Annual Report 2015

1

Annual Report 2015

2

CONTENTS

GENERAL MANAGER’S ADDRESS ....................................................................................................... 4

1. INTRODUCTION OF TERME ČATEŽ COMPANY AND TERME ČATEŽ GROUP ................................. 5

1.1 IDENTITY CARD OF THE COMPANY ......................................................................................... 5

1.2 EQUITY STRUCTURE ................................................................................................................. 5

1.3 TERME ČATEŽ GROUP .............................................................................................................. 6

1.4 PERFORMANCE HIGHLIGHTS ................................................................................................... 7

1.5 CORPORATION MANAGEMENT ............................................................................................. 10

1.6 SHARE DATA ........................................................................................................................... 13

2. BUSINESS REPORT ........................................................................................................................ 15

2.1 SALES & MARKETING ............................................................................................................. 15

2.1.1 Tourist trends in Slovenia and at Terme Čatež ............................................................... 15

2.1.2 Sales revenues ................................................................................................................. 15

2.1.3 Overnight stays ................................................................................................................ 16

2.1.4 Bathing guests ................................................................................................................. 16

2.2. SALES AND MARKETING ACTIVITIES IN 2015 AND PLAN 2016 ............................................ 17

2.2.1 Sales and marketing activities 2015 ................................................................................ 17

2.2.2 Planned sales and marketing activities in 2016 .............................................................. 19

3. PERFORMANCE ANALYSIS ........................................................................................................... 22

3.1 BALANCE SHEET OF TERME ČATEŽ COMPANY ...................................................................... 22

3.1.1 Profit & loss statement of Terme Čatež company .......................................................... 22

3.1.2 Balance sheet of Terme Čatež company ......................................................................... 23

3.1.3 Notes to capital- and cash flow statement of Terme Čatež company ........................... 24

3.2 BALANCE SHEET OF TERME ČATEŽ GROUP ........................................................................... 24

3.2.1. Profit & loss statement of Terme Čatež Group .............................................................. 24

3.2.2 Balance sheet of Terme Čatež Group .............................................................................. 26

3.2.3 Notes to capital- and cash flow statement of Terme Čatež company ........................... 27

3.3 HUMAN RESOURCES AND HR-POLICY .................................................................................. 27

3.4 INFORMATION TECHNOLOGY (IT) ......................................................................................... 29

3.5 SUPPLIERS AND CUSTOMERS ................................................................................................ 29

3.6 ENVIRONMENTAL CARE AND (LOCAL) COMMUNITY ........................................................... 29

3.7 RISKS ....................................................................................................................................... 30

3.8 PLANS 2016 ............................................................................................................................ 32

Annual Report 2015

3

3.9 EVENTS AFTER THE BALANCE ACCOUNT ............................................................................... 35

3.9.1 Licence on thermal water consumption ......................................................................... 35

3.9.2 Disposal of Terme Ilidža company .................................................................................. 35

3.10 STATEMENT ON MANAGING AND AGREEMENT WITH THE STIPULATIONS OF THE PUBLIC

COMPANY MANAGEMENT CODEX .............................................................................................. 37

4. FINANCIAL STATEMENT ............................................................................................................... 38

4.1 PROFIT & LOSS ACCOUNT WITH ANNOTATIONS ................................................................. 38

Annotations to non-consolidated financial statements of Terme Čatež company aligned with

the IFRS (International Financial Reporting Standards) ............................................................. 48

Annotations to consolidated financial statements of Terme Čatež Group aligned with the IFRS

(International Financial Reporting Standards) ......................................................................... 103

Annual Report 2015

4

GENERAL MANAGER’S ADDRESS

Esteemed shareholders, business partners and fellow workers,

Despite the adverse economic situation we successfully ended the business year. Accomplished

were the investments planned, which were necessary for the maintenance of the quality service

and current operation of the company. The company retains the leading role in the tourist branch

in Slovenia.

Terme Čatež company realized in 2015 € 29.2 m in operating revenues, € 8.1 m in EBITDA and €

1.6 m in net profit.

The investments conducted in 2015 were as follows: football playgrounds, adventure park,

acquisition of two real estaTES AT Mokrice, preparation of the sites for luxury tents in the campsite

and the erection of mobile fun park in the season.

In 2014 Terme Čatež company realized 659,603 overnight stays, which is a little less than in the

year before, but the overnight stays made by foreign visitors substantially increased (most of them

coming from Russia, the Netherlands and Poland).

Terme Čatež Group made in 2015 € 34.8 m in operating revenues, € 4.6 m in profit and € 9.7 m in

EBITDA.

In 2015 the company continued with a disinvestment process; the company sold the office

premises at Plava Laguna (Ljubljana) and the financial investment Terme Ilidža. The company

plans further the disposal of Golf Hotel Mokrice Castle resort and Marina Portorož company.

The year 2016 is going to be a challenging year aimig at better business results. The innovative

marketing approach and the implementation of contemporary marketing methods are our weapons

to meet the set goals. Regarding the growth indexes in 2015 and the current trends, we will be

aiming at maintaining the leading position in Spa tourism in the country, while consistently

promoting and selling of single company’s products and combining them into single units, which

will expand the growth and fulfil the expectations of the shareholders of Terme Čatež.

The goal of Terme Čatež company remains the challenge of maintaining the leading role in Spa

tourism in the SE Europe while improving the quality of products and services of the company.

We are confident of the challenges in 2016 and positive, that our know-how, creativity and

commitment will help us meet the goals set.

Bojan Petan, GM

Annual Report 2015

5

1. INTRODUCTION OF TERME ČATEŽ COMPANY AND TERME ČATEŽ GROUP

1.1 IDENTITY CARD OF THE COMPANY

Company name: Terme Čatež d.d. Activity: 55.100 Company registration number: 5004896 Tax number: 55444946 Reg. number: 10080100 Date of entry in the Companies Register: 23 Nov 1995 Company's share capital: € 12,444,216.32 Number of shares issued: 497,022 Face value of a share: ordinary shares Shares listing: Ljubljana Stock Exchange, standard listing, share marking: TCRG Management Board: Sebastjan Selan (until 31 July 2015), Bojan Petan(since 1 August 2015) Chairman of Supervisory Board: Robert Krajnik

The company Terme Čatež is engaged in various activities: hotels & restaurants, Spa/health resort, trade,

sports, recreation and other.

Pursuant to the Act on Medicinal Substances and Spa Health Resorts (Official Gazette of the SRS, no.

36/1964), it was established that the thermal water, staff, equipment and premises comply with the

requirements of the above specified Act, and Terme Čatež d.d. obtained the status, i.e. was registered as a

"natural spa health resort" in 1964. Written documents on the Spa originate from 1886 mentioning »hot thermal springs«.The first hotel was

build in 1926 and has been in the course of years reconstructed to the existing Toplice Hotel. Today, Terme

Čatež has got the controlling position in a Group of companies in Slovenia, Croatia and Bosnia and

Herzegowina. Terme Čatež company is one of fifteen Slovenian Natural Spas and enjoy the leading position

in Slovenian tourism.

Terme Čatež share was the first one in the tourism branch listed (7 June 1993) at the Ljubljana Stock

Exchange.

1.2 EQUITY STRUCTURE

Table 1: Extract from the Shareholders' Register as on 31 December 2015

SHAREHOLDER Number of shares % of holding

DZS, d.d. 227,586 45.78 KAPITALSKA DRUŽBA, d.d. 118,262 23.79 DELO PRODAJA, d.d. 45,463 9.15 TRIGLAV VZAJEMNI SKLADI 19.850 3.99 ZAVAROVALNICA TRIGLAV, d.d. 8,247 1.66 KRITNI SKLAD PRVEGA POK.SKLADA (PENSION OVERH.FUND I) 7,682 1.55 DEL NALOŽBE, d.d. 6,840 1.38 ABANKA SKLADI EVROPA (FUNDS) 5,379 1.08 ATTEMS JOHANNES 5,005 1.01 OTHER 52,708 10.61

TOTAL 497,022 100.00

Annual Report 2015

6

As on the end of December 2015 891 shareholders were registered in the Register of Shareholders kept and managed by the Central Clearing Corporation (KDD) Ljubljana. The subsidiary Del Naložbe holds 6,840 shares (TCRG) in the parent Terme Čatež company. As on 31 December 2015 the Management Board members and the members of Supervisory Council had a 0.21% holding in the company, i.e. 1,022 shares, 41 shares are in the holding of GM.

Table 2: Extract from the Shareholders' Register as on 31 Dec 2015

The members of Management Board and Supervisory Council have no pending resolution on acquisition and purchase of the sharess of the issuer. The company hasn't formulated the scheme of employees' participation in the equity of the company. The members of Management Board, Supervisory Council and workers can acquire the shares under the same conditions as the other participants in the capital market.

1.3 TERME ČATEŽ GROUP

Terme Čatež Group consists of the parent (controlling) company and subsidiaries, with the parent company as holding company and the majority in voting.

The companies included besides the parent company (Terme Čatež) in the Terme Čatež Group:

Marina Portorož d.d., Cesta solinarjev 8, 6320 Portorož

Del Naložbe d.d., Topliška cesta 35, 8250 Brežice

Terme Ilidža d.o.o., Ulica Mala aleja 40, Sarajevo (until 19 June, 2015, when the company was disposed)

M Kapital d.d.*, Cesta solinarjev 8, Portorož and

M Naložbe d.d.*, Cesta solinarjev 8, Portorož.

Equity investments in subsidiaries

*Terme Čatež company disposed the holding at Terme Ilidža company on 19 June 2015

Table 3: Equity investment into subsidiaries as on 31 Dec 2015

Company and its head-office Type of equity investment

Share of Terme Čatež comp. In equity of subsidiary (%)

Number of shares In holding of TČ.

Number of sh. Total

DEL NALOŽBE d.d., Čatež ob Savi shares 95.31 53,671 56,314

TERME ILIDŽA d.o.o., Sarajevo* holding 90.00 286,098 317,887

MARINA PORTOROŽ d.d., Portorož shares 100.00 313,932 313,932

M KAPITAL d.d., Portorož shares 100.00 313,932 313,932

M NALOŽBE d.d., Portorož shares 100.00 313,932 313,932

SHAREHOLDER Numb.of shares % in holding

SUPERVISORY BOARD

Ada De Costa Petan 1,022 0.21

TOTAL 1,022 0.21

Annual Report 2015

7

1.4 PERFORMANCE HIGHLIGHTS

a) Performance indexes

684,097 overnight stays were realized in 2015 which is by 3.7 % more than in 2014. The number of overnight stays of domestic guests increased by 7.4 %, however the number of overnight stays of foreign guests increased by 0.1 % compared to a year before. A new record of overnight stays in the history of the company was set in August 2015. A selective marketing strategy was reflected by an increased interest on the domestic and foreign markets, where Italy, Austria, Germany and Israel prevail. The visit to the thermal and other swimming pools, measured by the number of bathing guests, increased by 2.8 %; registered were 904,062 bathing entrances. b) Investment highlights

LOCATION TEME ČATEŽ

Football playgrounds:

Sports tourism represents a big potential in tourism and the organisation of sports trainings at Terme Čatež

were the reason for the construction of a football playgrounds, constructed by the latest UEFA standardas

(water draining system, heating of the grassy grounds in winter time and the automatic water spraying.

Adventure park: Close to the campsite, lake and outlet a family adventure park was set up with initially sightseing tower with the climbing wall and high dive unit and zip-line panorama free-hanging around the lake, 400 m long)

Annual Report 2015

8

Winter Thermal Riviera: overhauled were two bathroom premises, water piping system, ceramic tiles, etc…

Preparation of new camping sites In the first half of 2015 the campsite was expanded by the additional 10 sites for luxury tents.

Mobile fun fair

A good fit-back to the erection of the mobile fun fair and a pretty good turnover conditioned also in

2015 the establishment of the mobile fun fair with additional attractions. The project was again

realized in the co-operation with a foreign partner, who actually took care of the erection and

operation, while Terme Čatež provided the surface. The revenues derived from the operation were

madeby the tickets sold and the complementary offer.

Castles:

A part of the real estate was leased to a lessor, who erected a huge tent with the miniature castles

underneth. The makette castle modelsdiffer from the originals only by the size. A lot of efforts and

craftsmanship was invested into the minature construction and landscape elements. The visitors

Annual Report 2015

9

witness some of the historical battles and the warriors are unique and hand-made manufactured.

Enjoy will also the fans of medieval armor with also some unique specimens.

Mokrice: Acquisition of real estate

c) Profit & loss statement

Terme Čatež company realized in 2015 as follows:

- € 29.2 m in operating revenues - € 8.1 m in net profit + amortization - net profit amounting to € 1.6 m

Terme Čatež Group realized in 2015 as follows:

- € 34.8 m in operating revenues - € 9.7 m in net profit + amortization - net loss to the holder amounting to € -6.8 k.

d) Human resources

As on 31 December 2015 Terme Čatež Group employed 430 workers. Namely:

Terme Čatež company: 379 Marina Portorož company: 46 Del Naložbe: 5.

e) Other important events

18 April 2014 Terme Čatež company signed with the creditors (9 banks) the draft Agreement on Financial Restructuring defining thereby the relationships related to the financial liabilities up to the year 2016. It does not involve any write-offs or the conversions of financial liabilities into equity. Pursuant to the Agreement, the creditors should be redeemed by the positive cash-flow and disposal of unneeded intangible assets. In compliance with all the prerequisites, the Outline Agreement on Financial Restructuring became effective 17 July 2014.

Annual Report 2015

10

The company has been aligning Appendix 3 to the Contract on Financial Restructuring and doing its best to

meet the financial obligations (payment of principal and interests).

1.5 CORPORATION MANAGEMENT The management of Terme Čatež company and the companies within Terme Čatež Group is the so called two-track management.

ANNUAL GENERAL MEETING OF SHAREHOLDERS is the supreme Management entity of the company, where the shareholders realise their rights related to the company's performance. The AGM was convened once in 2015; the convention was released in The State Bulletin, in Dnevnik newspaper, on SEO-net and on www.terme-catez.si, at least 30 days prior to the assembly.

21th Regular Annual General Meeting of Shareholders of Terme Čatež - 17 July 2015 The resolutions are released on the website of Ljubljana Stock Exchange (SEOnet) or Terme Čatež company: www.terme-catez.si

SUPERVISORY COUNCIL

Supervisory Council of the company consists of nine Members; six members being the representatives of the capital are elected on the Annual Meeting of Shareholders, three are the representatives of the workers and are appointed by the Workers' Council. Members of Supervisory Council of Terme Čatež company:

- Mr. Robert Krajnik, Chairman - Mr. Mitja Grum, Member - Mrs. Ada de Costa Petan, Member - Mr. Samo Roš, Member - Mr. Vladimir Smolec, Member - Mrs. Vesna Uršič, Member - Mr. Damjan Krulc, Member (appointed by Workers Council) - Mr. Tomisla Kolarek, Member (appointed by Workers Council) - Mrs. Andreja Gošek, Member (appointed by Workers Council)

93rd Meeting of Supervisory Council dated 10 March 2015 The resolutions are released on the website of Ljubljana Stock Exchange (SEOnet) or Terme Čatež company: www.terme-catez.si

94th Meeting of Supervisory Council dated 8 May 2015 The resolutions are released on the website of Ljubljana Stock Exchange (SEOnet) or Terme Čatež company: www.terme-catez.si

95th Meeting of Supervisory Council dated 30 July 2015 The resolutions are released on the website of Ljubljana Stock Exchange (SEOnet) or Terme Čatež company: www.terme-catez.si

96th Meeting of Supervisory Council dated 22 Decmber 2015 The resolutions are released on the website of Ljubljana Stock Exchange (SEOnet) or Terme Čatež company: www.terme-catez.si

Annual Report 2015

11

MEMBERS OF SUPERVISORY COUNCILS WITHIN TERME ČATEŽ GROUP (SUBSIDIARIES)

Marina Portorož company:

Mr. Bojan Petan – Chairman

Mr. Sebastjan Selan – Member (until 15 May 2015)

Mr. Jože Hočevar – Member (since 4 November 2015)

Mr. Roman Baruca – Member M Kapital company:

Mr. Bojan Petan – Chairman

Mr. Jože Hočevar – Deputy Chairman

Mrs. Alenka Mokrovič Pogačar – Member (since 31 August 2015)

M Naložbe company:

Mrs Ada de Costa Petan – Chairman

Mr. Jože Hočevar – Deputy Chairman

Mrs. Alenka Mokrovič Pogačar – Member (since 31 August 2015) Del Naložbe company:

Mr. Blaž De Costa – Chairman

Mr. Rok Capl (since 21 May 2015)

Mrs Renata Martinčič – Member (until 13 July 2015)

Mrs. Nena Deržič – Member (since 14 July 2015) Terme Ilidža company:

Mr. Blaž de Costa – Chairman (until 23 June 2015)

Mr. Elvir Kazazović – Member

Mrs. Renata Martinčič – Member (until 23 June 2015) REVISION/AUDIT COMMITTEE

Pursuant to the stipulations of Public Company Law the company has got a Revision Committee, consisting of three members . The Committe executives prepare the proposals of resolutions of Supervisory Council, take care of their realization and administer other professional tasks pursuant to Article 280 of the Public Company Law. The members focused on account reports, inner control efficiency, risk systems, annual consolidated reports. In 2015 the members were: Mr. Robert Krajnik (Chairman), Mrs. Ada De Costa Petan (Deputy Chairman), Mrs. Tamara Groznik (Member).

Annual Report 2015

12

BOARD MANAGEMENT OF TERME ČATEŽ GROUP

Terme Čatež is represented and managed since 1 August 2015 by Mr. Bojan Petan, GM (until 31 July 2015 – Mr. Sebastjan Selan),

Marina Porotorž is represented and managed since 15 July 2015 by Mr Sebastjan Selan (he succeeded Mr. Miran Kraševec),

M Kapital is represented and managed by Mr. Sebastjan Selan

M Naložbe is represented and managed by Mr. Sebastjan Selan

Del naložbe is represented and managed by Mr. Jože Hočevar

Terme Ilidža is until 19 June 2015 when the company was disposed represented and managed by Mr. Irhad Kovačević.

REPORTING PURSUANT TO IFRS Terme Čatež company reports pursuant to IFRS as endorsed by EU.

AUDITING External audit The General Meeting of Shareholders appointed the auditing company PKF, revizija in svetovanje d.o.o., Kamniška ulica 25, 1000 Ljubljana, the auditor of the annual financial statements. The purpose of auditing is to provide an independent opinion on operation of the company and disclose it to the public and shareholders resp. Internal audit/controlling In order to increase the performance of the company, the quality of service, economy performance and risk control, the parent company currently performs the internal audit (Controlling Dept.) as well. Besides, the Supervisory Council appointed within itself an indipendent entity of surveillance – the audit board.

ANNOTATION TO INCORPORATED COMPANIES PURUSANT TO ARTICLE 530 OF PUBLIC COMPANY LAW-1

Pursuant to Alignment 1, Chapter 530 of Public company Law-1 (Corporation) - Terme Čatež company is not

associated with DZS company in the sense of a corporation.

Two companies can be defined as associated companies of a corporation, when they meet two legal

conditions complying with the legal theory.

The first condition is that the controlling company has got in an affiliated company (subdued company) a

holding share and the second one – that both companies have got a single management (i.e. the

management in common, i.e. the one of the controlling company). Regarding the legal theory a single

management means that the interests of the controlling company prevail over the interests of the affiliated

company, whereby the single management is not a sufficient condition; the single management must

actually be conducted in real and must include all the incorporated companies of a corporation, including

the controlling one. The essence of a corporation is, that the affiliated companies pursue certain common

goals, whereby the controllig company can independently manage e.g. the investments, finance, production

and other strategic management areas but deduce its power/influence onto the management of only one

management area. A corporation can be compared with a single organism/being, where the organs are

legally independent but under the control and management of a controlling company. A corporation is a

frame and a specific legal entity within which single companies appear in legal affairs. We can talk of more

independent legal subjects having »one company in common with more/other companies«, and the

Annual Report 2015

13

business plans are conducted commonly, although every single company is pursuing its own operation. The

essence of a corporation is therefore not only the relationship between the holding company and

affiliated/subdued one, but also all-round or just partial diverse connections between them.

Considering the above mentioned, it is evident that between Terme Čatež company and DZS company such

a connection typical of a corporation does not exist. DZS company with its 45.79 % share does not at Terme

Čatež company a controlling/holding share, since 54 % holding is in the holding of other shareholders.

Furhtermore, the two companies have not signed any contract on management nor do both companies

(and the other companies as well) have the same management and they are completely independent in

their decisions. The decisions in each company are made for each company separately like are separately

managed investments, finance, production etc.. and last but not least – the business plans are made

separately.

Pursuant to the above mentioned it can be established that Terme Čatež company is not associated with

DZS company in the sense of Alignment 1, Chapter 530 of Public company Law- 1 (Corporation) ), that is

why Terme Čatež company does not prepare the associated reports pursuant to Article 545 of Public

Company Law.

1.6 SHARE DATA

As on the end of December 2015 - 891 shareholders were registered in the Shareholders Register kept by the Central Securities Clearing Corporation in Ljubljana (orig. KDD Ljubljana). Equity capital is divided into into 497,022 ordinary shares of the same class; the shares being listed as TCRG-shares on the Ljubljana Stock Exchange Neither the company nor any other third person received pledged treasury shares on the account of the company or pledged any treasury shares as on 31 December 2015. The company Terme Čatež has no pending resolution on conditional increase of share capital nor a resolution on approved capital.

Table 4: Data on Terme Čatež share as on 31 December 2015

31 Dec 2015

Number of shares 497,022

Book value of share as on 31 December 97.51 €

Basic earning per share 3.19 € Number of shares (treasury shares in subsidiaries excl.) 490,182 Book value of share as on 31 Dec (treas.shares excl.) 98.87 €

Basic earning per share (treas.shares excl.) 3.24 €

Annual Report 2015

14

Book value of share as on 31 December 2015, calculated from the ratio between equity and the number of shares issued, amounted to € 103.39; book value of share as on 31 December 2015 (treasury shares excluded) amounted to € 104.83.

Yield per share as on 31 December 2015 is calculated from the ratio between the net profit earned in the accounting period (the numerator) and the number of issued shares (the denominator), and amounted to € 3.19; yield per share (treasury shares excluded) amounted to € 3.24.

Annual Report 2015

15

2. BUSINESS REPORT

2.1 SALES & MARKETING

2.1.1 Tourist trends in Slovenia and at Terme Čatež

In 2015 the accomodation amenities in Slovenia registered almost 3.8 m tourists (i.e. by 10.8 % more than in the year before) and 10.0 m overnight stays which is by 7.2 % more than in 2014. The number of arrivals of domestic guests in 2015 increased by 9.3 % so did the number of overnight stays (by 6.3 %), the number of foreign tourists by 11.6 % and they made by 7.7 % more overnight stays than in 2013.

The Slovenian natural Spas realized in 2015 2,658,010 overnight stays; 1,507,41 were domestic guests and 1,150,865 foreign guests. The overnight stays of domestic guests increased by 4.1 %, of foreign guests however decreased 2.8 % in comparison with 2014. Terme Čatež company realized in 2015 6.8 % of all overnight stays in Slovenia and 22.6% of the overnight stays made by all Slovenian Natural Spas.

2.1.2 Sales revenues

Terme Čatež d.d. realized in 2015 € 28.6 m in net sales revenues.

SALES REVENUES 2015

Figure 1. Sales revenues 2015 Legend: blue: Hotels, campsite and hospitality service crimson: Water programmes lime: Health service lilac: Sales of goods and services celeste: Other

Annual Report 2015

16

The biggest portion in the structure of revenues originates from the hotels and campsite, following the

water programmes, merchandising, health service and others.

2.1.3 Overnight stays

In 2015 - 684,097 overnight stays were registered in the structures of Terme Čatež (that being by 3.7 % more in comparison with 2014). The number of overnight stays of domestic guests increased by 7.4 %, of foreign guests however increased by 0.1 %.

STRUCTURE OF OVERNIGHT STAYS ACCORDING TO ACCOMODATION STRUCTURES (2015)

Figure 2. Structure of overnight stays in single facility

A selective marketing approach resulted in an increased enquiry on foreign markets, where the

Netherlands, Croatia, Russia, Poland, Belgium, Denmark and Israel prevail.

2.1.4 Bathing guests

The number of entrances to the thermal pools measured by the number of bathing visitors increased in 2015 by 2.8 % (registered were 904,062 bathing guests). 219,965 bathing tickets were sold to daily guests, which is by 0.2 % more (473 tickets) than in 2014.

Annual Report 2015

17

STRUCTURE OF BATHING TICKETS SOLD IN 2015

Figure 3. Structure of the sales of bathing tickets to daily visitors Legend: blue: Winter Thermal Riviera yellow: Summer Thermal Riviera celeste: Terme Hotel swimming pool orange: Čatež Hotel swimming pool lilac: Žusterna Hotel swimming pool

2.2. SALES AND MARKETING ACTIVITIES IN 2015 AND PLAN 2016

2.2.1 Sales and marketing activities 2015

2015 started for Terme Čatež with prestigious quality awards: ADAC and ANWB awarded the campsite with

the best one award in Slovenia, followed by the In Your Pocket award – 2nd place in The Best Thermal Spa

category.

In January we were again the host to the first Serbian football team - FC Crvena Zvezda with the press

conference organized at Aquapark Žusterna Hotel.

All the year through different theme wekends were organized at Terme Čatež, the most visited one The

Valentine Weekend in February which coincided with the awards for the best masques, since Mardi Gras.

For the winter holidays until the end of March we prepared interesting offers of swimming and sauna for

the daily guests to terme Čatež during the week-days.

Web-advertizing is today world-widely spread, therefore our software was complemented in order to

enable the comparison between the input assets for advertizing and the turnover on each market.

Updated was also the available data base of our clients.

In the beginning of spring we recorded a record number of the followers (200,000) on the facebook of

Terme Čatež. On this occasion a contest with attractive awards was organized.

Paralell to the sports activities the other marketing activities were conducted, e.g. in April there was

organized the traditional 5th handball competition for the Terme Čatež trophy. The first batlles started

already for the New Year Holidays. A part of promotion was also Terme Čatež tournament in Belgrade

(Serbia).

Annual Report 2015

18

The guideline of our offer still represents the Thermal Riviera. In May we again took part in the competition

for the best Slovenian swimming resort (traditionally, Terme Čatež always pocket an award).

In order to boost the sales of daily swimming tickets we started at the end of May and the beginning of June

the advertizing campaign in Zagreb (city spotlights), since the city has got over a million residents.

For the time being also the co-operation with FC Crvena Zvezda (Belgrade, Serbia) has been renewed and

the contract »refreshed« by the summer campus 2016 and 2017. The first event was conducted right in

June 2015, when the team was on the workout holiday and played friendly matches and the promotional

photo-shooting of the football players. The final matter was the press conference conducted on the new

football grounds.

The sports promotion was additionally boosted by the contract on partnership with the National Basketball

Team. For this purpose special ticket packages were issued for the visit to the European basketball matches

with the accomodation at Terme Čatež (our B National Team was accomodated at Terme Čatež as well. The

stay was accompanied by the promotional photo-shooting).

For all basketball fans a special fan-mile was established at Terme Čatež, which besides witnessed during

the high season many a performing artist (animation), but in September it was reserved (hot spot) for the

basketball fans.

Toplice Hotel was in June converted into a bikers friendly hotel. In co-operation with the Regional

Development Agency for Posavje, there were organized as a part of Festival of Tour Walking special

packages for the hotel guests. Their presentation was conducted on the press conference at Terme Čatež.

At the same time the campaign for the acquisition of the »Bikers-friendly Hotel« sign started at Aquapark

Žusterna Hotel.

In the first half of the year a photo shooting of a music spot of a renown Croatian band was conducted at

Mokrice. That was an excellent promotion of Mokrice resort in the Croatian media.

The promotion of Terme Čatež abroad was conducted also as a part of EXPO 2015 in Milan (Italy. The

festival took place from May to October and Terme Čatež appeared there as a member of the Slovenian

Natural Spas Association The first event was in June (concert for the partners and tourist agents). In

September Terme čatež presented itself in a regional TV-show. The photo shooting team visited and stayed

at Terme Čatež together with the winners of the competition. The last presentation of Terme Čatež in Italy

was conducted in October, with the presentation of Mokrice resort as the wedding destination.

In the first half of the year the poll was organized among the employees of Terme Čatež on their satisfaction

with the company.

The summer months began very actively as concerning the marketing activities. In June the visit to Terme

Čatež FB exceeded one million.

Internally and externally the promotion of summer adrenaline news at the Thermal Riviera was going on

(zip-line and Thermal tornado).

In summer, the traditional Thermal Formula daily competitions for the Big prize of Terme Čatež started,

with the finals at the end of summer.

During the whole summer we actively promoted the sales of bathing tickets to the Thermal Riviera, among

others the agreed promotion weekends at the Croatian shopping malls.

Annual Report 2015

19

After the spring agreements in July and August another Slovenian big summer promotion was organized –

united in a radio transmission was a cosmetic company, the Brežice community and Terme Čatež (bathing-

sightseing and animation). The promotion started already in June as a part of the local Brežice festival – My

Hometown. The visitors to Terme Čatež were offered free of charge comutings to Brežice Festival Shows.

During the whole summer a special attention was paid also to the evening animation programme, with the

top-event The Čatež Night.

At the beginning of September A Basketball Weekend was organized with the top event- the press

conference of the A- basketball national team. The team answered the questions to basketball fans and

primary school pupils before their participation to Eurobasket 2015 in Zagreb and threw basketball at the

Fan-mile. The event was musically assisted by the famous Slovenian rock band – The Big Foot Mama.

Regarding all the sports events at Terme Čatež, the new promotion material was accomplished in Autumn –

the new sports brochure of Terme Čatež (printed and the web-version).

In Autumn a new agreement with an Italian partner was signed, according to which the exclusive promotion

of Terme Čatež packages started on their web-site and an on-line access to the hotel reservation system.

The last two months of the year the promotion with Dnevnik newspaper started with specially created

hotel-packages for the readers. They were accompanied by the articles on historical development of the

Spa. The readers who subscribed to one of the editions of the newspaper company were awarded by a

special Terme Čatež bonus card.

In Autumn a promotion campaign for The Castles (a miniature exhibition of the world's 17 most famous

castles) started. In 2016 new co-operation issues will start with the holder of the exhibition.

In the same way the new dental studio was promoted, which opened at Terme Čatež.

In December there started the traditional sales campaign of bathing tickets to the Thermal Riviera for the

next season.

The preventative and curative programmes of Terme Čatež Health Centre were presented for the Croatian

population in the TV-show Al Jazeera.

The year was concluded by a successful enrolment for the organization of the biggest Slovenian event of the

year – The Slovenian International Workshop (SIW 2016; 9 June to 12 June 2016).

2.2.2 Planned sales and marketing activities in 2016

The activities in 2016 will be conducted according to the planned goals and vision of the company and

encompass all the locations of Terme Čatež (Čatež, Mokrice, Koper and Portorož). They shall be performed

systematically and comprehensively, due to the reorganization and staff reduction, with mingling of new

creative ideas and meeting of the goals set on each single market and globally on the level of the company.

We shall take care of promotion on all the markets (Slovenia, the former Balcan countries, Roman and

German market, East Europe and Near East). The goal is of course a bigger turnover.

Annual Report 2015

20

We will actively follow the world market trends by implementing our creative stories referring to either a

product or location. Based thereupon, the texts will be created either as the news, introductories, articles,

reports etc..

We will be a host to different media events, photo and/or video sessions and conferences, we shall

maintain and expand the contacts with media and permanently upgrade the Terme Čatež brand.

We will conduct the obligations from the Agreements with our advertising partners and PR-agencies, above

all those in Slovenia and on the ex-Yugoslaw territory addressing the daily visitors and holiday makers as

well.

On the overseas markets we will try to keep the co-operation with the available direct and indirect

partners, we will take care for the new ones and try to add some new tourist fair and workshop locations

resp.

