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Valamar Riviera d.d.

Quarterly Report Apr 30, 2018

2085_10-q_2018-04-30_19fe9d65-ad2d-4551-80cd-dcd7adb14476.pdf

Quarterly Report

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BUSINESS RESULTS 1/1/2018 - 31/3/2018

QUARTERLY Valamar Girandella Resort 4*&5*, Rabac REPORT OF THE GROUP AND THE COMPANY VALAMAR RIVIERA D.D.

for the period from 1 January 2018 to 31 March 2018

EXECUTIVE SUMMARY

Key financial indicators

(in '000,000 HRK) 1 - 3/
2017
1 - 3/
2018
2018/
2017
Total revenues 64.1 65.8 2.7%
Sales revenues 27.9 38.8 39.2%
Board revenues 14.7 23.3 59.2%
Operating costs 115.5 128.5 11.3%
EBITDA -84.6 -88.8 -5.0%
Adjusted EBITDA -85.5 -88.7 -3.8%
EBIT -165.6 -185.6 -12.1%
Adjusted EBIT -166.5 -185.5 -11.4%
EBT -147.3 -176.0 -19.5%
31/12/
2017
31/3/
2018
2018/
2017
Net debt 1,772.4 1,968.9 11.1%
Cash and cash equivalents 287.8 78.7 -71.3%
Market capitalization 5,420.3 4,977.3 -8.2%
Enterprise value 7,192.6 6,946.2 -6.0%

Key operating indicators

1 - 3/
2017
1 - 3/
2018
2018/
2017
Accommodation units (capacity) 20,852 20,648 -1.0%
Number of beds 56,662 56,267 -0.7%
Accommodation units sold 48,046 64,808 34.9%
Overnights 83,857 106,083 26.5%
Average daily rate (in HRK) 284 360 26.8%

Revenues and costs

Valamar Riviera achieved strong first-quarter results driven by the earlier Easter holiday period and successful destination events on Krk and in Dubrovnik that generated a 39% increase in sales revenues (HRK 28 million to HRK 39 million). Increased demand and active management of sales channels and prices resulted in a high 27% increase in overnights (106,083 in 2018 vs. 83,857 in 2017) and average daily rate (HRK 360 in 2018 vs. HRK 284 in 2017).

Operating costs were HRK 129 million, and due to an increased operating efficiency, their growth was slower (+11%) if compared to sales revenues. They grew mainly due to increased material costs driven by a larger business volume and increased staff costs. However, the share of staff costs in total operating expenses decreased from 29% to 27%. The staff cost increase was planned in line with the salary increase policy and the new staff hired to ensure service quality in the new premium and upscale products to be opened at the beginning of the second quarter of 2018.

First-quarter business results are not indicative because of the seasonal character of the industry in which the Group operates. First-quarter sales revenues have a very small impact on total annual revenues (in 2017 their impact was 2%), so their 39% growth in relation to the same period last year cannot be used to form fullyear expectations. Furthermore, a negative EBITDA is typical for the first quarter because of a smaller business volume.

Financial result

The Group's financial result was HRK 10 million (HRK 18 million in 2017), down by HRK 8 million due to a lower positive fair value of FX forwards resulting from the lower appreciation of HRK vs. EUR in relation to last year's comparable period (1.6% in 2017 vs. 1.1% in 2018), as well as increased financial expenses related to interest on longterm loans used to finance the large investment cycle.

Enterprise value

Enterprise value fell by 6%, coinciding with the decrease in international and national stock market indices.

Investments

In line with the previously announced investment cycle worth HRK 2 billion until 2020, Valamar Riviera proceeds with large investments worth over HRK 700 million. The investments include a number of projects: the repositioning of Rabac as leading high-end holiday destination will be completed with the opening of Valamar Girandella Maro Resort 5* and the Valamar Argosy 4* Hotel will be repositioned as "adults only" accommodation. Moreover, we continue investing in raising camping quality to offer products and services with high added value. The investments also include Imperial's projects and a range of other smaller projects to improve quality, operating efficiency and energy saving. The market demand for the recently developed properties is strong, and the preparation for the start of the season is expected to be completed in time.

For details, see '2018 Investments' on page 18.

EXECUTIVE SUMMARY OUTLOOK (continued)

Acquisitions

After Croatia's Restructuring and Sale Centre (CERP) accepted Valamar Riviera's binding bid to buy a stake in Hoteli Makarska d.d., on 4 April 2018 Valamar concluded an agreement on the purchase and transfer of 55.48% (HRK 172.7 million) of Hoteli Makarska's share capital. Hoteli Makarska is a company managing a 725-key portfolio, and Valamar Riviera also concluded a cooperation agreement with AZ mandatory pension funds, in order to start their acting in concert regarding Hoteli Makarska. After the acquisition of shares, Valamar transferred 30.48% of Hoteli Makarska's share capital to AZ.

Valamar's press release is available from the Valamar Riviera corporate website (valamar-riviera.com/ en/1Q2018).

A significant percentage increase in the booking of announced overnights until year-end indicates a positive business outlook for the year.

Our positive expectations regarding the further increase in overnights, sales revenues and EBITDA are based on this year's large investment cycle, the great market feedback received by the recently developed properties, the overall portfolio quality as well as the acquisition of Hoteli Makarska.

Following the successful acquisition of Hoteli Baška on Krk Island, Imperial on Rab Island and Hoteli Makarska in Makarska, we are considering further expansion by pursuing new partnerships and acquisition opportunities in Croatia and abroad. The investment and recapitalization offer for Helios Faros is currently being considered. Helios Faros is a company on Hvar Island undergoing bankruptcy proceedings and managing a 591-key portfolio. The offer was submitted by Valamar Riviera together with PBZ Croatia osiguranje pension fund (for details, see: "Significant Business Events", p. 6).

In line with our strategic goals until 2020, we are focused on preparing investments projects aimed at improving the portfolio properties and services. However, numerous factors reduce the competitiveness of Croatian tourism and hinder further investment potential: VAT and the rate of total contributions to salaries (both among the highest in the Mediterranean), the still unresolved issue of tourism land, skilled labor shortages, the likely introduction of property tax and tourist tax increase.

BUSINESS RESULTS 1/1/2018 - 31/3/2018

Table of Contents

Significant Business Events 6
Results of the Group 9
Results of the Company 17
Investments 2018 18
The Risks of the Company and the Group 21
Corporate Governance 25
Related-party Transactions 26
Branch Offices of the Company 26
Valamar Riviera Share 27
Additional Information 29
Responsibility for the Quarterly Financial Statements 30
Quarterly Financial Statements 31

Significant Business Bellevue Family Life Resort 4*, Rabac Events

About Valamar Riviera

Valamar Riviera is the leading tourism company and one of the leading tourism groups in Croatia. It is also one of the largest investors in Croatian tourism with over HRK 4 billion invested in the last 14 years. Valamar Riviera owns two brands: Valamar Hotels and Resorts and Camping Adriatic. With the acquisition of Imperial d.d. on Rab Island by the end of 2016, Valamar Riviera Group is now present in five attractive destinations along the Adriatic coast – from Istria and the islands of Krk and Rab to Dubrovnik – and manages approx. 12% of Croatia's categorized tourist accommodation. Valamar Riviera's portfolio includes 30 hotels and resorts and 15 camping resorts that can welcome over 56,000 guests daily in nearly 21,000 accommodation units. Valamar Riviera is the largest tourism group in Croatia, as measured by revenues and portfolio size. Valamar Riviera cares for the interests of all its stakeholders: guests, suppliers and partners, local communities and destinations, around 22,000 shareholders, nearly 6,000 people employed during peak season and society at large. Stakeholders' interests are actively promoted through Valamar Riviera's principles of sustainable and socially responsible growth and development. The company aims at growing further through portfolio investments, new acquisitions and partnerships, by developing its destinations and human resources and by increasing operating efficiency.

Bid to buy Hoteli Makarska shares

On 27 December 2017, Valamar Riviera submitted a binding bid to buy a 55.48% stake (621,086 shares) in Hoteli Makarska d.d. (hereinafter: Hoteli Makarska), a company from Makarska with 725 keys in its portfolio. Valamar Riviera concluded a cooperation agreement with AZ, a pension fund management company from Zagreb, acting in its own

name and on behalf of the mandatory pension funds it manages, in order to start their acting in concert regarding Hoteli Makarska. On 4 April 2018, Valamar Riviera concluded an agreement with the Republic of Croatia, represented by CERP (Restructuring and Sale Center), regarding the sale and transfer of Hoteli Makarska's shares. With this agreement, Valamar bought 621,086 ordinary shares for HRK 172.7 million. Following this acquisition, on 12 April 2018 Valamar Riviera transferred 30.48% of Hoteli Makarska's share capital (341,218 shares) to its partner AZ and retained 25.00%. After HANFA (Croatian Financial Services Supervisory Agency) approves the takeover bid, Valamar Riviera will announce its offer to take over Hoteli Makarska's ordinary voting shares, pursuant to the provisions and period prescribed by the Act on the Takeover of Joint Stock Companies.

Investment and recapitalization offer for Helios Faros

Valamar Riviera and PBZ Croatia osiguranje, a pension fund management company acting in its own name and on behalf of PBZ Croatia osiguranje mandatory pension fundscategories: A and B, submitted on 15 May 2017 a joint offer for the investment and recapitalization of Helios Faros, a hospitality company undergoing bankruptcy proceedings from Stari Grad on Hvar Island. The Assembly of bankruptcy creditors of Helios Faros decided on 20 July 2017 to prepare a Bankruptcy plan, following the investment and recapitalization offer. In this offer, PBZ Croatia osiguranje and Valamar Riviera presented a restructuring plan as well as a six-year plan worth HRK 650 million for investments in hospitality assets. The total renovation and construction of two premium resorts containing around 600 keys would reposition the Helios Faros portfolio as premium accommodation, thus turning Stari Grad into an attractive and well-known destination. Helios Faros would employ 500 people after the renovation of the Arkada and Lavanda hotels. The Bankruptcy plan would enable Helios Faros to emerge from bankruptcy and continue its business operations in close partnership with the destination, Stari Grad, in order to bring prosperity to the whole island. PBZ Croatia osiguranje and Valamar Riviera see this project as a confirmation of synergies from the joint activity of a large institutional investor and a strategic tourism investor contributing with its expertise and results. Consequently, Valamar Riviera would manage Helios Faros' development and operations through a model contract related to the management of facilities. The Bankruptcy plan still needs to be adopted by the Assembly of bankruptcy creditors and validated by the bankruptcy judge.

Statutory change

On 26 January 2018, Valamar Riviera received a notification by EPIC, Goldscheider und Wurmböck Unternehmensberatungsgesellschaft m.b.H. with registered office in Vienna, 8 Plösslgasse, Republic of Austria, regarding the changes in the percentage of voting rights¬ (fall below the voting rights threshold), caused by the transfer of 55,594,884 shares due to the demerger agreement and status change, i.e. the demerger of EPIC, Goldscheider und Wurmböck Unternehmensberatungsgesellschaft m.b.H., as demerging company and EPIC Hospitality Holding GmbH with registered office in Vienna, 8 Plösslgasse, Republic of Austria, as transferee company. As evidenced by the received notifications, the structure of members in the transferee company is indirectly identical to the structure of members in the demerging company. Consequently, no changes occurred in the controlling persons, since the members in EPIC Hospitality Holding GmbH are indirectly the same persons and hold the same stakes as the members in EPIC, Goldscheider und Wurmböck Unternehmensberatungsgesellschaft m.b.H Consequently, on the same day, Valamar Riviera received a notification by EPIC Hospitality Holding GmbH regarding the acquisition of 55,594,884 RIVP shares without nominal value, acquired through the demerger and representing 44.11% of the Company's share capital.

At its meeting held on 8 March 2018, the Supervisory Board approved the draft of the Joint Merger Plan pursuant to which EPIC Hospitality Holding is planned to be merged into Valamar Riviera, in line with legal provisions. The document was submitted to the court register of the Commercial court in Pazin on 9 March 2018. Valamar Riviera and EPIC Hospitality Holding made a joint proposal for the appointment of a merger auditor and the Commercial court in Pazin accepted the proposed appointment. The Joint Merger Plan was prepared as a notary public document after carrying out the procedures prescribed by existing regulations that precede the approval by the general assemblies. The auditor KPMG Croatia d.o.o. prepared the Report on the Merger Audit on 15 March 2018 and the management boards of the companies prepared the Joint Merger Report on 19 March 2018, while the Supervisory Board prepared on 20 March 2018 the Report of the Supervisory Board of Valamar Riviera on the Merger of Epic Hospitality Holding GmbH with Valamar Riviera. The final decision regarding the approval of the proposed merger will be rendered by the general assemblies of the companies taking part in the merger (the General Assembly of Valamar Riviera will be held on 8 May 2018).

According to the proposed draft of the Joint Merger Plan, the transferor or acquired company will convey all its assets, rights and liabilities to the transferee, and in return, the transferee will give 55,594,884 shares in the transferee to the transferor members (as an aliquot part of their stake in the transferor). Following this, the transferor members will become direct shareholders in Valamar Riviera.

As a result of the intended merger, the following two family companies and one private individual will become direct shareholders in Valamar Riviera: Wurmböck Beteiligungs GmbH (Wurmböck family), Goldscheider Keramik Gesellschaft m.b.H. (Goldscheider family) and Dr. Franz Lanschützer.

Since EPIC Hospitality Holding is a newly established special purpose vehicle, the intended merger does not affect Valamar Riviera's balance sheet, income statement, employment, operating profit and other financial and business indicators, and it is also tax neutral for both companies so the transferee will not be burdened by any liabilities. This status change will secure continuity in the shareholding structure, thus enabling the continuation of the Company's transparent management, care for employees, focus on destination development and business model sustainability. Furthermore, Valamar Riviera will retain its market-leading position and the long-term trust of the controlling shareholders.

Loans agreements

On 12 February 2018, Valamar Riviera concluded an agreement with OTP banka Hrvatska and OTP Bank Nyrt from Hungary regarding a club loan for a total of EUR 40 million. On 6 March 2018, Valamar Riviera concluded an agreement with the European Investment Bank from Luxembourg (hereinafter: EIB) regarding a loan of EUR 16 million. This is the first EIB transaction in Croatia that involves the direct financing of a private sector company that benefits from the support of the EU budget guarantee under the European Fund for Strategic Investments, the financing component of the Investment Plan for Europe. These transactions were concluded to finance long-term investments and they confirm the trust of the investment and financing community in the further development of Valamar Riviera.

General Assembly of Valamar Riviera

The Management Board met on 20 February 2018, while the Supervisory Board met on 27 February 2018 in order to determine the 2017 4Q audited financial statements and the 2017 audited annual financial statements. The Management Board decided on 21 March 2018 to convoke the General Assembly on 8 May 2018 at 11:00 at the Valamar Sanfior Hotel in Rabac.

Quarterly Financial Statements

The Management Board hereby presents the unaudited quarterly financial statements for the period from 1 January 2018 to 31 March 2018. These statements must be viewed in the context of the mergers and acquisitions specified below, and they provide information on the state of the Company and Group, as well as significant events.

The Company's balance sheet and income statement for the reviewed period include the merged companies: Puntižela d.o.o. for the period following the merger, i.e. as of 1 April 2017 and Elafiti Babin Kuk d.o.o. as of 29 December 2017.

Results of the Group

Key financial indicators1

1 - 3/2017 1 - 3/2018 2018/2017
Total revenues 64,088,362 65,826,381 2.7%
Sales revenues 27,913,573 38,848,253 39.2%
Board revenues (accomodation and board revenues)2 14,651,779 23,320,742 59.2%
Operating costs3 115,473,721 128,541,939 11.3%
EBITDA4 -84,582,590 -88,838,658 -5.0%
Extraordinary operations result and one-off items5 907,805 -89,957 /
Adjusted EBITDA6 -85,490,395 -88,748,701 -3.8%
EBIT -165,632,828 -185,594,466 -12.1%
Adjusted EBIT6 -166,540,633 -185,504,509 -11.4%
EBT -147,277,080 -175,977,442 -19.5%
EBT margin -441.2% -421.9% 1,930 bp
31/12/2017 31/3/2018 2018/2017
Net debt7 1,772,353,634 1,968,900,560 11.1%
Cash and cash equivalents 274,650,648 78,695,044 -71.3%
Market capitalization8 5,420,289,760 4,977,280,785 -8.2%
EV9 7,389,190,320 6,946,181,345 -6.0%
1 - 3/2017 1 - 3/2018 2018/2017
20,852 20,648 -1.0%
56,662 56,267 -0.7%
51,573 64,808 25.7%
83,857 106,083 26.5%
284 360 26.8%
  • 1 Classified accordiong to the Quarterly Financial Statement (TFI POD-RDG). EBIT, EBITDA and their adjusted values and respective margins are recorded on the basis of operating income.
  • 2 In compliance with the classification under the USALI international standard for reporting in hotel industry (Uniform System of Accounts for the Lodging Industry).
  • 3 Operating costs include material costs, staff costs, other costs, and other operating costs reduced by extraordinary expenses and oneoff items.
  • 4 EBITDA (eng. earnings before interest, taxes, depreciation and amortization) is calculated as: operating income - total operating costs + depreciation and amortisation + value adjustments.
  • 5 Adjustments were made for (i) extraordinary income (in the amount of HRK 2.0 million in 2018, and HRK 3.4 million in 2017), (ii) extraordinary expenses (in the amount of HRK 1.9 million in 2018, and HRK 2.4 million in 2017), and (iii) termination benefit costs (in the amount of HRK 0.2 million in 2018, and HRK 0.2 million in 2017).
  • 6 Adjusted by the result of extraordinary operations and one-off items.
  • 7 Net debt: non-current and current liabilities to banks and other financial institutions + liabilities for loans, deposits and other– cash and cash equivalents – long-term and short-term investments in securities – current loans given, deposits, etc.
  • 8 The number of shares as at 31 December 2017 net of treasury shares amounts to 124,233,091, while per 31 March 2018 amounts to 124,214,644.
  • 9 EV refers to enterprise value; calculated as market capitalization + net debt.
  • 10 Average daily rate is recorded on the basis of board revenues (accommodation and board's food and beverage revenues).

