Hrvatska Poštanska Banka d.d.

Annual / Quarterly Financial Statement • Apr 27, 2018

TRANSLATION

Annual Financial Statements for the Period from Jan 01 to Dec 31 2017 Audited

Zagreb, April 27 2018

In accordance with Capital Markets Act, HPB p.l.c. (Bank) publishes audited annual financial statements for the period from Jan 01 to Dec 31 2017.

Content of the report is as follows:

• Management Report of HPB p.l.c.,
• Statement by persons accountable for compiling the report of HPB p.l.c.,
• Audited set of financial statements (balance sheet, profit or loss statement, statement of changes in equity, cash flow statement),
• notes to financial statements,
• Resolution by the Supervisory Board on giving consent to annual financial statements of HPB p.l.c., and
• Proposal of allocation of profit earned in 2017 for HPB p.l.c.

Annual Report for 2017, which includes the full set of disclosures in accordance with Accounting Act and Credit Institutions Act, together with the auditor's report can be found on the following web link: http://www.zse.hr/userdocsimages/revizor/249_revizor_2017_konsolidirano_HR.pdf

Key highlights of results for 2017 are as follows:

• net profit amounting to HRK 8,3M in spite of significant impairment losses on exposures towards Agrokor and related parties (HRK 281M of impiarments towards this borrower group with impairment coverage standing at 62,2 percent on NPL exposures towards this borrower group).

- operating profit amounts to HRK 373,4M, representing a 1,8 percent y-o-y decrease consequent to significant one-offs in 2016 (e.g. VISA Europe Ltd. Transaction was closed in Jun 2016, resulting in HRK 33,5M gain for the Bank),

• net interest income amounts to HRK 531,3M – increase of 3,3% y-o-y,

• net fee income amounts to HRK 192,1M – increase by 4,0% or by HRK 7,4M y-o-y,

• almost 32 thousand new current accounts have been opened during 2017,

• book value per share increased by 0,9% during 2017,

- other trends in HPB operations – new digital banking products, e-cash, new web pages; HPB carried out the due diligence in Jadranska banka; preparations for recapitalization of HPB which is postponed for 2018; 10 branches and outlets have been wholly refurbished; reorganization and personnel changes,

• own funds strengthened by retaining 2016 earnings, and decreased RWA have resulted in strenghtened capital adequacy ratio, which equals 18,1 percent

Management Report of HPB p.l.c.

The year 2017 was marked by the effects associated with the deterioration of the Agrokor group's creditworthiness, which was felt by HPB as well. Since the end of 2016, and over the course of the larger part of 2017, growth was limited due to capital adequacy concerns, but the we managed to end the year in positive territory, by achieving a net profit of HRK 8,3M. This was also the year in which we continued to realize the strategic development guidelines that consist of the modernization of the business network and digitization of the Bank, as well as utilizing some other opportunities on the market.

In order to better respond to the needs of our clients, in 2017, we carried out a reorganization in which we formed a division specialized in business with SME segment, digital marketing section and ebranch.

We continue to actively participate in the digital transformation of the banking industry, so we have introduced the first non-card cash withdrawal service on ATMs on the Croatian market, so-called ecash. No less important is the HPB web site, as the point of first contact with HPB clients, which we redesigned in 2017 and made it more accessible to our customers who are more inclined to use this channel for using and gaining information about banking services.

In 2017, reconstruction of 4 outlets (Poreč, Zagreb - Jurišićeva, Vinkovci, Makarska) was completed, we opened one new outlet in Solin, and 5 others were moved and constructed on new locations that are more accessible and better in terms of customer frequency (Velika Gorica, Bjelovar, Rijeka, Zagreb - Gajnice, Beli Manastir). Domestic furbishing and Croatian design are main features of our branches that are becoming more and more modern and functional.

In 2017, the Bank marked the 26th anniversary since foundation, and on that occasion we have redefined the mission, vision and corporate values to ensure the fulfillment of the goals we have - to be the largest Croatian-owned banking group that takes cares about clients, shareholders, while providing top-level service and achieving long-term sustainable return on capital.

The previous year was marked impairment losses recognized on Agrokor exposures. However, we ended the year with a positive result, with a net profit of HRK 8,3M. Meanwhile, the Bank has been able to substantially improve its core revenue. Thus, net interest income amounted to HRK 531,3M, representing an increase of 3,3 percent compared to 2016, despite declining interest income (by 8,0% or HRK 57,5M), because interest expenses decreased significantly (by 36,2% or by HRK 74,4M) through funding structure optimization and lower interest rates. Net income from commission and fees amounted to HRK 192,1M, increasing by 4% or HRK 7,4M in comparison with 2016. The Bank has recorded a rise in fee income, with growth in the retail and card operations segment excelling (+25,2%) due to the increased number of users and ATM transactions. Furthermore, income from guarantees and letters of credit increased as well (+2,9%), owing to dynamics of import-export activities of Croatian companies in the post-recession period.

