Financial Reporting Policies of the Hrvatska banka za obnovu i razvitak Group

I. Introductory provisions

The Financial Reporting Policies of the Hrvatska banka za obnovu i razvitak Group (hereinafter: HBOR Group or the Group) provide for the financial reporting framework of the Group and determine:

• Financial statements of HBOR Group,
• Basis for the preparation of financial statements,
• Objective and purpose of financial reporting,
• Principles of financial reporting,
• Publication of financial statements with publication calendar,
• Audit of annual financial statements.

HBOR Group is comprised of Hrvatska banka za obnovu i razvitak (hereinafter: HBOR or the parent company) as the parent company and all companies under its control – direct or indirect.

II. Financial statements of HBOR Group

Hrvatska banka za obnovu i razvitak Group prepares:

1. Separate financial statements of the parent company - Hrvatska banka za obnovu i razvitak (HBOR) and
2. Consolidated financial statements that include HBOR and the companies under its control – subsidiary companies.

Separate and consolidated financial statements are stated as financial statements, unless otherwise noted. Financial statements give an objective, true and fair view of assets, liabilities, financial position and financial results (gains and losses) for the reporting period covered. HBOR and HBOR Group prepare and present their financial statements at the end of every quarter as of 31st March, 30th June, 30th September and 31st December. In addition to the financial statements as of 30th June and 31st December, the Managing Board also prepares and publishes management report. Financial statements for the periods shorter than a full financial year are prepared and presented as unaudited and interim reports.

III. Basis for the preparation of financial statements

III.1. Annual financial statements:

The obligation to prepare annual financial statements is regulated by the following rules:

• Hrvatska banka za obnovu i razvitak Act,
• International Financial Reporting Standards (IFRS),
• Accounting Act and
• Audit Act.

When preparing and presenting its annual financial statements, HBOR Group applies International Financial Reporting Standards (IFRS). Consequently, all data and financial statements for consolidation are prepared by the members of the Group in accordance with the IFRSs. Annual financial statements are comprised of:

• a statement of financial position at the end of the period,
• a statement of profit or loss and other comprehensive income for the period (with a separate statement of profit or loss and a separate statement of other comprehensive income),
• a statement of cash flows for the period,
• a statement of changes in equity for the period,
• notes to the financial statements comprising a summary of significant accounting policies and other explanatory information.

Annual financial statements are prepared for the financial year that is equal to the calendar year. In addition to annual financial statements, the Managing Board also prepares and presents management report on operations.

III.2. Interim financial reporting:

HBOR Group also prepares interim financial reports for the periods ending as at 31st March, 30th June and 30th September. Interim financial reports are prepared as a set of condensed financial statements for an interim period in compliance with International Accounting Standard 34 – Interim financial reporting. Interim financial statements include, at a minimum, the following:

• a condensed statement of financial position,
• a condensed statement of profit or loss and other comprehensive income (with a separate statement of profit or loss and a separate statement of other comprehensive income),
• a condensed statement of cash flows,
• a condensed statement of changes in equity,
• selected explanatory notes.

In its interim financial statements, HBOR Group applies the same accounting policies and methods as are applied to its annual financial statements. If accounting policies changes are made after the date of the most recent annual financial statements due to changes in IFRSs, the interim financial statements shall contain the description of the nature and the effects of the amended accounting policies and methods.

IV. Objective and purpose of financial reporting

Financial statements are drafted and prepared with the objective to provide information on financial position, success in operations and changes in the financial position of HBOR and HBOR Group in order to enable their users to make appropriate economic decisions. Financial statements are prepared and presented with the purpose of availability of the informationon financial position, success in performance and changes in the financial position of HBOR and HBOR Group to their users on a regular basis as well as giving financial information about how the the strategy of HBOR Group is carried out.

V. Principles of financial reporting

For the purpose of achieving financial reporting objective, HBOR Group respects the following principles with regard to financial reporting and disclosure:

• Transparency in disclosure in order to enhance its users’ understanding of the presented information,
• Consistency in presentation within each reporting period and between reporting periods,
• Simplicity in disclosure in order to allow the users to gain easier understanding of the financial position, business performance and changes in financial position as well as to ease decision making,
• Focusing on legal requirements in order to ensure compliance,
• Application of the best presentation practices appropriate to the Group's activities with respect to the up-to-date international trends in financial reporting, as well as market demands.

VI. Publication of financial statements

In order to accomplish the financial reporting purpose, HBOR Group makes its financial statements public on its website. Financial statements are made public once adopted by the Supervisory Board. Because of the regulation requirements, audited annual financial statements are made public before the ratification by the Croatian Parliament. The decision of the Croatian Parliament on ratification of annual financial statements is made public upon its adoption. Financial statements published on HBOR’s website remain publicly available for at least five (5) years after the publication date. HBOR’s website provides an overview of financial statements over the last five (5) consecutive business years. Financial statements of HBOR Group are made public on HBOR’s website in accordance with the following calendar:

VII. Audit of the annual financial statements

In accordance with the provisions of the HBOR Act, audit of the annual financial statements is carried out by a certified auditing company. Given that HBOR as parent company provides the funds for the implementation of its business activities through bond issues and borrowings both in the Republic of Croatia and abroad, its annual financial statements should be audited by an internationally recognized auditing company. Because of HBOR’s status of a European capital markets bond issuer and a borrower from European and international financial institutions, its annual financial statements should be audited by a certified auditing company that fulfils requirements for approval and public registration of auditors and auditing companies and an efficient system of public oversight of auditors and auditing companies by the competent authorities of the EU member states in whose regulated capital markets HBOR’s securities are listed. The decision on appointing the auditing company for each business year is made by the Supervisory Board on the Managing Board’s recommendation.

VIII. Final provisions

The financial statements are usually signed by the Executive Director in charge of the preparation and presentation of financial statements and the Member of the Managing Board in charge of financial reporting. These policies come into force upon their adoption.

Interim financial reporting – reporting periods: Interim financial reports shall include consolidated and separate interim financial statements for periods as follows:

1. a condensed statement of financial position as of the end of the current interim period and a comparative statement of financial position as of the end of the immediately preceding financial year;
2. a condensed statement of profit or loss and other comprehensive income (with a separate statement of profit or loss and a separate statement of other comprehensive income) for the current interim period and cumulatively for the current financial year to date, with comparative statements of profit or loss and other comprehensive income for the comparable interim periods (current and year-to-date) of the immediately preceding financial year;
3. a condensed statement of changes in equity cumulatively for the current financial year to date, with a comparative statement for the comparable year-to-date period of the immediately preceding financial year;
4. a condensed statement of cash flows cumulatively for the current financial year to date, with a comparative statement for the comparable year-to-date period of the immediately preceding financial year.

Illustration of periods for interim reporting – quarterly reporting:

Condensed statement of financial position: Condensed statement of profit or loss and other comprehensive income: Condensed statement of cash flows: Condensed statement of changes in equity: