097900BFHJ0000029454-2022-12-31-en

ANNUAL

REPORT

CONTENT

INTRODUCTION

CORPORATE PROFILE

INVESTOR INFORMATION

MANAGEMENT BOARD

SUPERVISORY BOARD

CORPORATE GOVERNANCE CODE COMPLIANCE STATEMENT

ECONOMIC ENVIRONMENT, MARKET AND REGULATORY OVERVIEW

ECONOMIC BACKGROUND

CROATIAN MARKET OVERVIEW

REGULATORY OVERVIEW

CHANGES IN REPORTING

BUSINESS REVIEW

SUMMARY OF KEY FINANCIAL INDICATORS – HT GROUP (INCLUDING CRNOGORSKI TELEKOM)

SUMMARY OF KEY FINANCIAL INDICATORS – HT GROUP IN CROATIA

SUMMARY OF KEY FINANCIAL INDICATORS – CRNOGORSKI TELEKOM STANDALONE

OVERVIEW OF SEGMENT PROFITABILITY

HT INC. FINANCIAL HIGHLIGHTS

CORPORATE SOCIAL RESPONSIBILITY

HT GROUP FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED BALANCE SHEET

CONSOLIDATED CASH FLOW STATEMENT

CONSOLIDATED FINANCIAL STATEMENTS

INDEPENDENT AUDITOR’S REPORT

RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CASH FLOWS

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Corporate profile

Investor information

Management board

Supervisory board

Corporate governance code

compliance statement

Supervisory board report

INTRO-

DUC-

TION

6 7

INTRODUCTION CORPORATE PROFILE

At a Glance

HT Group (Hrvatski Telekom d.d. (HT d.d. or the Company) and its

subsidiaries (together: HT Group)) is the leading provider of tele-

communications services in Croatia, offering fixed and mobile te-

lephony services, as well as wholesale, Internet and data services.

Hrvatski Telekom d.d., including its subsidiary companies, is the

leading provider of comprehensive information and communica-

tion solutions and services at the whole territory of the Republic

of Croatia. HT Group provides wide spectrum of fixed broadband

network products and services, mobile communications, inter-

net, IPTV, IoT services and data transfer services between devices

(M2M). Additionally, Group also provides integrated Information

and Communication Technology solutions (ICT) for business and

corporate customers and data transfer services (leased lines,

Metro-Ethernet, IP/MPLS).

History and Incorporation

Hrvatski Telekom d.d. is a joint stock company, majority owned by

Deutsche Telekom Europe B.V. It was incorporated on 28 Decem-

ber 1998 in the Republic of Croatia, pursuant to the provisions of

the Act on the Separation of Croatian Post and Telecommunica-

tions into Croatian Post and Croatian Telecommunications, by

which the business operation of the former HPT – Hrvatska pošta

i telekomunikacije (HPT s.p.o.) was separated and transferred into

two new joint stock companies, HT – Hrvatske telekomunikacije

d.d. (HT d.d.) and HP – Hrvatska pošta d.d. (HP d.d.). The Compa-

ny commenced operations on 1 January 1999.

Pursuant to the terms of the Act on Privatization of Hrvatske

telekomunikacije d.d. (AoP) (Official Gazette No. 65/99 and No.

68/01), on 5 October 1999, the Republic of Croatia sold 35% of

shares in HT d.d. to Deutsche Telekom AG (DTAG). On 25 Octo-

ber 2001, DTAG purchased further 16% of shares in HT d.d. and

thus became the majority shareholder with a 51% stake in the

Company.

Pursuant to the Share Transfer Agreement, in December 2013,

DTAG transferred 51% of its shares in the Company to T-Mobile

Global Holding Nr. 2 GmbH. Pursuant to the Deed of issuance of

a share against non-cash contribution, in February 2014, T-Mo-

bile Global Holding Nr. 2 GmbH transferred 51% of the shares in

the Company, to CMobil B.V. In April 2015, CMobil B.V. changed

its registered name into Deutsche Telekom Europe B.V. The

above-mentioned transfers of shares were executed as a part of

the internal restructuring performed within DTAG and as a result

thereof, DTAG’s influence in HT d.d. remains unchanged.

In 2002, HT mobilne komunikacije d.o.o. (HTmobile) was estab-

lished as a separate legal entity and subsidiary wholly owned by

HT d.d. for the provision of mobile telecommunications services.

HTmobile commenced commercial activities on 1 January 2003

and in October 2004, the company’s registered name changed to

T-Mobile Croatia d.o.o. (T-Mobile).

On 1 October 2004, the Company was re-branded in T-HT, thus

becoming a part of the global T- family of Deutsche Telekom. This

evolution of corporate identity was followed by the creation of

trademarks for the two separate business units of the Group: the

fixed network operations business unit, T-Com – which provides

wholesale, Internet and data services; and the mobile operations

business unit, T-Mobile.

On 17 February 2005, the Government of the Republic of Croatia

transferred 7% of its shares in HT d.d. to the Fund for Croatian

Homeland War Veterans and Their Families, pursuant to the AoP.

In May 2006, the Company acquired 100% of shares of Iskon Inter-

net d.d., one of the leading alternative telecom providers in Croatia.

As part of the continued privatization of HT d.d., on 5 October

2007, the Republic of Croatia sold 32.5% of HT ordinary shares

through an Initial Public Offering (IPO). Of the total shares includ-

ed in the IPO, 25% were sold to Croatian retail investors, while

7.5% were acquired by Croatian and international institutional

investors.

Following the sale of shares to current and former employees of

Hrvatski Telekom and Croatian Post in June 2008, the Govern-

ment of the Republic of Croatia reduced its holding from 9.5% to

3.5%, while private and institutional investors are holding a share

of 38.5% in total.

In October 2009, T-Mobile Croatia was merged into HT d.d., ef-

fective as of 1 January 2010. HT Group was organized into Res-

idential and Business unit. On 21 May 2010, the Company’s reg-

istered name was changed from HT – Hrvatske telekomunikacije

d.d. to Hrvatski Telekom d.d.

On 17 May 2010, HT d.d. completed the acquisition of IT services

company Combis d.o.o., extending its reach into the provision of

IT software and services for a client base that ranges from small

businesses to government departments.

In December 2010, according to the records stored in the Central

Depository & Clearing Company, the Republic of Croatia trans-

ferred 3.5% of its shares in the Company, to the Pensioners’ Fund.

On 12 December 2013, the Pensioners’ Fund transferred 3.5% of

shares in the Company to the account of the Restructuring and

Sale Center (Centar za restrukturiranje i prodaju – CERP). The Re-

public of Croatia established CERP in July 2013 as legal succes-

sor to the Government Asset Management Agency. As a result,

the Republic of Croatia again holds a stake in HT d.d. In Decem-

ber 2015, following the public auction, CERP sold 500,000 of its

shares in the Company (0.6% of HT d.d. share capital) via Zagreb

Stock Exchange trading system. Following this sale of shares

CERP reduced its holding from 3.5% to 2.9%.

In June 2014 HT took over management of OT-Optima Telekom

d.d. (Optima), following the completion of the pre-bankruptcy

settlement procedure. By the conversion of claims into share

capital and following the realization of a Mandatory Convertible

Loan instrument in July 2014, HT has acquired total of 19.1% of

Optima’s share capital.

Zagrebačka banka d.d., as the largest creditor of Optima, trans-

CORPORATE PROFILE

INTRODUCTION CORPORATE PROFILE

ferred controlling rights acquired in the pre-bankruptcy settle-

ment procedure to HT. Croatian competition agency (Agencija za

zaštitu tržišnog natjecanja -AZTN), has determined a set of mea-

sures defining the rules of conduct for HT with regard to manage-

ment and control over Optima. The duration of the concentration

of HT and Optima shall be limited to a period of four years, start-

ing from HT's acquisition of control over Optima.

On 3 November 2014 an extraordinary General Assembly of Op-

tima was held, at which the conversion of Tax Administration re-

ceivables into company capital was approved, thereby increasing

the share capital by a total amount of HRK 2,910,110.00. After the

registration of this change in the Court Registry in 2015, the own-

ership interest of HT in Optima decreased to 19.02%.

In July 2016, Optima’s Management Board adopted a strategic

decision on the merger of H1 Telekom d.d. (H1) with Optima in

order to achieve positive synergies among the companies and

to increase Optima’s value for its existing and new shareholders

(previous H1 shareholders). Accordingly, Optima submitted to

the AZTN an Application for Intended Concentration. Following

the aforementioned change in circumstances, HT submitted a re-

quest to prolong the temporary management of Optima until 2021.

In June 2017, AZTN passed the decision by which the duration of

temporary management rights of Optima for HT is prolonged for

an additional three-year period, that is, until 10 July 2021. AZTN

has also reached the decision on conditional approval of the con-

centration pursuant to the Merger Agreement of the company

H1 into Optima, concluded on 29 July 2016. Merger is executed

in such a way that the total assets of H1 are transferred to Optima,

thereby H1 ceases to exist as a separate legal entity, and in exchange

for H1 shares previous H1 shareholders obtain shares of Optima.

The procedure of the merger of H1 into Optima was completed

as at 1 August 2017, and for the purpose of the merger proce-

dure, an increase of share capital of Optima, for the amount of

58,864,560.00 HRK, was also carried out. Increase of share cap-

ital was carried out by issuing 5,886,456 new ordinary shares

that were transferred to previous shareholders of H1 Telekom.

After the registration of this change in the Court Registry in Au-

gust 2017, the ownership interest of HT in Optima decreased to

17.41%. Notwithstanding this decrease in ownership interest, con-

trolling rights transferred to HT pursuant to the Agreement with

Zagrebačka banka have remained unchanged.

At the beginning of January 2017, HT d.d. concluded a Share Pur-

chase Agreement with Magyar Telekom, Nyrt, based in Budapest,

Hungary. Under the agreement, Hrvatski Telekom acquires Mag-

yar Telekom’s 76.53% stake in Crnogorski Telekom A.D., based in

Podgorica, Montenegro, at a purchase price of EUR 123.5 million

(approximately HRK 933 million). Crnogorski Telekom is the larg-

est telecommunications company in Montenegro and provides a

full range of fixed and mobile telecommunications services.

On March 1st, 2018 HT d.d. concluded respective Agreements on

transfer of HT’s interest and shares in its subsidiaries and related

companies seated in Croatia, Iskon Internet d.d., OT-Optima Tele-

kom d.d., Combis, usluge integracija informatickih tehnologija,

d.o.o., Kabelsko distributivni sustav d.o.o. and E-tours d.o.o., to HT

holding, a limited liability company established and fully owned

by HT. Registration of transfers of interest and shares in all of

these companies was conducted during March 2018. Crnogorski

Telekom A.D. is also included in the portfolio of HT holding, as of

January 2017.

In September 2018, upon the obtaining of all necessary regulato-

ry approvals, HT d.d. concluded the sale transaction of its electric

energy business to the buyer RWE Hrvatska d.o.o. HT has been

offering retail electricity services to residential and business cus-

tomers as of December 2013.

In November 2018, HT d.d. concluded a Purchase Agreement

with the company HP-Hrvatska pošta d.d. on acquisition of 100%

stake in the company HP Produkcija d.o.o., provider of evotv ser-

vice. In February 2019 HAKOM approved HT’s takeover of HP

Produkcija d.o.o., thus enabling the closing of the transaction.

Registered name of HP Produkcija d.o.o. has been changed to HT

Produkcija d.o.o. in April 2019. Evotv is a simple service present at

the Croatian PayTV market as of 2012, enabled by using a digital

DVB-T signal which can be received through the existing antenna.

Within the strategy of restructuring non-core parts of HT’s busi-

ness operations, in November 2019 a Contract was concluded

with Uniline d.o.o. on transfer and sale of the share held by HT

holding d.o.o. in the company E-tours d.o.o. Transaction has been

closed on 31 December 2019.

In January 2020, as in accordance with the AZTN decision from

June 2017, HT started the sale process of all of its shares held

in the company Optima, through an Invitation for Submission of

Offers for the Acquisition of Shares in Optima, published in the

printed edition of the international financial herald Financial

Times. In December 2020, HT and Zagrebačka banka d.d. jointly

engaged the investment bank CREDIT SUISSE (DEUTSCHLAND)

AKTIENGESELLSCHAFT, with its registered seat in Frankfurt am

Main, Germany, for the continuation of the sale process of their

shares in the company Optima.

In July 2021, HT and Zagrebačka banka d.d. signed an agreement

with the company Telemach Hrvatska d.o.o. owned by Unit-

ed Group (United Group B.V., The Netherlands) on the sale and

purchase of the shares of the company Optima. The subject of

the transaction is sale of total of 54.31% shares of Optima out of

which 36.90% are owned by Zagrebačka banka, while 17.41% are

owned by HT holding d.o.o., a company in 100% ownership of HT.

The concentration of HT and Optima ceased as of 10 July 2021,

by which date management of HT over Optima ceased as well.

HT and Zagrebačka banka signed the Share Transfer Agreement

on 21 January 2022, whereby they transferred their shares in Op-

tima to the company Telemach. HT holding thus transferred its

17.41% stake and Zagrebačka banka transferred its 36.90% stake

in Optima to Telemach Hrvatska d.o.o., and Telemach Hrvatska

d.o.o. acquired the total of 54.31% of the stake in Optima.

In September 2021, Agreement on transfer of share held by HT

holding d.o.o. in Kabelsko distributivni sustav d.o.o. (KDS) was

8 9

concluded, between HT holding d.o.o. as the transferor company

and HT as the transferee company. HT and KDS concluded on 29

September 2021 the Agreement on merger of KDS into HT. On 1

December 2021 the merger has been entered into the Court Reg-

ister of the Commercial Court in Zagreb, by which the merged

company KDS seized to exist and the acquiring company, HT,

became the universal legal successor of the merged company,

thus entering into all legal relationships of the merged company.

HT and HT Produkcija d.o.o. (HTP) concluded on 15 March 2022

the Agreement on merger of HTP into HT. On 1 June 2022 the

merger has been entered into the Court Register of the Commer-

cial Court in Zagreb, by which the merged company HTP seized to

exist and the acquiring company, HT, became the universal legal

successor of the merged company, thus entering into all legal re-

lationships of the merged company.

INVESTOR INFORMATION

In 2022, CROBEX declined by 4.8%. However, this decline is one

of the lower ones recorded on the equity markets, as many in-

ternational indices such as S&P500, Nasdaq, and DAX, declined

by double-digit numbers. The main drivers have been the war in

Ukraine, combined with high inflation as global economies broke

out of the pandemic.

2022 was another challenging year for the European telecom

sector, grappling with increased capital expenditure needs for

fiber investments and 5G, the emergence of new competitors,

regulatory uncertainty and the overall growth prospects.

HT share overperformed CROBEX and the telecommunications

index STOXX® Europe 600 in 2022, with the share price amount-

ing to HRK 177.50 at the end of the year.

The HT share took first place in the top turnover share selection

according to the Zagreb Stock Exchange criteria. In 2022, the to-

tal regular turnover of HT shares on the Zagreb Stock Exchange

amounted to HRK 176.5 million (2021: HRK 188.8 million).

In 2022 HT received the Share of the Year award according to the

public's choice, for the third year in row. This achievement serves

as a clear validation that both the financial community and public

recognize the value we are generating for our shareholders.

Since its initial public offering in October 2007, HT shares have

traded on the Zagreb Stock Exchange, with Global Depositary Re-

ceipts trading on the London Stock Exchange until the delisting and

termination of the GDR facility on 6 October 2014. The shares will

continue to be listed and tradable on the Zagreb Stock Exchange.

Dividend policy

The dividend policy of the Company was set out in the prospectus

that accompanied its Initial Public Offering in October 2007 and

published on the website of the Company:

Any future dividend, declared and paid in respect of any year, shall

range from 50% to 100% of the Company’s distributable profits

earned in the immediately preceding year. Any annual dividend

shall depend on the overall financial position of the Company and

its working capital needs at the relevant time (including but not

limited to the Company’s business prospects, cash requirements,

financial performance, and other factors including tax and regu-

latory considerations, payment practices of other European tele-

communications operators and general economic climate).

INTRODUCTION INVESTOR INFORMATIONINTRODUCTION CORPORATE PROFILE

HT Share as compared to CROBEX and STOXX® Europe 600

Telecommunications Index, 31 December 2021 - 31 December 2022

Crobex STOXX® Europe 600 Telecommunications

HT Share

Share price performance

10 11

INTRODUCTION INVESTOR INFORMATIONINTRODUCTION INVESTOR INFORMATION

Dividend for the 2021 financial year

On 25 April 2022, the General Assembly of the Company approved

a dividend payment to shareholders of HRK 8.00 per share. HRK 8

per share was paid out of the year-end profit of 2021, in the amount

of HRK 637,768,168.00.

In total, HRK 8 represents a dividend payout ratio of 95.8% from the

Company’s net profit. The dividend was paid in May 2022.

At the end of 2022, this represented a dividend yield of 4.5% on

HT’s closing price of HRK 177.50.

Dividend proposal for financial year 2022

As of 2015, HT announces a minimum target dividend for each year

at the start of that particular year, within the range as set out in our

dividend policy e.g. from 50% to 100% of the Company’s distribu-

table profits depending on its overall financial position and working

capital needs.

To comply with that commitment, in March 2022, HT announced

that it expected to pay out a minimum dividend of HRK 6 per share

out of 2022 net profit.

The Management Board and Supervisory Board of Hrvatski Tele-

kom d.d. propose to this year’s General Assembly the distribution of

the net profit from 2022 in a way that a part of net profit in the amo-

unt of EUR 86.631.479,00 (HRK 652.724.878,53) shall be paid out

as dividend to shareholders, in the amount of EUR 1,10 (HRK 8.29)

per share, a part of net profit in the amount of EUR 5.586.982,71

(HRK 42.095.121,23) shall be allocated to retained earnings and the

remainder of net profit in the amount of EUR 0,62 (HRK 4,67) shall

be used to increase the share capital from Company’s own capital,

in order to express the share capital of the Company as a whole

number.

The General Assembly is planned to be convoked for 10 May 2023.

According to the proposal, the abovementioned dividend will be

paid to shareholders on 22 May 2023 (payment date), registered at

the Central Depository and Clearing Company (SKDD) on 15 May

2023 (record date).

Dividend proposal for financial year 2023

The Management Board currently expects a minimum dividend of

EUR 0.80 per share for the financial year 2023.

Share Buyback Programme

The ongoing Share Buyback Programme (“Programme”) was la-

unched by the Management Board on 28 April 2021, in line with

authorization of the General Assembly as of 23 April 2021, with

commencement as of 29 April 2021 and lasting until 22 April 2026.

The maximum number of shares intended to be acquired within

this Programme is 3,000,000, while the maximum amount alloca-

ted to the Programme is HRK 600,000,000.00. The purpose of the

Programme is to withdraw shares without a nominal value without

reducing the share capital, in accordance with the Article 352 pa-

ragraph 3 item 3 of the Companies Act, in which case the stake of

the remaining shares in the share capital increases and, in a smaller

part, to offer them to employees.

In April 2022 the Company transferred 14,663 Company`s shares

to managers, within the Company`s Share Award Plan (PDD) for

the managers.

In July 2022 the Management Board withdrew 1,271,667 acquired

Company shares without nominal value, without the share capital

of the Company being decreased, and the information on the new

number of shares has been aligned in the Articles of Association of

the Company. Thereby the total number of shares has decreased

from 80,047,509 shares to 78,775,842 shares without nominal va-

lue, while the remaining shares’ participation in the share capital is

being increased.

During 2022 the Company acquired at Zagreb Stock Exchan-

ge in total 979,444 Company shares, representing 1.24% of the

Company’s issued share capital. For this acquisition of Company

shares in 2022, the Company paid out an equivalent value of HRK

180,426,025.09. The total number of Company shares held on

December 31st, 2022, amounted to 19.952, in book value of HRK

3,556,931.12, representing 0.03% of the Company’s issued share

capital.

The Programme is running alongside the Company’s regular di-

vidend payout policy, providing clear evidence of the Company’s

commitment to delivering value to its shareholders.

Shareholder Structure as at 31 December 2022

Deutsche Telekom Europe B.V. 53%

War Veterans’ Fund 6.9%

Restructuring and Sale Center (CERP)/

Republic of Croatia

2.9%

Private and other institutional investors 37.2%

Total number of shares issued: 78,775,842

Deutsche Telekom Europe B.V. is the majority shareholder in HT

with a 53% holding (Deutsche Telekom Europe B.V. is 100% ow-

ned by Deutsche Telekom Europe Holding B.V. whose 100% owner

is Deutsche Telekom Europe Holding GmbH (former name was

T-Mobile Global Holding Nr. 2 GmbH). Deutsche Telekom Europe

Holding GmbH is 100% owned by Deutsche Telekom AG.

The Croatian War Veterans’ Fund owns 6.9%, with the Restructu-

ring and Sale Center (CERP)/Republic of Croatia holding 2.9%.

The remaining 37.2% is owned by Croatian citizens and other do-

mestic and foreign institutional investors. Raiffeisen Pension Funds

is the investor with the largest shareholding among private and in-

stitutional investors. As at 31 December 2022, Raiffeisen Pension

Funds had 11.2% of shares of the Company.

Financial Calendar

Date

Release of fourth quarter and full year

2022 un-audited results

February 23, 2023

Release of full year 2022 audited

results

Proposal on Utilization of Profit

March 23, 2023

Release of first quarter 2023 results April 28, 2023

The General Assembly of the Company May 10, 2023

Release of six months 2023 results July 27, 2023

Release of nine months 2023 results October 31, 2023

The above-mentioned dates are subject to change

General information on Shares

Share ISIN: HRHT00RA0005

Trading symbol at Zagreb Stock

Exchange:

Trading symbol at Central Depository

and Clearing Company

HT-R-A

Reuters: HT.ZA

Bloomberg: HT CZ

Number of Shares: 78,775,842

Type: Ordinary share

Nominal value: No nominal value

Investor Relations

Hrvatski Telekom d.d.

Radnička cesta 21

10000 Zagreb

Tel.: +385 1 49 11080, +385 1 49 11114

Fax: +385 1 49 12012

E-mail: ir@t.ht.hr

12 13

KONSTANTINOS NEMPIS

President of the Management Board (CEO)

Konstantinos Nempis has held the position of Hrvatski Telekom

CEO since, 1 April 2019.

He has over 20 years of experience of working in the telecom-

munications industry, leading national and international teams

in Vodafone Greece and HQ and OTE Group in Greece, where he

held the position of the Chief Commercial Officer for Residential

Customers.

MANAGEMENT BOARD

MATIJA KOVAČEVIĆ

Member of the Management Board (CFO)

Matija Kovačević was appointed Management Board Member

and Chief Financial Officer effective as of 1 August 2022. In his

role, Matija is responsible for finance, internal audit, risk man-

agement, procurement, real estate management and business

transformation.

During his career he held several executive positions in Croatian

Telecom and Deutsche Telecom, gaining extensive international

experience. He was responsible for financial and business steering

and lead a range of transformation and operating model change

projects in Deutsche Telekom's subsidiaries in South-East Europe,

as well as controlling of European Head Office unit at Deutsche

Telekom.

INTRODUCTION MANAGEMENT BOARDINTRODUCTION INVESTOR INFORMATION

MARIJANA BAČIĆ

Member of the Management Board and Chief

Business Officer (COOB)

Marijana Bačić was appointed as Management Board Member

and Chief Operating Officer Business as of 1 September 2022.

In this position, she is responsible for Sales, Business Marketing,

Business Steering and Channel Management, ICT Business Devel-

opment.

During her twenty-year career at Hrvatski Telekom, she had a sig-

nificant role in developing Hrvatski Telekom’s innovative products

and solutions that improved the business of companies of all sizes

and took part in creating and implementing ICT business synergy

within the HT Group.

NATAŠA RAPAIĆ

Member of the Management Board and Chief

Operating Officer Residential (COOR)

Nataša Rapaić has held the position of Member of the Manage-

ment Board and Chief Operating Officer Residential since 2013,

before which she held several senior management positions with-

in HT Group, which she joined in 2003.

Throughout her career, she was an economic analyst in the Eco-

nomic Office at the Embassy of Spain, a financial analyst in the

investment department of the bank Grupo Caixa Galicia, and a

consultant at Madrid-based Europraxis Consulting working on

Telefónica Móviles projects.

14 15

INTRODUCTION MANAGEMENT BOARDINTRODUCTION MANAGEMENT BOARD

IVAN BARTULOVIĆ

Member of the Management Board and Chief

Human Resources Officer (CHRO)

Ivan Bartulović has been Member of the Management Board and

Chief Human Resources Officer since 2019, and responsible for

strategic transformational management that lead to HT’s employ-

er satisfaction and engagement reaching all-time highs.

Before joining Hrvatski Telekom he held senior management posi-

tions with Intesa Sanpaolo Bank, CEMEX Group and A1 Group, and

in case of the latter two was responsible for strategic HR opera-

tions on a multi-country level.

BORIS DRILO

Member of the Management Board and Chief

Technical and Information Officer (CTIO)

Boris Drilo has held the position of Member of the Management

Board and Chief Technical and Information Officer since 2017.

He is responsible for development and implementation of latest

mobile and fixed networks technologies and information and busi-

ness systems.

He previously held the position of HT’s Sector Director in the CTIO

area, and that of Member of the Management Board in charge of

technology and IT with Iskon Internet d.d., a company fully owned

by HT.

He joined Hrvatski Telekom in the 2012, from Ericsson Group,

where he had spent 12 years at managerial functions related to the

development and application of telecommunications networks

and new technologies.

He at the moment also performs the role of the Executive Board

Member with Croatian Employers’ Association.

SINIŠA ĐURANOVIĆ

Management Board Member and Chief

Corporate Affairs Officer (CCO)

Siniša Đuranović was appointed Management Board Member and

Chief Corporate Affairs Officer (CCO) in December 2022. In his

role he is responsible for coordinating and managing the Compa-

ny’s corporate affairs in regard to strategy, M&A, legal and regula-

tory affairs, wholesale, electronic communications infrastructure

and business transformation.

During his career with Croatian Telecom, which started in 2000, he

has led regulatory and legal functions as well as strategic Croatian

Telecom and HT Group projects in Croatia and the region.

He is also a Chairman of the Board of Directors of Crnogorski

Telekom, Management Board member of HT holding d.o.o., Su-

pervisory Board member of the public company Hrvatske teleko-

munikacije d.d. Mostar, and Vice President of Croatian Employers

Association ICT section.

16 17

INTRODUCTION MANAGEMENT BOARD

Company’s Shares Award Plan (PDD)

In 2021 the Company’s Shares Award Plan (PDD) was launched.

Company’s Shares Award Plan (PDD) is a voluntary compen-

sation tool under which a member of the Management Board

has the option to choose HT shares instead of a pay-out of cer-

tain percentage of Short-Term incentive (STI) achieved for the

previous year. PDD participants are entitled to a bonus shares

according to the ratio 7 awarded shares: 1 bonus share, and all

shares must be retained for an uninterrupted period of one year

(lock-up period).

Within the Company`s Share Award Plan (PDD) 2022 for the

managers, HT shares were transferred to Management Board

Members, as follows:

• President of the Management Board (CEO), Mr. Konstantinos

Nempis, acquired 1,623 shares

• Member of the Management Board and Chief Operating

Officer Residential (COO Residential), Mrs. Nataša Rapaić,

acquired 792 shares

• Member of the Management Board and Chief Technical

and Information Officer (CTIO), Mr. Boris Drilo, acquired 317

• Member of the Management Board and Chief Human Resources

Officer (CHRO), Mr. Ivan Bartulović, acquired 251 shares

EU Game Changer

EU Game Changer Incentive Program is introduced in 2022 with

the goal to motivate managers to improve customer centricity

and the Company's profitability. EU Game Changer covers the

period from 1 January 2022 to 31 December 2025 with annual

payment instalments. Actual payments are determined by the

participant group, the number of years of consecutive overper-

formance and the average KPI target achievement for the re-

spective plan year.

Compensation paid out to the Management

Board members in 2022

Konstantinos Nempis, President of the Management Board and

CEO, was paid in 2022 a fixed and variable salary and Long-term

Incentive Plan (LTIP 2018) in gross amount of HRK 4,703,307.

Other benefits amounted gross to HRK 1,220,244 (company car

usage, rental cost, scholarship for children, pension fund and

other). The Christmas gift for children was paid in amount of

HRK 600 net.

Nataša Rapaić, Member of the Management Board and COO

Residential, was paid in 2022 a fixed and variable salary and

Long-term Incentive Plan (LTIP 2018) in gross amount of HRK

3,323,223. Other benefits amounted gross to HRK 41,923 (com-

pany car usage). The Christmas gift for child was paid in amount

of HRK 600 net.

Ivan Bartulović, Member of the Management Board and CHRO,

was paid in 2022 a fixed and variable salary in gross amount of

Remuneration to the Management Board

The remuneration and evaluation of the work performed by the

Management Board have been conducted in accordance with

the Remuneration Policy for Members of the Management Board

that was adopted by the General Assembly of the Company as of

20 July 2020, with amendments adopted by the General Assem-

bly of the Company as of 23 April 2021. As of 2020, the Company

once a year submits to the General Assembly the Report on re-

muneration paid to the Members of the Supervisory Board and to

the Management Board Members in the previous business year.

Remuneration Policy and the above stated Report (published to-

gether with the Invitation to the General Assembly) are available

at the Company web pages at the following link https://www.t.ht.

hr/en/investor-relations/report-of-remuneration for a period of

ten years as of their adoption. Therefore, a brief overview of Re-

muneration Policies and payments made to Management Board

and Supervisory Board Members in 2022 is given within the An-

nual Report.

Annual target salary of Management Board Members consists of

fixed basic annual salary and performance related variable com-

ponent, the so-called Short-Term incentive (STI). The STI shall re-

ward the achievement of collective targets over an annual period.

Compensation system also encompasses long-term compensa-

tion elements, Long-Term Incentive (LTI) and EU Game Changer

Incentive Program, that can be awarded on top of the target sala-

ry and Share Matching Plan (SMP) as a voluntary long term com-

pensation instrument. The mandatory prerequisite for participa-

tion in the SMP is that the executive invests in the share named in

the specified plan.

Additionally, to acknowledge extraordinary individual perfor-

mance and achievements Supervisory Board can grant a Spot

Bonus as one-time payment within one calendar year.

Individual compensation agreements can include fringe benefits:

company car, accommodation cost, pension fund, scholarship for

children, other non-cash benefits and services, depending on in-

dividual circumstances of the person in question.

Long Term Incentive Plans for management

Long-term incentive plans (LTI) introduced in 2019, 2020, 2021

and 2022 exist at Group level.

LTI 2018 ended on 31 December 2021 and the Supervisory Board

has determined final target achievement and awarded amount of

HRK 4,006,932 which was paid to plan participants in June 2022.

The LTI (Long term incentive) plan initiated in 2022, covers the

period from 1 January 2022 to 31 December 2025.

Share Matching Plan (SMP), plan for the award of bonus shares

to managers, is active in 2022. The term of the 2022 SMP covers

the period from 1 July 2022 to 30 June 2026. Share Matching

Plan is obligatory for the President of the Management Board

and voluntary for Management Board members.

INTRODUCTION MANAGEMENT BOARD

HRK 1,634,100. Other benefits amounted gross to HRK 33,865

(company car usage). The Christmas gift for children was paid

in amount of HRK 15,000 gross.

Boris Drilo, Member of the Management Board and CTIO was

paid in 2022 fixed and variable salary and Long-term Incentive

Plan (LTIP 2018) in gross amount of HRK 2,658,401. Other ben-

efits amounted gross to HRK 42,882 (company car usage). The

Christmas gift for children was paid in amount of HRK 1,200 net.

Daniel Darius Denis Daub, Member of the Management Board

and CFO until 31 July 2022, was paid in 2022 a fixed and vari-

able salary and Long-term Incentive Plan (LTIP 2018) in gross

amount of HRK 2,171,849. Other benefits amounted gross to

HRK 327,858 (rental cost, company car usage and other).

Matija Kovačević, Member of the Management Board and CFO

as of 1 August 2022, was paid in 2022 a fixed salary in gross

amount of HRK 364,044. Other benefits amounted gross to HRK

27,483 (company car usage and other).

Marijana Bačić, Member of the Management Board and COO

Business as of 1 September 2022, was paid in 2022 a fixed sal-

ary in gross amount of HRK 250,332. Other benefits amounted

gross to HRK 17,194 (company car usage). The Christmas gift for

children was paid in amount of HRK 600 net.

Siniša Đuranović has been appointed Management Board Mem-

ber and Chief Corporate Affairs Officer (CCO) as of 8 December

2022, therefore his first salary as Management Board Member

was paid out in January 2023.

Davor Tomašković, President of the Management Board and

CEO until 1 April 2019, was paid in 2022 Long-term Incentive

Plan (LTIP 2018) award in gross amount of HRK 585,535. With

this payment, all obligations towards Davor Tomašković based

on membership in the Management Board of the Company,

have been fulfilled.

Saša Kramar, Member of the Management Board and COO Busi-

ness until 1 January 2020, was paid in 2022 Long-term Incen-

tive Plan (LTIP 2018) award in gross amount of HRK 295,729.

18 19

INTRODUCTION SUPERVISORY BOARD INTRODUCTION SUPERVISORY BOARD

SUPERVISORY BOARD

Remuneration of the Supervisory Board

The remuneration of the Supervisory Board Members has been

determined in accordance with the Decision of the General As-

sembly on remuneration of members of the Supervisory Board as

of 20 July 2020.

The chairman of the Supervisory Board receives remuneration in

the amount of 1.5 of the average net salary of the employees of

the Company paid in the preceding month. To the deputy chair-

man, the amount of 1.25 of the average net salary of the employ-

ees of the Company paid in the preceding month is paid, while any

other member receives the amount of one average net salary of

the employees of the Company paid in the preceding month. To

a member of the Supervisory Board, who is in the same time the

Chairman of the Audit Committee of the Supervisory Board, in the

amount of 1.5 of the average monthly net salary of the employees

of the Company paid in the preceding month. A member of the

Supervisory Board, who is also a member of one board or com-

mittee of the Supervisory Board, receives a remuneration in the

amount of 1.25 of the average monthly net salary of the Compa-

ny's employees paid in the previous month. A member of the Su-

pervisory Board who is simultaneously a member of two or more

committees of the Supervisory Board receives a remuneration in

the amount of 1.5 of the average net salary of the Company's em-

ployees paid in the previous month. DT AG representatives do not

receive any remuneration for the membership in the Supervisory

Board due to a respective policy of DT AG.