Efforts made by the Bank to make internal improvements that would at least partly mitigate adverse effects of external factors limiting Bank's profitability, are reflected in almost unchanged operating costs level (+0,8%), in spite of a number of initiatives and projects having been launched and started in 2017, on top of the recapitalization process that has commenced.

Operating profit amounted to HRK 372,4M, representing a HRK 6,7M or 1,8 percent decrease compared to 2016, due to smaller one-off effects arising from the sale of securities.

Impairments spiked by 59,3%, resulting almost exclusively from impairment losses on exposures to the Agrokor group and economically and legally related parties. In addition to the provisions made, NPL coverage ratio does not materially differ from the 2016-level, equalling 59,8 percent (2016: 62,5%). Non-performing loan volume is unchanged when compared to 2016 e-o-y, as new deteriorations were neutralized by disposals of outstanding NPLs, thus reducing their burden on the financial position and making new liquidity available for placements.

During the past years, the Bank has achieved a strong growth in line with its strategy. However, this increase in the balance sheet led HPB to a relatively low capitalization, given that higher market share increases capital requirements. Limited capital base due to market share lingering around 5,00% significantly reduced the possibility of further balance sheet expansion over the majority of the period (until the new Decision on the Structural Systemic Risk Buffer came into force in August 2017), so the Bank's assets increased by 2,5 percent to HRK19,8B.

Due to the significant early repayments of loans recorded at the end of 2017, loans to customers decreased by 3,6 percent, although the Bank had a positive growth for almost the entire year. Retail loans continued to grow (+7,7%), but loans to corporate entities dropped by 10,4% due to the exceptionally good fiscal year and the realization of the budget above expectations, meaning that the government units had lower need for new debt.

HPB continues to be one of the most trusted banks in Croatia. Consequently, received deposits increased by 4,2 percent or by HRK 687M. As a result, deposits of all nonfinancial corporate entities and retail are on the increase. We are particularly proud of 32.000 newly opened retail current accounts of in 2017. At the same time, bank deposits fell by 21,5 percent, as the Bank had more than enough other available liquidity reserves.

As there was no need for other sources of funding, borrowings were partially repaid (-7,4%), with new debt not being contracted in a significant amount.

Capital adequacy equals 18,1 percent. Higher capital adequacy was achieved despite the postponement of the planned recapitalization at the end of 2017, through risk mitigation measures, where risk weighted assets ("RWA") dropped by 5,9 percent.

Mladen Mrvelj Board Member Domagoj Karadjole Board Member

Statement by persons accountable for compiling the report of HPB p.l.c.

In accordance with the Capital Market Act, the Management of HPB p.l.c., states that according to their best knowledge the set of audited financial statements for the period from Jan 01 to Dec 31 2017, compiled in accordance with the accounting regulation applicable to credit institutions in Croatia, presents complete and accurate view of assets and liabilities, losses and gains, financial position and results of HPB p.l.c.

Mladen Mrvelj Board Member Domagoj Karadjole Board Member

David Tomašek Head of Finance Division

HPB p.l.c.
Appendix 3. Reporting period:		Jan 01	to	Dec 31 2017
		Annual financial statements for credit institutions GFI-KI
Registration number (MB):	03777928
Registration number (MBS):	080010698
Personal identification number (OIB): Company:	87939104217 HPB p.l.c.
Postal code and city	10000	ZAGREB
	Address: JURIŠIĆEVA 4
E-mail address: hpb@hpb.hr
Internet address: www.hpb.hr
City code and name:	133 ZAGREB
County code and name:	21 GRAD ZAGREB			# of employees:	1.122
Consolidated report:	NO			(as per reporting date) Industry code:	6419
Consolidated companies (in accordance with IFRS):		Headquarters:		Registration number:
Book-keeping service provided by: Contact:	n/a Tomašek David	n/a
	Phone: 014804900		Fax:	014804594
	E-mail address: david.tomasek@hpb.hr
Surname and name: Karadjole Domagoj	Mrvelj Mladen (person authorized for representation)
Documentation to be made public:		1. Financial reports (balance sheet, profit or loss statement, cash flow statement, statement on changes

in equity and notes to financial statements)

