JADRAN d.d.

Bana Jelačića 16, Crikvenica

CONSOLIDATED ANNUAL REPORT OF THE GROUP

FOR 2021

Contents

JADRAN d.d.

Statement of the Management Board's responsibilities

Pursuant to the Croatian Accounting Act in force, the Management Board is responsible for ensuring that consolidated financial statements are prepared for each financial year in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, in order to give a true and fair view of the financial position and operating results of Jadran d.d. and its subsidiaries (hereinafter jointly: the Group). After making enquiries, the Management Board has a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Management Board of the Group has prepared the annual consolidated financial statements under the going concern assumption.

In preparing the annual consolidated financial statements the responsibilities of the Group’s Management Board include ensuring that:

 suitable accounting policies are selected and then applied consistently, in accordance with applicable financial reporting standards;

 judgements and estimates are reasonable and prudent;

 applicable accounting standards are followed; subject to any material departures disclosed and explained in the consolidated financial statements; and

 the annual consolidated financial statements are prepared on a going concern basis unless this assumption is inappropriate.

The Management Board is responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the financial position, operating results, changes in equity and cash flows of the Group and must also ensure that the financial statements comply with the Croatian Accounting Act in force and International Financial Reporting Standards. The Management Board is also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Moreover, in accordance with the Accounting Act, the Management Board is obliged to prepare a consolidated Annual Report comprising the consolidated financial statements, the consolidated Management Report and the Corporate Governance Statement. The consolidated Management Report was prepared in line with the requirements of Article 21 and 24 of the Croatian Accounting Act, and the Corporate Governance Statement in line with the requirements of Article 22 of the Croatian Accounting Act.

The Annual Report was authorised for issue by the Management Board on 28 April 2022.

JADRAN joint stock company for hotel management and tourism

Crikvenica

CONSOLIDATED ANNUAL

FINANCIAL STATEMENTS

FOR 2021

*The accompanying notes are an integral part of these consolidated financial statements.

These consolidated financial statements have been authorised and signed by the Management Board.

*The accompanying notes are an integral part of these consolidated financial statements.

These consolidated financial statements have been authorised and signed by the Management Board.

*The accompanying notes are an integral part of these consolidated financial statements.

These consolidated financial statements have been authorised and signed by the Management Board.

*The accompanying notes are an integral part of these consolidated financial statements.

These consolidated financial statements have been authorised and signed by the Management Board.

1. PRINCIPAL ACTIVITY AND GENERAL INFORMATION ABOUT THE COMPANY AND THE GROUP

JADRAN joint stock company for hotel management and tourism, Bana Jelačića 16, Crikvenica (the “Company”) is registered with the Commercial Court in Rijeka under Reg. No. (MBS): 040000817. The Company’s subscribed share capital amounts to HRK 482,507,730. The Company’s authorised representatives are Goran Fabris, Chairman of the Management Board, appointed on 22 May 2018, Ivan Safundžić, Member of the Management Board, appointed on 1 December 2020 and Miroslav Pelko, Member of the Management Board, appointed on 1 September 2021. The Company is represented by the Management Board in such a manner that each Member of the Management Board represents the Company jointly with another member of the Management Board. The Company’s principal activity is the provision of accommodation services in hotels, resorts and campsites, preparation of food and provision of food services, and preparation and serving of drinks and beverages.

In 2021, the average number of the Group’s employees was 320 (2020: 227 employees).

The Jadran Group consists of Jadran d.d., Crikvenica and its subsidiaries Club Adriatic d.o.o. and Stolist d.o.o. (the “Group”) in which Jadran d.d., Crikvenica has a 100% share and voting rights.

The Company's Supervisory Board comprises the following persons:

 Goran Hanžek, Chairman of the Supervisory Board

 Karlo Došen, Deputy Chairman of the Supervisory Board

 Adrian Čajić, Member of the Supervisory Board

 Dragan Magaš, Member of the Supervisory Board

 Mirko Herceg, Member of the Supervisory Board

2. SIGNIFICANT ACCOUNTING POLICIES

The most significant accounting policies consistently applied in the current year and previous years are set out below:

2.1. Statement of compliance and basis of presentation

The Group’s financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU. The financial statements also comply with the Croatian Accounting Act which refers to the IFRSs as adopted by the EU.

The Group's financial statements have been prepared under the accrual basis according to which the transaction effects are recognised when incurred and included in the financial statements for the period to which they relate, and by applying the basic accounting assumption of going concern.

The financial statements have been presented in the Croatian currency, Croatian kuna (“HRK”), which is the Company’s functional currency.

2.2. Critical accounting judgements and key sources of estimation uncertainty

In preparing these financial statements, certain estimates have been used that affect the presentation of the Group’s assets and liabilities, income and expenses and the disclosure of the Group’s contingent liabilities.

Future events and their effects cannot be anticipated with certainty, and therefore actual results may differ from these estimates. The estimates used in the preparation of the financial statements are subject to change as new events occur, as more experience is gained, additional information is obtained and due to the changing environment in which the Group operates.

The key estimates used in the application of accounting policies when preparing consolidated financial statements are disclosed in Note 3 below.

2.3. Going concern and the impact of the Covid-19 pandemic on the Group’s operations

At the beginning of 2021, the operations of the JADRAN group were marked by the COVID-19 pandemic to the same extent and in the same way as during almost the entire year 2020. Various forms of restrictions regarding both travels and events have led to most accommodation capacities remaining closed. Other than the café of International Hotel in Crikvenica, which operated in accordance with existing measures and restrictions, the Garden Palace Resort in Umag was opened on 1 February, and on 1 March, the Esplanade Hotel in Crikvenica reopened after having been closed in early January.

It is important to note that based on the decision of the Management Board of JADRAN d.d. dated 31 December 2020, the Group accommodated residents living in the earthquake-affected areas of Banovina and Glina in the International Hotel, thus helping thirty families until mid-March 2021.

In the second quarter of 2021, the Group still operated under the strong impact of the COVID-19 pandemic. However, given the many efforts made both at the global and local levels to bring the pandemic under control, the Group recorded a better business result in that period compared to the same period last year.

Although being faced with all the challenges posed to the Group by the COVID-19 pandemic, business continued in the third quarter with maximum adherence to all epidemiological measures, all for the purpose of protecting the Group’s guests and employees.

In the third quarter of 2021, there was a boost in tourism turnover compared to the same period last year, primarily due to more favourable trends in the expansion of COVID-19 in the Republic of Croatia and the fact that our most important European tourism competitors were in the so-called red zone for most of the third quarter (especially during peak season), which resulted in more tourists travelling to Croatia.

