 2,505 786 1,986 - 19,985Interest expense- Group income 24,413 7,525 1,191 1,313 2,877 2,085 (39,404) -- external income 15,432 16,819 4,204 3,765 6,770 45,514 - 92,504Operating segments for the year 2009 presented above have been changed compared to the segments presented in the financial statements for the yearended 31 December 2009 in a way that the Cement production segment has been isolated this year, while in the prior year financial statements it wasincluded in the segment Production of aggregates and concrete. Additionally, certain trading companies that were included in the prior year financialstatements in the segment Other activities, have this year been presented within the segment of a product that they trade with.

Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and Subsidiariesb) Geographical segmentsPortion of Group’s activities relate to operations in Croatia, and a portion of the Company’s activities are outside Croatia. A breakdown by geographicalsegment is as follows:IncomeCarrying amountof assets2010 2009Additions toproperty, plantand equipmentand intangibleassetsIncomeCarrying amountof assetsAdditions toproperty, plant andequipment andintangible assetsRepublic of Croatia 1,167,870 4,135,428 58,664 1,435,132 3,909,984 99,102Serbia 331,929 569,278 18,887 272,902 571,638 39,485Bosnia andHerzegovina198,459 428,684 18,657 237,012 404,147 26,900Romania 2,198 934 146 - - -1,700,456 5,134,324 96,354 1,945,046 4,885,769 165,487The segment in Bosnia and Herzegovina consists of entities in Bosnia and Herzegovina, of which GP PUT, in addition to its business and assets in Bosniaand Herzegovina, operates through its business units in Kenya, Pakistan and Uganda:IncomeCarrying amountof assets2010 2009Additions toproperty, plantand equipmentand intangibleassetsIncomeCarrying amountof assetsAdditions toproperty, plant andequipment andintangible assetsKenya 56,981 130,942 12,575 55,989 95,598 276Pakistan 4,388 39,675 - 32,329 40,299 9Uganda 307 1,752 - 4,113 5,396 -Bosnia andHerzegovina25,373 42,039 317 48,534 51,266 5,58187,049 214,408 12,892 140,965 192,559 5,866

82 / 83Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and Subsidiaries14. INTANGIBLE ASSETSPurchase valueIntangible assetsAssets underconstructionTotal intangible assetsBalance as at 31 December 2008 9,629 3,228 12,857Correction of opening balance 49 - 49Corrected balance as at 1 January 2009 9,678 3,228 12,906Nexe d.o.o. Novi Sad entering intoconsolidation28 - 28Additions 29 5,336 5,365Transfers 2,017 (2,017) -Disposals (186) - (186)Foreign exchange differences (533) (6) (539)Balance as at 31 December 2009 11,033 6,541 17,574Additions 10 5,296 5,306Transfers 5,777 (5,777) -Bilokalnik-Drvo d.o.o. entering intoconsolidation1,239 407 1,646Disposals (9) - (9)Foreign exchange differences (139) (5) (144)Balance as at 31 December 2010 17,911 6,462 24,373Accumulated amortisationBalance as at 31 December 2008 2,468 - 2,468Correction of opening balance 49 - 49Corrected balance as at 1 January 2009 2,517 - 2,517Nexe d.o.o. Novi Sad entering intoconsolidation4 - 4Amortization for the year 1,064 - 1,064Disposals (113) - (113)Foreign exchange differences (10) - (10)Balance as at 31 December 2009 3,462 - 3,462Amortization for the year 1,199 - 1,199Bilokalnik-Drvo d.o.o. entering intoconsolidation1,208 - 1,208Disposals (9) - (9)Foreign exchange differences 274 - 274Balance as at 31 December 2010 6,134 - 6,134Carrying amountBalance as at 31 December 2009 7,571 6,541 14,112Balance as at 31 December 2010 11,777 6,462 18,239Intangible assets largely relate to investment in Navision business information system.

Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and Subsidiaries15. PROPERTY, PLANT AND EQUIPMENTPurchase valueBalance as at1 January 2010Corrections of openingbalanceCorrected balance asat 1 January 2010LandBuildingsPlant andmachineryOtherequipmentAdvancepaymentsOtherassetsBiologicalassetsAssets underconstructionTotal fixedassets135,456 1,207,337 1,350,992 214,177 2,406 1,823 10,650 169,259 3,092,100(90) 392 639 392 - - - 90 1,423135,366 1,207,729 1,351,631 214,569 2,406 1,823 10,650 169,349 3,093,523Additions 1,044 317 1,793 890 1,563 161 1,441 83,839 91,048Transfers 4,611 85,593 39,388 9,055 - 51 1,217 (139,915) -Bilokalnik-Drvod.o.o. entering intoconsolidation38,247 51,530 45,504 5,687 - - - 5,846 146,814Disposals (54) (347) (12,275) (4,707) (2,093) (9) (1,584) (4,091) (25,160)Foreign exchangedifferencesBalance as at31 December 2010(600) (10,846) (21,830) 108 (108) 14 8 (1,243) (34,497)178,614 1,333,976 1,404,211 225,602 1,768 2,040 11,732 113,785 3,271,728AccumulateddepreciationBalance as at1 January 2010Corrections of openingbalanceCorrected balance asat 1 January 2010Depreciation for theyearBilokalnik-Drvod.o.o. entering intoconsolidation- 638,872 760,545 145,437 - 688 322 - 1,545,864- 399 476 548 - - - - 1,423- 639,271 761,021 145,985 - 688 322 - 1,547,287- 43,509 76,241 18,938 - 76 136 - 138,900- 27,819 20,045 4,742 - - - - 52,606Disposals - (117) (10,565) (4,285) - (5) - - (14,972)Foreign exchangedifferencesBalance as at31 December 2010- (2,721) (6,544) 418 - 10 1 - (8,836)- 707,761 840,198 165,798 - 769 459 - 1,714,985Carrying amountBalance as at31 December 2009Balance as at31 December 2010135,366 568,458 590,610 68,584 2,406 1,135 10,328 169,349 1,546,236178,614 626,215 564,013 59,804 1,768 1,271 11,273 113,785 1,556,743

84 / 85Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and SubsidiariesLandBuildingsPlant andmachineryOtherequipmentAdvancepaymentsOtherassetsBiologicalassetsAssets underconstructionTotal fixedassetsPurchase valueBalance as at1 January 2009Corrections ofopening balanceCorrected balanceas at 1 January2009130,402 1,143,123 1,283,796 176,536 10,581 2,373 8,992 309,317 3,065,120(8) 3,145 (66,458) 33,530 1,294 (718) - (9) (29,224)130,394 1,146,268 1,217,338 210,066 11,875 1,655 8,992 309,308 3,035,896Additions 7,303 10,738 5,730 7,902 2,248 130 1,428 124,969 160,448Transfers 3,311 77,827 174,744 6,562 - 69 1,383 (263,896) -Nexe doo NoviSad entering intoconsolidationEkonex d.o.o.entering intoconsolidation- - 179 - - - - - 179- - - 957 - - - - 957Revaluation (2,969) (6,535) - - - - - - (9,504)Disposals (963) (9,165) (13,640) (9,764) (11,553) (19) (1,153) - (46,257)Foreign exchangedifferencesBalance as at31 December 2009(1,620) (11,796) (33,359) (1,546) (164) (12) - (1,122) (49,619)135,456 1,207,337 1,350,992 214,177 2,406 1,823 10,650 169,259 3,092,100AccumulateddepreciationBalance as at1 January 2009Corrections ofopening balanceCorrected balanceas at 1 January 2009Depreciation for theyearNexe doo NoviSad entering intoconsolidationEkonex d.o.o.entering intoconsolidation- 596,361 767,438 118,300 - 7 186 - 1,482,292- 3,002 (52,148) 19,296 - 626 - - (29,224)- 599,363 715,290 137,596 - 633 186 - 1,453,068- 42,727 70,937 18,553 - 75 136 - 132,428- - 17 - - - - - 17- - - 24 - - - - 24Disposals - (438) (12,474) (8,756) - (26) - - (21,694)Foreign exchangedifferencesBalance as at31 December 2009Carrying amountBalance as at31 December 2008Balance as at31 December 2009- (2,780) (13,225) (1,980) - 6 - - (17,979)- 638,872 760,545 145,437 - 688 322 - 1,545,864130,394 546,905 502,048 72,470 11,875 1,022 8,806 309,308 1,582,828135,456 568,465 590,447 68,740 2,406 1,135 10,328 169,259 1,546,236

Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and SubsidiariesCarrying amount of assets under financial lease as at 31 December2010 amounts to 99,264 thousand kuna (31 December 2009: 85,317thousand kuna).Total purchase cost of tangible assets that are still in use and with thezero net book value as at 31 December 2010 amounts to 851,815thousand kuna (31 December 2009: 808,925 thousand kuna).Carrying amount of assets under mortgage as at 31 December 2010amounts to 952,514 thousand kuna (31 December 2009: 938,294thousand kuna).As at 31 December 2010 the Group has 25.01 million kuna ofcontracted investments for which works have not yet been performed.They largely relate to the investment in clinker refrigerator, constructionof the industrial railway, lime furnace and concrete production plant(31 December 2009: 28.24 million kuna).During 2010 the Group has capitalized bank interests in the amount of902 thousand kuna (2009: 5,054 thousand kuna).16. FINANCIAL ASSETS AVAILABLE FORSALEEquity investments2010 2009Equity securities 80,195 82,162Bonds 5,283 92,281Other financial assets 877 78686,355 175,229Equity investments are classified as available for sale and measuredat fair value if the fair value information is available on the market.Otherwise, they are carried at cost less impairment losses.Shares in the amount of 5 million kuna as at 31 December 2010 havebeen pledged in favour of Bank Alpinum Aktiengesellschaft, Vaduz,Liechtenstein according to loans given to Našicecement d.d. Našice andMr. Ergović.17. INVESTMENTS IN SUBSIDARIES2010 2009% Amount % AmountZ.a.o. Nexe Rus, Dobrjatino 99 931 99 931Laurus Consalting AG,Switzerland100 439 100 439Nekse d.o.o., Lendava 100 53 100 53Nexe kamen d.o.o., Trenkovo 100 20 100 20NC Betoni d.o.o., Zagreb 100 20 100 20Kraljev vrt d.o.o., Perušić 77.62 20 77.62 20Nexe beton d.o.o., BanjaLuka100 18 100 18Nexe gradnja doo Novi Sad 100 4 - -Bina Trading AG, Switzerland - - 100 491Bilokalnik-Drvo d.o.o.Koprivnica- - 100 -1,505 1,992Bilokalnik-Drvo d.o.o. has been consolidated in the financial statementsfor the year ended 31 December 2010. Bilokalnik-Drvo d.o.o. has notbeen consolidated in 2009 as it was classified as asset held for sale.18. INVESTMENT IN ASSOCIATEIn 2008 the Company acquired 390,804 shares of the companyIngram d.d. Srebrenik, Bosnia and Herzegovina. In 2010 the Companyadditionally acquired 721 shares having totally 28.05% share in thatcompany. The investment in the associate as at 31 December 2010amounts to 44,065 thousand kuna (31 December 2009: 42,819thousand kuna).Shares of Ingram d.d. Srebrenik, Bosnia and Herzegovina have beenpledged in favour of Bank Alpinum Aktiengesellschaft, Vaduz,Liechtenstein according to loans given to Našicecement d.d. Našice andMr. Ergović.Bonds mature in 2011 and 2017 and have interest rates that range from4.75% to 12%.Part of the disclosed bonds as at 31 December 2009 in the amountof 77,611 thousand kuna has been used as a collateral in repotransactions (note 31), out of which 10,040 thousand kuna relates tobonds disclosed within current financial assets and 67,571 thousandkuna to bonds disclosed within the long-term financial assets.Bonds owned by the Group as at 31 December 2010 have not beenused as collateral in repo transactions.

86 / 87Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and Subsidiaries19. RECEIVABLES FOR GIVEN LOANSAND DEPOSITS2010 2009Housing loans 6,410 8,734Loans given to non-relatedcompanies4,051 4,416Guarantees 1,495 589Loans given to employees 202 28Other long-term loans - 325Value adjustment of loanreceivablesCurrent portion of long-termloans(1,860) (2,507)(2,900) (1,907)7,398 9,678Loans given to non-related companies relate to loans given tocompanies Vibrobeton d.d. Vinkovci, Autoprijevoz Šuker Vinkovci andVulkanizer Zdeno Vinkovci.A loan given to Vibrobeton d.d. in the amount of 5,000 thousand kunahas been granted in 2009. This loan is due in 2012 and bears an annualinterest of 12%. The loan is secured by the mortgage on real estates.Current portion of long-term loans relates largely to this loan.A loan given to Autoprijevoz Šuker in the amount of 775 thousandkuna has been granted in 2010. This loan is due in 2015 and bears anannual interest of 8%. The loan is secured by the blank promissorynote.A loan given to Vulkanizer Zdeno in the amount of 270 thousand kunahas been granted in 2010. This loan is due in 2013 and bears an annualinterest of 8%. The loan is secured by the blank promissory note.Housing loans largely relate to loans granted by the Group entities inSerbia.20. GOODWILLGoodwill in the amount of 2,966 thousand kuna is a result of acquisitionof a majority stake in the company Betonmix d.o.o. in the year 2006(Betonmix d.o.o. has been subsequently merged with Nexe beton d.o.o.Našice) and goodwill in the amount of 11,142 thousand kuna is a resultof acquisition of company Nexe kamen d.o.o. Doboj in the year 2008.21. INVENTORIES2010 2009Finished products 162,416 127,754Raw materials and consumables 160,262 140,986Work in progress and unfinishedproducts45,616 51,319Biological assets 20,363 17,524Merchandise 12,011 9,569Advances 3,308 2,652403,976 349,804In 2010 total costs of realized own products amounted to 735,980thousand kuna (2009: 876,891 thousand kuna).22. TRADE AND OTHER RECEIVABLES2010 2009Trade receivables 520,987 515,392Doubtful receivables 87,236 45,813Foreign exchange differences 25 209Allowance for doubtful receivables (122,543) (80,375)485,705 481,03919.1. Changes in the value adjustment of loan receivableswere as follows:2010 2009Balance as at 1 January 2,507 3,287Discounting according to IAS 39 (443) (522)Foreign exchange differences (204) (258)Balance as at 31 December 1,860 2,507Prepayments 15,098 13,375Factoring receivables 14,291 -Receivables from the State 13,283 19,949VAT receivables 10,601 11,001Income tax receivables 4,822 584Other current receivables 23,821 23,459Allowance for other current receivables - (616)81,916 67,752Total receivables 567,621 548,791The average receivables collection period in 2010 was 155 days (2009:140 days). Interest is not being calculated until the due date and

Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and Subsidiariessubsequently it is calculated as 17% p.a. on the remaining amount ofreceivable.Before accepting any new customer, the Group uses internal creditscoring system to assess the potential customer’s credit quality anddefines credit limits for customers. In determining the recoverabilityof a trade receivable, the Group considers any change in the creditquality of the trade receivable from the date a receivable was initiallyrecognised up to the reporting date. The concentration of credit risk islimited due to the fact that the customer base is large and unrelated.The net carrying value of trade and other receivables is considered areasonable approximation of their fair value. For all receivables indicatorsof impairment have been considered and required allowances (valueadjustments) have been done.Allowances recognized represent the difference between the reportedbook value of trade receivables and current value of expected proceeds.22.1. Changes of allowance for doubtful receivables were asfollows:2010 2009Balance as at 1 January 80,375 70,781Correction of opening balance 4,964 -Bilokalnik-Drvo d.o.o. enteringinto consolidation12,368 -Allowances for potential losses 40,799 32,476Collected receivables previouslyallowed for(12,177) (18,970)Amounts written off (3,386) (3,276)Foreign exchange differences (400) (636)Balance as at 31 December (122,543) 80,37522.3. Changes of allowance for others receivables were asfollows:2010 2009Balance as at 1 January 616 -Allowances for potential losses - 616Collected receivables previously allowedfor(616) -Balance as at 31 December - 61623. LOAN RECEIVABLES AND OTHERFINANCIAL ASSETS2010 2009Loans 24,896 102,730Bills of exchange 17,837 8,869Deposits and guarantees 9,237 8,360Current portion of long-term loanreceivables2,900 1,907Bonds 1,220 12,181Other 119 1,644Investments in cash funds - 1,015Allowance for received bills of exchange (5,237) (5,221)Allowance for loan receivables (2,523) (2,874)Loans are given to the following companies:48,449 128,6112010 200922.2. Trade receivables are due as follows:2010 2009One to four months 115,574 123,013Four to six months 226,674 237,013Six to twelve months 33,810 42,774More than twelve months 59,622 46,445One to four months 85,307 66,147520,987 515,392Quaestus partneri d.o.o. 19,114 22,077Novalić d.d. 707 707NK Zoljan 365 351Bilokalnik-Drvo d.o.o. - 75,548Hospitalija trgovina d.o.o. - 1,496Other loans 4,710 2,55124,896 102,730Loans disclosed within current financial assets include loan principal andinterest receivables for the respective loan.As at 31 December 2009 the largest portion of the loans grantedrelated to a loan given to Bilokalnik-Drvo d.o.o. by Našicecement d.d.in the amount of 74,485 thousand kuna including interests. This loanhas been granted in the year 2006, had an interest rate of 6% that has