1. Management report

2. Statement by persons accountable for compiling the report

BALANCE SHEET

in HRK Dec 31 2017 as per
Item	AOP label	Dec 31 2016 (restated)	Dec 31 2017
1	2	3	4
ASSSETS
1. CASH AND DEPOSITS WITH THE CNB (002+003)	001	2.263.303.114	4.391.466.489
1.1.Cash	002	421.479.852	460.023.632
1.2.Deposits with the CNB	003	1.841.823.262	3.931.442.857
2. DEPOSITS WITH FINANCIAL INSTITUTIONS	004	774.135.009	473.302.324
3. SHORT-TERM TREASURY BILLS OF THE CROATIAN MINISTRY OF FINANCE	005	415.536.615	324.931.405
4. FINANCIAL ASSETS HELD FOR TRADING	006	551.322.886	513.989.813
5. FINANCIAL ASSETS AVAILABLE FOR SALE	007	2.630.574.528	2.459.982.241
6. FINANCIAL ASSETS HELD TO MATURITY	008	442.835.059	72.345.457
7. FINANCIAL ASSETS VALUED AT FAIR VALUE THROUGH PROFIT OR LOSS, NOT ACTIVELY TRADED	009	0	0
8. DERIVATIVE FINANCIAL ASSETS	010	3.780.197	0
9. LOANS TO FINANCIAL INSTITUTIONS	011	81.579.680	62.450.000
10. LOANS TO OTHER CUSTOMERS	012	11.250.340.147	10.851.664.988
11. INVESTMENTS IN SUBSIDIARIES, ASSOCIATED COMPANIES AND JOINT VENTURES	013	53.420.000	65.490.000
12. REPOSSESSED ASSETS	014	0	0
13. TANGIBLE ASSETS (LESS DEPRECIATION)	015	146.091.281	141.461.846
14. OTHER ASSETS	016	692.909.263	441.748.035
A) TOTAL ASSETS (001+004 to 016)	017	19.305.827.779	19.798.832.598
LIABILITIES
1. BORROWINGS FROM FINANCIAL INSTITUTIONS (019+020)	018	620.995.448	651.970.981
1.1. Short-term	019	0	0
1.2. Long-term	020	620.995.448	651.970.981
2. DEPOSITS (022 to 024)	021	14.529.990.572	15.134.400.504
2.1. Transactional and current accounts	022	4.009.237.425	5.172.463.233
2.2. Savings deposits (demand)	023	1.486.719.761	1.538.006.561
2.3. Term deposits	024	9.034.033.386	8.423.930.710
3. OTHER BORROWINGS (026+027)	025	88.426.108	20.286.850
3.1. Short-term	026	0	0
3.2. Long-term	027	88.426.108	20.286.850
4. DERIVATIVE AND OTHER FINANCIAL LIABILITIES HELD FOR TRADING	028	3.640.667	0
5. ISSUED SECURITIES (030+031)	029	0	0
5.1. Short-term	030	0	0
5.2. Long-term	031	0	0
6. SUBORDINATED DEBT ISSUED	032	0	0
7. HYBRID INSTRUMENTS	033	0	0
8. OTHER LIABILITIES	034	2.175.324.123	2.086.882.490
B) TOTAL LIABILITIES (018+021+025+028+029+032+033+034)	035	17.418.376.918	17.893.540.825
EQUITY
1. SHARE CAPITAL	036	1.214.298.000	1.214.298.000
2. PROFIT FOR THE YEAR	037	181.261.017	8.333.460
3. RETAINED EARNINGS	038	37.417.870	124.540.223
4. REGULATORY RESERVES	039	6.160.835	15.574.701
5. STATUTARY AND OTHER CAPITAL RESERVES	040	363.623.023	448.288.175
6. FAIR VALUE RESERVE	041	84.690.116	94.257.214
7. RESERVES ARISING FROM HEDGING TRANSACTIONS	042	0	0
C) TOTAL EQUITY (036 to 042)	043	1.887.450.861	1.905.291.773
D) TOTAL LIABILITIES AND EQUITY (035+043)	044	19.305.827.779	19.798.832.598