Jonathan Richard Talbot Chairman

From 25 April 2017 (chairman of the Related Parties Transactions

Committee and chairman of the Compensation and Nomination

Committee)

Ivica Mišetić, Ph. D. Deputy Chairman

Member from 21 April 2008 until 24 April 2020 (Deputy Chairman

from 8 May 2008);

From 20 July 2020 (member of the Compensation and Nomination

Committee)

Vesna Mamić

Member, workers’

representative

From 1 January 2016

Dolly Predovic Member

From 29 April 2014 (member of the Audit Committee and member of

the Related Parties Transactions Committee)

Marc Stehle Member From 16 December 2015 (chairman of the Audit Committee)

Eirini Nikolaidi Member

From 25 April 2016 until 24 April 2020;

From 20 July 2020 (member of the Audit Committee)

Eva Somorjai-Tamassy Member

Until 1 October 2022 (member of the Compensation and

Nomination Committee)

Tino Puch Member Until 24 April 2022

Gordan Gledec Ph. D Member

From 20 July 2020 (member of the Related Parties Transactions

Committee)

Jonathan Abrahamson Member From 25 April 2022

The remuneration of individual Supervisory Board members paid in 2022 is as follows:

The period of 2022 in which the remuneration was paid

From To Gross 1 (in HRK)

Vesna Mamić Member 1 January 31 December 161,108 HRK

Dolly Predovic Member 1 January 31 December 230,788 HRK

Ivica Mišetić Deputy Chairman 1 January 31 December 241,662 HRK

Gordan Gledec Member 1 January 31 December 161,108 HRK

Total 794,666 HRK

20 21

CORPORATE GOVERNANCE CODE

COMPLIANCE STATEMENT

Croatian Telekom Inc. (hereinafter referred to as “HT” or “the Com-

pany”), in accordance with Article 250b, paragraphs 4 and 5, and

Article 272p of the Companies Act (“Official Gazette” Nos. 111/93,

34/99, 121/99, 52/00 – Decision of the Constitutional Court of

RoC, 118/03, 107/07, 146/08, 137/09, 152/11 – clean text, 111/12,

68/13, 110/15,40/19, 34/22 i 114/22), issues the Corporate Gover-

nance Code Compliance Statement.

In the year 2022, the Company applied the Corporate Gover-

nance Code adopted by the Croatian Financial Services Super-

visory Agency (HANFA) and the Zagreb Stock Exchange Inc. Za-

greb, in effect as of 1 January 2020, and it was published on the

web-site of the ZSE (www.zse.hr) and on the web-site of HANFA

(www.hanfa.hr).

The Company complies with the recommendations of the Code,

with the exception of those provisions that were not or are not

practical for the Company to implement at the relevant time or

the application of which is not foreseen given the applicable legal

framework. These exceptions are as follows:

• The Management Board adopted the following acts and

duly informed the Supervisory Board thereon but has not

requested its approval (Articles 6, 7, 58, 69 and 83 of the

Code). These acts have been published at the web pages of

the Company:

• Code of Conduct

• Policy on Avoiding Corruption and Other Conflicts of

Interest

• Guideline for Prevention of Conflicts of Interest

• HT Group Policy Corporate Responsibility

• Policy on Employee Relations

• Social Charter

Given that adoption of these acts falls under the managing of

the business affairs, Supervisory Board approval is not fore-

seen. In 2022 the Management Board adopted the new Pol-

icy on Employee Relations, informed the Supervisory Board

thereon and the Policy has been published at the web pages

of the Company. Remaining above listed acts have not been

amended, as there was no need to do so.

• The Supervisory Board has not formally set the target per-

centage of female members of the Supervisory Board and

the Management Board (Article 14 of the Code), however,

all international and domestic standards on gender repre-

sentation and equality are directly implemented. Women

currently make up for 38% of Supervisory Board member-

ship (prior to resignation of SB Member, Mrs. Éva Somor-

jai-Tamássy, with effect as of 1 October 2022, women made

up for 44.4% of SB membership) and 29% of Management

Board membership, with women also holding 39% of mana-

gerial positions, while 39% of all employees are women.

• The Compensation and Nomination Committee encom-

passes all of the tasks listed in Article 15 of the Code, except

for monitoring the Management Board during the selection

and appointment of senior management, which is the sole

responsibility of the Management Board of the Company, in

line with the good corporate practice of management au-

tonomy to independently decide on line management and

on their closest associates.

• The Supervisory Board has not formally developed its pro-

file which specifies a minimum number of members and

the combination of skills, knowledge and education, as well

as professional and practical experience (Article 20 of the

Code). The size of the Supervisory Board is proscribed by the

Companies Act in relation to the share capital amount, while

the exact number and members’ profile is determined by the

Company’s Articles of Association. Along with the criteria

from the Companies Act and the Articles of Association, the

criteria referred to in the Audit Act are also applied, and it is

taken into account that at least one member has to be an

expert in the field of accounting and/or audit.

• The Supervisory Board is not composed mostly of indepen-

dent members, but two out of nine Members are indepen-

dent. None of them are Chairman or Deputy Chairman of the

Supervisory Board (Article 22 of the Code).

• The Compensation and Nomination Committee and the

Audit Committee are not composed mostly of indepen-

dent members (Article 27 of the Code). One of three Audit

Committee members is an independent member, while the

Compensation and Nomination Committee has no indepen-

dent members. The majority of Related Parties Transactions

Committee Members are independent.

• The Company has not designated a Company secretary

(Article 33 of the Code). HT is constituted under the dual-

istic governance model, with separated management of

the business affairs and supervision over the managing of

business affairs, and the Secretary of the Management

Board and the Secretary of the Supervisory Board has been

appointed.

• The Supervisory Board has not evaluated the performance

of its individual Members (Article 39 of the Code), howev-

er, the Supervisory Board evaluated its effectiveness for

the business year 2022. In line with the Companies Act, the

General Assembly approves the manner in which the Super-

visory Board members supervised the management of the

business affairs of the Company and performed their other

tasks, by granting approval of actions for the previous busi-

ness year. An evaluation of individual results is planned for

implementation in the future, following the analysis of orga-

nizational prerequisites.

• Internal documents of the Company do not prohibit Man-

agement Board Members from holding more than two posi-

tions in the management or supervisory board of companies

not part of HT Group (Article 47 of the Code), instead the

provisions of the Companies Act are applied. HT MB mem-

bers cannot hold management board and supervisory board

positions in companies which are not part of HT Group and

which are performing the same business activities and com-

peting with HT.

• The Compensation and Nomination Committee encom-

passes all the tasks listed in Article 50 of the Code, howev-

er, decisions on remuneration to senior management and

the workforce as a whole are the sole responsibility of the

Management Board of the Company. The Supervisory Board

participates in approving total workforce costs by approv-

ing the annual business plan. When the Management Board

plans to adopt any bonus plan, i.e., amendments to employ-

ee remuneration or benefits, it requires a prior approval of

the Supervisory Board.

• The Company has not established a formal mechanism to

ensure for minority shareholders the possibility of asking

questions directly to President of the Management Board

and the Chairman of the Supervisory Board (Article 76 of the

Code). Given that the Company has around 153 thousand

shareholders, we deem that opening such direct communi-

cation channel would lead to their unjustifiable burden. The

Company set up mechanisms for shareholders to ask ques-

tions by e-mail address for investors (ir@t.ht.hr), with the

possibility to pose questions directly to the Management

Board and the Supervisory Board at the General Assembly.

• The Company has not made available on its website answers

to questions raised at the General Assembly (Article 82 of

the Code). Raised questions and answers given are included

in the General Assembly Minutes, available to the public in the

Court Register. The Company shall consider a future practi-

cality of this option, within the applicable legal framework,

i.e., Companies Act and the Court Register Act and the Reg-

ulations on the Manner of Entry of Data in the Court Register.

• In line with the Companies Act, the Supervisory Board is

solely authorized for the adoption of decisions from its

area of responsibility, and the purpose of its Committees is

making recommendations and proposals in line with appli-

cable legal framework. Therefore, a direct communication

between the Chairman of a Supervisory Board Committee

and stakeholders, such as customers, suppliers, etc., is not

foreseen (Article 87 of the Code).

INTERNAL CONTROL AND RISK

MANAGEMENT

The principal responsibilities of the Audit Committee of the Su-

pervisory Board are the preparation of the decisions of the Super-

visory Board and the supervision of the implementation of such

decisions in relation to the controlling, reporting and audit activ-

ities within HT Inc. and the HT Group. The Audit Committee over-

sees the audit activities of the Company (internal and external),

discusses specific issues brought to the attention of the Audit

Committee by the auditors or the management team and makes

recommendations to the Supervisory Board. The Audit Committee

is responsible for ensuring the objectivity and credibility of the in-

formation and of the reports submitted to the Supervisory Board.

The Audit Committee is authorized to:

• Request the necessary information and supporting docu-

mentation from the management and senior employees of

the Company and from external co-workers;

• Participate at the meetings held within the Company on the

issues that fall under the scope of the activities and respon-

sibilities of the Audit Committee;

• Appoint advisors to the Audit Committee on a permanent

basis or on a case-by-case basis, if needed;

• Obtain, at the Company’s expense, external legal or other in-

dependent professional advice on any matter within its terms of

reference provided that such advice is needed for the fulfilment

of the Committee’s scope of activities and responsibilities.

The Corporate Internal Audit of the Company performs an indepen-

dent audit and control function on behalf of the Management Board

and informs managers with comprehensive audit reports (findings

and proposed improvements). In July 2017, the Management Board

adopted an updated Internal Audit Charter, a strategic document for

internal audit performance which defines the framework and then

main principles necessary for the work of the internal audit function

in HT Inc. and the HT Group. Further updates to the Internal Audit

Charter were made in May 2018 and in February 2019.

The main tasks of Corporate Internal Audit as defined in the Inter-

nal Audit Charter are evaluating whether:

• Risks relating to the achievement of HT Inc. and HT Group’s

strategic objectives are appropriately identified and managed,

• The actions of HT Inc. and HT Group’s officers, directors, em-

ployees and contractors are in compliance with HT Inc. and

HT Group’s policies, procedures, and applicable laws, regu-

lations and governance standards,

• The results of operations or programs are consistent with

established goals and objectives,

• Operations or programs are being carried out effectively

and efficiently,

• The established processes and systems enable compliance

with the policies, procedures, laws and regulations that

could significantly impact HT Inc. and HT Group,

• The information and the means used to identify, measure,

analyse, classify, and report such information are reliable

and have integrity,

• The resources and assets are acquired economically, used

efficiently and protected adequately.

Financial risk management objectives and

policies

The Group is exposed to international service-based markets. As a

result, the Group can be affected by changes in foreign exchange

rates. The Group also extends credit terms to its customers and

is exposed to a risk of default. The significant risks, together with

the methods used to manage these risks, are described in detail

in the Notes to the consolidated financial statements (Note 38

Financial risk management objectives and policies).

SIGNIFICANT COMPANY SHAREHOLDERS

As at 31 December 2022, significant Company shareholders are

as follows:

• Deutsche Telekom Europe B.V. is the majority shareholder

with a 53 per cent holding. (Deutsche Telekom Europe B.V.

INTRODUCTION CORPORATE GOVERNANCE CODE COMPLIANCE STATEMENT INTRODUCTION CORPORATE GOVERNANCE CODE COMPLIANCE STATEMENT

22 23

is 100% owned by Deutsche Telekom Europe Holding B.V.

whose 100% owner is Deutsche Telekom Europe Holding

GmbH (former name was T-Mobile Global Holding Nr.2

GmbH). Deutsche Telekom Europe Holding GmbH is 100%

owned by Deutsche Telekom AG.).

• The Croatian War Veterans' Fund owns 6.9 per cent of shares

of the Company.

• Centar za restrukturiranje i prodaju – CERP (Restructuring

and Sale Centre) of the Republic of Croatia (a legal succes-

sor to the Government Asset Management Agency) owns

2.9 per cent of shares of the Company.

• The remaining 37.2 per cent of shares are owned by Croatian

citizens and by domestic and foreign institutional investors.

Raiffeisen Pension Funds are investors with the largest share-

holding among the private and institutional investors. As at 31

December 2022, Raiffeisen Pension Funds owned 11.2 per cent

of shares of the Company.

An up to date list of the top ten shareholders of the Company can

be found on the Central Depository & Clearing Company web site

(start your search by entering HT-R-A in the browser).

Mr. Konstantinos Nempis, President of the Management Board

of Croatian Telecom Inc., owns 4,693 shares in total; Mr. Daniel

Daub, Management Board Member of Croatian Telecom Inc. un-

til 1 August 2022, owned 2,426 shares in total (position on the

last day of the term of office, i.e., on 31 July 2022); Mrs. Nataša

Rapaić, Management Board Member of Croatian Telecom Inc.,

owns 1,558 shares in total; Mr. Boris Drilo, Management Board

Member of Croatian Telecom Inc., owns 930 shares in total; Mr.

Ivan Bartulović, Management Board Member of Croatian Tele-

com Inc., owns 735 shares in total; Mr. Matija Kovačević, Manage-

ment Board Member of Croatian Telecom Inc., owns 285 shares in

total; Mrs. Marijana Bačić, Management Board Member of Croa-

tian Telecom Inc., owns 420 shares in total; Mr. Siniša Đuranović,

Management Board Member of Croatian Telecom Inc., owns 730

shares in total and Professor Gordan Gledec, Ph.D., Supervisory

Board Member of Croatian Telecom Inc., owns 63 shares in total.

APPOINTMENT OF THE MANAGEMENT

BOARD, THEIR FUNCTIONS AND

AMENDMENTS TO THE ARTICLES OF

ASSOCIATION

Members and President of the Management Board are appointed

and removed by the Supervisory Board. Their term of office is up

to five years, with the possibility of re-appointment. The Manage-

ment Board consists of between five and seven members. The

current composition of the Management Board includes seven

positions: President of the Management Board (CEO); MB Mem-

ber and Chief Financial Officer (CFO); MB Member and Chief Op-

erating Officer Residential (COO Residential); MB Member and

Chief Operating Officer Business (COO Business); MB Member

and Chief Technical and Information Officer (CTIO), MB Member

and Chief Corporate Affairs Officer (CCO) and MB Member and

Chief Human Resources Officer (CHRO).

The Company is offering fixed and mobile telephony services as

well as wholesale, Internet and data services, organized into two

main business units, Business and Residential.

The Management Board needs a prior approval from the Supervi-

sory Board for the proposal of any amendments to the Articles of

Association at the General Assembly.

AUTHORITIES OF THE MANAGEMENT BOARD

MEMBERS

Pursuant to the Companies Act and the Company's Articles of

Association, the Management Board has the responsibility for

managing the business affairs of the Company. It is obligated

and authorized to perform all the activities and to pass all the

resolutions that it considers necessary to successfully manage

the business affairs of the Company, subject to such approvals as

may be required from the Supervisory Board for certain matters

and decisions.

The Company may be represented by any two members of the

Management Board jointly.

The ongoing Share Buyback Programme (“Programme”) was

launched by the Management Board on 28 April 2021, in line

with authorization of the General Assembly as of 23 April 2021,

with commencement as of 29 April 2021 and lasting until 22

April 2026. The maximum number of shares intended to be ac-

quired within this Programme is 3,000,000, while the maximum

amount allocated to the Programme is HRK 600,000,000.00.

The purpose of the Programme is to withdraw shares without a

nominal value without reducing the share capital, in accordance

with the Article 352 paragraph 3 item 3 of the Companies Act, in

which case the stake of the remaining shares in the share capital

increases and, in a smaller part, to offer them to employees.

In April 2022 the Company transferred 14,663 Company’s shares

to managers, within the Company`s Share Award Plan (PDD) for

the managers.

In July 2022 the Management Board withdrew 1,271,667 ac-

quired Company shares without nominal value, without the share

capital of the Company being decreased, and the information on

the new number of shares has been aligned in the Articles of As-

sociation of the Company. Thereby the total number of shares has

decreased from 80,047,509 shares to 78,775,842 shares without

nominal value, while the remaining shares’ participation in the

share capital is being increased.

During 2022 the Company acquired at Zagreb Stock Exchange

in total 979,444 Company shares, representing 1.24% of the

Company’s issued share capital. For this acquisition of Compa-

ny shares in 2022, the Company paid out an equivalent value of

HRK 180,426,025.09. The total number of Company shares held

on December 31st, 2022, amounted to 19.952, in book value of

HRK 3,556,931.12, representing 0.03% of the Company’s issued

share capital.

INTRODUCTION CORPORATE GOVERNANCE CODE COMPLIANCE STATEMENT INTRODUCTION CORPORATE GOVERNANCE CODE COMPLIANCE STATEMENT

THE COMPOSITION AND FUNCTIONS OF THE

SUPERVISORY BOARD

The Supervisory Board consists of nine members. Eight mem-

bers are elected by the General Assembly, and one is appointed

by the Workers’ Council as the representative of the Company's

employees. The Supervisory Board is responsible for the appoint-

ment and removal of Management Board members as well as for

supervising the management of the Company's business affairs.

Certain major transactions and the assumption of long-term in-

debtedness require the approval of the Supervisory Board.

The Supervisory Board established the Compensation and Nom-

ination Committee, the Audit Committee and the Committee for

Transactions with Related Parties.

GENERAL ASSEMBLY

Information on the manner of work of the General Assembly and

on shareholder’s rights are provided to shareholders within the

Invitation to the General Assembly which is publicly announced

and made available at the Company web pages, together with

the list of frequently asked questions. The Invitation contains, in

addition to decision proposals with adequate explanations, in-

structions for participation and voting at the General Assembly

and the overview of shareholder rights to ask questions, request

amendments to the agenda, submit counterproposals and the

right on information. All other information on the authorizations

and the work of the General Assembly and on shareholder’s rights

are publicly available in relevant regulations. All General Assem-

bly Decisions, together with voting results, are published at the

Company web pages.

Economic background

Croatian market overview

Regulatory overview

Changes in reporting

ECONOMIC

ENVIRON-

MENT,

MARKET

AND REG-

ULATORY

OVERVIEW

26 27

In 2022 competitive landscape intensified, as competitors offe-

red promotions in mobile and convergent tariffs. Despite this, HT

Group maintained its leading market position. All players conti-

nued with 5G network development and fiber rollout.

The acceleration of inflation with increasing electricity and com-

modity prices forced mobile players to raise prices for certain

mobile services from July 2022. All players made changes to

their mobile tariffs pricing by providing more data traffic or ad-

ditional add-on services.

After consolidation of the fixed line operator, Optima Telekom as

of February 2022, Telemach Croatia became the third integrated

market player. In September 2022 Telemach acquired Totalna TV

as well, intensifying competition in converged telecommunicati-

on services.

Investments in fixed and mobile networks continued to grow in

2022. Investments in high-capacity networks (VHCN) in Q3/2022

recorded 17% growth, while investments in mobile base stations

(BTS) saw 9% growth compared to the same period last year.

Continued investments in broadband access infrastructure are a

key enabler for further growth of high-speed broadband conne-

ctions and broadband traffic. The migration of users to fiber FTT-

CROATIAN MARKET OVERVIEW

ECONOMIC ENVIRONMENT CROATIAN MARKET OVERVIEW

H/B technology continued, primarily those who had previously

used copper pair internet access. The share of fixed broadband

connections with a speed more than 100 Mbit/s has also been

on the rise, reaching 34% of fixed broadband connections at the

end of September 2022. In Q3/2022, data traffic through fixed

and mobile networks increased by 26% compared to the previous

year.

Wholesale

The number of broadband wholesale customers on copper and

fiber (BSA/Naked BSA/FTTH) was 109 thousand at the end of

2022, which is an increase of 2.4% compared to same period

last year. Share of fiber broadband wholesale access is slowly

growing and currently is 4% (compared to less than 1% at the end

of 2021). Increase in wholesale broadband services is driven by

lower churn and demand for fiber-based services. The number of

Unbundled Local Loops (ULL) and Wholesale Rental Lines (WLR)

contracted due to migration to broadband services (NBSA) and

operators’ own infrastructure. That resulted with 69 thousand

ULL accesses and 29 thousand WLRs. FA service (Fiber Access)

is showing slow growth with 1,6 thousand customers at the end

of December 2022. Regulated fixed voice termination rate (FTR)

and mobile termination rate (MTR) decreased from January 2022

as a result of EU Commission Delegated Act.

Economic background

Croatia’s economy continued with economic growth in Q4/2022

(4% YoY), but at slower dynamics than in the first half of the year

(7.3% YoY). Q4 2022 growth is driven primarily by investment ac-

tivity, while biggest GDP component, household consumption,

significantly slowed down as consumer sentiment and expec-

tations have been affected adversely by the strong inflationary

pressures. Nevertheless, the real GDP growth at 6.3% for the

whole of 2022 could be described as impressive, as it is robust

and broad-based (household consumption up by 5.1% yoy, in-

vestments 5.8% yoy, government consumption 3% yoy, exports

25.4% and imports 25%).

During 2022 inflation rate trend was accelerating month by

month, peaking in November at 13.5% YoY, before slightly slow-

ing down in December 2022 (13.1% YoY). The annual inflation rate

in 2022 was 10.8% primarily driven by increases in prices of food,

housing, and energy& fuels

. In response to economic challenges,

Government launched HRK 5bn financial package in April, fol-

lowed up with Autumn package, worth nearly HRK 21bn (€2.8bn)

and which took effect from 1 October. The Autumn package is

focused on capping electricity prices until end of March 2023,

tax reliefs and fuel excise tax cuts, energy subsidies to vulnerable

households, students and agriculturists, and capping prices on

basic foods, on top of earlier measures such as limited increases

in gas and electricity tariffs and fuel price caps.

The tourism industry experienced a significant rebound in 2022,

with tourist arrivals and overnight stays increasing by 37% and

25%, respectively, compared to 2021. These figures are even

more impressive when compared to the record high season of

2019 with 91% of arrivals and 96% of tourist overnights being

achieved. Revenue from foreign tourists in the first nine months

of 2022 was €11.6bn, higher by 43% YoY and 23% higher than

in the first nine months of the record 2019. Excellent booking in

post-season also contributed to a record-breaking result in 2022.

Expected revenue generated by foreign tourists for FY2022 is

€13bn

The labour market experienced a drop in unemployment with a

simultaneous continuation of employment growth. Average reg-

istered unemployment rate in 2022 was 6.8% (1.2PP lower than

in 2021).

Like in many other EU countries, Croatia is facing the

increasing share of workers from third countries which clearly re-

flects the mismatch between supply and demand for the labour

force.

In October 2022 the Fitch rating agency confirmed Croatia's

credit rating at BBB+ with a stable outlook - the highest grade

ever received by the agency. The stable outlook reflects the

Fitch’s expectation that the Croatian economy will remain resil-

ient to external shocks, due in part to improved fiscal and external

positions and euro adoption in January 2023.

On January 1, 2023, Croatia achieved two major milestones as it

officially adopted the Euro and became a member of the Schen-

gen area. The conversion rate was set at 7.53450 kuna per 1 euro.

Croatia's entry into the Schengen area and the Eurozone is ex-

pected to further facilitate the trade of goods and services and

boost tourism.

ECONOMIC ENVIRONMENT ECONOMIC BACKGROUND

ECONOMIC BACKGROUND

 Sources: Croatian Bureau of Statistics

 Source: Croatian Bureau of Statistics

 Source: Croatian National Tourist Board

 Source: Croatian Bureau of Statistics

 Source: HAKOM's press release, 9th December 2022

 Source: HAKOM's press release, 9th December 2022

28 29

Analysis of relevant electronic

communications markets

Next round of market analysis of wholesale fixed

network access markets (ULL and BSA markets)

On 7 February 2022, HAKOM invited all interested parties to sub-

mit their proposals and opinions regarding the current situation

on retail and wholesale fixed network broadband access markets

and to comment upon the appropriateness of the current regula-

tory regime and/or deliver their proposals if they find it necessary

to impose regulatory changes.

This round of market analysis will include detailed geographical

analysis of the relevant wholesale markets which can, under cer-

tain circumstances, result with the imposition of less stringent

regulatory pressure upon HT/deregulation of HT in geographic

areas with the adequate level of competitiveness.

In January 2023 HAKOM published draft decisions on market

analysis of wholesale fixed network access for public consulta-

tion (ends on 20th March 2023). Published drafts are going into

direction of deregulation of fiber in urban areas.

Law on the Treatment of Illegally Constructed

Infrastructure

Proposal of the new Law on the Treatment of Illegally Construct-

ed Infrastructure aims to include in the Croatian legal system all

infrastructure on the territory of the Republic of Croatia that has

been illegally constructed or illegally reconstructed, among oth-

ers also the electronic communication infrastructure (ECI). As a

member of CEA (Croatian Employers’ Association), HT has been

called to participate in a working group established before the

competent Ministry in drafting of the new Law. Timeline of adop-

tion of the new law is not known at this time.

Ordinance on simple and other buildings and

works

By adopting amendments to the Ordinance on simple and other

buildings and works on 29 June 2022, the regulatory framework

for issuing permits for the ECI construction has been significantly

simplified. The changes are regarding small cells, mini-trenches,

street cabinets, replacement of equipment at base stations and

replacement of cables in cable ducts and air poles. The possibility

of building an ECI contrary to the spatial plan is also introduced if

the spatial plan is not harmonized with the ECI regulations.

Changes of the Law on Roads

Changes of the Law on Roads which entered into force at the be-

ginning of 2022, prescribe for electronic communications infra-

structure on public roads only the payment of fees prescribed by

the Law on Roads and excludes the current possibility of paying

high right of way fees.

However, in the period from 3 May 2022 until 1 August 2022,

more than 30 local municipalities submitted their proposals to

the Constitutional Court of Croatia for the initiation of the Con-

stitutional Court procedure (constitutional claims), claiming that

the above changes to the Law on Roads were contrary to the Cro-

atian Constitution and asking for their abolishment. On 27 Sep-

tember 2022 the Constitutional Court initiated the court proce-

dure based on these claims and issued a decision on temporary

suspension of the disputed provisions of the Law on Roads.

However, final decision of the Constitutional Court arrived in De-

cember 2022, whereby the Constitutional Court rejected all con-

stitutional claims on this matter and abolished its decision from

27 September 2022 on temporary suspension, thereby determin-

ing changes of the Law on Roads in line with the Constitution.

Spectrum assignment and fees

On 12 October 2022 HAKOM initiated the public auction proce-

dure for assignment of nationwide licenses for using radiofre-

quency spectrum in 800 MHz, 900 MHz, 1800 MHz, 2100 MHz

and 2600 MHz radiofrequency bands and for assignment of re-

gional licenses for using radiofrequency spectrum in 3600 MHz

radiofrequency band.

HAKOM determined that HT fulfils all necessary conditions for

participation in the public auction procedure. Consequently, HT

qualified to participate in the public auction procedure at the

national level for the 800 MHz, 900 MHz, 1800 MHz, 2100 MHz

and 2600 MHz radiofrequency bands. Only qualified applicants

are allowed to participate in the bidding procedure, making them

bidders in the bidding procedure. The bidding procedure started

on 16 January 2023.

In December 2022 HAKOM and the Ministry of the Sea, Transport

and Infrastructure (MMPI) passed new by-laws prescribing the

amounts of annual fees:

• By-law on payment of fees for carrying out of tasks of the

Croatian Regulatory Authority for Network Industries (Offi-

cial Gazette, No. 154/22; HAKOM),

• By-law on payment of fees for right to use of addresses,

numbers and radio frequency spectrum (Official Gazette,

No. 151/22; MMPI).

As a result of the new HAKOM by-law from 1 January 2023 the

annual RF spectrum fee for public communications network was

increased (58% fee increase for frequencies below 3800 MHz,

and 20% fee increase for frequencies above 3800 MHz) as well

as the fee for performing other tasks of HAKOM (125%).

Single maximum Union-wide mobile and fixed

voice termination rates

The new maximum wholesale mobile and fixed termination rates,

applicable to all EU Member States, are effective from 1 July

2021, in accordance with the European Commission Delegated

Regulation (EU) 2021/654.

Maximum mobile termination rate in EU is 0.2 eurocents per min-

REGULATORY OVERVIEW

ECONOMIC ENVIRONMENT REGULATORY OVERVIEW ECONOMIC ENVIRONMENT REGULATORY OVERVIEW

ute and will be achieved gradually by 2024, facilitated by a three-

year glide path. In 2024, all EU operators should apply the same

single maximum rate (0.2 eurocents per minute).

Applicable mobile termination rates in Croatia:

• HRK 0.0450 per minute from 1 July 2021 to 31 December

2021

• HRK 0.0413 (EUR 0.55 cent) per minute from 1 January 2022

to 31 December 2022

• EUR 0.4 cent per minute from 1 January 2023 to 31 December

2023

• EUR 0.2 cent per minute from 1 January 2024.

Maximum fixed termination rate in EU is 0.07 eurocents per min-

ute. The Regulation includes a transitional period during 2021 to

allow for a gradual adjustment. From 2022, all fixed operators will

be subject to a maximum fixed termination rate of 0.07 eurocents

per minute.

Applicable fixed termination rates in Croatia:

• HRK 0.0057 per minute from 1 July 2021 to 31 December

2021

• HRK 0.0053 (EUR 0.07 cent) per minute from 1 January

2022.

The quoted rates do not apply to calls originating from country

numbers outside of the EU. However, there are two exemptions

from this rule:

• If a third country operator charges the EU operator with

equal or lower than those set by the Regulation,

• if a third country is listed in the Annex to the Regulation as a

country where termination rates are set on similar standards

as in the EU.

Roaming regulation

The new roaming regulation applicable from 1 July 2022 extends

the previous roaming rules until July 2032 and brings new addi-

tions to the regulation:

• lower wholesale roaming charges, impacting also retail

roaming surcharges amounts:

• for data services, the new regulation sets the following

wholesale caps: 2.00 EUR/GB in 2022, 1.80 EUR/GB in

2023, 1.55 EUR/GB in 2024, 1.30 EUR/GB in 2025, 1.10

EUR/GB in 2026 and 1.00 EUR/GB from 2027 onwards

• for calls: 0.022 EUR/min in 2022−2024 and 0.019 EUR/

min from 2025 onwards

• for SMS: 0.004 EUR/SMS in 2022−2024 and 0.003

EUR/SMS from 2025 onwards

• roaming providers’ obligation to deliver the same quality of

service (QoS) to their customers when roaming within the

EU as domestically, where technically feasible

• more transparency and additional obligations on QoS, ac-

cess to emergency services, use of value-added services

and on the use of roaming on non-terrestrial mobile net-

works (e.g., aircrafts, marine vessels).

HT as universal services operator

In June 2022 HAKOM adopted amendments to the Ordinance on

universal services in electronic communications, among others,

increasing USO speed to 7 Mbit/s download and 1 Mbit/s upload

(from current 4 Mbit/s download and 512kbit/s upload) as of 1

January 2023.

By its decision from 22 September 2022, HAKOM designated HT

as USO operator for the period of the following two years, starting

from 1 December 2022, for the following services:

• access services (of minimum download speed 4 Mbit/s un-

til 1 January 2023, and of minimum download speed of 7

Mbit/s starting from that date),

• public payphones,

• special measures for disabled,

• special tariffs for users with special social needs.

By its decision from 21 October 2022, HAKOM approved HT’s

prices and terms and conditions for USO products for the peri-

od of next 2 years. HT’s technologically neutral USO broadband

product, MAX net Mini, will be updated as from 1 January 2023,

to include new USO speed of 7 Mbit/s download and 1 Mbit/s up-

load.

Decision on new value of WACC for HT’

regulated wholesale products

On 22 November 2022 HAKOM defined new level of weighted

average cost of capital (WACC) in the amount of 4.71% and well

as the new level of additional risk premium (RP) for HT’s fiber net-

work in the amount of 1.55%.

Due to EU prescribed methodology that does not take into con-

sideration current economic situation of inflation and rise of all

costs, newly calculated WACC is lower than the previous one and

would lead to lowering of HT’s current wholesale prices, which is

why HT strongly argued against it. HT’s efforts in the end resulted

with significantly lower impact on HT in contrast to the initially

assumed: HT’s wholesale access price decrease of 4% in average,

as of 1 January 2023.

30 31

CHANGES IN REPORTING

ECONOMIC ENVIRONMENT CHANGES IN REPORTING

In 2014 Croatian Competition Agency has conditionally allowed

the concentration of HT with Optima Telekom based on the pro-

posal of financial and operational restructuring of Optima Tele-

kom within the pre-bankruptcy settlement procedure. In June

2017, AZTN passed the decision by which the duration of tempo-

rary management rights of Optima Telekom for HT is prolonged

for an additional three-year period, that is, until 10 July 2021. On

31 January 2020 HT initiated sale process for the shares of Opti-

ma Telekom. Submission of offers finished on 18 March 2020. On

9 July 2021 HT and Zagrebačka banka signed sale and purchase

agreement of 54.31% shares of Optima Telekom with Telemach

Hrvatska, owned by United Group. On 21 January 2022 HT and

Zagrebačka banka signed the Share Transfer Agreement, where-

by they transferred their shares in Optima Telekom to Telemach

Hrvatska. Respectively, Optima Telekom is deconsolidated from

financial reports as of July 2021.

In February 2019, HT d.d. concluded a Purchase transaction with

the company HP-Hrvatska pošta d.d. on acquisition of 100%

stake in the company HT Produkcija d.o.o., provider of EvoTV ser-

vice. HT Produkcija d.o.o. is consolidated in HT Group financial re-

sults starting with March 2019. Operational highlights that relate

to achievement of the main financial and non-financial key per-

formance indicators on the following pages are presented with

consolidation impact of EvoTV. In 2021 treatment of the second

set top box (STB) in EvoTV is changed. Namely, it is not treated as

additional customer any more in order to align with group defini-

tion. Numbers are retrospectively adjusted.

In September 2021, Agreement on transfer of share held by HT

holding d.o.o. in Kabelsko distributivni sustav d.o.o. (KDS) was

concluded, between HT holding d.o.o. as the transferor company

and HT as the transferee company. HT and KDS concluded on 29

September 2021 the Agreement on merger of KDS into HT. On 1

December 2021 the merger has been entered into the Court Reg-

ister of the Commercial Court in Zagreb, by which the merged

company KDS seized to exist and the acquiring company, HT,

became the universal legal successor of the merged company.

Based on the Merger Agreement concluded on 15 March 2022

between the company Croatian Telecom Inc. (hereinafter: HT Inc.

or the acquiring company) and the company HT Produkcija LLC

(hereinafter: HTP LLC or the merged company), and pursuant to

the Assembly decision of the merged company on approval of

the merger, on 1 June 2022 the merger has been entered into

the Court Register of the Commercial Court in Zagreb. By entry

of the merger into the Court Register, the merged company HTP

LLC seized to exist. The acquiring company, HT Inc., became the

universal legal successor of the merged company, thus entering

into all legal relationships of the merged company.