It can be concluded that 2021 was uncertain, challenging and unpredictable for the Group's operations.

In order to protect business continuity and preserve liquidity, the Group has maximally streamlined operating expenses, capital expenditures and control of cash outflows, similar to the previous year:

 As agreed with the social partners, it rationalised staff costs by reducing salaries for those employees who do not work and enabling, where possible, employees to work from home one to two days a week.

 Capital expenditures were limited to completing the investments started in recent years, completing the range of amenities in some facilities, investments in the beach management segment and continuing the investment cycle to ensure the further growth of the Group.

 Other operating expenses are limited to those necessary to maintain business continuity.

 Properties were sold in accordance with the previous disinvestment plan in CLUB ADRIATIC d.o.o., which in no way decreased the business potential, i.e. the accommodation capacities of the said company for 2021 were not reduced.

Despite the fact that the Group's operations were extremely challenging in the first half of the year and the future was uncertain and unpredictable at the time, the Group decided to continue the investment cycle. Capital expenditures were limited to completing the investments started in recent years, completing the range of amenities in some facilities, investments in the beach management segment, with liabilities arising from the signed concession agreements, and continuing the investment cycle to ensure the further growth of the Group as well as its future competitiveness.

Of the realised investments, special emphasis should be placed on the final completion of the investment in furnishing the annex buildings of Hotel Slaven with the aim of upgrading the classification from 2 to 3 stars, the purchase of 12 new mobile homes, the development and furnishing of plots and a supermarket at the Selce campsite, the beginning of investment in the swimming pool complex at Hotel Omorika as well as the development and furnishing of the Hotel Alem annex buildings.

All other operating expenses are limited to those necessary to maintain business continuity.

The Group’s cumulative losses as at 31 December 2021 amounted to HRK 175,901 thousand (2020: HRK 169,099 thousand) and current liabilities exceeded total assets by the amount of HRK 35,811 thousand (2020: HRK 121,502 thousand).

The Group has sufficient funds in the account and due to agreed credit facilities is able to ensure the liquidity of the Group. Accordingly, the consolidated financial statements are prepared on the going concern principle.

2.4. Changes in accounting policies and disclosures

2.4.1 New and amended standards adopted by the Group

The Group has applied the following standards and amendments for the first time for its annual reporting period commencing 1 January 2021:

 COVID-19-Related Rent Concessions – Amendments to IFRS 16 issued on 28 May 2020 and effective for annual periods beginning on or after 1 June 2020.

‎ 2.4.1 New and amended standards adopted by Group (continued)

 Effect of Interest rate benchmark reform – phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (issued on 27 August 2020 and effective for annual periods beginning on or after 1 January 2021).

The above amendments did not have a significant impact on the Group's current period.

2.4.2 Standards and interpretations not yet adopted:

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2021 reporting periods and have not been early adopted by the Group.

 Classification of liabilities as current or non-current - Amendments to IAS 1 (issued on 23 January 2020 and effective for annual periods beginning on or after 1 January 2022). These narrow scope amendments clarify that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period. Liabilities are non-current if the entity has a substantive right, at the end of the reporting period, to defer settlement for at least twelve months. The guidance no longer requires such a right to be unconditional. Management’s expectations whether they will subsequently exercise the right to defer settlement do not affect classification of liabilities. The right to defer only exists if the entity complies with any relevant conditions as of the end of the reporting period. A liability is classified as current if a condition is breached at or before the reporting date even if a waiver of that condition is obtained from the lender after the end of the reporting period. Conversely, a loan is classified as non-current if a loan covenant is breached only after the reporting date. In addition, the amendments include clarifying the classification requirements for debt a company might settle by converting it into equity. ‘Settlement’ is defined as the extinguishment of a liability with cash, other resources embodying economic benefits or an entity’s own equity instruments. There is an exception for convertible instruments that might be converted into equity, but only for those instruments where the conversion option is classified as an equity instrument as a separate component of a compound financial instrument. The amendment has not yet been endorsed by the European Union. The Group is currently assessing the impact of the amendments on its consolidated financial statements.

 Classification of liabilities as current or non-current, deferral of effective date – Amendments to IAS 1 (issued on 15 July 2020 and effective for annual periods beginning on or after 1 January 2023, not yet endorsed by the European Union). The amendment to IAS 1 on classification of liabilities as current or non-current was issued in January 2020 with an original effective date 1 January 2022. However, in response to the Covid-19 pandemic, the effective date was deferred by one year to provide companies with more time to implement classification changes resulting from the amended guidance. The Group is currently assessing the impact of the amendments on its consolidated financial statements.

 Proceeds before intended use, Onerous contracts - Cost of fulfilling a contract, Reference to the conceptual framework - narrow-scope amendments to IAS 16, IAS 37 and IFRS 3 and Annual improvements to IFRS Standards 2018-2020 cycle - amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41 (issued on 14 May 2020 and effective for annual periods beginning on or after 1 January 2022).

‎ 2.4.2 Standards and interpretations not yet adopted: (continued)

The amendment to IAS 16 prohibits an entity from deducting from the cost of an item of PPE any proceeds received from selling items produced while the entity is preparing the asset for its intended use. The proceeds from selling such items, together with the costs of producing them, are now recognised in profit or loss. An entity will use IAS 2 to measure the cost of those items. Cost will not include depreciation of the asset being tested because it is not ready for its intended use. The amendment to IAS 16 also clarifies that an entity is ‘testing whether the asset is functioning properly’ when it assesses the technical and physical performance of the asset. The financial performance of the asset is not relevant to this assessment. An asset might therefore be capable of operating as intended by management and subject to depreciation before it has achieved the level of operating performance expected by management.

 The amendment to IAS 37 clarifies the meaning of ‘costs to fulfil a contract’. The amendment explains that the direct cost of fulfilling a contract comprises the incremental costs of fulfilling that contract; and an allocation of other costs that relate directly to fulfilling. The amendment also clarifies that, before a separate provision for an onerous contract is established, an entity recognises any impairment loss that has occurred on assets used in fulfilling the contract, rather than on assets dedicated to that contract.