fo he rio d f r t pe ro m	Ja 0 1 2 0 17 n	to	De 3 1 c	2 0 17		in H R K
Ite m				O A P lab el	Jan 01 - D 31 201 6 ec (re ted ) sta	Jan 01 - D 31 201 7 ec
					Cu lat ive mu	Cu lat ive mu
1				2	3	5
1 Int inc st ere om e				0 8 4	72 0. 25 4.9 8 6	6 6 2.7 5 2.9 21
2 Int st ere ex p en se				0 4 9	20 5. 8 5 8. 44 7	13 1.4 17 .9 0 9
Ne int inc ( ) 3. t t 0 4 8- 0 4 9 er es om e				0 5 0	5 14 3 9 6. 5 3 9	5 3 1. 3 3 5. 0 1 2
4 Fe d c iss ion inc e a n om m om e				0 5 1	49 3. 8 8 0. 47 2	5 20 .9 6 4.6 6 1
Fe d c iss ion 5 e a n om m ex p en se				0 5 2	3 0 9. 11 0. 3 74	3 28 .8 3 7.1 17
6. Ne fee d c iss ion inc ( 0 5 1- 0 5 2 ) t an om m om e				0 5 3	1 8 4.7 7 0. 0 9 8	1 9 2.1 27 .5 44
Ga ins les los is ing fro inv in 7 tm ts s se s a r m es en j int ntu o ve res	bs i d iar ies su , a ss	iat d c oc e om	ies d p an an	0 5 4	0	0
Ga fro 8 ins les los d ing iv it ies tra t s se s m ac				0 5 5	6 6. 9 9 4.7 20	5 0. 8 25 .8 22
9 Ga ins les los fro bu i lt- in de iva ive t s se s m r s				0 6 5	0	0
10 Ga ins les los is ing fro f ina ia l a ets s se s a r m nc ss ive de d t a ct tra	lue d a fa ir v t va a	lue hro h P& t ug	L,	0 5 7	0	0
ly no 11 Ga ins les los is ing fro it ies i s se s a r m se cu r av a	la b le for le sa			0 5 8	48 9 44 3 .5 5.	3 0. 21 2.6 17
12 Ga ins les los is ing fro it ies he l s se s a r m se cu r	d t ity atu o m r			0 9 5	0	0
Ga fro 13 ins les los is ing he dg ing iv it t s se s a r m ac	ies			0 6 0	0	0
14 Inc fro inv in bs i d iar ies tm ts om e m es en su , a ss	iat d c ies oc e om p an	d j int an o ve	ntu res	0 6 1	3. 5 0 0. 0 0 0	3. 20 0. 0 0 0
15 Inc fro he ity ins ot tru nts om e m r e q u me				0 6 2	8 26 .6 26	9 74 .9 19
16 Ga ins les los fro ha d i f fer ate s se s m ex c ng e r en	ce s			0 6 3	( 4.0 9 8. 5 6 1 )	1.7 47 .15 1
Ot 17 he inc r om e				0 6 4	4.2 77 .8 70	5. 72 7.3 9 1
18 Ot he ing t sts r o p era co				0 6 5	9. 44 3. 79 1 5	6 2.0 27 3 9 .5
19 Ge l a d a dm in ist ive iza rat ort ne ra n ex p en se s, am	ion d de iat t an p rec	ion		0 6 6	3 8 0. 6 5 7.7 44	3 8 1.7 3 6. 3 18
Op 2 0. ing f it ( 0 5 0+ 0 5 3 t 0 6 4- 0 6 5- 0 6 6 ) at er p ro o				0 6 7	3 9. 6 2 0 0 7 1 1.	3 2. 3 8 6. 9 9 7 5
21 Im irm los d p is ion t p a en se s a n rov s				0 6 8	22 5. 9 9 1.3 8 7	3 5 9. 9 25 .8 8 1
2 2. P R O F I T B E F O R E T A X A T I O N ( 0 6 7- 0 6 8 )				0 6 9	15 3. 1 6 9. 8 1 3	1 2.4 6 0. 71 8
2 3. I N C O M E T A X E X P E N S E / D E F E R R E D T A X				0 0 7	( 28 .0 9 1.2 0 4 )	4.1 27 .25 8
24 N E T P R O F I T F O R T H E P E R I O D ( 0 6 9- 0 7 0 )				0 71	1 8 1. 2 6 1. 0 17	8. 3 3 3. 4 6 0
25 Ea ing ha rn s p er s re				0 7 2	9 0	4