The Group has an ownership interest of 39.1% in its joint venture

HT d.d. Mostar which is incorporated in the Federation of Bosnia

and Herzegovina. Valuation of the investment showed that the

assessed recoverable amount is lower than the carrying amount

which resulted in impairment of the net book value of invest-

ments accounted for using the equity method in the Group in the

amount of HRK 141 million. As of 31 December 2022, the invest-

ment is classified as asset held for sale.

IFRS 17 Insurance Contracts

IFRS 17 is mandatory for annual reporting periods beginning on or

after 1 January 2023. In HT there were no detected contracts on

which IFRS 17 would have a material impact.

Summary of key financial indicators

– HT Group (including Crnogorski

Telekom)

Summary of key financial indicators

– HT Group in Croatia

Summary of key financial indicators

– Crnogorski Telekom standalone

BUSI-

NESS

REVIEW

34 35

BUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS  HT GROUP IN CROATIABUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS  HT GROUP INCLUDING CRNOGORSKI TELEKOM

SUMMARY OF KEY FINANCIAL INDICATORS

 HT GROUP INCLUDING CRNOGORSKI

TELEKOM

HT Group changed presentation of revenue subcategories for 2021 and 2022, to align it with management reporting. The above-men-

tioned amendment had no effect on total revenue.

Key financial data (HRK mil.) 2021 2021

wo OT

2022 % of change

A22/A21

% of change

A22/A21

wo OT

Revenue 7.393 7.251 7.410 0,2% 2,2%

Adjusted EBITDA AL 2.883 2.822 2.845 -1,3% 0,8%

Adjusted EBITDA AL margin 39,0% 38,9% 38,4% -0,6 p.p. -0,5 p.p.

EBITDA AL 2.771 2.683 2.742 -1,0% 2,2%

EBITDA AL margin 37,5% 37,0% 37,0% -0,5 p.p. 0,0 p.p.

EBIT 813 789 946 16,4% 19,9%

EBIT margin 11,0% 10,9% 12,8% 1,8 p.p. 1,9 p.p.

Net profit after non controlling interests 615 593 655 6,6% 10,5%

Net profit margin 8,3% 8,2% 8,8% 0,5 p.p. 0,7 p.p.

CAPEX AL 1.779 1.739 1.737 -2,3% -0,1%

CAPEX AL / Revenue ratio 24,1% 24,0% 23,4% -0,6 p.p. -0,5 p.p.

Key financial data (HRK mil.) 2021 2021

wo OT

2022 % of change

A22/A21

% of change

A22/A21

wo OT

Revenue 6.834 6.692 6.821 -0,2% 1,9%

Mobile service revenues 2.347 2.351 2.446 4,2% 4,0%

Mobile non-service revenues 938 938 1.042 11,1% 11,1%

Fixed service revenues 2.213 2.213 2.221 0,4% 0,4%

Fixed non-service revenues 665 518 555 -16,6% 7,1%

System solutions 671 671 557 -16,9% -17,0%

Adjusted EBITDA AL 2.676 2.615 2.632 -1,6% 0,6%

Adjusted EBITDA AL margin 39,2% 39,1% 38,6% -0,6 p.p. -0,5 p.p.

EBITDA AL 2.566 2.478 2.535 -1,2% 2,3%

EBITDA AL margin 37,5% 37,0% 37,2% -0,4 p.p. 0,1 p.p.

EBIT 778 754 902 15,9% 19,6%

EBIT margin 11,4% 11,3% 13,2% 1,8 p.p. 2,0 p.p.

Net profit after non controlling interests 612 591 657 7,3% 11,2%

Net profit margin 9,0% 8,8% 9,6% 0,7 p.p. 0,8 p.p.

Exceptional items

110 137 97 -12,5% -29,6%

Mainly related to restructuring redundancy costs and legal cases

HT GROUP IN CROATIA

36 37

Key financial data (HRK mil.) 2021 2021

wo OT

2022 % of change

A22/A21

% of change

A22/A21

wo OT

Revenue 567 567 596 5,2% 5,2%

Mobile service revenues 252 252 265 5,2% 5,2%

Mobile non-service revenues 65 65 75 15,4% 15,4%

Fixed service revenues 183 183 185 1,0% 1,0%

Fixed non-service revenues 38 38 46 21,3% 21,3%

System solutions 29 29 25 -12,0% -12,0%

Adjusted EBITDA AL 207 207 213 3,0% 3,0%

Adjusted EBITDA AL margin 36,5% 36,5% 35,7% -0,7 p.p. -0,7 p.p.

EBITDA AL 205 205 207 0,7% 0,7%

EBITDA AL margin 36,2% 36,2% 34,6% -1,6 p.p. -1,6 p.p.

EBIT 33 33 42 29,0% 29,0%

EBIT margin 5,8% 5,8% 7,1% 1,3 p.p. 1,3 p.p.

Net profit after non controlling interests 23 23 18 -23,1% -23,1%

Net profit margin 4,1% 4,1% 3,0% -1,1 p.p. -1,1 p.p.

Exceptional items

2 2 -6 -520,3% -520,3%

BUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS  CRNOGORSKI TELEKOM STANDALONE

CRNOGORSKI TELEKOM STANDALONE

Mainly related to restructuring redundancy costs and legal cases

HT GROUP IN CROATIA

BUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS  HT GROUP IN CROATIA

Key operational data 2021. 2022. % of change

A22/A21

Mobile

Number of customers 2.276 2.305 1,3%

- Prepaid 942 917 -2,7%

- Postpaid 1.334 1.389 4,1%

Blended ARPU¹ 75 77 2,2%

- Prepaid 40 40 -0,1%

- Postpaid 102 103 1,0%

Fixed

Fixed voice mainlines - retail² 729 714 -2,1%

- ARPU voice per user 62 61 -2,3%

Broadband access lines - retail³ 633 648 2,4%

- Broadband retail ARPU 109 108 -0,8%

TV customers ⁴ 536 538 0,5%

- TV ARPU 86 88 1,8%

Wholesale customers 220 209 -5,0%

 ARPU includes IFRS 15 effects and has been amended to make the figure comparable to the current period

 Includes PSTN, FGSM,old PSTN Voice customers migrated to IP platform and Smart packages for business; payphones excluded

 Includes ADSL,VDSL, FTTH i Naked DSL

 TV service subscribers are restated in Q2 2021. Numbers are retrospectively adjusted.

 Includes Naked Bitstream + Bitstream + ULL + FA + WLR wholesale rental

38 39

BUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS  CRNOGORSKI TELEKOM STANDALONE

CRNOGORSKI TELEKOM STANDALONE

Key operational data 2021 2022 % of change

A22/A21

Mobile

Number of customers 378 449 18,8%

- Prepaid 115 163 42,0%

- Postpaid 263 286 8,6%

Fixed

Fixed mainlines - retail 102 102 0,3%

Broadband access lines - retail 81 83 2,6%

TV customers

74 79 6,7%

Agency of telecommunication changed the reporting definition for TV customers, starting from June 2020: only active are customers included,

suspended are excluded

BUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS  HT GROUP INCLUDING CRNOGORSKI TELEKOM

HT Group highlights

Financial performance:

• Revenue in 2022 grew by HRK 17 million (0.2%) YoY. Exclud-

ing OT contribution impact in 2021, Revenue in 2022 grew

by HRK 159 million (2.2%) YoY supported by strong perfor-

mance in mobile.

• EBITDA before exceptional items after leases in 2022 de-

clined by HRK 38 million (1.3%) YoY, negatively impacted

by Optima deconsolidation. Excluding OT contribution im-

pact in 2021, EBITDA grew by HRK 23 million (0.8%) YoY.

This growth was driven by higher net margin and increase in

other operating income, which compensated for inflationary

pressure mainly related to energy costs.

• Net profit after NCI in 2022 grew by HRK 40 million (6.6%)

as a result of lower depreciation and better EBITDA, which

compensated for higher taxation. Excluding OT contribution

impact in 2021, Net profit after NCI grew by HRK 62 million

(10.5%) YoY.

• Excluding OT contribution impact in 2021, Capex after leas-

es w/o Spectrum realization in 2022 remained at similar lev-

el as in 2021 (HRK -2 million/-0.1%).

Business segment:

• Mobile

• Focus on migration on new Magenta 1 offer, aiming to

cross-sell existing customers base and increase its rev-

enue

• Monetization on new flexible portfolio for larger cus-

tomer segment

• New mobile public portfolio for government institu-

tions

• New service Cisco Internet Security for mobile network

• Introduction of T-Phone and T-Phone PRO mobile de-

vices

• 5G speed increased from 1,5 Gbit/s to 2 Gbit/s

• Fixed

• Migration on new portfolio for fixed VSE customers

with M4M approach

• Introduction of new Business fiber Premium Modem

enabling better BB experience

• Increase FTTH utilization - continuous migrations from

copper infrastructure to FTTH

• Continuous migration from xDSL to ProLine; positive

development on Professional data

• Best sport content offer enriched with acquisition of

rights for HNL (Croatian Football League) offering ex-

clusivity on our special MAXSport channels in our line-

up and all competitions under jurisdiction of HNS (Cro-

atian Football Federation) for next 4 competition years

- campaign focused on content differentiation

• Launch of new CineStar Premiere TV package and Ter-

mination of SportKlub channels and replacement with

Arena 7−10 channels

• System Solutions

• Continuous focus on profitable managed services busi-

ness and integrated solutions in the area of Business

applications, Security, Infrastructure and IOT/Smart-city

• New services launched - web site and web shop cre-

ation & maintenance for small and medium businesses;

Fleet management new package for VSE companies

introduced, followed by launch of Fleet management

mobile application

• Data center Zagreb 1 (Selska) became officially certi-

fied by Uptime Institute Professional Services with „Tier

III Certification of Design Documents”

• Installed the equipment and sensors for smart public

Smart lighting project in the City of Sveta Nedelja

• Selected as a supplier for info-display system (totems)

to be installed on bus stations in the City of Šibenik

• „Yellow Frame” award for the best program in the „Sustain-

able categories of cities and sustainable communities “

• „Choose a bicycle” project successfully ended, marked

with final media conference in Split

• Promo offers: Business week including Digital Busi-

ness, My Digital Office, Microsoft 365 and Premium

fiscal cash register

Residential segment:

• Mobile

• Postpaid: M4M update of portfolio – continued promo

activities and best hardware offers focusing on MNP

and retention efforts

• Improved share of Core tariffs vs 2nd brand Bonbon

with channel and handset measures

• Xmas campaign: This Xmas make sure everyone is ok,

S&D launching an advent calendar with gifts for every

day in the Moj Telekom app and Special Xmas HW offer

@great discounts (Samsung & Xiaomi).

• Prepaid: launched first digital only e-Simpa options,

summer offer of “Daily flat options” and strong visitors

push to manage market share

• Bonbon: refreshed offer with more GB and additional

packages; Internet SIM launched

• Surprise and Delight offers continued (flat days POP

and PRP) to increase TRIM

• Swap and Save initiative with the aim of collecting and

disposing of old devices positively influencing on our

environment

• Fixed

• Best sport content offer enriched with acquisition of

rights for HNL (Croatian Football League) offering ex-

clusivity on our special MAXSport channels in our line-

up and all competitions under jurisdiction of HNS (Cro-

atian Football Federation) for next 4 competition years

- campaign focused on content differentiation

• FTTH rollout: 200 Mbit/s speed for all existing cus-

tomers with possibility to upgrade to 500 Mbit/s with

promo price or 1 Gbit/s. Reaching +27% YoY FTTH cus-

tomers growth.

• Fiber Internet on the leading network with SMART WI-

FI - attractive offers of devices for all HH members as

part of Back to school and Xmas campaign

• Introduced M4M price increase for all TV customers by

40 41

capitalizing on premium content starting 15 August

• Launch of MAX 2 5G product – home Internet on fast-

est 5G network

• Introduced Mini BB offer for upsell 1P to 2P with attrac-

tive offer

• Launch of new CineStar Premiere TV package and Ter-

mination of SportKlub channels and replacement with

Arena7−10 channels

Other highlights:

• In March 2022 Hrvatski Telekom has been recognized by

Ethisphere, a global leader in defining and advancing the

standards of ethical business practices, as one of the 2022

World’s Most Ethical Companies. This is the first time that a

Croatian company has received such a recognition and has

met Ethisphere’s criteria for excellence across five catego-

ries including the ethics and compliance program, ethical

culture, corporate citizenship, governance and leadership.

• In May 2022 the prestigious Financial Times included Hr-

vatski Telekom on the list of European climate leaders for

2022. It is great recognition for quality corporate gover-

nance, implementation of sustainable development strate-

gy, continuous investment, development of highly efficient

infrastructure, and introduction of modern ICT services and

innovative network solutions based on which HT positively

contributes to environmental protection and more efficient

use of natural resources.

• HT won the HRIO (Croatian Sustainability Index) award in the

Community Relations category, awarded at the 14th Con-

ference on Sustainable Development. HRIO represents the

practice by which a company, more than legally prescribed

obligations, integrates sustainable development into the

decision-making system and thereby manages the impact

of its operations on the environment and society. Thus, good

business results cease to be the only criterion for evaluating

the success of a company.

• On 9 December 2022 the Zagreb Stock Exchange (ZSE)

awarded prizes in seven categories for the year 2022, where-

by the HT was once again awarded for “Share of the year”

and "Top Turnover Stock".

• HT won both umlaut “Best in test” awards for the mobile and

fixed network, confirming the status of the best and fastest

mobile and fixed broadband network in Croatia. This is the

fifth time Hrvatski Telekom won the umlaut “Best in test”

award for the best mobile network, while also recording back-

to-back award for the best fixed broadband network as well.

• The quality of the HT in Q4 2022 mobile network was con-

firmed by winning the Ookla Speedtest Award certificate for

the best mobile network. Overall, in 2022, HT mobile net-

work was once again named as the best, fastest and network

with the best mobile coverage, and won three Ookla Speed-

test Awards.

• Continued significant investments in network infrastructure:

• At the end of the 2022, 21% increase customer units

were covered by Fiber to the home (FTTH) network,

thus the leading market position of Hrvatski Telekom in

the implementation of fiber optical networks was also

achieved in 2022.

Main financials development

Revenue

Excluding OT contribution impact in 2021, Revenue in 2022 grew

by HRK 159 million (2.2%) YoY, up in HT Group in Croatia (HRK 130

million or 1.9%) and in CT (HRK 29 million or 5.3%).

Revenue grew supported by higher mobile non-service (HRK 114

million or 11.4%), mobile service (HRK 108 million or 4.1%), fixed

non-service (HRK 45 million or 8.1%), fixed service revenue (HRK

10 million or 0.4%) offset by system solutions revenue (HRK 117

million or -16.8%).

In reported terms, Revenue grew by 0.2% YoY, negatively impact-

ed by Optima deconsolidation.

Mobile service revenue

Excluding OT contribution impact in 2021, Mobile service reve-

nue grew by HRK 108 million or 4.1%. Strong postpaid and visi-

tors’ revenue growth overcompensated decline on prepaid and

other mobile revenue.

HT Group in Croatia

Higher number of postpaid customers is a result of overall push

of successful and attractive More-4-More tariffs and handsets

as well as successful Bonbon campaigns resulting with solid

overall performance. After we refreshed postpaid portfolio and

increased competitiveness by including more GB and 5G in all

tariffs in Q2, in Q3 and Q4 we continued promo activities and

best hardware offers focusing on MNP and retention efforts, in-

creasing value and footfall. “Surprise and Delight” offers contin-

ued with unlimited weeks during the summer to boost TRIM, all

our mobile customers (both postpaid and prepaid) were able to

activate unlimited data days through “Moj telekom” app and use

benefits and discounts from our partners. FMS offer Gigabox con-

tinues to grow, providing our customers flat internet with mobili-

ty functionality without MCD on service and with MCD on router.

Growth in business mobile customer base and postpaid ARPU

is result of upselling activities on existing customer base. Focus

is on migration to new mobile portfolio for VSE customers with

More-4-More approach and 5G speed increased from 1,5 Gbit/s

to 2 Gbit/s for better customer experience and to keep price pre-

mium position.

Lower number of prepaid customers compared to last year is a

result of continuous efforts in migration prepaid customers to

postpaid, overall contraction of prepaid market and strong com-

petition. On-going MNP and retention efforts in prepaid segment,

as well as focusing on additional value for HT prepaid custom-

ers, are being undertaken to mitigate the on-going decline. In Q2

both prepaid brands focused their activities on refreshing offer

- launched new e-Simpa options (more GB, 5G, cost control, no

call set up fee) and new Bonbon offer. In Q3, following repricing of

entire offer we continued activities with additional units, summer

offer of “Daily flat options” and strong visitors push to manage

BUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS  HT GROUP INCLUDING CRNOGORSKI TELEKOM

market share. In Q4 bonbon launched new Internet SIM for cus-

tomers interested in data only service (without the possibility of

classic calls and SMS).

At the beginning of March, HT launched the Swap and Save ini-

tiative, aiming to collect and dispose old devices. Reducing the

amount of electronic waste and its disposal are environmental

priorities. HT, which has disposed more than 152,800 devices so

far, has decided to motivate customers by providing benefits for

each returned mobile phone when buying a new device.

Xmas campaign started with image communication: this Xmas

make sure everyone is ok, followed by S&D launching an advent

calendar with gifts for every day in the Moj Telekom app and Spe-

cial Xmas HW offer @great discounts (Samsung & Xiaomi).

Visitor roaming traffic in 2022 is higher than last year, due to

higher number of foreign users on HT network (less traveling

restrictions than last year related to COVID-19 pandemic) and

higher usage per customer. Compared to previous year, visitors

generated more voice originating minutes and more data traffic.

At the same time, on the wholesale cost side, HT's mobile cus-

tomers generated less voice originated minutes while roaming in

foreign countries and more data traffic which is driven partly by

higher volume of travel activity.

From 1 January 2022 regulated fixed termination rate (FTR) and

mobile termination rate (MTR) were further decreased because

of EU Commission Delegated Act.

Crnogorski Telekom

Mobile service revenue growth coming from prepaid push, post-

paid price increase and portfolio changes, as well as higher visi-

tors due to better tourist season development.

Mobile non-service revenue

Excluding OT contribution impact in 2021, Mobile non-service

revenue grew by HRK 114 million or 11.4% mainly due to promo-

tional activities which boosted handset sale.

Fixed service revenue

Excluding OT contribution impact in 2021, Fixed service revenue

grew by HRK 10 million or 0.4%, as a result of growth in Broad-

band, TV, professional data revenue, which offset lower voice and

other fixed service revenue.

HT Group in Croatia

Voice decline is driven by the market trend of fixed to mobile and

IP substitution, regulation, and competitive dynamics. However,

HT continues with further pro- and reactive churn prevention of-

fers and activities.

HT continued with push of FTTH offer, 200 Mbit/s speed for all

existing customers with possibility to upgrade to 500 Mbit/s or

1 Gbit/s. HT will continue to invest in the development of the fi-

ber network and plans to expand the fiber optical internet zones.

Broadband customers can upgrade their connection with Pre-

mium Smart WiFi offer, Premium CPE modem and repeater as-

suring same internet speed in all parts of home and on multiple

devices. This offer ensures fast and reliable internet connection

at any time. Focus in 2022 was on push of broadband and TV

acquisitions supported through HNL and FTTH campaigns with

attractive offers of devices for all HH members as part of Back to

school and Xmas offer. Additionally, due to intensified competi-

tive pressure more aggressive promo offers are continued.

In 2022 MAXtv is still standard for the premium television service.

Richest content, premium picture quality, interactivity, new inter-

face and full integration with mobile devices provide customers

a unique TV viewing experience fully adapted to their habits. We

continued sales activities on DVBT-2 devices. Best sport content

offer is additionally enriched with acquisition of rights for HNL

(Croatian Football League) and all competitions under jurisdic-

tion of HNS (Croatian Football Federation) for next 4 competition

years. Launched two new channels with exclusive sport content,

MAXSport1 included in basic package and MAX Sport2 included

in sport package. Introduced price increase for all TV custom-

ers using M4M concept based on our content offer (Arena, new

MAXsport channels with HNL, two Disney channels, NPVR) start-

ing 15 August.

Crnogorski Telekom

Fixed service revenue reported growth supported by Broadband

&TV driven by increase of both CB and ARPU, partly offset by low-

er Voice.

Fixed non-service revenue

Excluding OT contribution impact in 2021, Fixed non-service rev-

enue grew by HRK 45 million or 8.1% due to higher wholesale and

equipment sales and other fixed non-service.

HT Group in Croatia

In 2022 successful sales of IP and data services continued de-

spite competitive wholesale market of data and IP services.

System Solutions

Excluding OT contribution impact in 2021, System Solutions rev-

enue declined by HRK 117 million or 16.8% mostly driven by HT

Group in Croatia (HRK 114 million or 17.0%). Decline is due to fo-

cus on higher margin projects. Despite revenue decrease, EBITDA

generated by System Solutions business has increased in both

absolute and relative terms compared to the previous year.

HT Group in Croatia

In System Solutions focus is on profitable managed services busi-

ness and integrated solutions in area of Business applications,

Security, Infrastructure, and IOT/Smart City.

For the smart public lighting project that we are developing with

BUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS  HT GROUP INCLUDING CRNOGORSKI TELEKOM

42 43

BUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS  HT GROUP INCLUDING CRNOGORSKI TELEKOM

the City of Sveta Nedelja, HT won the „Yellow Frame“ award for

the best program in the „Sustainable categories of cities and sus-

tainable communities“. The initiative was organized by the Sus-

tainable Croatia initiative, National Geographic Croatia, and Adria

Media Zagreb.

With final media conference held in Split, in December, the public

bike-sharing system project „Choose a bicycle! “ was successfully

brought to an end. A total of 41 new terminals and 242 mechanical

and electric bicycles were installed in Split, Trogir, Kaštela, Solin

and the municipalities of Dicmo, Klis, Podstrana, and Dugopolje.

The project was operationally carried out by Hrvatski Telekom

and partner Nextbike, while the project holder is the city of Split.

During November’s Business week offer HT had promo offers on:

Digital Business, My Digital Office and Microsoft 365.

Promotional offer on Premium Fiscal cash register, started at the

end of November, followed by digital campaign.

To increase awareness and support the Digital business service,

HT launched promo offer, also followed by digital campaign.

During whole Q4 HT had extended preparations and numerous

activities on Fiscalization services for Euro introduction so that

customers can make transition from HRK to EUR as easily as

possible.

In December HT continued with digital campaign for Microsoft

365 with focus on business applications which are helping small

and medium businesses in their everyday activities (Teams, Plan-

ner, SharePoint, Bookings).

Combis key activities were focused on security portfolio – 30SEC,

Cloud, Managed services, self-service retail and Call from Teams

offerings. Combis presented to the market Cloud No.9 - a com-

plete offer of Cloud services and solutions. Solution is tailored for

each customer separately, depending on the needs of the busi-

ness, in cooperation with Combis' consultants and architects.

Combis employer branding and social responsibility initiative

#GetInvolved won the award for the best integration of employ-

er brand and corporate brand at the Employer Branding Awards

Adria Awards in December.

Crnogorski Telekom

System Solutions revenue reported slight decrease related to

one-time deals volume

Operating expenses

Excluding OT contribution impact in 2021, Operating expenses in

2022 grew by HRK 131 million or 3.1% YoY, driven by HT Group

in Croatia (HRK 101 million or 2.5%) and in CT (HRK 30 million

or 9.2%). Increase is mostly due to higher material expenses,

employee benefits expenses, net impairment losses on trade re-

ceivables and contract assets and lower work performed by the

Group, partly offset by lower other costs.

Material expenses

Increase is a result of higher merchandise, material and energy

cost (HRK 175 million or 12.5%), partly offset by lower service ex-

penses (HRK 44 million or 5.5%).

Employee benefits expenses

Total employee benefits expenses decrease is mainly driven by

HT Group in Croatia (HRK 25 million or 2.3%). The difference is

coming from Optima deconsolidation, excluding which expenses

are in line with 2021. Total number of FTEs amounts to 4,773 FTEs,

which is decrease of 149 FTEs compared to 2021, as a result of

continued operating model transformation activities.

Depreciation and amortization

Excluding OT contribution impact in 2021, depreciation and

amortization decreased (HRK 116 million or 5.1%) mostly influ-

enced by HT Group in Croatia (HRK 105 million or 5.1%).

Profitability

EBITDA before exceptional items after leases

Excluding OT contribution impact in 2021, EBITDA before excep-

tional items after leases in 2022 grew by HRK 23 million (0.8%)

YoY as a result of higher net margin and other operating income,

which compensated for inflationary pressures on operating ex-

penses, mainly related to energy costs. In reported terms, EBITDA

declined by 1.3% YoY.

Net profit after non-controlling interests (NCI)

Excluding OT contribution impact in 2021, Net profit after NCI in

2022 grew by HRK 62 million (10.5%) YoY. Increase is mostly a

result of lower depreciation and better EBITDA, which compen-

sated for higher taxation. In reported terms Net profit after NCI

grew by HRK 40 million (6.5%).

Financial position

Balance sheet

In comparison to 2021 year-end, total asset value decreased by

0,3% or HRK 50 million mainly driven by lower non-current finan-

cial assets, cash and cash equivalents and leased assets partially

offset by increased prepayments and inventory.

Total issued capital and reserves decreased 163 million (1,3%)

compared to 31 December 2021 mainly due to dividend paid and

treasury shares buyback, partially offset by net profit for the period.

Total non-current liabilities decreased by HRK 58 million (7,8%)

primarily due to lower lease liabilities partially offset by higher

provisions.

Total current liabilities increased by HRK 170 million to HRK 1,759

million at 31 December 2022 primarily due to higher trade pay-

ables to third parties.

BUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS  HT GROUP INCLUDING CRNOGORSKI TELEKOM

Cash flow

Cash flow from operating activities is T-HT Group’s principal

source of funds enabling the Company to finance capital invest-

ments and dividend distributions.

Cash Flow from operating activities decreased by 263 HRK mil-

lion (9%) mainly affected by unfavorable working capital move-

ments.

Cash Flow from investing activities increased by HRK 352 million

(23%) mainly affected by cash in from loan repayment.

Cash Flow from financing activities decreased by HRK 22 million

(2%) mainly affected by higher treasury buyback.

Capital expenditure after leases (without Spectrum)

CAPEX after leases

in HRK milion

2021 2021

wo OT

2022 % of

change

A22/A21

% of change

A22/A21

wo OT

CAPEX after leases* 1.779 1.739 1.737 -2,3% -0,1%

CAPEX after leases/ Revenue ratio 24,1% 24,0% 23,4% -0,6 p.p. -0,5 p.p.

CAPEX after leases

in HRK milion

2021 2021

wo OT

2022 % of

change

A22/A21

% of change

A22/A21

wo OT

CAPEX after leases* 1.640 1.601 1.616 -1,5% 0,9%

CAPEX after leases/ Revenue ratio 24,0% 23,9% 23,7% -0,3 p.p. -0,2 p.p.

IFRS 16 CAPEX 2021 2021

wo OT

2022 % of

change

A22/A21

% of change

A22/A21

wo OT

IFRS 16 CAPEX - HT Group 338 331 255 -24,4% -22,8%

IFRS 16 CAPEX - HT Group in Croatia 308 301 247 -19,5% -17,7%

IFRS 16 CAPEX - Crnogorski Telekom 30 30 8 -74,2% -74,2%

CAPEX after leases

in HRK milion

2021 2021

wo OT

2022 % of

change

A22/A21

% of change

A22/A21

wo OT

CAPEX after leases 138 138 121 -12,4% -12,4%

CAPEX after leases/ Revenue ratio 24,4% 24,4% 20,3% -4,1 p.p. -4,1 p.p.

HT Group

HT Group in Croatia

HT Group

Crnogorski Telekom

*CAPEX after leases excluding Spectrum

44 45

BUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS  HT GROUP INCLUDING CRNOGORSKI TELEKOM

Excluding OT contribution impact in 2021, Capex after leases

w/o Spectrum remained at similar level as in 2021 (HRK -2 mil-

lion/-0.1%), with decrease in CT by HRK -17 million and increase

in HT Group in Croatia by HRK 15 million. HT Group in Croatia in-

crease YoY is mainly due to Content capitalization increase (sign-

ing of contract for Croatian football league – HNL). CT decreased

YoY due to dynamic of TV Content capitalization, while operation-

al investments increased.

HT Group in Croatia

In 2022, the strategic program for the implementation of next

generation fixed access network (NGA) in Fiber To The Home

(FTTH) topology continued.

During Q4 2022, within the program of the broadband infrastruc-

ture development co-financed by EU funds the FTTH network

was implemented, and construction was started on the entire

scope of the program.

At the end of the 2022, 21% increase customer units were cov-

ered by Fiber to the home (FTTH) network, thus the leading mar-

ket position of Hrvatski Telekom in the implementation of fiber

optical networks was also achieved in 2022.

Optical based access network (FTTx), which in addition to the

design of Fiber To The Home (FTTH) includes implementation of

the Fiber To The Building (FTTB) and Fiber To The Cabinet (FTTC)

using vectoring and super-vectoring technology, is available for

729 thousand households.

HT is focused on investments in the development of 5G network

which currently covers around 100 cities throughout Croatia and

more than 2 million people.

The quality of the HT in Q4 2022 mobile network was confirmed

by winning the Ookla Speedtest Award certificate for the best

mobile network. HT mobile network achieved the best annual

Speed Score result, which is a 26.9% improvement compared to

HT's result in 2021 and 21% better score compared to the compe-

tition's result. Overall, in 2022, HT mobile network was once again

named as the best, fastest and network with the best mobile cov-

erage, and won three Ookla Speedtest Awards. The awards are

the result of extensive in-depth research where Ookla analyzed

more than 600,000 user-run tests on Speedtest iOS and Android

mobile apps, as well as the results more than 344 million scans at

239,754 locations of all mobile operators in Croatia, during 2022.

The overall stability of the HT network is maintained at a high

level. During 2022, there were no network incidents of the most

severe category, while in other categories a further improvement

in overall stability was recorded compared to the previous year.

In 2022 activities on network functions virtualization and mi-

gration to the cloud with a focus on voice platforms have been

continuing. Pilot of the OTT TV platform cloudification has been

started.

The first phase of the Euro currency introduction project was

successfully completed. Operations were carried out on 25 net-

work and IT systems, and during the Q4 2022, according to plan,

double display of prices was implemented, and from January 1,

2023, the transition to the Euro as the main payment currency

was ensured.

Total CAPEX (Booked + IFRS 16 Capex) 2021 2021

wo OT

2022 % of

change

A22/A21

% of change

A22/A21

wo OT

Total CAPEX 2.116 2.070 1.992 -5,9% -3,7%

Total CAPEX/ Revenue ratio 28,6% 28,5% 26,9% -1,7 p.p. -1,7 p.p.

HT Group

CORPO-

RATE

SOCIAL

RESPON-

SIBILITY

48 49

current business trends and employee needs, which has resulted

in the highest level of employee satisfaction in the Company's his-

tory.

Thanks to numerous initiatives dealing with key topics for employ-

ees, HT Group was the most awarded employer in 2022 and won

seven 'Employer Brand' awards for practices, projects, and activi-

ties carried out by employers, resulting in exceptional satisfaction,

experience, and employee engagement, and consequently a bet-

ter user experience.

Our excellence in human resource management, continuous im-

provement of work processes, and monitoring of global trends

was rated highly, thus confirming the Employer Partner status in

2022. In addition, as one of the best employers in Croatia, we re-

ceived additional confirmation of excellence with an "Above and

Beyond" certificate.

Health, disease prevention, and safety of employees are also one

of crucial tasks of Hrvatski Telekom. With the constant adaptation

of instructions and guidelines for work in the changing conditions

brought about by the pandemic, we continued in 2022 with the

active promotion of vaccination while encouraging employees to

behave responsibly to protect themselves, their loved ones, col-

leagues, and customer with whom they come into direct contact

during work. This is evidenced by the continuous activities carried

out during 2022:

• Implementation of a healthcare campaign on the topic "Vac-

cination against COVID-19 and other measures to prevent

the spread of the disease" in cooperation with the Croatian

Institute for Public Health and the Teaching Institute for

Public Health of Split-Dalmatia County.

• Country-wide organization of COVID-19 vaccinations/

re-vaccinations for HT employees.

• Organizing flu vaccination for HT employees in all regions.

• Celebrating World Hypertension Day with seminars in all re-

gions, in cooperation with the Croatian Red Cross, and pro-

curement of automatic external defibrillators for the largest

facilities in Zagreb, Split, Rijeka, and Osijek, as well as upper

arm blood pressure monitors.

• Celebrating World First Aid Day and organizing first aid

seminars in all regions in cooperation with the Croatian Red

Cross.

• Organizing ergonomic training as part of a preventive pro-

gram that includes awareness and practical education on

the effective use of the workspace.

• Organizing wellbeing webinars: Resilience, change manage-

ment, business-personal balance.

• Organizing the seminar "Traffic safety and traffic preven-

tion", in cooperation with the Croatian Auto Club.

• Conducting practical evacuation and rescue exercises in co-

operation with the Public Fire Department and Emergency

Medical Services.

• Conducting online exercises in collaboration with graduated

kinesiologists four times a week.

• SOS hour internal counseling, during which psychologists,

NLP experts, and others support employees who need it.

Knowledge society

In 2022, we continued cooperation with higher education institu-

tions and students. We provided students with internships led by

experienced HT experts acting as mentors.

In addition to traditional cooperation with faculties through guest

lectures and joint projects, summer and fall student internships

were organized in 2022, and the 'ICT Academy' continued. Through

summer 'Magenta Jump' internships, students were offered more

than 20 different positions and mentoring by experienced HT ex-

perts. At the 'ICT Academy', through 15 hours of interactive work-

shops and lectures, students learn directly from our experts who

work on some of the biggest projects in the ICT industry in this

part of Europe. More than 1,100 students recognized these great

opportunities and signed up.

We are continuously building the knowledge society from the

inside: all employees have 24/7 access to more than 20,000 on-

line educations on the internal Telekom learning platform, and we

conduct a whole series of professional training for our employees

internally and with renowned domestic and foreign suppliers. In

2021, we made a significant breakthrough because not only are

we perfecting existing competencies, but from the beginning, we

are training employees for the skills of the future, specifically soft-

ware developers. In 2022, we enrolled the second generation of

students who will be retrained as software developers.