Revenues and accommodation units sold

Steered by sustainability and social responsibility, Valamar Riviera's success is based on continual portfolio investments, acquisitions and partnerships and the development of our employees and destinations. As one of Valamar Riviera's key strategic goals, the investments in the preparation for his year's tourist season are HRK 705 million and they focus on the further increase of competitiveness and quality of properties and services.

Revenues

In the first quarter of 2018, total revenues were HRK 65.8 million, up by 2.7% (+HRK 1.7 million) and resulting from the following:

i) strong growth in sales revenues, up by 39.2% (+HRK 10.9 million) to HRK 38.8 million, mainly driven by board revenues (+59.2%; +HRK 8.7 million).

Due to this year's earlier Easter holidays, special attention was given to preparing numerous products, experiences and reasons for visiting. All the marketing segments grew in the first quarter compared to the same period last year (individuals and allotments in particular) with HRK 23.3 million in board revenues and 106,083 overnights reported, while the average daily rate grew by 26.8% to HRK 360 thanks to an active price and channel management.

Domestic sales revenues were HRK 15.3 million and represented 23.3% of total revenues (22.5% in 2017). They

grew by 6.3% in relation to the previous comparable period. International sales revenues were HRK 23.5 million, up by HRK 10.8 million and represented 35.8% of total revenues (21.1% in 2017).

ii) other operating revenues fell by 47.7% (-HRK 2.6 million) to HRK 2.9 million.

iii) financial income fell by -21.5% (-HRK 6.6 million) to HRK 24.1 million due to a lower positive fair value of FX forwards resulting from a lower appreciation of HRK vs. EUR in relation to last year's comparable period (1.6% in 2017 vs. 1.1% in 2018).

Other operating and financial income represented 41.0 % of total revenues (56.4% in 2017).

Total operating expenses of Valamar Riviera Group11

(in HRK) 1 - 3/2017 1 - 3/2018 2018/2017
Operating costs12 115,473,721 128,541,939 11.3%
Total operating expenses 199,013,724 227,304,203 14.2%
Material costs 33,247,324 38,219,074 15.0%
Staff costs 57,712,808 62,382,294 8.1%
Depreciation and amortisation 81,030,737 96,683,615 19.3%
Other costs 24,471,641 27,976,470 14.3%
Provisions and value adjustments 19,501 72,193 270.2%
Other operating expenses 2,531,713 1,970,557 -22.2%

Total operating expenses

Total operating expenses were HRK 227.3 million and grew by 14.2% (+HRK 28.3 million) or twice as slow if compared to operating revenues. The breakdown of total operating expenses is the following:

i) material costs represented 16.8% (16.7% in 2017), up by 15.0% (+HRK 5.0 million) to HRK 38.2 million mainly due to the increased costs of raw materials and consumables (especially direct food and beverage costs and energy consumption costs) driven by a larger business volume.

ii) staff costs represented 27.4% in the current year (their share in total expenses decreased from 29.0% in 1Q 2017), up by 8.1% (+HRK 4.7 million) to HRK 62.4 million mainly due to the efforts invested in securing competitive salaries and other material and non-material work conditions as well as the new staff hired to ensure service quality at the new premium/ upscale products to be opened at the beginning of the second quarter of 2018. Valamar Riviera is therefore the first company in Croatia guaranteeing a minimum net salary between HRK 5,000 and 7,500 to all of its employees.

iii) amortization costs represented 42.5% (40.7% in 2017), up by 19.3% (+HRK 15.7 million) to HRK 96.7 million due to the earlier large investment cycle.

iv) other costs represented 12.3% (12.3% in 2017), up by 14.3% (+HRK 3.5 million) to HRK 28.0 million mainly due to the i) increased costs of scholarships and employee training ii) increased costs of lodging and meals for employees, and iii) increased insurance costs.

v) provisions and value adjustments represented 0.03% (0.01% in 2017) and were HRK 72,000 (+HRK 53,000 vs. 2017).

vi) other operating expenses represented 0.9% (1.3% in 2017). They decreased by 22.2% (-HRK 0.6 million) to HRK 2.0 million, as a result of lower operating costs from previous years.

Operating costs12

Operating costs were HRK 128.5 million and their 11.3% increase was mainly due to i) increased material costs driven by a larger business volume, ii) increased other costs (explained above), and iii) increased staff costs (explained above).

EBITDA and EBT

The first quarter had a typical negative EBITDA due to the smaller volume of seasonal operations. EBITDA fell by HRK 4.3 million and the achieved loss was HRK 88.8 million, while adjusted EBITDA13 fell by HRK 3.3 million and the achieved loss was HRK 88.8 million. In relation to last year's comparable period, loss before tax grew by HRK 28.7 million to HRK 176.0 million due to the increased amortization costs and lower financial results (see details on the following page). Operating loss grew by 12% to HRK 185.6 million. The gross margin of the Group was -422% (-441% in 2017). The outlook remains positive due to a better booking pace compared to last year's results and the expected positive effects of this year's large investment cycle.

12 Operating costs include material costs, staff costs, other costs, and other operating costs reduced by extraordinary expenses and one-off items.

13 Adjustments were made for (i) extraordinary income (in the amount of HRK 2.0 million in 2018, and HRK 3.4 million in 2017), (ii) extraordinary expenses (in the amount of HRK 1.9 million in 2018, and HRK 2.4 million in 2017), and (iii)

termination benefit costs (in the amount of HRK 0.2 million in 2018, and HRK 0.2 million in 2017).

BUSINESS RESULTS 1/1/2018 - 31/3/2018

11 Classified accordiong to the Quarterly Financial Statement (TFI POD-RDG).

Financial result

In the first quarter of 2018, the Group reported a positive financial result of HRK 9.6 million (HRK 18.4 million in 2017), although lower by HRK 8.7 million in relation to the previous comparable period. This decrease was driven by i) a HRK 1.7 million decrease in net (positive) foreign exchange differences related to long-term loans, ii) a lower positive fair value of FX forwards that fell by HRK 4.8 million due to the lower appreciation of HRK vs. EUR in relation to last year's comparable period (1.6% in 2017 vs. 1.1% in 2018), and iii) the net effect of the HRK 2.6 million increase in financial expenses related to interest on long-term loans for financing investments.

Financial income

In the first quarter of 2018, financial income was HRK 24.1 million, down by HRK 6.6 million in relation to last year's comparable period. Foreign exchange differences and other financial income were HRK 22.7 million and fell by HRK 1.7 million. Unrealized gains (income) from financial assets were HRK 0.8 million and fell by HRK 4.8 million due to a lower positive fair value of FX forwards compared to the same period last year due to the lower appreciation of HRK vs. EUR. Other financial income was HRK 0.6 million.

Financial expenses

The Group's financial expenses were HRK 14.5 million and, in relation to the previous comparable period, they grew by HRK 2.6 million. Due to an increase in credit lines for the financing of the investment cycle in 2017, financial expenses related to interest rose by HRK 2.6 million to HRK 11.4 million. Unrealized expenses from financial assets increased by HRK 0.8 million, driven by increased liabilities related to the fair value of interest rate swaps due to the increased amount of hedged positions.

14 Net debt: non-current and current liabilities to banks and other financial institutions + liabilities for loans, deposits and other– cash and cash equivalents – long-term

Assets and liabilities

As of 31 March 2018, the total value of the Group's assets decreased by 2.3% compared to 31 December 2017 and totaled HRK 4,883.3 million. The reasons for this decrease as well as the decrease in other balance sheet items must be viewed in the context of reduced business volume typical for the first quarter.

Total share capital and reserves fell by HRK 177.1 million to HRK 2,339.1 million due to the achieved loss.

Total long-term liabilities rose from HRK 1,915.7 million to HRK 1,933.6 million due to loans contracted to finance this year's investments.

Total short-term liabilities were HRK 463.9 million and rose by 15.1 % vs 31 December 2017 as a result of typically higher liabilities related to advance payments from customers totaling HRK 112.6 million.

Cash and cash equivalents were HRK 78.7 million as at 31 March 2018. Their typical decrease vs. year-end 2017 results from the outflows related to the preparation for the 2018 season.

The contracted credit lines for investments and the strong cash potential from business activities secures a smooth continuation of future investments and potential acquisitions.

Assets and liabilities

Key operating indicators of Valamar Riviera Group per segments15

HOTELS AND RESORTS Total Premium Upscale Midscale Economy
1 - 3/2017 1 - 3/2018 2018/
2017
1 - 3/2017 1 - 3/2018 2018/
2017
1 - 3/2017 1 - 3/2018 2018/
2017
1 - 3/2017 1 - 3/2018 2018/
2017
1 - 3/2017 1 - 3/2018 2018/
2017
Number of accommodation units 8,982 9,278 3.3% 1,269 1,554 22.5% 1,980 1,986 0.3% 3,493 3,326 -4.8% 2,240 2,412 7.7%
Accommodation units sold 47,729 64,189 34.5% 9,001 12,640 40.4% 4,331 14,267 229.4% 15,887 20,885 31.5% 18,510 16,397 -11.4%
Overnights 83,290 104,837 25.9% 14,624 20,694 41.5% 8,045 27,964 247.6% 28,099 38,693 37.7% 32,522 17,486 -46.2%
ADR10 (in HRK) 297 354 19.2% 439 507 15.5% 454 469 3.3% 421 397 -5.7% 85 81 -4.7%
Board revenues (in HRK) 14,176,651 22,731,942 60.3% 3,949,544 6,408,910 62.3% 1,968,054 6,696,557 240.3% 6,692,502 8,294,566 23.9% 1,566,550 1,331,909 -15.0%
CAMPING RESORTS Total Premium Upscale Midscale Economy
1 - 3/2017 1 - 3/2018 2018/
2017
1 - 3/2017 1 - 3/2018 2018/
2017
1 - 3/2017 1 - 3/2018 2018/
2017
1 - 3/2017 1 - 3/2018 2018/
2017
1 - 3/2017 1 - 3/2018 2018/
2017
Number of accommodation units 11,870 11,370 -4.2% 3,466 4,053 16.9% 1,434 2,189 52.6% 5,150 3,335 -35.2% 1,820 1,793 -1.5%
Accommodation units sold 3,667 619 -83.1% 10 240 2300.0% 70 136 94.3% 57 114 100.0% 3,530 129 -96.3%
Overnights 318 1,246 291.8% 15 501 3240.0% 116 221 90.5% 116 188 62.1% 71 336 373.2%
ADR10 (in HRK) 130 951 631.5% 598 580 -3.0% 1,565 1,170 -25.2% 4,720 1,777 -62.4% 26 682 2523.1%
Board revenues (in HRK) 475,128 588,800 23.9% 5,983 139,152 2225.8% 109,540 159,080 45.2% 269,067 202,573 -24.7% 90,538 87,996 -2.8%

Key operating indicators of Valamar Riviera Group per destinations15

DESTINATION Poreč Rabac Island of Krk Island of Rab Dubrovnik
1 - 3/2017 1 - 3/2018 2018/
2017
1 - 3/2017 1 - 3/2018 2018/
2017
1 - 3/2017 1 - 3/2018 2018/
2017
1 - 3/2017 1 - 3/2018 2018/
2017
1 - 3/2017 1 - 3/2018 2018/
2017
Number of accommodation units 10,584 10,596 0.1% 1,971 2,124 7.8% 3,577 3,496 -2.3% 2,759 2,466 -10.6% 1,961 1,966 0.3%
Accommodation units sold 20,319 29,367 44.5% 21,417 20,370 -4.9% 118 572 384.7% 744 1,515 103.6% 8,899 12,984 45.9%
Overnights 29,312 54,680 86.5% 38,441 26,770 -30.4% 138 1,096 694.2% 1,449 2,913 101.0% 14,567 20,624 41.6%
ADR10 (in HRK) 356 428 20.2% 145 185 27.6% 1,247 507 -59.3% 537 537 0.0% 424 453 6.8%
Board revenues (in HRK) 7,226,492 12,582,750 74.1% 3,108,448 3,759,302 20.9% 147,123 289,724 96.9% 399,796 813,644 103.5% 3,769,919 5,875,322 55.8%

15 According to the classification under the USALI international standard for reporting in hotel industry (Uniform System of Accounts for the Lodging Industry). Puntižela - Pula business is included in destination Poreč. A detailed comparison of the new portfolio segmentation can be found on page 16.

Hotels and resorts

Hotels and resorts reported a 60.3% growth (+HRK 8.6 million) and HRK 22.7 million in board revenues. The high increase resulted from the demand-driven optimization of the marketing mix, prices due to this year's earlier Easter holidays as well as demand-driven number of operating days, in particular in the premium and upscale segment.

Premium hotels and resorts

Premium hotels and resorts reported a 62.3% increase in board revenues that totaled HRK 6.4 million. The growth was mostly under the impact of i) better performance reported by the Valamar Lacroma 4* hotel driven by the increase in the allotment and group channels and ii) the earlier opening of the Valamar Dubrovnik President 5* hotel that reported a particular increase in the M.I.C.E.16 segment.

Upscale hotels and resorts

Upscale hotels and resorts reported HRK 6.7 million in board revenues. The HRK 4.7 million growth was primarily driven by larger volumes, i.e. 27,964 realized overnights (+247.6%). The strong growth was driven by: i) the great market feedback received by all the channels at Hotel & Casa Sanfior 4*, especially allotments and individuals, ii) the earlier opening of Family Life Bellevue Resort 4* and Valamar Club Tamaris 4*, iii) better performance reported by the Valamar Zagreb 4* and Valamar Riviera 4* hotels that was driven by the European Handball Championship in Poreč and iv) growth in all segments at the Valamar Padova 4* hotel.

Midscale hotels and resorts

The midscale segment reported HRK 8.3 million in board revenues. The HRK 1.6 million growth was driven by a 31.5% increase in the number of accommodation units sold. Apart from the earlier Easter holidays, most of the growth was driven by the European Handball Championship in Poreč that

directly increased the number of overnights at the Valamar Diamant 4* and Valamar Crystal 4*.

Economy hotels and resorts

Economy hotels and resorts reported HRK 1.3 million in board revenues, while the HRK 0.2 million decrease was caused by Marina 2* hotel being closed.

Camping resorts

In the first quarter, campsites in general do not provide accommodation services and their business results were primarily related to revenues driven by winter flat rates.

Destinations

Destination Poreč

Poreč reported HRK 12.6 million in board revenues. The HRK 5.4 million increase was the result of the positive effects driven by the European Handball Championship in Poreč (increased number of overnights reported by the following hotels: Valamar Diamant 4*, Valamar Zagreb 4*, Valamar Crystal 4* and Valamar Riviera 4*) and the earlier opening of individual properties for Easter holidays.

Destination Rabac

Rabac reported HRK 3.8 million in board revenues. Most of the HRK 0.7 million growth was due to a good market feedback received by all the channels at the Hotel & Casa Valamar Sanfior, individuals and allotments in particular.

Destination Krk Island

This destination reported HRK 0.3 million in board revenues, and the business results were primarily related to revenues driven by the campsites' winter flat rate.

Destination Rab Island

Despite the Valamar Imperial Hotel 4* being closed due to investments, this destination reported a HRK 0.4 million increase in board revenues that totaled HRK 0.8 million. Most of the growth was driven by the Valamar Padova 4* hotel that reported good market feedback in all the segments.

Destination Dubrovnik

Dubrovnik reported HRK 5.9 million in board revenues. The HRK 2.1 million growth was influenced by the earlier opening of the Valamar Dubrovnik President 5* and Valamar Club Dubrovnik 3* hotels and the increase in the allotment and group channels at Valamar Lacroma 4* hotel.

Over the years Valamar Riviera has consolidated its portfolio in order to clearly differentiate, develop and reposition its hospitality products. A precise definition of market segments, the innovative development of service concepts, brand management, profitability increase and return-on-investment optimization demanded a revised segmentation of the portfolio of hospitality properties.

Hotels and Resorts Overview Categorization Segment Destination
2017 2018 2017 2018
Valamar Dubrovnik President Hotel * * Premium Premium Dubrovnik
Valamar Isabella Island Resort * / ** * / ** Premium Premium Poreč
Valamar Lacroma Hotel ****+ ****+ Premium Premium Dubrovnik
Valamar Club Tamaris **** **** Upscale Upscale Poreč
Valamar Riviera Hotel & Residence **** **** Upscale Upscale Poreč
Valamar Zagreb Hotel **** **** Upscale Upscale Poreč
Hotel & Casa Valamar Sanifor **** **** Upscale Upscale Rabac
Valamar Argosy Hotel **** **** Upscale Upscale Dubrovnik
Valamar Padova Hotel **** **** Upscale Upscale Rab Island
Valamar Diamant Hotel & Residence **** **** Midscale Midscale Poreč
Valamar Crystal Hotel **** **** Midscale Midscale Poreč
Valamar Pinia Hotel & Residence *** *** Midscale Midscale Poreč
Valamar Rubin Hotel *** *** Midscale Midscale Poreč
Bellevue Family Life Resort **** **** Upscale Upscale Rabac
Allegro Hotel *** *** Midscale Midscale Rabac
Miramar Hotel *** *** Midscale Midscale Rabac
Hotel Corinthia *** *** Midscale Midscale Krk Island
Zvonimir Hotel, Atrium & Villa Adria * / ** * / ** Midscale Midscale Krk Island
Valamar Koralj Romantic Hotel *** *** Midscale Midscale Krk Island
Valamar Club Dubrovnik *** *** Midscale Midscale Dubrovnik
Valamar Imperial Hotel **** **** Midscale Premium Rab Island
Hotel & Residence Carolina **** **** Midscale Midscale Rab Island
San Marino Resort *** *** Midscale Midscale Rab Island
Naturist Resort Solaris *** *** Economy Economy Poreč
Pical Hotel ** ** Economy Economy Poreč
Tirena Hotel *** *** Economy Economy Dubrovnik
Valamar Girandella Resort */** */** Premium Premium Rabac
Lanterna Apartments ** ** Economy Economy Poreč
Hotel & Residence Eva ** ** Economy Economy Rab Island
Marina Hotel & Mediteran Residence ** ** Economy Economy Rabac
Camping Resorts Overview Categorization Segment Destination
2017 2018 2017 2018
Camping Krk * * Premium Premium Krk Island
Camping Ježevac **** **** Upscale Premium Krk Island
Camping Lanterna **** **** Premium Premium Poreč
Camping Marina **** **** Upscale Upscale Rabac
Naturist Camping Bunculuka **** **** Upscale Upscale Krk Island
Camping Orsera *** *** Midscale Midscale Poreč
Naturist Resort Solaris *** *** Midscale Midscale Poreč
Camping Zablaće *** **** Midscale Upscale Krk Island
Camping Škrila *** *** Midscale Midscale Krk Island
Camping Solitudo *** *** Midscale Midscale Dubrovnik
Camping San Marino *** **** Midscale Upscale Rab Island
Camping Padova *** *** Midscale Midscale Rab Island
Naturist Camping Istra ** ** Economy Economy Poreč
Camping Brioni ** ** Economy Economy Pula - Puntižela
Camping Tunarica ** ** Economy Economy Rabac

Results of the Company

It is important to note that the data provided in the current year's financial statements are not fully comparable to prior year's data because of the mergers reported below. Current period items and prior period items until the time of the merger i.e. until 31 March 2017 did not include Puntižela d.o.o. as well as Elafiti Babin kuk d.o.o. until 29 December 2017.

In the first quarter of 2018, total revenues grew by HRK 2.6 million to HRK 64.4 million. Sales revenues were HRK 38.9 million and represented 61% of total revenues (43% in 2017). Compared to the same period last year, they grew by HRK 12.5 million. Their 48% growth was the result of the strong 58.5% growth in board revenues that totaled HRK 22.5 million. Sales revenues between parties within the Group were HRK 3.4 million (HRK 0.8 million in 2017) and mainly represented the management fee for Imperial's properties on the island of Rab. Sales revenues outside of the Group were HRK 35.5 million (HRK 25.6 million in 2017). Domestic sales revenues were HRK 16.1 million, representing 25% of total revenues (22% in 2017) and were 20% higher in relation to the past comparable period. International sales revenues were HRK 22.9 million and represented 36% of total revenues (21% in 2017). They grew by 75% in relation to the previous comparable period. Other operating and financial income represented 39% of total revenues (57% in 2017). Other operating revenues fell by 41% and totaled HRK 2.7 million, representing 4% of total revenues (7% in 2017).

Material costs fell by HRK 1.2 million to HRK 37.5 million and represented 18% of operating expenses (21% in 2017). Staff costs were HRK 59.0 million and represented 28% of operating expenses (29% in 2017). Compared to the same period last year, they grew by HRK 5.2 million, mainly due to the efforts invested in securing competitive salaries and other material and non-material work conditions as well as new hiring necessary to ensure service quality for the new premium and upscale products to be opened at the beginning of the second quarter of 2018. Valamar Riviera is therefore the first company in Croatia guaranteeing a minimum net salary between HRK 5,000 and 7,500 to all of its employees. Amortization represented 40% of operating expenses (36% in 2017) and totaled HRK 84.5 million (HRK 66.2 million in 2017). It grew by 28% due to the large investment cycle that had been carried out. Other costs were HRK 26.5 million and increased by HRK 3.6 million mainly due to the i) increased costs of scholarships and employee training, ii) increased costs of lodging and meals of employees, and iii) increased costs of insurance. Provisions and value adjustments were HRK 72,000. Other operating expenses fell by HRK 0.4 million and totaled HRK 1.8 million.

In the first quarter of 2018, financial income was HRK 22.7 million, down by HRK 8.2 million vs. 2017. The 26.4% decrease was driven by a i) a HRK 4.8 million decrease in unrealized gains (income) from financial assets due to a lower positive fair value of foreign currency term contracts vs. the same period last year, ii) HRK 3.2 million decrease in foreign exchange differences and other financial income, of which the largest item is represented by unrealized positive foreign exchange differences related to long-term loans. This is a consequence of the lower appreciation of HRK vs. EUR in relation to last year's comparable period. Other income related to interest grew by 32% and totaled HRK 50,800.

Financial expenses were HRK 12.9 million, up by HRK 2.3 million vs. previous comparable period results. Financial expenses related to interest and similar expenses grew by HRK 2.9 million and totaled HRK 10.4 million due to an increase in credit lines for the financing of the investment cycle in 2017. Foreign exchange differences and other expenses fell by HRK 1.2 million and totaled HRK 1.4 million. Unrealized loss from financial assets grew by HRK 0.8 million due to the increased liabilities related to the fair value of interest rate swaps resulting from the increase in the amount of hedged positions.

In relation to last year's comparable period, loss before tax grew by HRK 25.4 million to HRK 157.9 million due to increased amortization and a weaker result of financial activities. Operating loss grew by 10% to HRK 167.7 million. The Company's gross margin was -379% (-429% in 2017). The outlook remains positive due to a better booking pace compared to last year's results and the expected effects of this year's large investment cycle.

Total company assets as at 31 March 2018 were HRK 4,534.9 million, down by 2% vs. 31 December 2017.

2018 Investments Valamar Girandella Resort 4*&5*, Rabac

Valamar is one of the largest investors in Croatian tourism. We are carrying out new large investments worth HRK 705 million in 2018, as part of our strategy to invest HRK 2 billion by 2020. This year's HRK investment cycle is part of our strategy focused on further double-digit business growth and encompasses all of our five destinations, while Valamar's success and growth is based on sustainable and socially responsible investments in products, employees and destinations.

Our investment cycle in 2018 follows our strategy to reposition our portfolio towards top quality products and services, while the investments include the modernization of existing properties and the addition of new ones. Last year's opening of the two new resorts in Rabac represented the largest investment in Croatia's tourism. In this year, we plan to complete Valamar Girandella Resort in Rabac by opening the first Kinderhotel in our portfolio - Valamar Girandella Maro Suites 5*. Besides this key project in Rabac, other large investments are in progress at other destinations as well as the ongoing investments in premium camping.

The investment cycle carried out by Imperial this year is one of the largest in the history of the company. The investments are aimed at improving the quality of properties and services and the competitiveness of the whole destination. The reconstruction and repositioning of Grand Hotel Imperial 4* as "adults only" accommodation is the largest investment on Rab Island.

Destination Poreč

Investments at Lanterna Premium Camping Resort 4* are focused on improving accommodation and overall quality, including the reconstruction of the main road with

Camping Ježevac 4*, Krk Island footpaths and cycling paths. In the forthcoming season, the resort will include a large number of new features: the brand new family- friendly Maro Premium Village with 86 mobile homes, 9 glamping tents and other amenities (two swimming pools and children's playgrounds); 18 new mobile homes at Marbello Premium Village; 14 new glamping tents and improved beach at Glamping Village; a new zone for sports, recreation and entertainment –V Sport Park with Terra Magica adventure mini golf and numerous other amenities, as well as the reconstructed main road with footpaths and cycling paths.

The repositioning of Istra Camping Resort as premium accommodation is divided in three phases, and the first phase is planned for 2018. It includes the reconstruction of the municipal infrastructure (electrical and water supply, drainage, optical network, wireless network and the construction of a new main road). It also covers the improvement of several beaches and the reconstruction of the present 117 pitches in the southern part of the camping pitch zone and a new sanitary block. The second phase is planned to start in autumn, and it will include investments in the upgrade of accommodation and additional amenities.

Destination Rabac

We are opening our first Kinderhotel, Valamar Girandella Maro Suites 5*, by the end of April. The accommodation, services and amenities at Valamar Girandella Maro Suites 5* are tailored according to the needs of families with children of different ages: from spacious family rooms with children's accessories, indoor and outdoor swimming pools with water attractions and slides, to entertainment activities at the Maro clubs and the Teen Hangout zone. The restaurant includes a children's buffet serving soft drinks and afternoon snacks such as salads, soups and cakes and there is also a play lounge with an indoor playground. There are 50 Kinderhotels in Europe, and this will be the third Kinderhotel in Croatia. The hotel opening will complete the investments in Rabac where Valamar invested around HRK 600 million in the previous

period and Rabac will be repositioned as leading high-end holiday destination. Valamar Girandella Maro Suites 5* will create 150 new jobs at this destination and the recruiting will focus on chefs, waiting staff and bartenders, housekeeping and pool staff.

Destination Krk Island

The upgrade of Zablaće Camping Resort from 3* to 4* is in progress and the investment includes 35 new mobile homes, the construction of a new sanitary block and other amenities, landscaping work, infrastructural improvements of camping pitches and the introduction of energy-saving LED lighting.

Ježevac Camping Resort 4* is undergoing investments in a new pool zone featuring a sundeck and slides, a new children's playground, 31 new mobile homes and the replacement of 18 existing mobile homes with new ones. In the forthcoming season, the campsite will feature an EV charging station and upgraded services in line with premium campsite standards.

Škrila Camping 3* will feature a new shopping area, redesigned landscape, new mobile homes and energysaving LED lighting.

Investments at Bunculuka Camping Resort 4* are focused on the installation of solar panels and the redesign of the campsite entrance area.

After a four-year investment cycle, in 2016 Krk Premium Camping Resort became the first 5-star campsite in Croatia. The investments focused on improving a number of features: overall quality, beach services, landscape, sanitary block and now it also includes an EV charging station.

Destination Rab Island

The opening of the Valamar Imperial Hotel 4* on Rab Island is planned for the start of May: the new adults-only luxury hotel will include 136 keys, modern double rooms, a premium restaurant and other improved amenities.

Investments in campsites on Rab Island are focused on Lopar Garden Village at San Marino Camping Resort 4* that will offer new mobile homes. Moreover, numerous new features will be introduced at Padova Camping Resort 3*: from the new Marine Premium Village to the introduction of innovative camping concepts such as the spacious "camping suites" and "romantic camping chalets" for couples.

Destination Dubrovnik

Investments in Dubrovnik are focused on repositioning hotel accommodation and developing high-quality products and services. The Valamar Argosy Hotel 4* will open the new 2018 season offering upgraded service quality and new improved amenities such as the new outdoor pool featuring a new snack bar and terraces, landscape improvements, the total refurbishment of the 308 rooms, reception, lobby and restaurant and the redesign of the common areas.

As stated in our strategic goals, by continuously raising the quality of the portfolio properties and services, we create added value both for our guests and all company stakeholders. However, numerous factors reduce the competitiveness of Croatian tourism and hinder further investment potential: VAT (one of the highest rates in the Mediterranean), the rate of total contributions to salaries, the still unresolved issue of tourism land, skilled labor shortages, the likely introduction of property tax and tourist tax increase. While global trends report low interest rates and market demand focuses on safe tourist destinations, Croatia has the opportunity to reposition its tourism by incentivizing investments in products and services with high added value that stimulate employment and economic growth. Unfortunately, tourism is still not sufficiently recognized as an opportunity for the Croatian economy. Apart from the current financing programs offered by HBOR (Croatian Bank for Reconstruction and Development), tax incentives prescribed by the Act on Investment Promotion and Improvement, the decrease in the corporate income tax rate (from 20% to 18%, January 2017), and the tax-exempt in the accommodation and meals for seasonal employees (January 2018) there are no other measures that could significantly increase the growth pace and contribute to level Croatia's position with other destinations in the Mediterranean.

The Risks of the Camping Ježevac 4*, Krk Island Company and the Group

Tourism is a global industry, closely connected with the real and financial economy, geopolitical position and environmental sustainability. The integrity of this industry will determine its future growth. Given the importance of tourism and its overall impact on society, the Company and the Group monitor and assess risks at micro and macro levels. Moreover, when defining the strategy, particular attention is given to the short and medium–term risk impact in order to maintain business sustainability over time.

When monitoring and assessing risks the Company and Group use a proactive approach thus assessing the potential impact of each individual risk. The Company and Group consider risk management to be a key factor of differentiation among competitors. Risk management aims at creating sustainable value, thus offering reliability and security to numerous stakeholders.

There are five key steps in a risk management process:

  • 1) Identifying potential risks;
  • 2) Assessing identified risks;
  • 3) Determining actions and responsibilities for efficient risk management;
  • 4) Monitoring and overseeing preventive actions;
  • 5) Exchanging information on risk management results conducted by the Management board.

The different types of risks facing Valamar Riviera can be classified into the following groups:

  • Financial risks
  • related to financial variables, can have a negative impact on meeting liabilities for the company and the Group, liquidity, debt management etc.;
  • Business risks
  • related to the way company business is conducted in terms of supply and demand, competition, adapting to market trends, investments, growth etc.;
  • Operational risks
  • can arise from inadequate use of information, errors in business operations, non-compliance with internal procedures, human error, IT system, financial reporting and related risks, etc.;
  • Global risks
  • can arise from natural disasters, pandemics, food shortage, social unrest, wars and other force majeure events beyond Valamar Riviera's control;
  • Compliance risks
  • can arise from failure to comply with state laws and local regulations; risks related to changes in tax and other regulations.

Financial risks

In their day-to-day business activities, the Company and Group face a number of financial threats, especially:

  • 1) Foreign exchange risk;
  • 2) Interest rate risk;
  • 3) Credit risk;
  • 4) Price risk;
  • 5) Liquidity risk;
  • 6) Share-related risks.

The Company and Group have a proactive approach in mitigating interest rate and foreign exchange risks, by employing available market instruments. Internal risk management goals and policies aim at protecting foreign currency inflows during seasonal activity and partial interest hedging of the principal loan amount.

1) Foreign exchange risk

The Company and Group conduct their business operations across national borders and are exposed to foreign exchange risks. They mainly result from changes in the euro/ kuna exchange rate. Foreign exchange risk arises from future commercial transactions and recognized assets and liabilities. Most of the sales revenue generated abroad is denominated in euros, and so is the major part of longterm debt. Hence, for the most part the Company and Group are naturally hedged from exchange rate risks. Since some liabilities are denominated in kunas, the Company and Group actively manage risks by using derivative instruments available on the financial market. The instruments are used according to operating assessments and expected market trends. In this way the assets, liabilities and cash flow are protected from the risk impact.

2) Interest rate risk

Variable rate loans expose the Company and Group to cash flow interest rate risk. Periodically, the Company and Group resort to derivative instruments in order to hedge cash flow and interest rate by applying interest rate swaps. The economic effect of such swaps is the conversion of variable interest rate loans into fixed interest rate loans for a precommitted hedged part of the loan principal. The Company and Group have interest-bearing assets (cash assets and deposits) so their revenue and cash flow depend on changes in market interest rates. This becomes evident especially during the season when the Company and Group have significant cash surpluses at their disposal.

3) Credit risk

Credit risk arises from cash assets, time deposits and receivables. According to the Company and Group sales policy, business transactions are conducted only with customers with suitable credit history, i.e. by agreeing advances, bank securities and (for individual customers) payments made through major credit card companies. The Company and Group continuously strive to monitor their exposure towards other parties and their credit rating as well as obtain security instruments (bills of exchange, promissory notes) in order to reduce bad debt risks related to services provided.

4) Price risk

The Company and Group hold equity securities and are exposed to equity price risk due to security price volatility. Valamar Riviera is not an active participant in the market trade in terms of trading in equity and debt securities. However, with the HRK 291 million invested in buying Imperial shares, the company is exposed to the said risk to a certain extent.

5) Liquidity risk

The Company and Group have a sound liquidity risk management. Sufficient funds for meeting liabilities are available at any given moment through adequate amounts from contracted credit lines and by ensuring credit line availability in the future. Liquidity risk is managed by generating strong positive net operating cash flows, while capital investments are financed by credit lines. All the credit lines in 2017 have already been arranged with financial institutions. The repayment of the major credit lines coincides with periods of strong cash inflows from operations. The Company and Group monitor the level of available funds through daily cash and debt reports. Long-term cash flow forecasts as well as annual (monthly) forecasts are based on the set budget. After meeting the needs of working capital management the surplus is deposited in the treasury. From there the funds are invested in interest-bearing current accounts, time deposits, money market deposit accounts and marketable securities. Only instruments with suitable maturities and sufficient liquidity are selected, according to the forecast needs for liquid funds.

6) Share-related risks

The market value of shares is the riskiest asset class due to its volatility resulting from the volatile nature of the whole capital market, macroeconomic trends on markets where the

Hotel Valamar Padova 4*, Rab Island Company and Group operate and discrepancies between the expectations of financial analysts and the actual results. Furthermore, other contributing factors are also changes in the dividend policy, various activities in the segment of consolidations, mergers, acquisitions and forming of strategic partnership, the instability of the business model of the Company and Group as well as the fluctuations in the financial results for the Company and Group. In case any negative implications happen to be associated with these factors there is a considerable risk of market value drop that will in turn prevent investors from selling their shares at a fair market price.

Business risk

The Company and Group are constantly exposed to risks threatening its competitiveness and future stability. Since the Company and Group own real estate, this business model requires a large amount of capital in order to maintain high product and service standards. Various large capital investments in the upgrade of products and services can surpass budget expectations, delay the end of construction works, as well as the town-planning regulations and fiscal policy may be changed. These risks can increase costs for the Company and Group, and have a negative impact on the cash flow and revenues. In the previous period, the company and Group's business decisions improved their results and operating efficiency in the demanding Mediterranean market. These positive trends are expected to continue in the future through a prudent long-term strategic management.

Over 95% of Valamar Riviera's guests come from other countries and they are very careful when choosing their vacation destination in the competitive Mediterranean environment. Stable domicile countries macroeconomic indicators are important decision-making factors especially those relating to exchange rates and the price of goods and services because they directly affect the guests' purchasing power. However small, the share of domestic guests is also important; it is a segment directly influenced by various other macroeconomic indicators: employment/ unemployment rate, GNP rise/fall, industrial production and others. They all have a direct impact not only on the purchasing power of Croatian residents but they also determine whether they will choose to spend their vacation on the Adriatic.

When considering risks related to the tourism and hospitality industry, in previous years, the Croatian economy has been afflicted by the consequences of a global financial crisis and economic standstill. In this period, the tourism and hospitality industry has been among the rare growing industries in Croatia. Moreover, the marked seasonality of this industry leads to insufficient use of the Company and Group's resources. After joining the European Union, the Croatian market became part of a large European market, while safety risks decreased after joining the NATO. The Croatian Tourism Development strategy until 2020 (a government document published in the Official Gazette no. 55/13) defines the kind of tourism Croatia wants and needs to develop using the country's comparative advantages and expertise in order to improve the competitiveness of Croatian tourism. Maintaining the current tourism growth rates in the following years is of vital importance. It can be achieved by strategically developing tourism products and investing in the creation of additional values, which will help distinguish Croatian tourism from its competitors by emphasizing its uniqueness, appeal and quality.

Good management of human resources is vital for the future growth of the Company and Group. Risks related to shortages of specific skills, expertise and jobs are connected with the opening and expansion of the labor market. Valamar Riviera is one of the largest and most desirable employers in tourism. The active approach towards HR management develops key talents and

supports investments in training opportunities (HRK 2.5 million invested in training and professional development during 2017). We determine the needs for new skills and expertise by following emerging global trends in tourism. In this way, we are able to respond to challenges effectively. Through a continual dialogue with our social partners, we have ensured a high level of workers' rights in terms of competitive salaries, reward systems, career development, employees' wellbeing and cooperation with training institutions from all parts of Croatia.

Operational risks

Operational risks are risks connected with direct or indirect losses that arise form inadequate or wrong internal or external processes within the Company and the Group. They include the creation and analysis of financial reporting data (also known as "financial reporting risk") and also the potential insufficient and inadequate internal and external information sharing. When implementing the system of operational risk management, the Company and Group focused on its continuity and complexity due to the size of the organization. The benefits of the system include i) defining and identifying the Company and Group risk profile in relation to the operating risk ii) identifying and managing the known risk occurrences in order to decrease the

Company and Group costs and iii) data analysis which indicates the business trends for the Company and Group and trends in the domestic economy.

The Company and Group are aware of the reliability of IT business solutions and safety in the cyber world. Hence, they continually upgrade, develop and implement new technologies in everyday business operations. A special focus is given to providing sufficient resources for the development and implementation of new technologies related to ICT, data protection, and upgrade of the current business systems and implementation of new ones.

Global risks

Despite improved security and political conditions, which have encouraged to a certain extent investments into tourism and hospitality, there are challenges that the Croatian tourism has to face, such as:

  • Periods of global financial crisis which reduce the purchasing power of the travelling-prone population;
  • Security issues related to globally escalating terrorism threats;
  • Security and political instability in the immediate environment of the neighboring countries.

Environmental risks can also have an adverse effect on the Company and Group's business results, primarily in terms of customer satisfaction with the whole experience while staying at one of Valamar's properties and this can affect the number of arrivals. The possible risks can include: sea pollution (caused by oil or chemical spillage), but also long-term water quality reduction and coast pollution due to inadequate waste disposal and waste water treatment as well as extensive use of agricultural fertilizers. Other environmental conditions typical for climate changes such as long drought periods or long rainy periods can directly influence the guests' length of stay in the hotels and campsites as well as increasing the operating costs. A number of other natural disasters and calamities (earthquakes, fires, floods and rainstorms), air pollution caused by toxic gas emissions from industrial plants and vehicles, as well excessive urbanization and the introduction of invasive species should also be taken into consideration.

Compliance risks

Changes in tax laws and other regulations pose a very serious threat and represent a demanding segment in risk management because in this particular situation the possibilities for the Company and Group are limited. In previous years, there has been a number of important changes in tax and non-tax charging regulations, which have adversely affected the Company and Group profitability:

  • In March 2012 the standard VAT rate grew from 23% to 25%, in January 2013 a new 10% VAT rate was introduced only to be replaced within a year by a 13% VAT rate applicable to the tourism and hospitality industry (January 2014), while in January 2017 a new 25% VAT rate was introduced for F&B (a la carte) services;
  • In May 2012 the health insurance employer contribution rate fell from 15% to 13% and then in April 2014 it grew back to 15%;
  • Frequent increases in various fees and charges regarding water distribution and the like;
  • Tourist tax increase in 2018 ranging between HRK 2.5 and HRK 8.0 per person per overnight, depending on the class of the destination and utilization period (August 2017).

Such frequent changes in laws regulating taxes and parafiscal charges often take place only after the business policy and budget for the next financial year have been approved and commercial terms and conditions with partners agreed. All this jeopardizes the Company and Group financial position and future investment plans as well as credibility towards shareholders. The Company and Group are also threatened by changes in regulations governing concession fees for maritime domain and tourism land use, the latter still presenting unresolved legal issues. Given the nature of the Company and Group's business, the right to use parts of the maritime domain as well as land for tourism purposes is of vital importance for future growth, especially for campsiterelated operations.

Corporate Governance

The Company and the Group continuously strive to develop and operate according to good practices of corporate governance. The business strategy, corporate policy, key corporate regulations and business practice are all geared towards creating a transparent and efficient business operation while forging solid bonds with the local community. In order to foster further growth and set high corporate governance standards, the Company adopted its own Corporate Governance Code in 2008 and the Management Board fully complies with its provisions. After the company was listed on the Official market of the Zagreb Stock Exchange, the Company has also complied with the Zagreb Stock Exchange Governance Code. The Company respects and implements the prescribed corporate governance measures (as reported in detail in the prescribed annual questionnaire and published as prescribed on the Zagreb Stock Exchange and Valamar Riviera websites).

The major direct shareholders according to the Central Depository and Clearing Company data are presented in the overview in the "Valamar Riviera Share" section.

The Company defined the process of preparing and disclosing financial reports in a detailed internal document. With this, the financial reporting procedure is set within a system of internal review and risk management. Moreover, in order to monitor and mitigate the financial reporting risk, the Company uses the measures described in "The Risks of the Company and the Group".

The Companies Act and the Company Statute define the General Assembly's authority and prescribe how it meets and works. The meeting invitation, proposals and the adopted resolutions are made public according to the provisions of the Companies Act, Capital Market Act and the Zagreb Stock Exchange Rules. There is a time limit related to the voting right at the General Assembly: according to the provisions of the Croatian Companies Act, shareholders are required to register their participation within the prescribed time limit in order to attend the General Assembly. Under no circumstances can the financial right arising from securities be separated from holding the securities. There are no securities with special control rights nor are there any limitations to voting rights at the Company (one share, one vote). The Company Statute complies with the Croatian Companies Act and defines the procedure of appointing and recalling members of the Management Board and Supervisory Board. There are no limitations based on gender, age, education, profession or similar. According to the General Assembly's decision dated 17 November 2014, the Company can acquire its own shares. The Companies Act determines any amendments to the Company Statute, without any additional limitations. The Management Board members' authority fully complies with the regulations prescribed by the Companies Act.

The Company's Corporate Bodies Are:

Management Board: Mr. Željko Kukurin, President of the Management Board, and Mr. Marko Čižmek, Member of the Management Board.

Pursuant to the provisionss of the Capital Market Act and Regulation (EU) no. 596/2014, the Company has determined its senior management, consisting of the key company management: four vice presidents (Alen Benković, Davor Brenko, Ivana Budin Arhanić and David Poropat) and 21 sector directors (Miro Dinčić, Tomislav Dumančić, Ljubica Grbac, Flavio Gregorović, Marin Gulan, Vlastimir Ivančić, Željko Jurcan, Ivan Karlić, Dario Kinkela, David Manojlović, Sebastian Palma, Mile Pavlica, Tomislav Poljuha, Mirella Premeru, Bruno Radoš, Sandi Sinožić, Martina Šolić, Andrea Štifanić, Mauro Teković, Dragan Vlahović and Ivica Vrkić).

Supervisory Board: Mr. Gustav Wurmböck - Chairman, Mr. Franz Lanschützer - Deputy Chairman, Mr. Mladen Markoč - Deputy Chairman, and members: Mr. Georg Eltz, Mr. Hans Dominik Turnovszky, Mr. Vicko Ferić, and Mr. Valter Knapić (employee representative).

In order to perform efficiently its function and duties as prescribed by the Audit Act, the Supervisory Board has formed the following bodies:

Presidium of the Supervisory Board: Mr. Gustav Wurmböck, Chairman, Mr. Franz Lanschützer and Mr. Mladen Markoč, Presidium Members.

Audit Committee: Mr. Gustav Wurmböck, Chairman, and members: Mr. Franz Lanschützer, Mr. Georg Eltz, Mr. Mladen Markoč, and Mr. Vicko Ferić.

Investment Committee: Mr. Franz Lanschützer, Chairman and members: Mr. Georg Eltz, Mr. Vicko Ferić, Mr. Hans Dominik Turnovszky, and Mr. Gustav Wurmböck.

Compliant to effective regulations and Company bylaws, The Management and Supervisory Board primarily act through meetings and by correspondence in their decision-making.

Related-party transactions

Transactions between related parties within the Group are conducted under standard commercial terms and conditions and at current market prices.

In the reviewed period, revenues from related party transactions totaled HRK 2.9 million18 (2017: HRK 894 thousand) for the Company, and HRK 274 (2017: HRK 3 thousand) for the Group. Costs were HRK 68 thousand (2017: HRK 7.2 million19) for the Company, and none for the Group (2017: none).

As at 31 March 2018, related-party receivables and payables were as follows: receivables totaled HRK 1.8 million for the Company (year-end 2017: HRK 3.4 million), and HRK 182 for the Group (year-end 2017: none). Payables totaled HRK 50 thousand (year-end 2017: HRK 604 thousand) for the Company, and none for the Group (year-end 2017: HRK 425 thousand).

Branch Offices of the Company

The following branch offices were registered on 2 September 2011: Podružnica za turizam RABAC, with registered office in Rabac, Slobode 80, Podružnica za turizam ZLATNI OTOK, with registered office in Krk, Vršanska 8. The following branch office was registered on 4 October 2013: Podružnica za turizam DUBROVNIK BABIN KUK, with registered office in Dubrovnik, Dr. Ante Starčevića 45. The following branch office was registered on 1 October 2014: Podružnica za savjetovanje u vezi s poslovanjem i upravljanjem ZAGREB, with registered office in Zagreb, Miramarska 24. The following branch office was registered on 1 April 2017: Podružnica za turizam BRIONI, with registered office in Pula, Puntižela 155.

The branch offices of Rabac, Zlatni otok, Dubrovnik-Babin kuk and Brioni are the drivers of economic growth in their local communities. They operate at their destinations and support their development by promoting further investments and the development of tourism while participating in social and business activities.

The Company also established an office in the Town of Rab on Rab Island to increase the efficiency and streamline the management of operations as determined by the provisions of the concluded Hotel management contract with Imperial d.d.

18 The most part represents the fee regarding the management of Imperial's properties and services. The implementation of the Management contract started on 4 January 2017.

19 For the most part refers to the re-invoiced amount arising from the investment made in the reconstruction and upgrading of the hotel Valamar Lacroma owned by subsidiary Elafiti Babin-kuk d.o.o. which was merged on 29 December 2017.

BUSINESS RESULTS 1/1/2018 - 31/3/2018

Valamar Riviera Share

In 2016, the Company acquired 70,426 treasury shares at a total acquisition cost of HRK 2,950,075 which represents 1.05% of the share capital. In that period the Company released 51,979 treasury shares on the basis of remuneration of Company's key management, representing 0.04%. On 31 March 2018, the Company held in total 1,812,898 treasury shares, or 1.44% of the share capital.

In the first quarter of 2018, the highest recorded share price in regular trading on the regulated market was HRK 43.60, while the lowest was HRK 40.00. Following the decline of CROBEX and CROBEX 10 index by 2.4% and 1.9% respectively, the share price of the Company decreased by 6.9%. Valamar Riviera is the most traded share on the Zagreb Stock Exchange in the first quarter of 2018 with a regular trading turnover of HRK 0.9 million per day20.

Apart from the Zagreb Stock Exchange indices, the share is also part of the Vienna Stock Exchange indices (CROX21 and SETX22), SEE Link indices23 (SEELinX and SEELinX EWI) and MSCI Frontier Markets Indexes. Zagrebačka banka d.d. and Interkapital vrijednosni papiri d.o.o. are responsible for market making in ordinary Valamar Riviera shares listed on the Official Market of the Zagreb Stock Exchange. They provide support to Valamar Riviera's share turnover, which in the period under review was an average 27.1%24.

The Company is active in holding meetings, presentations and conference calls with domestic and foreign investors. This approach supports high-level transparency, creates additional liquidity, increases share value and the involvement of potential investors. During 2018 meetings were held on the London Stock Exchange, while during the second quarter we are participating at the Zagreb and Ljubljana Stock Exchange Investor conference in Zagreb (May), Erste Consumer

20 Block transactions are excluded from the calculation.

  • 21 Croatian Traded Index (CROX) is a capitalization-weighted price index and is made up of 12 most liquid and highest capitalized shares of Zagreb Stock Exchange.
  • 22 South-East Europe Traded Index (SETX) is a capitalization-weighted price index

Performance of Valamar Riviera's share and CROBEX and CROBEX 10 indices

Conference 2018 in Warsaw (June), as well as roadshows in other European financial centers.

Valamar Riviera will continue with this active approach in 2018 to grow further value for all its stakeholders and promote Valamar Riviera's share as one of the leading shares on the Croatian capital market and among other tourism shares on the Mediterranean.

consisting of blue chip stocks traded on stock exchanges in the region of South-eastern Europe (shares listed in Bucharest, Ljubljana, Sofia, Belgrade

and Zagreb). 23 SEE Link is a regional platform for securities trading. It was founded by Bulgarian, Macedonian, and Zagreb Stock Exchange. SEE LinX and SEE LinX EWI are two The analytical coverage of Valamar Riviera is provided by:

  • 1) Alta invest d.d., Ljubljana;
  • 2) ERSTE bank d.d., Zagreb;
  • 3) FIMA vrijednosnice d.o.o., Varaždin;
  • 4) Interkapital vrijednosni papiri d.o.o., Zagreb;
  • 5) Raiffeisenbank Austria d.d., Zagreb;
  • 6) UniCredit Group Zagrebačka banka d.d., Zagreb.

"blue chip" regional indices composed of ten most liquid regional companies listed on three Stock Exchanges: five from Croatia, three from Bulgaria, and two from Macedonia.

24 Block transactions are excluded from the calculation. Data refers to the period 1/1 - 31/12/2017.

25 On 26 January 2018 Valamar Riviera received a notification by EPIC Hospitality Holding GmbH regarding the acquisition of 55,594,884 Valamar Riviera shares due to the demerger agreement and status change, i.e. the demerger of EPIC, Goldscheider und Wurmböck Unternehmensberatungsgesellschaft m.b.H., as demerging company and EPIC Hospitality Holding GmbH with registered office in Vienna, 8 Plösslgasse, Republic of Austria, as transferee company.

Additional Information

As one of the largest employers in Croatia (as at 31 March 2018, the Group employed 3,199 people of which 1,553 were permanent employees; the Company employed 2,941 people of which 1,347 were permanent employees), the Company and the Group systematically and continuously invest in the development of human resources. An integral strategic approach to human resource management and top practices applied include transparent hiring processes, clear objectives and employees' performance measurement, rewarding systems, investment in employees' development and careers as well as the promotion of a twoway communication.

Valamar Riviera has organized its efforts in the field of corporate social responsibility into nine umbrella programs through which the company develops destination events and attractions, cares for the environment, supports arts, culture and sports, helps vulnerable social groups, hosts educational visits during which children learn about hospitality, cares for retired employees, develops skills in hospitality and invests in the development of tourism infrastructure. You can find more details on Valamar Riviera's CSR activities in the new annual Integrated Report that will be published in the second quarter of 2018.

The Management Board decided on 21 March 2018 to convoke the General Assembly that will be held on 8 May 2018 at 11:00 at the Valamar Sanfior Hotel in Rabac.

Pursuant to our policy promoting high transparency and quality of financial reporting, we will hold the third Investors Day in the first half of June 2018, during which the key management will present the latest information on business operations, development and strategy to create new value at Valamar Riviera.

In the course of the first quarter of 2018, the Company's Management Board managed and represented the company pursuant to regulations and the provisions of the Company Statute, and planned a business policy that was implemented with prudent care. The Company's Management Board will continue to undertake all the necessary measures in order to ensure sustainability and business growth. The quarterly consolidated and unconsolidated financial statements for the period from 1 January 2018 to 31 March 2018 were adopted by the Management Board on 25 April 2018.

The Management Board expresses its gratitude to all shareholders, business partners, and guests for their support and trust, and particularly to all employees for their contribution.

Management Board of the Company

Responsibility for the quarterly financial statements

In Poreč, 25 April 2018

In accordance with provisions of Law on Capital Market, Marko Čižmek, Management board member responsible for finance, treasury and IT business as well as relations with institutional investors and Ljubica Grbac director of department of finance and accounting, procurator and person responsible for finance and accounting, together as persons responsible for the preparation of quarterly reports of company Valamar Riviera d.d. seated in Poreč, Stancija Kaligari 1, OIB 36201212847 (hereinafter: Company), hereby make the following

STATEMENT

According to our best knowledge

  • The shortened set of consolidated and unconsolidated financial reports for the first quarter of 2018 are prepared in accordance with applicable standards of financial reporting and represent a true and fair view of the assets and obligations, profit and loss, financial position and Company's business as well as the companies included in the consolidation.
  • Interim report of the Company's Management board for the period between 1 January and 31 March 2018 contains the true presentation of development, results and position of the Company and companies included in the consolidation, with description of significant risks and uncertainties which the Company and companies included in the consolidation are exposed to.

Marko Čižmek Ljubica Grbac

Member of the Management Board Director of Department of Finance and Accounting

Reporting period: from 1/1/2018 to 31/3/2018

Quarterly financial report TFI-POD

Tax number (MB): 3474771
Company registration number
(MBS):
040020883
Personal identification number
(OIB):
36201212847
Issuing company: Valamar Riviera d.d.
Postal code and place 52440 Poreč
Street and house number: Stancija Kaligari 1
E-mail address: [email protected]
Internet address: www.valamar-riviera.com
Municipality/city code and name: 348 Poreč
Number of
employees:
County code and name: 18 Istarska (period end) 3.199
NKD code: 5510
Consolidated report: YES
Companies of the consolidation
subject (according to IFRS):
Seat: MB:
Valamar hotels & resorts GmbH Frankfurt 04724750667
Puntižela d.o.o. Pula 03203379
Elafiti Babin kuk d.o.o. Dubrovnik 01273094
Magične stijene d.o.o. Dubrovnik 02315211
Palme turizam d.o.o. Dubrovnik 02006103
Pogača Babin Kuk d.o.o. Dubrovnik 02236346
Bugenvilia d.o.o. Dubrovnik 02006120
Imperial d.d. Rab 03044572
Accounting firm:
Contact person: Sopta Anka
(please insert only the contact's full name)
Telephone: 052/408 188 Fax: 052/408 110
E-mail address: [email protected]
Family name and name: Kukurin Željko, Čižmek Marko
(authorized representative)

Documents disclosed:

  1. Financial statements (Balance Sheet, Income Statement, Cash Flow Statement, Statement of Changes in Equity and notes to financial statements)

  2. Management Interim Report;

  3. Declaration of the persons responsible for preparing the issuer's statements;

L.S. (authorized representative's signature)

Balance Sheet (as per 31/3/2018)

Taxpayer: 36201212847; Valamar Riviera d.d.

ADP Preceding Current
Item code year year
1 2 3 4
A) SUBSCRIBED CAPITAL UNPAID 001
B) NON CURRENT ASSETS (ADP 003+010+020+031+036) 002 4.632.400.572 4.720.395.021
I. INTANGIBLE ASSETS (ADP 004 to 009) 003 45.224.706 45.918.086
1. Research and Development expenditure 004
2. Patents, licences, royalties, trademarks and service marks, software and similar rights 005 37.949.592 37.270.822
3. Goodwill 006 6.567.609 6.567.609
4. Prepayments for intangible assets 007
5. Intangible assets under construction 008 707.505 2.079.655
6. Other intangible assets 009
II. TANGIBLE ASSETS (ADP 011 to 019) 010 4.440.260.536 4.527.549.051
1. Land 011 874.708.080 874.708.080
2. Property 012 2.871.712.565 2.797.406.151
3. Plants and equipment 013 367.257.268 356.864.147
4. Tools, plants and vehicles 014 101.131.434 98.874.618
5. Biological asset 015
6. Prepayments for tangible assets 016 24.768.328 69.535.170
7. Assets under construction 017 149.431.796 281.452.968
8. Other tangible assets 018 40.996.707 38.607.030
9. Investments property 019 10.254.358 10.100.887
III. NON-CURRENT FINANCIAL ASSETS (ADP 021 to 030) 020 5.417.132 5.434.902
1. Stakes (shares) in undertakings in a Group 021 1.435.245 1.351.867
2. Investments in other securities of undertakings in a Group 022
3. Loans, deposits etc given to undertakings in a Group 023
4. Stakes (shares) in undertakings with participating interest 024
5. Investments in other securities of undertakings with participating interest 025
6. Loans, deposits etc given to undertakings with participating interest 026
7. Investments in securities 027 3.620.830 3.749.832
8. Given loans, deposits and similar 028 191.057 163.203
9. Other investments accounted for using the equity method 029
10. Other non-current financial assets 030 170.000 170.000
IV. TRADE RECEIVABLES (ADP 032 to 035) 031 834.499 829.283
1. Receivables from undertakings in a Group 032
2. Receivables from undertakings with participating interests 033
3. Trade receivables 034 43.750 43.750
4. Other receivables 035 790.749 785.533
V. DEFERRED TAX ASSETS 036 140.663.699 140.663.699
C) CURENT ASSETS (ADP 038+046+053+063) 037 343.822.386 135.627.419
I. INVENTORIES (ADP 039 to 045) 038 24.496.814 26.094.165
1. Raw materials and consumables 039 24.296.180 25.614.027
2. Work in progress 040
3. Finished products 041
4. Merchandise 042 156.426 179.069
5. Prepayments for inventories 043 44.208 301.069
6. Other available-for-sale assets 044
7. Biological asset 045
II. RECEIVABLES (ADP 047 to 052) 046 30.637.890 29.480.452
1. Receivables from undertakings in a Group 047 231.675 1.440
2. Receivables from undertakings with participating interest 048
3. Trade receivables 049 13.742.895 11.499.738
4. Receivables from employees and members of the undertaking 050 1.226.272 3.185.189
5. Receivables from Government and other institutions 4.590.153
051 13.614.153
6. Other receivables 052 1.822.895 10.203.932
III. CURRENT FINANCIAL ASSETS (ADP 054 to 062) 053 850.728 1.357.758
1. Stakes (shares) in undertakings in a Group 054
2. Investments in other securities of undertakings in a Group 055
3. Loans, deposits etc given to undertakings in a Group 056
4. Stakes(shares) in undertakings with participating interest 057
5. Investments in other securities of undertakings with participating interest 058
6. Loans, deposits etc given to undertakings with participating interest 059
7. Investments in securities 060
8. Given loans, deposits and similar 061 746.646 746.641
9. Other financial assets 062 104.082 611.117
IV. CASH AND CASH EQUIVALENTS 063 287.836.954 78.695.044
D) PREPAYMENTS AND ACCRUED INCOME 064 20.382.090 27.255.003
E) TOTAL ASSETS (ADP 001+002+037+064)
F) OFF-BALANCE SHEET ITEMS
065
066
4.996.605.048
54.545.066
4.883.277.443
54.545.066

Balance Sheet (as per 31/3/2018) (continued) Taxpayer: 36201212847; Valamar Riviera d.d.

ADP Preceding Current
Item code year year
1 2 3 4
LIABILITIES
A) CAPITAL AND RESERVES (ADP 068 to 070+076+077+081+084+087) 067 2.516.174.910 2.339.081.029
I. SHARE CAPITAL 068 1.672.021.210 1.672.021.210
II. CAPITAL RESERVES 069 3.602.906 4.614.057
III. RESERVES FROM PROFIT (ADP 071+072-073+074+075) 070 102.055.847 100.188.336
1. Legal reserves 071 83.601.061 83.601.061
2. Reserves for own shares 072 44.815.284 44.815.284
3. Own stocks and shares (deductible items) 073 35.889.621 37.757.132
4. Statutory reserves 074
5. Other reserves 075 9.529.123 9.529.123
IV. REVALUATION RESERVES 076
V. FAIR VALUE RESERVES (ADP 078 to 080) 077 634.097 685.978
1. Fair value of financial assets available for sale 078 634.097 685.978
2. Efficient portion of cash flow hedge 079
3. Efficient portion of foreign net investment hedge 080
VI. RETAINED EARNINGS OR LOSS CARRIED FORWARD (ADP 082-083) 081 263.138.894 506.503.340
1. Retained earnings 082 263.138.894 506.503.340
2. Loss carried forward 083
VII. PROFIT OR LOSS FOR THE FINANCIAL YEAR (ADP 085-086) 084 243.596.016 -167.892.731
1. Profit for the financial year 085 243.596.016
2. Loss for the financial year 086 167.892.731
VIII. MINORITY INTEREST 087 231.125.940 222.960.839
B) PROVISIONS (ADP 089 to 094) 088 58.356.183 58.356.183
1. Provisions for pensions, severance pay and similar libabilities 089 5.446.558 5.446.558
2. Provisions for tax obligations 090
3. Provisions for litigations in progress 091 52.909.625 52.909.625
4. Provisions for renewal of natural resources 092
5. Provision for costs within warranty period 093
6. Other provisions 094
C) NON-CURRENT LIBILITIES (ADP 096 to 106) 095 1.915.658.762 1.933.583.755
1. Liabilites to related parties 096
2. Liabilities for loans, deposits etc of undertakings in a Group 097
3. Liabilities to undertakings with participating interest 098
4. Liabilities for loans, deposits etc of undertakings with participating interest 099
5. Liabilities for loans, deposits and other 100 9.046.000 9.046.000
6. Liabilities to banks and other financial institutions 101 1.852.267.505 1.869.692.937
7. Liabilities for advance payments 102
8. Trade payables 103
9. Amounts payable for securities 104
10. Other non-current liabilities 105 1.585.824 2.072.414
11. Deffered tax 106 52.759.433 52.772.404
D) CURRENT LIABILITIES (ADP 108 to 121) 107 402.912.295 463.947.968
1. Liabilities to undertakings in a Group 108 198.872
2. Liabilities for loans, deposits etc of undertakings in a Group 109
3. Liabilities to undertakings with participating interest 110
4. Liabilities for loans, deposits etc of undertakings with participating interest 111
5. Liabilities for loans, deposits and other 112 103.000 51.500
6. Liabilities to banks and other financial institutions 113 203.141.559 173.301.640
7. Amounts payable for prepayment 114 31.365.529 107.986.125
8. Trade payables 115 132.651.065 143.941.858
9. Liabilities upon loan stocks 116
10. Liabilities to emloyees 117 22.455.819 21.178.847
11. Taxes, contributions and similar liabilities 118 11.077.721 15.554.501
12. Liabilities arising from share in the result 119 230.130 230.130
13. Liabilities arising from non-current assets held for sale 120
14. Other current liabilities 121 1.688.600 1.703.367
E) ACCRUED EXPENSES AND DEFERRED INCOME 122 103.502.898 88.308.508
F) TOTAL LIABILITIES (ADP 067+088+095+107+122) 123 4.996.605.048 4.883.277.443
G) OFF-BALANCE SHEET ITEMS 124 54.545.066 54.545.066

Income Statement (for 1/1/2018 to 31/3/2018) Taxpayer: 36201212847; Valamar Riviera d.d.

Item ADP
code
Preceding period Current period
1 2 Cummulative
3
Quarter
4
Cummulative
5
Quarter
6
I. OPERATING INCOME (ADP 126+127+128+129+130) 125 33.380.896 33.380.896 41.709.737 41.709.737
1. Revenues from sales with undertakings in a Group 126 522.874 522.874
2. Sales revenues (outside the Group) 127 27.916.973 27.916.973 38.325.379 38.325.379
3. Revenues from use of own products, goods and services 128 852.175 852.175 142.999 142.999
4. Other operating revenues with undertakings in a Group 129
5.Other operating revenues (outside the Group) 130 4.611.748 4.611.748 2.718.485 2.718.485
II. OPERATING EXPENSES (ADP 132+133+137+141+142+143+146+153) 131 199.013.724 199.013.724 227.304.203 227.304.203
1. Changes in inventories of finished products and work in progress 132
2. Material costs (ADP 134 to 136) 133 33.247.324 33.247.324 38.219.074 38.219.074
a) Cost of raw materials & consumables 134 16.871.859 16.871.859 19.622.840 19.622.840
b) Cost of goods sold 135 19.920 19.920 40.977 40.977
c) Other costs 136 16.355.545 16.355.545 18.555.257 18.555.257
3. Staff costs (ADP 138 to 140) 137 57.712.808 57.712.808 62.382.294 62.382.294
a) Net salaries 138 34.561.148 34.561.148 38.510.784 38.510.784
b) Employee income tax 139 15.195.186 15.195.186 15.398.520 15.398.520
c) Tax on payroll 140 7.956.474 7.956.474 8.472.990 8.472.990
4. Depreciation and amortisation 141 81.030.737 81.030.737 96.683.615 96.683.615
5. Other expenditures 142 24.471.641 24.471.641 27.976.470 27.976.470
6. Value adjustment (ADP 144+145) 143 19.501 19.501 72.193 72.193
a) non-current assets (without financial assets) 144
b) current asssets (without financial assets) 145 19.501 19.501 72.193 72.193
7. Provisions (ADP 147 to 152) 146 0 0 0 0
a) Provision for pensions, severance payments and other employment
benefits
147
b) Provisions for tax liabilities 148
c) Provisions for litigations in progress 149
d) Provisions for renewal of natural resources 150
e) Provision for costs within warranty period 151
f) Other provisions 152
8. Other operating expenses 153 2.531.713 2.531.713 1.970.557 1.970.557
III. FINANCIAL INCOME (ADP 155 to 164) 154 30.707.466 30.707.466 24.116.644 24.116.644
1. Income from stakes (shares) in undertakings in a Group 155
2 Income from stakes (shares) in undertakings with participating interest 156
3. Income from other non-current financial investments and loans to
undertakings in a Group
157
4. Other interest income from undertakings in a Group 158
5. Foreign exchange differences and other financial income from
undertakings in a Group 159
6. Income from other non-current financial investments and loans 160
7. Other interest income 161 100.475 100.475 86.663 86.663
8. Foreign exchange differences and other financial income 162 24.334.091 24.334.091 22.680.935 22.680.935
9. Unrealized gains (income) from the financial assets 163 5.592.718 5.592.718 767.574 767.574
10. Other financial income 164 680.182 680.182 581.472 581.472
IV. FINANCIAL COSTS (ADP 166 to 172) 165 12.351.718 12.351.718 14.499.620 14.499.620
1. Interest expenses and similar expenses with undertakings in a Group 166
2. Foreign exchange differences and other expenses with undertakings 167
in a Group
3. Interest expenses and similar 168 8.791.817 8.791.817 11.388.916 11.388.916
4. Foreign exchange differences and other expenses 169 3.225.974 3.225.974 2.014.447 2.014.447
5. Unrealized loss (expenses) from the financial assets 170 47.549 47.549 810.941 810.941
6. Value adjustment expense on financial assets (net) 171
7. Other financial expenses 172 286.378 286.378 285.316 285.316
V. SHARE OF PROFIT FROM UNDERTAKINGS WITH PARTICIPATING INTEREST 173
VI. SHARE OF PROFIT FROM JOINT VENTURES 174
VII. SHARE OF LOSS FROM UNDERTAKINGS WITH PARTICIPATING INTEREST 175
VIII. SHARE OF LOSS FROM JOINT VENTURES 176
IX. TOTAL INCOME (ADP 125+154+173+174) 177 64.088.362 64.088.362 65.826.381 65.826.381
X. TOTAL EXPENSES (ADP 131+165+175+176) 178 211.365.442 211.365.442 241.803.823 241.803.823
XI. PROFIT OR LOSS BEFORE TAX (ADP 177-178) 179 -147.277.080 -147.277.080 -175.977.442 -175.977.442
1. Profit before tax (ADP 177-178) 180 -147.277.080 -147.277.080 -175.977.442 -175.977.442
2. Loss before tax (ADP 178-177) 181 0 0 0 0
XII. INCOME TAX EXPENSE 182
XIII. PROFIT OR LOSS FOR THE PERIOD (ADP 179-182) 183 -147.277.080 -147.277.080 -175.977.442 -175.977.442
1. Profit for the period (ADP 179-182) 184 -147.277.080 -147.277.080 -175.977.442 -175.977.442
2. Loss for the period (ADP 182-179) 185 0 0 0 0

Income Statement (for 1/1/2018 to 31/3/2018) (continued) Taxpayer: 36201212847; Valamar Riviera d.d.