 IFRS 3 was amended to refer to the 2018 Conceptual Framework for Financial Reporting, in order to determine what constitutes an asset or a liability in a business combination. Prior to the amendment, IFRS 3 referred to the 2001 Conceptual Framework for Financial Reporting. In addition, a new exception in IFRS 3 was added for liabilities and contingent liabilities. The exception specifies that, for some types of liabilities and contingent liabilities, an entity applying IFRS 3 should instead refer to IAS 37 or IFRIC 21, rather than the 2018 Conceptual Framework. Without this new exception, an entity would have recognised some liabilities in a business combination that it would not recognise under IAS 37. Therefore, immediately after the acquisition, the entity would have had to derecognise such liabilities and recognise a gain that did not depict an economic gain. It was also clarified that the acquirer should not recognise contingent assets, as defined in IAS 37, at the acquisition date.

 The amendment to IFRS 9 addresses which fees should be included in the 10% test for derecognition of financial liabilities. Costs or fees could be paid to either third parties or the lender. Under the amendment, costs or fees paid to third parties will not be included in the 10% test.

 Illustrative Example 13 that accompanies IFRS 16 was amended to remove the illustration of payments from the lessor relating to leasehold improvements. The reason for the amendment is to remove any potential confusion about the treatment of lease incentives.

 IFRS 1 allows an exemption if a subsidiary adopts IFRS at a later date than its parent. The subsidiary can measure its assets and liabilities at the carrying amounts that would be included in its parent’s consolidated financial statements, based on the parent’s date of transition to IFRS, if no adjustments were made for consolidation procedures and for the effects of the business combination in which the parent acquired the subsidiary. IFRS 1 was amended to allow entities that have taken this IFRS 1 exemption to also measure cumulative translation differences using the amounts reported by the parent, based on the parent’s date of transition to IFRS. The amendment to IFRS 1 extends the above exemption to cumulative translation differences, in order to reduce costs for first-time adopters. This amendment will also apply to associates and joint ventures that have taken the same IFRS 1 exemption.

‎ 2.4.2 Standards and interpretations not yet adopted: (continued)

 The requirement for entities to exclude cash flows for taxation when measuring fair value under IAS 41 was removed. This amendment is intended to align with the requirement in the standard to discount cash flows on a post-tax basis. The interpretation has not yet been endorsed by the European Union. The Group is currently assessing the impact of the amendments on its consolidated financial statements.

 Covid-19-Related Rent Concessions – Amendments to IFRS 16 (issued on 31 March 2021 and effective for annual periods beginning on or after 1 April 2021). In May 2020 an amendment to IFRS 16 was issued that provided an optional practical expedient for lessees from assessing whether a rent concession related to COVID-19, resulting in a reduction in lease payments due on or before 30 June 2021, was a lease modification. An amendment issued on 31 March 2021 extended the date of the practical expedient from 30 June 2021 to 30 June 2022. The Group is currently assessing the impact of the amendments on its consolidated financial statements.

Unless otherwise described above, the new standards and interpretations are not expected to affect significantly the Group’s consolidated financial statements.

2.5. Property, plant and equipment

Property, plant and equipment are presented in the statement of financial position (balance sheet) at historical cost less accumulated depreciation and accumulated impairment losses. Cost includes the purchase price and all costs directly attributable to bringing the asset to working condition for its intended use. The costs of current maintenance and repairs, replacements and minor investment maintenance are recognised as expense when incurred. The costs of major overhauls and replacements are capitalised.

Gains and losses on the retirement or disposal of property, plant and equipment are presented in profit or loss in the period when incurred.

Property under construction is presented at cost less any impairment losses. Depreciation commences when the assets are ready for their intended use. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets, as follows:

‎ 2.6. Intangible assets

Non-current intangible assets include licenses and software and are measured at historical cost less accumulated amortisation and any accumulated impairment losses. Subsequent costs are capitalised only if they increase future economic benefits arising from the asset. All other costs are recognised in profit or loss as incurred.

The amortisation charge is recognised in profit and loss on a straight-line basis over the estimated useful lives of intangible assets, from the date that they are available for use.

Intangible assets are amortised using the straight-line method over a period of 5 years.

2.7. Investment property

Investment property mainly relates to buildings and other business premises within the hotels and campsites and is held to earn long-term rentals or capital appreciation and is not owner-occupied. Investment property is treated as a long-term investment unless it is intended to be sold in the next year and a buyer has been identified in which case it is classified within current assets.

Investment property is carried at historical cost less accumulated depreciation. The depreciation of buildings is calculated using the straight-line method to allocate cost over their estimated useful life.

2.8. Impairment of non-financial assets

Non-financial assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). The Group defined the CGU at the profit centre i.e. accommodation facility level.

Non-financial assets that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

2.9.
‎ Financial assets

The business model reflects how the Group manages their assets in order to generate cash flows - regardless whether the Group’s objective is: (i) solely to collect contractual cash flows from the assets (“hold to collect contractual cash flows”) or (ii) to collect both the contractual cash flows and cash flows arising from the sale of assets (“hold to collect contractual cash flows and sell”) or, if neither of (i) and (ii) are applicable, financial assets are classified as part of “other” business model and are measured at fair value through profit or loss.

As at the reporting date, the Group’s financial assets comprise receivables.

Impairment of financial instruments

The measurement of the expected credit loss (ECL) is based on reasonable and supportable information available without undue costs or effort, including information about past events, current and foreseeable future conditions and circumstances. Assessments of expected credit losses are normally based on historical probability of the inability to collect debts, supplemented by future parameters relevant to credit risk.

For trade receivables, a simplified approach to expected credit loss measurement is applied i.e. measurement on a collective basis, depending on the type of customer, and are monitored according to their ageing structure. For example, ageing groups may be defined as follows: not past due, due in 0-90 days, due in 90-180 days, etc. The ageing groups are determined according to the stages of the collection process.

2.10. Inventories

Inventories are carried at the lower of cost and net realisable value. Cost is determined using the weighted average cost method. Net realisable value is the estimated selling price in the ordinary course of business, less costs to sell.

2.11. Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, deposits held at call with banks, and other short-term highly liquid instruments with original maturities of three months or less.

2.12. Borrowings

Borrowings are initially recognised at fair value less transaction costs and subsequently at amortised cost using the effective interest rate method. Interest is recognised as an expense, except in the case of the construction of a qualifying asset, when it is capitalised as part of the asset’s cost.

The effective interest rate method is a method to calculate the amortised cost of a financial liability and allocate interest expenses over the accounting period.

Borrowings are classified based on the agreed maturity as current liabilities, or non-current liabilities if they mature in more than 12 months. If the Group has an unconditional right to defer the settlement of a liability for at least 12 months after the reporting date, such liabilities are classified as non-current liabilities.