Generation NOW program

Hrvatski Telekom is one of the first companies to recognize the

importance of systematically and comprehensively promoting

STEM education in Croatian schools. With the Generation NOW

program, launched in 2004 by Hrvatski Telekom and the Institute

for Youth Development and Innovation, more than 450 mentors

from 360 educational institutions were trained. The goal of the do-

nation program is to integrate existing and emerging tech knowl-

edge in the design of creative IoT projects, develop creativity,

foster innovation, and provide many opportunities for students to

develop their own projects. In 2022, 169 institutions across Croa-

tia participated in the Generation NOW program, of which 60 new

ones joined the program.

Generations Together - national digital education pro-

gram for seniors

The program, which we implement in cooperation with the Vol-

unteer Center Zagreb, aims to enable senior citizens to acquire

valuable digital skills. The Generations Together program in 2022

included 12 new nursing homes: Nursing home Korčula, Nursing

home Konavle, Nursing home Novigrad, Nursing home Velika,

Nursing home Volosko Opatija, Nursing home Marko A. Stuparić

Nursing Home, Veli Lošinj, Petrinja Nursing Home, Makarska Nurs-

ing Home, Knin Nursing Home, Tisno Nursing Home, Oklaj Nurs-

ing Home, and Vinkovci Nursing Home. This brings the number of

homes participating in the program to 54.

In the 2022 Generation Together program, volunteers from outside

the HT Group system joined HT Volunteers through the 'Volonteka'

CORPORATE SOCIAL RESPONSIBILITY

Hrvatski Telekom is a company that promotes sustainable devel-

opment, adheres to, and sets the highest standards of profession-

al communication, encourages, and facilitates integration into the

information and knowledge society, and is dedicated to environ-

mental protection.

We believe that the Company's reputation does not depend sole-

ly on the quality, price, or specific characteristics of products and

services but also on the Company's relations with customers,

suppliers, investors, employees, the environment, and the broader

community in which the Company operates.

This is HT's social responsibility strategy framework and the foun-

dation of business success. Through teamwork and the entire

Company's commitment to socially responsible business, our goal

is to contribute to society and improve the quality of life.

Hrvatski Telekom is committed to participating in the develop-

ment of society. We focus on investments in critical infrastructure

and the application of modern technologies that represent a digi-

tal platform for economic development and societal progress.

Despite the devastating war in Ukraine accompanied by deterio-

rating economic prospects, a large increase in energy prices, and

inflation, as the largest private investor in Croatia's digitalization,

Hrvatski Telekom recognizes the fact that the ICT infrastructure

and digitalization it provides play a key role in economic growth

and societal development and has remained focused on imple-

menting its strategy and providing comprehensive support to

national interests.

Throughout 2022, Hrvatski Telekom thus continued its responsi-

ble strategic approach and activities that contributed to society

and resulted in recognition for societal development. Some of the

awards in 2022 are highlighted below.

Ethisphere, the global leader in defining and improving the stan-

dards of ethical business practices, awarded Hrvatski Telekom for

the highest standards of ethics and compliance, integrity and cul-

ture, responsible business, corporate responsibility, governance,

and leadership, making it the first Croatian Company ever to be

included among the 2022 World's Most Ethical Companies.

The Financial Times also recognized Hrvatski Telekom for quality

corporate governance, implementation of sustainable develop-

ment strategy, continuous investments, development of high-per-

formance infrastructure, and introduction of modern ICT services

and innovative network solutions based on which HT positively

contributes to environmental protection and more efficient use of

natural resources, highlighting it as one of the European climate

leaders.

HT's systematic implementation of the sustainable development

strategy throughout its ecosystem, aimed at achieving ambitious

ESG goals for the second year in a row, resulted in the 2022 Croa-

tian Sustainability Index Award for contributions to society.

As part of the Days of Regional Development and EU Funds and

the 2022 Best City Awards, HT received recognition for its Con-

tribution to the sustainable development of cities and local

communities. We received the award thanks to our investments,

the construction of critical infrastructure, and the development of

innovative smart city solutions through which we create the foun-

dations for local communities to be more sustainable and enable

a higher quality of life for our fellow citizens.

In 2022, we also earned the EcoVadis certificate, which confirms

to our customers that the Company undertakes all available mea-

sures to achieve business sustainability. We hold the ISO 14001

certificate based on 20 years of systematic environmental care.

Caring about and developing employees

In 2022, according to an extensive survey the DT Group conducts

every year, Hrvatski Telekom achieved the highest employee satis-

faction in the history of HT and the highest employee engagement

in all segments.

These results are also a direct consequence of introducing a ca-

reer path across the Company, providing all our employees with a

clear, transparent, and structured career path, as well as the larg-

est investments in employees. A new Collective Agreement was

signed in 2022, confirming HT's status as the most desirable em-

ployer in the telecommunications industry. It provides employees

with the highest level of social and material rights, and thus HT

responded to the challenges of inflation that all employees face

today.

An integral part of the development of HT as a digital company

is raising the level of knowledge in the Company through devel-

opment and programs for acquiring new skills and continuous

investment in employees. Digital learning is available to our em-

ployees through a platform that offers more than 23,000 online

courses. We are proud that over the last four years, we continu-

ously increased the number of completed online courses by an

average of 80 percent per year, providing modern learning tools

and enabling employees to take the initiative and seek continuous

training adapted to the specific needs of target groups of employ-

ees.

We have identified talents from all areas of the Company, and

we develop their career individually to maximize competencies,

engagement, and motivation. The Talent program was further

developed in 2022 with the new generation of participants of the

12-month comprehensive program. The content includes active

work with Management Board members on actual business top-

ics. It goes beyond relying solely on classic educational methods

and has proven to be the most effective training method because

learning takes place in the work process. In addition to HT's talent

programs, the Company's talents can participate in DT's talent

program called Future skilling, which focuses on five topics: Soft-

ware Development, Data Analytics, Digital Marketing, Artificial

Intelligence, and User Experience.

Traditionally, we take care of the balance between personal and

business life and the health of our employees. We continue to

operate in line with the SmartWork operating model adapted to

CORPORATE SOCIAL RESPONSIBILITY

CORPORATE SOCIAL

RESPONSIBILITY

50 51

CORPORATE SOCIAL RESPONSIBILITYCORPORATE SOCIAL RESPONSIBILITY

platform of the Zagreb Volunteer Center. A two-day workshop of

the 'Maksimir' Nursing Home was held. In addition to repeating the

basic tools, residents also learned about various apps that interest

them, updating data, etc.

HT's 'Generations Together', the national digital education pro-

gram for the elderly resident of nursing homes, was recognized

at the international "The SABRE Awards 2022" as one of the best

projects in the entire EMEA region.

Digital innovation incubator

Hrvatski Telekom is also the general partner of the Digital Innova-

tion Incubator, an online project in which students of all faculties

learn about creativity and innovation, connect with leading com-

panies in the region and develop applicable innovative solutions

in selected industries. More than 2,500 registered elementary and

high school students and students from all over Croatia participat-

ed in the Digital Incubator organized by the Institute for Innovation

in 2022.

Volunteers Club

HT Group volunteer club has 296 members, and the club's activ-

ities continued in 2022. Several volunteer actions of the different

scopes of engagement were organized, including organizing a

hospital stay for the Krijesnica Association, one reforestation cam-

paign, and two humanitarian campaigns - collecting Christmas

packages for the Mali zmaj Association in Zagreb and collecting

supplies for the Maestral Children's Home in Split. Hrvatski Tele-

kom volunteers also participated in the Good Deeds Day cam-

paign, which was held throughout Croatia, and the Resolution Z

nature conservation and cleaning program.

Voluntary blood donation drives are regularly organized at HT

premises in Zagreb and Rijeka, with a great turnout from HT Group

colleagues. At the end of the year, a donation contest was orga-

nized based on which the employees themselves selected five

associations and/or initiatives to receive HT's Christmas donation.

How Are You?

At the end of 2022, Hrvatski Telekom conducted a national sur-

vey on communication habits and the importance of communi-

cation on mental state. A panel discussion was organized on the

topic "HOW ARE YOU? it's not just an ordinary question" with the

participation of renowned experts: Prof. Nataša Jokić-Begić, Ph.D.

from the Faculty of Philosophy, University of Zagreb, Tanja Sever

from Sever Psychology Center, and Prof. Neven Ricijaš, Ph.D. from

the Faculty of Education and Rehabilitation of the University of

Zagreb. They spoke from an expert point of view about the impor-

tance of honest and open communication and providing support

to loved ones as one of the key prerequisites for happiness, about

how to deal with problems, stress, and loneliness, and what we

can do to make ourselves and others feel better.

Together with the kako si? Association, a non-profit organization

whose goal is to empower the public to face various everyday

difficulties, Hrvatski Telekom did a series of 15 videos covering

specific topics to draw attention to these important but often ne-

glected topics.

#WhatWeValue

Hrvatski Telekom presented a free digital #WhatWeValue plat-

form to support young volunteers financially and connect them

with experienced leaders of humanitarian and socially responsible

actions who can help them achieve their goals.

Smart cities

In 2022, Hrvatski Telekom continued to develop solutions that

improve the quality of life in Croatian cities, reduce greenhouse

gas emissions, and increase the level of public services and the

efficiency of public spending. Some of the projects related to the

development of smart cities are described below.

Public bicycle system in Split-Dalmatia County

HT, with the System of Public Bicycles and the City of Split, pre-

sented in May of 2022 the system of public bicycles in Klis. The bi-

cycles were installed in that municipality as part of the "Choose a

bicycle!" EU project, a total value of HRK 13.6 million. The "Choose

a bicycle!" project is carried out in eight cities and municipalities

in the Urban Agglomeration of Split (UAS), which is also a record

holder in the number of users of public bicycle systems in Croa-

tia. The public bicycle system was previously set up in Podstrana,

followed by the expansion to the areas of Trogir, Kaštela, Solin, Du-

gopolje, and Dicma, and the upgrade of the system in Split. A total

of 41 new terminals and 242 bicycles were installed.

Smart remote water consumption metering pilot

project

HT and Đakovački vodovod successfully piloted the project of

smart remote water consumption metering pilot project. The proj-

ect tested the equipment consisting of a water meter and a com-

munication device that collects water consumption and flow data,

communication NB-IoT technology that sends the collected data

to a central system for processing and a central system or plat-

form for data collection, analysis, and visualization - ComWater.

IoT metering devices to collect meteorological data on

Biokovo

With the help of HGSS station Split and Biokovo Nature Park and in

cooperation with our renowned alpinist Stipe Božić, Hrvatski Tele-

kom installed IoT metering devices for collecting meteorological

data at the location of the Pakline mountain shelter on Biokovo.

The metering devices collect temperature and air humidity data,

which are then displayed in real-time on a mobile app enabling

future users to monitor and analyze data for various needs. For

example, HGSS can access precise meteorological data at a par-

ticular location and accordingly plan the necessary interventions.

Next-generation broadband access construction proj-

ects in ten counties

Hrvatski Telekom started with projects for constructing next-gen-

eration access - in ten counties in Croatia. By the end of 2023, this

will enable fast (+40 Mbit/s) and ultra-fast (+100 Mbit/s symmet-

rical) broadband access for almost 150 thousand new users in cit-

ies, municipalities, suburbs, and rural areas across Croatia.

The 13 Partnership Agreements are an integral part of the Pub-

lic Call of the Ministry of Regional Development and EU funds for

constructing next-generation access networks.

Digital transformation of factories

In early 2022, HT signed a partnership with Culmena on the

project of 100 smart factories to enable easier digitalization and

application of Industry 4.0 in Croatian factories. As part of the

digitalization and the application of the Industry 4.0 project, Hr-

vatski Telekom as a technology partner, provides factories with an

assortment of infrastructure services and the possibility of using

the modern HT IoT platform. As part of the complete Industry

4.0 offering, customers also have access to an app that monitors

real-time production to raise quality control and digitalize the

process further. Industry 4.0 aims to establish communication

between machines, people, products, and business apps. This re-

quires digitalization with the ultimate goal for factories to operate

more efficiently and for products with the highest quality stan-

dards to be more competitively priced.

E-mobility

Activities continued related to the EV charging infrastructure de-

velopment (installation of charging stations) and the provision

of the best possible digital charging service. Infrastructure de-

velopment aims to encourage the use of electric vehicles as the

most environmentally friendly solution in traffic, reduce CO2, and

increase air quality. As a continuation of the started activities, Hr-

vatski Telekom expanded in 2022 its cooperation with the Tom-

my retail chain and added another location equipped with an EV

charging station in the vicinity of the city of Split. In addition to

increasing the number of users of our Fleet Management Portal

service in cooperation with ALD, we have expanded the service by

four more users, bringing the total number of vehicles for which

we enable monitoring and session cost planning to 39.

As part of the consortium of Ericsson Nikola Tesla and REGEA,

Hrvatski Telekom actively participates in the Smart EPC project,

the goal of which is to develop standard tender documentation for

public procurement procedures in Smart Lighting, based on the

maximum inclusion of non-energy components.

In 2022, Hrvatski Telekom was also a part of the EU EIT Urban

Mobility project, as one of the consortium members, along with

REGEA, the Faculty of Electrical Engineering and Computing, and

Invento Capital Partners. HT focused on achieving five strategic

goals: Create livable urban spaces, bridge the knowledge gap,

implement green, safe, and inclusive mobility solutions for people

and goods, accelerate market opportunities, promote effective

policies, and behavior change.

As the leader of the CEKOM Surinmo sub-project, Hrvatski Tele-

kom successfully developed a car-sharing solution (shared mobili-

ty) and connected it to a charging stations management platform,

resulting in a unique solution that, in addition to providing a shared

mobility service, enables the user to view charging points and their

availability in real-time, and facilitates the use of electric vehicles.

WiFi4EU

As part of the WiFi4EU program, the European Union co-finances

public WiFi network projects, and cities and municipalities that

meet the conditions receive EUR 15,000 vouchers to provide free

internet in public locations. This program seeks to promote the

introduction of free WiFi for citizens and visitors in public spaces

across the European Union, such as parks, squares, public build-

ings, libraries, healthcare institutions, and museums, funding

local government units to procure cutting-edge equipment for

free WiFi in public areas. The fact that municipalities, towns, and

cities in these projects select Hrvatski Telekom proves that the

Company has been recognized as a reliable technological partner

that can provide quality internet access that increases economic

activity and quality of life for citizens in urban and suburban com-

munities. Hrvatski Telekom has so far implemented WiFi in more

than 50 cities and municipalities through the WiFi4EU program.

Responsibility towards environment

Sustainable development and climate protection are one of the

strategic determinants of HT and the entire DT Group. The use of

renewable energy sources is a step forward in the ongoing efforts

of HT to create a society with reduced greenhouse gas emissions.

In 2022, HT continued to use CO2-neutral electricity for 100 per-

cent of its consumption. The first corporate agreement on the

main conditions for the Virtual Power Purchase Agreement (vPPA)

in Croatia marks a major structural energy transition and is an im-

portant step towards securing the necessary energy for HT's op-

erations from RES, which will at the same time directly contribute

to HT's ambitious ESG goals.

As the only telecommunications company in Croatia certified ac-

cording to the ISO 14001 environmental management standard,

HT focuses on implementing green technologies and energy-sav-

ing solutions that are favorable to creating a society with reduced

greenhouse gas emissions. We systematically implement numer-

ous measures to reduce energy consumption and increase energy

efficiency by investing in the latest technologies. By introducing

the latest ICT technologies and services, we are reducing our car-

bon footprint and that of our customers.

We also use renewable sources to power base stations in our

mobile networks. We regularly renew and modernize our vehicle

fleet, which allows us to improve quality and efficiency and reduce

harmful environmental effects.

In addition to the unprecedented rise in electricity prices, in ac-

cordance with our sustainability and energy efficiency strategy,

numerous initiatives were implemented to reduce energy con-

sumption, such as the relocation of some employees in Zagreb

and Rijeka, the installation of modern and energy-efficient heating

systems in Rijeka and Split, the switching off of unnecessary light-

52 53

ing in our T-Centers and energy saving measures in our networks,

while maintaining the status of the leading network.

We continually encourage our employees to think and act eco-

logically. Numerous initiatives enable us to reduce energy con-

sumption and adverse climate impact and to properly manage

resources and waste. Points of sale accept customers' obsolete

mobile phones, other electronic devices, and waste batteries. We

are committed to working harder on the development of the cir-

cular economy process, which helped us in 2022 to improve the

collection of old devices that users no longer use and their proper

disposal and recycling of valuable raw materials. We achieved the

set goal for the return of old mobile and other electronic devices

(three percent of returned devices from users, compared to sold

devices).

Responsible business in HT owned companies

COMBIS

Employees

In 2022, Combis realized many new socially responsible initiatives

under the umbrella #GetInvolved slogan. In March, they organized

surprises for female employees to celebrate International Wom-

en's Day and gave them a day off. International Men's Day was

also observed on November 19. The main goal was to focus on the

health of men of all age groups and improve gender relations.

For Earth Day, a two-day campaign, 'Help the environment without

hesitation,' was held, in which Combis employees collected elec-

tronic waste such as old mobile phones, printers, or hair dryers.

December was in the sign of the 'Combis humanitarians' project.

Numerous colleagues thus sold picture books from the Fairytales

in the Digital World collection, which aims to educate children

about the dangers lurking online. The collection of three different

picture books was created in cooperation between Combis and

the Center for Missing and Abused Children: 'The Three Little Pigs',

'The Ugly Duckling', and 'Pinocchio'. All proceeds from the sold pic-

ture books went to the Center for Missing and Abused Children.

Community

'Fairytales in the digital world' are part of an extensive educational

campaign about online security and growing Combis' recogni-

tion as a company with the highest security expertise. The public

recognized the campaign, as did the profession. It won the Best

Employer Brand Adria award for the best integration of employer

brand and corporate brand. It may not be easy to talk about tech-

nology in a simple way, but with effort and good communication,

one can talk about everything and create an atmosphere of trust,

which is an important part of the formula by which the Combis

team tries to answer the question of what is needed to be safe in

the digital world.

Knowledge society

Combis introduced to the market Cloud No.9 - a complete offering

of Cloud services and solutions, the main benefit of which is that

this solution is tailored for each user, depending on the business

needs, in agreement with Combis' consultants and architects,

whereby the user at all times has the right to expand or reduce the

amount of equipment and services used.

Combis also organized the online panel DiscussIT 'Innovations for

a better society' on tourism, encouraging significant interest from

the interested community and a wider dialog about the IT needs

of this vital part of the Croatian economy.

The long-term cooperation between Combis and Algebra gave

rise to another valuable project - the Damir Baronica scholarship,

named after a colleague who passed away prematurely. Through

it, Combis supports students at Algebra University and provides

them with the opportunity to gain valuable experience through

education and mentoring while at the same time financially sup-

porting them.

Also supported are VMware vForum, Adria Security Summit, Smart

Card Zadar, and B:IT.con, and in 2022 Combis also participated in

the humanitarian Good Game Global Counter-Strike tournament.

ISKON

Community

In 2022, Iskon continued implementing initiatives to increase

awareness of personal responsibility in preserving the environ-

ment. In cooperation with the owner of the first Croatian zero

waste store in Croatia, Anamarija Prgomet, Iskon created a se-

ries of video guides on positive changes that can be made in the

household to reduce the personal ecological footprint. It invited

its users to take concrete action to switch to an e-bill and addi-

tionally encouraged it through prizes. By the end of the year, 40

percent of the user base switched to an e-bill.

As a sponsor, Iskon joined the "ZGHack" hackathon for elementa-

ry school students to solve environmental protection and waste

management challenges. Over three days, 14 teams of students

from Zagreb schools designed their solutions, created them in Mi-

necraft, and presented them to the jury.

In the fall of 2022, Iskon received recognition for personal involve-

ment in ecology in the form of a "Plastic free Croatia" certificate

for the successful implementation and maintenance of the work-

place, promotional materials, and product packaging without ex-

cess plastic materials.

Culture

In addition to environmental engagement, Iskon continued to

invest in culture by supporting the annual "Rock&OFF" program,

partnering with Unison, HDS ZAMP, and Tvornica kulture. The pro-

gram aims to promote musical achievements and diversity to the

general public through the annual awards for the best achieve-

ments in rock, pop, hip-hop, electronic, and jazz. In addition to

awards, the program also focuses on promoting recently profiled

musical names with whom it organizes a summer tour. In 2022,

CORPORATE SOCIAL RESPONSIBILITY CORPORATE SOCIAL RESPONSIBILITY

the Rock&OFF finalists selected for the tour in the "Big Bang of

the Year" category were: Miriiam, Fran Vasilić, Eric and Šiza, who

performed in a total of six Croatian cities and at two festivals: Mo-

tovun Film Festival and Liburnia Film Festival.

Employees and community

In 2022, Iskon continued donating services to humanitarian asso-

ciations, volunteer campaigns, and other activities in the field of

employee engagement.

CRNOGORSKI TELEKOM

Green campaigns by Crnogorski Telekom

In April 2022, Crnogorski Telekom launched a large green cam-

paign that raised users' awareness of the importance of recycling

and responsible management of electronic waste by rewarding

the recycling of old devices with free gigabytes and discounts on

devices and services. Crnogorski Telekom also announced that for

the first 100 recycled old devices, it would organize the planting of

100 trees in the Montenegrin cities.

A large donor initiative was also launched for a campaign to plant

trees in the park forest of Gorica (Podgorica), which was de-

stroyed by a big fire last year. All Telekom postpaid and prepaid

users could thus donate 1 euro through the Telekom ME applica-

tion, and Telekom matched each donation.

The Telekom Volunteer Club participated, through volunteering

and donation, in the largest volunteer effort happening once a

year around the world and was organized in Montenegro on the

occasion of International Coastal Cleanup Day. At the same time,

Telekom promoted the importance of recycling old devices by re-

warding users with free gigabytes and discounts on devices for

those who bring old devices to T-Centre for recycling.

Telekom in the service of education

In line with its strategic commitment to encourage young people

to engage in STEM and direct them to develop innovations and

digital solutions in various fields, Crnogorski Telekom supported

many activities in education fields.

Crnogorski Telekom thus supported one of the world's largest

mathematical competitions for children, Kangourou sans Fron-

tières, which again exceeded expectations this year. In addition,

the competition for young programmers was supported as part of

the partner Cortex Academy (the largest online and hybrid plat-

form for education in Montenegro). They spent several months

developing web and mobile apps while one team worked on that

project with the mentoring support of Telekom's representatives.

Crnogorski Telekom continued to implement the Free Internet in

Schools project in 2022, thanks to which almost all Montenegrin

schools receive free internet necessary for their daily needs. In

order to give everyone equal access to new technologies in rural

and suburban parts of the country, where there is no possibility

to bring fiber optics or other landline technologies, Crnogorski

Telekom provides free mobile internet to schools. This continued

a decade and a half long, and over half a million Euro worth coop-

eration with the Ministry of Education since Crnogorski Telekom

has been providing free broadband internet to all Montenegrin

primary and secondary schools, as well as pre-schools since 2007.

Crnogorski Telekom’s Volunteer Club

The Volunteer Club and the Montenegrin Blood Transfusion Insti-

tute organized a voluntary blood drive among employees, and vol-

unteers have traditionally been participants in the humanitarian

Christmas Diplomatic Bazaar. This year again, Telekom supported

the humanitarian initiative, thanks to which hundreds of children

from all over Montenegro received humanitarian packages with

food and school supplies.

Crnogorski Telekom's Volunteer Club also took part in the DT

Group-wide initiative to collect money for the citizens of Ukraine

who did not escape from the devastated cities in that country.

Taxonomy Regulation

For the first two environmental goals, the Company will publish

information on the share EU Taxonomy eligible and aligned eco-

nomic activities and key performance indicators in the manner

and within the deadlines, as regulated by non-financial reporting

in Articles 21.a and 24.a of the Accounting Act (Official Gazette no.

78/15, 134/15, 120/16, 116/18, 42/20, 47/20, 114/22), at the latest

by the deadline from Article 30, paragraph 5. of the Accounting

Act, on Hrvatski Telekom's website, i.e., under the applicable reg-

ulations.

Consolidated income statement

Consolidated balance sheet

Consolidated cash flow statement

GROUP

FINAN-

CIAL

STATE -

MENTS

56 57

HT GROUP FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEET

CONSOLIDATED INCOME STATEMENT CONSOLIDATED BALANCE

SHEET

HT GROUP FINANCIAL STATEMENTS CONSOLIDATED INCOME STATEMENT

in HRK million At 31 Dec

2021

At 31 Dec

2022

% of change

A22/A21

Intangible assets 1.897 1.936 2,0%

Property, plant and equipment 6.300 6.319 0,3%

Non-current financial assets 388 10 -97,5%

Receivables 293 263 -10,2%

Prepayments and accrued income 0 186 -

Lessee use rights to leased assets (IFRS 16) 644 555 -13,8%

Contract assets (IFRS 15) 52 54 4,2%

Contract costs (IFRS 15) 137 167 21,7%

Deferred tax asset 140 135 -3,9%

Total non-current assets 9.852 9.625 -2,3%

Inventories 190 263 38,4%

Assets held for sale 0 238 -

Receivables 1.496 1.506 0,7%

Current financial assets 239 102 -57,5%

Contract assets (IFRS 15) 234 219 -6,4%

Contract costs (IFRS 15) 73 76 4,1%

Cash and cash equivalents 2.871 2.814 -2,0%

Prepayments and accrued income 93 157 68,1%

Total current assets 5.197 5.373 3,4%

TOTAL ASSETS 15.049 14.999 -0,3%

in HRK million 2021 2021

wo OT

2022 % of change

A22/A21

% of change

A22/A21

wo OT

Mobile revenue 3.602 3.607 3.828 6,3% 6,1%

Fixed revenue 3.094 2.947 3.002 -3,0% 1,9%

System solutions 697 698 581 -16,7% -16,8%

Revenue 7.393 7. 251 7.410 0,2% 2,2%

Other operating income 94 93 107 13,8% 14,9%

Total operating revenue 7.487 7.344 7.517 0,4% 2,4%

Operating expenses 4.345 4.296 4.428 1,9% 3,1%

Material expenses 2.233 2.198 2.330 4,3% 6,0%

Employee benefits expenses 1.154 1.129 1.137 -1,5% 0,7%

Other expenses 968 980 967 -0,1% -1,3%

Work performed by the Group and capitalised -79 -73 -70 11,9% 4,2%

Net impairment losses on trade receivables and

contract assets

68 62 64 -6,1% 2,6%

Depreciation and amortization 2.329 2.259 2.143 -8,0% -5,1%

EBIT 813 789 946 16,4% 19,9%

Financial income 32 32 29 -8,5% -9,5%

Income/loss from investment in joint ventures 0 0 0 11,5% 11,5%

Financial expenses 101 91 91 -9,7% 0,0%

Profit before taxes 744 730 885 18,9% 21,1%

Taxation 129 131 224 73,6% 71,5%

Net profit 614 599 660 7,4% 10,1%

Non controlling interests 0 -6 -5 -1069,1% 20,8%

Net profit after non controlling interests 615 593 655 6,6% 10,5%

Adjusted EBITDA AL

2.883 2.822 2.845 -1,3% 0,8%

Exceptional items

112 139 103 -7,9% -25,7%

EBITDA AL 2.771 2.683 2.742 -1,0% 2,2%

Mainly adjusted for restructuring redundancy costs and legal cases

Mainly related to restructuring redundancy costs and legal cases

58 59

in HRK million At 31 Dec

2021

At 31 Dec

2022

% of change

A22/A21

Subscribed share capital 10.245 10.245 0,0%

Reserves 575 520 -9,6%

Revaluation reserves 0 0 54,9%

Treasury shares -61 -6 90,1%

Retained earnings 1.104 900 -18,4%

Net profit for the period 615 655 6,6%

Non controlling interests 246 245 -0,2%

Total issued capital and reserves 12.723 12.560 -1,3%

Provisions 127 144 13,4%

Non-current liabilities 131 124 -5,0%

Lessee lease liabilities to third partie due > 1 year (IFRS 16) 446 378 -15,1%

Contract liabilities (IFRS 15) 0 0 -100,0%

Deferred tax liability 34 33 -1,6%

Total non-current liabilities 738 680 -7,8%

Current liabilities 1.304 1.493 14,5%

Contract liabilities (IFRS 15) 91 78 -14,3%

Lessee lease liabilities due <= 1 year (IFRS 16) 159 152 -4,7%

Accrued expenses and deferred income 9 9 2,2%

Provisions for redundancy 24 26 8,5%

Total current liabilities 1.588 1.759 10,7%

Total liabilities 2.326 2.438 4,8%

TOTAL EQUITY AND LIABILITIES 15.049 14.999 -0,3%

HT GROUP FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEET

CONSOLIDATED BALANCE SHEET

CONTINUED

CONSOLIDATED CASH FLOW

in HRK million 2021 2022 % of change

A22/A21

Profit before tax 744 885 18,9%

Depreciation and amortization 2.329 2.143 -8,0%

Increase / decrease of current liabilities -158 68 142,8%

Increase / decrease of current receivables 122 -280 -329,1%

Increase / decrease of inventories -40 -73 -81,5%

Other cash flow increases / decreases -136 -143 -5,6%

Net cash inflow/outflow from operating activities 2.862 2.599 -9,2%

Proceeds from sale of non-current assets 17 126 632,1%

Proceeds from sale of non-current financial assets 14 1 -93,2%

Interest received 5 10 87,0%

Other cash inflows from investing activities 0 201 -

Total increase of cash flow from investing activities 36 338 839,0%

Purchase of non-current assets -1.543 -1.467 4,9%

Other cash outflows from investing activities -40 -65 -60,5%

Total decrease of cash flow from investing activities -1.583 -1.533 3,2%

Net cash inflow/outflow from investing activities -1.547 -1.195 22,8%

Total increase of cash flow from financing activities

Repayment of loans and bonds -18 0 100,0%

Dividends paid -645 -636 1,4%

Repayment of lease -350 -317 9,4%

Other cash outflows from financing activities -426 -509 -19,3%

Total decrease in cash flow from financing activities -1.440 -1.462 -1,5%

Net cash inflow/outflow from financing activities -1.440 -1.462 -1,5%

Exchange gains/losses on cash and cash equivalents -6 1 108,9%

Cash and cash equivalents at the beginning of period 3.003 2.871 -4,4%

Net cash (outflow) / inflow -132 -58 56,2%

Cash and cash equivalents at the end of period 2.871 2.814 -2,0%

HT GROUP FINANCIAL STATEMENTS CONSOLIDATED CASH FLOW STATEMENT

Independent auditor’s report

Responsibility for the

consolidated financial statements

Consolidated statement of

comprehensive income

Consolidated statement of

financial position

Consolidated statement of cash

flows

Consolidated statement of

changes in equity

Notes to the consolidated

financial statements

CONSOLI

DATED

FINAN

CIAL

STATE 

MENTS

DRAFT

STRICTLY CONFIDENTIAL

Croatian Telecom Inc.

Consolidated financial statements

31 December 2022

DRAFT

STRICTLY CONFIDENTIAL

Croatian Telecom Inc.

Contents

Page

Independent Auditor’s Report 2

Responsibility for the consolidated financial statements 10

Consolidated statement of comprehensive income 11

Consolidated statement of financial position 13

Consolidated statement of cash flows 15

Consolidated statement of changes in equity 16

Notes to the consolidated financial statements 18

A member firm of Ernst & Young Global Limited

Mjerodavan sud: Trgovački sud u Zagrebu; Temeljni kapital: 20.000,00 kuna, uplaćen u cijelosti;

Članovi Uprave: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić

Applicable court: Commercial court in Zagreb; Registered share capital is 20.000,00 HRK, fully paid;

Members of the Board: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić

Ernst & Young d.o.o.

Radnička cesta 50, 10 000 Zagreb

Hrvatska / Croatia

MBS: 080435407

OIB: 58960122779

PDV br. / VAT no.: HR58960122779

Tel: +385 1 5800 800

Fax: +385 1 5800 888

www.ey.com/hr

Banka / Bank:

Erste & Steiermärkische Bank d.d.

Jadranski trg 3A, 51000 Rijeka

Hrvatska / Croatia

IBAN: HR3324020061100280716

SWIFT: ESBCHR22

INDEPENDENT AUDITOR’S REPORT

To the Shareholders of Hrvatski Telekom d.d.

Report on the audit of the consolidated financial statements

Opinion

We have audited the consolidated financial statements of Hrvatski Telekom d.d. (the Company) and its

subsidiaries (together – the Group), which comprise the consolidated statement of financial position as at 31

December 2022, consolidated statement of comprehensive income, consolidated statement of changes in

equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated

financial statements, including significant accounting policies.

In our opinion, the accompanying consolidated financial statements give a true and fair view of the

consolidated financial position of the Group as at 31 December 2022 and of its consolidated financial

performance and its consolidated cash flows for the year then ended in accordance with International

Financial Reporting Standards as adopted by the European Union (IFRS).

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities

under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated

financial statements section of our report.

We are independent of the Company and the Group in accordance with the International Ethics Standards

Board of Accountants’ (IESBA) International Code of Ethics for Professional Accountants, including

International Independence Standards (IESBA Code), together with the ethical requirements that are relevant

to our audit of the financial statements in Republic of Croatia, and we have fulfilled our other ethical

responsibilities in accordance with these requirements and the IESBA Code.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our

opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit

of the consolidated financial statements of the current period. These matters were addressed in the context

of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we

do not provide a separate opinion on these matters. For each matter below, our description of how our audit

addressed the matters is provided in that context.

We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the

consolidated financial statements section of our report, including in relation to these matters. Accordingly,

our audit included the performance of procedures designed to respond to our assessment of the risks of

material misstatement of the consolidated financial statements. The results of our audit procedures,

including the procedures performed to address the matters below, provide the basis for our audit opinion on

the accompanying consolidated financial statements.

A member firm of Ernst & Young Global Limited

Mjerodavan sud: Trgovački sud u Zagrebu; Temeljni kapital: 20.000,00 kuna, uplaćen u cijelosti;

Članovi Uprave: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić

Applicable court: Commercial court in Zagreb; Registered share capital is 20.000,00 HRK, fully paid;

Members of the Board: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić

Key audit matter

How we addressed key audit matter

Revenue recognition

Refer to Note 2.3.1 Significant accounting

estimates Revenue recognition, Note 2.4. (o)

Revenue recognition and Note 4 Segment

information of the consolidated financial

statements.

We consider revenue recognition as a significant

matter due to the complexity of the invoicing

systems and the large volume of data processed.

Additionally, various types of products and

services as well as pricing of these products and

services are the result of multi-element contracts.

Due to the complexity of transactions, which are

based on various inputs, there is a possibility that

the revenues will not be recognized in accordance

with IFRS as adopted by the EU.