PROFIT OR LOSS STATEMENT

CASH FLOW STATEMENT - INDIRECT METHOD

for the period from	Jan 01 2017	to	Dec 31 2017			in HRK
Item				AOP label	Jan 01 - Dec 31 2016 (restated)	Jan 01 - Dec 31 2017
	1			2	3	4
OPERATING ACTIVITIES
1. Cash flow from operating activities before changes in assets (002 to 007)				001	404.831.685	403.482.933
1.1. Profit for taxation				002	153.169.813	12.460.718
1.2. Impairment losses and provisions				003	225.991.387	359.925.881
1.3. Amortization and depreciation				004	45.052.891	43.868.284
1.4. Net unrealised gains less losses from financial assets valued at fair value through profit or loss				005	(23.227.067)	(9.142.470)
1.5. Gains / losses from sale of tangible assets				006	(253.900)	(1.882.329)
1.6. Other gains / losses				007	4.098.561	(1.747.151)
2. Net increase / decrease of operating assets (009 to 016)				008	(1.994.921.390)	693.980.911
2.1. Deposits with the CNB				009	0	0
2.2. Tresury bills of the Croatian Ministry of Finance				010	85.698.193	90.605.210
2.3. Deposits with and loans to financial institutions				011	13.252.769	40.590.504
2.4. Loans to other customers				012	(1.350.232.552)	223.606.619
2.5. Financial assets held for trading				013	45.203.042	46.475.543
2.6. Financial assets available for sale				014	(634.815.410)	198.252.413
2.7. Financial assets valued at fair value through profit or loss, not actively traded				015	0	0
2.8. Other operating assets				016	(154.027.432)	94.450.622
3. Net increase / decrease of operating liabilities (018 to 021)				017	1.754.457.573	559.561.762
3.1. Transactional accounts				018	1.055.284.154	1.163.225.808
3.2. Savings and term deposits				019	1.082.600.372	(558.815.876)
3.3. Derivative financial liabilities and other liabilities actively traded				020	3.640.667	(3.640.667)
3.4. Ostale liabilities				021	(387.067.620)	(41.207.503)
4. Net cash flow from operating activities before taxation (001+008+017)				022	164.367.868	1.657.025.606
5. Income tax paid				023	(171.183)	(207.923)
6. Net cash inflow / outflow from operating activities (022+023)				024	164.196.685	1.656.817.683
INVESTING ACTIVITIES
7. Net cash flow from investing activities (026 to 030)				025	85.557.602	146.708.515
7.1. Purchase of tangible and intangible assets				026	(42.125.587)	(42.434.067)
7.2. Investment in / disposal of subsidiaries, associated companies and joint ventures				027	0	0
7.3. Investment in / disposal of financial assets held to maturity				028	123.227.604	184.967.663
7.4. Dividends received				029	4.455.585	4.174.919
7.5. Other inflows / outflows from investing activities				030	0	0
FINANCIAL ACTIVITIES
8. Net cash flow from financial activities (032 to 037)				031	(326.508.925)	(37.163.725)
8.1. Net increase / decrease of borrowings				032	(295.746.710)	(37.163.725)
	8.2. Net increase / decrease of issued debt securities			033	0	0
8.3. Net increase / decrease of subordinated debt and hybrid instruments			034	0	0
8.4. Share capital raised			035	0	0
8.5. Dividends paid			036	(30.762.215)	0
	8.6. Other inflows / outflows from financial activities			037	0	0
9. Net increase / decrease of cash and cash equivalents				038	(76.754.638)	1.766.362.473
(024+025+031)
10. Effect of foreign exchange differences on cash and cash equivalents				039	813.257	(4.982.723)
11. Net increase/(decrease) in cash and cash equivalents (038+039)				040	(75.941.381)	1.761.379.750
12. Cash and cash equivalents at the beginning of the year				041	3.247.051.855	3.171.110.474
13. Cash and cash equivalents as per reporting date (040+041)				042	3.171.110.474	4.932.490.224

TRANSLATION

HPB p.l.c.

for th e p	eri od fro m	Jan 01	20 17	to	Dec 31	20 17			in H RK
	AO		Att rib	ble the sh hol uta to are	der f th nt c s o e p are om	pan y
Item	P lab el	Sha ital re cap	Ow har n s es	Reg ula tor tatu tor y, s y and her ot re ser ves	Ret ain ed nin ear gs	Pro fit f or t he iod per	Fa ir v alu e r ese rve	Min orit y in ter est	To tal ity equ
1	2	3	4	5	6	7	8	9	10
Bal Jan 01 20 17 anc e a s p er	00 1	1.2 .00 0 14. 775	(47 7.0 00)	369 .78 3.8 58	82. 293 .64 7	188 .27 7.3 28	84 .69 0.1 16	0	1.9 39. 342 .94 9
Effe of cts cha s in ntin olic ies nge ac cou g p and tion f er co rrec s o rors	002	0	0	0	(44 .87 5.7 77)	(7.0 16. 31 1)	0		(51 .89 2.0 88)
Res d b ala r Ja n 0 1 2 017 (00 1+0 02) tate nce as pe	003	1.2 14. 775 .00 0	(47 7.0 00)	369 .78 3.8 58	37. 417 .87 0	181 .26 1.0 17	84 .69 0.1 16	0	1.8 87. 450 .86 1
Disp l of fina ncia l as vail able for le set osa s a sa	004	0	0	0	0	0	(6.7 44 .61 3)		(6.7 44 .61 3)
Cha in t he f air valu f fin ial a ts a vail able for le nge e o anc sse sa	005	0	0	0	0	0	18. 934 .86 5		18. 934 .86 5
Tax ite ised dir ly ect on ms rec ogn in/tr fer red fro quit ans m e y	006	0	0	13. 093	0	0	(2.1 94. 245 )		(2.1 81. 152 )
Oth ains d (l es) ised dir ly in uity ect er g an oss rec ogn eq	007	0	0	(72 .73 9)	0	0	(42 8.9 09)		(50 1.6 48)
Net ins /(lo s) r gni sed dir ly i qui ect ty ga sse eco n e (00 4+0 05+ 006 +00 7)	008	0	0	(59 .64 6)	0	0	9.5 67. 098	0	9.5 07. 452
Pro fit f or t he iod per	009	0	0	0	0	8.3 33. 460	0		8.3 33. 460
Tot al r gni zed inc nd e fo r th eri od eco om e a exp ens e p (00 8+0 09)	010	0	0	(59 .64 6)	0	8.3 33. 460	9.5 67. 098	0	17. 840 .91 2
Incr e/d e in sh pita l eas ecr eas are ca	01 1	0	0	0	0	0	0		0
Pur cha se/ sale of har ow n s es	012	0	0	0	0	0	0		0
Oth han er c ges	013	0	0	0	(7.0 16. 31 1)	7.0 16. 31 1	0		0
Tra nsf er t o re ser ves	014	0	0	94. 138 .66 4	94. 138 .66 4	(18 8.2 77. 328 )	0		0
Divi den ds paid	015	0	0	0	0	0	0		0
Pro fit a lloc atio n (0 14+ 015 )	016	0	0	94. 138 .66 4	94. 138 .66 4	(18 8.2 328 ) 77.	0	0	0
Bal ing da te ( 003 +01 0+0 11+ 012 +01 3+0 16) ort anc e a s p er rep	017	1.2 14. 775 .00 0	(47 7.0 00)	463 .86 2.8 76	124 .54 0.2 23	8.3 33. 460	94. 257 .21 4	0	1.9 05. 291 .77 3