The Group derecognises financial liabilities when, and only when, they have been discharged, cancelled or have expired.

2.13.
‎ Trade payables

Trade payables are obligations to pay for goods or services that have been acquired from suppliers in the ordinary course of business. Trade payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

2.14. Taxation

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

The current tax liability is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years or non-taxable, i.e. not recognised as expense for income tax purposes. The Group’s current tax liability is calculated using tax rates that have been enacted by the reporting date.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences and tax losses can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the tax asset to be recovered. Deferred tax is recognised as an expense or income in profit or loss, except when they relate to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity.

2.15. Employee benefits

Pension obligations and post-employment benefits

In the normal course of business through salary deductions, the Group makes payments to mandatory pension funds on behalf of its employees as required by law. All contributions made to the mandatory pension funds are recorded as salary expense when incurred. The Group is not obliged to provide any other post-employment benefits.

Termination benefits

The Group pays one-time termination benefits to its employees at retirement. The liability and costs of such benefits are determined using the projected unit credit method and discounted to their present value based on calculations made at the end of each reporting period, which take into account the assumptions of the number of employees estimated to become entitled to termination benefits at regular retirement, the estimated cost of such termination benefits, and the discount rate defined as the average anticipated rate of return on investment in government bonds. Actuarial gains and losses resulting from experience adjustments and changes in actuarial assumptions are recognised immediately in profit or loss.

2.15.
‎ Employee benefits (continued)

Long-term employee benefits

The Group recognises a liability for long-term employee benefits (jubilee awards) evenly over the period the benefit is earned based on actual years of service. The long-term employee benefit liability is determined annually at the end of each reporting period using assumptions regarding the likely number of staff to whom the benefits will be payable, estimated benefit cost and the discount rate which is determined as the average expected rate of return on investments in government bonds. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised immediately in profit or loss.

2.16. Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Where the Group expects a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.

2.17. Share capital

The Group’s share capital comprises ordinary shares. The consideration paid for treasury shares purchased, including any directly attributable transaction costs, is deducted from equity attributable to the Group’s shareholders until the shares are withdrawn, reissued or disposed of. When such shares are subsequently disposed of or reissued, any consideration received, net of any directly attributable transaction costs, is included in equity attributable to the Group’s shareholders.

2.18. Revenue recognition

Revenue is income arising in the course of the Group’s ordinary activities. A five-step model used for recognition of revenue from contracts with customers is presented below:

Step 1: Identify the contract(s) with a customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contract

Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation

Revenue is recognised for each separate contractual performance obligation in the amount of the transaction price. The transaction price is the amount of the consideration in the contract to which the Group expects to be entitled in exchange for transferring control over the promised goods or services to a customer.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Group and specific criteria have been met for each of the Group’s activities.

‎ Revenue from provision of services

Revenue from hotel & tourism services is recognised in the period the services are provided.

Lease income

Lease income is generally recognised in the period the services are provided, using a straight-line method over the lease term.

Interest income

Interest income is recognised on a time-proportion basis using the effective interest method.

2.19. Government grants

Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and the Group and the Company will comply with all attached conditions. A grant receivable as compensation for costs or losses already incurred or for immediate financial support, with no future related costs, are recognised as income in the period in which it is receivable within other operating income - Note 7.

2.20. Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as the lessor

Rental income from operating leases is recognised on the straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.

The Group as the lessee

Assets held under finance leases are initially recognised as assets of the Group at their fair value at the commencement date of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between finance costs and the reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. All other borrowing costs are recognised in gain or loss in the period in which they arise.

At the inception of a contract, the Group assesses whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. If the above conditions are met, the contract is considered to be or contain a lease. If the terms and conditions of the contract are changed, the Company shall reassess whether the above conditions are met.

The Group determines the lease term as the non-cancellable period of a lease, together with the periods covered by the option to extend the lease if the lessee is reasonably certain to exercise that option; and the periods covered by the option to terminate the lease if the lessee is reasonably certain not to exercise that option, with the obligation to reassess the above if significant events or a significant change in circumstances arise.

‎ 2.20. Leases (continued)

At the commencement date (the date on which the underlying asset is available for use), the Group recognises a right-of-use asset and a lease liability.

The right-of-use assets are measured at cost that comprises: the amount of the initial measurement of the lease liability; any lease payments made at or before the commencement date, less any lease incentives received; any initial direct costs incurred.

After the commencement date, the right-of-use assets are measured using the cost model. Under the cost model, the right-of-use asset is measured at cost: less any accumulated depreciation on a straight-line basis over the period of the lease (3-15 years), and any accumulated impairment losses; and adjusted for any remeasurement of the lease liability.

Lease liabilities at the present value of the lease payments that are not paid by that date. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the lessee’s incremental borrowing rate is used.

The measurement of lease liabilities includes: fixed payments less any lease incentives receivable; variable lease payments that are based on an index or a rate; amounts expected to be payable by the Group under residual value guarantees; the exercise price of a purchase option if the Group is reasonably certain to exercise that option; payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.

After the commencement date, the lease liability is measured considering any changes in the interest rate, lease payments made and any reassessment or lease modifications.

Short-term leases and leases of low-value assets

The Group has decided to apply the short-term lease exemption recognition (for leases up to 12 months that do not include the purchase option) and leases for which the underlying asset is of low value (up to HRK 30,000). Payments for leases for which the underlying asset is of low value are recognised on a straight-line basis as an expense over the lease term. The Group will consider a short-term lease to be a new lease if there is a lease modification and/or a change to the lease term. These leases mainly relate to photocopier machines and fire extinguishers.

The Group as the lessor

Leases where the Group does not transfer substantially all the risks and rewards of ownership of the asset are classified as operating leases. Lease income is recognised on a straight-line basis over the lease term and included in the statement of comprehensive income due to its operating nature.

‎ 2.20. Leases (continued)

Concession arrangements

If investments are made that are expected to last less than one accounting period, then that expense is recognised as expense for the period, and if investments made in the concession area are expected to last longer than one accounting period, they will be capitalised. Investments in the concession area have a limited useful life and are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method to allocate the cost of investments over their estimated useful lives, which is consistent with the remaining life of the concession agreement .

2.21. Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings over the period of their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in the period in which they are incurred.

2.22. Foreign currencies

Transactions in currencies other than Croatian kuna are recorded at the exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are re-translated at the reporting date using the exchange rate prevailing at that date. Gains and losses arising on translation are charged to profit or loss in the period when incurred.