88 / 89Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and Subsidiariesbeen increased to 9% through the annex in 2010. The loan maturesin 2011. The loan is secured by 40 blank promissory notes. Bilokalnik-Drvo d.o.o. is consolidated in 2010 (in 2009 has been classified asasset held for sale).As at 31 December 2010 the Company has receivable for a loan givento Quaestus partneri d.o.o. in October 2009. The loan given was inthe connection to the bond of company Hospitalija Trgovina that wassold in 2009 before its maturity to the issuer. The Agreement on debttakeover between the Company, Hospitalija Trgovina and QuaestusPartneri was signed related to that bond sale transaction. Accordingto that Agreement, Quaestus Partneri are taking over 2,384 thousandeuro of the debt that will be settled on 30 September 2010 (as at 31December 2009: 17,421 thousand kuna, the remaining amount of thereceivable as at 31 December 2009 related to interests and a loan thatwas repaid in 2010) that is prolonged until 30 September 2011 throughthe Annex 1 from 2010. According to another contract on settlementof the above debt, Quaestus partneri are obliged to pay interest of10% p.a. and co-debtors to the agreement are Quaestus Invest d.o.o.i Quaestus Private Equity d.o.o. Loan is insured by 6 blank promissorynotes of Quaestus partneri d.o.o., Quaestus Invest d.o.o. i QuaestusPrivate Equity in the amount of 1 million kuna each (total 18 millionkuna).Bonds include the following:2010 2009Bonds 481 10,040Acquired interests on bonds 739 2,1411,220 12,18123.2. Changes in the allowances for bills of exchange were asfollows:2010 2009Balance as at 1 January 5,221 -New allowances 609 5,221Collected loans previouslyallowed for(593) -Balance as at 31 December 5,237 5,22124. CASH AND CASH EQUIVALENTS2010 2009Short-term deposits 23,633 -Cash with the bank 11,994 12,063Foreign currency accounts 6,219 4,321Cash on hand 286 24542,132 16,629Short-term deposits relate to deposits of Jelen Do a.d. with BancaIntesa a.d. Beograd for a period of 120 days and an interest of 2.8%annually.23.1. Changes in the allowances for loan receivables were asfollows:25. SHARE CAPITAL2010 2009Balance as at 1 January 2,874 1,305Collected loans previously allowed for - (599)New allowances - 2,168Amounts written off (351) -Balance as at 31 December 2,523 2,874Share capital represents own permanent sources of funds to financethe operations of the Company and as at 31 December 2009 it wasdivided into 473,189 ordinary shares with the nominal value of 200kuna each. The change of the Company’s Statute, through whichshare split has been effective, has been registered according to theResolution of the Commercial court in Osijek dated 27 May 2010. Eachshare of the Company with the nominal value of 200 kuna has beensplit to 20 shares with the nominal value of 10 kuna each. Number ofshares has been changed from 473,189 to 9,463,780.

Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and SubsidiariesOwnership structure as at 31 December 2010 is as follows:ShareholderNumberof sharesOwnership%Movements of revaluation reserves related to fair value of financialinstruments were as follows:2010 2009Ivan Ergović 8,523,740 90.06Našicecement d.d. Našice 700,000 7.40Treasury shares 240,040 2.549,463,780 100.00Ownership structure as at 31 December 2009 was as follows:Balance as at 1 January (882) (13,075)Fair value adjustment of shares 10,086 7,723Fair value adjustment of bonds 4,011 4,470Bilokalnik drvo d.o.o. entering intoconsolidation124 -Movements in the year 14,221 12,193Balance as at 31 December 13,339 (882)ShareholderNumberof sharesOwnership%Ivan Ergović 426,187 90.06Našicecement d.d. Našice 35,000 7.40Treasury shares 12,002 2.54473,189 100.00Changes of the ownership structure have been described in thenote 32. The last ownership change described in that note has beenregistered with the Central Depository and Clearing Company Inc. inJanuary 2011.In 2009 the Company has formed reserves for treasury shares inaccordance with the Company Law. According to the decision of theGeneral Assembly, 2009 profit in the amount of 6,746 thousand kunahas been transferred into legal reserves in the amount of 337 thousandkuna and into retained earnings in the amount of 6,409 thousandkuna.840,200 shares of the Company owned by Mr. Ergović are pledged infavour of Zagrebačka bank d.d.27. NON-CONTROLLING INTERESTS2010 2009Balance as at 1 January 49,284 54,626Acquisitions - (173)Share in the net loss of subsidiaries (10,699) (2,938)Other (1,405) (2,231)Balance as at 31 December 37,180 49,28428. LONG-TERM LOANS, LEASES ANDBONDS2010 200926. RESERVES2010 2009Bonds 582,862 566,385Long-term bank borrowings 521,141 446,171Finance leases 74,784 89,119Other long-term borrowings 2,810 3,7811,181,597 1,105,456Fair value of financial instruments 13,339 (882)13,339 (882)Current portion of long-term borrowings (743,359) (129,015)438,238 976,441Statutory reserves 34,020 23,025Other reserves 52,051 62,69886,071 85,734Balance as at 31 December 99,410 84,852

90 / 91Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and SubsidiariesBorrowings, bonds and leases are payable as follows:2010 2009Within 1 year 743,359 129,015In the second year 155,500 663,647From 3 to 5 years 220,769 233,791After 5 years 61,969 79,0031,181,597 1,105,456Less: Amounts due within 12 months (743,359) (129,015)Amounts due after 12 months 438,238 976,441Disclosed liabilities include also the corresponding interest liabilities.28.3. Finance leasesFinance leases relate to amounts payable for manufacturing equipmentunder a lease period of five and seven years. Companies have theoption to purchase the equipment upon the expiry of the lease term,at the amount specified in the underlying lease agreement. Companieshave the obligation to insure the assets they hold under lease. Effectiveinterest rates for leases range from 4.45% - 8.26%; 3/6 M EURIBOR+ 1.45% - 8.09% (2009: 4.9% - 8.26%; 3/6 M EURIBOR + 1.45% -6.4%).MinimumleasepaymentsPresent value ofminimum leasepayments2010 2009 2010 200928.1. Bonds issuedOn 14 June 2006 Nexe Grupa issued corporate bonds with a guaranteeof Našicecement d.d. The maturity of bonds is on 14 June 2011. Theyield on the bonds is payable on a semi-annual basis and the annualcoupon rate is 5.500%. By issuing these bonds, the principals andinterests of the existing loans were repaid. The total amount inCroatian kunas with respect to the bond subscription was paid at theissue price in cash less appropriate bank charges in accordance with thearrangement agreement and the offset of principal and interest repaidin respect of these loans.In the year 2010 bonds of Nexe Grupa d.d., with a nominal value inthe amount of 49.5 million kuna and a fair value in the amount of 42.3million kuna have been redeemed (in 2009: 38.9 million kuna bondswith the fair value of 34 million kuna). During the year redeemed ownbonds with a nominal value in the amount of 64.8 million kuna thatwere recognized at acquisition cost in the amount of 56.9 million kunahave been sold realizing a gain of 6.9 million kuna (in 2009: bonds witha nominal value of 42 million kuna that were recognized at acquisitioncost in the amount of 41 million kuna realizing a loss of 4,992 thousandkuna).As at 31 December 2010 the whole amount of liability for issued bondsin the amount of 580,828 thousand kuna and interests in the amountof 2,034 thousand kuna has been disclosed within short-term liabilities.Up to one year 35,691 32,649 32,428 29,790From 1 to 5 years 44,439 63,732 42,356 59,329Less: future financecharges 5,346 7,262Present value ofminimum leasepayments80,130 96,381 74,784 89,119- -74,784 89,119 74,784 89,119Current portion - - 32,428 29,790Amounts due after12 months29. LONG-TERM PROVISIONS- - 42,356 59,3292010 2009Provisions for retirement and jubilees 15,622 14,841Litigation provision 5,569 4,543Provisions for good performance guarantees 400 500Other provisions 928 81822,519 20,70228.2. Long-term bank borrowingsInterests on long-term bank borrowings range from 2% - 16%; 1/3/6M EURIBOR + 1.75% - 7%; TB of Ministry of Finance on 91 day +2.15% - 3.5% (2009: 2% - 7.2%; 1/3/6 M EURIBOR + 1.75% - 6.25%,TB of Ministry of Finance on 91 day + 2.15%). Mortgages and pledgeson real estates and equipment are used as collaterals for those loans.

Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and SubsidiariesProvisionsforretirementandjubileesLitigationprovisionProvisionsforgoodperformanceguaranteesOtherprovisionsTotalAccrued expenses for unusedvacation days757 792Liabilities for dividends - 962Other short-term liabilities 7,178 9,098199,778 132,446Total 443,079 321,892Balance as at1 JanuaryBilokalnik drvod.o.o. enteringinto consolidationAdditionalprovisionsUnused amountsreversed14,841 4,543 500 818 20,702692 246 - - 9383,243 1,784 - 880 5,907(1,865) (797) - (993) (3,655)Used during year (530) (207) (100) (104) (941)Foreign exchangedifferencesBalance as at31 December(759) - - 327 (432)15,622 5,569 400 928 22,519Major part of the provision for losses from court cases relates to suedprincipal and penalty interests in Nexe grupa d.d., Slavonija IGM d.o.o.,Našička gradnja d.o.o. and Nexe beton d.o.o. Našice according to thelawyers estimation of potential court cases losses.The average credit period on purchases and other payables is 118 days(2009: 135 days). The Group has financial risk management policiesin place to ensure that all payables are paid within the contractedtimeframe.Liabilities towards Mr. Ergović for shares of Nexe grupa d.d. relate toliabilities of Našicecement d.d. according to Nexe grupa share purchaseagreement described in more detail in the note 32.30. a) Operating lease liabilitiesThe Group’s liabilities related to operating leases are as follows:2010 2009Within one year 9,980 9,355From two to five years 16,729 22,111More than five years - 3626,709 31,50230. TRADE AND OTHER PAYABLES2010 2009Trade accounts payable 241,713 187,645Liabilities for unbilled goods andservices1,659 1,552Foreign exchange differences (71) 249Liabilities towards Mr. Ergovićfor shares in Nexe grupa d.d.243,301 189,44687,591 71,358Liabilities for advances received 62,890 17,217Liabilities for taxes andcontributions23,790 17,490Liabilities to employees 14,038 14,743Income tax liability 2,679 786Liabilities for unpaidcommercials bills855 -31. SHORT-TERM BORROWINGS ANDCURRENT PORTION OF LONG-TERMBORROWINGSCommercial bills and short-term loans2010 2009Bank borrowings 337,017 353,606Repo arrangements 118,527 185,659Liabilities for issued commercial bills 110,033 101,878Short-term loans from other companiesand related parties (note 32)43,250 20,949608,827 662,092Current portion of long-term borrowings 743,359 129,0151,352,186 791,107Short-term borrowings include principal and corresponding interestliability for the respective loan.

92 / 93Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and Subsidiaries31.1. Short-term bank borrowingsInterests on short-term bank borrowings range from 4% - 16%;1/3/6 M EURIBOR + 2% - 8%; TB of Ministry of Finance on 91 day +3% - 4.75% (2009: 3% - 6%; 1/3/6 M EURIBOR + 3% - 8%). Bills ofexchange, promissory notes, mortgages on real estates and supportletters are used as collaterals for those loans.31.2. Repo arrangements96.87%. Receipts from the issue of this tranche have been partly usedto repay the second tranche upon its maturity. The remaining amountof the due second tranche was closed with the new subscriptions ofdescribed addition to the third tranche by the existing owners of thesecond tranche, without the cash outflow.In September 2010 the Company redeemed 380,000 commercial billswith the nominal value of 1 euro from the company Auctor d.o.o. at aprice of 85.12% (amounted to 2,355 thousand HRK at the date of thepurchase contract).Liabilities for repo agreements relate to repo loans of Zagrebačkabanka d.d., Hypo Alpe Adria Bank d.d. and Quaestus Nekretnined.d. in the amount of 117,500 thousand kuna (31 December 2009:185,627 thousand kuna) and interests on repo loans in the amount of1,027 thousand kuna (31 December 2009: 32 thousand kuna). Owntreasury bonds have been used as collateral in above described repoagreements (in 2009 bonds disclosed within financial assets (note 16)were also used as collaterals).Liabilities for repo agreements were in the financial statements forthe year ended 31 December 2009 disclosed within Other short-termliabilities. In these financial statements comparative amounts havebeen reclassified so that presented information for both years arecomparable.31.3. Liabilities for issued commercial billsIn 2009 the Company initiated a short-term financing program throughissuing commercial bills. The program amounted to 400 million kunawith the single tranches being denominated in HRK or EUR andwith the 5 year maximum program period beginning from the dateof the first tranche being issued. Agent, Arranger and Dealer of thecommercial bill issue is Raiffeisenbank Austria d.d. Našicecement d.d. isa guarantor for the issued commercial bills.Total of 10,150,000 commercial bills with the nominal value of 1 eurowas issued in the first tranche on 28 April 2009. This tranche was dueon 27 April 2010. The purchase price was 91.18%, yield is 9.7% andbuy-out price is 100%. First tranche was repaid on 26 April 2010.Total of 4,500,000 commercial bills with the nominal value of 1 eurowas issued in the second tranche on 8 December 2009. This tranchewas due on 7 December 2010. The purchase price was 91.14%, yield is9.75% and buy-out price is 100%.Total of 11,200,000 commercial bills with the nominal value of 1 eurowas issued in the third tranche on 23 April 2010. This tranche is dueon 25 April 2011. The purchase price was 91.85%. Receipts from theissue of this tranche have been used to repay the first tranche uponits maturity.On 3 December 2010 the Company issued 4,500,000 commercial billswith the nominal value of 1 euro as an increase of the issued thirdtranche. Integral total issue of the third tranche after this amounts to15,700,000 euro and is due on 25 April 2011. The purchase price was

Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and Subsidiaries32. RELATED PARTY TRANSACTIONSRelated party transactions were as follows:31 December 2009Operating activitiesReceivables Liabilities Income ExpensesBilokalnik-Drvo d.o.o. 3,551 111 1,801 2,485Financing activitiesReceivables Liabilities Income ExpensesBilokalnik-Drvo d.o.o. 75,548 - 3,770 -Liability towards Mr. Ivan Ergović in the total amount of 1,800 thousandeuro with an interest rate of 4% p.a. increased for capital income taxand surtax relate to a short-term revolving loan given to the GroupMarch 2010. As at 31 December 2010 the liability towards Mr. IvanErgović according to this loan amounts to 3,977 thousand kuna (note31).Liability towards Mr. Ergović for shares in Nexe grupa d.d. in theamount of 87,591 thousand kuna relate to liability of Našicecementd.d. according to Nexe grupa share purchase agreement (note 30). In2009 Našicecement d.d. purchased 700,000 shares of Nexe grupa d.d.from Mr. Ivan Ergović (7.4% of share capital after the stock split). During2010 Mr. Ivan Ergović bought the shares back from Našicecement d.d.and sold them again to Našicecement d.d. in December 2010. In allabove described transactions the price of one share was 125 kuna.As at 31 December 2010 receivables of Našička gradnja d.o.o. from Mr.Ivan Ergović amounts to 81 thousand kuna. Receivables are based onthe real estate construction contract from 2007 for the total amount of3,382 thousand kuna increased for VAT.33. MANAGEMENT REMUNERATIONIn 2010 12,307 thousand kuna gross salary was paid to managementof the Group (2009: 12,355 thousand kuna).able to continue as a going concern while maximising the return tostakeholders through the optimisation of the debt and equity balance.The capital structure of the Group consists of debt which includesissued bonds, repo agreements and loan borrowings disclosed innotes 28 and 31, cash and cash equivalents and equity attributable toequity holders, comprising issued capital, legal and other reserves andretained earnings.34.1.1. Gearing ratioManagement reviews capital structure on quarterly basis. As part ofthis review, the Management considers the cost of capital and the risksassociated with each class of capital. The gearing ratio at the year-endwas as follows:2010 2009Debt 1,790,424 1,767,548Cash and cash equivalents (42,132) (16,629)Net debt 1,748,292 1,750,919Equity 506,893 693,183Net debt to equity ratio 3.45 2.5334. FINANCIAL INSTRUMENTS34.1. Capital risk managementThe Group manages its capital to ensure that the Group will be34.2. Significant accounting policiesDetails of the significant accounting policies and methods adopted,including the criteria for recognition, the basis of measurement andthe basis on which income and expenses are recognised, in respect ofeach class of financial assets, financial liability and equity instrument aredisclosed in note 2 to the financial statements.

94 / 95Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and Subsidiaries34.3. Categories of financial instruments2010 2009Financial assetsFinancial assets available for sale 86,355 175,229Loans and receivables (including cash and cash equivalents) 693,996 733,259780,351 908,488Financial liabilitiesAmortised cost 2,249,248 2,102,2372,249,248 2,102,237Fair value of financial assets and liabilitiesFair value of financial assets and liabilities, except for long-termborrowings, approximates to their carrying values. Fair values of longtermborrowings amount to 413,282 thousand kuna.The Company applied the following methods and assumptions duringthe estimation of fair value of financial instruments:Receivables and deposits at banksFor assets that mature within 3 months, carrying value is similar tothe fair value due to shortness of these instruments. For longer-termassets, contracted interest rates do not defer significantly from currentmarket interest rates, and due to that their fair value is similar to theircarrying value.Bank loan liabilitiesFair value of short-term liabilities is similar to their carrying value due toshortness of these instruments. The Management Board believes thattheir fair value is not significantly different from their carrying value.Other financial instrumentsFinancial instruments which are not valued at fair value are tradeaccounts receivable, other receivables, trade accounts payable andother payables. Historic carrying value of assets and liabilities, includingprovisions, which are in accordance with the usual business conditions,is similar to their fair value.The following table presents financial assets measured at fair value inthe statement of financial position in accordance with the fair valuehierarchy (the Group does not have financial liabilities classified asLiabilities at fair value through profit and loss). This hierarchy groupsfinancial assets into three levels based on the significance of inputsused in measuring the fair value of the financial assets. The fair valuehierarchy has the following levels:• Level 1: quoted prices on active markets for identical assets• Level 2: inputs, other than quoted prices included within Level 1, thatare observable for the assets either directly (i.e. as prices) or indirectly(i.e. derived from prices)• Level 3: inputs for the assets that are not based on observable marketdata.The level within which the financial asset is classified is determined basedon the lowest level of significant input to the fair value measurement.Financial assets measured at fair value in the Statement of FinancialPosition are grouped into the fair value hierarchy as follows:31 December 2010Level 1 Level 2 Level 3 TotalAssets - - -Long-term financialassets (note 16)78,803 - - 78,803Long-term financialassets (note 16) - 7,552 - 7,552Short-termfinancial assets(note 23) 1,220 - - 1,220Total 80,023 7,552 - 87,575Fair values of financial assets have been determined as follows:• the fair value of financial assets with standard terms and conditionsand traded on active liquid markets is determined with reference toquote market price;• the fair value of other financial assets (excluding derivative instruments)is determined in accordance with generally accepted pricing modelsbased on discounted cash flow analysis using prices for observablecurrent market transactions and dealer quotes for similar instruments;• the fair value of derivative instruments is calculated using quotedprices. Where such prices are not available, use is made of discountedcash flow analysis using the applicable yield curve for the durationof the instruments for non-optional derivatives, and option pricingmodels for optional derivatives; and• the fair value of finance guarantees has been determined using optionmodel where the main assumption is a discount assessed by thecounterparties based on the market information and amount of losscaused by a discount given.

96 / 97Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and Subsidiaries34.8. Credit risk managementCredit risk refers to the risk that counterparty will default on itscontractual obligations resulting in financial loss to the Group.The Group has adopted a policy of only dealing with creditworthycounterparties and obtaining sufficient collateral, where appropriate,as a means of mitigating the risk of financial loss from defaults. TheGroup’s exposure and the credit ratings of its counterparties arecontinuously monitored and the aggregate value of transactionsconcluded is spread amongst approved counterparties. Credit exposureis controlled by counterparty limits that are reviewed and approved bythe risk management committee annually.Trade receivables, net, consist of a large number of customers spreadacross diverse industries and geographical areas.The Group does not have any significant credit risk exposure to anysingle counterparty or any group of counterparties having similarcharacteristics. The Group defines counterparties as having similarcharacteristics if they are related entities.34.9. Liquidity risk managementUltimate responsibility for liquidity risk management rests withthe Management Board which has built an appropriate liquidityrisk management framework for the management of the Group’sshort, medium and long-term funding and liquidity managementrequirements. The Group manages liquidity risk by maintainingadequate reserves, banking facilities and other sources of financing, bycontinuously monitoring forecast and actual cash flows and matchingthe maturity profiles of financial assets and liabilities.34.9.1. Liquidity and interest risk tablesThe following table details the Group’s expected maturity for its nonderivativefinancial assets. The table below has been drawn up basedon the undiscounted cash flows of the financial assets based on theearliest date on which the Group can demand payment.The carrying amount of financial assets recorded in the financialstatements, which is net of impairment losses, represents the Group’smaximum exposure to credit risk without taking account of the valueof any collateral obtained.Maturity of non-derivative financial assetsWeightedaverageeffectiveinterest rateLess than1 month1 to 3 months3 to12months1 to 5years 5 + years Total2010Non-interestbearingVariable interestrate instruments% HRK HRK HRK HRK HRK HRK1,321,385 112,888 5,597 9,023 385 1,449,278- - - - - -Fixed interestrate instruments 8.91 4,963 824 25,359 1,315 - 32,4612009Non-interestbearingVariable interestrate instruments1,326,348 113,712 30,956 10,338 385 1,481,739680,573 307 1,680 1,518 1,913 685,9911 1 169 - - 171Fixed interestrate instruments 6 1,311 40,228 32,248 91,883 33,563 199,233681,885 40,536 34,097 93,401 35,476 885,395

Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and SubsidiariesThe following table details the Group’s remaining contractual maturityfor its non-derivative financial liabilities. The table has been drawn upbased on the undiscounted cash flows of financial liabilities based onthe earliest date on which the Group can be required to make payment.Maturity of non-derivative financial liabilities2010Non-interestbearingVariable interestrate instrumentsWeightedaverageeffectiveinterest rateLess than1 month1 to 3 months3 to12months1 to 5years 5 + years Total% HRK HRK HRK HRK HRK HRK262,751 82,827 98,687 27,501 - 471,7664.89 43,513 178,223 256,427 314,115 20,924 813,202Fixed interestrate instruments 6.46 10,999 16,329 893,740 131,255 21,778 1,074,101317,263 277,379 1,248,854 472,871 42,702 2,359,0692009Non-interestbearingVariable interestrate instruments354,134 3,449 8,301 32,106 36 398,0265.80 14,869 116,571 251,971 211,142 4,148 598,701Fixed interestrate instruments 5.80 9,413 69,869 309,920 698,771 57,222 1,145,195378,416 189,889 570,192 942,019 61,406 2,141,922The Group has access to financing facilities. As at the balance sheetdate the total unused amount is 301,789 thousand kuna. The Groupexpects to meet its other obligations from operating cash flows andproceeds of maturing financial assets.34.10. Fair value of financial instrumentsThe fair values of financial assets and financial liabilities are determinedas follows:The fair value of financial assets and financial liabilities with standardterms and conditions and traded on active liquid markets is determinedwith reference to quoted market prices.34.11. DerivativeAs at 31 December 2010 the Group has recognized a derivative /interest rate swap from 2007 with Calyon Credit Agricole CIB. Thederivative was used to hedge the interest rate risk until 2013 relatedto loans given by EBRD to Našicement and TOS. Conditions relatingto mutual liabilities according to this derivative have been changed in2010. As at 31 December 2010 the Group has disclosed a liability fora derivative in the amount of 325 thousand kuna. The Company hasa fixed liability towards Calyon Credit Agricole CIB in the amount of3,200 thousand euro that are to be repaid until 12 June 2013 accordingto the agreed repayment schedule.The fair value of other financial assets and financial liabilities isdetermined in accordance with generally accepted pricing modelsbased on discounted cash flow analysis using prices from currentmarket transactions.

98 / 99Notes the Consolidated Financial Statements (continued)For the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and Subsidiaries35. SUBSEQUENT EVENTS37. GOING CONCERN ASSUMPTIONIn February 2011 Našicecement d.d. received a short-term loan fromImex bank d.d. Split in the amount of 35 million kuna.According to the Resolution of the Commercial court in Osijek fromJanuary 2011, the company Našička gradnja d.o.o. changed the nameto Nexe gradnja d.o.o.36. CONTINGENT LIABILITIESThere are several active legal cases against the Group companies thatthe Management of respective Group company did not provide for asthe Management believes that companies will not incur losses relatedto those cases. This relates to the following cases:• In the period from 2005 to 2009 Dilj IGM d.o.o. was subject to twelveinspections performed by Tax Authorities which disputed certainfees paid to Nexe Grupa d.d. According to the Resolutions that TaxAuthorities issued for undertaken inspections, the company wascharged with additional VAT and according to certain Resolutionsalso corporate income tax.The company filed complaints on above mentioned Resolutionsand for some submitted also appeals to the Administrative Court ofRepublic of Croatia.Based on the submitted appeals, the Tax Authorities have issuedthe second instance tax resolution by which they have acceptedCompany’s appeals and have returned the cases to the first instancebody which has to revise/reconsider its conclusions.Most of the disputed fees paid to Nexe Grupa d.d. have beenaccepted during the revisions of cases. For the ones disputed again,the company submitted appeals to the Administrative Court ofRepublic of Croatia.Total tax liability after the last received Resolutions of Tax Authoritiesamounts to 2,343 thousand kuna, thereof 1,634 thousand kunabeing paid through deduction of company’s monthly VAT receivablesfrom the State. Dilj IGM d,o.o. has not made a provision for thoseamounts as it believes that the outcome of appeal will be in theirfavour.There are six law suits against Dilj IGM d.o.o. in total amount of1,598 thousand kuna that the company did not provide for. TheManagement Board believes that the company will not suffer anylosses related to those cases.• The Republic of Croatia started a court case against Igma d.o.o. statingthat the company has been performing illegal pebbles exploitation.The litigation amounts to 16.7 million kuna. First instance judgmentfrom 20 May 2009 and second instance judgment from 9 February2010 ruled the case in favour of the company.In 2010 the Group has faced a significant fall of sales and incurredoperating loss as well as deterioration in solvency due to significantfall of investment activities and personal consumption, as well as dueto worsening of receivables collection that led to significant valueadjustments of receivables in 2009 and 2010.The Group’s management undertakes continuous actions so as toensure continuing business operations of all Group companies andtimely settlement of all their liabilities. As significant portion of liabilitiesfalls due in 2011, the Management of the Group is taking actions toprovide long-term refinancing of Group’s debts so as to ensure that thedebts of the Group are in line with the expected future cash flows fromthe future business activities of the Group.The Management believes that all the efforts undertaken so far, suchas modernization of plants to enable production of products with ahigher added value and a higher quality of products and services thatis essential for the existence and increase of market share in the region,the reorganization of business due to the modernization of facilitiesand actions undertaken on refinancing of due liabilities, will enable theGroup to continue in business as a going concern over a long periodof time.

Approval of Consolidated Financial StatementsFor the year ended 31 December 2010(All amounts are expressed in thousands of kunas)Nexe Grupa d.d., Našice and Subsidiaries38. APPROVAL OF CONSOLIDATEDFINANCIAL STATEMENTSThe consolidated financial statements were approved by the Board andauthorized for issue on 4 March 2011.Signed on behalf of the Board:Ivan Ergović,President of the BoardTomislav Rosandić,Member of the Board

100 / 10115. Entrepreneur’s Annual financial report 2010Reference Operation: 777Entrepreneur’s Annual financial report 201074.587.070.798,98Control numberType of reportRegistration number:Court’s registration number:1001339761030057478Report filled in by the obliged person whose calendar yearoverlaps with business year and there have not been anychanges in status or banruptcy or liquidation has occuredduring reporting period.Evidence number(to be filled in by the Register)PIN:46078374806Name of obliged person:Nexe grupa d.d.ZIP code and city:Street and number:E-mail:Web site:Municipality/town code:County code:SIC code:Consolidated report:Obligatory audit:Purpose of submitting report:SizeOwnership code:31500 NašiceBraće Radića 200nexe-grupa@nexe.hrwww.nexe.hr278 Našice14 Osiječko-baranjska7022 Business and managing consultingYESYES2 For public announcement only3 Large company21 Private since foundingDocumentsYES Balance sheet and Profit and loss accountNO Additional dataYES Notes to financial statementsYES Financial flow statementYES Statement of changes in capital accountsYES Auditor’s reportCapital origin:Number of employees(at the end of period):Number of employees(according to working hours):Months of business operation:100 0(% domestic capital)3404 3494(in previous year)0 0(in previous year)12 12(in previous year)(% foreign capital)(in current year)(in current year)(in current year)Registration numbers of merged companies:YES Annual reportNO Decision on profit distribution or loss coverYES Decision on establishing annual financialreportsYES Annual financial report according to MSFIRegistration numbers of companies which changed status during merger:Bookkeeping:Contact person:Phone:(registration number of firm)(name of firm)Stošić Mirjana(to be filled in by name and surname of contact person)031616521 Fax: 031616520Excell version: 2.0.0.E-mail:Name and surname:mirjana.stosic@nexe.hrRosandić Tomislav(authorized representative)M.P.Signature of authorized representative:

BALANCE SHEETas at 31 December 2010Company: Nexe grupa d.d. and Subsidiariesin HRKPosition1AOP mark2No. of note3Previous year4Current year5ASSETSA) UNPAID SUBSCRIBED CAPITALB) LONG TERM ASSETS (003+010+020+029+033)I. INTANGIBLE ASSETS (004 to 009)1. Research and development expenditure2. Concessions, patents, licenses, trade and service marks;software and similar rights3. Goodwill4. Advance payments for intangible assets5. Intangible asset under construction6. Other intangible assetsII. TANGIBLE ASSETS (011 to 019)1. Land2. Building3. Plant and machinery4. Tools and equipment, transport vehicles5. Biological assets6. Advance payments for tangible assets7. Tangible assets under construction8. Other tangible assets9. Investment propertyIII. LONG TERM FINANCIAL ASSETS (021 to 028)1. Shares in subsidiaries2. Loans to related companies3. Participating interests4. Loans to companies with participatinginterests5. Investments in securities6. Loans, deposits and similar7. Other long term financial assets8. Investments accounted for under equity methodIV. RECEIVABLES (030 to 032)1. Amounts owed by related parties2. Sales on credit3. Other receivablesV. DEFERRED TAX ASSETSC) CURRENT ASSETS (035+043+050+058)I. INVENTORIES (036 to 042)1. Raw materials2. Work in progress3. Finished goods4. Merchandise5. Advance payments for inventories6. Assets held for sale7. Biological assets00100200300400500600700800901001101201301401501601701801902002102202302402502602702802903003103203303403503603703803904004104220,1420151718161911211,805,839,32828,220,26507,570,62314,108,00006,541,64201,546,236,524135,366,089568,458,037590,609,57468,584,28810,327,8522,406,153169,349,2171,135,3140229,717,6171,992,234042,819,1720175,228,6479,677,5640000001,664,9221,052,096,542358,065,833140,985,63151,318,623127,754,3409,569,6452,652,0828,261,77417,523,7381,732,158,45932,346,884011,777,28514,108,00006,461,59901,556,742,448178,613,984626,213,599564,011,69059,805,38811,273,7781,767,832113,785,4421,270,7350139,323,2681,504,929044,065,379086,354,8307,398,1300000003,745,8591,076,655,457418,453,592160,262,35445,615,882162,416,21612,011,5213,307,72914,476,65320,363,237