Our permanent obligation shall be an enhanced updating of the web-site, in digital media and social

netowrks.

We shall participate to different tourist contests on all markets and present the awards publicly.

A lot of activities shall be conducted in co-operation with the Slovenian Spas Association and the tourist

agencies abroad. Not to mention the co-operation with the local community and common promotional

campaigns and events.

The vision of Terme Čatež in 2015 is to be the most successful tourist company in Slovenia by a constant

quality improvement.

2.2.2.1 Most important planned activites in 2016

* complete overhaul of www.terme-catez.si:

The goal is the distinction of Terme Čatež brand, meaning eventually more overnights and bigger revenues.

The new website will enable a simpler and more clear access to single contents of Terme Čatež, utilizing an

attractive virtual material, focused on the final step – the reservation. The biggest impact will be put on

composing and interaction with other digital media – social networks, most important internet portals

(reservation), browsers, most visited blogs and forums.

The new website image shall have been finished in the first half of 2016.

*digital marketing

The new way of communication urgently requires suitable and experienced staff so as to immediately start

with linking of the available activities and the implementation of the new promotion and marketing

channels.

*on-line reservations (at present linked with booking.com and expedia.com)

Annual Report 2015

21

Will be implemented as the disengagement of the reservation staff. Further education will be necessary.

* Terme Čatež bonus card

Will include numerous bonuses in the resort as well as the local town and partners.

* new issues at Terme Čatež (dental and beauty studio, Castles, Pirate Ape/Zip line will be more intensively

promoted not only at site, but also on different promotion events

* sports marketing & PR

Considering the new developing trend at Terme Čatež and a good feedback, we will promote the new

football playgrounds and sports calebrities, clubs and campuses (in co-operation with FC Crvena Zvezda the

next one will be organized in summer 2016, the promotion of which will be in Belgrade in February 2016).

Promoted will be also other sports.

Besides the above mentioned targets we shall do our best to develop all the sales channels/markets,

whether it be the local ones, domestic market, the former Yugoslav markets, German markets, Italian

market and other world markets.

Annual Report 2015

22

3. PERFORMANCE ANALYSIS

3.1 BALANCE SHEET OF TERME ČATEŽ COMPANY

3.1.1 Profit & loss statement of Terme Čatež company

Terme Čatež company realized in 2015 € 29.28 m in operating revenues, € 3.7 m in operating profit (EBIT), € 8.1 m in operating profit + depreciation (EBITDA) and € 1.68 m in net profit. Net profit + depreciation of the company amounted in 2015 to € 6.1 m, which means 20.8 % in the structure of sales revenues, representing a sufficient potential for 2016.

STRUCTURE OF REVENUES 2015

Figure 4: Structure of revenues 2015

Legend: blue: Operating revenues lime: Other revenues lilac: Financial revenues

Net sales revenues are the core revenues of Terme Čatež company. They amounted in 2015 to 96.1% of

revenues total of the company, other operating revenues to 1.2 % and financial revenues to 2.7 % of the

revenues total. Considering 48.7 % of overnight stays made by foreign guests, it represents an impressive

portion of indirect export service.

Annual Report 2015

23

STRUCTURE OF EXPENSES 2015

Figure 5: Structure of expenses 2015 Legend: blue: Costs of goods, material and service crimson: Labour costs lime: Depreciation lilac: Other operating revenues celeste: Financial expenses

Costs of goods, material and services represented the highest portion in the structure of expenses - namely 46.1 %. Labour costs also contributed a great deal of expenses - namely 26.2 %. Depreciation made to 16.4%, financial and other expenses totalled 11.3 %.

3.1.2 Balance sheet of Terme Čatež company

The value of assets of Terme Čatež as on 31 December 2015 amounted to € 125,1 m. The bulk was long-term assets, namely 87.4 %, while short-term assets accounted for 11.9 %.

STRUCTURE OF ASSETS 2014 AS ON 31 DEC 2015

Figure 6: Structure of assets

Legend: blue: Long-term assets crimson: Short-term assets lime: short-term accrued income and

deferred expenses

Annual Report 2015

24

Figure 7: Structure of liabilities 2015

Legend: blue: Equity lilac: Short-term liabilities lime: Long-term liabilities crimson: Long-term accrued expenses and deferred income celeste: Short-term accrued expenses and deferred income

3.1.3 Notes to capital- and cash flow statement of Terme Čatež company

Cash flow statement presents movements (inflows and outflows) of cash in individual areas such as operation, financing and investing. It is compiled by the direct method. Capital restructuring and capital increase/decrease are presented in the capital flow statement; the allocated dividends reduces the value of equity, however, net profit of the company compensates for the loss.

3.2 BALANCE SHEET OF TERME ČATEŽ GROUP

Upon the composition of consolidated financial statement the effects of all transactions between related

companies are totally excluded.

3.2.1. Profit & loss statement of Terme Čatež Group Terme Čatež Group made in 2015 € 34.8 m in operating revenues, € 4.6 m in operating profit (EBIT), € 9.7m in net profit + depreciation (EBITDA). Net profit/loss to the controlling holder (Terme Čatež Group) amounted in 2015 to € -6,877 k. Net profit to the controlling holder and depreciation of Terme Čatež Group amounted in 2015 to € -1.8 m. Balance profit of the Group amounts to € 18.7 m and does not depend upon the proposals of balance sheet profit of individual companies within Terme Čatež Group. The proposals are given by the Supervisory Councils on discussion and adoption as part of the Annual Report and allocation of profit on Annual General Meetings.

Annual Report 2015

25

STRUCTURE OF REVENUES OF TERME ČATEŽ GROUP IN 2015

Figure 8: blue: Revenues from operating activity purple: Financial revenues

Lime: Other revenues

Net sales and service revenues are basic revenues of the Group. In 2015 they represented as far as 98.0 %

of the revenues of the Group.

STRUCTURE OF EXPENSES OF TERME ČATEŽ GROUP

Figure 9: Structure of expenses of Terme Čatež Group in 2015

Legend: blue: Costs of goods, material and service crimson: Labour costs

lime: Depreciation lilac: Other expenses

celeste: Financial expenses

Annual Report 2015

26

Costs of goods, material and service represented the highest portion in the structure of expenses - namely

33.7 %. Important is also the share of financial expenses amounting to 32,3 % of the expenses total. Labour

costs also contributed a great deal of expenses - namely 20.0 %. Depreciation made to 12.0% in expenses

total.

3.2.2 Balance sheet of Terme Čatež Group

Upon the preparation of financial statement of Terme Čatež Group the single company method is implemented, whereby all the assets and liabilities of the parent company and subisidiaries adhere to the Group whereas the minority shares are demonstrated as a part of equity of the Group. Net profit or loss of a business year is divided into net profit or loss of major shareholder and net profit or loss of minor shareholders. The value of Terme Čatež Group assets as on 31 December 2015 amounted to € 197.0 m. The bulk being long-term assets, namely 78.4 %, while short-term assets accounted for 21.2 %.

TERME ČATEŽ GROUP: STRUCTURE OF ASSETS AS ON 31 DEC 2015

Figure 10: Structure of assets 2015 Legend: blue: Long-term assets crimson: Short-term assets lime: Short-term accrued income and deferred expenses

Annual Report 2015

27

TERME ČATEŽ GROUP: STRUCTURE OF LIABILITIES AS ON 31 DEC 2015

Figure 11: Structure of liabilities 2015

Legend: blue: Equity lime: Long-term liabilities lilac: Short-term liabilities crimson: Long-term accrued expenses and deferred income celeste: Short-term accrued expenses and deferred income

3.2.3 Notes to capital- and cash flow statement of Terme Čatež company The cash flow statement presents movements (inflows and outflows) of cash in individual areas such as operation, financing and investing. It was compiled by the direct method. Capital restructuring and capital increase/decrease are presented in the capital flow statement; net profit of the Group compensates for the loss.

3.3 HUMAN RESOURCES AND HR-POLICY

We understand that the employees are the major asset in a company and know to appreciate the commitment of each individual. A constant education and investment into human resources development make it possible for us to provide and maintain a high quality service. A solid human resources policy creates an attractive work atmosphere for diverse operation profiles.

STRUCTURE OF EMPLOYEES

As on 31 December 2015 Terme Čatež Group employed 430 employees. Namely:

Terme Čatež company: 379

Annual Report 2015

28

Marina Portorož company: 46 Del Naložbe company 5

Terme Čatež company recruited 2015 – 53 employees, 64 employees left the coompany. The monthly average was 400 employees. STRUCTURE OF EMPLOYEES ACCORDING TO EMPLOYMENT CONTRACT AS ON 31 DEC 2015

Figure 12: Structure of employees according to work contracts 2015

Legend: blue: Permanent work contract crimson: Limited work contract lime: Individual contract

STRUCTURE OF EMPLOYEES ACCORDING TO GENDER AS ON 31 DEC 2015

Figure 13: Structure of employees according to gender in 2015

Legend: blue: Male employees crimson: Female employees

Terme Čatež company employs disabled and handicapped employees as well. As on 31 December 2015 – 35 such employees were employed in the company, i.e. 9.2 %.

Annual Report 2015

29

EDUCATION

Terme Čatež company gives its employees the chance to upgrade their professional skills. In 2015 the emphasis was put on to the health care, who participated special education trainings and seminars; also abroad.

3.4 INFORMATION TECHNOLOGY (IT)

In 2015 the following projects were successfully compiled:

Expansion of Wi-Fi at all three hotels at Čatež;

Better routing protocols (from 100mb on to 200 mb and the new software);

New ISL on-line product (fast link to distant computers and faster error elimination);

Installment of new web-service (Live-talk) – all registered languages;

Exchange of an e-mail server with a Microsoft Exchange server and consequently installation of new firewall, mobile mail, user registration, elimination of the anti-virus system – cost reduction);

Installation of VPN-system (home office, remote control);

Exchange and upgrade of hotel reservation system (ROS) and hotel&restaurant system, swimming pool system (Metra), shop-system, health care system due to new tax legislation;

Exchange of 30 POS-terminals;

Cash-box upgrade – GIS Prestige;

Upgrade of ROS and Navision in Accounting Dept.;

Registration of hard- and software throughout the company.

3.5 SUPPLIERS AND CUSTOMERS

Terme Čatež brandmark has been known in Slovenia and abroad, predominantly on the teritory of the former Yugoslav countries as well as our neighbouring countries. The communication with customers is based on media releases and via website, whereby a great care is dedicated to the satisfaction of our customers and an immediate response. The quality of service is measured by polls and other kind of information and is promptly being referred to.

Terme Čatež settles the relations (delivery terms and conditions) with the most important suppliers by annual contracts. Upon the choice of a supplier two facts are of utmost importance: price and quality.

3.6 ENVIRONMENTAL CARE AND (LOCAL) COMMUNITY

The operation of our company is based on controlled handling with water and energy, waste treatment, environment and all natural resourses and a part of permanent education of the employees covers these areas. The company has also solved the problem of waste water treatment. We respect the environment, we treat it with care, for we know how important it is for our health. The rational use of energy- and environment friendly sources is under constant control. According to the adopted legislation referring to waste and waste water, noise, packaging, energy sources, chemicals, construction of buildings, safety precautions, and pursuant ot the inspection audits, we are proud to say that the operation of Terme Čatež company is well within the adopted EU-standards.

Annual Report 2015

30

The company acts as sponsor or donates to diverse local and/or state entities, thus encouraging their cultural, sports, education, humanitary activities.

3.7 RISKS

Business performance on the locations in the country as well as beyond the boarders requiress from the management a certain recognition of risks related thereto and an immediate response to prevent negative consequences for the operation of the whole Group. The company is insured for the case of internal risks; for external risks has been cared for by suitable actions aiming at reduction of the risks on the minimum level possible. The risks are described in this Chapter, Chapter 26 (Accounting Report of Terme Čatež) and Chapter 24 (Financial Report of Terme Čatež Group – Financial instruments. The company Terme Čatež has acknowledged and evidented the risks; below the selection of risks.

A) OPERATION RISKS

Crucial risks:

- customers service

- purchase of raw material and goods (stock optimizing)

- purchase policy and price optimization of incoming goods

- pricing policy and competitiveness

- management and human resources policy

- consideration of legislation and legal policy

- maintenance of amenities and equipment

- investment into new amenities and facilities

- information technology and data security

- controlling

- risks of property loss and insurance

- risks related to possible terrorist attacks

- epidemic and pandemic diseases

- radiation. The company has introduced consistent methods of implementing, following and controlling of all business events, which can lead to changes of material status and economy threads; besides, the operation of the company is such, that enables a regular and consistent planning, business operation and synergy control. The company has been considering the risks related to an unexpected price-booming of incoming goods, raw material and service. In the case of loss of a supplier or changes of sales and payment terms, the company responds immediately by providing and including a new supplier under the very same terms and conditions as the previous one. The risks of the kind are insured by long-term contracts. Selling risks are related to the pricing policy of competitors. The risks of the kind are kept low by suitable marketing activities, a constant development of new products and quality improvement of the services provided, and nonetheless development of own marketing department. Terme Čatež company has got a consistent insurance policy of assets and humans in order to limit different risk threads such as business operation, material damage or human hazards. The company has got the insurance policy that includes the hazards like earthquake, fire, burglary, damage, fraud, insurance of hard- und software, inventory and other items as well as contingency insurance. By the insurance policy the company tries to prevent and reduce possible risks and hazards, which are likely to occur in everyday operation; it is a result of past experience and present awareness of the lurking risks.

Annual Report 2015

31

Furtheron, the company tends to optimization of business assets. The auditing of book value of the assets was being performed during the year and we were quite happy with the results (there were no bigger annual variations, which would result in revaluation of the assets). Long-term financial liablities include stakes in subsidiaries; they are presented by the purchase value. The comparison between the bona fide value of assets and book value provides control over the liquidity risks. The evaluation is being performed by purchase value. The accounts payable represent an important component in the financial policy of the company and the liquidity is estimated by means of constant inventory control. The investment policy was targeted at the projects with high rate of return (crutial for the decisionmaking has always been a feasibility study). The rate of return policy and JIT activation of the investment and its effect control are the risk reducing issues. A special emphasis upon each investment is put on nature and cultural heritage conservation, waste disposal and rational energy consumption. The choice of highly qualified employees and their motivation furtheron reduce the risks. A special attention is paid to a loss of key profiles and recruitment of new ones. The employees are being regularly informed by the contemporary communication media; the communications with the union representatives and workers delegates are on a regular basis as well. Permanent education, health care and work hazard courses, wage policy, management meetings and discussions of annual goals, health-checks and other means of motivation help reduce the risks. The actual availability and operation of IT and the data security system are provided by the Navision, ROS and Metra operation systems. The IT has constantly been upgraded, there has been a constant IT-work & maintenance control. The operators of IT have been a highly qualified and professional staff. IT hard- and software enable current and professional surveillance of the whole operation in the company. Hence, a suitable and high quality protection of the system is required to prevent intrusion. All business risks are at the same time also financial risks and can affect the liquidity of the company as a whole. For business risks count the capability of revenue making in certain period, cost control, maintenance of assets and exercising of business and financial control. External risks affecting the operation of Terme Čatež d.d. are above all of political nature (having in mind political changes in Bosnia and Herzegowina, where Terme Čatež company has got a subsidiary). The risk of delinquency, destruction or other kind of reduction of business assets is low, since all the important assets have been suitably insured.. The risk of fire is limited by the regular control of fire hazards; all the edifices have beeen equipped with the corresponding fire-alarm systems, that is why the rate of risk of the kind is kept very moderate. The risk of contract breech of the opposite party has been decreasing by current information on bonusses. The purchase is based on a practise, that the furnisher of investment and the vendor of equipment provide a warranty for the given advance-payment and quality of performance, for the rest of suppliers the payment is furnished after the delivery.

B) FINANCIAL RISKS

Exposure to financial risks means the possibility of changes in fair value of risk exposed items (impairment of assets or increase of debt), which have a direct impact on the company's profit and cash flow. These kinds of risk have been eased by a solid operation, improved bonusses and other operation acitivities on business, finance and investment levels. The risks like: risk in currency change, risk of changes in interest reate, credit risks and the analysis of sensibility to changes are dealt with in the Chapter: Financial instruments.

Annual Report 2015

32

Short-term payment risk (liquidity)

Liquidity was provided by planning of cash flows at the daily, monthly and annual level. A lot is daily

communication and alignments with the banks (creditors) and the acquisition of additional assets is

nowadays tricky due to an adverse economic situation. The risk is estimated as moderate.

Long-term solvency risk As regards the long-term solvency risk, it is estimated that it is present, however it is low because of the adequate capital structure and the quality and marketability of the Group's assets. Therefore, we estimate, that such a risk is held moderate. Inflation risk The exposure of the company to inflation risk is kept modest. Outgoing prices are modified by inflation, except in the cases, where this is not possible due to competition. In such cases internal reserves are released.

C) OTHER RISKS

The objective risks (force majeur) like war and political events do not as a rule affect the operation of a company, except in case of terrorist attacks in close vicinity. Our estimations show that there exists no such danger close to the headquarters of the company (the exception being the subsidiary in Bosnia). Certain risks represent epidemic and/or pandemic outbreaks (virusses and bacteria augmentation in water). Other unforeseen events, which could affect the tourist flows, include an outbreak of bird flu pandemic. The close vicinity of the nuclear power plant at Krško is ranged among the possible risks, like single terrorist actions or organized terrorist groups. All risks mentioned in this paragraph are not insured. The risk of flood due to the overflow of Sava river has been present though, above all in the case of longer periods of rain.

3.8 PLANS 2016

Terme Čatež company plans for 2016 as follows: - € 30.9 m in net sales revenues - € 31.5 m in operating revenues - € 9.2 m in net profit + amortization - net profit amounting to € 1.6 m (disinvestment excluded) - net profit from disinvestment (disposal of Mokrice resort, Terme Ilidža and Marina

Portorož) amounting to € 13.3 m . - net profit + disinvestment amounting to € 15.0 m.

Further, 699,673 overnight stays are planned for 2016 due to the disinvestment of Golf Hotel Mokrice Castle, residence marina and Koper Hotel) and 937,047 bathing entrances. The company shall invest appr. € 2.25 m into:

Glamcamp: An entirely new product of the mobile houses, highest quality rank. The village will be set southly from the Summer Thermal Riviera and will be close to the swimming pools. The project will be extremely demanding, due to the completely new infrastructure at the glass houses loacation, water and electric power, road connections. Value of infrastructure, phase I; estimation € 250,000.

Annual Report 2015

33

Football playgrounds: Alongside the new football playgrounds a new one shall be constructed, dim. 45 m x 70 m. and will serve as a training venue in the unfavourable wether conditions. The investment is estimated to € 230,000.

Terme Hotel: refurbishment of the indoor swimming pool and the surroundings. Adrenaline (theme) park is an answer to the expectations and demand of our guests. The investment is estimated to € 100,000.

Terme Hotel: extension of the parking place by 120 parking lots. The investment is estimated to € 47,000.

Expansion of campsite

The growing camping trends require permanent expansions, which is going to happen in 2016 and in the expansion of the campsite by the additional 40 mobile homes. Further, the available apartments Classic

Annual Report 2015

34

Type (30) and Superior Type (20) shall be refurbished and the new Reception build. The investment is estimated to € 291,000.

Refurbishment of rooms at Čatež Hotel, Toplice Hotel and Aquapark Žusterna Hotel. The

investment is estimated to € 750,000.

Spa & Wellbeing Centre: Exchange of PET-windows. The investment is estimated to € 120,000.

A. Regular maintenance The Summer and Winter Thermal Riviera: regular maintenance - € 289,263. Campsite: gardening, disposal containers, painting etc..: € 9,000.

B. Other investments: € 26,895, tangible assets: € 66,950.

Special highlights in 2016 will be as follows:

short-term payment policy (liquidity) and provision of long-term payment conditions implementation of sales and marketing strategy according to the goals set; more engagement on

foreign markets information technology implementation and upgrade organization and control standardization of operations single system of business operations and reporting for the whole Group motivation of employees complex business integration with the subsidiaries targeted at cost reduction environmental care distinction (trademark) of Terme Čatež company and Terme Čatež Group optimisation of power consumption.

Annual Report 2015

35

We understand, that the market share can only be increased by new investments and better quality of service. Terme Čatež Group plans for 2016 as follows:

- € 31,282,941 in net sales revenues - € 4,311,371 in operating profit - net profit amounting to € 1,5 mio (including the disinvestments of the parent company,

the profit of the Group will have amounted to € 14.9 mio).

3.9 EVENTS AFTER THE BALANCE ACCOUNT

3.9.1 Licence on thermal water consumption

Terme Čatež received the notification on granting the thermal water consumption licence on the Čatež

location, due 1 January 2016. The company filed an appeal and the proposal for the issue of temporary

notification at the Administrative Court of the Republic of Slovenia.

3.9.2 Disposal of Terme Ilidža company

Pursuant to the Agreement on On Financial Restructuring the disposal of Terme Ilidža is currently in

process. Upon the accomplishment of this report, the actual value of disposal has not yet been known, thus

dated 31 December 2014 the Management Board could not decide upon the impairment of the loan

granted to Terme Ilidža company. As soon as the Takeover Agreement shall have been signed, the decision

shall be conducted.

Annual Report 2015

36

IZJAVA O UPRAVLJANJU IN SKLADNOSTI Z DOLOČBAMI

KODEKSA UPRAVLJANJA JAVNIH DELNIŠKIH DRUŽB

Uprava in nadzorni svet družbe Terme Čatež, d.d. izjavljata, da je bilo upravljanje družbe skladno z ZGD,

Pravili Ljubljanske borze ter drugimi veljavnimi predpisi. Uprava in nadzorni svet izjavljata, da družba Terme

Čatež spoštuje Kodeks upravljanja javnih delniških družb z dne 08.12.2009, razen v naslednjem:

V statutu Term Čatež, d.d. niso opredeljeni cilji družbe. Kljub temu organi družbe delujejo v skladu z

osnovnimi cilji kot jih opredeljuje Kodeks, t.j. maksimiranje vrednosti družbe, dolgoročno ustvarjanje vrednosti za delničarje in upoštevanje socialnih in okoljskih vidikov poslovanja z namenom zagotavljanja trajnostnega razvoja družbe.

Družba nima objavljene politike upravljanja družbe.

Družba na svojih spletnih straneh nima objavljenih podpisanih izjav članov nadzornega sveta.

Družba nima objavljenega finančnega koledarja.

Izjava se nanaša na obdobje od 01.01.2015 do 31.12.2015. Kodeks je v slovenskem jeziku in angleškem jeziku objavljen na spletni strani www.ljse.si. O upoštevanju Kodeksa upravljanja javnih delniških družb bo uprava poročala v letnih poročilih in na spletnih straneh družbe www.terme-catez.si. 21.4.2016

Uprava družbe Terme Čatež, d.d.

Annual Report 2015

37

3.10 STATEMENT ON MANAGING AND AGREEMENT WITH THE STIPULATIONS OF THE PUBLIC

COMPANY MANAGEMENT CODEX (orig.: see previous page)

The Management of the company and its Supervisory Board declare hereby, that the managing of the company was aligned to the Public Company Law (orig. ZGD), Ljubljana Stock Exchange Rules and other effective regulations. The Management of the company and its Supervisory Board declare hereby, that Terme Čatež company honors the Public Company Management Codex dated 8 December 2009, with the exceptions as follows: - The statute of Terme Čatež company does not define the company goals. However, the entities of the company act according to the base company goals defined in the Codex, i.e. towards maximizing the company value, long-term value creation for shareholders and consideration of social and environmental aspects of performance aiming at assurance of permanent development of the company. - The company has not disclosed its management policy. - Signed statements of the members of Supervisory Council are not released on the web pages of the company. - The company has not released the financial schedule. This statement refers to the period from 1 January 2015 until 31 December 2015.

This Codex is released in Slovene and English on the website www.ljse.si.

Considering the stipulations of this Codex, the Management Board shall publicly report in Annual Reports of the company and on the website www.terme-catez.si. At Čatež ob Savi, 21 April 2016

Terme Čatež d.d. Management Board

Signed by Mr. Bojan Petan, GM

Annual Report 2015

38

4. FINANCIAL STATEMENT

4.1 PROFIT & LOSS ACCOUNT WITH ANNOTATIONS

Introductory notes to the preparation of profit & loss statement

Part I consists of the financial report of Terme Čatež company, Part II of the consolidated financial report of

Terme Čatež Group. Both reports are compiled in accordance with the International Financial Reporting

Standards (IFRS) endorsed by the European Union.

The auditor, PKF company, revizija in svetovanje d.o.o., Kamniška ul. 25, 1000 Ljubljana, audited each part

of the statments and compiled two independent reports each being a constituent part of a single chapter.

Terme Čatež Group is subordinated to DZS company, being a controlling holder with 45.79 % shares of

Terme Čatež company. The consolidated financial statement of which constituent part is the statement of

Terme Čatež Group, is available at the head-office of the holder - DZS company in Ljubljana.

Izjava o odgovornosti uprave (transl.: see next page)

Uprava potrjuje izkaz poslovnega izida, bilanco stanja, izkaz drugega vseobsegajočega donosa, izkaz

denarnih tokov in izkaz gibanja kapitala družbe Terme Čatež, d.d. za leto, ki se je končalo 31. decembra

2015.

Uprava potrjuje, da so bile pri izdelavi računovodskih izkazov dosledno uporabljene ustrezne računovodske

usmeritve in da letno poročilo predstavlja resnično in pošteno sliko premoženjskega stanja družbe ter izidov

njenega poslovanja za leto 2015.

Uprava potrjuje, da so bili računovodski izkazi izdelani v skladu z veljavno zakonodajo in Mednarodnimi

standardi računovodskega poročanja, ki jih je sprejela EU.

21.04.2016 Bojan Petan

generalni direktor Term Čatež, d.d.

Annual Report 2015

39

Liability statement of Management Board

The Management Board confirms hereby the profit & loss account, balance sheet, return on equity, cash-flow statement and capital-flow statement of Terme Čatež company for the year ending on 31 December 2015. The Management Board confirms hereby, that the consolidated financial statements were strictly conducted in accordance with the accounting standards and that they in all aspects demonstrate a fair situation of the financial conditions and performance of the company in 2015. The Management Board confirms hereby, that the consolidated financial statements were compiled in accordance with the adopted legislation and the International Financial Reporting Standards (IFRS) endorsed by the Europen Union. 21 April 2016 Terme Čatež d.d. Bojan Petan, GM

Annual Report 2015

40

I. Audited non-consolidated financial statement of Terme Čatež company pursuant to IFRS

BALANCE SHEET AS ON 31 DECEMBER 2015

(in EUR) 31 Dec 2015 31 Dec 2014 corrected 31 Dec 2014

ASSETS

Long-term assets

Intangible assets and long-term accrued income and deferred expenses 584,926 36,944 36,944

Tangible assets 83,818,039 86,896,548 86,896,548 Investment property 1.239.834 1.743.075 1,743,075 Long-term financial investments 20,511,357 26,798,850 44,911,255 Long-term operating receivables 310,894 0 0 Deferred tax liability 3,515,569 3,880,557 202,933

109,980,619 119,355,974 133,790,755

Short-term assets

Assets (groups of assets) on disposal 0 0 0 Inventory 530,234 510,050 510,050 Short-term financial investments 6,452,162 6,410,696 9,931,374 Short-term operating receivables 3,166,053 3,326,410 3,326,410 Cash 1,146,700 473,461 473,461

11,295,149 10,720,616 14,241,294

Short-term accrued income and deferred expenses 917,449 842,222 842,222

ASSETS TOTAL 122,193,217 130,918,812 148,874,271

Ex-balance assets 9,915,820 12,029,632 12,029,632

Annual Report 2015

41

BALANCE SHEET AS ON 31 DECEMBER 2015 - CONTINUED

(in EUR) 31 Dec 2015 31 Dec 2014 corrected 31 Dec 2014

LIABILITIES

Equity

Called-up capital 12,444,216 12,444,216 12,444,216 Capital reserves 29,842,696 29,842,696 29,842,696 Reserves from profit 2,524,839 2,524,839 2,524,839 Revaluation surplus 10,541,059 10,736,590 10,736,590 Net profit brought forward (6,888,422) 9,935,907 9,935,907 Net profit for the business year - (17,178,141) 777,318

48,464,387 48,306,107 66,261,566

Provisions an long-term accrued expenses and deferred income 6,014,001 6,278,934 6,278,934

Long-term liabilities Long-term financial liabilities 11,279,236 24,476,379 24,476,379 Long-term operating liabilities - - - Deferred tax liability 2,360,479 2,360,992 2,360,992

13,639,716 26,837,371 26,837,371

Short-term liabilities

Liabilities included in groups on disposal - - - Short-term financial liabilities 46,947,641 43,226,431 43,226,431 Short-term operating liabilities 7,081,147 6,250,907 6,250,907

54,028,788 49,477,338 49,477,338

Short-term accrued expenses and deferred income 46,325 19,062 19,062

LIABILITIES TOTAL 122,193,217 130,918,812 148,874,271

Ex-balance liabilities 9,915,820 12,029,632 12,029,632

Annual Report 2015

42

PROFIT7LOSS STATEMENT FOR THE YEAR ENDING ON 31 DECEMBER 2015

(in EUR) 2015 31 Dec 2014 corrected 2014

Net sales revenues 28,603,148 29,698,601 29,698,601 Change in value of inventory (products and unfinished production) - - - Materialized products and own services - - - Other operating revenues (revaluating revnues incl.) 595,731 1,062,539 1,062,539

Costs of goods, material and service (13,069,318) (14,261,304) (14,261,304) Labour costs (7,444,511) (8,527,093) (8,527,093) Value write-offs (4,669,030) (4,934,892) (4,934,892) Other operating costs (336,991) (340,228) (340,228)

Profit/loss from operating activity 3,679,028 2,697,624 2,697,624

Financial revenues from holdings 75,340 51,231 51,231 Financial revenues from loans 749,298 1,514,135 1,514,135 Financial revenues from operating liabilities 5,622 11,088 11,088

Financial expenses from financial investments - (21,633,083) - Financioal expenses from financial liabilities (2,848,883) (3,668,951) (3,668,951) Financial expenses from operating liabilities (41,765) (49,294) (49,294)

Profit/loss from financing activity (2,060,388) (23,774,873) (2,141,790)

Other revenues 350,731 338,238 338,238 Other expenses - - -

Corporation tax - (10,069) (10,069) Deferred tax (382,920) 3,570,940 (106,684) Net profit/loss for the accounting period 1,586,451 (17,178,141) 777,318

Net profit/loss per share 3.24 (35.04) 1.59 Corrected net profit/loss per share 3.24 (35.04) 1.59

Annual Report 2015

43

Return on equity II

(in EUR) 2014 2014-corr. 2015

Net profit / loss for the accounting period 777,318(17,178,141) 1.586,451

Changes in surplus from revaluation of intangible and tangible assets Changes in surplus from revaluation of financial assets on disposal 115,059 115,059

(2,501)

Profit / loss from translation of accounting statements of companies abroad (exchange rate difference) - -

Other items of return on equity - (431,625) -

-

Return on equity for the accounting period - TOTAL 892,377 17,063,082 (1,152,324)

CASH-FLOW STATEMENT FOR THE YEAR ENDING ON 31 DECEMBER 2015

(in EUR) 2014 2015

Cash flow from operating activity

Receivables from operating activity Receivables from sales of products and services 29,917,076 28,775,857 other receivables from operating activity 488,994 400,668

Disbursements from operating activity Disbursements for purchase of raw material and service (13,037,815) (12,447,184 Disbursements for salaries and equity shares of employees in profit (8,430,615) (7,548,036) Disbursements for duties of all kinds (1,948,915) (1,534,794) Other disbursements from operating activity (2,754,504) (442,200)

Surplus in receivables / disbursements from operating activity 6,546,525 4,892,007

Cash-flow from investment activity

Receivables from investment activity Receivables from acquired interests and holdings in profit of others,

referring to investment activity 58,214 3,572 Receivables from disposal of intangible assets Receivables from disposal of tangible assets 4,000 Receivables from disposal of investment property 400,000 681,000 Receivables from disposal of long-term financial investments 9,000,100 Receivables from disposal of short-term financial investments

Disbursements from investment activity Disbursements from acquisition of intangible assets Disbursements from acquisition of tangible assets (243,582) (837,292) Disbursements from acquisition of investment property (5,636) Disbursements from acquisition of long-term financial investments (58,000) (96,000) Disbursements from acquisition of short-term financial investments

Surplus in receivables / disbursements from investment activity 154,996 (8,751,379)

Annual Report 2015

44

* All disbursements are demonstrated as negative items.