As a result of the above factors as well as

significance of revenues to the financial

statements, the revenue recognition is considered

as a key audit matter.

Our audit procedures related to revenue recognition

included, among others, understanding of sales,

billing, roaming, interconnection and revenue

recognition processes. We understood and evaluated

the design and implementation of segregation of

duties, the adequacy of the policies and key controls,

including relevant Information technology systems

and controls around revenue recognition. On the

sample basis we tested the operating effectiveness of

key controls relevant to the revenue recognition.

We performed testing, on a sample basis, of revenue

accounts, including test of details by reviewing

contracts with customers and performing testing of

issued invoices around the balance sheet date. We

performed analytical procedures by comparison of

financial data with non-financial data (number of

users, industry trends) and investigation of

significant changes or lack of expected changes. We

assessed the adequacy of categorization of revenues

within portfolio approach.

We also assessed adequacy of the disclosures in the

consolidated financial statements and if these are in

line with the requirements of IFRS as adopted by the

EU.

Valuation of goodwill

Refer to Note 2.4. (e) Intangible assets, (g)

Impairment of non-financial assets and Note 15

Intangible assets of the consolidated financial

statements.

The carrying amount of goodwill of the Group as

at 31 December 2022 was HRK 347 million.

Audit procedures included understanding of the

assets impairment assessment process as well as

identifying the relevant controls. We performed

inquiry of management and examined the

methodology used by management to assess the

carrying value of respective goodwill to determine

their compliance with IFRS as adopted by the EU and

consistency of application.

A member firm of Ernst & Young Global Limited

Mjerodavan sud: Trgovački sud u Zagrebu; Temeljni kapital: 20.000,00 kuna, uplaćen u cijelosti;

Članovi Uprave: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić

Applicable court: Commercial court in Zagreb; Registered share capital is 20.000,00 HRK, fully paid;

Members of the Board: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić

The assessment of the “fair value” and “value in

use” of the Group’s cash generating units (“CGU”)

represents significant area of management’s

judgement regarding the future results of the

business and the discount rates applied to future

cash flow forecasts. It involves significant

management’s judgments about the future cash

flows generated from CGUs.

Due to the range of judgements and assumptions

used in the models and impairment assessments,

as well as the significant carrying amount of the

goodwill, this is an area considered to be a key

audit matter.

We evaluated the Group’s future cash flow forecasts

and the process by which they were prepared. On the

sample basis we compared the budget inputs in the

model to the approved budgets and forecast inputs in

the model to management plans. We compared the

current year (2022) actual results with the figures

included in the prior year (2021) forecast to evaluate

assumptions used.

We also evaluated management’s key assumptions

for long-term growth rate by comparing it to

historical growth results. We performed audit

procedures on the mathematical integrity of the

impairment models and sensitivity analysis and

tested the appropriateness of discount rates used in

the calculation with the assistance of the valuation

specialists.

We also assessed adequacy of the disclosures in the

consolidated financial statements and if these are in

line with the requirements of IFRS as adopted by the

EU.

Recognition and valuation of content rights

Refer to Note 2.3.1 Significant accounting

estimates Capitalized content rights, Note 2.4. (e)

Intangible assets, (g) Impairment of non-financial

assets and Note 15 Intangible assets of the

consolidated financial statements.

The carrying amount of content rights of the

Group as at 31 December 2022 was HRK 122

million.

There is a risk that the Group has not applied right

criteria for the capitalization of content rights cost

and/ or the risk that Group estimation of future

We obtained the understanding of content rights

accounting process. We understood and evaluated

the design and implementation of segregation of

duties, the adequacy of the policies and key controls,

including controls that are in place around content

rights accounting.

We obtained a detailed analysis of capitalized content

contracts in the current period and reconciled these

amounts to the general ledger. We have tested a

sample of costs capitalized in the period by inspection

of related contracts and invoices to assess whether

they have been appropriately capitalized.

A member firm of Ernst & Young Global Limited

Mjerodavan sud: Trgovački sud u Zagrebu; Temeljni kapital: 20.000,00 kuna, uplaćen u cijelosti;

Članovi Uprave: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić

Applicable court: Commercial court in Zagreb; Registered share capital is 20.000,00 HRK, fully paid;

Members of the Board: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić

consideration payable from content contracts is

not reasonable.

Since the estimation process is based on the

assumptions like the estimated number of future

customers and discount rate, implying subjectivity

and complexity, this is an area considered to be a

key audit matter.

We assessed the reasonableness of assumptions

(estimated number of future customers and discount

rate) used for measurement of future consideration.

We compared the future customers estimate to

historical data and considered the consistency of the

future growth rate assumptions with management’s

business plans. We tested the appropriateness of

discount rates used in the calculation with the

assistance of the valuation specialists.

We also assessed adequacy of the disclosures in the

consolidated financial statements and if these are in

line with the requirements of IFRS as adopted by the

EU.

Other information

Management is responsible for the other information. Other information comprises the Management Report

and Corporate Governance Statement included in the Group’s Annual Report, but does not include

consolidated financial statements and our auditor’s report thereon. Our opinion on the consolidated financial

statements does not cover the other information.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other

information and, in doing so, consider whether the other information is materially inconsistent with the

consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be

materially misstated.

With respect to the Management Report and Corporate Governance Statement, we also performed

procedures required by the Accounting Act. Those procedures include considering whether the Management

Report is prepared in accordance with the requirements of Article 21 and 24 of the Accounting Act and

whether the Corporate Governance Statement includes the information specified in Article 22 and 24 of the

Accounting Act.

Based on the procedures undertaken, to the extent we are able to assess it, we report that:

1. the information given in the enclosed Management Report and Corporate Governance Statement is

consistent, in all material respects, with the enclosed consolidated financial statements;

2. the enclosed Management Report is prepared in accordance with requirements of Article 21 and 24 of the

Accounting Act;

3. the enclosed Corporate Governance Statement includes the information specified in Article 22 and 24 of

the Accounting Act.

In the light of the knowledge and understanding of the Group and its environment obtained in the course of

the audit of consolidated financial statements, we are also required to report if we have identified material

misstatements in the Management Report and Corporate Governance Statement. We have nothing to report

in this respect.

A member firm of Ernst & Young Global Limited

Mjerodavan sud: Trgovački sud u Zagrebu; Temeljni kapital: 20.000,00 kuna, uplaćen u cijelosti;

Članovi Uprave: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić

Applicable court: Commercial court in Zagreb; Registered share capital is 20.000,00 HRK, fully paid;

Members of the Board: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić

Responsibilities of management and Audit Committee for the consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements

in accordance with IFRS, and for such internal control as management determines is necessary to enable the

preparation of consolidated financial statements that are free from material misstatement, whether due to

fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group’s

ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using

the going concern basis of accounting unless management either intends to liquidate the Group or to cease

operations, or has no realistic alternative but to do so.

Audit Committee is responsible for overseeing the Group’s financial reporting process.

Auditor’s responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a

whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report

that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an

audit conducted in accordance with ISAs will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,

they could reasonably be expected to influence the economic decisions of users taken on the basis of these

consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional

skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements,

whether due to fraud or error, design and perform audit procedures responsive to those risks, and

obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of

not detecting a material misstatement resulting from fraud is higher than for one resulting from

error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the

override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures

that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the

effectiveness of the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and,

based on the audit evidence obtained, whether a material uncertainty exists related to events or

conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If

we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s

report to the related disclosures in the consolidated financial statements or, if such disclosures are

inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to

the date of our auditor’s report. However, future events or conditions may cause the Group to cease

to continue as a going concern.

A member firm of Ernst & Young Global Limited

Mjerodavan sud: Trgovački sud u Zagrebu; Temeljni kapital: 20.000,00 kuna, uplaćen u cijelosti;

Članovi Uprave: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić

Applicable court: Commercial court in Zagreb; Registered share capital is 20.000,00 HRK, fully paid;

Members of the Board: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić

• Evaluate the overall presentation, structure and content of the consolidated financial statements,

including the disclosures, and whether the consolidated financial statements represent the

underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or

business activities within the Group to express an opinion on the consolidated financial statements.

We are responsible for the direction, supervision and performance of the group audit. We remain

solely responsible for our audit opinion.

We communicate with Audit Committee regarding, among other matters, the planned scope and timing of

the audit and significant audit findings, including any significant deficiencies in internal control that we

identify during our audit.

We also provide Audit Committee with a statement that we have complied with relevant ethical requirements

regarding independence, and communicate with them all relationships and other matters that may

reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats

or safeguards applied.

From the matters communicated with Audit Committee, we determine those matters that were of most

significance in the audit of the consolidated financial statements of the current period and are therefore the

key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public

disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should

not be communicated in our report because the adverse consequences of doing so would reasonably be

expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

In compliance with Article 10(2) of Regulation (EU) No. 537/2014 of the European Parliament

and the Council, we provide the following information in our independent auditor’s report, which is required

in addition to the requirements of ISAs:

Appointment of Auditor and Period of Engagement

We were initially appointed as auditors of the Company on 23 April 2021. Our appointment has been renewed

annually by General Assembly of Shareholders, with the most recent reappointment on 25 April 2022,

representing a total period of uninterrupted engagement appointment of 2 years.

Consistence with Additional Report to Audit Committee

We confirm that our audit opinion on the consolidated financial statements expressed herein is consistent

with the additional report to the Audit Committee of the Company, which we issued on 20 February 2023 in

accordance with Article 11 of Regulation (EU) No. 537/2014 of the European Parliament and the Council.

Provision of Non-audit Services

We declare that no prohibited non-audit services referred to in Article 5(1) of Regulation (EU) No. 537/2014

of the European Parliament and the Council were provided by us to the Company and its controlled

undertakings within the European Union. In addition, there are no other non-audit services which were

provided by us to the Company and its controlled undertakings and which have not been disclosed in the

consolidated financial statements.

A member firm of Ernst & Young Global Limited

Mjerodavan sud: Trgovački sud u Zagrebu; Temeljni kapital: 20.000,00 kuna, uplaćen u cijelosti;

Članovi Uprave: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić

Applicable court: Commercial court in Zagreb; Registered share capital is 20.000,00 HRK, fully paid;

Members of the Board: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić

Report on Regulatory requirements

Report based on Delegated Regulation (EU) 2018/815 on supplementing Directive 2004/109/EZ of

European parliament and Council related to regulatory technical standard for specification of single

electronic reporting format of reporting

Independent report on the compliance of consolidated financial statements prepared pursuant to Article 462

(5) of the Capital Market Act (Official Gazette 65/18, 17/20,83/21 and 151/22) applying the requirements

of the Delegated Regulation (EU) 2018 / 815 on establishing of single electronic reporting format for issuers

(the ESEF Regulation).

We have conducted a reasonable assurance engagement on whether the consolidated financial statements,

as contained in the attached electronic file 097900BFHJ0000029454-2022-12-31-en, are prepared, for

the purposes of public disclosure pursuant to Article 462, paragraph 5 of the Capital Market Act, in all ma-

terial respects in accordance with the requirements of the ESEF Regulation.

Responsibilities of the management and Audit Committee

Management is responsible for the preparation of the consolidated financial statements in accordance with

ESEF Regulation.

Furthermore, management is responsible for maintaining an internal control system that reasonably ensures

the preparation of consolidated financial statements without material non-compliances with ESEF Regulation

requirements, whether due to fraud or error.

Management is also responsible for:

• the public disclosure of consolidated financial statements included in the annual report, in XHTML

format and

• selecting and using XBLR codes in accordance with ESEF regulation.

Audit Committee is responsible for overseeing the preparation of the consolidated financial statements in

ESEF format as part of the financial reporting process.

Auditor's responsibilities

Our responsibility is to express a conclusion, based on the audit evidence gathered, as to whether the

consolidated financial statements are free from material non-compliances with the requirements of the ESEF

Regulation. We conducted our reasonable assurance engagement in accordance with International Standard

for Assurance Engagements ISAE 3000 (revised) - Assurance engagements other than audits or reviews of

historical financial information.

Work performed

The nature, timing and extent of the procedures selected depend on the auditor's judgment. Reasonable

assurance is a high degree of assurance, however it does not guarantee that the scope of procedures will

identify all significant (material) non-compliance with ESEF regulation.

In respect of the subject matter, we have performed the following procedures:

• we read the requirements of the ESEF Regulation,

• we have gained an understanding of the Company's internal controls relevant to the application of

the requirements of the ESEF Regulation,

A member firm of Ernst & Young Global Limited

Mjerodavan sud: Trgovački sud u Zagrebu; Temeljni kapital: 20.000,00 kuna, uplaćen u cijelosti;

Članovi Uprave: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić

Applicable court: Commercial court in Zagreb; Registered share capital is 20.000,00 HRK, fully paid;

Members of the Board: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić

• we have identified and assessed the risks of material non-compliance with the ESEF Regulation due

to fraud or error; and

• Based on this, devise and implement procedures to respond to the assessed risks and to obtain

reasonable assurance for the purpose of expressing our conclusion.

The aim of our procedures was to assess whether:

• the consolidated financial statements, which are included in the annual report, are prepared in the

relevant XHTML format,

• the information contained in the consolidated financial statements required by the ESEF Regulation

is marked and all markings meet the following requirements:

o the XBRL markup language was used,

o the basic taxonomy elements listed in the ESEF Regulation with the closest accounting

significance have been used, unless an additional taxonomy element has been created in

accordance with Annex IV. ESEF Regulation,

o the labeled elements comply with the common labeling rules under the ESEF Regulation.

We believe that the audit evidence obtained is sufficient and appropriate to provide a basis for our conclusion.

Conclusion

Based on the procedures performed and evidence gathered, the consolidated financial statements presented

in ESEF format for the year ended on 31 December 2022, contained in the aforementioned attached

electronic file and prepared pursuant to Article 462 paragraph 5 of the Capital Market Act prepared for public

disclosure, are prepared in all material respects in line with the requirements of Articles 3, 4 and 6 of the

ESEF Regulation.

Further to this conclusion, as well as the opinion contained in this independent auditor’s report related to

accompanying consolidated financial statements and annual report for the year ended 31 December 2022,

we do not express any opinion on the information contained in these presentations or on any other

information contained in the aforementioned file.

The partner in charge of the audit resulting in this independent auditor’s report is Ivana Krajinović.

Ivana Krajinović

Member of the Management Board and Certified auditor

Ernst & Young d.o.o.

Radnička cesta 50

10000 Zagreb, Republic of Croatia

14 March 2023

Consolidated statement of comprehensive income

For the year ended 31 December 2022

11 Croatian Telecom Inc.

Notes

2022

2021

HRK million

Revenue

7,410

7,393

Other operating income

107

Merchandise, material and energy expenses

(1,580)

(1,412)

Service expenses

(750)

(822)

Employee benefits expenses

(1,137)

(1,154)

Work performed by the Group and capitalized

Depreciation and amortization

(1,987)

(2,266)

Impairment of non-current assets

(156)

(63)

Net impairment losses on trade receivables and contract assets

(64)

(68)

Other expenses

(967)

(968)

__________

Operating profit

946

813

__________

Finance income

Finance costs

(91)

(101)

__________

Finance costs – net

(62)

(69)

__________

Profit before income tax

884

744

Income tax expense

(224)

(130)

__________

Profit for the year

660

614

__________

Items that may be subsequently reclassified to comprehensive

income

Effects of foreign exchange

(2)

Changes in the fair value of debt instruments at fair value

(1)

Other comprehensive income/ (loss) for the year, net of tax

(3)

__________

Total comprehensive income for the year, net of tax

663

611

__________

Consolidated statement of financial position DRAFT

As at 31 December 2022 STRICTLY CONFIDENTIAL

13 Croatian Telecom Inc.

Notes

31 December

2022

2021

HRK million

ASSETS

Non-current assets

Intangible assets

1,936

1,897

Right-of-use assets

555

644

Property, plant and equipment

6,308

6,288

Investment property

Investments accounted for using the equity method

379

Financial assets at fair value through other comprehensive income

Trade and other receivables

265

294

Contract assets

Capitalized contract costs

167

137

Prepayments

186

Deferred tax asset

135

140

__________

Total non-current assets

9,626

9,852

__________

Current assets

Inventories

263

190

Assets classified as held for sale

238

Trade and other receivables

1,505

1,489

Contract assets

219

234

Capitalized contract costs

Prepayments

156

Financial assets at fair value through other comprehensive income

201

Income tax prepayments

Bank deposits

102

Cash and cash equivalents

2,814

2,871

__________

Total current assets

5,373

5,197

__________

TOTAL ASSETS

14,999

15,049

___________

__________

Consolidated statement of cash flows

For the year ended 31 December 2022

Croatian Telecom Inc.

Notes

2022

2021

HRK million

Operating activities

Profit before income tax

884

744

Depreciation and amortization

1,987

2,266

Impairment loss of PPE & Intangible assets

Impairment loss of investment accounted for using the equity method

141

Impairment loss of Goodwill

Interest income

(7)

(8)

Interest expense

(Gain) on disposal of assets

5,10

(43)

(13)

Other net financial loss

11,12

(Increase) in inventories

(73)

(39)

(Increase)/ decrease in receivables and prepayments

(268)

182

Increase in contract assets/costs

(20)

(29)

Increase/ (decrease) in payables and accruals

(199)

Increase/ (decrease) in contract liabilities

(13)

Increase (decrease) / in provisions

Increase / (decrease) in employee benefit obligations

Increase in accruals

Other non-cash items

(2)

__________

Cash generated from operations

2,771

3,117

Interest paid

(40)

(78)

Income tax paid

(132)

(177)

__________

Net cash flows from operating activities

2,599

2,862

__________

Investing activities

Payments for non-current assets

(1,467)

(1,542)

Proceeds from sale of non-current assets

126

Disposal of subsidiary, net of cash disposed

(3)

Proceeds from financial assets at fair value through other comprehensive income

201

Other investment received

Payments for secured deposits

(68)

(38)

Interest received

__________

Net cash flows used in investing activities

(1,195)

(1,547)

__________

Financing activities

Dividends paid

(630)

(640)

Dividend paid to non-controlling interest in subsidiary

(6)

(5)

Repayment of radio frequency spectrum and content

(326)

(327)

Repayment of bonds and borrowings

(19)

Repayment of lease liability principal amounts

(317)

(350)

Acquisition of treasury shares

(183)

(100)

__________

Net cash flows used in financing activities

(1,462)

(1,441)

__________

Net (decrease) / increase/ in cash and cash equivalents

(58)

(126)

Cash and cash equivalents as at 1 January

2,871

3,003

Exchange (losses) on cash and cash equivalents

(6)

__________

Cash and cash equivalents as at 31 December

2,814

2,871

_________

________

The accompanying accounting policies and notes are an integral part of these consolidated financial statements.

Consolidated statement of changes in equity

As at 31 December 2022

Croatian Telecom Inc.

Issued

capital

Legal

reserves

Effects of

foreign

exchange

Other reserves

Reserve for

treasury

Treasury

Retained

earnings

Total equity

attributable to

equity holders

of the parent

Non-

controlling

interest

Total equity

HRK million

(Note 31)

(Note 32)

(Note 33)

(Note 34)

Balance as at 31 December 2020

10,245

512

(90)

1,834

12,594

313

12,907

________

__________

______

_________

__________

_______

Balance as at 1 January 2021

10,245

512

(90)

1,834

12,594

313

12,907

Profit for the year

615

(1)

614

Effects of Changes in Foreign

Exchange Rates

(2)

Other comprehensive income for the

year

(1)

________

_________

__________

________

_________

__________

________

Total comprehensive income for

the year

(2)

(1)

615

612

(1)

611

Dividends (Note 34)

(640)

(5)

(645)

Reserve for treasury shares

100

(100)

Acquisition of treasury shares

(100)

Share based payments

(3)

Shares cancelled

(126)

126

Transfer of NCI to retained earnings

(7)

Other changes

Disposal of subsidiary (Note 3)

(54)

________

__________

_______

_________

__________

_______

Balance as at 31 December 2021

10,245

512

(61)

1,719

12,477

246

12,723

________

_________

__________

________

__________

________

The accompanying accounting policies and notes are an integral part of these consolidated financial statements.

Consolidated statement of changes in equity (continued) DRAFT

For the year ended 31 December 2022TIAL

17 Croatian Telecom Inc.

Issued

capital

HRK million

Legal

reserves

HRK

million

Effects of

foreign

exchange

HRK

million

Other

reserves

HRK million

Reserve for

treasury

HRK million

Treasury

HRK

million

Retained

earnings

HRK

million

Total equity

attributable

to equity

holders of

the parent

HRK million

Non-

controlling

interest

HRK

million

Total equity

HRK million

(Note 31)

(Note 32)

(Note 33)

(Note 34)

Balance as at 1 January 2022

10,245

512

(61)

1,719

12,477

246

12,723

Profit for the year

655

660

Effects of Changes in Foreign Exchange

Rates

Other comprehensive income for the year

_____

______

_______

________

_______

______

_______

________

Total comprehensive income for the year

655

658

663

Dividends (Note 34)

(630)

(5)

(635)

Reserve for treasury shares

180

(180)

Acquisition of treasury shares

(183)

Share based payments

(3)

Effect of merger of subsidiary (Note 3)

(11)

Shares cancelled

(235)

235

Other changes

(1)

Transfer of NCI to retained earnings

_____

______

_______

________

_______

______

_______

________

Balance as at 31 December 2022

10,245

512

(6)

1,556

12,315

245

12,560

_____

______

_______

________

_______

______

_______

________

In 2021 and 2022, the Company has changed the presentation method of Share Award Plan as a part of treasury shares in the statement of financial position and the

statement of changes in equity. In 2021, Share Award Plan was shown separately, as a share based program in the statement of changes in equity, and as a share

based program in the statement of financial position. This was done in order to make the presentation of equity movements more transparent. The aforementioned

adjustment had no impact on the total amount of equity.

The accompanying accounting policies and notes are an integral part of these financial statements.

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

1 Corporate information

Croatian Telecom Inc. (“HT” or the “Company”) is a joint stock company whose majority shareholder is Deutsche

Telekom Europe B.V. with a 53% holding. Deutsche Telekom Europe B.V. is 100% owned by Deutsche Telekom Europe

Holding B.V. Deutsche Telekom Europe Holding B.V is 100% owned by Deutsche Telekom Europe Holding GmbH which

is 100% owned by Deutsche Telekom AG. Thus, Deutsche Telekom AG is the ultimate controlling parent.

The registered office address of the Company is Radnička cesta 21, Zagreb, Croatia.

The consolidated financial statements include the financial statements of Croatian Telecom Inc., HT Production d.o.o.

and HT holding d.o.o. in which HT holds 100.00% shares which comprise together HT Group (”Group”).

The total number of employees of the Group as at 31 December 2022 was 4,984 (31 December 2021: 5,149).

The principal activities of the Group are described in Note 4.

The consolidated financial statements for the financial year ended 31 December 2022 were authorized for issue in

accordance with a resolution of the Management Board on 14 March 2023. These consolidated financial statements

are subject to approval of the Supervisory Board as required by the Croatian Company Act. Annual consolidated

financial statements of DT Group are disclosed on the web page of Deutsche Telekom in Investor Relations.

2.1. Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting

Standards (IFRS) as endorsed by the EU. The consolidated financial statements also comply with the Croatian

Accounting Act on consolidated financial statements, which refers to IFRS as endorsed by the EU.

The consolidated financial statements have been prepared under the historical cost convention, as modified by the

revaluation financial assets at fair value through other comprehensive income (Note 20), as disclosed in the accounting

policies hereafter.

The Group’s consolidated financial statements are presented in Croatian Kuna (“HRK”) which is the Group’s

presentation currency. All amounts disclosed in the consolidated financial statements are presented in millions of HRK

if not otherwise stated.

On 1 June 2022, HT Production was merged with Hrvatski Telekom d.d. pursuant to the Merger Agreement and the

decision of the Assembly of the merged company by which the merger was approved. Company HT holding d.o.o. acts

as special purpose vehicle entity which holds following investments:

Ownership interest

31 December

Entity

Country of Business

Principal Activities

2022

2021

_______________

________________

________________________________

__________

Combis d.o.o.

Republic of Croatia

Provision of IT services

100%

Iskon Internet d.d.

Republic of Croatia

Provision of internet and data services

100%

OT-Optima Telekom d.d. /i/

Republic of Croatia

Provision of internet and data services

17.41%

Crnogorski Telekom AD

Republic of Montenegro

Provision of fixed and mobile telephony

services, internet and data services

76.53%

Due to loss of control in July 2021, Optima Telekom is deconsolidated from statements of HT Group for 2021. In 2022, the sale process of

Optima shares is closed.

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

19 Croatian Telecom Inc.

2.1. Basis of preparation (continued)

Set out below is summarised financial information for subsidiaries with non-controlling interest: OT-Optima Telekom d.d.

and Crnogorski Telekom AD. The amounts disclosed are before intercompany eliminations including purchase price fair

value allocation on consolidation level. For OT-Optima Telekom, financial information is presented as at 30 June 2021.

Although the control ceased on 10 July 2021, the Group deconsolidated Optima Telekom from 1 July 2021 for practical

reasons.

OT-Optima Telekom d.d.

Summarised statement of financial position

30 June

2021

HRK million

Current assets

101

Current liabilities

(430)

__________

Current net liabilities

(329)

Non-current assets

559

Goodwill (recognised only for the parent Company share)

Non-current liabilities

(165)

__________

Non-current net assets

433

__________

Net assets

104

__________

Accumulated non-controlling interest

(54)

Net assets after non-controlling interest (Note 3)

Summarised statement of comprehensive income

30 June

2021

HRK million

Revenue

224

Loss for the period

(11)

Other comprehensive income

__________

Total comprehensive loss

(11)

Loss allocated to non-controlling interest

(6)

Summarised statement of cash flows

30 June

2021

HRK million

Cash flow from operating activities

Cash flow from investing activities

(4)

Cash flow from financing activities

(49)

__________

Net decrease in cash and cash equivalents

(23)

__________

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

2.1. Basis of preparation (continued)

Crnogorski Telekom AD

Summarised statement of financial position

31 December

2022

31 December

2021

HRK million

Current assets

472

384

Current liabilities

221

182

__________

Current net assets

251

202

Non-current assets

869

931

Goodwill (recognised only for the parent Company share)

136

Non-current liabilities

__________

Non-current net assets

939

982

__________

Net assets

1,190

1,184

__________

Accumulated non-controlling interest

246

Summarised statement of comprehensive income

31 December

2022

31 December

2021

HRK million

Revenue

598

569

Profit for the period

Other comprehensive income

__________

Total comprehensive income

Profit allocated to non-controlling interest

Dividends paid to non-controlling interest

Summarised statement of cash flows

31 December

2022

31 December

2021

HRK million

Cash flow from operating activities

210

231

Cash flow from investing activities

(168)

(120)

Cash flow from financing activities

(83)

(84)

__________

Net decrease in cash and cash equivalents

(41)

__________

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

21 Croatian Telecom Inc.

2.2. Changes in accounting policies and disclosures

Certain new standards and interpretations have been issued that are mandatory for the annual periods beginning on or

after 1 January 2022 or later. The new standards did not have any material impact on the Company:

• IFRS 3 Business Combinations (Amendments) update a reference in IFRS 3 to the previous version of the

IASB’s Conceptual Framework for Financial Reporting to the current version issued in 2018 without significantly

changing the accounting requirements for business combinations

• IAS 16 Property, Plant and Equipment (Amendments) prohibit a company from deducting from the cost of

property, plant and equipment any proceeds from the sale of items produced while bringing the asset to the

location and condition necessary for it be capable of operating in the manner intended by management. Instead,

a company recognizes such sales proceeds and related cost in profit or loss

• IAS 37 Provisions, Contingent Liabilities and Contingent Assets (Amendments) specify which costs a company

includes in determining the cost of fulfilling a contract for the purpose of assessing whether a contract is

onerous. The amendments clarify, the costs that relate directly to a contract to provide goods or services include

both incremental costs and an allocation of costs directly related to the contract activities.

• Annual Improvements 2018-2020 make minor amendments to IFRS 1 First-time Adoption of International

Financial Reporting Standards, IFRS 9 Financial Instruments, IAS 41 Agriculture and the Illustrative Examples

accompanying IFRS 16 Leases

• IFRS 16 Leases-Cοvid 19 Related Rent Concessions beyond 30 June 2021 (Amendment); The Amendment

applies to annual reporting periods beginning on or after 1 April 2021, with earlier application permitted,

including in financial statements not yet authorized for issue at the date the amendment is issued. In March

2021, the Board amended the conditions of the practical expedient in IFRS 16 that provides relief to lessees

from applying the IFRS 16 guidance on lease modifications to rent concessions arising as a direct consequence

of the covid-19 pandemic. Following the amendment, the practical expedient now applies to rent concessions

for which any reduction in lease payments affects only payments originally due on or before 30 June 2022,

provided the other conditions for applying the practical expedient are met.

New standards and interpretations not yet adopted

Certain new standards and interpretations have been issued that are mandatory for the annual periods beginning on or

after 1 January 2023 or later. The new standards do not have any material impact on the Company:

• IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies

(Amendments); The Amendments are effective for annual periods beginning on or after January 1, 2023 with

earlier application permitted. The amendments provide guidance on the application of materiality judgements

to accounting policy disclosures. In particular, the amendments to IAS 1 replace the requirement to disclose

‘significant’ accounting policies with a requirement to disclose ‘material’ accounting policies. Also, guidance and

illustrative examples are added in the Practice Statement to assist in the application of the materiality concept

when making judgements about accounting policy disclosures.

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

2.2. Changes in accounting policies and disclosures (continued)

New standards and interpretations not yet adopted (continued)

• IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates

(Amendments); The amendments become effective for annual reporting periods beginning on or after January

1, 2023, with earlier application permitted and apply to changes in accounting policies and changes in

accounting estimates that occur on or after the start of that period. The amendments introduce a new definition

of accounting estimates, defined as monetary amounts in financial statements that are subject to measurement

uncertainty, if they do not result from a correction of prior period error. Also, the amendments clarify what

changes in accounting estimates are and how these differ from changes in accounting policies and corrections

of errors

• IAS 12 Income taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction

(Amendments); The amendments are effective for annual periods beginning on or after January 1, 2023 with

earlier application permitted. The amendments narrow the scope of and provide further clarity on the initial

recognition exception under IAS 12 and specify how companies should account for deferred tax related to

assets and liabilities arising from a single transaction, such as leases and decommissioning obligations. The

amendments clarify that where payments that settle a liability are deductible for tax purposes, it is a matter of

judgement, having considered the applicable tax law, whether such deductions are attributable for tax purposes

to the liability or to the related asset component. Under the amendments, the initial recognition exception does

not apply to transactions that, on initial recognition, give rise to equal taxable and deductible temporary

differences. It only applies if the recognition of a lease asset and lease liability (or decommissioning liability and

decommissioning asset component) give rise to taxable and deductible temporary differences that are not equal

• IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current

(Amendments); The amendments are effective for annual reporting periods beginning on or after January 1,

2024, with earlier application permitted, and will need to be applied retrospectively in accordance with IAS 8.

The objective of the amendments is to clarify the principles in IAS 1 for the classification of liabilities as either

current or non-current. The amendments clarify the meaning of a right to defer settlement, the requirement for

this right to exist at the end of the reporting period, that management intent does not affect current or non-

current classification, that options by the counterparty that could result in settlement by the transfer of the

entity’s own equity instruments do not affect current or non-current classification. Also, the amendments specify

that only covenants with which an entity must comply on or before the reporting date will affect a liability’s

classification. Additional disclosures are also required for non-current liabilities arising from loan arrangements

that are subject to covenants to be complied with within twelve months after the reporting period. The

amendments have not yet been endorsed by the EU

• IFRS 16 Leases: Lease Liability in a Sale and Leaseback (amendments); The amendments are effective for

annual reporting periods beginning on or after January 1, 2024, with earlier application permitted. The

amendments are intended to improve the requirements that a seller-lessee uses in measuring the lease liability

arising in a sale and leaseback transaction in IFRS 16, while it does not change the accounting for leases

unrelated to sale and leaseback transactions. In particular, the seller-lessee determines ‘lease payments’ or

‘revised lease payments’ in such a way that the seller-lessee would not recognise any amount of the gain or

loss that relates to the right of use it retains. Applying these requirements does not prevent the seller-lessee

from recognising, in profit or loss, any gain or loss relating to the partial or full termination of a lease.

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

23 Croatian Telecom Inc.

2.2. Changes in accounting policies and disclosures (continued)

New standards and interpretations not yet adopted (continued)

A seller-lessee applies the amendment retrospectively in accordance with IAS 8 to sale and leaseback

transactions entered into after the date of initial application, being the beginning of the annual reporting period

in which an entity first applied IFRS 16. The amendments have not yet been endorsed by the EU.

• Amendment in IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint

Ventures: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture; The

amendments address an acknowledged inconsistency between the requirements in IFRS 10 and those in IAS

28, in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The

main consequence of the amendments is that a full gain or loss is recognized when a transaction involves a

business (whether it is housed in a subsidiary or not). A partial gain or loss is recognized when a transaction

involves assets that do not constitute a business, even if these assets are housed in a subsidiary. In December

2015 the IASB postponed the effective date of this amendment indefinitely pending the outcome of its research

project on the equity method of accounting. The amendments have not yet been endorsed by the EU.

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

2.3. Significant accounting judgments, estimates and assumptions

2.3.1. Significant accounting estimates

The preparation of the Group’s financial statements requires management to make judgments, estimates and

assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of

contingent liabilities, during the reporting period or at the reporting date respectively. However, uncertainty about these

assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the

asset or liability affected in future periods. The key assumptions concerning the future and other key sources of

estimation uncertainty at the statement of financial position date, that have a significant risk of causing a material

adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

Capitalized content rights

The rights to use electronic signals to broadcast sport events, TV programs, movies, music streams, etc. shall be

capitalized as intangible assets if all of the following conditions are met:

- there is no doubt whatsoever that the content will be delivered as agreed in the contract. That means that the

probability that the signal will eventually not be delivered is remote. If the probability of non-delivery is higher

than remote, such contract is accounted for as an executory contract where any prepayments are presented

as other assets and amortized through expenses for services purchased.

- the non-cancellable minimum term and the period over which revenues from customers are expected to be

generated exceed one year. If the term is shorter, the contract is accounted for as an executory contract.

- cost can be estimated reliably.

Contract values are calculated based on the price in the contract and the estimated number of users discounted for the

duration of the contract. Used discount rate depends on the duration of the contract.