2.23. Earnings (loss) per share

Earnings per share are determined by dividing the profit or loss attributable to equity holders of the Group by the weighted average number of participating shares outstanding during the year.

2.24. Business combinations

Subsidiaries are all entities controlled by the Group. The Group controls the entity when the Group is exposed or is entitled to variable returns from its association with the entity and has the ability to influence those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and are de-consolidated from the date that control ceases.

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value as at the acquisition date through comprehensive income.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IFRS 9 either as income or expense or as a change to other comprehensive income. The contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.

Goodwill is initially measured as the difference between the consideration transferred and the amount of non-controlling interest in the acquiree in relation to the fair value of identified net assets acquired. If this consideration is lower than the fair value of the net assets acquired, the difference is recognised in the statement of comprehensive income. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.

2.25. Consolidation

Intercompany transactions, balances, income and expenses from transactions with Group entities are eliminated. Gains and losses from intercompany transactions recognised in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

2.26. Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments. The chief operating decision-maker is the Group’s Management Board.

2.27. Events after the end of the reporting year

Events after the end of the reporting year providing additional information about the position of the Group as at the date of the financial statements (adjusting events) are reflected in the financial statements. Events that are not adjusting events are disclosed in the notes to the financial statements, if material.

3. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES

In applying the accounting policies described in Note 2, Group management has made certain judgements that had a significant impact on the amounts reported in the financial statements (independent of those presented below).

These judgements are detailed in the relevant notes and the most significant ones among them relate to the following:

Estimated useful life of property, plant and equipment

When a significant investment in tourism properties (buildings) occurs, the useful life of buildings or their components is reassessed/reviewed. The useful lives should be periodically revised to reflect any changes in circumstances since the previous assessment. Changes in estimate, if any, will be reflected prospectively in a revised depreciation charge over the remaining, revised useful life.

Analysis of sensitivity to changes in useful lives:

By using a certain asset, the Group uses the economic benefits contained in this asset, which diminish more intensely with economic and technological ageing. Consequently, in the process of determining the useful life of an asset, in addition to assessing the expected physical utilisation, it is necessary to consider the changes in demand on the tourism market, which will cause a faster economic obsolescence as well as a more intense development of new technologies.

In view of the above, business operations in the hotel industry impose the need for more frequent investments, and this circumstance contributes to the fact that the useful life of assets is decreasing.

If the useful lives of property, plant and equipment had been 10% longer/shorter, with all other variables held constant, the net profit for the year would have been HRK 2,413 thousand higher/lower in 2021 (2020: HRK 2,018 thousand), and the net carrying amount of property, plant and equipment would have been HRK 2,942 thousand higher/lower in 2021 (2020: HRK 2,461 thousand).

3.
‎ CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES (continued)

Impairment of non-current non-financial assets - recoverable amount of property, plant and equipment, investment property and right-of-use assets

1) Property, plant and equipment and investment property

In accordance with the adopted accounting policy, the Group reviews the carrying amounts of non-financial assets (including property, plant and equipment, investment property and right-of-use assets) at least once a year to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). The cash-generating unit in the hotel industry/tourism is the accommodation facility. The accounting policy is presented in Note 2.8.

Given the prolonged impact of the COVID-19 pandemic on the Group's operations in 2021 and the absence of operating profit or overall operations in individual cash-generating units, the Group has assessed that there are indicators of impairment of certain categories of non-current non-financial assets and in accordance with IAS 36 made an impairment test of all its cash-generating units i.e. accommodation facilities (own as well as leased facilities).

The recoverable amount is calculated in one of two ways: by calculating the value of assets in use or by calculating the fair value of assets less costs to sell for individual cash-generating units whose value in use determined by the Discounted Cash Flows (DCF) method does not reflect their intrinsic value (taking into account their location and development potential).

The investment cycle started by the Group in 2019 and continued through 2020 and 2021 resulted in an increase in revenue in the facilities covered by new investments. Consequently, the historical approach to allocating administrative costs by revenue of an individual facility in relation to total revenues did not adequately reflect the Group’s new asset structure. In order to optimally allocate the administrative costs of central services, a new method of allocating these costs has been applied, which is based on the number of accommodation units per each facility. By applying the new method of allocating administrative costs of central services, the Group’s total operating result remained unchanged.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining the recoverable amount, management considers key indicators such as revenue growth based on occupancy of facilities, revenue per unit and expected market growth in the hotel industry, etc. The valuations are based on five-year cash flow projections prepared by the Group's management, with the budget for 2022 also approved by the Supervisory Board. For the period after the end of the five-year period, the assumed long-term sustainable growth rate (sustainable growth rate) was applied. Taking into account the significant capital investments in the Group's accommodation units just before the outbreak of the Covid-19 pandemic, the sustainable growth rates used in the valuation represent the maximum value of the projected inflation rates in the Republic of Croatia.

‎ 3. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES (continued)

An overview of the assumptions used in the in-use value calculation model is as follows:

Note: the margin and revenue growth listed in the table above reflect the ranges after returning to the business level after the Covid-19 pandemic (in 2023 or onwards) and depend on the individual facility of different characteristics.

The calculation of fair value less costs to sell is based primarily on the revenue method, and in two cases on the comparative (for land) and cost method. According to the income method, real estate is worth as much as the cash it is able to generate over its lifetime. After determining all income and expenses related to an individual accommodation unit, the net income of all future periods is calculated and discounted at an adequate discount rate in order to obtain the present value of future cash flows. The assumptions used in the income method are the average board price per accommodation unit, the average occupancy rate, the estimated total cost defined as % of GOP and the capitalisation factor.

The following is an overview of the key assumptions in the revenue method used:

Tourism 2022

Average board price (HRK) 43 - 646

Average occupancy rate 18% - 66%

Estimated total cost (% of GOP) 60%

Capitalisation factor 7%

Note: The key assumptions listed in the table above depend on the individual facility of different characteristics.

For accommodation facilities where land represents the most significant part of the estimated value, a comparative method was used, i.e. method of determination based on realised comparable transactions on the real estate market, in accordance with the current state of the respective real estate.

Prepared impairment tests suggest that the recoverable amount of each facility exceeds the net carrying amount of each facility as at 31 December 2021 and, accordingly, there are no indications of impairment.