Item ADP
code
Preceding period Current period
Cummulative Quarter Cummulative Quarter
1 2 3 4 5 6

PROFIT OR LOSS FROM DISCONTINUED OPERATIONS (applicable for entities which use IFRS and have discontinued operations)

XIV. PROFIT OR LOSS FROM DISCONTINUED OPERATIONS BEFORE TAX
(ADP 187-188)
186
1. Profit before tax from discontinued operations 187
2. Loss before tax from discontinued operations 188
XV. INCOME TAX EXPENSE FROM DISCONTINUED OPERATIONS 189
1. Profit for the period from discontinued operations (ADP 186-189) 190
2. Loss for the period from discontinued operations (ADP 189-186) 191

TOTAL PROFIT OR LOSS FOR THE PERIOD (applicable for entities which use IFRS and have discontinued operations)

XVI. PROFIT OR LOSS BEFORE TAX (ADP 179+186) 192
1. Profit before tax (ADP 192) 193
2. Loss before tax (ADP 192) 194
XVII. INCOME TAX EXPENSE (ADP 182+189) 195
XVIII. PROFIT OR LOSS FOR THE PERIOD (ADP 192-195) 196
1. Profit for the period (ADP 192-195) 197
2. Loss for the period (ADP 195-192) 198

APPENDIX TO THE INCOME STATEMENT (to be completed by entities submitting consolidated financial statements)

XIX. PROFIT OR LOSS FOR THE PERIOD (ADP 200+201) 199 -147.277.080 -147.277.080 -175.977.442 -175.977.442
1. Attributable to parent company's shareholders 200 -139.836.334 -139.836.334 -167.892.731 -167.892.731
2. Attributable to non-controlling interests 201 -7.440.746 -7.440.746 -8.084.711 -8.084.711

STATEMENT OF OTHER COMPREHENSIVE INCOME (to be completed by entities subject to IFRS)

I. PROFIT OR LOSS FOR THE PERIOD 202 -147.277.080 -147.277.080 -175.977.442 -175.977.442
II. OTHER COMPREHENSIVE INCOME /LOSS BEFORE TAX
(ADP 204 to 211)
203 248.168 248.168 64.852 64.852
1. Exchange differences arising from foreign operations 204
2. Revaluation of non-current assets and intangible assets 205
3. Gains or loss available for sale investments 206 248.168 248.168 64.852 64.852
4. Gains or loss on net movement on cash flow hedges 207
5. Gains or loss on net investments hedge 208
6. Share of the other comprehensive income/loss of associates 209
7. Acturial gain / loss on post employment benefit obligations 210
8. Other changes in capital (minorities) 211
III. TAX ON OTHER COMPREHENSIVE INCOME OF THE PERIOD 212 49.633 49.633 12.970 12.970
IV. NET OTHER COMPREHENSIVE INCOME OR LOSS FOR THE YEAR
(ADP 203-212)
213 198.535 198.535 51.882 51.882
V. TOTAL COMPREHENSIVE INCOME/LOSS FOR THE PERIOD
(ADP 202+213)
214 -147.078.545 -147.078.545 -175.925.560 -175.925.560

APPENDIX to the Statement of Comprehensive Income (to be completed by entities submitting consolidated financial statements)

VI. TOTAL COMPREHENSIVE INCOME/LOSS FOR THE PERIOD
(ADP 216+217)
215 -147.078.545 -147.078.545 -175.925.560 -175.925.560
1. Attributable to parent company's shareholders 216 -139.637.799 -139.637.799 -167.840.849 -167.840.849
2. Attributable to non-controlling interests 217 -7.440.746 -7.440.746 -8.084.711 -8.084.711

Cash Flow Statement - Indirect Method (for 1/1/2018 to 31/3/2018) Taxpayer: 36201212847; Valamar Riviera d.d.

ADP Preceding Current
Item code year year
1 2 3 4
CASH FLOW FROM OPERATING ACTIVITIES
1. Profit before taxes 001 -147.277.080 -175.977.442
2. Adjustments (ADP 003 to 010) 002 70.518.091 86.383.953
a) Depreciation and amortisation 003 81.030.737 96.683.615
b) Profit and loss from sales and value adjustments of non-current tangible and intangible assets 004 -29.499 -17.607
c) Profit and loss from sales and unrealised profit and loss and value adjustments of financial assets 005 -211.828 0
d) Income from interest and dividends 006 -38.746 -86.206
e) Interest expenses 007 9.078.195 11.674.232
f) Provisions 008 8.430.277 3.656
g) Foreign exchange differences (unrealized) 009 -22.212.431 -21.956.738
h) Other adjustments for non-cash transactions and unrealized profit and loss 010 -5.528.614 83.001
I. Increase or decrease of cash flow before changes in working capital (ADP 001+002) 011 -76.758.989 -89.593.489
3. Changes in working capital (ADP 013 to 016) 012 52.205.684 59.808.104
a) Increase or decrease of current liabilities 013 37.100.100 89.496.955
b) Increase or decrease of current receivables 014 15.874.003 2.938.772
c) Increase or decrease of inventories 015 -768.419 -1.597.351
d) Other increase or decrease of working capital 016 -31.030.272
II. Cash from operating activities (ADP 011+012) 017 -24.553.305 -29.785.385
4. Interest 018 -10.471.507 -2.857.718
5. Income tax paid 019 -1.326.223 -611.713
A) NET CASH FLOW FROM OPERATING ACTIVITIES (ADP 017 to 019) 020 -36.351.035 -33.254.816
CASH FLOW FROM INVESTMENT ACTIVITIES
1. Proceeds from sale of non-current assets
021 135.498 20.000
2. Proceeds from selling financial instruments 022 1.808.303 0
3. Proceeds from interest rates 023 43.005 89.342
4. Proceeds from dividends 024 0
5. Proceeds from repayment of given loans and savings 025 2.770.489 45.395
6. Other proceeds from investment activities 026
III. Total cash proceeds from investment activities (ADP 021 to 026) 027 4.757.295 154.737
1. Purchase of non-current tangible and intangible assets 028 -204.471.047 -184.665.511
2. Purchase of financial instruments 029
3. Loans and deposits for the period 030 -1.836.122 -96.324
4. Acquisition of subsidiary, net of acquired cash 031
5. Other payments from investment activities 032 -17.769
IV. Total cash payments from investment activities (ADP 028 to 032) 033 -206.307.169 -184.779.604
B) NET INCREASE OF CASH FLOW FROM INVESTMENT ACTIVITIES (ADP 027+033) 034 -201.549.874 -184.624.867
CASH FLOW FROM FINANCIAL ACTIVITIES
1. Proceeds from increase of subscribed capital 035
2. Proceeds from issuing equity-based and debt-based financial instruments 036
3. Proceeds from loan principal, loans and other borrowings 037 93.511.020 37.191.385
4. Other proceeds from financial activities 038 1.063.033
V. Total proceeds from financial activities (ADP 035 to 038) 039 93.511.020 38.254.418
1. Repayment of loan principals, loans and other borrowings and debt-based financial
instruments
040 -17.260.582 -27.649.134
2. Dividends paid 041
3. Payment of finance lease liabilities 042 -41.333
4. Re-purchase of treasury shares and decrease in subscribed share capital 043 -1.867.511
5. Other payments from financial activities 044
VI. Total cash payments from financing activities (ADP 040 to 044) 045 -17.301.915 -29.516.645
C) NET CASH FLOW FROM FINANCIAL ACTIVITIES (ADP 039+045) 046 76.209.105 8.737.773
1. Cash and cash equivalents-unrealized foreign exchange differences 047
D) NET INCREASE OR DECREASE OF CASH FLOW (ADP 020+034+046+047) 048 -161.691.804 -209.141.910
E) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD 049 274.650.648 287.836.954
F) CASH AND CASH EQUIVALENTS AT THE END OF PERIOD (ADP 048+049) 050 112.958.844 78.695.044

37 Statement of Changes in Equity (for the period from 1/1/2018 to 31/3/2018) Taxpayer: 36201212847; Valamar Riviera d.d.

Minority (non-controlling) interest
Subscribed
Share capital
Capital re- serves Legal reserves Reserves for own shares Treasury shares
and shares (de-
ductible item)
Statutory re- serves Other reserves Revaluation
reserves
Fair value of
financial assets
available for
sale
Efficient portion
of cash flow
hedge
Efficient portion
of foreign net
investment
hedge
Retained
earnings / loss
carried forward
Net profit/ loss
for the period
Total distribut-
able to majority
owners
Minority
(non-con
trolling) interest
Total capital
and reserves
+ 8 to 15) 17 18 (16+17)
2.373.637.039
$\circ$
$\circ$
2.373.637.039
245.087.385
235.842.123 2.137.794.916
$\circ$
342.313.777 36.580.064 $\mathbf 0$ $\mathbf 0$ 273.313
$\mathbf 0$ 9.529.123 $\mathbf 0$
$\sqrt{a}$
235.842.123 2.137.794.916 342.313.777 36.580.064 $\mathbf 0$ $\mathbf 0$ 273.313 $\mathbf 0$ 9.529.123 0
1.491.369 243.596.016 243.596.016
$\bigcirc$ $\circ$
$\bigcirc$ $\circ$
450.979 450.979 450.979
$\circ$ $\bigcirc$
$\circ$ $\overline{O}$
$\bigcirc$ $\sqrt{a}$
$\bigcirc$ $\bigcirc$
$\circ$ $\overline{O}$
$-90.195$ $-90.195$ $-90.195$
$\bigcirc$ $\bigcirc$
$\circ$ $\circ$
$\bigcirc$ $\bigcap$
1.251.675 1.251.675
$\circ$ $\bigcirc$
-97.953.976 -97.953.976 $-99.352.192$
$-6.207.997$ $-6.207.552$ $-445$ $-342.313.777$ 325.911.021
$\sqrt{a}$ $\Omega$
2.516.174.910 231.125.940 2.285.048.970 243.596.016 263.138.893 $\mathbf 0$ $\mathbf 0$ 634.097 $\mathbf 0$ 9.529.123 0
360.784
$\bf{0}$
360.784 $\mathbf 0$ $\mathbf 0$ $\mathbf 0$ $\mathbf 0$ 360.784 $\mathbf 0$ $\mathbf 0$ $\mathbf 0$
245.448.169 1.491.369 243.956.800 243.596.016 0 $\mathbf 0$ $\mathbf 0$ 360.784 $\mathbf 0$ $\mathbf 0$ $\mathbf 0$
$-102.910.298$ $-6.207.552$ $-96.702.746$ $-342.313.777$ 226.558.829 $\mathbf 0$ $\pmb{0}$ $\mathbf 0$ $\mathbf 0$ $\mathbf 0$ $\pmb{0}$
$\mathbf 0$ 9.529.123 $\mathbf 0$ 634.097 $\mathbf 0$ $\mathbf{0}$ 263.138.893 243.596.016 2.285.048.970 231.125.940 2.516.174.910
$\circ$ $\circ$
$\circ$ $\bigcap$
$\mathbf 0$ 9.529.123 $\bf{0}$ 634.097 $\mathbf 0$ $\mathbf 0$ 263.138.893 243.596.016 2.285.048.970 231.125.940 2.516.174.910
$-167.892.731$ -167.892.731 $-80.390$ $-167.973.121$
$\circ$ $\circ$
$\circ$ $\circ$
64.851 64.851 64.851
$\sqrt{a}$ $\circ$
$\bigcap$ 0
$\circ$ $\bigcirc$
$\overline{O}$ $\overline{0}$
$-231.569$ $-231.569$ $-231.569$
$-12.970$ $-12.970$ $-12.970$
$\circ$ $\bigcirc$
$\bigcirc$ $\bigcirc$
$\bigcap$ $\sqrt{a}$
$-2.950.076$ $-2.950.076$
$\bigcirc$ $\circ$
2.093.715 2.093.715
243.596.016 $-243.596.016$ $\bigcirc$ $-8.084.711$ $-8.084.711$
$\Omega$ $\overline{O}$
$\mathbf 0$ 9.529.123 $\mathbf 0$ 685.978 $\mathbf 0$ $\mathbf 0$ 506.503.340 $-167.892.731$ 2.116.120.190 222.960.839 2.339.081.029
$\bf{0}$ $\mathbf 0$ $\mathbf 0$ 51.881 $\mathbf 0$ $\mathbf 0$ $-231.569$ $-179.688$
$\overline{\mathbf{0}}$
$\mathbf 0$ $-179.688$
0 $\mathbf 0$ $\mathbf 0$ 51.881 $\mathbf 0$ $\mathbf 0$ $-231.569$ $-167.892.731$ $-168.072.419$ $-80.390$ -168.152.809
$\mathbf 0$ $\mathbf 0$ $\pmb{0}$ $\bf{0}$ $\mathbf 0$ $\mathbf 0$ 243.596.016 $-243.596.016$ $-856.361$ $-8.084.711$ $-8.941.072$

Description ADP Share capital Capital re- serves Legal reserves Reserves for own shares Treasury shares and shares (de- ductible item) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 (3 to 6 - 7 Previous period 1. Balance at 1 January of the previuos period 01 1.672.021.210 2.204.690 67.198.750 44.815.284 37.141.295 0 9.529.123 0 273.313 0 0 36.580.064 342.313.777 2.137.794.916 235.842.123 2.373.637.039 2. Changes in accounting policies 02 0 0 3. Error correction 03 0 0 4. Balance at 1 January of the previous period (ADP 01 to 03) 04 1.672.021.210 2.204.690 67.198.750 44.815.284 37.141.295 0 9.529.123 0 273.313 0 0 36.580.064 342.313.777 2.137.794.916 235.842.123 2.373.637.039 5. Profit/loss for the period 05 243.596.016 243.596.016 1.491.369 245.087.385 6. Foreign currency translation differences- foreign operations 06 0 0 7. Changes in revaluation reserves of non-current tangible and intangible assets 07 0 0 8. Profit or loss from re-evaluation of finacial assets held for sale 08 450.979 450.979 450.979 9. Profit or loss from cash flow hedge 09 0 0 10. Profit or loss from foreign net investment hedge 10 0 0 11. Share in other comprehensive income/loss from undertakings with participat- ing interest 11 0 0 12. Actuarial gains/losses from defined benefit plans 12 0 0 13. Other changes in capital (minorities) 13 0 0 14. Taxation of transactions recognized directly in equity 14 -90.195 -90.195 -90.195 15. Increase/decrease of subscribed share capital (except by reinvested profit and in pre-bankruptcy settlement) 15 0 0 16. Increase of subscribed share capital by profit reinvestment 16 0 0 17. Increase of subscribed share capital in pre-bankruptcy settlement 17 0 0 18. Repurchase of own shares/ stakes 18 -1.251.675 1.251.675 1.251.675 19. Share in profit/ dividend payout 19 0 0 20. Other distribution to majority owners 20 1.398.216 -99.352.192 -97.953.976 -97.953.976 21. Transfer to reserves according to annual plan 21 16.402.311 325.911.021 -342.313.777 -445 -6.207.552 -6.207.997 22. Increase in reserves in pre-bankruptcy settlement 22 0 0 23. Balance at 31 Decemeber of previous period (ADP 04 to 22) 23 1.672.021.210 3.602.906 83.601.061 44.815.284 35.889.620 0 9.529.123 0 634.097 0 0 263.138.893 243.596.016 2.285.048.970 231.125.940 2.516.174.910 ADDITION TO STATEMENT OF CHANGES IN EQUITY (only for IFRS adopters) I. OTHER COMPREHENSIVE INCOME OF PREVIOUS PERIOD NET OF TAX (ADP 06 to 14) 24 0 0 0 0 0 0 0 0 360.784 0 0 0 0 360.784 0 360.784 II. COMPREHENSIVE INCOME OR LOSS FOR THE PREVIOUS PERIOD (ADP 05+24) 25 0 0 0 0 0 0 0 0 360.784 0 0 0 243.596.016 243.956.800 1.491.369 245.448.169 III. TRANSACTIONS WITH OWNERS IN THE PREVIOUS PERIOD, RECOGNIZED DIRECTLY IN EQUITY (ADP 15 to 22) 26 0 1.398.216 16.402.311 0 -1.251.675 0 0 0 0 0 0 226.558.829 -342.313.777 -96.702.746 -6.207.552 -102.910.298 Current period 1. Balance at 1 January of current period 27 1.672.021.210 3.602.906 83.601.061 44.815.284 35.889.620 0 9.529.123 0 634.097 0 0 263.138.893 243.596.016 2.285.048.970 231.125.940 2.516.174.910 2. Changes in accounting policies 28 0 0 3. Error correction 29 0 0 4. Balance at 1 January of current period (ADP 27 to 29) 30 1.672.021.210 3.602.906 83.601.061 44.815.284 35.889.620 0 9.529.123 0 634.097 0 0 263.138.893 243.596.016 2.285.048.970 231.125.940 2.516.174.910 5. Profit/loss for the period 31 -167.892.731 -167.892.731 -80.390 -167.973.121 6. Foreign currency translation differences- foreign operations 32 0 0 7. Changes in revaluation reserves of non-current tangible and intangible assets 33 0 0 8. Profit or loss from re-evaluation of finacial assets held for sale 34 64.851 64.851 64.851 9. Profit or loss from cash flow hedge 35 0 0 10. Profit or loss from foreign net investment hedge 36 0 0 11. Share in other comprehensive income/loss from undertakings with participating interest 37 0 0 12. Actuarial gains/losses from defined benefit plans 38 0 0 13. Other changes in capital (minorities) 39 -231.569 -231.569 -231.569 14. Taxation of transactions recognized directly in equity 40 -12.970 -12.970 -12.970 15. Increase/decrease of subscribed share capital (except by reinvested profit and in pre-bankruptcy settlement) 41 0 0 16. Increase of subscribed share capital by profit reinvestment 42 0 0 17. Increase of subscribed share capital in pre-bankruptcy settlement 43 0 0 18. Repurchase of own shares/ stakes 44 2.950.076 -2.950.076 -2.950.076 19. Share in profit/ dividend payout 45 0 0 20. Other distribution to majority owners 46 1.011.151 -1.082.564 2.093.715 2.093.715 21. Transfer to reserves according to annual plan 47 243.596.016 -243.596.016 0 -8.084.711 -8.084.711 22. Increase in reserves in pre-bankruptcy settlement 48 0 0 23. Balance as at 31 December of the current period (ADP 30 to 48) 49 1.672.021.210 4.614.057 83.601.061 44.815.284 37.757.132 0 9.529.123 0 685.978 0 0 506.503.340 -167.892.731 2.116.120.190 222.960.839 2.339.081.029 ADDITION TO STATEMENT OF CHANGES IN EQUITY (only for IFRS adopters) I. OTHER COMPREHENSIVE INCOME OF CURRENT PERIOD, NET OF TAX (ADP 32 to 40) 50 0 0 0 0 0 0 0 0 51.881 0 0 -231.569 0 -179.688 0 -179.688 II. COMPREHENSIVE INCOME OR LOSS FOR THE CURRENT PERIOD (ADP 31 + 50) 51 0 0 0 0 0 0 0 0 51.881 0 0 -231.569 -167.892.731 -168.072.419 -80.390 -168.152.809 III. TRANSACTIONS WITH OWNERS IN THE CURRENT PERIOD, RECOGNIZED DIRECTLY IN EQUITY (ADP 41 to 48) 52 0 1.011.151 0 0 1.867.512 0 0 0 0 0 0 243.596.016 -243.596.016 -856.361 -8.084.711 -8.941.072

Notes

(1) The notes to financial statements include additional and supplemental information not presented in the Balance Sheet, Income Statement, Cash Flow Statement or the Statement of Changes in Equity in accordance with the provisions of the relevant financial reporting standards.

Companies of the consolidation subject Balance sheet-previous period Balance sheet-current period
31/12/2017 31/3/2018
Puntižela d.o.o. Yes (merged to Valamar Riviera d.d. 31.3.2017.)
Elafiti Babin kuk d.o.o. Yes (merged to Valamar Riviera d.d. 29.12.2017.)
Valamar hotels & resorts GmbH Yes Yes
Magične stijene d.o.o. Yes Yes
Palme turizam d.o.o. Yes Yes
Pogača Babin Kuk d.o.o. Yes Yes
Bugenvilia d.o.o. Yes Yes
Imperial d.d. Yes Yes
Companies of the consolidation subject: Income statment-previous period Income statment-current period
31/12/2017 31/3/2018
Puntižela d.o.o. 1.1.-31.3.
(merged to Valamar Riviera d.d. 31.3.2017.) -
Elafiti Babin kuk d.o.o. 1.1.-31.3.
(merged to Valamar Riviera d.d. 29.12.2017.) -
Valamar hotels & resorts GmbH - -
Magične stijene d.o.o. 1.1.-31.3. 1.1.-31.3.
Palme turizam d.o.o. 1.1.-31.3. 1.1.-31.3.
Pogača Babin Kuk d.o.o. 1.1.-31.3. 1.1.-31.3.
Bugenvilia d.o.o. 1.1.-31.3. 1.1.-31.3.
Imperial d.d. 1.1.-31.3. 1.1.-31.3.

Reporting period: from 1/1/2018 to 31/3/2018

Quarterly financial report TFI-POD

Tax number (MB): 3474771
Company registration number
(MBS):
040020883
Personal identification number
(OIB):
36201212847
Issuing company: Valamar Riviera d.d.
Postal code and place 52440 Poreč
Street and house number: Stancija Kaligari 1
E-mail address: [email protected]
Internet address: www.valamar-riviera.com
Municipality/city code and name: 348 Poreč
Number of
employees:
County code and name: 18 Istarska (period end) 2.941
NKD code: 5510
Consolidated report: NO
Companies of the consolidation
subject (according to IFRS):
Seat: MB:
Accounting firm:
Contact person: Sopta Anka
(please insert only the contact's full name)
Telephone: 052/408 188 Fax: 052/408 110
E-mail address: [email protected]
Family name and name: Kukurin Željko, Čižmek Marko
(authorized representative)

Documents disclosed:

  1. Financial statements (Balance Sheet, Income Statement, Cash Flow Statement, Statement of Changes in Equity and notes to financial statements)

  2. Management Interim Report;

  3. Declaration of the persons responsible for preparing the issuer's statements;

L.S. (authorized representative's signature)

Balance Sheet (as per 31/3/2018)

Taxpayer: 36201212847; Valamar Riviera d.d.

ADP Preceding Current
Item code year year
1 2 3 4
A) SUBSCRIBED CAPITAL UNPAID 001
B) NON CURRENT ASSETS (ADP 003+010+020+031+036) 002 4.321.068.373 4.394.784.961
I. INTANGIBLE ASSETS (ADP 004 to 009) 003 44.533.715 45.136.814
1. Research and Development expenditure 004
2. Patents, licences, royalties, trademarks and service marks, software and similar rights 005 37.646.206 37.001.127
3. Goodwill 006 6.567.609 6.567.609
4. Prepayments for intangible assets 007
5. Intangible assets under construction 008 319.900 1.568.078
6. Other intangible assets 009
II. TANGIBLE ASSETS (ADP 011 to 019) 010 3.697.439.264 3.770.376.430
1. Land 011 633.926.337 633.926.337
2. Property 012 2.416.617.894 2.352.888.473
3. Plants and equipment 013 345.844.344 336.383.210
4. Tools, plants and vehicles 014 89.672.494 87.764.391
5. Biological asset 015
6. Prepayments for tangible assets 016 23.166.558 64.090.232
7. Assets under construction 017 137.209.673 246.857.528
8. Other tangible assets 018 40.747.606 38.365.372
9. Investments property 019 10.254.358 10.100.887
III. NON-CURRENT FINANCIAL ASSETS (ADP 021 to 030) 020 456.347.314 456.528.853
1. Stakes (shares) in undertakings in a Group 021 452.395.427 452.475.818
2. Investments in other securities of undertakings in a Group 022
3. Loans, deposits etc given to undertakings in a Group 023
4. Stakes (shares) in undertakings with participating interest 024
5. Investments in other securities of undertakings with participating interest 025
6. Loans, deposits etc given to undertakings with participating interest 026
7. Investments in securities 027 3.620.830 3.749.832
8. Given loans, deposits and similar 028 191.057 163.203
9. Other investments accounted for using the equity method 029
10. Other non-current financial assets 030 140.000 140.000
IV. TRADE RECEIVABLES (ADP 032 to 035) 031 188.176 182.960
1. Receivables from undertakings in a Group 032
2. Receivables from undertakings with participating interests 033
3. Trade receivables 034
4. Other receivables 035 188.176 182.960
V. DEFERRED TAX ASSETS 036 122.559.904 122.559.904
C) CURENT ASSETS (ADP 038+046+053+063) 037 291.552.583 113.821.148
I. INVENTORIES (ADP 039 to 045) 038 23.913.513 24.910.071
1. Raw materials and consumables 039 23.767.779 24.741.457
2. Work in progress 040
3. Finished products 041
4. Merchandise 042 145.734 168.614
5. Prepayments for inventories 043
6. Other available-for-sale assets 044
7. Biological asset 045
II. RECEIVABLES (ADP 047 to 052) 046 29.405.487 25.285.116
1. Receivables from undertakings in a Group 047 3.392.515 1.756.527
2. Receivables from undertakings with participating interest 048
3. Trade receivables 049 12.221.884 9.973.658
4. Receivables from employees and members of the undertaking 050 1.171.905 3.124.032
5. Receivables from Government and other institutions 051 10.812.531 480.540
6. Other receivables 052 1.806.652 9.950.359
III. CURRENT FINANCIAL ASSETS (ADP 054 to 062) 053 832.773 1.339.808
1. Stakes (shares) in undertakings in a Group 054
2. Investments in other securities of undertakings in a Group 055
3. Loans, deposits etc given to undertakings in a Group 056 25.800 25.800
4. Stakes (shares) in undertakings with participating interest 057
5. Investments in other securities of undertakings with participating interest 058
6. Loans, deposits etc given to undertakings with participating interest 059
7. Investments in securities 060
8. Given loans, deposits and similar 061 702.891 702.891
9. Other financial assets 062 104.082 611.117
IV. CASH AND CASH EQUIVALENTS
063 237.400.810 62.286.153
D) PREPAYMENTS AND ACCRUED INCOME
E) TOTAL ASSETS (ADP 001+002+037+064)
064
065
19.416.287
4.632.037.243
26.261.862
4.534.867.971

Balance Sheet (as per 31/3/2018) (continued) Taxpayer: 36201212847; Valamar Riviera d.d.

ADP Preceding Current
Item code year year
1 2 3 4
LIABILITIES
A) CAPITAL AND RESERVES (ADP 068 to 070+076+077+081+084+087) 067 2.395.468.296 2.236.719.360
I. SHARE CAPITAL 068 1.672.021.210 1.672.021.210
II. CAPITAL RESERVES 069 3.602.906 4.614.057
III. RESERVES FROM PROFIT (ADP 071+072-073+074+075) 070 102.055.847 100.188.336
1. Legal reserves 071 83.601.061 83.601.061
2. Reserves for own shares 072 44.815.284 44.815.284
3. Own stocks and shares (deductible items) 073 35.889.621 37.757.132
4. Statutory reserves 074
5. Other reserves 075 9.529.123 9.529.123
IV. REVALUATION RESERVES 076
V. FAIR VALUE RESERVES (ADP 078 to 080) 077 634.097 685.978
1. Fair value of financial assets available for sale 078 634.097 685.978
2. Efficient portion of cash flow hedge 079
3. Efficient portion of foreign net investment hedge 080
VI. RETAINED EARNINGS OR LOSS CARRIED FORWARD (ADP 082-083) 081 385.175.162 617.154.236
1. Retained earnings 082 385.175.162 617.154.236
2. Loss carried forward 083
VII. PROFIT OR LOSS FOR THE FINANCIAL YEAR (ADP 085-086) 084 231.979.074 -157.944.457
1. Profit for the financial year 085 231.979.074
2. Loss for the financial year 086 157.944.457
VIII. MINORITY INTEREST 087
B) PROVISIONS (ADP 089 to 094) 088 31.597.492 31.597.492
1. Provisions for pensions, severance pay and similar libabilities 089 4.665.359 4.665.359
2. Provisions for tax obligations 090
3. Provisions for litigations in progress 091 26.932.133 26.932.133
4. Provisions for renewal of natural resources 092
5. Provision for costs within warranty period 093
6. Other provisions 094
C) NON-CURRENT LIBILITIES (ADP 096 to 106) 095 1.739.431.226 1.758.521.650
1. Liabilites to related parties 096
2. Liabilities for loans, deposits etc of undertakings in a Group 097
3. Liabilities to undertakings with participating interest 098
4. Liabilities for loans, deposits etc of undertakings with participating interest 099
5. Liabilities for loans, deposits and other 100
6. Liabilities to banks and other financial institutions 101 1.721.763.614 1.740.354.477
7. Liabilities for advance payments 102
8. Trade payables 103
9. Amounts payable for securities 104
10. Other non-current liabilities 105 1.585.824 2.072.414
11. Deffered tax 106 16.081.788 16.094.759
D) CURRENT LIABILITIES (ADP 108 to 121) 107 369.130.888 424.742.830
1. Liabilities to undertakings in a Group 108 377.577 50.385
2. Liabilities for loans, deposits etc of undertakings in a Group 109
3. Liabilities to undertakings with participating interest 110
4. Liabilities for loans, deposits etc of undertakings with participating interest 111
5. Liabilities for loans, deposits and other 112
6. Liabilities to banks and other financial institutions 113 184.701.848 155.576.304
7. Amounts payable for prepayment 114 30.708.993 138.635.203
8. Trade payables 115 121.224.757 96.797.292
9. Liabilities upon loan stocks 116
10. Liabilities to emloyees 117 20.606.875 19.734.373
11. Taxes, contributions and similar liabilities 118 10.270.639 12.703.400
12. Liabilities arising from share in the result 119 72.403 72.403
13. Liabilities arising from non-current assets held for sale 120
14. Other current liabilities
E) ACCRUED EXPENSES AND DEFERRED INCOME
121
122
1.167.796
96.409.341
1.173.470
83.286.639
F) TOTAL LIABILITIES (ADP 067+088+095+107+122) 123 4.632.037.243 4.534.867.971
G) OFF-BALANCE SHEET ITEMS 124
54.545.066 54.522.829

Income Statement (for 1/1/2018 to 31/3/2018) Taxpayer: 36201212847; Valamar Riviera d.d.

Item ADP
code
Preceding period Current period
1 2 Cummulative
3
Quarter
4
Cummulative
5
Quarter
6
I. OPERATING INCOME (ADP 126 to 130) 125 30.921.593 30.921.593 41.628.023 41.628.023
1. Revenues from sales with undertakings in a Group 126 888.234 888.234 3.448.721 3.448.721
2. Sales revenues (outside the Group) 127 25.512.677 25.512.677 35.491.236 35.491.236
3. Revenues from use of own products, goods and services 128 852.175 852.175 135.053 135.053
4. Other operating revenues with undertakings in a Group 129 3.400 3.400 30.602 30.602
5.Other operating revenues (outside the Group) 130 3.665.107 3.665.107 2.522.411 2.522.411
II. OPERATING EXPENSES (ADP 132+133+137+141+142+143+146+153) 131 183.741.794 183.741.794 209.367.355 209.367.355
1. Changes in inventories of finished products and work in progress 132
2. Material costs (ADP 134 to 136) 133 38.687.699 38.687.699 37.509.430 37.509.430
a) Cost of raw materials & consumables 134 16.330.459 16.330.459 19.352.140 19.352.140
b) Cost of goods sold 135 19.879 19.879 40.740 40.740
c) Other costs 136 22.337.361 22.337.361 18.116.550 18.116.550
3. Staff costs (ADP 138 to 140) 137 53.791.382 53.791.382 59.037.355 59.037.355
a) Net salaries 138 32.075.816 32.075.816 36.186.318 36.186.318
b) Employee income tax 139 14.265.956 14.265.956 14.834.745 14.834.745
c) Tax on payroll 140 7.449.610 7.449.610 8.016.292 8.016.292
4. Depreciation and amortisation 141 66.193.806 66.193.806 84.460.117 84.460.117
5. Other expenditures 142 22.830.013 22.830.013 26.475.850 26.475.850
6. Value adjustment (ADP 144+145) 143 19.501 19.501 72.193 72.193
a) non-current assets (without financial assets) 144
b) current asssets (without financial assets) 145 19.501 19.501 72.193 72.193
7. Provisions (ADP 147 to 152) 146 0 0 0 0
a) Provision for pensions, severance payments and other employment
benefits
147
b) Provisions for tax liabilities 148
c) Provisions for litigations in progress 149
d) Provisions for renewal of natural resources 150
e) Provision for costs within warranty period 151
f) Other provisions 152
8. Other operating expenses 153 2.219.393 2.219.393 1.812.410 1.812.410
III. FINANCIAL INCOME (ADP 155 to 164) 154 30.879.761 30.879.761 22.729.300 22.729.300
1. Income from stakes (shares) in undertakings in a Group 155
2 Income from stakes (shares) in undertakings with participating interest 156
3. Income from other non-current financial investments and loans to
undertakings in a Group
157
4. Other interest income from undertakings in a Group 158
5. Foreign exchange differences and other financial income from
undertakings in a Group 159
6. Income from other non-current financial investments and loans 160
7. Other interest income 161 38.585 38.585 50.767 50.767
8. Foreign exchange differences and other financial income 162 24.568.315 24.568.315 21.336.934 21.336.934
9. Unrealized gains (income) from the financial assets 163 5.592.718 5.592.718 767.574 767.574
10. Other financial income 164 680.143 680.143 574.025 574.025
IV. FINANCIAL COSTS (ADP 166 to 172)
1. Interest expenses and similar expenses with undertakings in a Group
165
166
10.627.329 10.627.329 12.934.425 12.934.425
2. Foreign exchange differences and other expenses with undertakings
in a Group 167
3. Interest expenses and similar 168 7.542.089 7.542.089 10.419.287 10.419.287
4. Foreign exchange differences and other expenses 169 2.784.813 2.784.813 1.447.596 1.447.596
5. Unrealized loss (expenses) from the financial assets 170 47.549 47.549 810.941 810.941
6. Value adjustment expense on financial assets (net) 171
7. Other financial expenses 172 252.878 252.878 256.601 256.601
V. SHARE OF PROFIT FROM UNDERTAKINGS WITH PARTICIPATING INTEREST 173
VI. SHARE OF PROFIT FROM JOINT VENTURES 174
VII. SHARE OF LOSS FROM UNDERTAKINGS WITH PARTICIPATING INTEREST 175
VIII. SHARE OF LOSS FROM JOINT VENTURES 176
IX. TOTAL INCOME (ADP 125+154+173+174) 177 61.801.354 61.801.354 64.357.323 64.357.323
X. TOTAL EXPENSES (ADP 131+165+175+176) 178 194.369.123 194.369.123 222.301.780 222.301.780
XI. PROFIT OR LOSS BEFORE TAX (ADP 177-178) 179 -132.567.769 -132.567.769 -157.944.457 -157.944.457
1. Profit before tax (ADP 177-178)
2. Loss before tax (ADP 178-177)
180
181
-132.567.769
0
-132.567.769
0
-157.944.457
0
-157.944.457
0
XII. INCOME TAX EXPENSE 182
XIII. PROFIT OR LOSS FOR THE PERIOD (ADP 179-182) 183 -132.567.769 -132.567.769 -157.944.457 -157.944.457
1. Profit for the period (ADP 179-182) 184 -132.567.769 -132.567.769 -157.944.457 -157.944.457
2. Loss for the period (ADP 182-179) 185 0 0 0 0

Income Statement (for 1/1/2018 to 31/3/2018) (continued) Taxpayer: 36201212847; Valamar Riviera d.d.