Provisions and contingencies

The Group is exposed to a number of legal cases and regulatory proceedings and ownership dispute over distributive

telecommunication infrastructure that may result in significant outflow of economic resources or derecognition of related

assets. The Group uses internal and external legal experts to assess the outcome of each case and makes judgments

as to if and in what amount provisions need to be recorded in the financial statements as explained further in Notes 29,

30 and 36. Changes in these judgments could have a significant impact on the financial statements of the Group.

Impairment of non-financial assets

The determination of impairment of assets involves the use of estimates that include, but are not limited to, the cause,

timing and amount of the impairment. Impairment is based on a large number of factors, such as changes in current

competitive conditions, expectations of growth in the industry, increased cost of capital, changes in the future availability

of financing, technological obsolescence, discontinuance of services, current replacement costs, prices paid in

comparable transactions and other changes in circumstances that indicate an impairment exists. The recoverable

amount and the fair values are typically determined using the discounted cash flow method which incorporates

reasonable market participant assumptions.

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

25 Croatian Telecom Inc.

2.3. Significant accounting judgments, estimates and assumptions (continued)

2.3.1. Significant accounting estimates (continued)

Impairment of non-financial assets (continued)

The identification of impairment indicators, as well as the estimation of future cash flows and the determination of fair

values for assets (or groups of assets) require management to make significant judgments concerning the identification

and validation of impairment indicators, expected cash flows, applicable discount rates, useful lives and residual values.

Specifically, the estimation of cash flows underlying the fair values of the business considers the continued investment

in network infrastructure required to generate future revenue growth through the offering of new data products and

services, for which only limited historical information on customer demand is available. If the demand for those products

and services does not materialize as expected, this would result in less revenue, less cash flow and potential impairment

to write down these investments to their fair values, which could adversely affect future operating results.

The fair value less costs of disposal calculation is based on available data from binding sales transactions in an arm’s

length transaction of similar assets or observable market prices less incremental costs for disposing of the asset. The

value in use calculation is based on a discounted cash flow model. The cash flows are derived from the financial plan

covering a mid-term period. The cash flows beyond the planning period are extrapolated using appropriate growth rates.

The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the

expected future cash inflows and the growth rate used for extrapolation purposes. Further details including carrying

values and effects on the result of the period are given in Notes 15 and 16.

Useful lives of assets

The determination of the useful lives of assets is based on historical experience with similar assets as well as any

anticipated technological development and changes in broad economic or industry factors. The appropriateness of the

estimated useful lives is reviewed annually, or whenever there is an indication of significant changes in the underlying

assumptions. We believe that this is a critical accounting estimate since it involves assumptions about technological

development in an innovative industry and is heavily dependent on the investment plans of the Group. Further, due to

the significant weight of depreciable assets in the Group’s total assets, the impact of significant changes in these

assumptions could be material to the financial position and results of operations of the Group.

The following table demonstrates the sensitivity to a reasonably possible change in useful life on amortization and

depreciation, with all other variables held constant, on the Group’s profit post tax:

Increase /

decrease in %

Effect on profit

post tax

HRK million

Year ended 31 December 2022

+10

122

-10

(143)

Year ended 31 December 2021

+10

143

-10

(170)

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

2.4. Significant accounting judgments, estimates and assumptions (continued)

2.4.1. Significant accounting estimates (continued)

Impairment of goodwill

The Group tests annually whether goodwill has suffered any impairment. The recoverable amounts of cash-generating

units have been determined based on value in use calculations. These calculations require the use of estimates (Note

15). Management believes that no reasonably possible change in any of the key assumptions 2022 would cause the

carrying value of the business and residential cash-generating units, and cash-generating unit Crnogorski Telekom, to

materially exceed their recoverable amount.

In 2021, total amount of impairment of Optima Telekom goodwill is HRK 39 million. Impairment was performed based

on signed agreement on the sale and purchase of the shares of the company Optima Telekom d.d, with which

determined that the fair value is lower than the carrying amount (Note 3).

Content contract liability

As explained in intangible asset accounting policy (Note 2.4.) content costs are capitalized with related liability

recognised. The determination of liability for variable content contracts requires judgement as it is based on estimated

number of future customers and use of a discount rate.

Intangible assets with an indefinite life

In arriving at the conclusion that the acquired brand EVOtv has an indefinite life, the Group considered the fact that the

brand represents a residential segment and relate to operators with proven and sustained demand for their products

and services in a well-established market. The brand EVOtv has historically been supported through spending on

consumer marketing and promotion. The Group considered other factors such as the ability to continue to protect the

legal rights that arise from the brands name indefinitely and the absence of any competitive factors that could limit the

life of the brand name. The Group expects continued economic benefits from the acquired brand in the future. However,

a strategic decision to withdraw marketing support from the brand or the weakening in the brand’s appeal through

changes in customer preferences might result in an impairment charge in the future. Also, reasonable change in certain

key assumptions (such as change of revenues by 2% and change in royalty relief rate by 0.1%) does not lead to

impairment.

In 2021 brand name related to Optima Telekom d.d. is derecognized in the total amount of HRK 61 million due to

deconsolidation (Note 3).

Expected credit loss (ECL) measurement

With application of IFRS 9, Model of Expected Loss (ECL) is introduced. The measurement of expected loss is based

on reasonable and supporting information that is available without additional expenses and effort and which include

information on past events, current and foreseeable future conditions and circumstances.

When estimating the expected credit loss, historical probabilities of non-collection are usually used, complemented with

future parameters relevant to the credit risk.

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

27 Croatian Telecom Inc.

2.3. Significant accounting judgments, estimates and assumptions (continued)

2.3.1. Significant accounting estimates (continued)

Expected credit loss (ECL) measurement (continued)

Macroeconomic data are linked to historical customer behaviour, which is corrected under the following conditions:

- Unemployment rate – If changes in unemployment rate are more than 2% compared to the average of the

last two years

- GDP – If GDP change rates are higher than 1% compared to the average of the last four years

- Average interest rates – If changes in average interest rates are greater than 2% compared to the average of

the last four years.

The general approach of expected credit losses applies to loans, debt instruments measured at amortized cost and

debt instruments measured at fair value through other comprehensive income. A simplified approach to expected credit

losses is applied to customer and contract assets, which results in earlier recognition of impairment charges.

Besides above stated assets to which a simplified approach applies, subsequent measurement of all other financial

assets applies a general approach of expected credit loss consisting of three stages: Bucket 1, Bucket 2 and Bucket 3.

The degree of application depends on the increase in credit risk by financial instrument after initial recognition, i.e. on

the credit quality of the financial instrument:

Buckets for measurement of credit

risk

Period of measurement of ECL

Increase of credit risk

Bucket 1

Performing

12-month expected credit losses

None or not significant

Bucket 2

Underperforming

Lifetime expected credit losses

Significant

Bucket 3

Non-performing

Lifetime expected credit losses

Significant

There is evidence that

financial asset is impaired

at the reporting date

A credit risk is the risk that a counterparty of a financial instrument creates financial losses for the other counterparty by

not fulfilling the contractual obligation. Since the standard does not prescribe a definition of “significant increase in credit

risk” an entity decides how to define it in the context of its specific types of instruments taking into account the availability

of information and own historic data. Basis for assessing an increase in credit risk is either the probability of default or

an analysis of overdue receivables. Revision of applied simplified approach credit risk percentages is done twice a year

to measure credit risk and historical data in order to quantify expected credit loss.

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

2.3. Significant accounting judgments, estimates and assumptions (continued)

2.3.1. Significant accounting estimates (continued)

Expected credit loss (ECL) measurement (continued)

Additionally, financial analyst analyses macroeconomic and external data – inflation rates, consumer credit interest

rates, GDP per capita, unemployment and employment rates and consumer price index change. These data are put in

correlation with historical HT customer payment behaviour in order to see possible change of credit risk percentages

applied.

The standard contains the rebuttable assumption that a “default event” has occurred when the financial asset is more

than 90 days overdue. The assumption may also be supported by the following indicators:

- Counterparty repeatedly fails to meet payment obligations and the service is blocked (contract not yet

terminated).

- Counterparty is over the credit limit with unpaid invoices and fails to pay despite repeated demands.

- Country embargo/countries are in recession or payment restrictions by the relevant state bank.

In making these assumptions, estimates based on historical data and existing market conditions are used.

Simplified approach of expected credit loss measurement i.e measurement on collective basis is applied for trade

receivables, due to large number of analytical data (customers) and homogeneous base of receivables. Trade

receivables are divided into portfolios based on type of customer and tracked according to aging structure. Portfolios

are created based on similarities of the customer behavior as to historical data and future expectations. Portfolios are

for example Mobile Residential Customers, Fixed Residential Customers, Mobile Business Customers, Fixed Business

Customers. Aging clusters for example are Undue, Overdue 0-29 days, Overdue 30-89 days and so further. Aging

clusters are created based on the similarities in collection process steps.

If not collected earlier, all telco receivables are claimed at Court within the statute of limitations.

Analysis of claimed and impaired receivables showed significant collection in first year from due date and subsequent

two years through claims.

Trade receivables credit risk was recognized through ECL provision matrix. Risk assumptions include historical

collection risk and dynamics adjusted for significant changes in macroeconomic indicators (GDP change, unemployment

rate, and credit default swap rate for long term receivables).

During the reporting period there were no significant changes in the gross carrying amount of financial instruments, so

there were no significant impacts on the loss allowance.

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

29 Croatian Telecom Inc.

2.3. Significant accounting judgments, estimates and assumptions (continued)

2.3.1. Significant accounting estimates (continued)

Revenue recognition

Following IFRS15 judgments are applied in portfolio approach in order to reflect contracts behaviour from contract

inception over the contract duration period. The most relevant judgements include:

- value adjustment of contract asset due to early contract termination in range of 3%-10% (2021: 3%-10%) and

penalty fee collection in range of 52%-81% (2020: 52%-76%), depending on portfolio / customer group

- value adjustment of contract asset due to non-payment (relation with IFRS 9) in range of 0.1%-3% (2021: 0.1%-

3%), depending on portfolio / customer group

- handset budget is not used evenly during contract duration, which is mostly 24 months, so linear usage within

12 months after contract inception is approximation of the uneven usage for large customer segment and

unlinear 3 months usage after contract inception is approximation for VSE customer segment

- costs which are directly attributable to acquisition of a new contract are amortized over average customer

retention period. Customer retention period is calculated per core services based on historical data.

Assets Classified as Held for Sale

Held for sale assets are non-current assets for which a Company has a concrete plan to dispose of the asset by sale.

They are carried on balance sheet at the lower of carrying value or fair value and no depreciation is charged on them.

In estimating the fair value of asset classified as held for sale, Company is applying income approach based on

discounted cash flows which is supplemented with market approach. Based on current initiated process and actions

taken, assets classified as held for sale refers to assets for which it is in managements best belief that it will be sold

within the next twelve months.

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

2.3. Significant accounting judgments, estimates and assumptions (continued)

2.3.2. Significant judgment used in applying accounting policies

Control over OPTIMA

Control over Optima was acquired through a transfer of managerial rights in accordance with the agreement with

Zagrebačka banka d.d., the single largest shareholder of Optima (representing 36.90% of voting rights in OPTIMA). The

Croatian Competition Agency has conditionally allowed control over OPTIMA by HT and determined a set of measures

with regard to management and control over Optima, among which is the implementation of so called ’’Chinese wall’’

between Optima’s and HT employees in respect of all sensitive business information with the exception of reporting of

financial information necessary for consolidation. The control of HT over Optima was initially limited to a period of four

years, up to 18 June 2018.

14 June 2017 HT received the Decision of the Croatian Competition Agency by which the duration of the temporary

management rights over OPTIMA for HT were prolonged for an additional three-year period, that is, until 10 July 2021.As

of July 2021 control by HT was automatically terminated, without the possibility of extension.

HT and Zagrebačka banka d.d. signed on 9 July 2021 an agreement with the company Telemach Hrvatska d.o.o. owned

by United Group (United Group B.V., The Netherlands) on the sale and purchase of the shares of the company Optima

Telekom d.d. The subject of the transaction is sale of total of 54.31% shares of Optima Telekom out of which 36.90%

are owned by Zagrebačka banka, while 17.41% are owned by HT holding d.o.o., a company in 100% ownership of the

Company.

By signing an agreement on the sale and purchase of the shares of the company Optima Telekom d.d., it was determined

that the fair value is lower than the carrying amount, which resulted in impairment of goodwill and assets in Group in

the net amount of HRK 50 million.

In 2022, the sale process of Optima shares is closed.

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

31 Croatian Telecom Inc.

2.3. Significant accounting judgments, estimates and assumptions (continued)

2.3.2. Significant judgment used in applying accounting policies (continued)

If OPTIMA were classified as a discontinued operation in financial statements for 2021, the Statement of Comprehensive

income would be presented as follows:

2021

HRK million

Revenue

7,251

Other operating income

Merchandise, material and energy expenses

(1,405)

Service expenses

(794)

Employee benefits expenses

(1,129)

Work performed by the Group and capitalized

Depreciation and amortization

(2,196)

Impairment of non-current assets

(71)

Net impairment losses on trade receivables and contract assets

(62)

Other expenses

(953)

__________

Operating profit

807

__________

Finance income

Finance costs

(92)

__________

Finance costs – net

(59)

Share of profit of investments accounted for using the equity method

__________

Profit before income tax

748

Income tax expense

(131)

__________

Profit for the year from continuing operations

617

Profit for the year from discontinuing operations

(3)

_________

Profit for the year

614

__________

Items that may be subsequently reclassified to comprehensive

income

Effects of foreign exchange

(1)

Changes in the fair value of debt instruments at fair value

(1)

Other comprehensive income for the year from continuing

operations, net of tax

(2)

__________

Total comprehensive income for the year, net of tax

612

__________

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

2.4. Significant accounting policies

a) Operating profit

Operating profit is defined as the result before income taxes and finance items. Finance items comprise interest revenue

on cash balances in the bank, deposits, treasury bills, interest bearing financial assets at fair value through other

comprehensive income, share of profit and loss from associate and joint venture, interest expense on borrowings, gains

and losses on the sale of financial assets at fair value through other comprehensive income and foreign exchange gains

and losses on all monetary assets and liabilities denominated in foreign currency.

b) Business Combinations and Goodwill

Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed

to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through

its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group

and are deconsolidated from the date that control ceases.

The Group applies the acquisition method to account for business combinations. The consideration transferred for the

acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the

acquire and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset

or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and

contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

The Group recognizes any non-controlling interest in the acquire on an acquisition-by-acquisition basis, either at fair

value or at the non-controlling interest’s proportionate share of the recognized amounts of acquiree’s identifiable net

assets. Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity

interest in the acquire is remeasured to fair value as at the acquisition date through the statement of comprehensive

income.

Any contingent consideration to be transferred by the Group is recognized at fair value at the acquisition date.

Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is

recognized in accordance with IFRS 9 in statement of comprehensive income. Contingent consideration that is classified

as equity is not remeasured, and its subsequent settlement is accounted for within equity.

Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the amount of non-

controlling interest in the acquire over the fair value of identifiable net assets acquired. If this consideration is lower than

the fair value of the net assets acquired, the difference is recognized in profit or loss. Following initial recognition,

goodwill is measured at cost less any accumulated impairment losses.

Inter-company transactions, balances, income and expenses on transactions between group companies are eliminated.

Profits and losses resulting from inter-company transactions that are recognized in assets are also eliminated.

Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies

adopted by the Group.

Purchases of subsidiaries from parties under common control

Purchases of subsidiaries from parties under common control are accounted for using the predecessor values method.

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

33 Croatian Telecom Inc.

2.4. Significant accounting policies (continued)

Purchases of subsidiaries from parties under common control (continued)

Under this method the consolidated financial statements of the combined entity are presented as if the businesses had

been combined from the beginning of the earliest period presented or, if later, the date when the combining entities were

first brought under common control. The assets and liabilities of the subsidiary transferred under common control are

at the predecessor entity’s carrying amounts.

The predecessor entity is considered to be the highest reporting entity in which the subsidiary’s IFRS financial

information was consolidated. Related goodwill inherent in the predecessor entity’s original acquisitions is also recorded

in these consolidated financial statements. Any difference between the carrying amount of net assets, including the

predecessor entity’s goodwill, and the consideration for the acquisition is accounted for in these consolidated financial

statements as an adjustment to retained earnings.

c) Investment in associate

In the Group’s financial statements, investment in an associated company (generally a shareholding of between 20%

and 50% of voting rights) where significant influence is exercised by the Group is accounted for using the equity method

less any impairment in value. Under the equity method, the investment is initially recognized at cost, and the carrying

amount is increased or decreased to recognize the investor’s share of the profit or loss of the investee after the date of

acquisition. An assessment of investment in associate is performed when there is an indication that the asset has been

impaired or that the impairment losses recognized in previous years no longer exist.

When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not

recognize further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the

associate. Unrealized gains on transactions between the Group and its associate are eliminated to the extent of the

Group’s interest in the associate. Unrealised losses are also eliminated unless the transaction provides evidence of an

impairment of the asset transferred.

d) Investment in joint venture

The Group has an interest in a joint venture which is a jointly controlled entity, whereby the venturers have a contractual

arrangement that establishes joint control over the economic activities of the entity. The Group recognizes its interest in

the joint venture using equity method of accounting. The financial statements of the joint venture are prepared for the

same reporting period as the parent company.

Adjustments are made where necessary to bring the accounting policies into line with those of the Group. Adjustments

are made in the Group’s financial statements to eliminate the Group’s share of unrealised gains and losses on

transactions between the Group and its jointly controlled entity. Losses on transactions are recognized immediately if

the loss provides evidence of a reduction in the net realisable value of current assets or an impairment loss. Interest in

the joint venture is derecognized at the date on which the Group ceases to have joint control over the joint venture.

When the Group’s share of losses in a joint venture equals or exceeds its interest in the joint venture, the Group does

not recognize further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the

joint venture. Unrealized gains on transactions between the Group and its joint venture are eliminated to the extent of

the Group’s interest in the joint venture. Unrealised losses are also eliminated unless the transaction provides evidence

of an impairment of the asset transferred.

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

2.4. Significant accounting policies (continued)

e) Intangible assets

Intangible assets are measured initially at cost. Intangible assets are recognized in the event that the future economic

benefits that are attributable to the assets will flow to the Group, and that the cost of the asset can be measured reliably.

After initial recognition, intangible assets are measured at cost less accumulated amortization and any accumulated

impairment losses. Intangible assets are amortised on a straight-line basis over the best estimate of their useful life.

The amortization method is reviewed annually at each financial year-end.

Amortization of the telecommunication licence commences when the licence is acquired and ready for use, with the

amortization period being the term of the licence.

The Group recognizes costs of content as an intangible asset at the inception of the related contract. The Group

determined that the following conditions have to be met for capitalization of content provider contracts: contract duration

must be longer than one year, cost must be determined or determinable, contracted rights must be continuous and

costs under the contract are unavoidable. Assets recognized under these contracts will be amortized over the contract

period. Content contracts which do not meet the criteria for capitalization are expensed and presented in ‘other

expenses’ in the statement of comprehensive income.

Customer relationships and long-term customer contracts acquired in a business combination are recognised at fair

value at the acquisition date. They have a finite useful life and are subsequently carried at cost less accumulated

amortisation and impairment losses.

Useful lives of intangible assets are as follows:

Licences and rights

Radio frequency spectrum in 2100 MHz frequency band

15 years

Radio frequency spectrum in 700 MHz/3600 MHz/ 26 GHz frequency bands

15 years

Radio frequency spectrum in 800 MHz frequency band

11-12 years

Radio frequency spectrum in 900/1800 MHz frequency band

10-13 years

Radio frequency spectrum in 2600 MHz frequency band

6 years

Radio frequency spectrum for digital television multiplexes

10 years

5G spectrum licence

15 years

Software, content and other assets

2-8 years or as per

contract duration

Customer relationship

6.5–10.5 years

Brand

Indefinite

HAKOM licence

Indefinite

Long-term customer contracts

1.5-7 years

Assets under construction are not amortised but are being reviewed for impairment annually.

In 2021, with the introduction of the new business (ERP) system, the structure of intangible assets within the Group was

harmonized in the area of fixed assets register classification, which resulted in a change of estimated useful life of

certain categories of intangible assets. The Group has changed the estimate of useful lives in order to reflect the

technical characteristics and technological functionalities of the future benefits from existing and newly acquired

intangible assets. The effect of the change in accounting estimate is not significant for financial statements.

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

35 Croatian Telecom Inc.

2.4. Significant accounting policies (continued)

e) Intangible assets (continued)

Goodwill arises on the acquisition of subsidiaries. For impairment testing, goodwill acquired in a business combination

is allocated to each of the Group’s cash generating units, or groups of cash generating units, that are expected to benefit

from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the

lowest level within the Group at which the goodwill is monitored for internal management purposes.

Goodwill, intangible assets with indefinite useful lives and intangible assets under construction are reviewed for

impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be

impaired. Impairment for goodwill is determined by assessing the recoverable amount, based on value in use

calculations, of the cash-generating unit (or group of cash-generating units), to which the goodwill relates. Where the

recoverable amount of the cash-generating unit (or group of cash-generating units) is less than the carrying amount of

the cash-generating unit (group of cash-generating units) to which goodwill has been allocated, an impairment loss is

recognized. Impairment losses relating to goodwill cannot be reversed in future periods. The Group performs its annual

impairment test of goodwill as at 31 December. Please see Note 15 for more details.

f) Property, plant and equipment

An item of property, plant and equipment that qualifies for recognition as an asset is measured at its cost. The cost of

an item of property, plant and equipment comprises its purchase price, including import duties and non-refundable

purchase taxes, after deducting trade discounts and rebates, and any directly attributable costs of bringing the asset to

its working condition and location for its intended use.

In addition to directly attributable costs, the costs of internally constructed assets include proportionate indirect material

and labour costs, as well as administrative expenses relating to production or the provision of services.

Subsequent expenditure on an asset that meets the recognition criteria to be recognized as an asset or an addition to

an asset is capitalized, while maintenance and repairs are charged to expense when incurred.

After recognition as an asset, an item of property, plant and equipment is measured at cost less accumulated

depreciation and any accumulated impairment losses.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item

is depreciated separately.

Depreciation is computed on a straight-line basis.

Useful lives of newly acquired assets are as follows:

Buildings

10-50 years

Telecom plant and machinery

Cables

8-20 years

Cable ducts and tubes

20-35 years

Other

2-15 years

Customer premises equipment (CPE)

7 years

Tools, vehicles, IT, office and other equipment

2-15 years

Land, works of art and assets under construction are not depreciated, but are being reviewed for impairment annually.

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

2.4. Significant accounting policies (continued)

f) Property, plant and equipment (continued)

Useful lives, depreciation method and residual values are reviewed at each financial year-end, and if expectations differ

from previous estimates, the change(s) are accounted for as a change in an accounting estimate.

With the introduction of the new business (ERP) system in 2021, the structure of tangible assets within the Group was

harmonized in the area of fixed assets register classification, which resulted in a change of estimated useful life of

certain categories of tangible assets. The Group has changed the estimate of useful lives in order to reflect the technical

characteristics and technological functionalities of the future benefits from existing and newly acquired tangible assets.

The effect of the change in accounting estimate is not significant for financial statements.

Construction-in-progress represents plant and properties under construction and is stated at cost. Depreciation of an

asset begins when it is available for use. Gains and losses on disposals are determined by comparing the proceeds

with the carrying amount and are recognised within ‘Other expenses’ in the statement of comprehensive income.

g) Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets

that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that

the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s

carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less

costs of disposal and value in use amount. For the purpose of assessing impairment, assets are grouped at the lowest

levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than

goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

h) Inventories

Inventories are measured at the lower of cost and net realisable value, after provision for obsolete items. Net realisable

value is the selling price in the ordinary course of business, less the costs necessary to make the sale. Cost is

determined on the basis of weighted average cost.

i) Investment property

Investment property, principally comprising business premises and land, is held for long-term rental yields or

appreciation and is not occupied by the Group. Investment property is treated as a long-term investment unless it is

intended to be sold in the next year and a buyer has been identified in which case it is classified within current assets.

Investment property is carried at historical cost less accumulated depreciation and provision for impairment.

Depreciation of buildings is calculated using the straight-line method to allocate their cost over their estimated useful

lives of 10 to 50 years (2021: 10 to 50 years).

Subsequent expenditure is capitalized only when it is probable that future economic benefits associated with it will flow

to the Group and the cost can be measured reliably. All other repairs and maintenance costs are charged to the

statement of comprehensive income when incurred. If an investment property becomes owner-occupied, it is reclassified

to property, plant and equipment, and its carrying amount at the date of reclassification becomes its deemed cost to be

subsequently depreciated.

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

37 Croatian Telecom Inc.

2.4. Significant accounting policies (continued)

j) Assets Classified as Held for Sale

Held for sale assets are long-lived assets for which a Group has a concrete plan to dispose of the asset by sale. They

are carried on balance sheet at the lower of carrying value or fair value and no depreciation is charged on them. Assets

are classified as held for sale: when the following conditions are met: management is committed to a plan to sell, the

asset is available for immediate sale, an active program to locate a buyer is initiated, the sale is highly probable, within

12 months of classification as held for sale (subject to limited exceptions), the asset is being actively marketed for sale

at a sales price reasonable in relation to its fair value, actions required to complete the plan indicate that it is unlikely

that plan will be significantly changed or withdrawn.

k) Financial assets

All assets are classified and measured as described below:

Classification and measurement

Classification / measurement

Assets

Current assets

Cash and cash equivalents (deposits, commercial

papers)

Amortized cost

Trade and other receivables

Amortized cost

Other financial assets

Amortized cost

Given loans and other receivables

Amortized cost

Equity instruments

Fair value through Other Comprehensive Income without recycling

to Profit and Loss (FVOCI)

Debt instruments

Fair value through Other Comprehensive Income with subsequent

reclassification to the income statement

Non-current assets

Trade and other receivables

Amortized cost

Other financial assets

Amortized cost

Given loans and other receivables

Amortized cost

Equity instruments

Hold to collect and sell

Fair value through Other Comprehensive Income without recycling

to Profit and Loss (FVOCI)

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

2.4. Significant accounting policies (continued)

k) Financial assets (continued)

The business model reflects how the Group manages the debt financial assets in order to generate cash flows – whether

the Group’s objective is: (i) solely to collect the contractual cash flows from the assets (“hold to collect contractual cash

flows”,) or (ii) to collect both the contractual cash flows and the cash flows arising from the sale of assets (“hold to collect

contractual cash flows and sell”) or, if neither of (i) and (ii) is applicable, the financial assets are classified as part of

“other” business model and measured at FVTPL.

Debt instruments

For the measurement of debt instruments, it is important which business model applies to each of them, and whether

they have the characteristics of an ordinary loan, i.e. whether their cash flows consist solely of interest and principal. If

they have these characteristics, and if they are not sold according to the business model but are held to maturity, they

must be measured at amortized cost. If the business model aims to sell and partially hold such instruments, they are to

be measured at fair value through other comprehensive income with subsequent reclassification to the income

statement. In all other cases, financial assets are to be measured at fair value through profit or loss.

Receivables which are sold to Collecting Agency as way of collection are initially considered to be in the ‘held to collect’

business model and are therefore measured at amortized cost since HT initially has the credit risk and the SPPI test is

satisfied.

Equity instruments

Held equity instruments include strategic investments. HT has exercised the option of valuing these in the Other

comprehensive income without subsequent reclassification. The reason for this is that strategic investments do not

focus on short-term profit maximization. Acquisition and sale of strategic investments are based on business policy

considerations. Dividends are recognized directly in profit or loss, in case that they do not constitute a capital repayment.

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

39 Croatian Telecom Inc.

2.4. Significant accounting policies (continued)

l) Foreign currencies

Transactions denominated in foreign currencies are translated into local currency at the middle exchange rates of the

Croatian National Bank prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign

currencies are translated into local currency at the middle exchange rates of the Croatian National Bank prevailing at

the statement of financial position date. Any gain or loss arising from a change in exchange rates subsequent to the

date of the transaction is included in the statement of comprehensive income within financial income or financial

expense, respectively.

The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary

economy) that have a functional currency different from the presentation currency are translated into the presentation

currency as follows:

(a) assets and liabilities for each statement of financial position presented are translated at the middle exchange rates

of the Croatian National Bank prevailing at the statement of financial position date;

(b) income and expenses for each statement of comprehensive income are translated at average exchange rates of the

Croatian National Bank; and

m) Taxation

The income tax charge is based on profit for the year and includes deferred taxes. Deferred taxes are calculated using

the balance sheet liability method.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and

liabilities for financial reporting purposes and the amounts used for income tax purposes at the reporting date.

Deferred tax is determined using income tax rates that have been enacted or substantially enacted by the financial

statement date and are expected to apply when the related deferred tax asset is realized or the deferred tax liability is

settled.

The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would arise from

the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and

liabilities.

Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries,

associates and joint arrangements, except for deferred income tax liability where the timing of the reversal of the

temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the

foreseeable future.

Generally, the Group is unable to control the reversal of the temporary difference for associates.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets

against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by

the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to

settle the balances on a net basis. Deferred tax assets are recognized to the extent that it is probable that

future taxable profit (or reversing deferred tax liabilities) will be available against which the temporary differences can

be utilized.

Deferred tax assets and liabilities are not discounted and are classified as non-current assets and liabilities in the

statement of financial position. Deferred tax assets are recognized when it is probable that sufficient taxable profits will

be available against which the deferred tax assets can be utilised.

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

2.4. Significant accounting policies (continued)

Current and deferred taxes are charged or credited in other comprehensive income if the tax relates to items that are

credited or charged, in the same or a different period in other comprehensive income.

n) Employee benefit obligations

The Group provides other long-term employee benefits (Note 28). These benefits include pension benefit. The defined

benefit obligation is calculated annually by independent actuary using a projected unit credit method. The projected unit

credit method considers each period of service as giving rise to an additional unit of benefit entitlement and measures

each unit separately to build up the final obligation.

Past service costs are recognized in profit or loss immediately in the period in which they occur. Gains or losses on the

curtailment or settlement of benefit plans are recognized when the curtailment or settlement occurs. The benefit

obligation is measured at the present value of estimated future cash flows using a discount rate that is similar to the

interest rate on government bonds where the currency and terms of the government bonds are consistent with the

currency and estimated terms of the benefit obligation. Gains and losses resulting from changes in actuarial

assumptions are recognized in other comprehensive income in the period in which they occur.

The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and

the fair value of plan assets. This cost is included in employee benefit expense in the statement of comprehensive

income.

The Group provides death in service short term benefits which are recognized as an expense of the period in which it

is incurred.

o) Revenue recognition

Revenue is income arising in the course of the Group’s ordinary activities.

Revenue is recognized for each distinct performance obligation in the contract in the amount of transaction price.

Transaction price is the amount of consideration in a contract to which Group expects to be entitled in exchange for

transferring promised goods or services to a customer.

For contracts that contain more than one performance obligation (multiple element arrangements), Group allocates the

transaction price to those performance obligations on a relative stand-alone selling price basis. The stand-alone selling

price (SSP) is the price at which Group would sell a promised good or service separately to a customer.

Revenue is recognized when performance obligations are satisfied by transferring control of a promised good or service

to a customer. Control of good (e.g. sale of equipment) is transferred when goods are delivered to customer, the

customer has full discretion over goods and there is no unfulfilled obligation that could affect the customer’s acceptance

of the goods. Delivery occurs when goods have been shipped to the specific location, and the risks of obsolescence

and loss have been transferred to customer. Control of good is usually transferred at point in time.

Control of services (e.g. sales of telecommunication services, maintenance services, sale of licences, etc) transfers

over time or at a point in time, which affects when revenue is recorded. Revenue from providing services is recognized

in the accounting period in which the services are rendered. If service realization extend to more than one accounting

period both, input method (based on cost incurred) and output method (based on units/work delivered) are used to

measure progress towards completion.

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

41 Croatian Telecom Inc.

2.4. Significant accounting policies (continued)

o) Revenue recognition (continued)

Output method is used in mass market services (e.g. voice and data services provided on a monthly basis to customers)

as well as in system solutions (e.g. installation of equipment, when time period between start of work and delivery of

service is not too long and / or where work completed is regularly confirmed by both parties). Input method is mainly

used in complex systems solution (e.g. in case of development of customer tailored made solution which lasts longer

period of time), where revenue is recognized monthly based on cost incurred in order to reflect progress towards

completion in periods where mutual confirmations are still not due.

In determining the transaction price, the Group adjusts the promised amount of consideration for the effects of the time

value of money if the timing of payments agreed to by the parties to the contract (either explicitly or implicitly) provides

the customer or the Group with a significant benefit of financing the transfer of goods or services to the customer. The

Group makes use of the option not to consider a significant financing component if the maximum period between

delivery of a good or provision of a service and payment by the customer is one year or less. As well under the Group’s

policy, it is assumed that if the amount of the financing component exceeds 5% of a total contract’s transaction price,

this will indicate that such financing component will be deemed significant.

By contrast, if the amount is 5% or lower, an entity may conclude that the financing component is not considered

significant. Based on these criteria the Group did not identify significant financing component in contracts with

customers.

The IFRS 15 Standard specifies the accounting for an individual contract with a customer. However, as a practical

expedient, the Standard may be applied to a portfolio of contracts, if:

- the contracts aggregated to a portfolio possess similar characteristics, and

- applying the Standard to the portfolio does not result in a materially different result compared to accounting of

single contracts.

In the Group IFRS 15 revenue is applied to portfolios of contracts as well as to single contracts. The Standard is applied

to portfolios of contracts for mass market products, while for special solutions it is applied on individual contracts level.

Portfolios are defined within each relevant business area and are set up based on common adjustment requirements

for the individual contracts.

IFRS 15 Standard has impact, on following business events:

Multiple element arrangements – in case of multiple-element arrangements (e.g. mobile contract plus handset) with

subsidised products delivered in advance, the transaction price is allocated to the performance obligations in the

contract by reference to their relative standalone selling prices. Standalone selling prices of hardware are determined

using price list prices. As a result, a larger portion of the total consideration is attributable to the component delivered in

advance (mobile handset), requiring earlier recognition of revenue which results in higher revenue from the sale of

goods and merchandise and lower revenue from provision of service (mobile communication service). This leads to the

recognition of what is known as a contract asset – a receivable arising from the customer contract that has not yet

legally come into existence – in the statement of financial position. The contract asset is amortized over the remaining

term of the contract. Contract liabilities are netted off against the contract assets on portfolio level.