The Group considered the impact of reasonable changes in key assumptions and identified the following:

 if the EBITDA margin rate were to decrease by 100 bps within the projected five-year period, the Group should recognise an impairment in the amount of HRK 2.7 million in its records.

 if the growth rate were to decrease by 100 bps within the projected five-year period, the Group should recognise an impairment in the amount of HRK 5.7 million in its records.

3. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES (continued)

 if the discount rate were to increase by 50bps, the Group should recognise an impairment in the amount of HRK 16.3 million in its records and

 if the terminal growth rate were to decrease by 50bps, the Group should recognise an impairment in the amount of HRK 13.1 million in its records.

2) Right-of-use assets

In 2021, the Group conducted an impairment test for right-of-use assets with respect to the indicators of impairment due to the prolonged effects of the COVID-19 pandemic. A leased accommodation facility was identified as a cash-generating unit.

The recoverable amount of leased accommodation facilities has been determined on the basis of the value in use based on financial projections in the contracted lease term at a discount rate.

For tourism facilities for which the recoverable amount is determined at fair value less costs to assess, based on the assessment of an independent appraiser, the Group has classified them in Level 3 of the fair value hierarchy . The applied valuation methods for these facilities are described above.

The results of this analysis suggest that the recoverable amount of each leased facility exceeds the reported net carrying amount of each facility as at 31 December 2021 and, accordingly, there are no indications of impairment.

Leases

As the interest rate implicit in the lease cannot be readily determined, the Group uses its own incremental borrowing rate of 2.7% (2020: 2.70%) when calculating the lease liability for cash flow discounting purposes.

The Group defines a lease term as a non-cancellable period, together with periods under the lease extension and/or termination option if it is reasonably certain that such option will be exercised (extension) or not exercised (termination).

The Group does not expect to exercise either the lease termination or the extension option, and no potential effects were calculated in relation to these options.

Provisions for legal disputes

The Group is a party to a number of legal disputes arising from the ordinary course of business (Note 35). A provision is made if there is a present obligation resulting from a past event (taking into account all available evidence, including the opinions of legal experts) when it is probable than an outflow of resources will be required to settle the obligation, and the amount of the obligation can be measured reliably. As at 31 December 2021, provisions for legal disputes amounted to HRK 181,000 thousand (31 December 2020: HRK 0, see Note 25).

4.
‎ FINANCIAL INSTRUMENTS

Capital risk management

The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group's capital structure consists of share capital, statutory reserves, retained earnings and profit for the year.

Classes of financial instruments

Financial risk factors

The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Group does not have a formal risk management programme in place, and the overall risk management in respect of these risks is carried out by the Group’s Management Board and management.

Market risk

The Group’s activities primarily expose the Group to the financial risks of changes in foreign currency exchange rates and interest rates (see below). Market risk exposures are supplemented by the sensitivity analysis. There has been no change to the Group’s exposure to market risks or the manner in which it manages and measures the risk.

4.
‎ FINANCIAL INSTRUMENTS (continued)

Currency risk management

The Group undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate fluctuations arise. The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities as at the reporting date are as follows:

Analysis of foreign currency sensitivity

The Group is exposed to foreign currency risk in the event of a change in the euro (EUR) exchange rate. The following table presents an analysis of the effects of changes in the HRK exchange rate compared to the increase or decrease in HRK value by 10% in relation to EUR. 10% is the rate used for internal reporting to the Management Board on foreign currency risk and represents the Management Board's assessment of the reasonably possible change in foreign exchange rates. An analysis is performed only for receivables and liabilities denominated in foreign currencies and represents the adjustment of their value at the period end for a change in the exchange rate of 10%. The sensitivity analysis includes third-party loans where the loan is denominated in the currency different from the lender's or the borrower's currency. The positive/negative amount recorded below indicates a net decrease/increase in profit or other equity when HRK compared to the relevant currency strengthens by 10%: If the HRK would weaken by 10% in relation to another relevant currency, the effect would be the same, only negative.

Interest rate risk management

The Group is exposed to interest rate risk as it enters into loan agreements with variable interest rates. The Group’s exposure to interest rates based on financial assets and liabilities is detailed under Liquidity risk management. The Group manages this risk by maintaining an appropriate ratio of loans with fixed and variable interest rates in its loan portfolio.

‎

4. FINANCIAL INSTRUMENTS (continued)

Interest rate sensitivity analysis

Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss for the Group. The Group constantly monitors its exposure to the parties it conducts business with and their credit ratings and allocates the total value of transactions among acceptable customers.

The carrying amount of financial assets recorded in the financial statements, net of impairment losses, represents the Group's maximum exposure to credit risk without taking account of the value of any collateral obtained.

Liquidity risk management

The ultimate responsibility for liquidity risk management rests with the Group's Management Board which has built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, bank borrowings and other sources of financing, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

The table below details the remaining contractual maturities for the Group for non-derivative financial liabilities. The table has been prepared on the basis of undiscounted cash flows of financial liabilities based on the earliest date on which the Group may be required to settle the liabilities.

4.
‎ FINANCIAL INSTRUMENTS (continued)

Maturities of non-derivative financial liabilities

5.
‎ SEGMENT INFORMATION

Operating segments are reported in accordance with the internal reporting procedure to the Group’s Management Board, the chief operating decision-maker, which is responsible for allocating resources to the reportable segments and assessing its performance.

Management defined Hotels & Apartments, Campsites and operating units Inter café bar, Rokan, Katarina swimming pools and Kačjak beach as its reportable segments.

The segment information for the reportable segments for the year ended 31 December 2021 is as follows:

The segment information for the reportable segments for the year ended 31 December 2020 is as follows:

The result by segment represents the profit of each segment before the distribution of other operating income, other operating expenses, finance income, finance costs and income tax. This result represents a benchmark that is submitted to the Group's Management Board for the purpose of making a decision on allocating resources to that segment and evaluating its performance.

‎ 5. SEGMENT INFORMATION (continued)

A reconciliation of the result of reportable segments and net loss for the current period is provided as follows:

The Group does not monitor assets and liabilities by segments and therefore, this information has not been disclosed. The Group does not monitor income and expenses or assets and liabilities of the subsidiary Stolist d.o.o. by segments.

The hotels, apartments and campsites (operating assets) are located in the Republic of Croatia.

The Group provides its hotel/hospitality services and sales activities in Croatia to domestic and foreign customers.
‎

6. REVENUE

The Group provides its hotel/hospitality services and sales activities in Croatia to domestic and foreign customers. The Group’s revenues are classified according to the customers’ origin.