Item ADP
code
Preceding period Current period
Cummulative Quarter Cummulative Quarter
1 2 3 4 5 6

PROFIT OR LOSS FROM DISCONTINUED OPERATIONS (applicable for entities which use IFRS and have discontinued operations)

XIV. PROFIT OR LOSS FROM DISCONTINUED OPERATIONS BEFORE TAX
(ADP 187-188)
186
1. Profit before tax from discontinued operations 187
2. Loss before tax from discontinued operations 188
XV. INCOME TAX EXPENSE FROM DISCONTINUED OPERATIONS 189
1. Profit for the period from discontinued operations (ADP 186-189) 190
2. Loss for the period from discontinued operations (ADP 189-186) 191

TOTAL PROFIT OR LOSS FOR THE PERIOD (applicable for entities which use IFRS and have discontinued operations)

XVI. PROFIT OR LOSS BEFORE TAX (ADP 179+186) 192
1. Profit before tax (ADP 192) 193
2. Loss before tax (ADP 192) 194
XVII. INCOME TAX EXPENSE (ADP 182+189) 195
XVIII. PROFIT OR LOSS FOR THE PERIOD (ADP 192-195) 196
1. Profit for the period (ADP 192-195) 197
2. Loss for the period (ADP 195-192) 198

APPENDIX TO THE INCOME STATEMENT (to be completed by entities submitting consolidated financial statements)

XIX. PROFIT OR LOSS FOR THE PERIOD (ADP 200+201) 199 0 0 0 0
1. Attributable to parent company's shareholders 200
2. Attributable to non-controlling interests 201

STATEMENT OF OTHER COMPREHENSIVE INCOME (to be completed by entities subject to IFRS)

I. PROFIT OR LOSS FOR THE PERIOD 202 -132.567.769 -132.567.769 -157.944.457 -157.944.457
II. OTHER COMPREHENSIVE INCOME /LOSS BEFORE TAX
(ADP 204 to 211)
203 248.168 248.168 64.852 64.852
1. Exchange differences arising from foreign operations 204
2. Revaluation of non-current assets and intangible assets 205
3. Gains or loss available for sale investments 206 248.168 248.168 64.852 64.852
4. Gains or loss on net movement on cash flow hedges 207
5. Gains or loss on net investments hedge 208
6. Share of the other comprehensive income/loss of associates 209
7. Acturial gain / loss on post employment benefit obligations 210
8. Other changes in capital (minorities) 211
III. TAX ON OTHER COMPREHENSIVE INCOME OF THE PERIOD 212 49.633 49.633 12.970 12.970
IV. NET OTHER COMPREHENSIVE INCOME OR LOSS FOR THE YEAR
(ADP 203-212)
213 198.535 198.535 51.882 51.882
V. TOTAL COMPREHENSIVE INCOME/LOSS FOR THE PERIOD
(ADP 202+213)
214 -132.369.234 -132.369.234 -157.892.575 -157.892.575

APPENDIX to the Statement of Comprehensive Income (to be completed by entities submitting consolidated financial statements)

VI. TOTAL COMPREHENSIVE INCOME/LOSS FOR THE PERIOD
(ADP 216+217)
215 0 0 0 0
1. Attributable to parent company's shareholders 216
2. Attributable to non-controlling interests 217

Cash Flow Statement - Indirect Method (for 1/1/2018 to 31/3/2018) Taxpayer: 36201212847; Valamar Riviera d.d.

ADP Preceding Current
Item code year year
1 2 3 4
CASH FLOW FROM OPERATING ACTIVITIES
1. Profit before taxes 001 -132.567.769 -157.944.457
2. Adjustments (ADP 003 to 010) 002 53.588.184 74.535.932
a) Depreciation and amortisation 003 66.193.807 84.460.117
b) Profit and loss from sales and value adjustments of non-current tangible and intangible assets 004 -29.499 -17.606
c) Profit and loss from sales and unrealised profit and loss and value adjustments of financial assets 005 -211.829 0
d) Income from interest and dividends 006 -447.803 -50.308
e) Interest expenses 007 7.794.966 10.675.888
f) Provisions 008 9.008.892 3.656
g) Foreign exchange differences (unrealized) 009 -23.161.817 -20.618.816
h) Other adjustments for non-cash transactions and unrealized profit and loss 010 -5.558.533 83.001
I. Increase or decrease of cash flow before changes in working capital (ADP 001+002) 011 -78.979.585 -83.408.525
3. Changes in working capital (ADP 013 to 016) 012 58.617.200 65.190.641
a) Increase or decrease of current liabilities 013 37.377.556 83.358.849
b) Increase or decrease of current receivables 014 21.330.350 5.496.614
c) Increase or decrease of inventories 015 -90.706 -996.558
d) Other increase or decrease of working capital 016 -22.668.264
II. Cash from operating activities (ADP 011+012) 017 -20.362.385 -18.217.884
4. Interest 018 -9.391.931 -2.857.718
5. Income tax paid
A) NET CASH FLOW FROM OPERATING ACTIVITIES (ADP 017 to 019)
019
020
-52.823
-29.807.139
0
-21.075.602
CASH FLOW FROM INVESTMENT ACTIVITIES
1. Proceeds from sale of non-current assets 021 135.498 20.000
2. Proceeds from selling financial instruments 022 1.808.303 0
3. Proceeds from interest rates 023 40.716 53.444
4. Proceeds from dividends 024 598.453 0
5. Proceeds from repayment of given loans and savings 025 2.063.356 45.395
6. Other proceeds from investment activities 026
III. Total cash proceeds from investment activities (ADP 021 to 026) 027 4.646.326 118.839
1. Purchase of non-current tangible and intangible assets 028 -198.752.080 -158.000.381
2. Purchase of financial instruments 029
3. Loans and deposits for the period 030 -1.836.122 -96.324
4. Acquisition of subsidiary, net of acquired cash 031 -80.390
5. Other payments from investment activities 032 -101.148
IV. Total cash payments from investment activities (ADP 028 to 032) 033 -200.588.202 -158.278.243
B) NET INCREASE OF CASH FLOW FROM INVESMENT ACTIVITIES (ADP 027+033) 034 -195.941.876 -158.159.404
CASH FLOW FROM FINANCIAL ACTIVITIES
1. Proceeds from increase of subscribed capital 035
2. Proceeds from issuing equity-based and debt-based financial instruments 036
3. Proceeds from loan principal, loans and other borrowings 037 93.511.017 37.191.385
4. Other proceeds from financial activities 038 1.063.033
V. Total proceeds from financial activities (ADP 035 to 038) 039 93.511.017 38.254.418
1. Repayment of loan principals, loans and other borrowings and debt-based financial
instruments
040 -15.424.445 -32.266.558
2. Dividends paid 041
3. Payment of finance lease liabilities 042 -41.331
4. Re-purchase of treasury shares and decrease in subscribed share capital 043 -1.867.511
5. Other payments from financial activities 044
VI. Total cash payments from financing activities (ADP 040 to 044) 045 -15.465.776 -34.134.069
C) NET CASH FLOW FROM FINANCIAL ACTIVITIES (ADP 039+045) 046 78.045.241 4.120.349
1. Cash and cash equivalents-unrealized foreign exchange differences 047
D) NET INCREASE OR DECREASE OF CASH FLOW (ADP 020+034+046+047) 048 -147.703.774 -175.114.657
E) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD 049 237.647.696 237.400.810
F) CASH AND CASH EQUIVALENTS AT THE END OF PERIOD (ADP 048+049) 050 89.943.922 62.286.153

45 Statement of Changes in Equity (for the period from 1/1/2018 to 31/3/2018) Taxpayer: 36201212847; Valamar Riviera d.d.

Minority (non-controlling) interest
Subscribed
Share capital
Capital re- serves Legal reserves Reserves for own shares Treasury shares
and shares (de-
ductible item)
Statutory re- serves Other reserves Revaluation
reserves
Fair value of
financial assets
available for
sale
Efficient portion
of cash flow
hedge
Efficient portion
of foreign net
investment
hedge
Retained
earnings / loss
carried forward
Net profit/ loss
for the period
Total distribut-
able to majority
owners
Minority
(non-con
trolling) interest
Total capital
and reserves
+ 8 to 15) 17 18 (16+17)
$\mathbf 0$ 9.529.123 $\mathbf 0$ 273.313 $\pmb{0}$ $\mathbf 0$ 228.523.684 336.657.721 2.324.082.480 2.324.082.480
$\overline{0}$ $\overline{0}$
$\overline{O}$ $\Omega$
$\mathbf 0$ 9.529.123 $\bf{0}$ 273.313 $\mathbf 0$ $\mathbf 0$ 228.523.684 336.657.721 2.324.082.480 $\mathbf{0}$ 2.324.082.480
231.979.074 231.979.074 231.979.074
$\circ$ $\mathcal{O}$
$\circledcirc$ $\circ$
450.979 450.979 450.979
$\bigcirc$ $\bigcirc$
$\circ$ $\circ$
$\bigcirc$ $\circ$
$\circ$ $\bigcirc$
$\bigcirc$ $\overline{0}$
$-90.195$ $-90.195$ $-90.195$
$\circ$ $\bigcirc$
$\bigcirc$ $\bigcirc$
$\overline{0}$ $\Omega$
1.251.674 1.251.674
$\circ$ $\circ$
$-99.352.193$ -97.953.977 -97.953.977
256.003.671 -336.657.721 $-64.251.739$ $-64.251.739$
$\overline{O}$ $\bigcap$
$\mathbf{0}$ 9.529.123 $\mathbf 0$ 634.097 $\mathbf 0$ $\mathbf 0$ 385.175.162 231.979.074 2.395.468.296 $\mathbf 0$ 2.395.468.296
$\mathbf 0$ $\mathbf 0$ $\mathbf 0$ 360.784 $\mathbf 0$ $\mathbf 0$ $\mathbf 0$ $\mathbf 0$ 360.784 $\mathbf 0$ 360.784
$\mathbf 0$ $\mathbf 0$ $\mathbf 0$ 360.784 $\pmb{0}$ $\mathbf 0$ $\mathbf 0$ 231.979.074 232.339.858 $\mathbf 0$ 232.339.858
$\mathbf 0$ $\pmb{0}$ $\mathbf 0$ $\mathbf 0$ $\pmb{0}$ $\mathbf 0$ 156.651.478 $-336.657.721$ $-160.954.042$ $\mathbf 0$ -160.954.042
2.395.468.296 $\mathbf 0$ 2.395.468.296 231.979.074 385.175.162 $\mathbf 0$ 0 634.097 $\mathbf 0$ 9.529.123 $\bf{0}$
$\circ$ $\overline{0}$
$\circ$ $\bigcap$
2.395.468.296 $\mathbf 0$ 2.395.468.296 231.979.074 385.175.162 $\mathbf 0$ $\mathbf 0$ 634.097 $\mathbf 0$ 9.529.123 $\mathbf 0$
$-157.944.457$ -157.944.457 $-157.944.457$
$\circ$ $\bigcirc$
$\circ$ $\overline{0}$
64.851 64.851 64.851
$\circ$ $\bigcirc$
$\circ$ $\overline{O}$
$\circ$ $\overline{O}$
$\bigcirc$ $\bigcirc$
$\circ$ $\bigcap$
$-12.970$ $-12.970$ $-12.970$
$\mathbf 0$ $\circ$
$\bigcirc$ $\bigcirc$
$\circ$ $\bigcap$
$-2.950.075$ $-2.950.075$
$\circ$ $\bigcirc$
2.093.715 2.093.715
$\circ$ $\bigcirc$ -231.979.074 231.979.074
$\Omega$ $\bigcap$
2.236.719.360 $\mathbf 0$ 2.236.719.360 $-157.944.457$ 617.154.236 $\mathbf 0$ 0 685.978 $\mathbf 0$ 9.529.123 $\mathbf 0$
51.881 $\mathbf 0$ 51.881 $\mathbf 0$ $\mathbf 0$ $\mathbf 0$ 0 51.881 $\mathbf 0$ $\pmb{0}$ $\bf{0}$
-157.892.576 $\mathbf 0$ $-157.892.576$ $-157.944.457$ $\mathbf 0$ $\mathbf 0$ 0 51.881 $\mathbf 0$ 0 $\mathbf 0$
$-856.360$ 0 $-856.360$ $-231.979.074$ 231.979.074 $\mathbf 0$ 0 $\pmb{0}$ $\pmb{0}$ $\pmb{0}$ $\pmb{0}$

Description ADP Share capital Capital re- serves Legal reserves Reserves for own shares Treasury shares and shares (de- ductible item) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 (3 to 6 - 7 Previous period 1. Balance at 1 January of the previuos period 01 1.672.021.210 2.204.690 67.198.750 44.815.284 37.141.295 0 9.529.123 0 273.313 0 0 228.523.684 336.657.721 2.324.082.480 2.324.082.480 2. Changes in accounting policies 02 0 0 3. Error correction 03 0 0 4. Balance at 1 January of the previous period (ADP 01 to 03) 04 1.672.021.210 2.204.690 67.198.750 44.815.284 37.141.295 0 9.529.123 0 273.313 0 0 228.523.684 336.657.721 2.324.082.480 0 2.324.082.480 5. Profit/loss for the period 05 231.979.074 231.979.074 231.979.074 6. Foreign currency translation differences- foreign operations 06 0 0 7. Changes in revaluation reserves of non-current tangible and intangible assets 07 0 0 8. Profit or loss from re-evaluation of finacial assets held for sale 08 450.979 450.979 450.979 9. Profit or loss from cash flow hedge 09 0 0 10. Profit or loss from foreign net investment hedge 10 0 0 11. Share in other comprehensive income/loss from undertakings with participat- ing interest 11 0 0 12. Actuarial gains/losses from defined benefit plans 12 0 0 13. Other changes in capital (minorities) 13 0 0 14. Taxation of transactions recognized directly in equity 14 -90.195 -90.195 -90.195 15. Increase/decrease of subscribed share capital (except by reinvested profit and in pre-bankruptcy settlement) 15 0 0 16. Increase of subscribed share capital by profit reinvestment 16 0 0 17. Increase of subscribed share capital in pre-bankruptcy settlement 17 0 0 18. Repurchase of own shares/ stakes 18 -1.251.674 1.251.674 1.251.674 19. Share in profit/ dividend payout 19 0 0 20. Other distribution to majority owners 20 1.398.216 -99.352.193 -97.953.977 -97.953.977 21. Transfer to reserves according to annual plan 21 16.402.311 256.003.671 -336.657.721 -64.251.739 -64.251.739 22. Increase in reserves in pre-bankruptcy settlement 22 0 0 23. Balance at 31 Decemeber of previous period (ADP 04 to 22) 23 1.672.021.210 3.602.906 83.601.061 44.815.284 35.889.621 0 9.529.123 0 634.097 0 0 385.175.162 231.979.074 2.395.468.296 0 2.395.468.296 ADDITION TO STATEMENT OF CHANGES IN EQUITY (only for IFRS adopters) I. OTHER COMPREHENSIVE INCOME OF PREVIOUS PERIOD NET OF TAX (ADP 06 to 14) 24 0 0 0 0 0 0 0 0 360.784 0 0 0 0 360.784 0 360.784 II. COMPREHENSIVE INCOME OR LOSS FOR THE PREVIOUS PERIOD (ADP 05+24) 25 0 0 0 0 0 0 0 0 360.784 0 0 0 231.979.074 232.339.858 0 232.339.858 III. TRANSACTIONS WITH OWNERS IN THE PREVIOUS PERIOD, RECOGNIZED DIRECTLY IN EQUITY (ADP 15 to 22) 26 0 1.398.216 16.402.311 0 -1.251.674 0 0 0 0 0 0 156.651.478 -336.657.721 -160.954.042 0 -160.954.042 Current period 1. Balance at 1 January of current period 27 1.672.021.210 3.602.906 83.601.061 44.815.284 35.889.621 0 9.529.123 0 634.097 0 0 385.175.162 231.979.074 2.395.468.296 0 2.395.468.296 2. Changes in accounting policies 28 0 0 3. Error correction 29 0 0 4. Balance at 1 January of current period (ADP 27 to 29) 30 1.672.021.210 3.602.906 83.601.061 44.815.284 35.889.621 0 9.529.123 0 634.097 0 0 385.175.162 231.979.074 2.395.468.296 0 2.395.468.296 5. Profit/loss for the period 31 -157.944.457 -157.944.457 -157.944.457 6. Foreign currency translation differences- foreign operations 32 0 0 7. Changes in revaluation reserves of non-current tangible and intangible assets 33 0 0 8. Profit or loss from re-evaluation of finacial assets held for sale 34 64.851 64.851 64.851 9. Profit or loss from cash flow hedge 35 0 0 10. Profit or loss from foreign net investment hedge 36 0 0 11. Share in other comprehensive income/loss from undertakings with participating interest 37 0 0 12. Actuarial gains/losses from defined benefit plans 38 0 0 13. Other changes in capital (minorities) 39 0 0 14. Taxation of transactions recognized directly in equity 40 -12.970 -12.970 -12.970 15. Increase/decrease of subscribed share capital (except by reinvested profit and in pre-bankruptcy settlement) 41 0 0 16. Increase of subscribed share capital by profit reinvestment 42 0 0 17. Increase of subscribed share capital in pre-bankruptcy settlement 43 0 0 18. Repurchase of own shares/ stakes 44 2.950.075 -2.950.075 -2.950.075 19. Share in profit/ dividend payout 45 0 0 20. Other distribution to majority owners 46 1.011.151 -1.082.564 2.093.715 2.093.715 21. Transfer to reserves according to annual plan 47 231.979.074 -231.979.074 0 0 22. Increase in reserves in pre-bankruptcy settlement 48 0 0 23. Balance as at 31 December of the current period (ADP 30 to 48) 49 1.672.021.210 4.614.057 83.601.061 44.815.284 37.757.132 0 9.529.123 0 685.978 0 0 617.154.236 -157.944.457 2.236.719.360 0 2.236.719.360 ADDITION TO STATEMENT OF CHANGES IN EQUITY (only for IFRS adopters) I. OTHER COMPREHENSIVE INCOME OF CURRENT PERIOD, NET OF TAX (ADP 32 to 40) 50 0 0 0 0 0 0 0 0 51.881 0 0 0 0 51.881 0 51.881 II. COMPREHENSIVE INCOME OR LOSS FOR THE CURRENT PERIOD (ADP 31 + 50) 51 0 0 0 0 0 0 0 0 51.881 0 0 0 -157.944.457 -157.892.576 0 -157.892.576 III. TRANSACTIONS WITH OWNERS IN THE CURRENT PERIOD, RECOGNIZED DIRECTLY IN EQUITY (ADP 41 to 48) 52 0 1.011.151 0 0 1.867.511 0 0 0 0 0 0 231.979.074 -231.979.074 -856.360 0 -856.360

Valamar Riviera d.d. Stancija Kaligari 1 52440 Poreč, Hrvatska T +385 (52) 408 002 F +385 (52) 451 608 E [email protected] W www.valamar.com

Investor relations Stancija Kaligari 1 52440 Poreč, Hrvatska T +385 (52) 408 159 F +385 (52) 451 608 E [email protected] W www.valamar-riviera.com

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