CASH-FLOW STATEMENT FOR THE YEAR ENDING ON 31 DECEMBER 2015 -CONTINUED

(in EUR) 2014 2015

Cash flow from financing activity

Receivables from financing activity Receivables from capital deposit Receivables from increased long-term financial liabilities Receivables from increased short-term financial liabilities

Disbursements from financing activity Disbursements for interests referring to financing activity (3,698,712) (2,637,574) Disbursements for capital deposits Disbursements from increased long-term financial liabilities (1,848,296) (2,487,200) Disbursements from increased short-term financial liabilities (2,474,042) (6,890,055) Disbursements for allocation of dividends and other holdings in profit (30) (955,318)

Surplus in receivables / disbursements from financing activity (8,021,080) (12,970,147)

Final balance of cash 473,461 1,146,699

Cash balance for the period (1,319,559) 673,239 Opening balance of cash 1,793,020 473,461

Annual Report 2015

CAPITAL FLOW AS ON 31. DECEMBER 2015

Called-up Reserves for Reserves Revaluation Net profit / loss Net proft /

Equity capital Capital Legal treasury shar. from profit surplus brought loss for the

(v EUR) TOTAL reserves reserves and holdings TOTAL forward year Total

Entry balance as on 31 December 2014 12,444,216 12,444,216 29,842,696 1,689,962 834,877 2,524,839 10,736,590 9,935,907 777,318 66,261,566

- -

Calculations for the past (abolitkion of errors) - - - - - - - - (17,955,459) (17,955,459)

Adjustments for the past (Changes in accoounting standards) - - - - - - - - - -

Opening balance as on 31 December 2014 (corrected) 12,444,216 12,444,216 29,842,696 1,689,962 834,877 2,524,839 10,736,590 9,935,907 (17,178,141) 48,306,107

Changes in holding equity - transactions with holders

Entry of called-up capital - - - - - - - - - -

Entry of non called-up capital - - - - - - - - - -

Called-up of entered equity - - - - - - - - - -

Entry of subsequent equity - - - - - - - - - -

Acquisition of treasury shares and own holding capital - - - - - - - - - -

Disposal or withdrawal of treasury shares and own holdings - - - - - - - - - -

Capital reimbursement - - - - - - - - - -

Dividend pay-out - - - - - - - (994,044) - (994,044)

Payment of premiums to Management Board and Superv.Council - - - - - - - - - -

Other changes in holding equity - - - - - - - - - -

- - - - - - - (994,044) - (994,044)

Total return on equity for the accounting period

Entry of net profit / loss for the reported period - - - - - - - - 1,586,451 1,586,451

Changes in surplus from revaluation of intangible assets - - - - - - - - - -

Changes in surplus from revaluation of tangible assets - - - - - - - - - -

Changes in surplus from revaluation of financial investments - - - - - - (2,501) - - (2,501)

Other components of return on equity for the reported period - - - - - - (193,030) (238,595) - (431,625)

- - - - - - (195,531) (238,595) 1,586,451 1,152,324

Transfers from capital

Allocation of the rest of net profit of compared reported period

onto other capital items - - - - - - - - - -

Allocation of a part of net profit of the reported period

on other capital items, pursuant to the resolut. of MB and SC - - - - - - - - - -

Razporeditev dela čistega dobička za oblikovanje dodatnih rezerv po sklepu skupščine - - - - - - - - - -

Clearance of the loss as discounting capital item - - - - - - - 1,586,451 (1,586,451) -

Formation of provisions for treasury shares and holdings from other capital items - - - - - - - - - -

Release of reserves for treasury shares and holdings - - - - - - - - - -

Other changes in equity - - - - - - - (17,178,141) 17,178,141 -

- - - - - - - (15,591,690) 15,591,690 -

Closing balance as on 31 December 2015 12,444,216 12,444,216 29,842,696 1,689,962 834,877 2,524,839 10,541,059 (6,888,422) - 48,464,387

Annual Report 2015

CAPITAL FLOW FOR THE YEAR ENDING ON 31 DECEMBER 2014

Called-up Reserves for Reserves Revaluation Net profit / loss Net proft /

Equity capital Capital Legal treasury shar. from profit surplus brought loss for the

(v EUR) TOTAL reserves reserves and holdings TOTAL forward year Total

Entry balance as on 31 December 2013 12,444,216 12,444,216 29,842,696 1,689,962 834,877 2,524,839 10,621,531 9,960,803 558,687 65,952,771

- -

Calculations for the past (abolition of errors) - - - - - - - (226,885) - (226,885)

Adjustments for the past (Changes in accoounting standards) - - - - - - - (356,698) - (356,698)

Opening balance as on 1 January 2014 12,444,216 12,444,216 29,842,696 1,689,962 834,877 2,524,839 10,621,531 9,377,220 558,687 65,369,189

Changes in holding equity - transactions with holders

Entry of called-up capital - - - - - - - - - -

Entry of non called-up capital - - - - - - - - - -

Called-up of entered equity - - - - - - - - - -

Entry of subsequent equity - - - - - - - - - -

Acquisition of treasury shares and own holding capital - - - - - - - - - -

Disposal or withdrawal of treasury shares and own holdings - - - - - - - - - -

Capital reimbursement - - - - - - - - - -

Dividend pay-out - - - - - - - - - -

payment of premiums to Management Board and Superv.Council - - - - - - - - - -

Other changes in holding equity - - - - - - - - - -

- - - - - - - - - -

Total return on equity for the accounting period

Entry of net profit / loss for the reported period - - - - - - - - 777,318 777,318

Changes in surplus from revaluation of intangible assets - - - - - - - - - -

Changes in surplus from revaluation of tangible assets - - - - - - - - -

Changes in surplus from revaluation of financial investments - - - - - - 115,059 - - 115,059

Other components of return on equity for the reported period - - - - - - - - - -

- - - - - - 115,059 - 777,318 892,377

Transfers from capital

Allocation of the rest of net profit of compared reported period

onto other capital items - - - - - - - 558,687 (558,687) -

Allocation of a part of net profit of the reported period

on other capital items, pursuant to the resolut. of MB and SC - - - - - - - - - -

Razporeditev dela čistega dobička za oblikovanje dodatnih rezerv po sklepu skupščine - - - - - - - - - -

Clearance of the loss as discounting capital item - - - - - - - - - -

Formation of provisions for treasury shares and holdings from other capital items - - - - - - - - - -

Release of reserves for treasury shares and holdings - - - - - - - - - -

Other changes in equity - - - - - - - - - -

- - - - - - - 558,687 (558,687) -

Closing balance as on 31 December 2014 12,444,216 12,444,216 29,842,696 1,689,962 834,877 2,524,839 10,736,590 9,935,907 777,318 66,261,566

Annual Report 2015

Annual Report 2015

48

Annotations to non-consolidated financial statements of Terme Čatež company aligned with the IFRS (International Financial Reporting Standards)

1. Reporting company Terme Čatež company (hereinafter: the company) has got its head office in Slovenia, the address: Topliška 35, SI-8251 Čatež ob Savi. The financial statements of Terme Čatež company are compiled for the year ending 31 December 2015. The company compiles separate financial statements pursuant to IFRS 27 (»Consolidated and Separate Financial Statements«) as required by the Slovene legislation. For Terme Čatež Group the consolidated statements are accomplished; they however are available at the company's head-office. 2. Basic guidelines a) Alignment statement The non-consolidated financial report of the company is aligned with the IFRS (International Financial Reporting Standards) endorsed by the European Union. Implemented were the financial and reporting standards as well as the Public Company Law. Standards and annotations in the current period: In the current period the valid amendments of the available standards issued by the IFRS Committee and endorsed by EU, are as follows:

Amendments to diverse standards (»Improvements of IFRS 2011 – 2013«), based on the annual improvement project (IFRS 3, IFRS 13 and IFRS 40) aiming at the elimination of non-alignments and misinterpretation of the text endorsed by EU dated 18 December 2015 or even later);

IFRS Committee 21 »Taxes«, endorsed by EU dated 13 June 2014 (due annually, starting 17 June 2014 or later).

The endorsement of the above amendments to the standards did not bring along any changes in the financial directions of a company. Standards and annotations, issued by IFRS Committee and endorsed by EU, yet not due As on the day of confirmation of this financial report, the following standards, amendments and annotations endorsed by EU, were issued, yet not due:

Amendments to IFRS 11 »Shared concern« - Calculation of the acquired holdings in joint ventures, endorsed by EU dated 24 November 2015 (due annually, starting 1 January 2016 or later);

Amendments to IFRS 1 »Demonstration of financial report« - The disclosure initiative endorsed by EU, dated 18 December 2015 due annually, starting 1 January 2016 or later);

Amendments to IFRS 16 »Tangible assets« and IFRS 38 »Intagible assets« - Annotation of the tolerated amortization methods, endorsed by EU dated 2 December 2015 (due annually, starting 1 January 2016 or later);

Amendments to IFRS 16 »Tangible assets« and IFRS 41 »Agriculture« - Agriculture: Fertile plants - endorsed by EU dated 23 November 2015 (due annually, starting 1 January 2016 or later);

Amendments to IFRS 19 »Payroll« - Programmes with particular payments: Contributions by employees: endorsed by EU dated 17 December 2015 (due annually, starting 1 February 2015 or later);

Amendments to IFRS 27 »Separate accounting reports«: Equity method: endorsed by EU dated 18 December 2015 (due annually, starting 1 January 2016 or later);

Annual Report 2015

49

Amendments to different IFRS »IFRS Improvements (period 2010 – 2012)«, derived from the annual improvement project (IFRS 2, IFRS 3, IFRS 8, IFRS 13, IFRS 16, IFRS 24 and IFRS 38) aiming at the elimination of non-alignment and text misenterpretations, endorsed by EU dated 17 December 2014 (due periodically, starting 1 February 2015 or later);

Amendments to different IFRS »IFRS Improvements (period 2012 – 2014)«, derived from the annual improvement project (IFRS 5, IFRS 7, IFRS 19, IFRS 34) aiming at the elimination of non-alignment and text misenterpretations, endorsed by EU dated 15 December 2015 (due periodically, starting 1 January 2016 or later).

It is assumed that the introduction of the above standards, amendments of the available standards and annotations in the starting period shall not siginificantly affect the present accounting report of the company. Standards and annotations issued by IFRS Committee, yet not endorsed by EU For the time being the IFRS endorsed by EU do not significantly differ from the regulations endorsed by IFRS Committee, with the exception of the standards and amendments to the available standards which as on 25 February 2016 were not endorsed as due for the implementation within EU, as follows:

IFRS 9 »Financial instruments« (due periodically, starting 1 January 2018 or later);

IFRS 14 »Legally delayed payments« (due periodically, starting 1 January 2016 or later) – European Committee decided not to start the adoption process of this interim standard, but shall rather wait until the final version has been passed;

IFRS 15 »Revenues from contracts« and further amendments« (due periodically, starting 1 January 2018 or later);

IFRS 16 »Leasing« (due periodically, starting 1 January 2019 or later);

Amendments to IFRS 10 »Consolidated accounting reports«, IFRS 12 »Disclosures of holdings in subsidiaries« and and IFRS 28 »Investments to mergers and joint ventures« - Invested companies: exceptions related to consolidations (due periodically, starting 1 January 2016 or later);

Amendments to IFRS 10 »Consolidated accounting reports and and IFRS 28 »Investments to mergers and joint ventures« - Disposal or investments granted by the investing company and his merged companies or joint ventures, and further amendments: (due validity date has been postponed for an indefinite period of time until the research project regarding the equity method has been finished);

Amendments to IFRS 12 »Corporation tax« - Acknowldgement of delayed tax payments related to non-realized loss (due periodically, starting 1 January 2017 or later).

It is assumed that the introduction of the above standards, amendments of the available standards and annotations in the starting period shall not siginificantly affect the present accounting report of the company. b) Criteria Financial standards of the company are based on the core value assesment, with the exception of the real estate and financial assets at disposal, where fair value is applied. The methods implemented upon the fair value assessment are described in Annotation 4. c) Functional and demonstration currency The consolidated financial report of the company is evaluated in EUR, i.e. the functional currency of the company. All accounting information in EUR are rounded off to integers.

Annual Report 2015

50

d) Implementation of assessments The Management Board is obliged pursuant to IFRS to provide the assessments and conditions, which affect the implementation of financial principles and and the demonstration of the assets, liablities, revenues and disbursements. The actual results can vary. The assessments and conditions require current auditing. The corrections of the financial estimations are acknowledged in the correction period and in the coming years affected by the corrections. The data on important assessments of unceratinty and essential criteria set-up by the Management Board during the process of implementation of financial principles, are highlighted in the Annotations as follows:

Annotation – measurement criteria for specific remunerations

Annotation – provisions and conditional liabilities

Annotation – evaluation of financial instruments 3. Important financial principles The financial policies below were strictly obeyed for all the periods attached to this report. The company did dot change the accounting assesments in 2015.

(a) Error corrections Errors occuring upon the recognition, assessment, demonstration or disclosure of the accounting report items for the current period, discovered in that very period, are subject to correction, before they are approved to be published. Crucial errors discovered in the following period are subject to correction and based on the comparative method of the information demonstrated in the period when the error was revealed. The company discovered such one error regarding the assesment of long-term accounts payable (loan granted to Terme Ilidža subsidiary) and short-term financial investment into the shares of DZS company and changed the calculation of comparable amounts from the demonstrated past period, when the error occured, pursuant to IFRS 8 (»Accounting regulations, amendments to financial assessments and errors). The error is the consequence of wrong financial assessments of the Management and wrong misused financial regulation regarding the assessment of long-term loan granted and accounts payable of a short-term financial investment. The correction of the error from the past year is reflected in the reduction of long-term financial investments value amounting to € 18,112,405, increase of the value of accounts payable related to deferred tax amounting to € 3,079,109 and reduction of net operating profit from 2014 amounting to € 15,033,296. The correction of the past year error related to the short-term financial investment into shares of DZS company is reflected in the reduction of short-term financial investments amounting to € 3,520,677, increased value of the accounts payable related to deferred tax amounting to € 598,515 and reduction of operating profit 2014 amounting to € 2,922,162. Net profit 2014 before the correction amounted to € 777,318. If the company recognized the effect of crucial errors, discovered in 2015 after the approvement of financial report 2014,already in profit&loss account 2014, the net loss 2014 would amount to € 17,178,140.

(b) Foreign currency (1) Foreign currency transactions

Foreign currency transactions are calculated in a corresponding functional currency of the company pursuant to the parity rate of the Bank of Slovenia on the day of its occurence/transaction. Pecuniary assests and liabilities expressed in a foreign currency on the balance sheet date are calculated in the functional currency according to the parity rate of the bank of Slovenia on the last day of the fiscal period. Positive or negative exchange differences are the ones between the pay back value (in functional currency)

Annual Report 2015

51

at the beginning of the period, corrected by the amount of effective interests and payments during the period, as well as by the pay back values in foreign currency calculated according to the average rate of exchange at the end of the period. Non pecuniary assests and liabilities expressed in foreign currency and assessed by a fair value are transferred into the functional currency according to the parity rate of the Bank of Slovenia on the date of the affected fair value. The exchange rate differences are recognized in the profit & loss account, which is not true however for the differences appearing from the calculation of equity instruments ranged as being on disposal.

(2) Companies abroad The assests and liabilities of the companies abroad, including goodwill and correction of fair value upon their affection, are calculated in EUR pursuant to the parity rate of ECB on the day of the balance sheet date.

(3) Investments in subsidiaries Long-term financial investments into equity of subsidiaries included into consolidated financial statement are evaluated by their purchase value. The share in profit of a subsidiary is recognized in financial statement of controlling company, which in turn gets the right to the share in profit. Should the loss of a subsidiary cause the impairment of the investment, the amount lost is measured as a difference between book value of the investment and actual value of the expected future cash flows. (c) Financial instruments

(1) Non-executed orders in financial instruments They include equity investments into pledged securities, operating and other liabilities, cash and cash equivalents, loans granted and loans granted to others and operating and other liabilities. Non-executed orders in financial instruments are at the beginning acknowledged in their fair value increased by business costs. After that, the non-executed orders in financial instruments can be evaluated by the items as presented below. (2) Cash & cash equivalents Cash and cash equivalents include cash in cash desk, on current account(s) and deposits. Account overdrafts, which can be settled on demand and are a part of money management of the company are included in the item cash and cash equivalents.

(3) Financial assets on disposal

Equity investments are classified as financial assets on disposal. Securities on disposal are holding securities of the companies listed and/or non-listed on the Stock Exchange. Initially, these investments are valued pursuant to a fair value and its changes can be directly evident in equity. When the recognition of investment cease to exist, the related profit or loss is transferred into profit & loss account. The investment into securities and holdings are shown according to their fair value. When the recognition of investment cease to exist, the recognized profit/loss in equity should be evident in the periodical profit & loss account. The fair value of securities at disposal listed on the Stock Exchange, equals the released standard price as at balance sheet affection. The fair value of shares and holdings in companies not listed on the Stock Exchange, is estimated pursuant to the recent public transactions.

(4) Other Other non-realized financial instruments are valued by the payback value by the effective interest method, reduced by the amount of loss due to impairment.

Annual Report 2015

52

(d) Equity 1) Ordinary shares are part of equity capital. Additional charges arizing from the issue of new shares and share options, are shown as capital decrease, whereby the effects on capital are not considered. 2) Treasury shares buy-out Upon the buy-out of treasury shares or stakes, which are shown as part of equity capital, the amount of paid reimbursement including the buy-out costs without possible tax effects, can be recgnized as the capital change. The buy-out treasury shares are shown as shares of Terme Čatež company and are being reduced from the capital. Upon the disposal of treasury shares or the new issue, the cash receivable is shown as capital increase and the surplus / loss of the transaction is transferred into retained profit and capital reserves respectively. 3) Dividends are demonstrated in the financial report among the liabilities; they are evidented upon the generation of the business event.

(e) Intangible assets, tools and equipment

(1) Demonstration and evaluation Intangible assets, tools and equipment of the company (real estate excluded) are demonstrated in their purchase value (purchase costs included) reduced by amortization and the impairment. Thus, the price consists of the purchase price, costs of import and non-restitutable purchase taxes and costs referring directly to the operation and (when required) the starting costs of disassembly and disposal of intangible assets, tools and/or equipment and restoration of the venue where the latter were placed. The purchase value of intangible assets, tools and equipment is increased by the costs for future benefits of the item. The costs expanding the utility margin if the item, are demonstrated as its reduction of the corrected value. The intangible assets of the company are calculated according to their fair value. Upon the adoption of IFRS, the company got the certified evaluator (Dodoma company from Maribor) who made the revaluation. Upon the revaluation the flat rate was the market price (this, in turn means the estimated price according to which the buyer and the seller would exchange the assets, i.e. on the date of estimation of the value of the elaborated business, after the suitable merchandising of the assets, where both partners acted informed, careful and voluntarily). The fair value reduced by the sales costs becomes a replacable value, when it is higher than the practical value. Upon the estimation of real estate, the valuer took predominantly the basic evaluation method into account, i.e. direct comparison of purchase price of similar real estates, which location and construction possibilities are most similar to the subjected estate. The, the modifications followed as to their macro & micro location, dimensions of the estate, its surface structure and access. The difference in time, when the purchse will be ralized, was also taken into account. The essential changes in real estate values since their revaluation have not been registered. Under the item intangible assets the company demonstrates the estates, buildings and equipment; separately shown are the assets in acquisition and utilization. Profit and loss resp.upon the disposal of intangible assets, tools and equipment, is defined as the difference between the revenues from the disposal and its book balue and is taken into consideredation under the item »other operating revenues« and/or »other operating expenses« (in the case of loss).

(2) Rearrangements into investment property The future intangible assets treated as investment property are being handled like tangible assets and are shown in their purchase value (until the date of its finished construction or development, when the intangibles become investment property). Profit/loss appearing upon the revaluation of fair value, is referred to in the profit & loss account.

Annual Report 2015

53

If the utilized intangible asset becomes an investment property, it is valuated in its fair value and rearranged into the investment property. The profit appearing upon the revaluation is shown directly in the equity, whereby the loss in the profit & loss account.

(3) Incidental costs The costs of exchange of a part of an intangible asset, tool or equipment are demonstrated in its book value, if there exists the possibility, that the incidental economic benefits referring to the operation of this part, shall flow into the company and if the purchase value can be reliable measured. The recognition of book value of the exchanged part is annuled. Other costs e.g. daily maintenance are recognized in the profit & loss account as disbursements, as soon as they appear.

(4) Depreciation Depreciation is calculated pursuant to the method of even amortization in time unit upon the consideration of utility period of separate asset. The depreciation of leased assets is affected by the consideration of the lease duration and utility period, unless it is not certain, that the company shall after the lease termination become the owner of the leased assets/item. Real estates are not being depreciated. The due date of depreciation of an intangible asset is its availability for utilization. The depreciation rates are as follows: * buildings 1 % to 6 % * furniture and equipment 5 % to 33 %. * agricultural real estate (orchards) 5 % * inventory 50 % * investment property 3 % to 5 % The methods of depreciation, utility period and other values are checked upon the reporting day.

(5) Lease costs The financing costs of intagibles, tools and equipment during acquisition until their effectivenss are materialized by the company, later on they are shown as part of disbursements for interests.

(f) Intangible assets Intangible assets are demonstrated in their purchase value reduced by amortization and the impairment. Among the intangible long-term assets the company demonstrates its programme rights.

(1) Subsequent/incidental costs The subsequent costs related to intangible assets are part of the assets when they increase the future economic benefits related to the assets. Other costs, including goodwill and brand names created by the company, are demonstrated in the profit & loss account as the expenses, upon the date of their effectiveness.

(2) Depreciation Depreciation is calculated pursuant to the method of even depreciation in time unit upon the consideration of utility period of intangibles and starts on the day of its utility. The annual depreciation rates are as follows: * programme licenses 30 % to 33 % * software 25 % to 50 %.

(g) Investment property Investment property are intangible assets bringing benefits as rentals and/or increasing the value of a long-term investment (or both), and not for disposal (sales) in current operation processes, utilization in manufacturing process or goods and/or service supply for office purposes. Investment property is depicted in purchase value.

Annual Report 2015

54

The company compiled the evaluation of investment property upon the transition to IFRS. It proved, that there were no differences as to the purchase value. If the utility of an investment property is changed so much, that it should be rearranged among the intangibles, its fair value is changed into a cost. Depreciation is calculated pursuant to the method of even depreciation in time unit upon the consideration of utility period of separate investment property. The rate of depreciation of investment property is 3 % to 6 %. Real estates are not being depreciated. The utility period if an investment property equals the period of a similar intangible asset.

(h) Leased assets

The lease, where the company grants for the essential risks and benefits related to the ownership of the asset, is treated as financial lease. After the initial recognition leased assets are demonstrated as the amount equalling the fair value or when the fair value is lower, it equals the current value of the sum total of the lowest leases. The assets are treated pursuant ot the financial standards valid for such assets. Other leases are treated as business leases and (with the exception of investment property) are not recognized in the balance sheet of the company and Group resp. The leased investment property is shown in the balance sheet of the company – in purchase value.

(i) Inventory

Inventory is valuated in genuine value or net obtainable market price, i.e. the lower price is taken into account. The costs of inventories are shown pursuant to the FIFO-Method (first-in, first-out method) and include the purchase value, costs of manufacture and transfer into other costs appearing upon their recovery. The costs of inventories can include their transfers from the equity capital (of a possible profit/loss as the consequence of the cash-flow risk-protection upon the purchase of inventories with foreign currencies. Net obtainable market price is estimated sales price obtained during regular operation and reduced by the estimated finishing costs and estimated sales costs.

(j) Impairment of assets

(1) Financial assets On the day of reporting the company assesses the value of financial assets in order to establish a possible impairment. Assets are impaired, if there are objective proofs, that one ore more events originated the consequent cash-flow reduction. The impairment is calculated as the difference between the non-depreciated value of the assets and the expected future cash-flow decreased by the genuine valid interests. The impairment of assets on disposal is calculated pursuant to its actual fair value. The assessment of impairment of important financial assets is compiled sporadicaly, whilst of the other assets as the group depending on their common features upon risk exposure. The company discloses all losses from impairment in the profit & loss account for the period. A possible impairment related to financial assets on disposal, which was recognized directly in equity, is transferred to profit & loss account.

Annual Report 2015

55

The loss due to impairment is abolished, if it is autonomously related to the event which happened after the recognition of impairment. Upon the financial assets shown in installment value, and the financial assets on disposal being instruments of credit, the annullment of loss due to impairment is shown in the profit & loss account. The annullment of financial assests on disposal, which are holding securities, the company demonstrates directly in equity.

(2) Non-financial assets Upon each reporting the company checks the rest of book value of non-financial assets, with the exception of investment property, inventory and deferred tax liabilities, in order to find out possible impairment. If the signs for it exist, the assessment of exchangeable value of the asset is done. The assessment of impairment of goodwill and intangibles with non-defined utility period, which are not yet ready for disposal, is done each time on the reporting day. The exchangeable value of the asset or money creating unit is the actual value or fair value reduced by the sales costs (biggest value). Upon the definition of the asset value in affection, the expected subsequent cahs-flows are being discounted on their actual value by means of a discount rate before tax, which reflects current market assessments of the value of money and risk in time unit typical for the asset. For the impairment test sake, the assets are united into the smallest groups of assets, which create cash-flows from permanent utilization. Those assets are mostly independent from the others or other groups of assets (»money making units«). For the sake of impairment test, the goodwill acquired in business grouping is rearranged into the money making units, which are expected to bring profit by utilizing the synergy effects. The impairment of an assets or money making unit is acknowledged, when its book value exceeds it exchangeable value. The impairment is shown in the profit & loss account.. The company assesses as on the balance sheet date the losses due to impairment in past periods, thus finding out possible loss reductions or even its non-existence. The loss due to impairment is annulled, if the assessments, on the base of which the company defines the exchangeable value of the asset, changed. The loss due to impairment of an asset is annulled up to a level, where the increased book value of the asset does not exceed the book value, which would be assessed after the reduction of amortized depreciation, should not in the past years the loss due to impairment have been recognized.

(k) Payroll 1) Other long-term allowances of the employees – provisions for leave benefits and jubilee premiums A pure obligation of the company, originated by long-term earnings of employees, is the total of earnings obtained upon the exchange for their input work currently done or performed in the past. Such a total of earnings is discounted, whereby its actual value is obtained, which then is reduced by fair value of all associated assets. The discount rate as at the day of report is the registered earning of bonds AA bonus. Their due date is nearly similar to the due date of liabilities of the company. The calculation is done by the method of excpected importance of the units. Possible actuary profit/loss is recognized in the profit & loss account in the period of their origin. The company is according to the legislative regulations, union agreement and internal acts obliged to payment of jubilee premiums and provisions for leave-benefits (retirement). For this purposes long-term provisions are created. Other pension liabilities do not exist. Provisions are levelled with the estimated subsequent pay-outs of remunerations, discounted as on the date of balance sheet. The calculation was done on 31 December 2015 for each employee. The calculation included the costs of leave benefits and jubilee premiums in the future and the chosen discount rate was 1.75 % per annum, which represents a real interest rate (like the high yield 10-year state bonds in EU). The calculation was conducted by the approved actuary.

Annual Report 2015

56

(l) Provisions Provisions are approved, if the company has got due to the past event legal or indirect obligations, which are possible to assess and it is most likely, that upon the settlement of the liability certain outflows shall occur, which in turn would bring about the economic benefits. Where the effect of time value of money is essential, the group defines the reservations by discounting the excpected subsequent cash-flows before tax, which reflects the actual estimations of time value of money and, if required, also the risks accompanying the liability.

(m) Receivables

(1) Receivables from the sales of merchandizing goods reflect the fair value of the paid goods or accounts payable referring to it and reduced by the cash disbursements, rebate and quantity commission.The transfer of risks and favours depends on contract stipulations. Upon the sales of goods, the transfer is done after the goods have arrived in the buyer's warehouse.

(2) Receivables from services are shown according to their accomplishment on the reporting day. Their accomplishment is estimated by the audit.

(3) Receivabless from lease of investment property are currently established during the leasing period.

(n) Subsidy

State subsidy is initially recognized as deferred receivables, when there is suitable guarantee, that the company will not only receive the subsidy but that it will also meet all the conditions related to it. State subsidy, granted for cost cover, is shown among receivables in the periods, when the costs to cover appear. State subsidy/aid are being part of profit & loss statement: consistently as part of other operating receivables in the utilization period of separate assets.

(o) Financial lease Receivables from financial lease are shown currently during the time of lease. Subsidy for lease are recognized as a part of disbursements. The lowest lease total is transferred to financial disbursements- the item accounts payable. Financial costs are arranged according to the lease periods, so as to get a permanent interes trate for the rest of the debt for each period. The company demonstrates the conditioned payments from financial lease in an amount established in such a manner, that upon the confirmed recipt on the changed lease amount, it revaluates the lowest amount of the leasings in the rest period. Conditional payments referring to financial lease are demonstrated, when a conditional liability does not exist any more and when the amount of changed value of a financial lease is assessed (reestimation of the value of the lowest amount total of the leases in the rest period of lease duration).

(p) Financial revenues and financial expenses They include the revenues from the interests into investment property, dividends, financial assets for disposal, change of fair value of financial assets and are shown in the profit & loss account. The revenues from the interests are assessed by the applied method of the effective interest rate. The revenues from dividentsare shown as at the day when the sharehoder's right of payment is due; for the listed companies it is in the rule the date, when the right on current dividend related to the share is due. Financial expenses include the costs of lease, changes of fair value of financial assets, impairment losses, depreciation of investment property. The costs of lease are shown in the profit & loss account by the effective interes trate method. Profit & loss due to the echange rate difference is shown in net value.

Annual Report 2015

57

(r) Corporate tax

Includes current tax and deferred tax. Corporate tax is shown in the profit & loss account, with the exception of the part referring to the items, which are demonstrated directly in the equity capital. Current tax is the tax expected to be paid on profit for the current year upon consideration of tax rates valid on the day of reporting and possible modifications related to the past year Deferred tax payable is shown according to the liability method from the balance sheet, whereby temporary differences between the book value of the assets and liabilities are considered. The following temporary differences are not considered: initial acknowledgement of the assets or liabilities in the operation not related to the merger (which would not affect either the accounted or profit after tax and the differences related to the investments into subsidiaries and common holding of the company up to the level, where there is possible, that they would not be annuled in a predicatble period in the future. Further, in the case of temporary differences related to the initial recognition of a goodwill. The deferred tax is demonstrated by the amount expected to be paid on the day of reporting. The company settles this deferred tax, if there exists the legal right. The deferred tax payable is recognized in the amount, where there exists the possibility, that the next profit shall be available for the payment of the deferred tax. The deferred tax payable is reduced by the amount for which is not possbile to claim for the tax bonus related to the asset any longer.

(s) Earning per share (EPS) Share capital of the company is divided into ordinary shares, therefore the company shows basic earning per share, which is calculated by the division of profit or loss by the average number of ordinary shares in the business year.

(t) Correction of EPS The corrected earning per share equals the basic EPS since the company does not have preferential shares and/or interchangeable securities.