/i/ Other includes revenues from the sale of trade goods, alcoholic and non-alcoholic drinks, food and beverages, parking services, wellness and other similar services, where it is not possible to determine whether revenue was earned from the sale to foreign or domestic customers.

7. OTHER INCOME

‎

8. COST OF RAW MATERIALS AND SUPPLIES

9. COST OF SERVICES

‎

10. STAFF COSTS

Remuneration for the members of the key management personnel and Supervisory Board:

11. IMPAIRMENT OF NON-CURRENT NON-FINANCIAL ASSETS

12.
‎ NET GAINS/(LOSSES) ON VALUE ADJUSTMENTS OF FINANCIAL ASSETS

13. OTHER OPERATING EXPENSES

‎

14. FINANCE INCOME AND COSTS

15. INCOME TAX

The Group is liable for income tax under the laws and regulations of the Republic of Croatia. The tax base is determined as the difference between income and expenses for the period plus and net of income and expenses having a different tax treatment according to the tax regulations concerning the taxation of income. The income tax rate was 18% in all presented periods.

‎ 15. INCOME TAX (continued)

In recent years, the Tax Authority has not conducted an audit of tax on the Group's income tax returns. According to the relevant tax regulations, the Tax Administration may inspect the Group’s books and records at any time within three years of the end of the year in which the relevant tax liability is presented and may impose additional tax liabilities and penalties. The Group's Management is not aware of any circumstances, which may give rise to a potential material liability in this respect.

As at 31 December 2021, temporary tax differences for which deferred tax assets were not recognised, and which relate to property, plant and equipment, amount to HRK 20,293 thousand. Also, the Group has tax losses available for utilisation in the amount of HRK 13,456 thousand for which deferred tax assets are not recognised as presented in the table below Deferred tax assets were not recognised given that their utilisation is uncertain. In the following periods, the Group will consider the recognition of deferred tax assets in accordance with the requirements of IAS 12.

Tax losses available for carry forward are presented below:

16. LOSS PER SHARE

17.
‎ PROPERTY, PLANT AND EQUIPMENT

‎ 17. PROPERTY, PLANT AND EQUIPMENT (continued)

Additions to tangible assets in 2021: buildings in the amount of HRK 10,955,805 relate to investments in hotel facilities (upgrading the classification of hotels, developing campsites and other construction works) (2020: HRK 58,786,083), equipment in the amount of HRK 25,773,100 relates to the purchase of equipment necessary for operations in hotels and campsites (2020: HRK 39,684,049), other assets in the amount of HRK 518,488 (2020: HRK 326,171) and the additions to tangible assets under construction in the amount of HRK 4,298,357 relate to investments in hotel facilities and campsite development, which were not put into use during 2021 (2020: disposals of HRK 33,188,961).

As at 31 December 2021, the carrying amount of mortgaged properties (hotels Omorika, hotel Ad Turres, Esplanade, Katarina, International, Slaven resort, pavilions, swimming pool and central restaurant within the Ad Turres, Kačjak and Kaštel resorts) amounts to a total of HRK 298,653,837 (31 December 2020: HRK 165,115,398).

The total value of tangible assets that are fully depreciated, and which are still in use as at 31 December 2021 amounts to HRK 107,649,750 (31 December 2020: HRK 102,812,819).

Proceeds from sale of property, plant and equipment in 2021 amounted to HRK 27,943,446 and the unsettled amount of HRK 12,191,132 is stated within trade receivables at the balance sheet date.

18. INTANGIBLE ASSETS

‎

19. INVESTMENT PROPERTY

20.
‎ NON-CURRENT FINANCIAL ASSETS

21. INVENTORIES

22. TRADE RECEIVABLES

/i/ The carrying amount of foreign trade receivables is translated from EUR.

22.
‎ TRADE RECEIVABLES (continued)

Based on the above calculation, the closing loss allowance for trade receivables is reconciled with the opening loss allowance as follows:

23. RECEIVABLES FROM THE GOVERNMENT

24.
‎ OTHER RECEIVABLES

/i/ Receivables arising from advances given relate to advances paid to HEP in the amount of HRK 560,199, to Cossetto in the amount of HRK 464,230 and other advances given to suppliers.

25. CASH AND CASH EQUIVALENTS

/i/ The carrying amount of cash at banks in foreign currency was translated from EUR.

The Company mainly deposits its cash at local banks that are members of banking groups with the following credit ratings by Standard & Poor's:

26.
‎ CAPITAL AND RESERVES

The parent company's share capital amounts to HRK 482,507,730 and is divided among 27,971,463 ordinary shares without a nominal value with the ticker symbol JDRN-R-B. The Company's ID No. (OIB) is 56994999963, while its Reg. No. (MBS) is 040000817. The share capital represents the Company’s own sources of assets for its operating purposes.

Capital reserves as of 31 December 2021 as well as of 31 December 2020 amount to HRK 234,210,922 and are not available for distribution to the shareholders.

Individual major shareholders are PBZ CO OMF – CATEGORY B which holds 58.02% of shares and ERSTE PLAVI OMF CATEGORY B which holds 30.56% of the Company’s shares.

Table 1: Structure of shareholders as at 31 December 2021 and 31 December 2020

27. PROVISIONS

‎ Movements in provisions over the years are as follows:

28. LIABILITIES TO BANKS AND OTHER FINANCIAL INSTITUTIONS

28.
‎ LIABILITIES TO BANKS AND OTHER FINANCIAL INSTITUTIONS (continued)

A summary of long-term loans denominated in foreign currencies is presented below:

/i/ In 2015, the Group entered into a long-term loan agreement with the Croatian Bank for Reconstruction and Development for a loan of HRK 7 million, repayable over 5 years, with a 1-year grace period and 3% interest rate, for the renovation of facilities and upgrading the classification of Hotel Omorika and Selce Autocamp. The loan matures in 2022 due to moratorium granted in Covid period.

/ii/ In 2016, the Group entered into a long-term loan agreement with the Croatian Bank for Reconstruction and Development for a loan of HRK 17,400,000, repayable over 8 years, with a 1-year and 10 months grace period and 3% interest rate, for the renovation of facilities and upgrading the classification of Hotel Omorika and Hotel Varaždin (Katarina).

/iii/ In 2016, the Group entered into a long-term loan agreement with the Croatian Bank for Reconstruction and Development for a loan of HRK 10 million, repayable over 8 years, with a 1-year and 3 months grace period and 3% interest rate, for the renovation of facilities and upgrading the classification of Hotel Varaždin (Katarina).