STATEMENT OF CHANGES IN EQUITY

NOTES TO FINANCIAL STATEMENTS

A) Profit or Loss Statement

1) INTEREST INCOME

	Jan 01 - Dec 31 2016	Jan 01 - Dec 31 2017
	Cumulative	Cumulative
Loans	595.182.686	573.042.923
Deposits	2.001.471	(1.125.453)
Debt securities	123.070.829	90.835.451
TOTAL	720.254.986	662.752.921

2) INTEREST EXPENSE

	Jan 01 - Dec 31 2016	Jan 01 - Dec 31 2017
	Cumulative	Cumulative
Borrowings	18.962.631	14.083.983
Deposits	186.895.816	117.333.926
TOTAL	205.858.447	131.417.909

3) FEE AND COMMISSION INCOME

	Jan 01 - Dec 31 2016	Jan 01 - Dec 31 2017
	Cumulative	Cumulative
Cash payment operations - channels	285.883.396	277.133.722
Retail and card operations	143.639.056	176.067.813
Corporate operations	57.004.833	59.486.631
Other fee and commission income	7.353.187	8.276.495
TOTAL	493.880.472	520.964.661

4) FEE AND COMMISSION EXPENSE

	Jan 01 - Dec 31 2016	Jan 01 - Dec 31 2017
	Cumulative	Cumulative
Payment operations	284.852.560	278.084.072
Other fee and commission expense	24.257.814	50.753.045
TOTAL	309.110.374	328.837.117

5) GAINS LESS LOSSES FROM TRADING ACTIVITIES

	Jan 01 - Dec 31 2016	Jan 01 - Dec 31 2017
	Cumulative	Cumulative
Securities and equity instruments	25.153.961	12.093.968
FX transactions	43.408.098	38.157.579
HRK cash transactions	367.955	490.545
Derivatives	(1.935.294)	83.730
TOTAL	66.994.720	50.825.822

6) OPERATING EXPENSES

	Jan 01 - Dec 31 2016	Jan 01 - Dec 31 2017
	Cumulative	Cumulative
General and administrative expenses	335.532.113	337.868.034
Amortization and depreciation	45.125.631	43.868.284
Savings deposit insurance costs	33.913.498	35.559.103
Other costs	25.530.293	26.468.436
TOTAL	440.101.535	443.763.857

7) IMPAIRMENT LOSSES AND PROVISION EXPENSES

	Jan 01 - Dec 31 2016	Jan 01 - Dec 31 2017
	Cumulative	Cumulative
Individually identified impairment losses
(risk group B i C)	171.720.380	352.638.151
Portfolio based provisions for identified losses (risk group A)	13.522.210	5.404.384
Other provisions	40.748.797	1.883.346
TOTAL	225.991.387	359.925.881

B) Balance sheet

	in HRK
Dec 31 2016	Dec 31 2017
421.479.852	460.023.632
1.841.823.262	3.931.442.857
1.300.796.321	1.300.268.691
541.026.941	2.631.174.166
-	-
-	-
2.263.303.114	4.391.466.489

in HRK 9) DEPOSITS WITH FINANCIAL INSTITUTIONS
	Dec 31 2016	Dec 31 2017
Deposits with foreign banking institutions	753.064.739	449.961.229
Deposits with domestic banking institutions	21.070.270	23.341.095
Portfolio based impairment allowance for identified losses	-	-
TOTAL	774.135.009	473.302.324