102 / 103BALANCE SHEETas at 31 December 2010Company: Nexe grupa d.d. and Subsidiariesin HRKPosition1AOP mark2No. of note3Previous year4Current year5II. RECEIVABLES (044 to 049)1. Receivables from related parties2. Trade debtors3. Participating interest receivables4. Receivables from employees and members5. Receivables from the State and other institutions6. Other receivablesIII. SHORT TERM FINANCIAL ASSETS (051 to 057)1. Shares in subsidiaries2. Loans to related companies3. Participating interests4. Loans to companies with participatinginterests5. Investments in securities6. Loans, deposits and similar7. Other short term financial assetsIV. CASH AT BANK AND IN HANDD) PREPAYMENTS AND ACCRUEDINCOMEE) TOTAL ASSETS (001+002+034+059)F) OFF-BALANCE SHEET ITEMSEQUITY AND LIABILITIESA) CAPITAL AND RESERVES(063+064+065+071+072+075+078)I. SUBSCRIBED CAPITALII. CAPITAL RESERVESIII. PROFIT RELATED RESERVES (066+067-068+069+070)1. Legal reserves2. Reserves for trasury shares3. Treasury shares (deduction)4. Statutory reserves5. Other reservesIV. REVALUATION RESERVESV. RETAINED EARNINGS OR LOSS BROUGHT FORWARD (073-074)1. Retained earnings2. Loss brought forwardVI. PROFIT OR LOSS FOR THE FINANCIAL YEAR (076-077)1. Profit for the financial year2. Loss for the financial yearVII. NON-CONTROLING INTERESTB) PROVISIONS (080 to 082)1. Provisions for retirement, severances and similar obligations2. Provisions for tax liability3. Other provisionsC) LONG TERM LIABILITIES (084 to 092)1. Liabilities to related parties2. Loans, deposits and similar liabilities3. Liabilities toward banks and other financialinstitutions0430440450460470480490500510520530540550560570580590600610620630640650660670680690700710720730740750760770780790800810820830840850862223242526252625272928548,790,6020481,039,8160257,10331,535,42535,958,258128,611,289000012,181,189110,123,8716,306,22916,628,81829,550,2742,887,486,1440742,466,02694,637,8000-59,992,86523,025,57312,752,21497,727,81501,957,16347,117,004628,331,743628,331,7430-16,911,520016,911,52049,283,86420,702,66414,841,02105,861,643998,520,77000411,943,234567,621,2440485,705,3580533,60728,705,43552,676,84448,449,08000001,219,90334,509,73312,719,44442,131,54128,395,8072,837,209,7230544,072,81594,637,8000-47,578,54334,020,2074,716,92397,727,815011,412,14249,260,947580,919,610580,919,6100-170,347,2870170,347,28737,180,28822,518,75515,621,88106,896,874459,608,12700438,237,750

BALANCE SHEETas at 31 December 2010Company: Nexe grupa d.d. and Subsidiariesin HRKPosition1AOP mark2No. of note3Previous year4Current year54. Advance payments received5. Trade creditors6. Securities related payables7. Liabilities to companies with participatinginterests8. Other long term liabilities9. Deferred tax liabilityD) SHORT TERM LIABILITIES (094 do 105)1. Liabilities to related parties2. Loans, deposits and similar liabilities3. Liabilities toward banks and other financialinstitutions4. Advance payments received5. Trade creditors6. Securities related payables7. Liabilities to companies with participatinginterests8. Liabilities to employees9. Liabilities for taxes, contributions and etc10. Liabilities for distribution of profit11. Liabilities for long term assets held for sale12. Other short term liabilitiesE) ACCRUALS AND DEFERRED INCOMEF) TOTAL EQUITY AND LIABILITIES(062+077+081+090+102)G) OFF- BALANCE SHEET ITEMSAppendix to Balance sheet (filled by company whichpresents Consolidated Financial Statements)CAPITAL AND RESERVES1. Attributable to major shareholders2. Attributable to non-controlling interest08708808909009109209309409509609709809910010110210310410510610710810911028281130, 312700564,351,4740145,26722,080,7951,112,999,79300687,037,36617,217,428189,446,538104,070,113014,743,59018,276,115962,195081,246,44812,796,8912,887,486,1440693,182,16249,283,8640000021,370,3771,795,264,36400769,324,09662,890,032243,301,113582,861,590014,038,01526,469,20617096,380,29515,745,6622,837,209,7230506,892,52737,180,288

104 / 105PROFIT AND LOSS ACCOUNTFrom 1 January to 31 December 2010Company: Nexe grupa d.d. and Subsidiariesin HRKPosition1AOP mark2No. of note3Previous period4Current period5I. OPERATING REVENUES (112 to 113)1. Sales revenues2. Other operating incomeII. OPERATING COSTS(115+116+120+124+125+126+129+130)1. Change in value of work in progress and finishedgoods2. Cost of material (117 to 119)a) Cost of raw materialsb) Cost of goods soldc) Other material costs3. Staff costs (121 do 123)a) Net wages and salariesb) Taxes and pension contributionsc) Contributions on salaries4. Depreciation and amortization5. Other operating costs6. Value adjustments (127+128)a) Long term assets (except for financial assets)b) Short term assets (except for financial assets)7. Provisions8. Other operating expensesIII. FINANCIAL REVENUES (132 to 136)1. Interest income, fx gains, dividends and other relatedrevenues from operations with related parties2. Interest income, fx gains, dividends and otherrelated revenues from operations with unrelatedcompanies3. Income from associates participating interests4. Unrealised gains5. Other financial incomeIV. FINANCIAL EXPENSES (138 to 141)1. Interest expenses, fx losses, dividends and otherrelated expenses from operations with relatedparties2. Interest expenses, fx losses, dividends and otherrelated expenses from operations with unrelatedcompanies3. Unrealised loses4. Other financial expensesV. SHARE OF PROFIT OF ASSOCIATED COMPANIESVI. SHARE OF LOSS OF ASSOCIATED COMPANIESVII. EXTRAORDINARY - OTHER INCOMEVIII. EXTRAORDINARY - OTHER EXPENSESIX. TOTAL INCOME (111+131+142 +144)X. TOTAL EXPENSES (114+137+143+145)XI. PROFIT OR LOSS BEFORE TAXATION (146-147)111112113114115116117118119120121122123124125126127128129130131132133134135136137138139140141142143144145146147148456714, 158, 98881010581,336,944,6111,260,264,79276,679,8191,231,038,333-31,879,072663,499,679430,825,42263,870,615168,803,642257,940,080158,437,80464,657,68534,844,591133,492,651158,194,98241,897,573041,897,5737,892,4400127,886,3333,770,000123,479,94300636,390220,346,7180215,675,58104,671,13700567,5212,433,5871,465,398,4651,453,818,63811,579,8271,184,866,0831,099,170,65985,695,4241,230,204,706-22,610,079646,533,919452,238,91994,547,31299,747,688248,039,930152,761,15957,526,42537,752,346140,098,566169,466,26943,580,981043,580,9815,095,120067,985,594067,985,594000196,081,3330194,348,19601,733,1372,172,40101,624,5041,862,5661,256,648,5821,428,148,605-171,500,023