(u) Reporting after sections A section is a costituent part of the company handling with products or services (area sections) or products and services in a special economy (district section) and is subject to risks and profit, which differ from those in other sections. Terme Čatež company makes revenues in the Republic of Slovenia. Reporting after sections is based on Hotels & Restaurants, where the risks and revenues do not essentiall vary, thus are not subject of such reporting. They are being disclosed in the consolidated Annual Report of the Group.

(v) Financial and operating liabilities

Financial and operating liabilities are initially presented by the amounts derived from the corresponding registers of origin. Later on they can be increased by the addition of return rates and other compensation items pursuant to the agreements with creditors. Liabilities increased by interests (the actual or agreed rate of interest does not essentially differ from the effective one) are in the balance sheet presented by the initial recognized value reduced by the installments. The agreed rate of interest does not vary from the effective one, if the difference does not exceed 1 % of the loan value.

Annual Report 2015

58

The liabilities of essential importance which are not increased by the interest rates, are in the balance sheet presented in their discounted value, taking in consideration the average rate of interest of the similar transactions conducted by the company. Important liabilities are those, the value of which exceeds a certain percent of liabilities total defined by the Management Board. The liabilities expressed in foreign currency are calculated in the domestic currency as on the date of the balance-sheet report. 4. Fair value definition As to the financial principles and analises of the company, there is often required the definition of fair value of financial and non-finacial assets and liabilities. The methods of definition adopted by the company are described in the following passages. In the case of additional explanation, it is given in the analises of a single item or liability of the company.

(1) Investment property The investment property is assessed by an independent assessor, who assesses the investment portfolio of the company. The assessment is done min. once in a single decade. The fair value is based on marketing value, which equals the assessed value, by which the investment property could be exchanged as on the day of the evaluation between the buyer and seller, who would act deliberately, independent (an arm's length transaction) and benevolent. If it is not possible to define temporary market prices, the value of investment property is estimated by total value of excpected cash-flows from the lease. Profit reflecting extra risks is included in the calculation of the investment property, and is based on the discounted net cash-flow per annum. Where there is suitable, there has to be consideered also the types of lessee, who stay in the edifice, their ability as borrower, their ability of maintenance and insurance and the amortization period of the edifice etc.. Upon the lease contract renewal, all the possbile rental-fee increases due to recovery of its primary state of condition, count all the notices and back-references provided in written and in due time.

(2) Investments into holdings and pledged securities Fair value of financial assets, is determined by the offered purchase price on the day of reporting. Fair value of financial assets in possession until the due date of payment is ascertained only for the sake of reporting.

(3) Liabilities The fair value of liabilities is calculated as the actual value of subsequent cash-flow discounted by the market interest rate on the day of reporting. Short-term operating liabilities of the company are not discounted due to their short-term character, whereas impairment (value corrections) of fair value is regarded.

(4) Non-realized financial liabilities Fair value is for the report sake calculated on the base of the actual value of subsequent disbursements of principal amount and interests discounted by the market price of interests on the day of reporting. Regarding the calculations in the past, we found out that the costs of management and financial lease practically do not affect the actual interes trate, which would mean that it is the same as provided in the contract.

Annual Report 2015

59

5. Operating revenues

6. Other operating revenues

Net sales revenues

(in EUR) 2014 2015

Revenues from the sales of products and service on domestic market 26,423,567 25,612,648 Revenues from the sales of products and service on foreign markets 164,604 220,747 Revenues from the sales of merchand.goods and material on domestic market 2,536,823 2,293,832 Revenues from the sales of merchandizing goods and material on foreign markets Revenues from lease 573,606 518,885

Total 29,698,601 28,603,148

Other operating revenues

(in EUR) 2014 2015

Revenues from abolishment and consumption of long-term provisions 491,183 490,397 Revenues from mergers (badwill) Subsidy, extraordinary assets… 58,125 56,631 Revaluating operating revenues

Revenues from written-off accounts payable 127,075 43,739 Disposal of tangible and intangible assets 2,687 4,964 Disposal of investment property 383,469 Liabilities write-offs

Total 1,062,539 595,731

Annual Report 2015

60

7. Costs of material, service and labour

Costs of material, service and labour

(in EUR) 2015 2014

Costs of goods, material and service Purchase value of the goods and material sold 1,625,132 1,797,949 Costs of processed material 4,749,458 4,873,719 Costs of service 6,694,728 7,589,635

Labour costs Costs of salaries 4,850,395 5,763,662 Social insurance costs 808,672 932,013

- for pension insurance Costs of additional pension insurance 122,430 129,930 Other labour costs 1,663,0154 1,695,488

Value write-offs Depreciation 4,462,832 4,730,904 Revaluating operating expenses in intangible, tangible assets and investment property 64,407 5,030 Revaluating operating expenses related to short-term assets, with the exception of financial investments and investment property 141,791 198,958 Revaluating operating expenses related to labour costs

Other operating expenses Formation of long-term provisions - - Other expenses 336,991 340,228

Total 25,519,851 28,063,517

Expenses according to functional groups Common

Production Merchand. operation (v EUR) costs costs costs Total

Costs of goods, material and service Purchase value of the goods and material sold 1,625,132 1,625,132 Costs of processed material 4,561,906 19,542 168,011 4,749,458 Service costs 5,110,333 672,972 911,423 6,694,728

Labour costs 5.845,938 360,421 1,238,152 7,444,511 Value write-offs

Depreciation 27,596 106,568 4,462,832 Revaluating operating expenses in intangible, tangible assets and

investment property 42,186 22,221 141,790

Revaluating operating expenses related to short-term assets, With the exception of financial invesmtnes and investment property 119,596 - 22,221 141,790 Revaluating operating expenses related to labour costs - - - -

Other operating expenses 169,944 3,865 163,182 336,991

Total in 2015 20,178,545 2,709,527 2,631,778 25,519,851

Total in 2014 22,278,405 3,006,489 2,778,624 28,063,518 Purchase value of the goods sold in 2014 1,797,949

Annual Report 2015

61

8. Financial revenues

9. Financial expenses

Note: Corrections in 2014: -impairment of financial assets measured pursuant to pay-off value: to other companies of the Group € 18,103, 845 -impairment of financial assets measured pursuant to purchase value: to other companies » € 8,560 : to other companies € 3,520,678

Financial revenues

(in EUR) 2015 2014

Financial revenues from holdings Financial revenues from holdings in subsidiaries Financial revenues from holdings in mergers Financial revenues from holdings in other companies 75,340 51,231 Financial revenues from other investments Financial revenues from financial investments in fair value through profit / loss statement

Financial revenues from loans Financial revenues from loans granted to subsidiaries 749,298 1,609,236 Financial revenues from loans granted to others 4,899

Financial revenues from operating accounts payable Financial revenues from accounts payable from subsidiaries Financial revenues from accounts payable from the others 5,622 11,088

Total 830,260 1,576,454

Financial expenses

(in EUR) 2015 2014

Financial expenses from financial investments Disbursements from abolition of acceptance of financial investments

- to companies of the Group 6,522 - to mergers - to other companies 4,256

Financial expenses from financial liabilities Financial disbursements from loans granted by affiliated companies 344,128 386,322 Financial disbursements from bank loans 1,926,512 2,509,830 Financial disbursements from bonds issued Financial disbursements from other financial liabilities 578,243 772,799

Financial expenses from operating liabilities Financial disbursements from operating receivables to affiliated companies Financial disbursements from liabilities to suppliers 10,021 3,382 Financial disbursements from other operating liabilities 31,744 45,912

Total 2,890,648 3,718,244

Annual Report 2015

62

10. Other revenues and expenses

Other revenues

(in EUR) 2015 2014

Revenues from evaluation of investment property according to fair value - Revenues from disposal of investment property evaluated according to fair value - Subsidy and similar revenues not related with business Effects - - Acquired indemnity 95,395 166,571 Sustained penalties Other revenues 255,336 171,667

Total 350,731 338,238

Annual Report 2015

63

11. Corporation tax

Corporation tax

(in EUR) 2014 2015

Profit / loss before tax 894,071 1.969,371 Corporation tax after taxation 10,069 - Deferred tax 106,684 382,920 Effective tax rate 1% - Effective tax rate stopnja obdavčitve po odhodkih za davek 13% 19%

(in EUR) 2014 2015

Revenues compiled pursuant to accounting standards 32,675,832 30,379,870 Expenses assessed pursuant to accounting standards (31,781,761) (28,410,499) Accounting profit or loss 894,071 1.969,371

Reduction of tax rate and tax abatement (1,586,476) (18,593,924) Increase of tax rate 751,635 678,127

59,230 (15,946,426)

Corporation tax 17% 10,069

(in EUR) 2014 2015

Tax abatement:

- from, investments into intangible assets and equipment 40,163 - additional abatement up to 10% of investment into equipment for Research and development - - from employment of disabled 196,381 - from additional pension insurance 129,750 - - other 948 -

716,933 -

Annual Report 2015

64

12. Intangible assets, devices and equipment

The value of assets acquired by financial lease amounts as on 31 December 2015 to € 153,320. The liabilities

to the providers of assets amount to € 101,153.

The revaluation of real estate of the company was conducted by Dodoma d.o.o. The book value of the real

estate would, pursuant to the model of the purchasing value as on 31 December 2015, amount to €

16,472,585.

If the company evaluated tangible assets according to the purchase value model, their book value would

amount as on 31 December 2015 to € 71,358,780.

The book value of mortgaged real estate amounts as on 31 December 2015 to € 46,204,034

Intangible assets, devices and equipment

Production Other Fixed assets Fixed assets Advance devices and devices and permanently out Investment into in payments for

(in EUR) Real estate Buildings tools equipment of use foreign assets acquisition fixed assets Total

Purchase value

As on 31 December 2014 28,461,687 108,150,796 - 20,711,999 - 32,742 785,881 158,143,105 Adjustments - - - - - - - - -

Opening balance as on 1 Jan 2015 28,461,687 108,150,796 - 20,711,999 - 32,742 785,881 - 158,143,105

Acquisitions - - - - 329,708 - 329,708 Acquisition- own production - - - - - - - - Transfer from current investments 7,747 189,564 176,292 - (373,603) 0 Increases due to mergers - - - - - - - - Disposal (711,779) - - - (711,779) Transfer to short-term assets - - - - - - - - - Impairment - - - - - - - - - Alignment with fair value - - - - - - - ) Transfer from investment property - - - - - - - - - Transfer to investment property - - - - - - - - - Rearrangements - - - - - - - - - Materialization of financing costs - - - - - - - - -

Closing balance as on 31 Dec 2015 28,469,434 108,340,360 - 20,176,512 - 32,742 741,985 - 157,761,033

Accumulated value correction

Closing balance as on 31 Dec 2014 - 51,782,617 - 15,225,000 - 2,816 - - 67,010,433 Adjustments - - - - - - - - -

Opening balance as on 1 Jan 2015 - 51,782,617 - 15,225,000 - 2,816 - - 67,010,433

Depreciation during the year - 3,181,562 - 1,337,153 - 1,389 - - 4,520,104 Increases due to mergers - - - - - - - Disposal - - (666,051) - - - - (666,051) Transfer to short-term assets - - - - - - - - - Impairment - - - - - - - - - Alignment with fair value - - - - - - - - - Transfer from investment property - - - - - - - - - Transfer to investment property - - - - - - - - - Rearrangements - - - - - - - - -

Closing balance as on 31 Dec 2015 - 54,964,179 - 15,896,102 - 4,205 - - 70,864,486

Non written-off value

Closing balance as on 31 Dec 2014 28,469,434 53,376,181 - 4,280,000 - 28,536 741,985 - 86,896,547 Opening balance as on 1 Jan 2015 28,469,434 53,376,181 - 4,280,000 - 28,536 741,985 - 86,896,547 Closing balance as on 31 Dec 2015 28,926,587 50,279,186 - 3,289,516 - 27,147 741,985 - 83,818,039

Annual Report 2015

65

13. Investment property

Investment property

(in EUR) 31 Dec 2015 31 Dec 2014 Investment property: Real estate 457,445 457,445 Buildings 782,390 1,285,630 Total 1,239,834 1,743,075

Annual Report 2015

66

Investment property dynamics (compiled after purchase value)

Investment (in EUR) property

Purchase value

31 Dec 2014 3,785,873 Adjustments -

1 January 2015 2,824,699

Acquisitions 98 Disposals (912,568) Transfer to short-term assets - Transfer from fixed assets - Transfer to fixed assets - Impairment - Rearrangements -

31 December 2015 1,912,229

Accumulated value correction

31 December 2014 1,435,355 Adjustments - 1 January 2015 1,081,624

Depreciation within the year 121,152 Acquisitions and mergers - Disposals (530,382) Transfer to short-term assets - Transfer from fixed assets - Transfer to fixed assets - Impairment - Rearrangements -

31 December 2015 672,395

Non written-off value

31 December 2014 1,743,075 1 January 2015 1,743,075 31 December 2015 1,239,834

Annual Report 2015

67

14. Intangible assets

Revenues from lease etc..

(in EUR) 2015 2014 Investment property:

Revenues from lease 272,860 434,757 Direct expenses from investment property granting lease revenues - - Direct expenses from investment property not granting lease revenues - -

Intangible assets and long-term accrued income and deferred expenses

Property- & Intangible Long-term Developm. Other rights Assets in deferred Good-will Paid

(in EUR) costs acquisition costs deposits Total

Acquisition value

As on 31 December 2014 - 493,245 - - - - 493,245 Adjustments - - - - - - -

As on 1 January 2015 - 493,245 - - - - 493,245 Acquisitions - - - - - - Acquisitions – own production - - - - - - - Increase due to merger - - - - - - - Transfer from current investments - - - - - - Disposals - - - - - - - Transfer to short-term assets - - - - - - - Impairment - - - - - - - Adjustments with fair value - - - - - - - Rearrangements 577,941 577,941

- - - - - -

As on 31 December 2015 - 493,244.78 577,941 - - - 1,071,186

Accumulated value correction

As on 31 December 2014 - 456,301 - - - - 456,301 Adjustments - - - - - - -

As on 1 January 2015 - 456,301 - - - - 456,301

Depreciation during the year 29,959 - 29,959 - - - - Increases due to mergers - - - - - - - Disposals - - - - - - - Transfer to short-term assets - - - - - - - Impairments - - - - - - - Adjustments with fair value - - - - - - - Rearrangements - - - - - - -

As on 31 December 2015 - 486,260 - - - - 486,260

Non written-off value

As on 31 December 2014 - 36,944 - - - - 36,944 As on 1 January 2015 - 36,944 - - - - 36,944 As on 31 December 2015 - 6,985 577,941 - - - 584,926

Annual Report 2015

68

15. Long-term financial investments

The book value of mortgaged securities amounts as on 31 December 2015 to € 20,511,357 The corrected value of long-term loans granted to affiliated companies amounted to € 6,278,934; the other corrected value remained unchanged.

Long-term financial investments

(in EUR) 31 Dec 2015 31 Dec 2014 Long-term financial investments:

Long-term financial investments (loans excl.) Shares and holdings in companies within the Group 20,511,359 20,519,916 Shares and holdings in mergers - - Other shares and holdings - - Other long-term financial investments - -

Long-term loans Long-term loans to companies within the Group - 24,391,339 Long-term loans granted to mergers - - Long-term loans to others - - Long-term non deposited called-up capital - -

Total 20,511,357 44,911,255

Annual Report 2015

69

Corrected net value as on 31 Dec 2014(table above) 6,278,934 20,519,916 26,798,850

Company and its head-office Type of equity investment

Share of Terme Čatež comp. In equity of subsidiary (%)

Number of shares In holding of TČ.

Number of sh. Total

DEL NALOŽBE d.d., Čatež ob Savi shares 95.31 53,671 56,314

TERME ILIDŽA d.o.o., Sarajevo* holding 90.00 286,098 317,887

MARINA PORTOROŽ d.d., Portorož shares 100.00 313,932 313,932

M KAPITAL d.d., Portorož shares 100.00 313,932 313,932

M NALOŽBE d.d., Portorož shares 100.00 313,932 313,932

Dynamics of long-term financial investments

Financial investm. Loans for disposal

(in EUR) Total

As on 31Dec2014 24,391,339 20,519,916 44,911,255

Increases - - 96,000 96,000 New loans, acquisitions - - - - Revaluation - exchange rate difference - - 740,859 - 740,859 Ascription of interests - - - -

Transfer from short-term part Reductions - - - Repayments, disposals - (7,071,314) (8,560) (7,079,874) Transfer to short-term part - - (44,480) (44,480) Final write-off (18,112,405) (18,112,405) - - - - revaluation to fair value - - -

As on 31Dec2015 - - - 20,511,357 20,511,357

Value correction

As on 31Dec2014 - - - - -

Increases Formation of value correction during the year - - - -

Reductions Claimed written-off investments - - - - - Final write-of (18,112,405) (18,112,405)

- -

Transfer to short-term part - - - - - As on 31Dec2015 - - - - -

Net value as on 31Dec2014* - - 24,391,339 20,519,916 44,911,255 Net value as on 31dec 2015 - - - 20,511,357 20,511,357

Annual Report 2015

70

Investments into subsidiaries are evaluated in purchase value as on 31 december 2015.

16. Deferred tax liability

17. Inventory

The inventory in material refers to the inventory of edibles, alcholic drinks and beverages, business stationery etc.. The value of inventory in the H & R is ignorable.

The annnual inventory control of alchoholic drinks, beverages and merchandising goods revealed € 2,519 surplus and € 1,323 deficit. The annual control in the market store revealed the negative difference

Deferred tax liability

31 Dec 2014 Deferred tax Deferred tax

through profit/ through l (in EUR) 31 Dec 2014 Correction loss acc. equity

31 Dec 2015

Depreciation over the max.legal recommended - - - Revaluation / impairment of intangible asseets 1,402- Revaluation / impairment of tangible fixed assets - - - Revaluation / impairment of financial investments 1.,402 3,679,026 (3,079,109) 599,918 - Revaluation / impairment of financial invesmtnes - negative revaluation reserve - - Revaluation before risk of secured items - - - Impairment of accounts payable 112,304 112,302 1,486 113,790 Impairment of inventory - - - Provisions for costs and disbursements 89,227 89,227 (16,190) 17,932 89,227 Non applied tax bonuses and tax abatements - Non applied transferred tax loss 2,710,892 2,710,892 - - Difference between tax and book value of acquired assets and liabilities (acquisitions) - - - Non applied tax loss and bonuses of acquired company (acquisitions) -

202,933 3,880,557 (382,920) 17,932 3,515,569

Inventory

(in EUR) 31 Dec 2015 31 Dec 2014

Material and raw material 307,320 307,118 Unfinished production Products Merchandising goods 222,914 202,932 Down payments of inventory Impairment -

Total 530,234 510,050

in EUR

SUBSIDIARY AND HEAD-OFFICE EQUITY PROFIT /

LOSS 2015 MARINA PORTOROŽ d.d., Portorož 45,763,392 844,194 DEL NALOŽBE, d.d., Čatež ob Savi 1,186,117 (234,966) TERME ILIDŽA, d.o.o., (until disposed) (1.042,847)

M KAPITAL, d.d., Portorož 18,388,358 413,802 M NALOŽBE, d.d., Portorož 13,100,060 (2,892)

Annual Report 2015

71

amounting to € -6,767. The company calculates the justified write-off of items pursuant to adopted legislation, which tolerates the negative difference almost in total (the registered negative difference was € 5,963). The stock is not pledged.

18. Short-term financial investments

The book value of mortgaged securities amounts as on 31 December 2015 to € 5,922,481.

Short-term financial investments into shares and holdings (amounting to € 708,196) are evaluated in fair

value through equity. Terme Čatež company conducted pursuant to IFRS an the Amendments to Slovenian Financial Standards 3 (Financial investments) of the Slovenian Revision Institute the impairment of a short-term financial investment into the shaers of DZS company by 3,520,677 EUR. The impairment of this financial investment classified as being on disposal and evaluated after the purchase value reduced by the accumulated loss due to the impairment, was listed in the Annual Report 2015 as the error correction with effect on the compared Annual Report dated 31 December 2014. The error correction of the past year is the consequence of the reduced book value of the share of DZS company, which was due to the error correction from the past years and the change in Accounting guidelines as on 31 December 2014 reduced from € 40.83/per share on to € 29.02/per share. The reduced book value of share is the consequence of the changed accounting guideline of evaluation of all financial investments into subsidiaries and mergers from the method of evaluation of such investments after their fair value and based on the assessments of authorized evaluators and a single stock exchange rate resp.on to the evaluation method after the genuine or purchase value. The Management Board of the company decided upon the preparation of the Annual Report 2015, that the demonstrated exchangeable value of financial investment into the shares of DZS company amounting to € 5,214,285 pursuant to IFRS 36 (Impairment of assets) was a suitable/appropriate one.

Short-term financial investments

(in EUR) 31 Dec 2015 31 Dec 2014 31 Dec 14-corr. Short-term financial investments:

Short-term financial investments except loans Shares and holdings in affiliated companies of the Group - - Shares and holdings in mergers - - Other shares and holdings 5,931,386 9,455,077 5,934,399 Other short-term financial investments - -

Short-term loans Short-term loans to companies of the Group 177,918 133,439 133,439 Short-term loans granted to mergers - - Short-term loans granted to others 342,858 342,858 342,858 Short-term non deposited called-up capital - -

Total 6,452,162 9,931,374 6,410,696

Annual Report 2015

72

Short-term of a long-term loan to a subsidiary amounted to € 177,918. The rate of interest of loans granted wad EURIBOR + 4.5 % to 6.2 %.

MOVEMENT OF SHORT-TERM FINANCIAL INVESTMENTS

Financial invest. Financial invest. Financial invest. after fair value In possession on disposal

(in EUR) through profit/loss until due Loans Total Gross value

As on 31 Dec 2014 - - 476,298 9,583,841 10,060,138 Error correction from past years - Closing balance as on 31 Dec 2014 (corrected) - - 476,298 9,583,841 10,060,138

Increases New loans, acquisitions - - - - - revaluation – exchange rate difference - - - - - Ascription of interests - - - - - Transfer from long-term part - - 44,480 - 44,480 Revaluation on to fair value - - - - -

Reductions Payments, disposals - - - - - Revaluation – exchange rate difference - - - - - Transfer to long-term part - Final write-off - - - - - Revaluation on to fair value - - - (3,014) (3,014)

Closing balance as on 31 Dec 2015 - - 520,777 9,580,827 10,101,604

Value correction

As on 31 Dec 2014 - - - 128,764 128,764 Error correction from the past years 3,520,678 3,520,678 As on 31 Dec 2014 (corrected) - - - 3,649,442 3,649,442

Increases Transfer from long-term part - - - - - Formation of value correction during the year - - - - -

Reductions Accounts payable - - - - - Final write-off of investments - - - - -

Closing balance as on 31 Dec 2015 - - - 3,649,442 3,649,442

Net value as on 31 Dec 2014 - - 476,298 9,455,077 9,931,374 Net value as on 31 Dec 2014 (corrected) - - 476,298 5,934,399 6,410,696 Net value as on 31 Dec 2015 - - 520,777 5,931,385 6,452,162

Annual Report 2015

73

19. Short-term operating receivables

20. Short-term deferred expenses and accrued income

Short-term operating receivables

(in EUR) 31 Dec 2015 31 Dec 2014

Short-term operating receivables from customers: on domestic market 2,918,521 2,634,375 on foreign markets 633,416 582,509 Short-term operating receivables from companies of the Group 12,988 401,080 Granted short-term loans and deposits 6,744 6,384 Short-term liabilities from operation on the account of others Short-term receivables related to financial revenues 151 217 Other short-term receivables 238,843 305,766 Short-term part of long-term operating receivables Impairment 689,611) (603,922)

3,166,053 3,326,410

Value correction of short-term receivables

(in EUR) 31 Dec 2015 31 dec 2014

Opening balance as on 1 January 603,922 1,315,087

Increases Formation of value corrections during the year 318,728 181,178 Exchange rate differences Transfer from long-term operating receivables

Decreases Encashed written-off accounts payable (43,739) (127,075) Final write-off of accounts payable (189,300) (765,268) Echange rate difference

Closing balance as on 31 December 689,611 603,922

Short-term accrued income and deferred expenses

(in EUR) 31 Dec 2015 31 Dec 2014

Short-term deferred expenses 917,449 842,222 Short-term accrued income - Securities - - VAT from acquired down-payments - -

Total 917,449 842,222

Annual Report 2015

74

21. Pecuniary

22. Capital

Called-up capital and deposited capital surplus Called-up capital of the company amounts to € 12,444.216 and is divided into 497,022 ordinary shares, each

having the value of € 25.04. The shares are of the same class with the same legal rights.

Dividends The dividend policy is the result of equity composition of the company, excpectations of the shareholders, investment policy, taxation and expected performance / business results. The Annual General Meeting of shareholders adopted on their meeting dated 17 June 2015 the resolution on the dividend pay-off for 2014. Reserves Reserves amount to € 42,908,594, as follows: * capital reserves - € 29,842,696, * legal reserves - € 1,689,962, * reserves for treasury shares of Terme Čatež company in holding of subisidiaries, amounting to €834,877, * reserves for fair value, amounting as on 31 December 2015 to € 10,541,059. They represent the effects of changes in fair value of securities on disposal reduced by the deferred tax liability referring thereto and amounting to € 392,904. The reserves for fair vallue amounted as on 31 December 2015 € 10,341,184. These reserves reduce the actuary loss related to the leave allowances amounting to € 193,030.

Pecuniary

(in EUR) 31 Dec 15 31 Dec 2014

Cash at cash desk in domestic currency 65,850 71,200 Cash at cash desk in foreign currency - Issued cheques and promisory notes (deduction) - Received cheques and promisory notes - Non risky securities available for instant encashment - Money in circulation 44,777 67,558 Pecuniary on accounts in domestic currency 148,008 76,378 Pecuniary on accounts in foreign currency - Short-term deposits in domestic currency 886,000 256,000 Short-term deposits in foreign currency - - Pecuniary on special accounts for special purposes 2,065 2,324

Total 1,146,700 473,461

Annual Report 2015

75

Revaluation surplus

The yield on share in 2015 amounts to € 2.35, in the year 2014 it amounted to € 1.82 (with

incl.correction for 2014 it amounted to € -34.81).

Capital reserves

(in EUR) 31 Dec 2015 31 Dec 2014

Deposited capital surplus 11,914,806 11,914,806 Profit from disposal of treasury shares and holdings resp. - Deposits from issue of exchangeable bonds or bonds with share - options - Deposits for acquisition of preferencial rights (shares) - Other capital deposits pursuant to Statute - Simplified reduction of equity by withdrawal of shares 3,755,679 3,755,679 General revaluating euity correction 14,172,211 14,172,211 Amounts from effects of confirmed sale by court order -

Total 29,842,696 29,842,696

Dynamics of revaluation surplus

Tangible Short-term Leave allow.hort-term

assets Intangible assets financial (retirement) (in EUR) Investm. Total

Opening balance as on 31 December 2014 10,341,184 395,406 - 10,736,589

Increase Alignment with fair value - - 115,059 115,059

Gross value - - 138,626 138,626 Deferred tax effect - - - (23,566) (23,566)

Abolishment at expense of profit brought forward (193,030) (193,030)

-

Gross value (210,962) (210,962) Deferred tax effect 17,932 17,932

Impairment of financial assets on disposal (transfer of negative revaluation surplus to expenses) - - -

Gross value - - - Deferred tax effect - -

Reduction (2,501) (2,501)

Alignment with fair value (3,014) (3,014) - - - Gross value 512 512 - - Deferred tax effect - - - -

Utilization of revaluation reserve for impairment - - - Gross value - - - Deferred tax effect - - -

Abolition upon disposal of assets - - - Gross value - - - Deferred tax effect - - -

Abolition of transferred profit in credit - - - Gross value - - - Deferred tax effect - - -

Final balance as on 31 December 2015 10,341,184 392,904 - 193,030 10,541,059

Annual Report 2015

76

Balance loss

Balance loss amounts as on 31 December 2015 to € 688,422. As on 31 December 2014 balance profit

amounted to € 10,713,225 (with correction incl.amounted the balance loss to € 7,242,234).

Corrected net yield per share equals EPS.

Profit / loss (calculated pursuant to the costs of living index)

Should the company revaluate the equity pursuant to the costs of living index, i.e. by 0.50 % in 2015, the

net profit would amount to € 1,827,982 (corporation tax effect excluded).

Return on equity II - annotations

(in EUR) 2015 2014 2014 corr.

Net profit / loss for the period 1,586,451 777,318 (17,178,141) Changes in surplus from revaluation of intangible and tangible assets -

Gross value Deferred tax effect -

Changes in surplus from revaluation of financial assets on disposal (2,501) 115,059 = corr

Gross value (3,014) 138,626 = corr

Deferred tax effect 512 (23,566)= corr

Profit / loss from translation of financial statements of the companies abroad (exchange rate diff. effect) - - Gross value - - Deffered tax effect - -

Other items of return on equity (431,625) - - - actuary profit / loss of profitable programmes (193,030) - -

Gross value (210,962) - - Deferred tax effect (17,932) -

- effective part of profit / loss from instruments for risk security money management - - Gross value - - Deferred tax effect - -

- share in return on equity II of mergers and joint ventures, calculated pursuant to capital method - - Gross value - - Deferred tax effect - -

- transfer of revaluation surplus to transferred profit - - Gross value - - Deferred tax effect - -

- other (238,595)

-

Gross value (238,595) - Deferred tax effect -

Return on equity for the accounting period - Total 1,152,324 892,377 (17,063,082)

Annual Report 2015

77

23. Provisions

Provisions from subsidy are being abolished pursuant to the plan (subway garage Žusterna, equipment for convention amenities at Čatež). Provisions for liabilities to employees represent the calculated long-term liabilities for pension leave and jubilee premiums in accordance with the actuary calculation. They are being reduced by the actually performed payments. The provisions from subsidy (European Regional Development Fund) are recorded by the incalculated depreciation. Provisions will have been drawn in the next 20 years pursuant to the actuary calculation.

Provisions for liabilities to employees are formed according to actuary account conducted by 3 Sigma company, Ljubljana as on 31 december 2015, considering the regulations for the preparation of actuary accounts.

24. Financial liabilities

Terme Čatež company signed 18 April 2014 with the creditors (9 banks) the draft Agreement on Financial

Restructuring defining thereby the relationships related to the financial liabilities up to the year 2016. It

does not involve any write-offs or the conversions of financial liabilities into equity. Pursuant to the

Short-term financial liabilities

(in EUR) 31 Dec 2015 31 Dec 2014

Short-term financial liabilities to subsidiaries - - Short-term loans from banks and companies within the country 34,506,559 40,004,579 Short-term loans from banks and companies abroad - Short-term financial liabilities from bonds - Short-term loans from natural persons - Short-term liabilities from partition of profit / loss account 66,095 51,581 Liabilities from capital deposits until registration - Other short-term financial liabilities 12,775 63,417 Short-term part od long-term financial liabilities 12.362,212 3,106,854

Total 46,947,641 43,226,431

Dynamics of provisions and long-term accrued expenses and deferred income

Provisions Pension allowance, Subsidy Acquired

Provisions For amortiz. Provisions Jubilee premiums, Provisions For costs Subsidy for for Of fixed assets For tricky Leave allowance For granted za covering Fixed assets Lawsuits Provisions for Other

(in EUR) reorganization agreements warrants sredstva Environm.care Provision. Total

As on 31 December 2014 - - 11,428 539,890 - - 5,727,616 - - - 6,278,934 -

Change during the year - -

Formation 302,148 302,148 - - - - - - - -

- Utilization - - - (101,275) - - (490,397) - - - (547,430) Abolishment - -

- - - - - - - Discounting 24,590 24,590 - - - - - - - - - -

As on 31 December 2015 - - 11,428 539,890 - - 5,237,220 - - - 6,014,,001

Annual Report 2015

78

Ageement the creditors should be redeemed from the positive cash-flow and disposal of unneeded

intangible assets and financial investments.