10) EQUITY INSTRUMENTS AND SECURITIES in HRK

	Dec 31 2016	Dec 31 2017
Short term Treasury bills of the Croatian Ministry of Finance	415.536.615	324.931.405
Financial assets held for trading	551.322.886	513.989.813
Financial assets available for sale	2.630.574.528	2.459.982.241
Financial assets held to maturity	450.105.787	73.139.356
Portfolio based impairment allowance for identified losses	(6.771.524)	(775.376)
Deferred front-end fee	(499.204)	(18.523)
TOTAL	4.040.269.088	3.371.248.916

11) LOANS TO CUSTOMERS		in HRK
	Dec 31 2016	Dec 31 2017
Loans to financial instutitions	81.579.680	62.450.000
Gross loans	81.583.376	62.454.545
Impairment allowance	(3.696)	(4.545)
Loans to companies	2.783.381.353	2.948.467.733
Gross loans	3.880.932.056	3.908.831.549
Impairment allowance	(1.097.550.703)	(960.363.816)
Retail loans	4.577.784.714	4.866.944.528
Gross loans	4.799.866.200	5.163.867.192
Impairment allowance	(222.081.486)	(296.922.664)
Other loans	4.037.506.783	3.192.134.584
Gross loans	4.040.077.723	3.198.303.415
Impairment allowance	(2.570.940)	(6.168.831)
Portfolio based impairment allowance for identified losses	(103.076.997)	(116.708.983)
Deferred front-end fee	(45.255.706)	(39.172.874)
TOTAL	11.331.919.827	10.914.114.988

B) Balance sheet (continued)

12) DEPOSITS		in HRK
	Dec 31 2016	Dec 31 2017
Financial institutions	1.180.254.901	1.198.016.694
Corporations	3.010.655.654	3.891.544.698
Retail	8.886.016.253	9.150.703.429
Other	1.453.063.764	894.135.683
TOTAL	14.529.990.572	15.134.400.504

13) BORROWINGS		in HRK
	Dec 31 2016	Dec 31 2017
Borrowings from HBOR	624.696.401	656.196.151
Borrowings from domestic banking institutions	-	-
Borrowings from domestic non-banking institutions	0	-
Borrowings from foreign banking institutions	88.426.109	20.286.850
Deferred front-end fee	(3.700.954)	(4.225.170)
TOTAL	709.421.556	672.257.831

14) OTHER LIABILITIES		in HRK
	Dec 31 2016	Dec 31 2017
Restricted deposits	1.715.292.949	1.786.812.843
Interest and fees payable	58.731.565	48.664.624
Provisions for off-balance sheet exposure	22.269.210	25.171.072
Other	379.030.399	226.233.951
TOTAL	2.175.324.123	2.086.882.490

in HRK 14) CASH AND CASH EQUIVALENTS
	Dec 31 2016 (restated)	Dec 31 2017
Cash and accounts held with banks	1.554.584.113	3.451.043.575
Mandatory reserve held in CNB	1.300.796.321	1.300.268.691
Placements to banks with original maturity of 90 days or less	148.462.493	101.668.054
Instruments in course of collection	167.267.547	79.509.904
TOTAL	3.171.110.474	4.932.490.224

C) Changes in accounting policies

There were no changes in accounting policies of the Bank during the reporting period which might have impact on financial position or results of the Bank.

D) Changes in presentation of financial reports

Bank has carried out a correcton of prior period error with regard to certain items in financial statements. In line with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, prior period financial reports have been restated.

Correction is related to a deduction from retained earnings for erroneously booked income from FX translation differences arising from foreign payment operations for a foreign partner, over the course of the period from Jan 01 2011 to Dec 31 2015, as well as correction of 2016 net profit for erroneously booked FX translation differences arising from aforementioned operations.

Corrections with regard to prior periods have been carried out during the current reporting period, error in booking has been eliminated, and P&L presented in these reports reflects correct effects of these transactions.

Effects arising from correction are presented below:

Effects on statement on financial position as per Dec 31 2016(in HRK)

	r 3 1.1 2.2 01 6. as pe	Re ffe sta tem t e cts en	r 3 1.1 2.2 01 6. as pe
Ite m	be for tat t e r es em en -		aft tat t er res em en -
AS SE TS
Ot he ( AO P 0 16) ts r a sse	74 4.8 01 .35 1	( 51 .89 2.0 88	) 69 2.9 09 .26 3
EQ UIT Y
Pro fit/ ( los s) for th eri od ( AO P 0 37 ) e p	188 .27 7.3 28	( 7.0 16 .31 1)	18 1.2 61 .01 7
Re tai d e ing s ( AO P 0 38 ) ne arn	82 .29 3.6 47	( 44 .87 5.7 77	) 37 .41 7.8 70
Eff P& L s t fo r th eri od fr Ja ts tat ec on em en e p om ( in HR K) Ite m	n 0 1. – De 31 20 16 c : 01 .01 31 .12 .20 16 . - be for tat t e r es em en -	Uč inc i p lja nja rep rav	01 .01 31 .12 .20 16 . - aft tat t er res em en -
Ga ins le lo fro ha ate ss ss es m ex ng e r dif fer en ce s ( AO P 0 63 )	4.4 57 .91 6	( 8.5 56 .47 7)	( 4.0 98 .56 1)
INC OM E T AX EX PE NS E / D EF ER RE D T AX ( AO P 0 70 )	( 26 .55 1.0 38 )	40 .16 6 1.5	( 28 .09 1.2 04 )
Pro fit/ los s f the rio d or pe AO ( P 0 71 )	18 8.2 77 .32 8	( 7.0 16 .31 1)	18 1.2 61 .01 7

Annual Financial Statements for the Period from Jan 01 – Dec 31 2017 (audited)

E) Ownership structure the Bank

Ownership structure of HPB p.l.c. as per Dec 31 2017 was as follows:

Shareholder	Ownership stake
Republic of Croatia (Ministry of State Assets)	42,43%
HP Hrvatska pošta Plc	11,93%
State Agency for Deposit Insurance and Bank Resolution	8,98%
Croatian Pension Insurance Insitute (Ministry of State Assets)	8,76%
Prosperus Invest d.o.o., for Prosperus FGS	4,94%
PBZ CROATIA OSIGURANJE OMF (B category)	4,12%
ERSTE d.o.o. for ERSTE PLAVI OMF (B category)	3,90%
Allianz ZB d.o.o., for AZ OMF (B category)	2,88%
CROATIA osiguranje Plc	2,47%
Fund for Financing the Decommissioning of the Krško Nuclear Power Plant and the Disposal of NEK Radioactive Waste and Spent Nuclear Fuel	2,36%
RAIFFEISEN D.D., for Raiffeisen OMF (B category)	2,20%
Minorities	4,99%
Own shares	0,04%

F) HPB stock

Shares of HPB p.l.c. are listed on the Official Market of ZSE. The last price per share at the end of the reporting period was HRK 506,00 (Dec 29 2017) representing a decrease of 32,6% when compared to the last traded price in 2016 (HRK 751,00 on Dec 30 2016).

Trading during the reporting period was as follows:

HPB p.l.c. Zagreb, Jurišićeva 4

SUPERVISORY BOARD

Zagreb, March 30 2018

In accordance with the provision of article 21 of the Articles of Association of HPB p.l.c. (in further text: Bank), and in line with Articles 300.c and 300.d of the Companies Act, Supervisory Board of the Bank has at its meeting held on March 30 2018, made the following:

RESOLUTION

on giving consent to Annual financial statements and consolidated annual financial statements of the Bank and the Group, for the 2017 business year, comprising also the Management Board's annual report on condition of HPB p.l.c. and its subisidiaries

I. Consent is given to Annual financial statements and consolidated annual financial statements of the Bank and the Group for the business year ended December 31 2017, comprising also the Management Board's annual report on condition of HPB p.l.c. and its subisidiaries, submitted by the Bank's Management Board.

Acceptance is given for Auditor's report by Ernst & Young d.o.o., Zagreb, Radnička 50. Auditor has conducted the audit of Annual financial statements the Bank and the Group for the year ended December 31 2017.

• II. By giving consent to statements outlined in paragraph I. of this Resolution, Annual financial statements and consolidated annual financial statements of the Bank and Group for the year ended December 31 2017 are considered to be confirmed by the Management Board and the Supervisory Board.
• III. This resolution comes into force on the day of its adoption.

President of the Supervisory Board Marijana Miličević

HPB p.l.c. Zagreb, Jurišićeva 4

SUPERVISORY BOARD

Zagreb, March 30 2018

In accordance with the provision of article 21 of the Articles of Association of HPB p.l.c. (in further text: Bank), and in line with Article 300.b and Article 275, paragraph 1, point 2 of the Companies Act, Supervisory Board of the Bank has at its meeting held on March 30 2018, made the following:

RESOLUTION on giving consent to Management Board's proposal on allocation of profit earned in 2017

I.

Bank's Supervisory Board gives its consent and accepts Management Board's proposal on allocation of profit earned in 2017, which is a constituent part of this resolution.

II.

By providing its consent outlined in paragraph I. of this Resolution, Management Board's proposal on allocation of profit earned in 2017 is considered to be confirmed.

III.

Supervisory Board proposes to General Assembly to vote in favour of profit allocation as outlined in Management Board's proposal.

IV.

This resolution comes into force on the day of its adoption and is submitted to General Assembly for adoption.

President of the Supervisory Board Marijana Miličević