PROFIT AND LOSS ACCOUNTFrom 1 January to 31 December 2010 (continued)Company: Nexe grupa d.d. and Subsidiariesin HRKPosition1AOP mark2No. of note3Previous period4Current period51. Profit before taxation (146-147)2. Loss before taxation (147-146)XII. INCOME TAXXIII. PROFIT OR LOSS FOR THE PERIOD (148-151)1. Profit for the period (149-151)2. Loss for the period (151-148)Appendix to P&L (filled by company which presentConsolidated Financial Statements)1. Attributable to major shareholders2. Attributable to non-controlling interestSTATEMENT OF OTHER COMPREHENSIVE INCOMEI. PROFIT OR LOSS FOR THE PERIOD (= 152)II. OTHER COMPREHENSIVE INCOME / LOSSBEFORE TAX (159 do 165)1. Exchange differences on translating foreignoperations2. Change in revaluation reserves of long-livedtangible and intangible assets3. Profit or loss on remeasurement of fair value ofavailable-for-sale financial assets4. Profit or loss from cash flow hedges5. Profit or loss from hedges of net investment offoreign operation6. Share of other comprehensive income / loss ofassociates7. Actuarial gains (losses) on defined benefit pensionplansIII. INCOME TAX RELATING OF OTHER COMPREHENSIVEINCOMEIV. OTHER COMPREHENSIVE INCOME FOR THE YEAR,NETO OF TAX (158-166)V. COMPREHENSIVE INCOME OR LOSS FOR THE PERIOD(157+167)Appendix to P&L (filled by company which presentConsolidated Financial Statements)VI. COMPREHENSIVE INCOME OR LOSS FOR THEPERIOD1. Attributable to major shareholders2. Attributable to non-controlling interest149150151152153154155156157158159160161162163164165166167168169170112711,579,827031,429,347-19,849,520019,849,520-16,911,520-2,938,000-19,849,520-15,995,00010,778,0000-26,773,00000000-15,995,000-35,844,520-30,675,520-5,169,0000171,500,0239,546,209-181,046,2320181,046,232-170,347,287-10,698,945-181,046,2326,614,62513,982,5110-7,367,886000006,614,625-174,431,607-162,327,895-12,103,712

106 / 107CASH FLOW STATEMENT - Indirect methodfrom 1 January to 31 December 2010Company: Nexe grupa d.d. and Subsidiariesin HRKPosition1AOP mark2No. of note3Previous period4Current period5CASH FROM OPERATING ACTIVITIES1. Profit before income tax2. Amortization and depreciation3. Increase in short term liabilities4. Decrease in short term receivables5. Decrease in inventories6. Other cash inflowI. Total increase in cash flow from operating activities(001 to 006)1. Decrease in short term liabilities2. Increase in short term receivables3. Increase in inventories4. Other cash outflowII. Total decrease in cash flow from operating activities(008 to 011)A1) NET INCREASE IN CASH FLOW FROM OPERATINGACTIVITIES (007-012)A2) NET DECREASE IN CASH FLOW FROM OPERATINGACTIVITIES (012-007)CASH FLOW FROM INVESTING ACTIVITIES1. Proceeds from sale of tangible and intangible assets2. Proceeds from sale of debt and equity instruments3. Interest received4. Dividends received5. Other proceeds from investing activitiesIII. Total cash inflow from investing activities(015 to 019)1. Purchase of tangible and intangible assets2. Purchase of debt and equity financial instruments3. Other cash outflow from investing activitiesIV. Total cash outflow from investing activities(021 to 023)B1) NET INCREASE IN CASH FLOW USED IN INVESTINGACTIVITIES (020-024)B2) NET DECREASE IN CASH FLOW USED IN INVESTINGACTIVITIES (024-020)CASH FLOW FROM FINANCING ACTIVITIES1. Proceeds from debt and equity instruments2. Proceeds from loans and other borrowings3. Other cash proceeds from financing activities00100200300400500600700800901001101201301401501601701801902002102202302402502602702802914, 1511,579,827133,492,65104,009,9380102,296,775251,379,19112,714,52935,294,23215,428,42218,984,61582,421,798168,957,3930608,00014,347,608600,866023,085,86538,642,339160,127,3658,258,31740,853,109209,238,7910170,596,4520526,957,506150,389,346-171,500,023140,098,566115,400,2814,255,4270088,254,2510038,621,79010,482,53149,104,32139,149,93008,367,284104,365,210372,4993,688,7128,631,903125,425,60894,770,0011,673,41319,501,291115,944,7059,480,90300795,660,0100

CASH FLOW STATEMENT - Indirect methodfrom 1 January to 31 December 2010 (continued)Company: Nexe grupa d.d. and Subsidiariesin HRKPosition1AOP mark2No. of note3Previous period4Current period5V. Total cash inflow from financing activities(027 to 029)1. Repayments of borrowings2. Dividends paid3. Repayment of finance lease liabilities4. Own shares acquired5. Other cash outflow from financing activitiesVI. Total cash outflow from financing activities(031 to 035)C1) NET INCREASE IN CASH FLOW USED IN FINANCINGACTIVITIES (030-036)C2) NET DECREASE IN CASH FLOW USED IN FINANCINGACTIVITIES (036-030)Total increase in cash flow(013 - 014 + 025 - 026 + 037 - 038)Total decrease in cash flow(014 - 013 + 026 - 025 + 038 - 037)Cash and cash equivalents at the beginning of the periodIncrease in cash and cash equivalentsDecrease in cash and cash equivalentsCash and cash equivalents at the end of the period0300310320330340350360370380390400410420430442424677,346,852475,362,636043,341,2130163,796,472682,500,32105,153,46906,792,52823,421,34606,792,52816,628,818795,660,010682,690,050043,214,137092,883,933818,788,120023,128,11025,502,723016,628,81825,502,723042,131,541

108 / 10916. Decision proposal on establishing the consolidated financial reportsfor 2010On the basis of Art. 300a and 300b of the Companies Law, and on the basis of Art. 20 Statute of the joint stock company Nexe GrupaNašice, the Board of the company at the meeting held on 11 April 2011 adopted, unanimously, the followingDECISION PROPOSALOn Establishing Consolidated Financial Reports for 2010IThe following consolidated financial reports are established for 2010:MOTHER COMPANYCONSOLIDATED1) BALANCE SHEET with the sum of assets and liabilities 1,151,471,287.08 2,837,209,723.152) PROFIT AND LOSS STATEMENT with data on- revenues 154,262,003.32 1,256,648,581.93- expenses 149,466,960.92 1,428,148,604.93- profit/loss before taxation 4,795,042.40 (171,500,023.00)- profit tax (798,127.84) (9,546,209.17)- net profit / loss 3,996,914.56 (181,046,232.17)- minority interest - 10,698,945.07- profit of the group - (170,347,287.10)3) CASH FLOW STATEMENT4) STATEMENT OF CHANGES IN EQUITY5) NOTES TO THE FINANCIAL STATEMENTS6) ANNUAL REPORT ON THE STATUS OF THE GROUP7) STATEMENT OF OTHER COMPREHENSIVE INCOMEIIManagement proposes to the Supervisory Board to examine and approve the consolidated financial statements for 2010 and thus itconfirms.Ivan Ergović, B.Sc.President of the Board

17. Statement of persons responsible for compiling the annualreportAnnual report on the state of Nexe Grupa for 2010 gives a true and fair view of assets and liabilities, profits and losses, financial position andoperations of Nexe Grupa and companies involved in the consolidation as a whole.Management report for 2010 contains true view of development and operating results of Nexe Grupa and companies included in consolidation,with a description of significant risks and uncertainties with which Nexe Grupa and its companies are faced as a whole.Ivan Ergović, B.Sc.President of the BoardTomislav RosandićMember of the Board

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Nexe grupa d.d.Braće Radića 20031500 NašiceRepublic of CroatiaPhone: +385 (0)31 616 100Fax: +385 (0)31 616 474E-mail: nexe-grupa@nexe.hrwww.nexe.hrCopies: 130Year: 2011