/iv/ In 2016, the Group entered into a long-term loan agreement with Privredna banka Zagreb d.d. for a loan of EUR 7,400,000, repayable over 6 years, with a 1-year and 6 months grace period and 2.6% interest rate, for the renovation of facilities and upgrading the classification of Hotel Varaždin (Katarina) and Hotel Esplanade and to purchase the receivables from Veneto banka d.d. This Agreement was entered into in December of 2016. The amount of EUR 7,343,852 was drawn under the loan, and the loan commencement date was 20 July 2019.

/v/ In 2019, the Group entered into a long-term loan agreement with Privredna banka Zagreb d.d. for a loan of EUR 12,250,000, repayable over 12 years, with a 2.05% interest rate, for the renovation of facilities and upgrading the classification of the Ad Turres resort, Selce Campsite - swimming pool and allotment, Hotel Katarina, Hotel Omorika, Kačjak resort, Slaven pavilions and Hotel Esplanade (up to 31 December 2019, the unused part of the loan amounted to HRK 44,238,054).

/vi/ In 2019, the Group entered into a long-term loan agreement with Erste&Steiermärkische Bank d.d. for a loan of EUR 13,441,000.00, repayable over 10 years, with a 2.1% interest rate, to be used for investments - purchasing and other costs of acquiring Club Adriatic d.o.o. Zagreb.

29. OTHER NON-CURRENT LIABILITIES

/i/ The liabilities under the Bankruptcy Plan of HRK 61,720 relate to liabilities to secured creditors of the 2nd rank = HRK 31,224 and liabilities intended to be included in the share capital of HRK 30,496. The Bankruptcy Plan does not infringe on the secured creditors’ right to be paid from items subject to separate satisfaction.

30. TRADE PAYABLES

31. LIABILITIES FOR ADVANCES, DEPOSITS AND GUARANTEES

/i/ In 2021, liabilities for advances received mainly relate to individual advances from domestic customers in the amount of HRK 215,192, individual advances from foreign customers in the amount of HRK 211,613 (equivalent of EUR 28,151) and Katarina line d.o.o., Opatija in the amount of HRK 185,674 (equivalent of EUR 24,700).

32. LIABILITIES TO EMPLOYEES

33. LIABILITIES TO THE GOVERNMENT

34. OTHER CURRENT LIABILITIES

/i/ The capital aid of HRK 737,911 remitted by the Energy Efficiency and Environmental Protection Fund relates to the reconstruction of the heating system at Hotel Katarina in 2016 and is prorated to revenue on an annual basis.

35. LEGAL PROCEEDINGS INITIATED AGAINST THIRD PARTIES

After the bankruptcy proceedings were completed in 2014, the Group continued to conduct all legal disputes initiated at the time of bankruptcy of JADRAN d.d., as well as those that the stated company did not manage to resolve during the bankruptcy period. Most legal actions related to claims brought by employees for failure to pay wages owed since before the year 2000. Pursuant to the settlement agreements signed, JADRAN d.d. made the relevant payments to its former employees and the relevant mortgages/pledges and annotations were removed from the land registry. JADRAN d.d. took legal action against a former employee with whom no settlement agreement was reached.

The process of JADRAN d.d.’s transformation and the Property Statement Resolution issued by the Croatian Privatisation Fund resulted in unresolved proprietary matters. For the purpose of resolving such proprietary matters regarding the stated company’s properties, JADRAN d.d. initiated individual corrective processes to align the land registry status with the actual status of the properties, as well as processes to establish title.

Modular structures owned by third parties were illegally mounted on a part of assets owned by JADRAN d.d., namely at the Selce campsite and the Kačjak campground. As the owners of such modular structures refuse to remove them and surrender the plots, JADRAN d.d. took legal action for the purpose of repossessing the land/plots.

JADRAN d.d. is involved in three legal proceedings concerning the establishment of title regarding two restaurants that had been owned by the stated company until 2006, when JADRAN d.d. leased them out. Based on the Decisions of the Primorje-Gorski Kotar County, these facilities were given to be managed by third parties, without JADRAN d.d. receiving any compensation, considering that the stated company built and maintained these properties until they were leased. The proceedings in question are being conducted against the Town of Crikvenica and the Republic of Croatia.

Also, JADRAN d.d. has several disputes with the Town of Crikvenica, related to property issues.

Returning the plots at the Selce campsite and the Kačjak campground to the possession of JADRAN d.d. is a precondition for the stated company to continue the investment cycle in these two very attractive locations. For the further continuation of the investment cycle, it is important to resolve the issue of the status of the restaurant as well as disputes with the Town of Crikvenica.

As regards other legal proceedings, JADRAN d.d. is a party to proceedings for the restitution of and compensation for property seized and enforcement proceedings to collect debt owed to it by third parties.

CLUB ADRIATIC d.o.o. conducts enforcement and litigation proceedings against third parties and one labour dispute for the purpose of annulling an extraordinary dismissal. The stated company has no proprietary legal disputes with respect to the real estate Baško Polje.

In 2021, STOLIST d.o.o. was not involved in any proprietary or other legal disputes.

36. LEASE LIABILITIES AND RIGHT-OF-USE ASSETS

The interest expense on lease liabilities is included in Finance costs - Interest expense on lease (Note 14).

The method of recognition and measurement is set out in Note 2.20.

LEASE LIABILITIES

RIGHT-OF-USE ASSETS

As stated in Note 2.20, the Group uses the exemption expedient for short-term leases and low-value leases. In 2021, short-term leases and low-value leases amounted to HRK 563,895 (Note 9).

‎

37. NET DEBT

Changes in net debt are presented in the table below:

38. EVENTS AFTER THE BALANCE SHEET DATE

On 23 March 2022, the Lease Agreement for the View Hotel located in Postira on the island of Brač was signed for the period from 1 June 2022 to 31 December 2022. The rent was agreed in the amount of EUR 225,000.00 payable in HRK at the middle exchange rate of the CNB on the date of the invoice issued by the Lessor over the entire lease term .

The situation in Ukraine is alarming, but due to its unpredictability it is not possible to assess its impact on the overall tourist season. Given the structure of our guests and the fact that in our facilities we have not had a significant share of guests from Ukraine, Russia and guests from remote markets such as South Korea or the United States, at this time we still believe in a very successful season in the Kvarner and Istria region. Compared to the same period last year, the dynamics of accommodation bookings has slowed down, with an increasing tendency. In our Dalmatian destinations, activities have been launched aimed at adapting to the possible decline in the number of air travellers .