Regarding the expiration date of the Agreement (end of the year 2016), the long-term liabilities were

transferred to the short-term part of long-term liabilities.

Terme Čatež company paid in 2015 the principals amounting to € 9.4 mio. The payment from the regular

operation amounted to € 3.1 mio, from the disposed of unneeded intangible assets (disposal of Terme Ilidža

company and premises at Plava Laguna, Ljubljana) € 6.3 mio.

The table above does not include short-term financial liabilities related to the allocation of profit amounting

to € 66,095 and the liabilities to minor shareholders amounting to € 12,775.

The interest rate of short-term loans amounts to 3 M EURIBOR 5 %, in some short-term loans the interest

rate is fixed, namely 5 %.

Long-term financial liabilities

(in EUR) 31 Dec 2015 31 Dec 2014

Long-term financial liabilities to subsidiaries 12,517,051 12,517,051 Long-term financial liabilities to mergers - Long-term loans from banks and companies within the country 11,098,944 15,029,064 Long-term loans from banks and companies abroad - Long-term financial liabilities from bonds - Long-term debts from financial lease 25,453 37,119 Long-term financial liabilities to natural persons Other long-term financial liabilities - Short-term part of long-term financial liabilities (12,362,212) (3,106,854)

Total 11,279,236 24,476,379

Short-term financial liabilities to banks and others during the year

Loan New loans Principal principal During the Exchange r. Payment as on

(in EUR) 1 Jan year differences in the yr 31 Dec

Creditor

Banks in the country - total 42,284,975 - - 8,581,795 33,703,181 Subsidiaries – transf.frm long-term part - 2,592,049 - 2,592,049 Other creditors - 826,456 9,770,163 - (25,345) 10,573,542

Short-term loans acquired - TOTAL 43,111,431 12,362,212 - (30,667,478) 46,868,771

Annual Report 2015

79

The interest rate of long-term loans amounts to 3M EURIBOR 5% in some long-term loans the interest rate is fixed and amounts to 5 %. Insurance of long-term and other liabilities The amount of loans hypothecary insured in favour of the creditors totals € 32,932,964. Other long-term liabilities are insured by bills or warrants.

25. Deferred tax liability

Deferred tax liability

Deferred tax Deferred tax Through profit/ Through revaluat.

(in EUR) 31 Dec 2014 Loss account reserves 31 Dec 2015

Revaluation of intangible assets to fair value - - - Revaluation of tangible assets to fair value 2,007,968 - - 2,007,968 Revaluation of financial investments to fair value 80,985 (512) 80,985 Revaluation of financial investments – transfer to deferred tax liability - - - Revaluation before risk of secured items - - - Transfer of tax liability to future years due to application of new accounting standards - - - Difference between tax and book value of assets from acquisition and liabilities (take-overs) 272,039 - 272,039 Depreciation rate for taxation purpose is bigger than operating one - - - Enhanced depreciation of inventory for taxation purpose - - -

2,360,992 - (512) 2,360,992

Long-term financial liabilities to banks and others during the year

Loan New loans Principal Part due Principal During the Price growth Exch.rate Payments Debt paym. Long-term

(in EUR) As on 1 Jan year index differences Thr.year As on 31 Dec in 2015 part

Creditor

Subsidiaries – total 12,517,051 - - - - 12,517,051 (2,592,049) 9,925,002 Other creditors – total 11,959,328 16,495 - (851,426) - 11,124,397 (9,770,163) 1,354,234

Long-term loans - total 24,476,379 16,495 - (851,426) - 23,641,448 (12,362,212) 11,279,236

Revaluation

Annual Report 2015

80

26. Short-term operating liabilities and short-term deferred income and accrued expenses

Short-term deferred income and accrued expenses

(in EUR) 31 Dec 2015 31 Dec 2014

Accrued expenses 4,815 Short-term deferred income 46,325 14,247 VAT from down-payments

Total 46,325 19,062

Short-term operation liabilities to affiliates

(in EUR) 31 Dec 2015 31 Dec 2014

Short-term operation liabilities to suppliers 49,549 23,941 Short-term liabilities from down-payments, depostis Short-term liabilities to creditors 1,094,858 1,003,475 Other short-term operating liabilities Short-term part of long-term operating liabilities

Total 1,144,407 1,027,416

Short-term operating liabilities

(in EUR) 31 Dec 2015 31 Dec 2014

Short-term liabilities to subsidiaries 1,144,407

1,027,416 Short-term liabiities to suppliers

On domestic market 3,139,988 2,631,587 On foreign markets 237,884 232,853

Short-term promisory note liabilities Short-term liabilities from down-payments and deposits 1,402,932 1,249,225 Short-term liabilities from oepration on the account of others Short-term liabilities to employees 739,878 907,988 Short-term liabilities to state and other state entities 157,533 109,236 Short-term liabilities to creditors 231,532 76,620 Other short-term operating liabilities 26,993 15,983 Short-term part of long-term operating liabilities - -

Total 7,081,147 6,250,907

Annual Report 2015

81

27. Financial instruments

The implementation of financial instruments registers the following risks:

credit risk

liquidity risk

marketing risk

currency risk

interest risk

fair value risk. This section delas with the risks of the company, its goals, trends and procedures for risk measurement and management and capital management. Other quantity indicators are described in the section Annotations to Financial Report. The Management Board is thoroughly liable for the risk management. The guidelines of risk management are set in order to analyse the risks, which threaten the company and according to them suitable restrictions and controls are undertaken. The trends and risk management are being regularly controlled followed by the corresponding reaction. By education trainings and risk management standards the company tries to develop a disciplined and constructive climate, where the roles are strictly obeyed.

1. Credit risks Credit risk is the risk, that the company would suffer a financial loss, if the customer or partner would not fulfill his obligations from the contract. This type of risk originates from the accounts payable from customers and asset-backed securities.

2. Operating and other accounts payable (liabilities) Exposure to risk from loans depends primarily on the type of customer. The structure of the company's customers as well as the liquidity factor of the State, where the customer operates, does not have a big impact on the risk. As to the geography aspect, the concentration of the credit risk in Slovenia does not exist. The customers are divided into groups according to their characteristics: whether the customer is a single company or a group of companies, wholesaler or retailer or enduser as to the geographic positions, operation mode, duration of claims, days overdue and financial troubles in the past. Customers with a high risk mark are listed in separate files and business with them is limited (all subsequent business is based on advance payments). The company forms a correction due to impairment, which represents the estimated loss out of operation and other receivables and investments. The main two elements of correction are the special part of loss referring to single important risks, and common part of loos formed for the groups of similar assets due to losses, which appreared and are not yet defined. The correction of loss total is determined by the data from the past referring to the payment manner of similar financial assets.

3. Liquidity risks Liquidity risk means, that the company will not be able to settle its financial liabilities on their due date. The highest liquidity possbile is provided by the current cash-flow to make up for the liabilities in due time under ordinary and stressed circumstances, without loss or bad image suffering. Liquidity is provided by planning of cash-flow on daily, monthly and annual level. A special attention was paid to daily contacts with the creditor banks.

Annual Report 2015

82

The company co-operates with many banks, but due to an adverse economic situation the acquisition of additional funds is a tricky one. Short-term liabilities as on 31 December 2015 exceed the short-term assets by € 42.7 m, which is the consequence of lisitng the short-term liabilities to banks pursuant to the Agreement on financial restructuring, therefore we estimate the risk as increased. Management Board of the company is doig their best to sign the Appendix to the Agreement on financial restructuring, wherewith the payment term of financial liabilities to banks and the Agreement validity resp.would be delayed. Long-term liquidity risk is nevertheless present, but of lesser importance, due to a suitable equity composition of the company, an effective asset management and cash-flow provision. Management Board of the company is doig their best to decrease the liquidity risk.

4. Marketing risks Marketing risks are changes in market prices such as rate of exchange, rate of interest and holding instruments. The goal of managing such risks is to control and surveil the exposure of such risks within reasonable limits and optimizing the revenues. The strategy of the company is such, that it minimizes such risks by constant and corresponding marketing activities, by offering new products, quality improvement and own marketing network. The influence of competitors is however present, but is kept moderate. The company has been considering the risks related to an unexpected price-booming of incoming goods, raw material and service. In the case of loss of a supplier or changes of sales and payment terms, the company responds immediately by providing and including a new supplier under the very same terms and conditions as the previous one. The risks of the kind are insured by contracts. The risks related to changes in price of raw material are relatively low, since predominantly service character of operation of the company (23 % in the structure of revenues).

5. Currency risks Slovenia being a member of EU is practically not exposed to currency risk. The risk is being additionally reduced since the agreements with the partners are all based on Euro.

6. Interest rate risk

Interest rate risk has got in the company a foremost influence on the operation. Long- and short-term bank loans are granted pursuant to a variable and fixed interest rate resp. Such kind of risk is moderate.

Financial risk analysis

a) Sensibility to changes in rate of interest As regards financial risks the company is by far most vulnerable to the interest rate changes, since long-term loans are based on variable rate of interest. The change in each tenth of percent (upon the unchanged indebtedness as on 31 December 2015 increases the costs of interests by € 708,821.

Annual Report 2015

83

Change in disbursements for interests with regard to the average rate of interest for loans with changeable

rate of interest

Average rate of interest (variable upon consideration of Euribor as on 31 Dec 2015): 2.904

b) Sensibility to changes in fair value

Disbursements from interests during the year (EUR) 2,270,640 % of loans with variable ROI 91 Disbursements from loan interests with variable ROI 2,058,239

Revenues from interests during the year (EUR) 749,298 % of loans with variable ROI 100 Reveneus from loan interests with variable ROI 749,298

Change in disbursements Adjusted disbursements (in EUR) For interests For interests

Increased average rate of interest by 1 hundreth point 708,821 2,979,461 by 1,5 hundreth point 1,063,232 3,333,871

Decreased average rate of interest by 1 hundreth point -708,821 - 1,561,818 by 1,5 hundreth point -1,063,232 - 1,207,408

Risk in changes of interest rate

Book value (in EUR)

Financial instruments in fixed interest rate Financial assets - Financial liabilities 5,446,657

Financial instruments in variable rate of interest Financial assets 520,777 Financial liabilities 52,780,221

Annual Report 2015

84

b) Sensibility to changes in currency

Since the payment occurs mostly in domestic currency (€), the company is not affected by the currency changes. c) Sensibility to increased indebtedness If Terme Čatež company additionaly indebted by € 1 M, this would mean (upon the average interest rate as on 31 December 2015) the increased interests by € 53.4 k. d) Sensibility to due terms of payment

28. Reporting after sections

Pursuant opt the regulations of IFRS Terme Čatež company is not obliged to accomplish such a report.

29. Conditional liabilities

Terme Čatež company has got as on 31 December 2015 all evident and known conditional liabilities included in the disclosure/release. Terme Čatež company was sued by Kapitalska družba pokojninskega in invalidskega zavarovanja company due to the change of the AGM-resolution adopted 29 August 2014, i.e. the profit should be allocated in that one part of balance sheet amounting to 4 % of equity should be allocated for the dividend pay-out, i.e. 1.00 (€ one) per share. The company estimates, that the sueing party chances for success are being very low.

Risk against change in fair value

Effect of changes in securities at disposal, accounted pursuant stock price Difference – effect on Difference – effect on

Fair value Difference - effect Value of revaluating Deferred tax liability (in EUR) As on 31 Dec 2015 On value of fin.investm. reserves Fair value as on 31 Dec 2015 708,196

Uptick of stock price by10 % 779,016

70,820 58,780

12,039

by 20 % 849,835 141,639

117,561 24,079

by 30 % 920,655

212,459 176,341

36,118

Drop of stock price by 10 % 637,376 (70,820) -

(58,780) - (12,039) -

by 20 % 566,557

(141,639) - (117,561) -

(19,985) -

by 30 % 495,737 (212,459) -

(176,341) - (36,118) -

Liquidity risk

Book value Due within one Due from one (in EUR) year to 5 years

Operating liabilities 7,081,147 7,081,147 - Loans granted by incorporated companies 12,517,051 2,592,049 9,925,002 Loans granted by other legal and natural persons 12,006,646 10,652,412 1,354,234 Loans granted by banks 33,703,181 33,703,181 -

Total 65,308,024 54,028378 11,279,236

Annual Report 2015

85

30. Ex-balance assets

Pertaining to the ex-balance of assets and liabilities is the value of granted warrants of the parent company to incorporated companies for the insurance of loans. While the value of ex-balance assets as on 31 December 2014 amounted to € 12,029,632, it amounted as on 31 Dec 2015 to € 9,915,820.

31. Incorporated parties

Corporate business:

Sales to incorporated companies

(in EUR) 2015 2014

Incorporated companies:

Del Naložbe d.d. 227,702 373,011 Marina d.d. 23,813 62,874 Terme Ilidža d.o.o. 108,745 DZS d.d. 19,745 23,223 DNEVNIK d.d. 42,444 30,258 SUPRIMA d.o.o. 548 2,099

Total 314,251 600,210

Purchase in incorporated companies

(in EUR) 2015 2014

Incoporated companies:

Del Naložbe d.d. 208,485 322,094 Marina d.d. 103,494 152,793 Terme Ilidža d.o.o. 10,000 DZS d.d. 1,002,201 1,095,112 DNEVNIK d.d. 56,008 62,542 SUPRIMA d.o.o. 63,793 73,519

Total 1,433,981 1,716,059

Ex-balance items

(in EUR) 31 Dec 2015 31 Dec 2014

Granted warrants 9,915,820 12,029,632

Total 9,915,820 12,029,632

Annual Report 2015

86

Accounts payable from sales / purchase in incorporated companies

(in EUR) 31 Dec 2015 31 Dec 2014

Accounts payable Incorporated aprties:

Del Naložbe d.d. 310,894 247,911 Marina d.d. 12,988 - Terme Ilidža d.o.o. - 153,169 DZS d.d. 6,117 5,614 DNEVNIK d.d. 13,356 888 SUPRIMA d.o.o. 66

Total 208,444 407,648

Del Naložbe d.d. 43,101 11,254 Marina d.d. 14,549 13,941 M Kapital d.d. 1,086,757 1,002,221 Terme Ilidža d.o.o. DZS d.d. 377,522 428,451 DNEVNIK d.d. 33,580 7,548 SUPRIMA d.o.o. 4,542 4,433

Total 1,602,420 1,509,852

Liabilities related to operations with incorporated companies

Annual Report 2015

87

Remuneration to Management Board in the last accounting year

Mr. Sebastjan Selan acquired until 31 July 2015 € 79,823 in total as gross payroll amount (i.e. € 42,081 fixed net value), his successor Mr. Bojan Petan acquired since 1 August 2015 until 31 December 2015 € 48,000 fixed gross payroll amount, i.e. € 35,108 net amount. There were no other benefits or special rights related to management Board. Remuneration to the members of Supervisory Council in the last accounting year The attendance fee pertaining to a member of SC totals € 166.92 net value and € 250.38 EUR to a Chairman. Besides, the members are entitled to the monthly membership remuneration amounting to € 1,341 (gross value), a Chairman however to € 2,681. The members of Audit Committee within the Supervisory Council are entitled to the monthly remuneration amounting to 50 % of the monthly membership remuneration. Gross remuneration of Supervisory Council in 2015 amounted to € 171,817.77 in total; therefrom as follows:

Remuneration amounting to € 162,00.27; Attendance fee and costs of transfer amounting € 9,817.50.

LOANS GRANTED BY INCORPORATED COMPANIES Total (v EUR) 31 Dec 2015 31 Dec 2014

Incorporated companies: Marina d.d. 402,086 402,086 M Kapital d.d. 11,925,002 11,925,002 DZS d.d. 6,648,664 6,648,664 Dnevnik d.d. 100,000 100,000 Del Naložbe d.d. 189,963 189,963

Total 19,265,715 19,265,715

LOANS GRANTED TO INCORPORATED COMPANIES (in EUR) 31 Dec 2015 31 Dec 2014

Povezane družbe: Del Naložbe d.d. 177.918 177,918 Terme Ilidža d.o.o. 22,788,557 Termalna riviera d.o.o. - - SUPRIMA d.o.o. 5,000

Total 177,918 22,971,475

Annual Report 2015

88

Survey of gross remuneration to the members of Supervisory Council of Terme Čatež company for 2015

Member Attendance fee,

commuting allowance

Membership

remuneration Total

Krajnik Robert 1,950.88 32,173.80 34,124.68

Petan-DE Costa Ada 1,365.72 16,086.84 17,452.56

Grum Mitja 1,365.72 16,086.84 17,452.56

Roš Samo 682,86 16,086.84 16,769.70

Uršič Vesna 827.34 16,086.84 16,914.18

Vladimir Smolec 630.78 17,218.59 17,849.37

Krulc Damjan 938.36 16,086.84 17,025.20

Kolarek Tomislav 1,023.84 16,086.84 17,110.68

Gošek Andreja 1,032.00 16,086.84 17,118.84

TOAL 9,817.50 162,000.27 171,817.77

Net remuneration pertaining to the members of Supervisory Council amounted in 2015 to € 128,850.96 EUR in total; therefrom as follows:

Remuneration amounting to € 121,421.88; Attendance fee and costs of transfer amounting € 7,429.08.

Survey of net remuneration to the members of Supervisory Council of Terme Čatež company in 2015

Member Attendance fee,

commuting allowance

Membership

remuneration Total

Krajnik Robert 1,418.88 23,400.00 24,818.88

Petan-DE Costa Ada 993.28 11,700.00 12,693.28

Grum Mitja 993.28 11,700.00 12,693.28

Roš Samo 496.64 11,700.00 12,196.64

Uršič Vesna 601.72 11,700.00 12,301.72

Vladimir Smolec 747.60 16,121.88 16,869.48

Annual Report 2015

89

Krulc Damjan 682.48 11,700.00 12,382.48

Kolarek Tomislav 744.64 11,700.00 12,444.64

Gošek Andreja 750.56 11,700.00 12,450.56

TOTAL 7,429.08 121,421.88 128,850.96

Extra rights or bonuses pertaining to the members od Supervisory Council There were no extra rights or bonuses pertaining to the members od Supervisory Council There were no loans, warranties or down-payments granted by the company to the members of Management Board and employees under individual contracts. Employment under individual contracts Pursuant to the individual contracts 16 employees were entitled to € 720,800 total gross value (i.e. € 429,823 net amount) of the remuneration as on 31 December 2015. Terme Čatež company co-operated with the incorporated parties on the basis of contracts.

32. Audit costs and tax consultancy costs

The costs of auditing of the financial statement of Terme Čatež company amounted in 2015 to €35,100, whereby the auditing costs for Terme Čatež company amounted to € 24,800, for the Group € 10,300. Other auditing costs amount to € 450. The audit at Terme Čatež company and Terme Čatež Group was conducted by the audit company PKF d.o.o., in alignment with the AGM-resolution of Terme Čatež company.

Annual Report 2015

90

Poročilo neodvisnega revizorja za družbo Terme Čatež, d.d.

Annual Report 2015

91

Annual Report 2015

92

Report of independent auditor on Terme Čatež company (translation from the original above)

PKF revizija in svetovanje d.o.o. PKF Authorized Auditors &

Business Counsellors REPORT OF INDEPENDENT AUDITOR

To Shareholders Terme Čatež company

We have audited the enclosed financial statements Terme Čatež company , which include the profit / loss statement as on 31

December 2014, return on equity II report, capital and cash flow statement as on the very same day and the review of core financial

guidelines as well as other annotations thereto. Audited was also the Business Report.

Liability of Management Board for financial statements

The Managemennt Board is liable for the preparation and fair demonstration of consolidated financial statements pursuant to the

International Financial Reporting Standard as endorsed by the European Union, and for such an internal control which reflects the

decisions adopted by the former, in order to enable the very preparation of financial statements lacking of intentionally misleading

information due to fraud or error.

Auditor's liability

Our liability is to express the opinion on the financial statements presented in the Annual Report pursuant to the implemented audit.

The audit was compiled in accordance with the Inernational Auditing Standards and is based on ethical bias, planning and

implementation of auditing process aiming at the acquirement of acceptable evidence, that the statements do not imply important

misleading data.

Auditing includes the implementation of procedures required for the procurement of evidence on amounts and disclosures in financial

statements. The choice of methods is a matter of an auditor and as such also includes the assessment of risks related to incorrect

statements (aiming at fraud or error). Upon the assessment of those risks, the auditor evaluates the performance of internal control in

connection with the preparation and fair presentation of financial statements of a company, in order to pinpoint suitable audit

procedures rather than express the opinon on successfulness of internal control. The Auditor's Report also includes the evaluation of

suitablity of applied financial guidelines and verification of financial assessments conducted by the Management Board, as well as the

evaluation of the comprehensive presentation of financial statements.

We believe, that the acquired proofs of auditing are an ample and suitable base for our Auditor's Report.

Opinion

To our best knowledge the present Accounting statements are true and fair demonstration of the financial situation at Terme čatež

company as on 31 december 2015 and its profit & loss account and cash-flow statement as on the said date, prepared in compliance

with the International Financial Reporting Standards as endorsed by the European Union.

Emphasis of matter

Pursuant to the Annotation 24 to the Financial Statement (»Financial Liabilities«) the company made in 2014 the draft Agreement on

Financial Restructuring defining therewith the relationships related to financial liabilities up to incl. 31 December 2016. Management

Board of the company is doig their best to sign the Appendix to the Agreement on financial restructuring in order to manage the

liquidity risk as the uncertainty consequence as stated in Annotation 27.3 (Liquidity risks) to the Report. Should this Agreement with

the creditor banks not be rolled-over, there exists an uncertainty as to the further operation of the company. The Financial Statement

does not include accidental/possible corrections which could be the consequence of that uncertainty.

Our opinion to the emphasis of matter has not been aligned.

Annual Report 2015

93

Paragraph on other subject matter

The Annual Report is aligned with the audited financial statements.

In Ljubljana, 21 April 2016

PKF revizija in svetovanje d.o.o. PKF revizija in svetovanje d.o.o.

Marjan Habjan, Authorized Auditor

Annual Report 2015

94

II. Audited consolidated financial statement of Terme Čatež Group pursuant to IFRS

Izjava o odgovornosti uprave (transl.below)

Uprava potrjuje izkaz poslovnega izida, bilanco stanja, izkaz drugega vseobsegajočega donosa, izkaz

denarnih tokov in izkaz gibanja kapitala Skupine Terme Čatež za leto, ki se je končalo 31. decembra 2015.

Uprava potrjuje, da so bile pri izdelavi računovodskih izkazov dosledno uporabljene ustrezne računovodske

usmeritve in da letno poročilo predstavlja resnično in pošteno sliko premoženjskega stanja Skupine Terme

Čatež ter izidov njenega poslovanja za leto 2015.

Uprava potrjuje, da so bili računovodski izkazi izdelani v skladu z veljavno zakonodajo in Mednarodnimi

standardi računovodskega poročanja, ki jih je sprejela EU.

21.04.2016 Bojan Petan

generalni direktor Term Čatež, d.d.

Liability statement of Management Board

The Management Board confirms hereby the profit & loss account, balance sheet, return on equity II, cash-flow statement and capital-flow statement of Terme Čatež Group for the year ending on 31 December 2015. The Management Board confirms hereby, that the consolidated financial statements were strictly conducted in accordance with the accounting standards and that they in all aspects demonstrate a fair situation of the financial conditions and performance of the Group in 2015. The Management Board confirms hereby, that the consolidated financial statements were conducted in accordance with the adopted legislation and the International Financial Reporting Standards (IFRS) as endorsed by the European Union. 21 April 2016 Terme Čatež d.d. Bojan Petan, GM

Annual Report 2015

95

TERME Čatež Group consists of the parent company Terme Čatež d.d., Topliška cesta 35, 8251 Čatež ob Savi, the equity of which amounts to more than 50 %, and the subisdiaries, as follows:

Marina Portorož d.d., Cesta solinarjev 8, 6320 Portorož

M Kapital d.d.*, Cesta solinarjev 8, Portorož

M Naložbe d.d.*, Cesta solinarjev 8, Portorož

Del Naložbe d.d., Topliška cesta 35, 8250 Brežice.

Upon the accomplishment of consolidated financial statements the long-term finncial investments into

subsidiaries with the adherent equity were abolished amounting to € 20,511,357. Financial investment of a

subsidiary into the shares of controlling company amoounting to the purchase value € 834,877 is referred

to in the consolidated financial statements as subtacting item of the equity to controlling holder. The value

of abolished long-term loans between the affiliated companies oft he Group as on 31 December 2015

amounts to € 9,925,002, while the value of short-term loans to € 2,780,102. Upon the accomplishment of

consolidated financial statements as on 31 December 2015 were between the affiliated companes oft he

Group abolished the short-term operating accounts payable amounting to € 1,185,027. The value of sales

revenues, which were upon the accomplishment of financial statements abolished with the costs of service

amounting to € 243,742 and purchase value of the goods sold amounting to € 172,922, amounts to €

416,664. The amount of abolished financial revenues and expenses from the loans between subsidiaries

amounts to € 1,093,544.

Since the affiliated Terme Ilidža company was disposed, is the effect of indemnity of a long-term loan

granted to the company included into the consolidated financial statement 2015. The indemnity effect is

reflected in the consolidated adjustments, as follows:

Increase in financial expenses derived from the indemnity of financial investments amounting to €

18,112,405,

Increase in deferred tax liability amounting to € 3,079,109.

Upon the disposal of financial investment from the Group the final account was conducted, which is

reflected in the decrease of financial expenses from the indemnity of financial investments amounting to €

6,445,800 and the increase of net profit brought forward, amounting to € 5, 995,354, which ist he

consequence oft he abolishment of the previously established surplus from the real estate revaluation.

Annual Report 2015

96

Annotation*: Long-term assets amount to € 155, 828,415, short-term assets to € 31,198,937.

BALANCE SHEET AS ON 31 DECEMBER 2015

(in EUR) 31Dec 15 31 Dec 14-corr 31 Dec14

ASSETS

Long-term assets*

Intangible assets and long-term accrued income and deferred expenses 2,744,192 2,199,836 2,199,863

Tangible assets 141,002,738 166,154,184 166,154,184 Investment property 3,197,251 4,883,915 4,883,915 Long-term financial investments 3,853,556 4,421,585 4,421,585 Long-term operating receivables 6,300 15,698 15,698

Deferred tax liability 5,024,377 2,261,438 796,451

179,936,683 178,471,696

Short-term assets*

Assets (group of assets) on disposal - - Inventory 630,346 702,396 702,396 Short-term financial investments 24,648,876 24,294,053 34,826,178 Short-term operating receivables 4,625,301 4,095,967 4,095,967 Cash 1,294,415 762,673 762,673

29,855,088 40,387,213

Short-term accrued income and deferred expenses 910,492 850,058 850,058

ASSETS TOTAL 187,937,844 210,641,828 219,708,966

Ex-balance assets 30,862,539 31,219,103 31,219,103

Annual Report 2015

97

Annotation*: Equity as on 31 Dec 2015 amounts to € 107,348,388, long-term liabilities to € 19,

915,345, short-term liabilities to € 53,313,938.

BALANCE SHEET AS ON 31 DECEMBER 2015 – CONTINUED 31 Dec 15 31 Dec 14-corr. 31 Dec 14

(in EUR)

LIABILITIES

Equity*

Called-up capital 12,444,216 12,444,216 12,444,216 Capital reserves 29,842,696 29,842,696 29,842,696 Reserves from profit 3,830,347 3,830,347 3,830,347 Revaluation surplus 49,696,283 56,259,050 57,848,131

Net profit/loss brought forward 18,411,872 20,522,837 20,522,837 Net profit/loss for the business year (6,877,025) (6,837,810) 610,964

115,450,372 124,192,035

Provisions and long-term accrued expenses and deferred income 6,289,548 6,552,192 6,552,192

Long-term liabilities*

Long-term financial liabilities 9,041,998 19,048,611 19,048,611 Long-term operating liabilities 0 0 Deferred tax liability 10,873,356 12,286,913 12,612,388

31,335,524 31,660,999

Short-term liabilities*

Liabilities, parto of the groups, on disposal 0 0 Short-term financial liabilities 46,532,242 49,346,027 49,346,027 Short-term operating liabilities 6,871,696 6,821,625 6,821,625

56,167,652 56,167,652

Short-term accrued expenses and deferred income 1,070,616 1,136,088 1,136,088

LIABILITIES TOTAL 187,937,844 210,641,828 219,708,966

Ex-balance liabilities 30,862,539 31,219,103 31,219,103

Annual Report 2015

98

* In the statement 2015 the corrected values for 2014 differ in the items, as follows: * (8,735,569), **(12,444,153), ***(1,332,448), ****(6,837,810). The other values of items of the corrections 2014 did not change.

PROFIT / LOSS STATEMENT FOR THE YEAR ENDING ON 31 DECEMBER 2015

(in EUR) 2015 2014

Nert sales revenues 34,167,910 35,973,551 Change in value of inventory (products and unfinished production) - - Materialized own products and service - - Other operating revenues (revaluat.revenues incl.) 661,090 1,408,596 *

Costs of goods, material and service (15,044,060) (16,334,271) Labour costs (8,957,635) (10,226,128) Value depreciation (5,384,500) (5,961,783) Other operasting costs (879,908) (867,676)

Profit / loss from operating activity 4,569,554 3,992,288

Financial revenues from holdings 99,964 90,098 Financial revenues from loans 190,101 193,108 Financial revenues from operating receivables 12,506 21,342

Financial expenses from financial investments (11,666,605) (118,000) *

Financial expenses from financial liabilities (3,015,059) (3,955,492) Financial expenses from operating liabilities (47,562) (57,640)

Profit / loss from financial activity (14,426,656) (3,826,584) **

Other revenues 423,855 392,761 Other expenses (2,375) (26,010)

Corporate tax (216,033) (288,878 Deferred tax 2,670,346 (132,539) *** Net profit/loss for the accounting period 6,981,309 111,038

Net profit to controlling holder (6,877,025) 314,772**** Net profit to minor sherholders (104,284) (203,734)

Net profit/loss per share 14.03 0.64 Correction of net profit/loss per share 14.03 0.64

Annual Report 2015

99

Return on equity II correction

(in EUR) 2015 2014 2014

Net profit / loss for the accounting period (6,981,309) (7,041,544)

111,038 Changes in surplus from revaluation of intangible and tangible assets (5,995,354)

(133,050) (133,050)

Changes in surplus from revaluation of financial assets on disposal (360,905) (1,337,767)

251,312 Profit / loss from translation of accounting statements of companies abroad (exchange rate difference) -

- -

Other items of return on equity 6,229,630 170,530

170,530

Return on equity for the accounting period - TOTAL (7,107,939) (8,341,831)

399,830

Return on equity TOTAL for the accounting period to controlling holder (7,718,903) (8,138,097)

603,565 Return on equity TOTAL for the accounting period to non-controlling holder 610,964

(203,734) (203,734)

Yield TOTAL per share to controlling holder 15.75 -

16.60 - 1.23

CASH-FLOW STATEMENT FOR THE YEAR ENDING ON 31 DECEMBER 2015

(in EUR) 2015 2014

Cash flow from operating activity

Receivables from operating activity Receivables from sales of products and services 35,133,676 37,520,690 other receivables from operating activity 539,453 932,578

Disbursements from operating activity Disbursements for purchase of raw material and service (14,432,131) (15,444,347) Disbursements for salaries and equity shares of employees in profit (9,147,173) (10,183,450) Disbursements for duties of all kinds (3,327,457) (3,851,796) Other disbursements from operating activity (2,931,362) (832,347)

Surplus in receivables / disbursements from operating activity 5,835,006 8,141,300

Cash-flow from investment activity

Receivables from investment activity Receivables from acquired interests and holdings in profit of others,

referring to investment activity 367,020 235,738 Receivables from disposal of intangible assets - - Receivables from disposal of tangible assets - 329,370 Receivables from disposal of investment property 863,618 610,000 Receivables from disposal of long-term financial investments 8,978,612 47,850 receivables from disposal of short-term financial investments 145,001 16,729

Disbursements from investment activity Disbursements from acquisition of intangible assets (3,295) (769) Disbursements from acquisition of tangible assets (1,016,865) (542,015) Disbursements from acquisition of investment property (5,636) - Disbursements from acquisition of long-term financial investments (96,000) (58,000) Disbursements from acquisition of short-term financial investments (405,000) -

Surplus in receivables / disbursements from investment activity (8,833,090) (633,268)

Annual Report 2015

100

CASH-FLOW STATEMENT FOR THE YEAR ENDING ON 31 DECEMBER 2015 -CONTINUED Cash-flow from financing activity

Receivables from financing activity Receivables from capital deposit - - Receivables from increased long-term financial liabilities 1,203,415 - Receivables from increased short-term financial liabilities 59,639 50,000

Disbursements from financing activity Disbursements for interests referring to financing activity (3,108,890) (4,318,375) Disbursements for capital deposits - - Disbursements from increased long-term financial liabilities (3,154,645) (2,892,012) Disbursements from increased short-term financial liabilities (8,180,555) (2,794,892) Disbursements for allocation of dividends and other holdings in profit (955,318) (30)

Surplus in receivables / disbursements from financing activity (14,136,355) (9,955,309)

Final balance of cash 1,294,415 762,673

Denarni izid v obdobju 531,742 (1,180,742) Začetno stanje denarnih sredstev 762,673 1,943,415

Annual Report 2015

Called-up Reserves for Own holdings Reserves Revaluation Net profit Net loss Net profit / lossNet profit Net loss Net proft / Capital of Capital of

CAPITAL FLOW FOR THE YEAR ENDING ON 31 DECEMBER 2014 Equity Non called-up capital Capital Legal treasury shar.and shares Statutary Other reservesfrom profit surplus brought brought brought for the yearfor the loss for the contr. non-contr.

capital TOTAL reserves reserves and holdings reserves from profit TOTAL forward forward forward year year holders holders Total

(v EUR)

Entry balance as on 31 December 2014 12,444,216 - 12,444,216 29,842,696 1,689,962 834,877 (834,877) - 2,140,385 3,830,347 57,729,868 20,805,261 - 20,805,261 197,541 - 197,541 124,849,929 (407,230) 124,442,699

- - - - - - - - - - - - - - - - - - - -

Calculations for the past (abolitkion of errors) - - - - - - - - - - - (293,797) - (293,797) - - - (293,797) - (293,797)

Adjustments for the past (Changes in accoounting standards) - - - - - - - - - - - (356,698) - (356,698) - - - (356,698) - (356,698)

- - - - - - - - - - - - - - - - - - - -

Opening balance as on 1 January 2015 12,444,216 - 12,444,216 29,842,696 1,689,962 834,877 (834,877) - 2,140,385 3,830,347 57,729,868 20,154,766 - 20,154,766 197,541 - 197,541 124,199,434 (407,230) 123,792,204

- - - - - - - - - 0 - - - - - - - - - -

Changes in holding equity - transactions with holders - - - - - - - - - - -

Entry of called-up capital - - - - - - - - - - - - - - - - - - - -

Entry of non called-up capital - - - - - - - - - - - - - - - - - - - -

Called-up of entered equity - - - - - - - - - - - - - - - - - - - -

Entry of subsequent equity - - - - - - - - - - - - - - - - - - - -

Acquisition of treasury shares and own holding capital - - - - - - - - - - - - - - - - - - - -

Disposal or withdrawal of treasury shares and own holdings - - - - - - - - - - - - - - - - - - - -

Capital reimbursement - - - - - - - - - - - - - - - - - - - -

Dividend pay-out - - - - - - - - - - - - - - - - - - - -

payment of premiums to Management Board and Superv.Council - - - - - - - - - - - - - - - - - - - -

Other changes in holding equity - - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - - - -

- - - - - - - - - 0 0 0 0 - - - - - - -

Total return on equity for the accounting period - - - - - - - - - - - - - - - - - - - -

Entry of net profit / loss for the reported period - - - - - - - - - - - - - - 314,772 - 314,772 314,772 (203,734) 111,038

Changes in surplus from revaluation of intangible assets - - - - - - - - - - - - - - - - - - - -

Changes in surplus from revaluation of tangible assets - - - - - - - - - - (133,050) - - - - - - (133,050) - (133,050)

Changes in surplus from revaluation of financial investments - - - - - - - - - - 251,313 - - - - - - 251,313 - 251,313

Other components of return on equity for the reported period - - - - - - - - - - - 170,530 - 170,530 - - - 170,530 - 170,530

- - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - 118,263 170,530 - 170,530 314,772 - 314,772 603,565 (203,734) 399,831

- - - - - - - - - - - - - - - - - - - -

Transfers from capital - - - - - - - - - 0 0 0 0 - - - - - - -

Allocation of the rest of net profit of compared reported period - - - - - - - - - - - - - - - - - - - -

onto other capital items - - - - - - - - - - - - - - - - - - - -

Allocation of a part of net profit of the reported period - - - - - - - - - - - - - - - - - - - -

on other capital items, pursuant to the resolut. of MB and SC - - - - - - - - - - - 197,541 - 197,541 (197,541) - (197,541) - - -

Allocation of a part of net profit for additional provisions pursuant to AGM-resol. - - - - - - - - - - - - - - - - - - - -

Clearance of the loss as discounting capital item - - - - - - - - - - - - - - - - - - - -

Formation of provisions for treasury shares and holdings from other capital items - - - - - - - - - - - - - - - - - - - -

Release of reserves for treasury shares and holdings - - - - - - - - - - - - - - - - - - - -

Other changes in equity - - - - - - - - - - - - - - - - - - - -

- - - - - - - - - 0 0 0 0 - - - - - - -

- - - - - - - - - - - 197,541 - 197,541 (197,541) - (197,541) - - -

Closing balance as on 31 December 2015 12,444,216 - 12,444,216 29,842,696 1,689,962 834,877 (834,877) - 2,140,385 3,830,347 57,848,131 20,522,837 - 20,522,837 314,772 - 314,772 124,802,999 (610,964) 124,192,035

Annual Report 2015

CAPITAL FLOW FOR THE YEAR ENDING ON 31 DECEMBER 2015

Called-up Reserves for Own holdings Reserves Revaluation Net profit /lossNet proft / Capital of Capital of

Equity Non called-up capital Capital Legal treasury shar.and shares Statutary Other reservesfrom profit surplus brought loss for the contr. non-contr.

(v EUR) capital TOTAL reserves reserves and holdings reserves from profit TOTAL forward year holders holders Total

Entry balance as on 31 December 2014 12,444,216 - 12,444,216 29,842,696 1,689,962 834,877 (834,877) - 2,140,385 3,830,347 57,848,131 20,522,837 314,772 124,802,999 (610,964) 124,192,035

Calculations for the past (abolitkion of errors) - - - - - - - - - - (1,589,081) - (7,152,582) (8,741,663) - (8,741,663)

Adjustments for the past (Changes in accoounting standards) - - - - - - - - - - - - - - - -

Opening balance as on 1 January 2015 12,444,216 - 12,444,216 29,842,696 1,689,962 834,877 (834,877) - 2,140,385 3,830,347 56,259,050 20,522,837 (6,837,810) 116,061,336 (610,964) 115,450,372

Changes in holding equity - transactions with holders

Entry of called-up capital - - - - - - - - - - - - - - - -

Entry of non called-up capital - - - - - - - - - - - - - - - -

Called-up of entered equity - - - - - - - - - - - - - - - -

Entry of subsequent equity - - - - - - - - - - - - - - - -

Acquisition of treasury shares and own holding capital - - - - - - - - - - - - - - - -

Disposal or withdrawal of treasury shares and own holdings - - - - - - - - - - - - - - - -

Capital reimbursement - - - - - - - - - - - - - - - -

Dividend pay-out - - - - - - - - - - - (994,044) - (994,044) - (994,044)

payment of premiums to Management Board and Superv.Council - - - - - - - - - - - - - - - -

Other changes in holding equity - - - - - - - - - - - - - - - -

- - - - - - - - - - - (994,044) - (994,044) - (994,044)

Total return on equity for the accounting period

Entry of net profit / loss for the reported period - - - - - - - - - - - - (6,877,025) (6,877,025) (104,284) (6,981,309)

Changes in surplus from revaluation of intangible assets - - - - - - - - - - - - - - - -

Changes in surplus from revaluation of tangible assets - - - - - - - - - - (5,995,354) 5,995,354 - - - -

Changes in surplus from revaluation of financial investments - - - - - - - - - - (360,905) - - (360,905) - (360,905)

Other components of return on equity for the reported period - - - - - - - - - - (206,508) (274,465) - (480,973) 715,249 234,276

- - - - - - - - - - (6,562,767) 5,720,889 (6,877,025) (7,718,903) 610,964 (7,107,939)

Transfers from capital

Allocation of the rest of net profit of compared reported period - - - - - - - - - - - - - - - -

onto other capital items - - - - - - - - - - - 314,772 (314,772) - - -

Allocation of a part of net profit of the reported period - - - - - - - - - - - - - - - -

on other capital items, pursuant to the resolut. of MB and SC - - - - - - - - - - - - - - - -

Allocation of a part of net profit for additional provisions pursuant to AGM-resol. - - - - - - - - - - - - - - - -

Clearance of the loss as discounting capital item - - - - - - - - - - - (7,152,582) 7,152,582 - - -

Formation of provisions for treasury shares and holdings from other capital items - - - - - - - - - - - - - - - -

Release of reserves for treasury shares and holdings - - - - - - - - - - - - - - - -

Other changes in equity - - - - - - - - - - - - - - - -

- - - - - - - - - - - (6,837,810) 6,837,810 - - -

Closing balance as on 31 December 2015ž 12,444,216 - 12,444,216 29,842,696 1,689,962 834,877 (834,877) - 2,140,385 3,830,347 49,696,283 18,411,872 (6,877,025) 107,348,388 - 107,348,388

Annual Report 2015

103

Annotations to consolidated financial statements of Terme Čatež Group aligned with the IFRS (International Financial Reporting Standards)

1. Reporting company Terme Čatež company (hereinafter: the company) has got its head office in Slovenia, the address: Topliška 35, SI-8251 Čatež ob Savi. The consolidated financial statements of Terme Čatež Group are compiled for the year ending 31 December 2015 and include the parent company and the affiliated companies (hereinafter: the Group). 2. Basic guidelines a) Alignment statement The non-consolidated financial report of the company is aligned with the IFRS (International Financial Reporting Standards) endorsed by the European Union. Implemented were the financial and reporting standards as well as the Public Company Law. Standards and annotations in the current period: In the current period the valid amendments of the available standards issued by the IFRS Committee and endorsed by EU, are as follows:

Amendments to diverse standards (»Improvements of IFRS 2011 – 2013«), based on the annual improvement project (IFRS 3, IFRS 13 and IFRS 40) aiming at the elimination of non-alignments and misinterpretation of the text endorsed by EU dated 18 December 2015 or even later);

IFRS Committee 21 »Taxes«, endorsed by EU dated 13 June 2014 (due annually, starting 17 June 2014 or later).

The endorsement of the above amendments to the standards did not bring along any changes in the financial directions of a company. Standards and annotations, issued by IFRS Committee and endorsed by EU, yet not due As on the day of confirmation of this financial report, the following standards, amendments and annotations endorsed by EU, were issued, yet not due:

Amendments to IFRS 11 »Shared concern« - Calculation of the acquired holdings in joint ventures, endorsed by EU dated 24 November 2015 (due annually, starting 1 January 2016 or later);

Amendments to IFRS 1 »Demonstration of financial report« - The disclosure initiative endorsed by EU, dated 18 December 2015 due annually, starting 1 January 2016 or later);

Amendments to IFRS 16 »Tangible assets« and IFRS 38 »Intagible assets« - Annotation of the tolerated amortization methods, endorsed by EU dated 2 December 2015 (due annually, starting 1 January 2016 or later);

Amendments to IFRS 16 »Tangible assets« and IFRS 41 »Agriculture« - Agriculture: Fertile plants - endorsed by EU dated 23 November 2015 (due annually, starting 1 January 2016 or later);

Amendments to IFRS 19 »Payroll« - Programmes with particular payments: Contributions by employees: endorsed by EU dated 17 December 2015 (due annually, starting 1 February 2015 or later);

Amendments to IFRS 27 »Separate accounting reports«: Equity method: endorsed by EU dated 18 December 2015 (due annually, starting 1 January 2016 or later);

Amendments to different IFRS »IFRS Improvements (period 2010 – 2012)«, derived from the annual improvement project (IFRS 2, IFRS 3, IFRS 8, IFRS 13, IFRS 16, IFRS 24 and IFRS 38)

Annual Report 2015

104

aiming at the elimination of non-alignment and text misenterpretations, endorsed by EU dated 17 December 2014 (due periodically, starting 1 February 2015 or later);

Amendments to different IFRS »IFRS Improvements (period 2012 – 2014)«, derived from the annual improvement project (IFRS 5, IFRS 7, IFRS 19, IFRS 34) aiming at the elimination of non-alignment and text misenterpretations, endorsed by EU dated 15 December 2015 (due periodically, starting 1 January 2016 or later).

It is assumed that the introduction of the above standards, amendments of the available standards and annotations in the starting period shall not siginificantly affect the present accounting report of the Group. Standards and annotations issued by IFRS Committee, yet not endorsed by EU For the time being the IFRS endorsed by EU do not significantly differ from the regulations endorsed by IFRS Committee, with the exception of the standards and amendments to the available standards which as on 25 February 2016 were not endorsed as due for the implementation within EU, as follows:

IFRS 9 »Financial instruments« (due periodically, starting 1 January 2018 or later);

IFRS 14 »Legally delayed payments« (due periodically, starting 1 January 2016 or later) – European Committee decided not to start the adoption process of this interim standard, but shall rather wait until the final version has been passed;

IFRS 15 »Revenues from contracts« and further amendments« (due periodically, starting 1 January 2018 or later);

IFRS 16 »Leasing« (due periodically, starting 1 January 2019 or later);

Amendments to IFRS 10 »Consolidated accounting reports«, IFRS 12 »Disclosures of holdings in subsidiaries« and and IFRS 28 »Investments to mergers and joint ventures« - Invested companies: exceptions related to consolidations (due periodically, starting 1 January 2016 or later);

Amendments to IFRS 10 »Consolidated accounting reports and and IFRS 28 »Investments to mergers and joint ventures« - Disposal or investments granted by the investing company and his merged companies or joint ventures, and further amendments: (due validity date has been postponed for an indefinite period of time until the research project regarding the equity method has been finished);

Amendments to IFRS 12 »Corporation tax« - Acknowledgment of delayed tax payments related to non-realized loss (due periodically, starting 1 January 2017 or later).

It is assumed that the introduction of the above standards, amendments of the available standards and annotations in the starting period shall not siginificantly affect the present accounting report of the Group. b) Criteria The consolidated financial statements of the company are based on the core value assesment, with the exception of the real estate and financial assets at disposal, where fair value is applied. The methods implemented upon the fair value assessment are described in Annotation 4. c) Functional and demonstration currency The consolidated financial report of the Group is evaluated in EUR, i.e. the functional currency of the Group. d) Implementation of assessments The Management Board is obliged pursuant to IFRS to provide the assessments and conditions, which affect the implementation of financial principles and and the demonstration of the assets, liablities, revenues and disbursements. The actual results can vary.

Annual Report 2015

105

The assessments and conditions require current auditing. The corrections of the financial estimations are acknowledged in the correction period and in the coming years affected by the corrections. The data on important assessments of unceratinty and essential criteria set-up by the Management Board during the process of implementation of financial principles, are highlighted in the Annotations as follows:

Annotation – measurement criteria for specific remunerations

Annotation – provisions and conditional liabilities

Annotation – evaluation of financial instruments 3. Important financial principles The subsidiaries included in Terme Čatež Group strictly obeyed the financial policies below for all the periods attached to this consolidated financial report.

(a) Error corrections Errors occuring upon the recognition, assessment, demonstration or disclosure of the accounting report items for the current period, discovered in that very period, are subject to correction, before they are approved to be published. Crucial errors discovered in the following period are subject to correction and based on the comparative method of the information demonstrated in the period when the error was revealed. The parent company discovered such one error regarding the assesment of long-term accounts payable (loan granted to Terme Ilidža subsidiary) and short-term financial investment into the shares of DZS company and changed the calculation of comparable amounts from the demonstrated past period, when the error occured, pursuant to IFRS 8 (»Accounting regulations, amendments to financial assessments and errors). The error is the consequence of wrong financial assessments of the Management and wrong misused financial regulation regarding the assessment of long-term loan granted and accounts payable of a short-term financial investment. The correction of the error from the past year is reflected in the reduction of long-term financial investments value amounting to € 18,112,405, increase of the value of accounts receivable related to deferred tax amounting to € 3,079,109 and reduction of net operating profit from 2014 amounting to € 15,033,296. The correction of the past year error in single financial report of the parent company does not effect the financial report of the Group dated 31 December 2014. The parent company (Terme Čatež d.d.) and the subsidiaries Marina Portorož company and M Naložbe company made the correction of the core error referring to the assessment of profitability of a short-term financial investment into the shares of DZS company, in that they calculated the comparative amounts from the past year, when the error occured, pursuant to IFRS. The error is the consequence of false allegations of financial estimations of the Managements in a single subisidiary and misused accounting guidelines regarding the assessment of profitability of a short-term financial investment into the DZS company shares. The correction of the error from the past year included in the financial report of the Group is reflected in the reduction of short-term financial investments value amounting to € 10,532,125, reduction of afore demonstrated surplus from revaluation of financial investments on disposal amounting to € 1,589,081 and pertaining deferred tax liability amounting to € 325,475, reduction of net profit/loss account 2014 to the controlling holder amounting to € 7,152,582 and increased deferred tax liability amounting to € 1,464, 987. Net profit 2014 to the controlling holder amounted before the correction to € 314,772. If the Group recognized the effect of crucial errors, discovered in 2015 after the approvement of financial report 2014,already in profit&loss account 2014, the net loss to the controlling holder 2014 would amount to € 6,837,810.

Annual Report 2015

106

(b) Consolidation principles

(1) Subsidiaries Subsidiaries are companies controlled by Terme Čatež company. The controlling role exists, when the Group is able to decide on financial and business goals of the company in order to gain profit from its operation. Upon the assessment of influence the existence and effect of potential voting rights are being considered, which can currently be imposed or exchanged. The financial statements of subsidiaries are part of the consolidated financial statement from the moment of the imposed controlling role until its expiration. The financial guidelines of subsidiaries were changed when necessary or adjusted/subdued to the general guidelines of the Group.

(2) Businesses excluded from consolidation State of conditions, non-realized profits and losses derived from the businesses within the Group have been excluded from the consolidated financial report.

(c) Foreign currency

(1) Foreign currency transactions Foreign currency transactions are calculated in a corresponding functional currency of the companies incorporated in the Group pursuant to the parity rate of the Bank of Slovenia on the day of its occurence/transaction. Pecuniary assests and liabilities expressed in a foreign currency on the balance sheet date are calculated in the functional currency according to the parity rate of the bank of Slovenia on the last day of the fiscal period. Positive or negative exchange differences are the ones between the pay back value (in functional currency) at the beginning of the period, corrected by the amount of effective interests and payments during the period, as well as by the pay back values in foreign currency calculated according to the average rate of exchange at the end of the period. Non pecuniary assests and liabilities expressed in foreign currency and assessed by a fair value are transferred into the functional currency according to the parity rate of the Bank of Slovenia on the date of the affected fair value. The exchange rate differences are recognized in the profit & loss account, which is not true however for the differences emerging from the calculation of equity instruments ranged as being on disposal.

(2) Companies abroad The assests and liabilities of the companies abroad, including goodwill and correction of fair value upon their affection, are calculated in EUR pursuant to the parity rate of ECB on the day of the balance sheet date. Revenues and expenses of the companies abroad, with the exception of companies in hyperinflation economies, are being calculated in EUR as on the exchange rate on the day of a transaction. The exchange rate differences derived from such a calculation, are being listed in equity. Since the adoption of IFRS, these changes are being part of translation reserves (foreign currency trnaslation reserve – FCTR). In case of disposal (partial or total) of a company abroad, the respective amount is being transferred from translation reserve into profit & loss account.

(d) Financial instruments

(1) Non-executed orders in financial instruments They include equity investments into pledged securities, operating and other liabilities, cash and cash equivalents, loans granted and loans granted to others and operating and other liabilities. Non-executed orders in financial instruments are at the beginning acknowledged in their fair value increased by business costs. After that, the non-executed orders in financial instruments can be evaluated by the items as presented below.

Annual Report 2015

107

(2) Cash & cash equivalents Cash and cash equivalents include cash in cash desk, on current account(s) and deposits. Account overdrafts, which can be settled on demand and are a part of money management of the company are included in the item cash and cash equivalents. The accounting of financial revenues and expenses is described in the accounting report.

(3) Financial assets on disposal

Equity investments are classified as financial assets on disposal. Securities on disposal are holding securities of the companies listed and/or non-listed on the Stock Exchange. Initially, these investments are valued pursuant to a fair value and its changes can be directly evident in equity. When the recognition of investment cease to exist, the related profit or loss is transferred into profit & loss account. The investment into securities and holdings are shown according to their fair value. When the recognition of investment cease to exist, the recognized profit/loss in equity should be evident in the periodical profit & loss account. The fair value of securities at disposal listed on the Stock Exchange, equals the released standard price as at balance sheet affection. The fair value of shares and holdings in companies not listed on the Stock Exchange, is estimated pursuant to the recent public transactions.

(4) Other Other non-realized financial instruments are valued by the payback value by the effective interest method, reduced by the amount of loss due to impairment.

(5) Equity Ordinary shares are part of equity capital. Additional charges arizing from the issue of new shares and share options, are shown as capital decrease, whereby the effects on capital are not considered. Treasury shares buy-out Upon the buy-out of treasury shares or stakes, which are shown as part of equity capital, the amount of paid reimbursement including the buy-out costs without possible tax effects, can be recgnized as the capital change. The buy-out treasury shares are shown as shares of Terme Čatež company and are being reduced from the capital. Upon the disposal of treasury shares or the new issue, the cash receivable is shown as capital increase and the surplus / loss of the transaction is transferred into retained profit and capital reserves respectively. Dividends are acknowledged in the financial report of the Group in the period of its acceptance by the AGM (resolution of divident pay-out).

(e) Intangible assets, tools and equipment

(1) Demonstration and evaluation Intangible assets, tools and equipment of the company (real estate excluded) are demonstrated in their purchase value (purchase costs included) reduced by amortization and the impairment. Thus, the price consists of the purchase price, costs of import and non-restitutable purchase taxes and costs referring directly to the operation and (when required) the starting costs of disassembly and disposal of the intangibles, tools and/or equipment and restoration of the venue where the latter were placed. The purchase value of intangibles, tools and equipment is increased by the costs for future benefits of the item. The costs expanding the utility margin if the item, are demonstrated as its reduction of the corrected value.

Annual Report 2015

108

The intangible assets of the Group are calculated according to their fair value. Upon the adoption of IFRS, the Group got the certified evaluator (Dodoma company from Maribor) who made the revaluation. Upon the revaluation the flat rate was the market price (this, in turn means the estimated price according to which the buyer and the seller would exchange the assets, i.e. on the date of estimation of the value of the elaborated business, after the suitable merchandising of the assets, where both partners acted informed, careful and voluntarily). The fair value reduced by the sales costs becomes a replacable value, when it is higher than the practical value. Upon the estimation of real estate, the valuer took predominantly the basic evaluation method into account, i.e. direct comparison of purchase price of similar real estates, which location and construction possibilities are most similar to the subjected estate. The, the modifications followed as to their macro & micro location, dimensions of the estate, its surface structure and access. The difference in time, when the purchse will be ralized, was also taken into account. The essential changes in real estate values since their revaluation have not been registered. Under the item intangible assets the Group demonstrates the estates, buildings and equipment; separately shown are the assets in acquisition and utilization. Profit and loss resp.upon the disposal of intangible assets, tools and equipment, is defined as the difference between the revenues from the disposal and its book balue and is taken into consideredation under the item »other operating revenues« and/or »other operating expenses« (in the case of loss).

(2) Rearrangements into investment property The future intangibles treated as investment property are being handled like tangible assets and are shown in their purchase value (until the date of its finished construction or development, when the intangibles become investment property). Profit/loss appearing upon the revaluation of fair value, is referred to in the profit & loss account. If the utilized intangible becomes an investment property, it is valuated in its fair value and rearranged into the investment property. The profit appearing upon the revaluation is shown directly in the equity, whereby the loss in the profit & loss account.

(3) Incidental costs The costs of exchange of a part of an intangible asset, tool or equipment are demonstrated in its book value, if there exists the possibility, that the incidental economic benefits referring to the operation of this part, shall flow into the company and if the purchase value can be reliable measured. The recognition of book value of the exchanged part is annuled. Other costs e.g. daily maintenance are recognized in the profit & loss account as disbursements, as soon as they appear.

(4) Depreciation Depreciation is calculated pursuant to the method of even amortization in time unit upon the consideration of utility period of separate asset. The depreciation of leased assets is affected by the consideration of the lease duration and utility period, unless it is not certain, that the company shall after the lease termination become the owner of the leased assets/item. Real estates are not being depreciated. The due date of depreciation of an intangible asset is its utilization period. The depreciation rates are as follows: * buildings 1 % to 5 % * furniture and equipment 5 % to 33 %. The methods of depreciation, utilization period and other values are checked upon the reporting day.

Annual Report 2015

109

(5) Lease costs

The financing costs of intagibles, tools and equipment during acquisition until their effectivenss are materialized by the company, later on they are shown as part of disbursements for interests.

(f) Intangible assets Intangible assets are demonstrated in their purchase value reduced by amortization and impairment. Among the intangible long-term assets the Group demonstrates its programme rights, goodwill and long-term deferred expenses.

(1) Goodwill Goodwill (bad-will) emerges upon the takeover of subsidiaries, mergers and joint ventures. Takeovers since the adoption of IFRS The takeovers as on 1 January 2006 or later register goodwill (surplus or difference between the acquisition amount and holding of the Group) in net fair value of the registered assets, liabilities and conditional liabilities of a target company. If the surplus is negative (bad-will) it is demonstrated in the profit & loss statement. Acquisition of minor holdings Goodwill emerging from the acquisition of small holdings in subsidiaries, is a surplus or a difference between the costs of additional investment and book value of assets acquired on the day of the exchange. Subsequent assessments Goodwill is demonstranted in acquisition value reduced by the incidental accumulated loss due to impairment. The recipient of investment (calculated in capital method) includes the book value of goodwill into the book value of investment. (2) Subsequent/incidental costs

The subsequent costs related to intangible assets are part of the assets when they increase the future economic benefits related to the assets. Other costs, including goodwill and brand names created by the company, are demonstrated in the profit & loss account as the expenses, upon the date of their effectiveness.

(3) Depreciation Depreciation is calculated pursuant to the method of even depreciation in time unit upon the consideration of utility period of intangibles and starts on the day of its utility. The annual depreciation rates are as follows: * programme licenses 30 % to 33 % * software 25 % to 50 %.

(g) Investment property Investment property are intangibles bringing benefits as rentals and/or increasing the value of a long-term investment (or both), and not for disposal (sales) in current operation processes, utilization in manufacturing process or goods and/or service supply for office purposes. Investment property is depicted in purchase value. The Group conducted the evaluation of investment property upon the transition to IFRS. It proved, that there were no differences as to the purchase value. If the utility of an investment property is changed so much, that it should be rearranged among the intangibles, its fair value is changed into a cost. Depreciation is calculated pursuant to the method of even depreciation in time unit upon the consideration of utility period of separate investment property. Real estates are not being depreciated. The utility period if an investment property equals the period of a similar intangible asset.

Annual Report 2015

110

(h) Leased assets

The lease, where the Group grants for the essential risks and benefits related to the ownership of the asset, is treated as financial lease. After the initial recognition leased assets are demonstrated as the amount equalling the fair value or when the fair value is lower, it equals the current value of the sum total of the lowest leases. The assets are treated pursuant ot the financial standards valid for such assets. Other leases are treated as business leases and (with the exception of investment property) are not recognized in the balance sheet of the company and company resp. The leased investment property is shown in the balance sheet of the company – in purchase value.

(i) Inventory

Inventory is valuated in genuine value or net obtainable market price, i.e. the lower price is taken into account. The costs of inventories are shown pursuant to the FIFO-Method (first-in, first-out method) and include the purchase value, costs of manufacture and transfer into other costs appearing upon their recovery. The costs of inventories can include their transfers from the equity capital (of a possible profit/loss as the consequence of the cash-flow risk-protection upon the purchase of inventories with foreign currencies. Net obtainable market price is estimated sales price obtained during regular operation and reduced by the estimated finishing costs and estimated sales costs.

(j) Impairment of assets

(1) Financial assets On the day of reporting the Group assesses the value of financial assets in order to establish a possible impairment. Assets are impaired, if there are objective proofs, that one ore more events originated the consequent cash-flow reduction. The impairment is calculated as the difference between the non-depreciated value of the assets and the expected future cash-flow decreased by the genuine valid interests. The impairment of assets on disposal is calculated pursuant to its actual fair value. The assessment of impairment of important financial assets is compiled sporadicaly, whilst of the other assets as the group depending on their common features upon risk exposure. The Group discloses all losses from impairment in the profit & loss account for the period. A possible impairment related to financial assets on disposal, which was recognized directly in equity, is transferred to profit & loss account. The loss out of impairment is abolished, if it can be autonomously related to the event which happened after the recognition of impairment. Upon the financial assets shown in installment value, and the financial assets on disposal being instruments of credit, the annullment of loss due to impairment is shown in the profit & loss account. The annullment of financial assests on disposal, which are holding securities, the Group demonstrates directly in equity.

(2) Non-financial assets Upon each reporting the Group checks the rest of book value of non-financial assets, with the exception of investment property, inventory and deferred tax liabilities, in order to find out possible impairment. If the signs for it exist, the assessment of exchangeable value of the asset is done. The assessment of impairment of goodwill and intangibles with non-defined utility period, which are not yet ready for disposal, is done each time on the reporting day.

Annual Report 2015

111

The exchangeable value of the asset or money creating unit is the actual value or fair value reduced by the sales costs (biggest value). Upon the definition of the asset value in affection, the expected subsequent cahs-flows are being discounted on their actual value by means of a discount rate before tax, which reflects current market assessments of the value of money and risk in time unit typical for the asset. For impairment test sake, the assets are united into the smallest groups of assets, which create cash-flows from permanent utilization. Those assets are mostly independent from the others or other groups of assets (»money making units«). For the sake of impairment test, the goodwill acquired in business grouping is rearranged into the money making units, which are expected to bring profit by utilizing the synergy effects. The impairment of an assets or money making unit is acknowledged, when its book value exceeds it exchangeable value. The impairment is shown in the profit & loss account. The Group assesses as on the balance sheet date the losses due to impairment in past periods, thus finding out possible loss reductions or even its non-existence. The loss due to impairment is annulled, if the assessments, on the base of which the Group defines the exchangeable value of the asset, changed. The loss due to impairment of an asset is annulled up to a level, where the increased book value of the asset does not exceed the book value, which would be assessed after the reduction of amortized depreciation, should not in the past years the loss due to impairment have been recognized.

(k) Remuneration / payroll Other long-term allowances of the employees – provisions for leave benefits and jubilee premiums A pure obligation of the Group, originated by long-term payroll, is the sum total of future payrolls obtained upon the exchange for the input work currently conducted or conducted in the past by the employees. Such a total of earnings is discounted, whereby its actual value is obtained, which then is reduced by fair value of all associated assets. The discount rate as at the day of report is the registered earning of bonds AA bonus. Their due date is nearly similar to the due date of liabilities of the Group. The calculation is done by the method of excpected importance of the units. Possible actuary profit/loss is recognized in the profit & loss account in the period of their origin. The Group is according to the legislative regulations, Union agreement and internal acts obliged to payment of jubilee premiums and provisions for leave-benefits (retirement). For this purposes long-term provisions are created. Other pension liabilities do not exist. Provisions are levelled with the estimated subsequent pay-outs of remunerations, discounted as on the date of balance sheet. The calculation was done on 31 December 2012 for each employee. The calculation included the costs of leave benefits and jubilee premiums in the future and the chosen discount rate was 2.75 % per annum, which represents a real interest rate (like the earning of long-term state bonds increased by the additional charge for local risk). The calculation was conducted by the approved actuary.

(l) Provisions Provisions are approved, if the Group has got due to the past event legal or indirect obligations, which are possible to assess and it is most likely, that upon the settlement of the liability certain outflows shall occur, which in turn would bring economic benefits. Where the effect of time value of money is essential, the Group defines the reservations by discounting the excpected subsequent cash-flows before tax, which reflects the actual estimations of time value of money and, if required, also the risks accompanying the liability.

(m) Receivables

(1) Receivables from the sales of merchandizing goods reflect the fair value of the paid goods or accounts payable referring to it and reduced by the cash disbursements, rebate and quantity commission.The transfer of risks and favours depends on contract stipulations. Upon the sales of goods, the transfer is done after the goods have arrived in the buyer's warehouse.

Annual Report 2015

112

(2) Receivables from services are shown according to their accomplishment on the reporting day. Their accomplishment is estimated by the audit.

(3) Receivabless from lease of investment property are currently established during the leasing period.

(n) Subsidy State subsidy is initially recognized as deferred receivables, when there is suitable guarantee, that the Group will not only receive the subsidy but that it will also meet all the conditions related to it. State subsidy, granted for cost cover, is shown among receivables in the periods, when the costs to cover appear. State subsidy/aid are being part of profit & loss statement: consistently as part of other operating receivables in the utilization period of separate assets.

(o) Financial lease Receivables from financial lease are shown currently during the time of lease. Subsidy for lease are recognized as a part of disbursements. The lowest lease total is transferred to financial disbursements- the item accounts payable. Financial costs are arranged according to the lease periods, so as to get a permanent interes trate for the rest of the debt for each period. The company demonstrates the conditioned payments from financial lease in an amount established in such a manner, that upon the confirmed recipt on the changed lease amount, it revaluates the lowest amount of the leasings in the rest period. Conditional payments referring to financial lease are demonstrated, when a conditional liability does not exist any more and when the amount of changed value of a financial lease is assessed (reestimation of the value of the lowest amount total of the leases in the rest period of lease duration).

(p) Financial revenues and financial expenses They include the revenues from the interests into investment property, dividends, financial assets for disposal, change of fair value of financial assets and are shown in the profit & loss account. The revenues from the interests are assessed by the applied method of the effective interest rate. The revenues from dividentsare shown as at the day when the sharehoder's right of payment is due; for the listed companies it is in the rule the date, when the right on current dividend related to the share is due. Financial expenses include the costs of lease, changes of fair value of financial assets, impairment losses, depreciation of investment property. The costs of lease are shown in the profit & loss account by the effective interes trate method. Profit & loss due to the echange rate difference is shown in net value.

(q) Corporate tax Includes current tax and deferred tax. Corporate tax is shown in the profit & loss account, with the exception of the part referring to the items, which are demonstrated directly in the equity capital. Current tax is the tax expected to be paid on profit for the current year upon consideration of tax rates valid on the day of reporting and possible modifications related to the past year

Annual Report 2015

113

Deferred tax payable is shown according to the liability method from the balance sheet, whereby temporary differences between the book value of the assets and liabilities are considered. The following temporary differences are not considered: initial ackonwledgement of the assets or liabilities in the operation not related to the merger (which would not affect either the accounted or profit after tax and the differences related to the investments into subsidiaries and common holding of the company up to the level, where there is possible, that they would not be annuled in a predicatble period in the future. Further, in the case of temporary differences related to the initial recognition of a goodwill. The deferred tax is shown in the amount expected to be paid on the day of reporting. The Group settles this deferred tax liability, if there exists the legal right. The deferred tax payable is recognized in the amount, where there exists the possibility, that the next profit shall be available for the payment of the deferred tax. The deferred tax payable is reduced by the amount for which is not possbile to claim for the tax bonus related to the asset any longer.

(r) Earning per share (EPS) Share capital of the Group is divided into ordinary shares, therefore the company shows basic earning per share, which is calculated by the division of profit or loss by the average number of ordinary shares in the business year.

(s) Correction of EPS The corrected earning per share equals the basic EPS since the Group does not have preferential shares and/or interchangeable securities.

(t) Reporting after sections A section is a costituent part of the Group handling with products or services (area sections) or products and services in a special economy (district section) and is subject to risks and profit, which differ from those in other sections. Terme Čatež Group makes 97.49 % revenues in the Republic of Slovenia. Reporting after sections is based on hospitality service and the operation of marine.

(u) Financial and other liabilities Financial and operating liabilities are initially presented by the amounts derived from the corresponding registers of origin. Later on they can be increased by the addition of return rates and other compensation items pursuant to the agreements with creditors. Liabilities increased by interests (the actual or agreed rate of interest does not essentially differ from the effective one) are in the balance sheet presented by the initial recognized value reduced by the installments. The agreed rate of interest does not vary from the effective one, if the difference does not exceed 1 % of the loan value. The liabilities of essential importance which are not increased by the interest rates, are in the balance sheet presented in their discounted value, taking in consideration the average rate of interest of the similar transactions conducted by the company. Important liabilities are those, the value of which exceeds a certain percent of liabilities total defined by the Management Board. The liabilities expressed in foreign currency are calculated in the domestic currency as on the date of the balance-sheet report. 4. Fair value definition As to the financial principles and analises of the Group, there is often required the definition of fair value of financial and non-finacial assets and liabilities. The methods of definition adopted by the Group are described in the following passages. In the case of additional explanation, they are given in the analises to a single item of the assets or liabilities of the Group.

Annual Report 2015

114

(1) Investment property The investment property is assessed by an independent assessor, who assesses the investment portfolio of the company. The assessment is done min. once in a single decade. The fair value is based on marketing value, which equals the assessed value, by which the investment property could be exchanged as on the day of the evaluation between the buyer and seller, who would act deliberately, independent (an arm's length transaction) and benevolent. If it is not possible to define temporary market prices, the value of investment property is estimated by total value of excpected cash-flows from the lease. Profit reflecting extra risks is included in the calculation of the investment property, and is based on the discounted net cash-flow per annum. Where there is suitable, there has to be consideered also the types of lessee, who stay in the edifice, their ability as borrower, their ability of maintenance and insurance and the amortization period of the edifice etc.. Upon the lease contract renewal, all the possbile rental-fee increases due to recovery of its primary state of condition, count all the notices and back-references provided in written and in due time.

(2) Investments into holdings and pledge securities Fair value of financial assets, is determined by the offered purchase price on the day of reporting. Fair value of financial assets in possession until the due date of payment is ascertained only for the sake of reporting.

(3) Operating and other receivables The fair value of operating receivables is calculated as the actual value of subsequent cash-flow discounted by the market interest rate on the day of reporting. Short-term operating liabilities of the Group are not discounted due to their short-term character, whereas impairment (value corrections) of fair value is regarded.

(4) Non-realized financial liabilities Fair value is for the report sake calculated on the base of the actual value of subsequent disbursements of principal amount and interests discounted by the market price of interests on the day of reporting. Regarding the calculations in the past, we found out that the costs of management and financial lease practically do not affect the actual interes trate, which would mean that it is the same as provided in the contract.

5. Operating revenues

Net sales revenues

(in EUR) 2015 2014

Revenues from the sales of products and service on domestic market 33,743,307 32,120,911 Revenues from the sales of products and service on foreign markets 220,747 164,604 Revenues from the sales of merchand.goods and material on domestic market 2,323,703 2,568,375 Revenues from the sales of merchandizing goods and material on foreign markets Revenues from lease 880,153 1.119,661

Total 34,167,910 35,973,551

Annual Report 2015

115

6. Other operating revenues

Other operating revenues

(in EUR) 2015 2014

Revenues from abolishment and consumption of long-term provisions 528,643 505,709 Revenues from mergers (badwill) Subsidy, extraordinary assets… 56,961 61,034 Revaluating operating revenues

Revenues from written-off accounts payable 50,269 142,794 Disposal of tangible and intangible assets 5,210 136,391 Disposal of investment property 6,000 561,001 Liabilities write-offs (2013:169, 2012: 238) 14,006 1,667

Total 661,090 1,408,596

Other revenues

(in EUR) 2015 2014

Revenues from evaluation of investment property pursuant to fair value - - Reveneus from disposal of investment property evaluated pursuant to

fair value - - Subsidy, donations and other revenues not related to

Business effects 10,135 8,675 Received indemnity 121,491 186,646 Penalties - - Other revenues 292,229 197,440

Total 423,855 392,761

Annual Report 2015

116

7. Costs of material, service and labour

Costss of material, service and labour (in EUR) 2015 2014

Costs of goods, material and service Purchase value of the goods and material sold 1,475,217 1,544,678 Costs of utilized material 5,546,794 5,964,379 Service costs 8,022,392 8,825,214

Labour costs Payroll costs 5,913,893 7,015,532 Social insurance costs 983,418 1,130,591

- deducted pension insurance costs 90,774 93,355 Costs of additional pension insurance 135,930 144,390 Other labour costs 1,924,394 1,935,615

Value write-offs Depreciation 5,096,330 5,634,010 Revaluating operating expenses in intangible, tangible assets

and investment property 128,763 73,817 revaluating operating expenses related to short-term assets, with the exception of financial investments and investm.property 159,407 253,957 revaluating operating expenses related to labour costs - -

Other operating costs Formation of long-term provisions - 6,500 Other costs 872,908 861,176

Total 30,259,446 33,389,859

Annual Report 2015

117

8. Financial revenues

Financial revenues

(in EUR) 2015 2014

Financial revenues from holdings Financial revenues from holdings in subsidiaries - Financial revenues from holdings in mergers - Financial revenues from holdings in other companies 75,340 51,230 Financial revenues from other investments 24,624 38,868

Financial revenues from loans Financial revenues from loans granted to subsidiaries - - Financial revenues from loans granted to others 190,101 193,108

Financial revenues from operating accounts payable Financial revenues from accounts payable from subsidiaries Financial revenues from accounts payable from the others 12,506 21,342

Total 302,571 304,548

Expenses according to functional groups Costs of

Production Merchand. general (in EUR) costs costs activities Total

Costs of goods, material and service Purchase value of the goods and material sold 1,475,217 1,475,217 Costs of processed material 5,312,737 66,047 168,011 5,546,794 Service costs 5,683,158 1,151,231 1,188,003 8,022,392

Labour costs 7,260,119 459,364 1,238,152 8,957,635 Value write-offs

Depreciation 4,848,866 133,811 113,282 5,096,329 revaluating operating expenses in intangible, tangible assets and

investment property 22,282 106,481 - 128,763 revaluating operating expenses related to short-term assets, with the exception of financial investments and investment property 133,518 3,667 22,221 159,406 Revaluating operating expenses related to labour costs - - - -

Other operating expenses 665,274 3,865 203,771 872,910

Total in 2015 24,010,153 3,293,201 2,956,092 30,259,446

Total in 2014 26,780,015 3,612,878 2,996,965 33,389,859 Purchase value of the goods sold in 2014 1,544,678

Annual Report 2015

118

9. Financial expenses

* Financial expenses from financial investments: Corrected value 2014: € 8,735,569

Financial expenses

(in EUR) 2015 2014

Financial expenses from financial investments 11,666,605 118,000*

Financial expenses from financial liabilities Financial disbursements from loans granted by affiliated companies - - Financial disbursements from bank loans 2,409,233 3,119,589 Financial disbursements from bonds issued Financial disbursements from other financial liabilities 605,826 835,903

Financial expenses from operating liabilities Financial disbursements from operating receivables to affiliated companies Financial disbursements from liabilities to suppliers 10,373 5,875 Financial disbursements from other operating liabilities 37,189 51,766

Total 14,729,226 4,131,132

Annual Report 2015

119

10. Intangible assets, devices and equipment

The value of fixed assets acquired by financial lease as on 31 December 2015 amounts to € 153,320. Liabilities

to suppliers of equity as on 31 December 2015 amount to € 126,669.

If the Group evaluated tangible assets according to the purchase value model, the book value would as on 31

December 2015 amount to € 78,467,732.

Book value of the mortgaged real estate of the Group amounts as on 31 December 2015 to € 101,111,458.

Intangible assets, devices and equipment

Production Other Fixed assets Fixed assets Advance devices and devices and permanently out Investment into in payments for

(in EUR) Real estate Buildings tools equipment of use foreign assets acquisition fixed assets Total

Purchase value

As on 31 December 2014 88,752,052 134,261,181 - 25,377,150 - 83,486 1,481,7204 - 249,955,589 Adjustments - - - - - - - - -

Opening balance as on 1 Jan 2015 88,752,052 134,261,118 - 25,377,150 - 83,486 1,481,720 - 249,955,589

Acquisitions - - - - - - 1,425,982 - 1,425,982 Acquisition- own production - - - - - - - Transfer from current investments 457,155 88,843 - 187,637 - - (733,635) - Increases due to mergers - - - - - - - - - Disposal (8,074,550) (16,070,096) (1,022,064) - - - (204,176) (25,370,886) - Transfer to short-term assets - - - - - - - - - Impairment - - - - - - - - - Alignment with fair value - - - - - - - Transfer from investment property - - - - - - - - - Transfer to investment property - - - - - - - Rearrangements (1,500) (1,500) - - - - - - Materialization of financing costs - - - - - - - - -

Closing balance as on 31 Dec 2015 81,134,657 118,279,928 - 24,542,723 - 83,486 1,968,391 - 226,009,184

Accumulated value correction

Closing balance as on 31 Dec 2014 - 63,636,479 - 20,134,912 - 30,013 - - 83,801,404 Adjustments - - - - - - - - -

Opening balance as on 1 Jan 2015 - 63,636,479 - 20,134,912 - 30,013 - - 83,801,404

Depreciation during the year - 3,361,753 - 1,399,482 - 6,163 - - 4,767,399 Increases due to mergers - - - - - - - - - Disposal (2,577,527) - - (984,831) (3,562,358) - - - - Transfer to short-term assets - - - - - - - - - Impairment - - - - - - - - - Alignment with fair value - - - - - - - - - Transfer from investment property - - - - - - - - - Transfer to investment property - - - - - - - - - Rearrangements - - - - - - - - -

Closing balance as on 31 Dec 2015 - 64,420,705 - 20,549,564 - 36,176 - - 85,006,446

Non written-off value

Closing balance as on 31 Dec 2014 88,752,052 70,624,702 - 5,242,238 - 53,472 1,481,720 - 166,154,184 Opening balance as on 1 Jan 2015 88,752,052 70,624,702 - 5,242,238 - 53,472 1,481,720 - 166,154,184 Closing balance as on 31 Dec 2015 81,134,657 53,859,223 - 3,993,159 - 47,309 1,968,391 - 141,002,739

Annual Report 2015

120

11. Investment property

Revenues from lease etc..

(in EUR) 2015 2014 Investment property:

Revenues from lease 255,774 497,884 Direct expenses from investment property granting lease revenues 15,339 23,980 Direct expenses from investment property not granting lease revenues - -

Investment property

(in EUR) 31 Dec 2015 31 Dec 2014 Investment property: Real estate 2,526,6625 2,623,313 Buildings 670,590 2,260,602 Total 3,197,251 4,883,915

Annual Report 2015

121

Investment property dynamics (compiled after purchase value)

Investment (v EUR) property

Purchase value

31 Dec 2013 6,835,252 Adjustments -

1 January 2014 6,835,252

Acquisitions- 98 Disposals (2,909,845) Transfer to short-term assets - Transfer from fixed assets - Transfer to fixed assets - Impairment - Rearrangements -

31 December 2014 3,925,505

Accumulated value correction

31 December 2013 1,951,337 Adjustments - 1 January 2014 1,951,337

Depreciation within the year 134,590 Acquisitions and mergers - Disposals (1,357,675) Transfer to short-term assets - Transfer from fixed assets - Transfer to fixed assets - Impairment - Rearrangements -

31 December 2014 728,253

Non written-off value

31 December 2013 4,883,915 1 January 2014 4,883,915 31 December 2014 3,197,251

Annual Report 2015

122

12. Intangible assets

Intangible assets and long-term accrued income and deferred expenses

Property- & Intangible Long-term Developm. Other rights Assets in deferred Good-will Paid

(in EUR) costs acquisition costs deposits Total

Acquisition value

As on 31 December 2011 - 588,101 1,668 - 2,131,869 - 2,721,638 Adjustments 4,873 4,873 - - - - -

As on 1 January 2012 - 588,101 6,541 - 2,131,869- - 2,726,511 Acquisitions - 1,568 1,839 - - 3,407 Acquisitions – own production - - - - - - - Increase due to merger - - - - - - - Transfer from current investments - 1,568 (1,568) - - - - Disposals - - - - - - - Transfer to short-term assets (834) (834)

- - - - - Impairment - - - - - - - Adjustments with fair value - - - - - - - Rearrangements 1,500 577,941 579,441

- - - -

As on 31 December 2012 - 591,169 - 585,487 2,131,869 - 3,308,525

Accumulated value correction

As on 31 December 2011 - 521,775 - - - - 521,775 Adjustments - - - - - - -

As on 1 January 2012 - 521,775 - - - - 521,775

Depreciation during the year - 37,810 - - - - 37,810 Increases due to mergers - - - - - - - Disposals - - - - - - - Transfer to short-term assets 4,748 4,748 - - - - - Impairments - - - - - - - Adjustments with fair value - - - - - - - Rearrangements - - - - - - -

As on 31 December 2013 - 559,585 4,748 - - - 564,333

Non written-off value

As on 31 December 2012 2,502 - 66,326 2,131,869 - 2,199,863 As on 1 January 2013 - 66,326 2,502 2,131,869 - 2,204,737 As on 31 December 2013 - 31,584 2,502 2,131,869 - 2,744,192

Annual Report 2015

123

13. Non current financial investments

Long-term financial investments

(in EUR) 31 Dec 2015 31 Dec 2014 Long-term financial investments:

Long-term financial investments (loans excl.) Shares and holdings in companies within the Group - - Shares and holdings in mergers - - Other shares and holdings - - Other long-term financial investments 766,128 1,201,037

Long-term loans Long-term loans to companies within the Group - - Long-term loans granted to mergers - - Long-term loans to others 3,087,428 3,220,548

Long-term non deposited called-up capital - -

Total 3,853,556 4,421,585

Annual Report 2015

124

14. Deferred tax liability

Deferred tax liability amounts as on 31 december 2015 to EUR 5,024,377. It is calculated from the provisions for leave allowances, jubilee premiums, corrected value of liabilities, indemnity liability and loss in profit upon the disposal of the Group intangible assets.

Dynamics of long-term financial investments

Financial investm. Financial invest. In possession on disposal

(in EUR) until expiration Loans Total Gross value

As on 31Dec2014 3,220,548 1,201,037 4,421,585

Increases New loans, acquisitions - - Transfer of repayment value 4,717 - 4,717 Ascription of interests - - - - Revaluation to fair value - - - -

reductions Repayments, disposals - - - - Revaluation - exchange rate difference - - Transfer to short-term part (137,837) (137,837) - Final write-off - - Revaluation to fair value - - (214,122) (431,813)

As on 31Dec2015 3,078,229 1,036,877 3,856,652

Value correction

As on 31Dec2014 - - - -

Increases Formation of value correction during the year - - - -

Reductions Paid writen-off investments - - - - Final write-off 3,096 3,096 - - Transfer to short-term part - - - -

As on 31Dec2015 3,096

3,096 - -

Net value as on 31Dec2014 3,220,548 - 1,201,037 4,421,585 Net value as on 31Dec2015 3,087,428 - 766,128 3,853,556

Annual Report 2015

125

Corrected value total 2014: € 2,261,438 (the values of single items did not change, just the total)

15. Inventory

The inventory in material refers to the inventory of edibles, alcholic and non-alchoholic drinks, business stationery etc..

The annnual inventory control of alchoholic drinks, beverages and merchandizing goods at the parent company (Terme Čatež) revealed € 2,519 surplus and € 1,323 loss. The annual control in the market store revealed the negative difference amounting to € -6,767. Terme Čatež company calculates the justified write-off of single group items pursuant to adopted legislation. The negative difference booked was € -5,963. The annnual inventory control in Wholesale Dept. revealed € 4,689 surplus and € 4,206 deficit. The stock is not pledged. Marina Portorož company made € 1,073 deficit in maintenance, which is within the tolerated limits and the surplus amounting to€ 2,196. H&R reveal write-off in inventory amounting to € 52.00 and surplus amounting to € 120. 00. Del Naložbecompany made in 2015 surplus amouonting to € 101.00 and deficit amounting to € 87.00. Inventory is not pledged.

Inventory

(v EUR) 31 Dec 2015 31 Dec 2014

Material and raw material 406,205 497,128 Unfinished production Products Merchandising goods 224,141 222,623 Down payments of inventory Impairment -

Total 630,346 702,396

DEFERRED TAX LIABILITY

Deferred tax Deferred tax Deferred Deferred tax through through equity tax through through

(in EUR) 31-Dec-14 profit / loss acc. reval.reserv. good-will 31-Dec-15

Depreciation over max. Legal recommended - - - - Revaluation / impairment of intangible assets - - - Revaluation / impairment of tangible fixed assets 2,559 - - 2,559 Revaluation / impairment of financial investments - Revaluation / impairment of financial investments - negative revaluation reserve 416,964 73,408 490,372 Revaluation before risk of secured items - - - - Impairment of accounts payable 120,960 (1,833) - 119,127 Impairment of inventory - - - - Provisions for costs and disbursements 101,071 (20,285) 19,184 99,970 Non applied tax bonuses and tax abatements - - - - Non applied transferred tax loss 1,164 2,711,485 2,712,649 - Profit from disposal between subisdiaries 78,242 (8,693) - 69,549 Difference between tax and book value of acquired assets and liabilities (takeovers) - - - - Non applied tax loss and bonuses of targeted company (takeovers) - - -

796,451* 2,670,346 19,184 73,408 5,024,377 -

Annual Report 2015

126

16. Short-term financial investments

Book value of pledged securities as on 31 December 2015 amounted to € 5,922,481.

The parent company (Terme Čatež d.d.) and the subsidiaries Marina Portorož company and M Naložbe company made the correction of the core error referring to the assessment of profitability of a short-term financial investment into the shares of DZS company, in that they calculated the comparative amounts from the past year, when the error occured, pursuant to IFRS. The error is the consequence of false allegations of financial estimations of the Managements in a single subisidiary and misused accounting guidelines regarding the assessment of profitability of a short-term financial investment into the DZS company shares. The correction of the error from the past year included in the financial report of the Group is reflected in the reduction of short-term financial investments value amounting to € 10,532,125, reduction of afore demonstrated surplus from revaluation of financial investments on disposal amounting to € 1,589,081 and pertaining deferred tax liability amounting to € 325,475, reduction of net profit/loss account 2014 to the controlling holder amounting to € 7,152,582 and increased deferred tax liability amounting to € 1,464, 987. The impairment of this financial investment classified as being on disposal and evaluated after the purchase value reduced by the accumulated loss due to the impairment, was listed in the Annual Report 2015 as the error correction with effect on the compred Annual Report dated 31 December 2014. The error correction of the past year is the consequence of the reduced book value of the share of DZS company, which was due to the error correction from the past years and the change in Accounting guidelines as on 31 December 2014 reduced from € 40.83/per share on to € 29.02/per share. The reduced book value of share is the consequence of the changed accounting guideline of evaluation of all financial investments into subsidiaries and mergers from the method of evaluation of such investments after their fair value and based on the assessments of authorized evaluators and a single stock exchange rate resp.on to the evaluation method after the genuine or purchase value. The Management Board of the company estimated upon the preparation of the Annual Report 2015, that the demonstrated exchangeable value of financial investment into the shares of DZS company amounting to € 22,513,048 pursuant to IFRS 36 (Impairment of assets) was a suitable/appropriate one.

Short-term financial investments

(in EUR) 31 Dec 2015 31Dec14-corr. 31 Dec 2014 Short-term financial investments:

Short-term financial investments except loans Shares and holdings in affiliated companies of the Group - - Shares and holdings in mergers - - Other shares and holdings 23,502,74 23,505,764 34,037,889 Other short-term financial investments 430 430 430

Short-term loans Short-term loans to companies of the Group - Short-term loans granted to mergers - Short-term loans granted to others 1,145,696 787,859 787,859 Short-term non deposited called-up capital -

Total 24,648,876 24,294,053 34,826,178

Annual Report 2015

127

(in EUR) 31 Dec 2015 31Dec14-corr. 31 Dec 2014 Short-term financial investments:

Financial investments pursuant to fair value in Profit & loss account - - Financial investments in possession until expiration - - Loans 1,145,696 787,859 787,859 Investment property on disposal 23,503,180 23,506,194 34,038,319

Total 24,648,876 24,294,053 34,826,178

Annual Report 2015

128

17. Short-term operating receivables

Short-term operating receivables are mostly the receivables from customers as on 31 December 2015; they amounted to € 3,675,078 ( as on 31 Dec 2014 - € 3,308,329) and other receivables amounting to € 950,221 (as on 31 Dec 2014 - € 787,637) including the value corrections. Short-term operating receivables are not extra insured.

DYNAMICS OF SHORT-TERM FINANCIAL INVESTMENTS

Short-term Short-term Financial invest.

(in EUR) deposits loans on disposal Total Gross value

As on 31 Dec 2014 145,001 702,859 34,180,404 35,028,263 Calculation for the past (abolition of errors) - - (1,914,555) (1,914,555) As on 31 Dec 2014 - corrected 145,001 702,859 32,265,849 33,113,708

Increases New loans, acquisitions 365,000 - - 365,000 Ascription of interests - 135 - 135 Transfer from long-term part - 137,703 - 137,703 Revaluation on to fair value - - - -

reductions Repayments, disposals (145,001) - - (145,001) Revaluation - exchange rate difference - - - - Transfer - (60,000) - (60,000) Final write-off of investments - - - - Revaluation on to fair value - - (3,014) (3,014)

Balance as on 31 Dec 2015 365,000 780,696 32,262,835 33,408,531

Value correction

As on 31 Dec 2014 - 60,000 142,085 202,085 Calculation for the past (abolition of errors) - - 8,617,570 8,617,570 As on 31 Dec 2014 - corrected - 60,000 8,759,655 8,819,655

Increases Transfer from long-term part - - - - Formation of value correction in the year - - - -

Reductions Paid accounts receivable - (991) - (991) Final write-off of investments - (59.009) - (59,009)

Final balance as on 31 Dec 2015 - - 8,759,655 8,759,655

Net value as on 31 Dec 2014 145,001 642,859 34,038,319 34,826,178 Corrected net value as on 31 Dec 2014 145,001 642,859 23,506,194 24,294,053 Net value as on 31 Dec 2015 365,000 780,696 23.503.180 24.648.876

Annual Report 2015

129

Short-term operating receivables

(in EUR) 31 Dec 2015 31 Dec 2014

Short-term operating receivables from customers: on domestic market 3,521,642 3,222,146 on foreign markets 967,766 839,184 Short-term operating receivables from companies of the Group - - Granted short-term loans and deposits 10,966 7,201 Short-term liabilities from operation on the account of others Short-term receivables related to financial revenues 569,507 400,651 Other short-term receivables 377,612 388,399 Impairment of receivables related to financial revenues (7,864) (8,614) Impairment (814,330) (753,001)

4,625,301 4,095,967

Value correction of short-term receivables

(in EUR) 31 Dec 2015 31 dec 2014

Opening balance as on 1 January 761,614 1,546,470

Increases Formation of value corrections during the year 336,611 236,331 Exchange rate differences Transfer from long-term operating receivables

Decreases Encashed written-off accounts payable (51,019) (142,794) Final write-off of accounts payable (225,013) (878,392) Echange rate difference

Closing balance as on 31 December 822,194 761,614

Short-term accrued income and deferred expenses

(in EUR) 31 Dec 2015 31 Dec 2014

Short-term deferred expenses 910,492 849,780 Short-term accrued income - 278

Securities - - VAT from acquired down-payments - -

Total 910,492 850,058

Annual Report 2015

130

18. Pecuniary

19. Capital

Equity

Shares in circulation Called-up capital of the company amounts to € 12,444.216 and is divided into 497,022 ordinary shares, each

having the value of € 25.04. The shares are of the same class with the same legal rights. The shares of Terme

Čatež company in holdings of subsidiaries have not got voting rights and are not entitled to dividends.

The ownership structure and its changes are described in Chapter »Structure of hodlings at Terme Čatež

company and changes in its structure«. The state of condition and capital flow are described in the capital flow

table.

Shares of Terme Čatež in holding of subsidiaries

The value of TCRG-shares in subsidiaries amounting to € 834.877 includes the shares in

Del Naložbe company 6,840 TCRG-shares (1.38 %).

Reserves Reserves amount to € 84,204,203, as follows: * capital reserves - € 29,842,696, * legal reserves - € 1,689,962, * reserves for treasury shares of Terme Čatež company in holding of subisidiaries, amounting to €834,877, * other reserves – € 2,140,385 and * reserves for fair value, amounting as on 31 December 2015 to € 49,696,283.

Pecuniary

(in EUR) 31 Dec 2015 31 Dec 2014

Cash at cash desk in domestic currency 125.433 131,844 Cash at cash desk in foreign currency - 640 Issued cheques and promisory notes (deduction) - Received cheques and promisory notes - Non risky securities available for instant encashment - Money in circulation 58,491 73,992 Pecuniary on accounts in domestic currency 222,391 297,548 Pecuniary on accounts in foreign currency 35

324 Short-term deposits in domestic currency 886,000 256,000

Short-term deposits in foreign currency - - Pecuniary on special accounts for special purposes 2,065 2,324

Total 1,294,415 762,673

Annual Report 2015

131

Revaluation surplus

Balance profit

Balanace profit 2015 amounts to € 11,534,847 (in 2014: € 20,837,609; including the correction it amounted to €

13,685,027) and includes the profits from the past years brought forward and net profit for the current year.

Net profit to the controlling holder as on 31 December 2015 amounts € - 6,877,025.

2015 2014

Net profit for the year -6,877,025

490,182

314,772

Weighed average number of ordinary shares 490,182 490,182

Basic earning per share (in EUR) -14.03 0.64

REVALUATION SURPLUS

Tangible assets Long-term Short-term Leave

Intangible financial financial

(in EUR) assets investments Investm. allowances Total

Opening balance as on 31 Dec 2014 57,899,409 - (2,035,765) 1,984,487 57,848,131 Error correction from the past years (1,589,081) (1,589,081) Opening balance as on 31 Dec 2014 (corrected) 57,899,409 - (2,035,765) 395,406 - 56,259,050

Increases Alignment with fair value - - (358,404) - (13,478) (371,882)

Gross value - - (431,813) - (14,730) (446,543) Deferred tax effect - - 73,409 - 1,252 74,661

Abolition upon disposal of asssets - - - - - Gross value - - - - - - Deferred tax effect - - - - - -

Impairment of financial assets on disposal - - - - - (transfer of negative revaluation surplus into expenses) - - - - - -

Gross value - - - - - - Deferred tax effect - - - - - -

Abolition into debit of profit brought forward - - - - (193,030) (193,030) Gross value - - - - (210,962) (210,962) Deferred tax effect - - - - 17,932 17,932

Alignment with fair value - - - (2,501) - (2,501) Gross value - - - (3,014) - (3,014) Deferred tax effect - - - 512 - 512

Utilization of revaluation reserves for impairment - - - - - - Gross value - - - - - - Deferred tax effect - - - - - -

Abolition upon disposal of assets (5,995,354) - - - - (5,995,354) Gross value (6,661,504) - - - - (6,661,504) Deferred tax effect 666,150 - - - - 666,150

Abolition to credit of profit brought forward - - - - - - Gross value - - - - - - Deferred tax effect - - - - - -

Closing balance as on 31 December 51,904,055 - (2,394,169) 392,904 (206,508) 49,696,283

Annual Report 2015

132

Capital to minor shareholders

Minor shareholders as on 31 December 2015

Capital of minor shareholders amounts in 2014 to € -610,964. In 2015 the Group does have a minor

shareholder; the whole equity is in holding of the controlling holder.

Return on equity II - annotations

(in EUR) 2015 2014-corr. 2014

Net profit / loss for the period (6,981,309) 7,041,544) 111,038 Changes in surplus from revaluation of intangible and tangible fixed assets (5,995,354) (133,050) 133,050 -

Gross value (5,995,354) (160,301) 160,301 Deferred tax effect (27,251) 27,251)

Changes in surplus from revaluation of financial assets on disposal (360,905) (1,337,767) (251,313) Gross value (434,826)

(1,611,769) (302,786) Deferred tax effect 73,920 274,002 (51,473)

Profit / loss from translation of financial statements of the companies abroad (exchange rate difference effect) - - Gross value - - Deffered tax effect - -

Other items of return on equity 6,229,630 170,530 - 170,530 - - actuary profit / loss of profitable programmes (206,508) - -

Gross value (225,692) - - Deferred tax effect 19,184 - -

- effective part of profit / loss from instruments for risk security money management - - Gross value - - Deferred tax effect - -

- share in return on equity II of mergers and joint ventures, calculated pursuant to capital method - - Gross value - - Deferred tax effect - -

- transfer of revaluation surplus to retained profit 5,995,354 160,301 - - Gross value 5,995,354 160,301 - Deferred tax effect - -

- other 440,784 10,229 Gross value 440,784 10,229 - - Deferred tax effect - -

Return on equity for the accounting period – Total (7,107,938) 8,341,831 399,831

in EUR

SUBSIDIARY AND HEAD-OFFICE EQUITY PROFIT /

LOSS 2015

MARINA PORTOROŽ d.d., Portorož 45,763,392 844,194 DEL NALOŽBE, d.d., Čatež ob Savi 1,186,117 (234,966)

TERME ILIDŽA, d.o.o.,- until disposal (1,042,847)

M KAPITAL, d.d., Portorož 18,388,358 413,802

M NALOŽBE, d.d., Portorož 13,100,060 (2,892)

Annual Report 2015

133

20. Provisions

Provisions from subsidy are being abolished pursuant to the plan (subway garage Žusterna), as are the provisions for subsidy from the European Regional Development Funds and Ministry of Economy of the Republik of Slovenia. Provisions for liabilities to employees represent the calculated long-term liabilities for retirement leave and jubilee premiums in accordance with the actuary calculation. They are being reduced by the actually performed payments. The provisions from subsidy (European Regional Development Fund) are recorded by the incalculated depreciation. Provisions will have been drawn in the next 20 years pursuant to the actuary calculation. The provisions for liabilities to employees are formed pursuant to actuary calculation accomplished by 3 Sigma d.o.o., Ljubljana, company, as on 31 december 2015 and consideration of actuary calculation guidelines.

21. Financial liabilities

This annotation provides the information on quantity and conditions of acquired loans. More information on exposure of the Group to interest rate and exchange rate risk is provided in item »Financial Instruments«.

Dynamics of provisions and long-term accrued expenses and deferred income

Leave allowance, Acquired Subsidy Provisions jubilee premiums subsidy for for for tricky covering of assets Lawsuit Other

(in EUR) Contracts expenses provisions Total

Opening balance as on 1 January 11,428 648,840 70,129 5,727,616 94,179 6,552,192

Changes during the year:

Formation - 313,343 7,596 5,600 - - 326,539 Consumption - (103,775) (490,397) (7,848) - (602,019) Abolishment - (17,661) - - - (18,661) Discounting 31,497 31,497 - - - -

Closing balance as on 31 December 11,428 871,244 70,129 5,727,616 - 94.179 6,289,548

Annual Report 2015

134

The interest rate of long-term loans amounts to EURIBOR + 3.5 % up to EURIBOR + 6.15 % in some of the long-term loans however the rate is fixed amounting to 5 %. The most distant long-term loan is due in 2018.

Amount toal of loans warranted by mortgage in favour of creditors amounts to € 42,576,847. Book value of the

mortgaged intangible assets amounts to € 101,111,458.

Long term financial liabilities

(in EUR) 31 Dec 2015 31 Dec 2014

Long-term financial liabilities to companies of the Group - - Long-term financial liabilities to mergers - - Long-term loan from banks and companies in the country 20,446,228 23,493,382 Long-term loans from banks and companies abroad - - Long-term financial liabilities from bonds - - Long-term debts from financial lease 25,453 37,119 Long-term financial liabilities to natural persons - - Other long-term financial liabilities - - Short-term part of long-term financial liabilities (11,429,683) (4,481,889)

Total 9,041,998 19,048,611

Short-term financial liabilities

(in EUR) 31 Dec 2015 31 Dec 2014

Short-term financial liabilities to subsidiaries - Short-term loans from banks and companies within the country 35,023,658 42,976,151 Short-term loans from banks and companies abroad - Short-term financial liabilities from bonds - Short-term loans from natural persons - Short-term liabilities from partition of profit / loss account 66,125 51,611 Liabilities from capital deposits until registration - Other short-term financial liabilities 12,776 63,417 Short-term part od long-term financial liabilities 11,429,683 6,254,849

Total 46,532,242 49,346,028

Annual Report 2015

135

Terme Čatež company signed 18 April 2014 with the creditors (9 banks) the draft Agreement on Financial

Restructuring defining thereby the relationships related to the financial liabilities up to the year 2016. It does

not involve any write-offs or the conversions of financial liabilities into equity. Pursuant to the Ageement the

creditors should be redeemed from the positive cash-flow and disposal of unneeded intangible assets and

financial investments.

Regarding the expiration date of the Contract (end of 2016) the long-term liabilities of the company transferred

into the short-term part of long-term liabilities.

Terme Čatež company paid in 2015 the principals amounting to € 9.4 mio (from operating revenues € 3.1 mio,

from disposal of intangible assets -Terme Ilidža company and Plava laguna office- €6.3 mio).

The interest rate of short-term loans amounts to EURIBOR + 4.3 %, in some of the short-term loans however

the rate is fixed amounting to 4.2 % and 5.5 %.

22. Deferred tax liability

* Corrected value 2014: 80,985, thus total 12,286,913

Deferred tax liability

Deferred tax Deferred tax through profit/ through revaluat.

(in EUR) 31 Dec 2014 loss account reserves 31 Dec 2015

Revaluation of intangible assets to fair value - - - Revaluation of tangible assets to fair value 11,933,890 - (1,413,046) 10,520,844 Revaluation of financial investments to fair value 406,459* (512) 80,473 Revaluation of financial investments – transfer to deferred tax liability - - - Revaluation before risk of secured items - - - Transfer of tax liability to future years due to application of new accounting standards - - - Difference between tax and book value of assets from acquisition and liabilities (take-overs) 272,039 - - 272,038 Depreciation rate for taxation purpose is bigger than operating one - - - Enhanced depreciation of inventory for taxation purpose - - -

12,612,388 - (1,413,558) 10,873,356

DYNAMICS OF SHORT-TERM FINANCIAL LIABILITIES TO BANKS AND OTHERS

Principal New Transfer to Principal (loan) loans within Long-term Exch.rate Payments as on

(in EUR) 1 January the year part difference During year 31 Dec

Creditor

Banks in the country 45,178,251 450,000 (950,000) - (10,457,968) 34,220,284 Transfer from long-term part 453,338 1,659,520 - - (453,338) 1,659,520 Banks in the country - total 45,631,585 2,109,520 (950,000) - (10,911,304) 35,879,802 Banks abroad 1,772,960 - - - (1,772,960) - Other creditors 826,456 59,800 - 2,268 (85,145) 803,379 Transfer from long-term part 1,000,000 9,770,163 - - (1,000,000) 9,770,163 Other creditors - total 1,826,456 9,829,963 - 2,268 (1,085,145) 10,573,542 Other financial liabilities 115,027 970,983 - - (1.007.112) 78,898 Short-term financial liabilities - Total 49,346,027 12,910,466 (950,000) 2,268 (14,776,521) 46,532,242

Annual Report 2015

136

23. Short-term operating liabilities and short-term deferred income and accrued expenses

24. Ex-balance evidence

Ex-balance items

(in EUR) 31 Dec 2015 31 Dec 2014

Mortgage on intengible assets 22,752,671 23,109,103 Mortgage of tangible assets - - Mortgage of securities - - Granted warrants and pledge 8,109,868 8,110,000 Other ex-balance items - -

Total 30,862,539 31,219,103

Short-term deferred income and accrued expenses

(in EUR) 31 Dec 2015 31 Dec 2014

Accrued expenses 26,384 38,993 Short-term deferred income 1,044,232 1,097,094 VAT from down-payments

Total 1,070,616 1,136,088

Short-term operating liabilities

(in EUR) 31 Dec 2015 31 Dec 2014

Short-term liabilities to subsidiaries - - Short-term liabiities to suppliers

On domestic market 3,477,931 3,456,169 On foreign markets 268,230 251,903

Short-term promisory note liabilities Short-term liabilities from down-payments and deposits 1,473,873 1,315,903 Short-term liabilities from oepration on the account of others 355 18,635 Short-term liabilities to employees 831,676 1,057,367 Short-term liabilities to state and other state entities 430,688 429,844 Short-term liabilities to creditors 268,896 250,429 Other short-term operating liabilities 30,047 41,372 Short-term part of long-term operating liabilities - -

Total 6,781,695 6,821,625

Annual Report 2015

137

25. Financial instruments

The implementation of financial instruments registers the following risks:

credit risk Book vallue of financial assets and liabilities equals fair value. Related to financial instruments are the risks as follows:

credit risk

liquidity risk

marketing risk

currency risk

interest rate risk. This section deals with the Group risks, goals, trends and procedures for risk measurement and management and capital management. Other quantity indicators are described in the section Annotations to Consolidated Financial Report. The Management Board in separate subsidiary is fully liable for the risk management subdued to the Group. The guidelines of risk management are set in order to analyse the risks, which threaten the Group and according to them suitable restrictions and controls are undertaken. The trends and risk management are being regularly controlled followed by the corresponding reaction. By education trainings and risk management standards the Group tries to develop a disciplined and constructive climate, where the roles are strictly obeyed. Credit risks Credit risk is the risk, that the Group would suffer a financial loss, if a customer or partner would not fulfill his obligations from the contract. This type of risk originates from the accounts payable from customers and asset-backed securities. Operating and other account receivables Exposure to risk from loans depends primarily on the type of customer. The structure of the Group's customers as well as the liquidity factor of the State, where the customer operates, does not have a big impact on the risk. The customers are divided into groups according to their characteristics: whether the customer is a single company or a group of companies, wholesaler or retailer or end-user as to the geographic positions, operation mode, duration of claims, days overdue and financial troubles in the past. Customers with a high risk mark are listed in separate files and business with them is limited (all future future business is based on advance payments).

Fair value of financial instruments

(in EUR) 31 Dec 15 31Dec14-corr. 31Dec 14

Cas and cash equivalents 1,294,415 762,673 762,673 Financial assets on disposal 1,439,779 1,874,605 35,239,356 Loans granted 4,233,124 4,008,407 4,008,407 Operating accounts payable 4,631,532 4,111,665 4,111,665

Assets total 11,598,850 10,757,349 44,122,100

Loans acquired 55,495,342 68,279,610 68,279,610 Other financial liabilities 78,898 115,029 115,029 Operating liabilities 6,781,696 6,821,625 6,821,625

Liabilities total 62,355,936 75,216,264 75,216,264

Annual Report 2015

138

The goods are sold in such a manner, that the ownership is kept until the customer has paid his liabilities in total; the Group is insured in case of non-payment. For operating and other receivables the Group does not require a deposit. The Group forms a correction due to impairment, which represents the estimated loss out of operation and other receivables and investments. The main two elements of correction are the special part of loss referring to single important risks, and common part of loos formed for the groups of similar assets due to losses, which appreared and are not yet defined. The correction of loss total is determined by the data from the past referring to the payment manner of similar financial assets. Accounts receivable include outstanding payments of domestic and foreign customers. Liquidity risks Liquidity risk means, that the Group will not be able to settle its financial liabilities on their due date. The highest liquidity possbile is provided by the current cash-flow to make up for the liabilities in due time under ordinary and stressed circumstances, without loss or bad image suffering. Liquidity is provided by planning of cash-flow on daily, monthly and annual level. A special attention was paid to daily contacts with the creditor banks. The Group co-operates with more banks, but due to an adverse economic situation the acquisition of additional funds is a tricky one. We estimate the risk as moderate to increased. The Group is not exposed to lower liquidity risk and changes in market price of securities, since it is not in possession of investments into merchandising securities. Long-term liquidity risk is nevertheless present, but of lesser importance, due to an effective asset management, cash-flow provision, creditability, quality and merchandising of the assets. We estimate such a risk as moderate. Marketing risks Marketing risks are changes in market prices such as rate of exchange, rate of interest and holding instruments. The goal of managing such risks is to control and surveil the exposure of such risks within reasonable limits and ptimizing the revenues. The strategy of the company is such, that it minimizes such risks by constant and corresponding marketing activities, by offering new products, quality improvement and own marketing network. The influence of competitors is however present, but is kept moderate. The Group has been considering the risks related to an unexpected price-booming of incoming goods, raw material and service. In the case of loss of a supplier or changes of sales and payment terms, the Group responds immediately by providing and including a new supplier under the very same terms and conditions as the previous one. The risks of the kind are insured by contracts. The risks related to changes in price of raw material are relatively low, since predominantly service character of operation of the company (23 % in the structure of revenues). Currency risks Slovenia being a member of EU (ERM2) would mean no currency risk exposure. The risk is being additionally reduced since the visitors are predominantly foreigners paying in €uro. Currency risk is being reduced also by the fact, that the accommodation amenities host a little less 49 % foreign guests paying mostly in Euro.

Interest rate risk Interest rate risk has got in the Group a foremost influence on the operation, since bank loans are granted pursuant to a variable interest rate (Euribor). Equity management Management Board decided on keeping a rather substantial amount in equity to justify the confidence of shareholders, creditors and market and permanent growth and development of the Group. The book value of Terme Čatež Group's equity amounts as on 31 December 2015 € 107,348,388, as on the same day of the year before € 124,442,699, including the corrections € 115,450,372. The Supervisory Council monitors the return on equity, defined by the Group as net operation profit divided with equity (minor holdings excl.). The Group holds 6,840 treasury shares.

Annual Report 2015

139

Financial risk analysis Sensibility to changes in rate of interest As regards financial risks the Group is by far most vulnerable to the interest rate changes, since long-term loans are based on variable rate of interest (EURIBOR). The change in each tendth of percent (upon the unchanged indebtedness as on 31 December 2015) increases the costs of interests by € 549,130.

Change in revenue Adjusted revenues (in EUR) by interests by interests

Increased average rate of interest by 1 hundreth point 80,420 270,522 by 1,5 hundreth point 120,630 310,732

Decreased average rate of interest by 1 hundreth point 80,420 - 109,682 by 1,5 hundreth point 120,630 - 69,472

Change in expenses Adjusted expenses (in EUR) by interests by interests

Increased average rate of interest by 1 hundreth point 549,130 2,958,363 by 1,5 hundreth point 823,695 3,232,928

Decreased average rate of interest by 1 hundreth point -549,130 - 1,860,103 by 1,5 hundreth point -823,695 - 1,585,530

Risk in changes of interest rate

Book value (in EUR)

Financial instruments in fixed interest rate Financial assets 807,919 Financial liabilities 5,489,370

Financial instruments in variable rate of interest Financial assets 3,425,205 Financial liabilities 50,084,871

Annual Report 2015

140

Sensibility to changes in fair value

Sensibility to changes in currency

Since the payment occurs mostly in domestic currency (€), the Group is not affected by the currency changes. Sensibility to increased indebtedness If Terme Čatež Group additionaly indebted by € 1 M, this would mean (upon the average interest rate as on 31 December 2015) the increased interests by € 39.9 k. Sensibility to due terms of payment

Liquidity risk

Book value Due within one Due from one Due over (in EUR) year to 5 years 5 years

Operating liabilities 6,781,696 6,470,803 310,893 - - Loans granted by incorporated companies - - - - Loans granted by other legal and natural persons 12,006,678 10,652,442 1,354,235 - Loans granted by banks 43,567,563 35,879,800 7,687,763 -

Total 62,212,362 52,814,991 9,397,371 -

Risk against change in fair value

Effect of changes in securities for disposal accounted pursuant to stock price Difference - effect on Difference - effect on

Fair value as on Difference - effect revaluat. rezerve deferred tax (v EUR) 31 Dec 15 on value of financ.invest. value liabilitiy

Fair value as on 31Dec 2015 1,439,779

Uptick of stock price by 10 % 1,583,757 143,978 119,502 24,476 Uptick of stock price by 20% 1,727,735 287,956 239,003 48,952 Uptick of stock price by 30% 1,871,713 431,934 358,505 73,429 Drop of stock price by 10 % 1,295,801 (143,978) (119,502) (24,476) Drop of stock price by 20 % 1,151,823 (287,956) (239,003) (40,631) Drop of stock price by 30% 1,070,845 (431,934) (358,505) (73,429)

Annual Report 2015

141

26. Reporting after sections

Reporting after sections

Sections 2015

(in EUR) Health Dept. Marina Other Total

__________________________________________________________________________________________

Profit & loss account

Operating revenues 1,889,189 5,355,137 27,584,674 34,829,000

Reporting after sections

Sections 2014

(in EUR) Health Dept. Marina Other Total

__________________________________________________________________________________________

Profit & loss account

Operating revenues 2,705,445 5,906,559 28,770,143 37,382,147

27. Conditional liabilities

Terme Čatež Group has got as on 31 December 2015 all evident and known conditional liabilities included in the disclosure/release. Terme Čatež company was sued by Kapitalska družba pokojninskega in invalidskega zavarovanja company due to the change of the AGM-resolution adopted 29 August 2014, i.e. the profit should be allocated in that one part of balance sheet amounting to 4 % of equity should be allocated for the dividend pay-out, i.e. 1.00 (€ one) per share. The company estimates, that the sueing party chances for success are being very low. Hypothecary mortgage granted (warranty for loans acquired): The Group demonstrates in the ex-balance evidence in assets and liabilities the value of guaranties to the companies as mortgage of loans. Other non-current liabilities are insured by drafts.

28. Incorporated parties

The incorporated companies of Terme Čatež Group operate by means of contracts under regular market conditions, as follows:

As on 31 Dec 2014 the Shareholders' Register reveals, that the Management Board and Supervisory Council

members hold 1,022 shares, i.e. 0.21 % of all the shares of Terme Čatež company, the General Manager holds

41 shares.

Annual Report 2015

142

There are no rights pertaining to the Management Boards and Supervisory Councils for the acquisition of

shares of the issuer.

There were no loans, warrants or accounts payable pertaining to the members of Management Boards or Supervisory Councils members. The company has not got the schedule on participation of the employees in equity of the issuer. Management Boards and Supervisory Council members can acquire the shares under the same conditions as the other participants in the capital market.

Interactive business:

Liabilities from warrants: Marina Portorož company – 1,805,952

Survey of equity and net profit / loss in 2015 within the Group:

Terme Čatež group: Survey of equity and net profit / loss statement 2015

in EUR

SUBSIDIARY AND HEAD-OFFICE EQUITY PROFIT / LOSS

2015

MARINA PORTOROŽ d.d., Portorož 45,763,392 844,194

DEL NALOŽBE, d.d., Čatež ob Savi 1,186,117 (234,966)

TERME ILIDŽA, d.o.o., Ilidža, Sarajevo (1,042,847)

M KAPITAL, d.d., Portorož 18,388,358 413,802

M NALOŽBE, d.d., Portorož 13,100,060 (2,892)

Investment Accounts payable as on 31 dec 2015

Short-term prepaid expenses Loans granted

Accounts payable as on 31 dec 2013 Loans acquired

Operating revenues

Revenues from interests

Material costs

Other service costs

Disbursem. for interests

Marina d.d., Portotož 0 14,685 0 14,549 402,086 19,425 0

51,822 16,140 M kapital d.d. 0 0 0 1,086,757 11,925,002 0 0 0 0 325,370 M naložbe d.d. 0 0 0 0 0 0 0 0 0 0 Terme Ilidža d.o.o. (until disposal) 0 0 0 0 0 0 740,860 0 0 0 Del naložbe d.d. 310,894 0 177,918 43,101 189,963 206,393 8,438 165,911 3,438 2,618

Skupaj 310,894 14,685 177,918 1,144,407 12,517,051 225,818 749,289 165,911 55,260 344,128

Annual Report 2015

143

29. Remunerations to Management Boards and Supervisory Councils

Survey of gross remuneration to Management Board of Terme Čatež Group in 2015 in EUR

Company Gross rem.; fixed part

Gross remun.; variable part Bonuses

Other allowances

Premium pursuant to resol.

Gross remuner. TOTAL

Terme Čatež d.d. 127,823 0 0 0 0 127,823 Marina Portorož d.d. 34,709 120,000 7,765 9,525 0 171,998 M kapital d.d. 0 0 0 0 0 0 M naložbe d.d. 0 0 0 0 0 0 Del naložbe d.d. 12,000 0 0 340 0 12,340 TOTAL 259,823 34,709 7,765 9,864 0 312,161

Survey of gross remuneration to Management Board of Terme Čatež Group in 2014 in EUR

Company Gross rem.; fixed part

Gross remun.; variable part Bonuses

Other allowances

Premium pursuant to resol.

Gross remuner. TOTAL

Terme Čatež d.d. 100,475 0 0 0 35,421 100,475 Marina Portorož d.d. 120,000 1,068 0 3,344 0 124,412 M kapital d.d. 0 0 0 0 0 0 M naložbe d.d. 0 0 0 0 0 0 Del naložbe d.d. 12,000 428 0 0 0 12,428 Terme Ilidža d.o.o. 25,170 0 0 4,940 0 30,110 TOTAL 257,645 1,068 0 8,712 35,421 267,425

Survey of net remuneration to Management Board of Terme Čatež Group in 2015 in EUR

Company Net rem.; fixed part

Net remun.; variable part Bonuses

Other allowances

Premium pursuant to resol.

Net remuner. TOTAL

Terme Čatež d.d. 77,189 0 0 0 0 77,189 Marina Portorož d.d. 67,830 13,571 8,890 0 0 90,291 M kapital d.d. 0 0 0 0 0 0 M naložbe d.d. 0 0 0 0 0 0 Del naložbe d.d. 8,775 200 0 0 0 8,975 Total 153,794 13,571 9,090 0 0 173,495

Survey of net remuneration to Management Board of Terme Čatež Group in 2014 in EUR

Company Net rem.; fixed part

Net remun.; variable part Bonuses

Other allowances

Premium pursuant to resol.

Net remuner. TOTAL

Terme Čatež d.d. 62,049 0 0 0 0 62,049 Marina Portorož d.d. 59,141 3,160 0 0 0 62,301 M kapital d.d. 0 0 0 0 0 0 M naložbe d.d. 0 0 0 0 0 0 Del naložbe d.d. 8,775 312 0 0 0 9,087 Terme Ilidža d.o.o. 16,035 3,068 0 0 0 19,103 TOTAL 146,000 0 0 6,540 27,451 152,540

Annual Report 2015

144

Survey of gross remuneration to Supervisory Councils of Terme Čatež Group in 2015

in EUR

Company

Attendance fee and commuting

Premium pursuant to resolution

Payment for office

Gross remunerat. TOTAL

Terme Čatež d.d. 9,818 0 162,00 171,818

Marina Portorož d.d. 25,818 0 0 25,811

M naložbe d.d. 0 0 0 0

M kapital d.d. 0 0 0 0

Del naložbe d.d. 4,647 0 0 4,647

Terme Ilidža d.o.o. 0 0 0 0

TOTAL 40,276 0 162,000 202,276

Survey of gross remuneration to Supervisory Councils of Terme Čatež Group in 2014 in EUR

Company

Attendance fee and commuting

Premium pursuant to resolution Paym.for office TOTAL

Gross remunerat.

Terme Čatež d.d. 7,333 0 215,140 222,473 Marina Portorož d.d. 23,160 0 0 23,160 M naložbe d.d. 0 0 0 0 M kapital d.d. 0 0 0 0 Del naložbe d.d. 516 516 0 0 TOTAL 46,210 0 215,140 246,149

Survey of net remuneration to Supervisory Councils of Terme Čatež Group in 2015 in EUR

Company

Attendance fee and commuting

Premium pursuant to resolution Paym.for office

Gross remunerat. TOTAL

Terme Čatež d.d. 7,429 0 121,422 128,851 Marina Portorož d.d. 18,772 0 0 18,772 M naložbe d.d. 0 0 0 0 M kapital d.d. 0 0 0 0 Del naložbe d.d. 3,380 0 0 3,380 TOTAL 29,581 0 121,422 151,003

Survey of net remuneration to Supervisory Councils of Terme Čatež Group in 2014 in EUR

Company

Attendance fee and commuting

Premium pursuant to resolution Other

Gross remunerat. TOTAL

Terme Čatež d.d. 5,407 0 158,301 163,708 Marina Portorož d.d. 16,844 0 0 16,844 M naložbe d.d. 0 0 0 0 M kapital d.d. 0 0 0 0 Del naložbe d.d. 400 0 0 400 TOTAL 22,651 0 158,301 180,952

Annual Report 2015

145

30. Remuneration pursuant to individual contracts

Pursuant to individual contracts in Terme Čatež Group as on 31 Dec 2015 the gross remuneration amount paid was € 1,003 k, i.e. € 616 k net amount.

Survey of gross remuneration to holders of individual contracts in Terme Čatež Group in 2015 in EUR

Company Gross remunerat.

Other (premiums, bonuses)

Gross remuner. TOTAL

Terme Čatež d.d. 703,008 17,495 720,503 Marina Portorož d.d. 43,465 239,167 282,987 M naložbe d.d. 0 0 0 M kapital d.d. 0 0 0 Del naložbe d.d. 0 0 0 TOTAL 942,530 60,960 1,003,490

Survey of gross remuneration to holders of individual contracts in Terme Čatež Group in 2014 in EUR

Company Gross remunerat.

Other (premiums, bonuses)

Gross remuner. TOTAL

Terme Čatež d.d. 1,093,170 23,196 1,116,366 Marina Portorož d.d. 283,372 9,674 293,047 M naložbe d.d. 0 0 0 M kapital d.d. 0 0 0 Del naložbe d.d. 0 0 0 Terme Ilidža d.o.o. 202,207 202,207 0 TOTAL 1,578,749 32,870 1,611,620

Survey of net remuneration to holders of individual contracts in Terme Čatež Group in 2015

Company Net remunerat.

Other (premiums, bonuses)

Net remuner. TOTAL

Terme Čatež d.d. 416,784 16,485 677,447 Marina Portorož d.d. 155,040 5,339 157,635 M naložbe d.d. 0 0 0 M kapital d.d. 0 0 0 Del naložbe d.d. 0 0 0 TOTAL 571,824 43,793 615,616

Annual Report 2015

146

31. Audit costs and tax consultancy costs

Pursuant to the contract the auditing costs of the companies of Terme Čatež Group amounted in 2015 to €49,760; the other audit costs for the Group amounted to € 4,050. The audit of Annual Report 2015 was conducted by the audit company PKF d.o.o. , pursuant to the resolution of AGM of Terme Čatež company.

Survey of net remuneration to holders of individual contracts in Terme Čatež Group in 2014

Company Net remunerat.

Other: prem., holid. leave,bonus.

Net remuner. TOTAL

Terme Čatež d.d. 647,696 16,764 664,460 Marina Portorož d.d. 175,903 6,655 182,558 M naložbe d.d. 0 0 0 M kapital d.d. 0 0 0 Del naložbe d.d. 0 0 0 Terme Ilidža d.o.o. 131,507 131,507 0 TOTAL 955,106 23,419 978,525

Annual Report 2015

147

Poročilo neodvisnega revizorja za Skupino Terme Čatež

Annual Report 2015

148

Annual Report 2015

149

Report of independent auditor on Terme Čatež Group (translation from the previous two pages)

PKF revizija in svetovanje d.o.o. PKF Authorized Auditors &

Business Counsellors REPORT OF INDEPENDENT AUDITOR

To shareholders of incorporated companies of Terme Čatež company

We have audited the enclosed financial statements of Terme Čatež company and its subsidiaries (Terme Čatež Group), which include the

profit / loss statement as on 31 December 2015, return on equity II report, capital and cash flow statement as on the very same day and

the review of core financial guidelines of the Group as well as other annotations thereto. Audited was also the Business Report.

Liability of Management Board for financial statements

The Managemennt Board is liable for the preparation and fair demonstration of consolidated financial statements pursuant to the

International Financial Reporting Standard as endorsed by the European Union, and for such an internal control which reflects the

decisions adopted by the former, in order to enable the very preparation of financial statements lacking of intentionally misleading

information due to fraud or error.

Auditor's liability

Our liability is to express the opinion on the financial statements of the Group presented in the Annual Report pursuant to the

implemented audit. The audit was compiled in accordance with the Inernational Auditing Standards and is based on ethical bias, planning

and implementation of auditing process aiming at the acquirement of acceptable evidence, that the statements do not imply important

misleading data.

Auditing includes the implementation of procedures required for the procurement of evidence on amounts and disclosures in financial

statements. The choice of methods is a matter of an auditor and as such also includes the assessment of risks related to incorrect

statements (aiming at fraud or error). Upon the assessment of those risks, the auditor evaluates the performance of internal control in

connection with the preparation and fair presentation of financial statements of a company, in order to pinpoint suitable audit procedures

rather than express the opinon on successfulness of internal control. The Auditor's Report also includes the evaluation of suitablity of

applied financial guidelines and verification of financial assessments conducted by the Management Board, as well as the evaluation of the

comprehensive presentation of financial statements.

We believe, that the acquired proofs of auditing are an ample and suitable base for our Auditor's Report.

Reservation matter

The subsidiary Marina Portorož company holds as on 31 december 2015 a real estate pursuant to the revaluation model amounting to €

52,193. The Management Board of the subisdiary did not acquire the new assessment for the compilation of Financial Report 2015,

therefore we could not make sure, implementing the available audit methods, whether and to what extent it would be neccessary to

revaluate the estate mentioned due to the impairment as on 31 December 2015.

Opinion about reservation

With the exception of possible effects of the matter described in the Paragraph above (Reservation matter), the attached consolidated

financial statements are in our opinion a true-to-life and fair presentation of the financial situation of Terme Čatež Group as on 31

December 2015, its profit & loss account and cash-flow statement for the respective year, prepared in compliance with the International

Financial Reporting Standards as endorsed by the European Union.

Emphasis of matter

Pursuant to the Annotation 24 to the Financial Statement (»Financial Liabilities«) the company made in 2014 the draft Agreement on

Financial Restructuring defining therewith the relationships related to financial liabilities up to incl. 31 December 2016. Management Board

of the company is doig their best to sign the Appendix to the Agreement on financial restructuring in order to manage the liquidity risk as

Annual Report 2015

150

the uncertainty consequence as stated in Annotation 27.3 (Liquidity risks) to the Report. Should this Agreement with the creditor banks not

be rolled-over, there exists an uncertainty as to the further operation of the company. The Financial Statement does not include

accidental/possible corrections which could be the consequence of that uncertainty.

Our opinion to the emphasis of matter has not been aligned.

Paragraph on other subject matter

The Annual Report is aligned with the audited financial statements.

In Ljubljana, 21 April 2016

PKF revizija in svetovanje d.o.o. PKF revizija in svetovanje d.o.o.

Marjan Habjan, Authorized Auditor

Annual Report 2015

151