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

2.4. Significant accounting policies (continued)

o) Revenue recognition (continued)

Material rights which are granted to customers at contract inception with the option to be exercised at later point of time

mainly relate to granted Handset Budgets – the total transaction price of the combined contract is allocated to the

individual, separate performance obligations on a relative stand-alone selling price basis. A larger portion of the total

remuneration is attributable to the material right (e.g. right to a future subsidy on a mobile phone).

In the balance sheet, this leads to the recognition of a contract asset, which is amortized over the remaining term of the

contract and, compared with the amounts invoiced, reduces the revenue from service obligations.

Capitalized contract cost which consists of Cost to obtain a contract and Cost to fulfil a contract - Cost to obtain a

contract mainly relate to expenses for sales commissions paid to indirect partners or own employees which are

capitalized as Contract costs and amortised over the estimated customer retention period (depending on service) in

case of contact acquisitions or over contract duration period (usually 24 months) in case of contract prolongations. Cost

to fulfil a contract mainly relate to telecommunication costs occurred to fulfil contracts with customers as well as cost of

vouchers / benefits for third party products granted at contract inception. These costs are capitalized as Contract costs

and amortised over contract duration period (usually 24 months).

One-time payments made in advance by the customer that do not fulfil definition of a separate performance obligation

but represent a prepayment on future services are deferred and recognized in revenue over the (remaining) term of the

contract and presented within contract liability.

Discounts or uneven transaction prices – When discounts on service fees are granted unevenly for specific months of

a contract or monthly service fees are charged unevenly for specific months of a contract while monthly service is

provided evenly to the customer, service revenue is recognized on a straight-lined basis.

IFRS 15 adjustments had major impact on revenues from mobile services. On fixed revenues impacts mainly relate to

multiple element arrangements and even service revenue recognition over contract duration period. System solution

area was not significantly impacted due to continuity in timing of revenue recognition.

p) Cash and cash equivalents

Cash and cash equivalents include cash on hand, demand deposits, corporate commercial papers and short-term,

highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months

or less and which are subject to an insignificant risk of change in value. Cash and cash equivalents are carried at

amortised costs because: (i) they are held for collection of contractual cash flows and those cash flows represent SPPI,

and (ii) they are not designated at FVTPL.

q) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred and are subsequently carried at

amortised cost using the effective interest method.

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

43 Croatian Telecom Inc.

2.4. Significant accounting policies (continued)

r) Provisions

A provision is recognized when, and only when, the Group has a present obligation (legal or constructive) as a result of

a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the

obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each

statement of financial position date and adjusted to reflect the current best estimate.

Where the effect of the time value of money is material, the amount of a provision is the present value of the expenditures

expected to be required to settle the obligation. When discounting is used, the increase in provision reflecting the

passage of time is recognized as financial expense.

Provisions for termination benefits are recognized when the Group is demonstrably committed to a termination of

employment contracts, that is when the Group has a detailed formal plan for the termination which is without realistic

possibility of withdrawal. Provisions for termination benefits are computed based on amounts paid or expected to be

paid in redundancy programs.

Levies and charges, such as taxes other than income tax or regulatory fees based on information related to a period

before the obligation to pay arises, are recognised as liabilities when the obligating event that gives rise to pay a levy

occurs, as identified by the legislation that triggers the obligation to pay the levy. If a levy is paid before the obligating

event, it is recognised as prepayment.

A number of sites and other assets are utilised which are expected to have costs associated with de-commissioning.

Provision is recognized for associated cash outflows which are substantially expected to occur at the dates of exit of

the assets to which they relate, which are long-term in nature, primarily in periods up to 20 years from when the asset

is brought into use.

s) Contingencies

Contingent assets are not recognized in the financial statements. They are disclosed when an inflow of economic

benefits is probable.

Contingent liabilities are not recognized in the financial statements. They are disclosed unless the possibility of an

outflow of resources embodying economic benefits is remote.

t) Share-based payments

The cost of cash-settled and equity-settled transactions is measured initially at fair value at the grant date using a

binomial model, further details of which are given in Note 43. This fair value is expensed over the period until the vesting

date with recognition of a corresponding liability for cash-settled and equity-settled transactions are recognised in equity.

The liability is remeasured to fair value at each statement of financial position date up to and including the settlement

date with changes in fair value recognized in the statement of comprehensive income.

u) Events after reporting period

Post-year-end events that provide additional information about the Group’s position at the statement of financial position

date (adjusting events) are reflected in the financial statements. Post-year-end events that are not adjusting events are

disclosed in the notes to the consolidated financial statements when material.

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

2.4. Significant accounting policies (continued)

v) Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business

from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they

are presented as non-current liabilities.

w) Dividend distribution

Dividend distributions to the Group’s shareholders are recognized as a liability in the Group’s financial statements in the

period in which the dividends are approved by the Group’s shareholders.

x) Earnings per share

Earnings per share are calculated by dividing the profit attributable to equity holders of the Group by the weighted

average number of ordinary shares in issue during the year excluding ordinary shares purchased by the Group and

held as treasury shares.

y) Contributed equity

Ordinary shares are classified as equity. Shares held by the Group are disclosed as treasury shares and deducted from

contributed equity.

z) Right-of-use assets

Leases are recognised as right-of-use assets and corresponding liabilities at the date at which the leased assets are

available for use by the Group.

The right-of-use assets is presented separately in the statement of financial position, except for right-of-use assets that

meet the definition of investment property which is presented in statement of financial position in separate line item –

“investment property”.

Right-of-use assets are measured initially at cost comprising the following:

• the amount of the initial measurement of the lease liability;

• any lease payments made at or before the commencement date less any lease incentives received;

• any initial direct costs;

• restoration costs.

Subsequently, the right-of-use assets, are measured at cost less accumulated depreciation and any accumulated

impairment losses and adjusted for remeasurement of the lease liability due to reassessment or lease modifications.

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

45 Croatian Telecom Inc.

2.4. Significant accounting policies (continued)

z) Right-of-use assets (continued)

The right-of-use assets are depreciated over the shorter of the asset’s useful life and the lease term on a straight-line

basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the

underlying assets’ useful lives. The amortisation periods for the right-of-use assets are as follows:

Buildings

1 - 69 years

Equipment

2 - 6 years

Land

0.5 - 25 years

Lease lines

1 - 26 years

Vehicles

0.5 - 7 years

Payments associated with all short-term leases are recognised on a straight-line basis as an expense in profit or loss.

Short-term leases are leases with a lease term of 1 month or less.

Full recognition requirements of IFRS 16 will also apply to leases based on low-value assets.

aa) Lease liabilities

At the commencement date, lease liabilities are measured at an amount equal to the present value of the following

lease payments for the underlying right-of-use assets during the lease term:

• fixed payments (including in-substance fixed payments), less any lease incentives receivable;

• amounts expected to be payable by the Group under residual value guarantees;

• the exercise price of a purchase option if the Group is reasonably certain to exercise that option;

• payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.

The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined,

or the Group’s incremental borrowing rate.

Each lease payment is allocated between the liability and finance cost. Lease liabilities are subsequently measured

using the effective interest method. The carrying amount of liability is remeasured to reflect any reassessment, lease

modification or revised in-substance fixed payments.

The lease term is a non-cancellable period of a lease; periods covered by options to extend and terminate the lease are

only included in the lease term if it is reasonably certain that the lease will be extended or not terminated.

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

3 Business combinations

Deconsolidation of Optima

The Group ceased to have control in July 2021, and, as at 1 July 2021, the Group has deconsolidated Optima Telekom

(Note 2).

Thus, the Group derecognised the related assets (including goodwill), liabilities, non-controlling interest and other

components of equity at the date when control is lost, with carrying amount recognised in profit or loss.

Net assets of Optima Telekom as of 30 June 2021

(of which Optima’s goodwill HRK 47 million)

Goodwill

__________

Net assets and goodwill (Note 2)

Impairment of net assets excluding goodwill

(11)

Impairment of GW

(39)

__________

Total impairment

(50)

__________

Disposal of net assets

(54)

Non-controlling interest at date of disposal

Profit (loss) on deconsolidation

__________

Merger of HT Production d.o.o.

As at 1 March 2019 the Group acquired 100% of the voting shares of HT Production d.o.o., following the approval of

the National Regulatory Agency (HAKOM), from Hrvatska Pošta. HT Production was an unlisted company located in

Zagreb, pay TV provider – EVOtv.

As at 1 June 2022, HTP d.o.o. was merged into Croatian Telecom Inc. By entering the merger in the court register, the

merged company HTP d.o.o. has ceased to exist. The acquirer, HT d.d., became the general legal successor of the

merged company and thereby entered all legal relations of the merged company. Due to the merger, there were no

changes of existing EVOtv services.

The carrying value of assets and liabilities of HT Production were transferred into Croatian Telecom Inc. Since this

merger is considered a business combination under common control, there is no material effect in the aspect of

consolidated financial statements of the Group.

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

47 Croatian Telecom Inc.

4 Segment information

The business reporting format of the Group for purpose of segment reporting is determined to be Residential, Business,

Network and Support Function, Optima Telekom and Crnogorski Telekom as the Group’s risks and rates of return are

affected predominantly by differences in the market and customers. The segments are organised and managed

separately according to the nature of the customers and markets that the services rendered, with each segment

representing a strategic business unit that offers different products and services.

The Residential Segment includes marketing, sales and customer services, focused on providing mobile, fixed line

telecommunications and TV distribution and services to residential customers.

The Business Segment includes marketing, sales and customer services, focused on providing mobile and fixed line

telecommunications and systems integration services to corporate customers, small- and medium-sized businesses

and the public sector. The Business Segment is also responsible for the wholesale business in both fixed and mobile

services.

The Network and Support Functions segment performs cross-segment management and support functions, and

includes the Technology, Procurement, Accounting, Treasury, Legal and other central functions.

The Optima Telekom segment includes the contribution of all Optima Telekom’s functions to Group financial results

following the same reporting structure as used for other operating segments, except revenue details that are only

reported in the whole amount on the Miscellaneous revenue line. According to the restrictions introduced by the

regulator, access to Optima Telekom revenue information is limited.

The Crnogorski Telekom segment includes the contribution of all Crnogorski Telekom’s functions to Group financial

results following the same reporting structure as used for other operating segments.

The Management Board, as the chief operating decision maker, monitors the operating results of business units

separately for the purpose of making decisions about resource allocation and performance assessment. Segment

performance is evaluated based on contribution margin or segment result (as calculated in the table below).

The Group’s geographical disclosures are based on the geographical location of its customers.

Management of the Group does not monitor assets and liabilities by segments and therefore this information has not

been disclosed. Fully owned subsidiaries Iskon Internet, Combis (that are owned through HT holding d.o.o.) and HT

Production (until the merger with HT on 1 June 2022) are consolidated within the respective operating segments to

which they relate.

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

4 Segment information (continued)

The following tables present revenue and results information regarding the Group’s segments:

Residential

Business

Network and

Support

functions

Optima

Telekom

consolidated

Crnogorsk

i Telekom

consolidat

Total

Year ended 31 December 2022

HRK

million

HRK million

HRK

million

HRK

million

Net revenue

3,981

2,821

596

7,410

Mobile revenue

2,345

1,143

340

3,828

Fixed revenue

1,636

1,123

230

3,001

System solutions revenue

555

581

Usage related direct costs

(220)

(260)

(40)

(520)

Income and losses on accounts receivable

(31)

(10)

(6)

(9)

(56)

_________

__________

________

Contribution margin I

3,730

2,551

547

6,834

Non-usage related direct costs

(650)

(600)

(155)

(123)

(1,528)

_________

________

__________

________

Segment result (contribution margin II)

3,080

1,951

(149)

424

5,306

_________

__________

________

Other operating income

106

107

Other operating expenses

(463)

(382)

(1,292)

(187)

(2,324)

Depreciation and amortization of non-current

assets

(1,799)

(188)

(1,987)

Impairment of non-current assets

(156)

_________

__________

________

Operating profit

2,617

1,569

(3,290)

946

_________

__________

________

Year ended 31 December 2021

Net revenue

3,824

2,784

218

567

7,393

Mobile revenue

2,187

1,098

317

3,602

Fixed revenue

1,637

1,018

218

221

3,094

System solutions revenue

668

697

Usage related direct costs

(235)

(247)

(24)

(35)

(541)

Income and losses on accounts receivable

(28)

(18)

(5)

(9)

(60)

_________

__________

________

Contribution margin I

3,561

2,519

189

523

6,792

Non-usage related direct costs

(687)

(751)

(10)

(102)

(1,550)

_________

________

__________

________

Segment result (contribution margin II)

2,874

1,768

179

421

5,242

_________

__________

________

Other operating income

Other operating expenses

(470)

(367)

(1,133)

(40)

(184)

(2,194)

Depreciation and amortization of non-current

assets

(1,996)

(71)

(199)

(2,266)

Impairment of non-current assets

(63)

_________

__________

________

Operating profit

2,404

1,401

(3,101)

813

_________

__________

_________

________

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

49 Croatian Telecom Inc.

4 Segment information (continued)

Reconciliation of profit

2022

2021

HRK million

Segment profit

946

813

Finance income

Finance cost

(91)

(101)

__________

Profit before income tax

884

744

__________

Revenue by geographical area

2022

2021

HRK million

Republic of Croatia

6,127

6,221

Rest of the world

1,283

1,172

__________

7,410

7,393

__________

The majority of the Group’s assets are located in Croatia.

None of the Group’s external customers represent a significant source of revenue.

Revenue by category

2022

2021

HRK million

Revenue from rendering of services

6,071

6,226

Revenue from sale of goods and merchandise

1,339

1,167

__________

7,410

7,393

__________

2022

2021

HRK million

Revenue realized over time

6,080

5,959

Revenue realized at point in time

1,330

1,434

__________

7,410

7,393

__________

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

5 Other operating income

2022

2021

HRK million

Gain from sale of property, plant and equipment

Income from penalties and damage compensations

Sale of subsidiary

Liabilities write off

Sale of waste

Rental income

Other income

__________

107

__________

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

51 Croatian Telecom Inc.

6 Merchandise, material and energy expenses

2022

2021

HRK million

Purchase cost of goods sold

1,278

1,251

Energy costs

271

126

Cost of raw material and supplies

Cost of services sold

__________

1,580

1,412

__________

7 Service expenses

2022

2021

HRK million

Domestic interconnection

209

236

International interconnection

311

305

107

Online services

Cleaning services

Bank and money transfer fees

Security services

Other services

__________

750

822

__________

8 Depreciation, amortization and impairment of non-current assets

2022

2021

HRK million

Depreciation

920

1,047

Amortization

748

882

Amortization of Right-of-use assets

319

337

__________

Total depreciation and amortization

1,987

2,266

Impairment loss of Goodwill

Impairment loss of PPE & Intangible assets

Impairment loss of investment accounted for using the equity method

141

__________

Total impairment of non-current assets

156

__________

Notes 15, 16, 17 and 18 disclose further details on amortization and depreciation expense and impairment loss.

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

9 Employee benefits expenses

2022

2021

HRK million

Net salaries

648

652

Contributions and taxes from salaries

262

270

Contributions on salaries

125

Redundancy expenses

Amortisation of capitalized cost to obtain contract – own employees

Long-term employee benefits

Other employee related expenses

__________

1,137

1,154

__________

10 Other expenses

2022

2021

HRK million

Maintenance services

234

259

Licence cost

132

131

Advertising

105

Contract workers

105

Amortisation of capitalized cost to obtain contract - external parties

Selling commissions

Provisions for legal cases

Non-income taxes and contribution

Postal expenses

Education and consulting

Daily allowances and other costs of business trips

Expenses from penalties and damage compensations

Insurance

Rental costs

Expenses related to customers acquisition

Loss on disposal of fixed assets

Write down of inventories

Other operating charges

__________

967

968

__________

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

53 Croatian Telecom Inc.

11 Finance income

2022

2021

HRK million

Foreign exchange gains

Interest income

__________

12 Finance cost

2022

2021

HRK million

Interest expense from leases

Interest expense from other financial liabilities

Foreign exchange loss

Interest expense from borrowings

Other

__________

101

__________

13 Income tax expense

a) Tax on profit

2022

2021

HRK million

Current tax expense

219

142

Deferred tax expense

(12)

__________

224

130

__________

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

13 Income tax expense (continued)

b) Reconciliation of the taxation charge to the income tax rate

2022

2021

HRK million

Profit before tax

885

744

__________

Income tax at 18% (domestic rate)

159

134

Tax effect of:

Expenses not deductible for tax purposes

Effect of different tax rates

(6)

Tax effects of tax loss for which no deferred income tax asset was recognised

Tax paid abroad

Other

(8)

__________

224

130

__________

Effective tax rate

25.38%

17.47%

__________

The Group utilized a tax incentive in previous periods in respect of reinvesting profit and increasing the share capital in

the same amount. If subsequently the capital that was increased by reinvested profit is decreased, this may result in a

future tax liability for the Group. The Group believes a future tax liability will not arise in this regard.

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

55 Croatian Telecom Inc.

13 Income tax expense (continued)

Components and movements of deferred tax assets and liabilities are as follows:

Deferred tax assets

recognized in:

December

2022

(charged) /

credited

in 2022

Write off

in 2022

December

2021

(charged) /

credited

in 2021

December

2020

HRK million

Statement of

comprehensive income

Non-tax deductible

provisions

(5)

(11)

Property, plant and

equipment write down

(6)

(1)

Accrued interest on

legal cases

Losses

(8)

(3)

Accruals

Other

__________

_________

__________

_________

__________

Deferred tax asset

135

(11)

140

134

__________

_________

__________

_________

__________

Deferred tax liabilities

recognized in:

31 December

2022

charged /

(credited)

in 2022

Write off

in 2022

31 December

2021

charged /

(credited)

in 2021

31 December

2020

HRK million

Statement of

comprehensive income

Property, plant,

equipment and

intangible assets

(15)

__________

_________

__________

_________

__________

Other comprehensive

income

Actuarial gains and

losses

__________

_________

__________

_________

__________

Deferred tax liability

(15)

__________

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

13 Income tax expense (continued)

Deferred tax assets have been recognised for all deductible temporary differences to the extent that it is probable that

taxable profit will be available against which the deductible temporary differences can be utilised. Deferred tax assets

have not been discounted. Out of total deferred tax assets, current portion amounts to HRK 83 million.

Deferred tax asset arises on the property, plant and equipment impairment, on provision of impairment of receivables

and inventories (materials, merchandise), and related to accruals and provisions and other temporary differences.

There are no formal procedures in the Republic of Croatia to agree the final level of tax charge upon submission of the

declaration for corporate tax. However, such tax settlements may be subject to review by the relevant tax authorities

during the limitation period of six years. The limitation period of six years starts with the year that follows the year of

submission of tax declarations, i.e. 2023 for the 2021 tax liability.

On reporting date, the Group has available HRK 215 million of tax loss for which deferred tax asset was not recognised,

since it is not expected to be used in future periods. These losses relate to subsidiaries of the Group.

Losses expire in:

HRK million

2023

2024

2025

2026

2027

132

________

215

14 Earnings per share

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders

of the Group by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are equal to basic earnings per share since there are no dilutive potential ordinary

shares or share options.

The following reflects the income and share data used in the basic and diluted earnings per share computations:

2022

2021

Profit for the year attributable to ordinary equity holders of the Company

in HRK million

655

615

Weighted average number of ordinary shares for basic earnings per share

79,191,974

80,238,967

__________

HRK 8.28

HRK 7.66

__________

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

57 Croatian Telecom Inc.

15 Intangible assets

15 Intangible assets (continued)

Licences

Software

Goodwill

Other

assets

Assets under

construction

Total

HRK million

As at 1 January 2021

Cost

879

5,183

546

2,689

9,340

Accumulated amortization

and impairment losses

(479)

(4,275)

(112)

(2,296)

(7,162)

__________

Net book value

400

908

434

393

2,178

__________

Year ended 31 December 2021

Opening net book value

400

908

434

393

2,178

Other

Additions

249

266

242

837

Transfers

120

(135)

(2)

Disposal of subsidiary

(4)

(47)

(48)

(100)

(199)

Amortization charge

(173)

(479)

(230)

(882)

Impairment loss

(39)

(11)

(50)

Foreign exchange difference

__________

Net book value

593

480

347

194

283

1,897

__________

As at 31 December 2021

Cost

1,159

3,806

459

1,241

283

6,948

Accumulated amortization

and impairment losses

(566)

(3,326)

(112)

(1,047)

(5,051)

__________

Net book value

593

480

347

194

283

1,897

Year ended 31 December 2022

Opening net book value

593

480

347

194

283

1,897

Other

Additions

127

251

382

771

Transfers

308

(335)

Amortization charge

(105)

(348)

(295)

(748)

Foreign exchange difference

__________

Net book value

541

568

347

150

330

1,936

__________

As at 31 December 2022

Cost

1,212

4,242

459

1,492

330

7,735

Accumulated amortization

and impairment losses

(671)

(3,674)

(112)

(1,342)

(5.799)

__________

Net book value

541

568

347

150

330

1,936

__________

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

The intangible assets of the Group as at 31 December 2022 include seven licences for use of the radio frequency

spectrum and licence for 5G spectrum (Notes 2.4. e) and 41 b).

Other assets mainly consist of brand name HRK 10 million (31 December 2021: HRK 10 million), customer relationships

HRK 8 million (31 December 2021: HRK 10 million) and capitalized content contracts HRK 122 million (31 December

2021: HRK 159 million).

Assets under construction primarily relate to software and the various licences for the use of software.

Intangible assets with indefinite useful life consist of brand name related to EVOtv. with carrying value as at 31

December 2022 HRK 10 million (31 December 2021: HRK 10 million) and HAKOM licence related to HT Production

d.o.o. with carrying value as at 31 December 2022 HRK 40 million (31 December 2021: HRK 40 million).

In 2021 brand name related to Optima Telekom d.d. is impaired in the total amount of HRK 61 million. Impairment was

performed based on signed Share Purchase Agreement with the buyer of Optima Telekom (Note 3).

Additions of intangible assets

Major additions in 2022 relate to software and the various licences for the use of software in the amount of HRK 461

million and capitalized content costs in the amount of HRK 251 million.

Impairment testing of goodwill

Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to operating segment. An

operating segment-level summary of the goodwill allocation is presented below:

31 December

2022

31 December

2021

HRK million

Residential

104

Business

107

Crnogorski Telekom

136

__________

347

__________

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

59 Croatian Telecom Inc.

15 Intangible assets (continued)

Impairment testing of goodwill (continued)

The key assumptions used for value in use calculations are as follows:

Crnogorski Telekom

Residential

Business

31 December

December

2022

2021

2022

2021

2022

2021

________

Growth rate

1.0%

2.0%

1.0%

2.0%

1.0%

2.0%

Discount rate (pre-tax)

10.42%

8.02%

10.75%

6.35%

10.75%

6.35%

Sales growth rate

0.7%

0.5%

1.6%

0.8%

0.6%

1.5.%

Budgeted EBITDA margin

48.1%

46.3%

66.9%

72.4%

48.2%

52.7%

Average annual capital

expenditure (HRK million)

143

128

1,014

1,035

526

602

_________

________

The recoverable amount of a CGU is determined based on value in use calculations. The key assumptions reflect

experience and expectations of market development, particularly the development of revenue, market share, customer

acquisition and retention cost, capital expenditures and growth rate. The growth rate does not exceed the long-term

average growth rate for the industry in which the CGU operates. The weighted average growth rate is used to extrapolate

cash flows beyond the budgeted period and pre-tax discount rate is applied to the cash flow projections. The costs of

central functions (Management and Administration) have been allocated between the segments for the purpose of

impairment testing based on internal secondary cost allocation, using defined planed internal products. The

measurements of CGU are founded on projections for a ten-year projection period that are based on financial plans that

have been approved by management and are used for internal purposes. The planning horizon selected reflects the

assumptions for short- to medium-term market developments and is selected to achieve a steady state in the business

outlook that is necessary for calculating the perpetual annuity. This steady state can only be established based on this

planning horizon, in particular due to the sometimes long investment cycles in the telecommunications industry and the

investments planned and expected in the long run to acquire. In estimates that are used for calculations is included the

impact of COVID-19 for changes of revenue and costs or ratios.

Crnogorski Telekom CGU

The recoverable amount of the Crnogorski Telekom CGU as of 31 December 2022 has been determined based on a

value in use calculation using cash flow projections from financial budgets approved by the management covering a

five-year period. Parameters beyond the five-year period are extrapolated using a 0.7% sales growth rate (2021: 0.5%)

and 1% compound annual growth rate (2021: 2%). The pre-tax discount rate applied to cash flow projections is 10.42%

(2021: 8.02%). Forementioned growth rates are based on compound annual growth rates in telecommunications

industry and average rates derived from actual results in previous years. The management has also taken into

consideration the recent negative impact and uncertainties caused by war in Ukraine, strong inflationary pressures and

negative impact on available income of the consumers and economic activities as well as the overall economic situation

in Crna Gora. As a result of this analysis, management has not recognised an impairment charge in the current year.

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

15 Intangible assets (continued)

Impairment testing of goodwill (continued)

Residential CGU

The recoverable amount of the Residential CGU as of 31 December 2022 has been determined based on a value in

use calculation using cash flow projections from financial budgets approved by the management covering a five-year

period. Parameters beyond the five-year period are extrapolated using a 1.6% sales growth rate (2021: 0.8%) and 1%

compound annual growth rate (2021: 2%). The pre-tax discount rate applied to cash flow projections is 10.75% (2021:

6.35%). Forementioned growth rates are based on compound annual growth rates in telecommunications industry and

average rates derived from actual results in previous years. The management has also taken into consideration the

recent negative impact and uncertainties caused by war in Ukraine, strong inflationary pressures and negative impact

on available income of the consumers. As a result of this analysis, management has not recognised an impairment

charge in the current year.

Business CGU

The recoverable amount of the Business CGU as of 31 December 2022 has been determined based on a value in use

calculation using cash flow projections from financial budgets approved by the management covering a five-year period.

Parameters beyond the five-year period are extrapolated using a 0.6% sales growth rate (2021: 1.5%) and 1%

compound annual growth rate (2021: 2%). The pre-tax discount rate applied to cash flow projections is 10.75% (2021:

6.35%). Forementioned growth rates are based on compound annual growth rates in telecommunications industry and

average rates derived from actual results in previous years. The management has also taken into consideration the

recent negative impact and uncertainties caused by war in Ukraine, strong inflationary pressures and negative impact

on economic activities, as well as positive impacts of Croatia entering the euro zone and Schengen zone. As a result of

this analysis, management has not recognised an impairment charge in the current year.

Impairment testing of brand

HT Production has registered the trademark “EVOtv” as intellectual property rights. After the merger of HT Production

with HT d.d. in 2022, the trademark “EVOtv” became intellectual property rights of HT.

Brand is an indefinite – lived asset, and it is tested for impairment annually using the Relief from Royalty method. The

brand value represents the net present value of the projected brand earnings, discounted using the pre-tax discount

rate on projected cash flows. The net present value calculation comprises both the explicit five and a half year

projections and the terminal period, as this reflects the brand’s ability to create revenues in perpetuity. The growth rate

of projected cash flows and the discount rate used is the same as the key assumptions utilised in the impairment testing

of goodwill (reflected above).

Value of HAKOM licence for the radio frequency spectrum which was recognized as intangible assets was increased

through PPA adjustment due to acquisition of HT Production. First licence is granted to HT Production on 26 October

2011. Licence is renewed every ten years and there is no risk assigned to the renewal of HAKOM licence; accordingly,

HAKOM licence is an indefinite-lived intangible asset.

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

61 Croatian Telecom Inc.

16 Property, plant and equipment

Land and

buildings

Telecom

plant and

machinery

Tools,

vehicles, IT

and office

equipment

Assets under

construction

Total

HRK million

As at 1 January 2021

Cost

2,500

16,353

1,137

195

20,185

Accumulated depreciation and impairment losses

(1,616)

(11,136)

(929)

(4)

(13,685)

__________

Net book value

884

5,217

208

191

6,500

__________

Year ended 31 December 2021

Opening net book value

884

5,217

208

191

6,500

Additions

182

940

1,163

Transfers

210

(214)

(73)

Disposals

(13)

Disposal of subsidiary

(4)

(272)

(3)

(22)

(301)

Depreciation charge

(104)

(848)

(95)

(1,047)

Impairment loss

(13)

Foreign exchange difference

(1)

__________

Net book value

977

4,051

224

1,036

6,288

__________

As at 31 December 2021

Cost

3,214

13,731

1,051

1,036

19,032

Accumulated depreciation and impairment losses

(2,237)

(9,680)

(827)

(12,744)

__________

Net book value

977

4,051

224

1,036

6,288

__________

Year ended 31 December 2022

Opening net book value

977

4,051

224

1,036

6,288

Additions

386

549

1,036

Transfers

512

(566)

Disposals

(80)

(2)

(82)

Depreciation charge

(84)

(741)

(95)

(920)

Impairment loss

(15)

Foreign exchange difference

__________

Net book value

853

4,209

227

1,019

6,308

__________

As at 31 December 2022

Cost

3,174

14,630

1,164

1,019

19,987

Accumulated depreciation and impairment losses

(2,321)

(10,421)

(937)

(13,679)

__________

Net book value

853

4,209

227

1,019

6,308

__________

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

16 Property, plant and equipment (continued)

Beginning in 2001, the Group has performed additional procedures which have provided support for the existence of

legal title to land and buildings transferred from HPT s.p.o. under the Separation Act of 10 July 1998. The Group is still

in the process of formally registering this legal title.

The Group does not have any material property, plant and equipment held for disposal.

Assets under construction

Assets under construction mainly relates to construction of mobile network devices and equipment of HRK 200 million

(2021: HRK 198 million), and construction of core, transmission and IP network of HRK 581 million (2021: HRK 622

million).

Impairment loss

In 2022, the Group recognized an impairment loss on property, plant and equipment of HRK 15 million (2021: HRK 13

million) mostly relating to change of equipment due to transfer to newer technology. The recoverable amount of that

equipment is its estimated fair value less costs of disposal, which is based on the best information available to reflect

the amount that the Group could obtain, at the statement of financial position date, from the disposal of the asset in an

arm’s length transaction between knowledgeable, willing parties, after deducting the costs of disposal.

Disposal of property, plant and equipment

The disposal of the property, plant and equipment primarily relates to the disposal of land and building, telecom switches

and devices, old tools, IT, office equipment and vehicles in the gross amount of HRK 439 million (2021: HRK 275 million).

The gain from the sale is HRK 45 million (2021: HRK 15 million), the loss on the disposal is HRK 2 million (2021: HRK

2 million).

Ownership over ducts

Although assets (including the ducts as a part of the infrastructure) were transferred from the legal predecessor of the

Company, HPT Public Company, by virtue of the Law on Separation of Croatian Post and Telecommunication and

contributed by the Republic of Croatia to the share capital at the foundation of the Company on 1 January 1999,

according to other Croatian legislation, which is also known as Distributive Telecommunication Infrastructure (DTI, TI or

ducts), does not have all the necessary documents (building, use permits etc.) which may be relevant to the issue of

proving the ownership towards third parties. Some claims of ownership over these assets by the local authorities (the

City of Zagreb) may have a material effect on the financial statements in the case that HT will not be able to prove its

ownership rights for such ducts. However, HT management believes the likelihood of occurrence of such circumstances

is remote. Therefore, no adjustments were made to these financial statements in respect of this matter.

The net book value of all the Group’s ducts as at 31 December 2022 is HRK 647 million (31 December 2021: HRK 618

million).

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

63 Croatian Telecom Inc.

17 Investment property

HRK million

As at 1 January 2021

Cost

Accumulated depreciation

(29)

__________

Net book value

__________

Year ended 31 December 2021

Opening net book value

Transfers to property plant and equipment

Disposal

(3)

Depreciation charge

(1)

__________

Net book value

__________

As at 31 December 2021

Cost

Accumulated depreciation

(28)

__________

Net book value

__________

Year ended 31 December 2022

Opening net book value

Transfers to property plant and equipment

Disposal

(1)

Depreciation charge

(1)

__________

Net book value

__________

As at 31 December 2022

Cost

Accumulated depreciation

(26)

__________

Net book value

__________

The Group has classified unoccupied buildings and undeveloped land as investment property.

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

18 Right-of-use assets and lease liabilities

The Group leases various cell sites (land, space in cell towers or rooftop surface areas), network infrastructure, and

buildings used for administrative or technical purposes and vehicles. Rental contracts are typically made for fixed

periods of 3 months to 69 years.

Until 31 December 2018 leases of property, plant and equipment were classified as either finance leases or operating

leases. From 1 January 2019, leases and ECI (electronic communications infrastructure and associated facilities) are

recognised as a right-of-use asset and a corresponding liability from the date when the leased asset becomes available

for use by the Group. In 2022 renewals of the lease agreements are treated as increase of the right-of-use assets

(additions) and changes in the duration or fees in the agreements are classified as terminations or modifications (an

early termination or change in initially defined fee in the agreement).

In million HRK

Note

Land

Buildings

Equipment

Other

Total

Carrying amount at 1 January 2021

207

356

691

Additions

269

337

Terminations/modifications

(3)

(20)

(15)

(9)

(47)

Transfers

(1)

Depreciation charge

(238)

(58)

(12)

(29)

(337)

Carrying amount at 31 December 2021

234

310

644

Additions

204

256

Terminations/modifications

(18)

(8)

(1)

(27)

Depreciation charge

(235)

(45)

(11)

(27)

(318)

Carrying amount at 31 December 2022

185

282

555

The Group recognised lease liabilities as follows:

In million HRK

31 December 2022

31 December 2021

Short-term lease liabilities

152

159

Long-term lease liabilities

378

446

Total lease liabilities

530

605

The movement of lease liabilities is disclosed in Note 40.

Interest expense included in finance costs of 2022 was HRK 32 million (2021: HRK 34 million).

Total cash outflow for leases in 2022 was HRK 317 million plus interest expense HRK 32 million (2021: HRK 350 million

plus interest expense HRK 34 million).

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

65 Croatian Telecom Inc.

19 Investments accounted for using the equity method

The net book value of investments accounted for using the equity method comprises of:

2022

2021

HRK million

Joint venture HT d.d. Mostar:

As at 1 January

379

Share of profit

Dividends paid

Impairment of investment

(141)

__________

Investment

238

Reclassification to assets held for sale

(238)

__________

As at 31 December

379

__________

Investment in joint venture:

The Group has an ownership interest of 39.1% in its joint venture HT d.d. Mostar which is incorporated in the Federation

of Bosnia and Herzegovina. The principal activity of this company is provision of telecommunication services.

All decisions made by the Management Board and all decisions made by the Supervisory Board must be approved by

both majority shareholders. Therefore, the investment is classified as a jointly controlled entity. The rest of the company

is mainly owned by the Federation of Bosnia and Herzegovina (50.10%).

The Group’s share in HT d.d. Mostar profit for the year ended 31 December 2022 is recognized in the statement of

comprehensive income in the amount of HRK 0 million (2021: HRK 0 million).

In 2022 and 2021, HT did not receive any dividend from HT d.d. Mostar.

The Company started the sale process during 2022 with the preparation of a valuation. As a result of valuation,

investment in HT d.d. Mostar was impaired in the amount of HRK 141 million. As at 31 December 2022, the amount of

investment of HRK 238 million is classified as assets held for sale (Note 22). The management considers the sale

process to be finalized within the next twelve months.

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

19 Investments accounted for using the equity method (continued)

Summarised financial information for investments accounted for using the equity method is as follows:

Summarised statement of financial position:

31 December

2022

31 December

2021

HRK million

Estimated

Actual

Joint venture HT d.d. Mostar:

Current

Cash and cash equivalents

Other current assets

411

__________

Total current assets

495

Financial liabilities

Other current liabilities

229

__________

Total current liabilities

230

Non-current

Non-current assets

1,105

Financial liabilities

Other liabilities

__________

Total non-current liabilities

__________

Net assets

1,281

__________

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

67 Croatian Telecom Inc.

19 Investments accounted for using the equity method (continued)

Summarised statement of comprehensive income:

2022

2021

HRK million

Estimated

Actual

Joint venture HT d.d. Mostar:

Revenue

751

__________

Depreciation and amortisation

(194)

Interest income

Interest expense

(6)

__________

Pre-tax (loss)/profit

Income tax expense

__________

Net income

__________

Dividends received

Reconciliation of summarised financial information

31 December

2022

31 December

2021

HRK million

Estimated

Actual

Joint venture HT d.d. Mostar

Opening net assets 1 January

1,281

1,282

Profit for the period

Foreign currency translation

(1)

__________

Closing net assets

1,283

1,281

__________

Interest in joint venture 39.10%

502

501

Foreign currency translation

(2)

Impairment

(262)

(120)

__________

Carrying value

238

379

__________

Reclassification to asset classified as held for sale

(238)

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

20 Financial asset at fair value through other comprehensive income

Financial assets at fair value through other comprehensive income, include the following:

Issuer

Credit

rating

Currency

Maturity

31 December

2022

31 December

2021

HRK million

Foreign bonds:

Fortenova Group TopCo B.V.,

Amsterdam

EUR

Other

__________

Total non current financial assets

__________

Issuer

Credit

rating

Currency

Maturity

31 December

2022

31 December

2021

HRK million

Given loan to Optima Telecom

HRK

2022

201

__________

Total current financial assets

201

__________

Interest rate for given loans is 2,5 %.

Given loan was repaid in full in January 2022.

21 Inventories

31 December

2022

31 December

2021

HRK million

Inventories and spare parts (at lower of cost and net realisable value)

Merchandise (at lower of cost and net realisable value)

225

166

__________

263

190

__________

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

69 Croatian Telecom Inc.

22 Asset classified as held for sale

31 December

2022

31 December

2021

HRK million

Asset classified as held for sale

238

__________

238

__________

Assets classified as held for sale refers to the joint venture HT d.d. Mostar which is incorporated in the Federation of

Bosnia and Herzegovina. The Group has an ownership share of 39.1%. The principal activity of this company is

provision of telecommunication services.

The Company started the sale process during 2022 with the preparation of a valuation. As a result of valuation,

investment in HT d.d. Mostar was impaired in the amount of HRK 141 million. As at 31 December 2022, the amount

of investment of HRK 238 million is classified as assets held for sale. The management considers the sale process to

be finalized within the next twelve months.

Estimated net book value of HT d.d. Mostar as at 31 December 2022 is HRK 1,283 million (financial information for

2022 represents estimations as HT d.d. Mostar did not issue its financial statements up to the date of issuing

consolidated financial statements of HT Group).

Summarised statement of financial position:

31 December

2022

HRK million

Estimated

Current

Cash and cash equivalents

178

Other current assets

343

__________

Total current assets

521

Financial liabilities

Other current liabilities

213

__________

Total current liabilities

234

Non-current

Non-current assets

1,079

Financial liabilities

Other liabilities

__________

Total non-current liabilities

__________

Net assets

1,283

__________

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

23 Trade and other receivables

31 December

2022

31 December

2021

HRK million

Trade receivables

170

150

Loans to employees

Other receivables

__________

Non-current financial instruments

227

222

__________

Prepayments to regulator

Total non-current trade and other receivables

265

294

Trade receivables

1,424

1,442

Loans to employees

Other receivables

__________

Current trade and other receivables

1,505

1,489

__________

1,770

1,783

__________

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

71 Croatian Telecom Inc.

23 Trade and other receivables (continued)

The aging analysis of current trade receivables and current and non-current contract assets as of 31 December 2022

is as follows:

Total

Current

31-60 days

61-90 days

91-180 days

>180 days

HRK million

31 December 2022

Expected credit loss rate

0.5-8%

1.11-20%

1.11-29%

1.11-86.88%

1.11-100%

Gross carrying amount -

trade receivables

2,256

1,392

800

Loss allowance

(832)

(36)

(3)

(2)

(7)

(784)

__________

_________

Net amount – trade

receivables

1,424

1,356

Gross carrying amount -

contract assets

288

Loss allowance

(16)

__________

_________

Net amount – contract

assets

272

The aging analysis of current trade receivables and current and non-current contract assets as of 31 December 2021

was as follows:

Total

Current

31-60 days

61-90 days

91-180 days

>180 days

HRK million

31 December 2021

Expected credit loss rate

0.35-8.00%

0.87-21.00%

0.87-31.00%

0.87-71.68%

0.87-100%

Gross carrying amount -

trade receivables

2,291

1,351

828

Loss allowance

(849)

(24)

(3)

(15)

(804)

__________

_________

Net amount – trade

receivables

1,442

1,327

Gross carrying amount -

contract assets

299

Loss allowance

(13)

__________

_________

Net amount – contract

assets

286

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

23 Trade and other receivables (continued)

The following table explains the changes in the credit loss allowance for trade receivables under simplified ECL model

between the beginning and the end of the annual period:

Contract

assets

Trade

receivables

HRK million

As at 1 January 2022

849

__________

Changes in estimates and assumptions

Financial assets derecognised during the period

(15)

__________

Total credit loss allowance charge in profit and loss for the period

Write-offs

(4)

(74)

__________

As at 31 December 2022

832

__________

Contract

assets

Trade

receivables

HRK million

As at 1 January 2021

969

__________

Changes in estimates and assumptions

Financial assets derecognised during the period

(26)

__________

Total credit loss allowance charge in profit and loss for the period

Write-offs

(18)

(182)

__________

As at 31 December 2021

849

__________

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

73 Croatian Telecom Inc.

24 Assets and liabilities arising from contracts with customers

The Group has recognized following assets and liabilities related to contracts with customers:

31 December

2022

31 December

2021

HRK million

Current contract asset resulting from

Equipment and service sales

229

243

Value adjustment

(10)

(9)

__________

Total current contract asset

219

234

Non current contract asset resulting from

Equipment and service sales

Value adjustment

(5)

(4)

__________

Total non current contract asset

Current capitalized contract cost resulting from

Cost to obtain a contract

Cost to fulfil a contract

__________

Total current capitalized contract cost

Non-current capitalized contract cost resulting from

Cost to obtain a contract

165

134

Cost to fulfil a contract

__________

Total non-current capitalized contract cost

167

137

Current contract liabilities

__________

Total current contract liabilities

Decrease of contract asset compared to previous year is a result of lower sales of subsidized handsets and lower value

of granted handset budgets in current year compared to previous year, followed by higher release of contract asset from

previous year contracts.

Increase of contract cost compared to previous year is result of increased fees paid to indirect partners for contract

acquisition.

At 31 December 2022 the Group recognised HRK 63 million (31 December 2021: HRK 66 million) of revenue that was

included in the contract liability balance at the beginning of the period.

Group applies the IFRS 9 simplified approach, whereas to measure the expected credit losses clusters have been

grouped based on customer credit risk characteristics and collection efficiency. The expected loss rates are based on

the past data collected over a period of 36 months.

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

24 Assets and liabilities arising from contracts with customers (continued)

Group has recognized following revenue adjustments from contracts with customers, which was not in line with billed

revenue, per following categories:

2022

2021

HRK million

Sale of goods

164

167

Sale of services

(171)

(154)

__________

Total Residential Customers

(7)

Sale of goods

163

177

Sale of services

(169)

__________

Total Business Customers

(6)

__________

Total for Other segment (OT)

(2)

The following table presents information on unsatisfied performance obligations resulting from long-term contracts with

customers.

31 December

2022

31 December

2021

HRK million

Aggregate amount of the transaction price allocated to

long term contracts with customers that are unsatisfied

1,136

1,066

Management expects that 77% (HRK 871 million) of the transaction price allocated to unsatisfied contracts as at 31

December 2022 will be recognized as revenue during the next reporting period. The remaining 23% (HRK 265 million)

will be recognized in the next 1.5 years.

Group uses practical expedient not to disclose the outstanding transaction price allocated to performance obligations

that are unsatisfied (or partially unsatisfied) when the revenue is recognised overtime in line with billed revenue.

25 Prepayments

Prepayments mainly consist of prepaid liabilities for concession fees towards regulator in amount of HRK 83 million (31

December 2021: HRK 53 million), advances towards third parties in amount of HRK 248 million most of which refers to

advances for sports content rights secured by bank guarantees in amount of HRK 186 million (31 December 2021: HRK

22 million). Non current prepayments are consisted completely of aforementioned HRK 186 million for sports content

rights. Additionally, within prepayments are prepaid expenses in amount of HRK 11 million (31 December 2021: HRK

18 million).

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

75 Croatian Telecom Inc.

26 Cash and cash equivalents and bank deposits

a) Cash and cash equivalents

Cash and cash equivalents comprise the following amounts:

31 December

2022

31 December

2021

HRK million

Cash on hand and balances with banks

1,824

1,779

Commercial papers

750

1,079

Reverse repurchase agreement

226

Time deposits with maturity less than 3 months

__________

2,814

2,871

__________

HT has deposited an amount of HRK 226 million via reverse repurchase agreement of Croatian government bonds

CROATIA 1,75% 03/04/41 (ISIN: XS2309433899).

b) Currency breakdown of cash and cash equivalents and time deposits:

31 December

2022

31 December

2021

HRK million

HRK

2,358

2,158

EUR

411

665

GBP

USD

BAM

RSD

__________

2,814

2,871

__________

c) Bank deposits

Current

Non-current

31 December

2022

31 December

2021

31 December

2022

31 December

2021

HRK million

Foreign bank (guarantee deposits)

Foreign bank (bank deposits)

__________

102

__________

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

27 Trade payables and other liabilities

31 December

2022

31 December

2021

HRK million

Content contracts

Licence for radio frequency spectrum

Other

__________

Non-current

125

132

__________

Trade payables

1,078

945

Content contracts

109

157

VAT and other taxes payable

Payroll and payroll taxes

Licence for radio frequency spectrum

Other

__________

Current

1,306

1,223

__________

1,431

1,355

__________

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

77 Croatian Telecom Inc.

28 Employee benefit obligations

Employee benefits include pension benefit payments in accordance with the collective agreement. Employee benefits

are determined using the projected unit credit method. Gains and losses resulting from changes in actuarial assumptions

are recognized as other comprehensive income in the period in which they occur.

Employee benefits include a compensation for the employees described in Note 43.

The movement in the liability recognized in the statement of financial position was as follows:

2022

2021

HRK million

As at 1 January

LTI changes

LTI paid

(6)

(3)

LTI transfer to other liabilities

(2)

Service costs

Benefit paid

(1)

Actuarial gains

__________

As at 31 December

__________

Retirement

Jubilee awards

LTI

__________

Retirement

Jubilee awards

LTI – non-current

__________

Non-current

__________

LTI – current

__________

The principal actuarial assumptions used to determine retirement benefit obligations as at 31 December were as follows:

2022

in %

2021

in %

Discount rate (annually)

3.00

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

29 Provisions

Legal claims

Assets

retirement

obligation

Total

HRK million

As at 1 January 2021

Additions

Utilisation

(19)

Net changes

(1)

Interest costs

As at 1 January 2022

112

Additions

Utilisation

(38)

(1)

(39)

Net changes

(2)

Interest costs

__________

As at 31 December 2022

126

__________

Legal claims

As at 31 December 2022, the Group has provided estimated amounts for several legal actions and claims that

management has assessed as probable to result in outflow of resources of the Group.

Asset retirement obligation

Asset retirement obligation primarily exists in the case of telecommunications structures constructed on third parties’

properties. The Group carries out a revision of the necessary provisions every year.

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

79 Croatian Telecom Inc.

30 Accruals

Variable

salary

Redundancy

Unused

vacation

Total

HRK million

As at 1 January 2021

Additions

121

190

Utilisation

(114)

(70)

(184)

As at 1 January 2022

Additions

119

177

Utilisation

(109)

(52)

(161)

Reversal

(5)

(4)

__________

As at 31 December 2022

106

__________

Redundancy

Redundancy expenses and accruals include the amount of gross severance payments and other related costs for

employees whose employment contracts are terminated during 2022.

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

31 Issued share capital

Authorised, issued, fully paid and registered share capital:

31 December

2022

HRK million

78,775,842 ordinary shares without par value

10,245

__________

31 December

2021

HRK million

80,047,509 ordinary shares without par value

10,245

__________

During 2022, 1,271,667 shares were cancelled (2021: 718,720).

32 Legal reserves

Legal reserves represent reserves prescribed by the Company Act in the amount of 5% of the net profit for the year,

until these reserves amount to 5% of the issued share capital. Legal reserves that do not exceed the above amount can

only be used to cover current year or prior year losses. If the legal reserves exceed 5% of the issued capital, they can

also be used to increase the issued share capital of the Group. These reserves are not distributable.

33 Treasury shares

In 2017, the Company started with acquisition of own shares due to introduction of share buy-back program which

lasted until 20 April 2021. 528,245 shares that were bought through this program in 2020 were cancelled in 2021.

Additional 205,443 shares which were bought from 1 January 2021 to 20 April 2021 were cancelled in 2021. Within this

program total of 1,853,528 shares are bought from the introduction of share buy-back program.

On 28 April 2021, Management Board launched a new Treasury Share Buyback Program with commencement as of 29

April 2021 and lasting until 22 April 2026. Under this Program the Company continuously performs acquisition of shares

in order to act in line with the purpose of the Program which is to withdraw shares without a nominal value without

reducing the share capital. In 2022, a total of 1,271,667 shares were cancelled, out of which 326,838 shares were

bought in 2021.

In 2022 Crnogorski Telekom has also carried out purchase of own shares. Total of 272,588 shares were bought in 2022

but none were cancelled. Cancelation of those 272,588 shares is expected in 2023.

Reserve for purchased own shares amounts to HRK 3 million as of 31 December 2022 (31 December 2021: HRK 61

million) and is not distributable.

The Company holds 19,952 own shares as at 31 December 2022 (31 December 2021: 326,838).

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

81 Croatian Telecom Inc.

34 Retained earnings

In 2022, General Assembly of the Company has brought the decision regarding the dividend pay-out. Under that

decision, HRK 630 million (2021: HRK 641 million) or HRK 8 per share were paid out to shareholders (2021: HRK 8).

Dividend was distributed from net profit in 2021.

35 Commitments

Capital commitments

The Group was committed under contractual agreements to capital expenditure as follows:

31 December

2022

31 December

2021

HRK million

Intangible assets

711

349

Property, plant and equipment

942

1,081

__________

1,653

1,430

__________

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

36 Contingencies

At the time of preparation of these consolidated financial statements, there are outstanding claims against the Group.

In the opinion of the management, the settlement of these cases will not have a material adverse effect on the financial

position of the Group, except for certain claims for which a provision was established (Note 29).

The Group vigorously defends all of its legal claims and potential claims, including regulatory matters, third party claims

and employee lawsuits.

Ownership claim of Distributive Telecommunication Infrastructure (DTI) by the City of Zagreb

In September 2008, the Group received a lawsuit filed by the Zagreb Holding Ltd. branch Zagreb Digital City (“ZHZDG”)

against the Group. ZHZDG is claiming the ownership of the City of Zagreb over DTI on the area of the City of Zagreb

and demanding a payment of fee for usage of DTI system in the range of up to HRK 390 million plus interest.

This lawsuit is based on a claim that the HT is using DTI owned by the City of Zagreb without any remuneration.

In December 2012, the Group received the partial interlocutory judgement and partial judgement by which it was

determined that the HT is obliged to pay to ZHZDG the fee for usage of the DTI system, and that until the legal validity

of this partial interlocutory judgment, litigation will be stopped regarding the amount of the claim. Furthermore, the claim

was rejected in the part concerning the establishment of the ownership of the City of Zagreb over DTI and other

communal infrastructure for laying telecommunication installations on the area of the City of Zagreb for the purpose of

communication-information systems and services. The Group appealed against this judgment.

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

83 Croatian Telecom Inc.

36 Contingencies (continued)

Ownership claim of Distributive Telecommunication Infrastructure (DTI) by the City of Zagreb (continued)

In August 2015 the second instance County Court of Varaždin accepted the HT’s remedy and returned the case back

to the first instance court proceeding.

As to avoid statute of limitation, the plaintiff has raised its claim in June 2016, 2017 and 2018, for the additional amount

of HRK 90 million each year respectively. Therefore, the claim now amounts altogether HRK 660 million, plus interest.

Based on the merit and development of the above legal proceedings, the Group concluded that the likelihood of an

obligation arising from these legal cases is remote, and that there was no need to present a provision related to these

cases in these financial statements.

Subscriber lawsuits

7 residential subscribers initiated in 2003 against Republic of Croatia as first defendant and HT as second defendant a

dispute, in which the Municipal Civil Court in Zagreb passed in a retrial in 2021 first-instance decision by which: (i) the

contractual provisions of the Concession Agreement for the Provision of Public Voice Services in the Fixed Network

concluded between Republic of Croatia and HT in 1999, as amended in 2001 (Concession Agreement), has been

determined as void in the part concerning monthly access charge and 1 minute billing interval; and (ii) ordered a payment

in the amount of HRK 925 per claimant plus interest.

In 2022 the County Court of Zagreb confirmed the first instance judgement by which HT was finally obliged to such

payment. HT filed against final court decision a proposal to submit revision before the Supreme Court of the Republic

of Croatia, as well as the constitutional claim before the Constitutional Court of the Republic of Croatia, with the

arguments that it was charging its residential subscribers in accordance with the Concession Agreement, as well as

other applicable laws and regulations.

Apart from the 7 mentioned plaintiffs in the above described procedure, there are 5 more plaintiffs who initiated litigation

against Republic of Croatia as first defendant and HT as second defendant with the same claim. These procedures are

pending.

There is a possibility of additional claims that could be initiated against HT on the same factual and legal ground.

Pending regulatory misdemeanour proceedings

The Croatian Regulatory Authority for Network Industries (HAKOM) initiated two misdemeanor proceedings against HT

in connection with possible breach of imposed regulatory obligations in 2018. Electronic Communications Act prescribes

for such misdemeanors fine in the amount of 1% up to a maximum of 10% of the total annual gross revenue of the

Company from performing electronic communications networks and services, achieved in the last year for which exist

concluded annual financial reports.

In one of this misdemeanor proceedings, initiated against HT regarding breach of price control and cost accounting

regulatory obligation, High Misdemeanour Court confirmed in 2022 fine imposed to HT by the first-instance judgement

of the Misdemeanour Court in the amount of HRK 36 million, with the possibility for HT of the payment of 2/3 of the

imposed fine within one month, in which case it will be considered as the fine has been paid in its entirety. HT paid 2/3

of the imposed fine, i.e. HRK 24 million and filed against this judgment constitutional claim to the Constitutional Court

of the Republic of Croatia and a proposal to the State Attorney’s Office in order to initiate proceedings for the protection

of legality before the Supreme Court of the Republic of Croatia.

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

36 Contingencies (continued)

Pending regulatory misdemeanor proceedings (continued)

In another misdemeanor proceeding initiated against HT for abusing access, non-discrimination and transparency

regulatory obligation, misdemeanor procedure is still on-going.

37 Balances and transactions with related parties

The transactions disclosed below primarily relate to transactions with the companies owned by DTAG. The Group enters

into transactions in the normal course of business on an arm’s length basis. These transactions included the sending

and receiving of international traffic to/from these companies during 2022 and 2021.

The main transactions with related parties during 2022 and 2021 were as follows:

Revenue

Expenses

2022

2021

2022

2021

Related party:

HRK million

Ultimate parent

Deutsche Telekom AG, Germany

127

Joint venture

HT d.d. Mostar, Bosnia and Herzegovina

Subsidiaries of ultimate parent

Telekom Deutschland GmbH, Germany

Slovak Telecom a.s., Slovakia

Magyar Telekom Nyrt., Hungary

Deutsche Telekom Cloud Services d.o.o

T-Mobile Austria GmbH, Austria

T-Mobile Czech

Deutsche Telekom UK Limited

T-Mobile Polska

DT Europe Holding

T-Mobile Netherlands

T-Systems International GmbH, Germany

Makedonski Telekom

Hellenic Telecommunications Organization

Deutsche Telekom IT

Deutsche Telekom Services Europe SE

T-Systems Enterprise Services Gmbh

Others

__________

227

258

236

262

__________

The transactions with DTAG disclosed above primarily relate to Licence Agreement and Frame agreement which covers

all mutual needs for services provided by the companies in DT group in telecom industry. The transactions with HT

Mostar relate to international settlement of telecommunications services.

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

85 Croatian Telecom Inc.

37 Balances and transactions with related parties (continued)

The statement of financial position includes the following balances resulting from transactions with related parties:

Receivables

Payables

31 December

2022

31 December

2021

31 December

2022

31 December

2021

Related party:

HRK million

Ultimate parent

Deutsche Telekom AG, Germany

Joint venture

HT d.d. Mostar, Bosnia and Herzegovina

Subsidiaries of ultimate parent

T-Systems International GmbH, Germany

Deutsche Telekom IT GmbH

Deutsche Telekom Cloud Services d.o.o

Makedonski Telekom

Magyar Telekom Nyrt., Hungary

Telekom Deutschland GmbH, Germany

Deutsche Telekom UK Limited

Slovak Telecom a.s., Slovakia

Others

__________

173

151

__________

At the year end the Group holds investment in commercial paper of ultimate parent in the amount of HRK 750 million

(31 December 2021: HRK 1,079 million) (Note 26).

The Federal Republic of Germany is both a direct and an indirect shareholder and holds 30.4 % of the share capital of

DTAG. Due to the average attendance at the shareholders’ meetings, the Federal Republic of Germany represents a

solid majority at the shareholders’ meetings of DTAG, although it only has a minority shareholding, making DTAG a

dependant company of the Federal Republic of Germany. Therefore, the Federal Republic of Germany and the

companies controlled by the Federal Republic of Germany or companies over which the Federal Republic of Germany

can exercise a significant influence are classified as related parties of DTAG, and consequently of the Group as well.

The Group did not execute as part of its normal business activities any transactions that were individually material in

the 2022 or 2021 financial year with companies controlled by the Federal Republic of Germany or companies over which

the Federal Republic of Germany can exercise a significant influence.

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

37 Balances and transactions with related parties (continued)

Compensation of the members Supervisory Board

The chairman of the Supervisory Board receives remuneration in the amount of 1.5 times of the average net salary of

the employees of the Company paid in the preceding month. To the deputy chairman, the amount of 1.25 of the average

net salary of the employees of the Company paid in the preceding month is paid, while any other member receives the

amount of one average net salary of the employees of the Company paid in the preceding month. To a member of the

Supervisory Board, who is at the same time the Chairman of the Audit Committee of the Supervisory Board, in the

amount of 1.5 of the average monthly net salary of the employees of the Company paid in the preceding month. A

member of the Supervisory Board, who is also a member of one board or committee of the Supervisory Board, receives

a remuneration in the amount of 1.25 of the average monthly net salary of the Company's employees paid in the previous

month. A member of the Supervisory Board who is simultaneously a member of two or more committees of the

Supervisory Board receives a remuneration in the amount of 1.5 of the average net salary of the Company's employees

paid in the previous month.

DTAG representatives do not receive any remuneration for the membership in the Supervisory Board due to a respective

policy of DTAG.

In 2022, the Group paid a total amount of HRK 0.9 million (2021: HRK 0.9 million) to the members of its Supervisory

Board. No loans were granted to the members of the Supervisory Board.

Compensation to key management personnel

In 2022, the total compensation paid to key management personnel of the Group amounted to HRK 50 million (2021:

HRK 48 million). Key management personnel include members of the Management Boards of the Company and its

subsidiaries and the Company’s directors of Sector, who are employed by the Group.

Compensation paid to key management personnel includes:

2022

2021

HRK million

Short-term benefits

__________

In 2022, the total cost of pension contribution is HRK 6 million (2021: HRK 5 million).

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

87 Croatian Telecom Inc.

38 Financial risk management objectives and policies

The Group is exposed to international service-based markets. As a result, the Group can be affected by changes in

foreign exchange rates. The Group also extends credit terms to its customers and is exposed to a risk of default. The

significant risks, together with the methods used to manage these risks, are described below. The Group does not use

derivative instruments either to manage risk or for speculative purposes.

a) Credit risk

The Group has no significant concentration of credit risk with any single counter party or group of counterparties with

similar characteristics. The Group procedures are in force to ensure on a permanent basis that sales are made to

customers with an appropriate credit history and do not exceed an acceptable credit exposure limit.

The Group does not guarantee obligations of other parties.

The Group considers that its maximum exposure is reflected by the value of debtors (Note 23) net of provisions for

impairment recognized at the statement of financial position date.

Additionally, the Group is exposed to risk through cash deposits in the banks. As at 31 December 2022, the Group had

business transactions with thirty-four banks (2021: thirty-eight banks). The Group held cash and deposits in three banks

almost exclusively. For one domestic bank with foreign ownership, the Group received guarantee for deposits placed

from parent bank which has a minimum rating of BBB+ and acceptable Credit Default Swap level (“CDS”). The

management of this risk is focused on dealing with the most reputable banks in foreign and domestic ownership in the

domestic and foreign markets and on contacts with the banks on a daily basis.

The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected

loss allowance for all trade receivables and contract assets. To measure the expected credit losses, trade receivables

and contract assets have been grouped based on shared credit risk characteristics and the days past due. The contract

assets relate the same risk characteristics as the trade receivables for the same types of contracts. The group has

therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the loss rates

for the contract assets.

The expected loss rates are based on the payment profiles of sales over a period of 36 months.

The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors

affecting the ability of the customers to settle the receivables.

The Group has identified the GDP and the unemployment rate in the country in which it sells its goods and services to

be the most relevant factors, and accordingly adjusts the historical loss rates based on expected changes in these

factors.

Deposited amounts in Banks are money on current account and deposits under 3 months which are collected at maturity.

That is why it is classified as hold to collect according to IFRS 9 and according to that measurement is to amortized

cost. Credit risk is measured using the general approach. Impairment losses are recognized on the basis of individual

impairment. Group uses the daily CDS-level which covers insurance for a period of five years. A CDS with an insurance

of five years has the highest market liquidity and was therefore chosen as a reference. The CDS-level reacts

immediately if a default risk increases - independently if an insurance with a period of three years or five years has been

chosen. For the risk measure of banks and partners which don’t provide adequate bank guarantee with acceptable CDS

level or don’t have their own adequate rating, Group took the CDS indicator of Croatia, which was on 31 December

2022 amounted to 1.03%.

Credit risk amount calculated using the formula: deposit amount * number of days * 1.03% / 365. For a vista deposits

the Group uses 2 days.

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

38 Financial risk management objectives and policies (continued)

b) Liquidity risk

The Group policy is to maintain sufficient cash and cash equivalents or to have available funding through an adequate

amount of committed credit facilities to meet its commitments for the foreseeable future.

Any excess cash is invested mostly in financial assets that are valued at fair value through other comprehensive income.

The amounts disclosed in the table are the contractual undiscounted cash flows:

31 December 2022

Less than 3

months

3-12 months

1-5 years

>5 years

HRK million

Trade and other payables

1,097

Capitalized content rights

102

Other liabilities

119

Lease liabilities

118

249

234

31 December 2021

Less than 3

months

3-12 months

1-5 years

>5 years

HRK million

Trade and other payables

964

Capitalized content rights

107

Other liabilities

121

Lease liabilities

125

301

259

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

89 Croatian Telecom Inc.

38 Financial risk management objectives and policies (continued)

c) Interest rate risk

The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s financial assets at

fair value through other comprehensive income, cash, cash equivalents, time deposits and bank borrowings.

The Group is not exposed to variable interest rates.

d) Foreign currency risk

As at 31 December 2022 the Group’s functional currency is the Croatian Kuna. Certain assets and liabilities are

denominated in foreign currencies which are translated at the valid middle exchange rate of the Croatian National Bank

at each statement of financial position date. The resulting differences are charged or credited to the statement of

comprehensive income but do not affect short-term cash flows.

A significant amount of deposits in the banks, financial assets at fair value through other comprehensive income and

cash and equivalents, receivables and payables are made in foreign currency, primarily in Euro.

Considering that Croatia joined the euro area and adopted Euro as an official currency as at 1 January 2023, there is

no foreign exchange currency risk to a change in the Euro exchange rate. The fixed official exchange rate is set at

7,53450 HRK per 1 EUR.

e) Fair value estimation

The fair value of securities included in financial assets at fair value through other comprehensive income is estimated

by reference to their quoted market price at the statement of financial position date. The Group's principal financial

instruments not carried at fair value are trade receivables, other receivables, non-current receivables, trade and other

payables. The historical cost carrying amounts of receivables and payables, including provisions, which are all subject

to normal trade credit terms, approximate their fair values.

f) Capital management

The primary objective of the Group’s capital management is to ensure business support and maximise shareholder

value. The capital structure of the Group comprises of issued share capital, reserves and retained earnings and totals

HRK 12,315 million as at 31 December 2022 (31 December 2021: HRK 12,477 million).

The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To

maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to

shareholders or issue new shares. No changes were made in the objectives, policies or processes during the years

ended 31 December 2022 and 31 December 2021 (Notes 32 and 35).

In accordance with the Law on electronic money (Official Gazette No. 64/18, Article 41), the Company as electronic

money institution and payment institution is obliged to report regulatory capital in its annual audited financial statements.

These disclosures are not required by IFRS and the law does not require the disclosure of comparative information from

previous year.

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

38 Financial risk management objectives and policies (continued)

f) Capital management (continued)

Regulatory capital for electronic money institutions

REGULATORY CAPITAL FOR ELECTRONIC MONEY INSTITUTIONS - FORM IEN-RK

Electronic money institution: HRVATSKI TELEKOM d.d.

Personal identification number (OIB): 81793146560

Date: 31 December 2022

IEN-RK: Section A - Calculation of Regulatory Capital

HRK

No.

Item

Amount

REGULATORY CAPITAL

10,386,789,929.59

EQUITY TIER 1 CAPITAL

10,386,789,929.59

COMMON EQUITY TIER 1 CAPITAL

10,386,789,929.59

Capital instruments

10,244,977,390.00

Share premium

0.00

(-) Direct, indirect and synthetic holdings

by the institution of Common Equity Tier

1 Capital

-9,215,740.88

Retained earnings or (-) carry back

losses

995,938,285.90

Losses for the current fiscal year

0.00

Accumulated other comprehensive

income

49,625.29

10.

Other reserves

528,173,032.42

11.

(+)/(–) Adjustments to the Common

Equity Tier 1 from prudential filters

0.00

12.

Intangible assets

-1,246,612,014.19

13.

(-) Deferred tax assets that rely on

future profitability and not arise from

temporary differences

0.00

14.

(-) Pension fund assets under

management

0.00

15.

(-) Reciprocal cross holdings in

Common Equity Tier 1

0.00

16.

(-) Deduction from Common Equity Tier

1 items that exceed Additional Tier 1

0.00

17.

(-) Holdings of Common Equity Tier 1

instruments where an institution does

not have a significant investment in a

financial sector entity

0.00

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

91 Croatian Telecom Inc.

38 Financial risk management objectives and policies (continued)

f) Capital management (continued)

Regulatory capital for electronic money institutions (continued)

REGULATORY CAPITAL FOR ELECTRONIC MONEY INSTITUTIONS - FORM IEN-RK

Electronic money institution: HRVATSKI TELEKOM d.d.

Personal identification number (OIB): 81793146560

Date: 31 December 2022

IEN-RK: Section A - Calculation of Regulatory Capital

HRK

No.

Item

Amount

18.

(-) Deferred tax assets that rely on future profitability and arise

from temporary differences

-126,520,648.95

19.

(-) Holdings of Common Equity Tier 1 instruments where an

institution has a significant investment in a financial sector entity

0.00

20.

(-) Deduction over treshold (17.65%)

0.00

21.

(-) Deduction from Common Equity Tier 1 items - other

0.00

22.

ADDITIONAL TIER 1 CAPITAL

0.00

23.

Capital instruments

0.00

24.

Share premium

0.00

25.

(-) Direct, indirect and synthetic holdings by the institution of

Additional Tier 1 Capital

0.00

26.

(-) Reciprocal cross holdings in Additional Tier 1

0.00

27.

(-) Holdings of Additional Tier 1 instruments where an institution

does not have a significant investment in a financial sector entity

0.00

28.

(-) Holdings of Additional Tier 1 instruments where an institution

has a significant investment in a financial sector entity

0.00

29.

(-) Deduction from Additional Tier 1 items that exceed Tier 2

Capital

0.00

30.

Deduction from Additional Tier 1 items that exceed Additional Tier

1 (deducted from Common Equity Tier 1)

0.00

31.

(-) Deduction from Additional Tier 1 items - other

0.00

32.

TIER 2 CAPITAL

0.00

33.

Capital instruments

0.00

34.

Share premium

0.00

35.

(-) Direct, indirect and synthetic holdings by the institution of Tier 2

Capital

0.00

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

38 Financial risk management objectives and policies (continued)

f) Capital management (continued)

Regulatory capital for electronic money institutions (continued)

REGULATORY CAPITAL FOR ELECTRONIC MONEY INSTITUTIONS - FORM IEN-RK

Electronic money institution: HRVATSKI TELEKOM d.d.

Personal identification number (OIB): 81793146560

Date: 31 December 2022

IEN-RK: Section A - Calculation of Regulatory Capital

HRK

No.

Item

Amount

36.

(-) Reciprocal cross holdings in Tier 2

0.00

37.

(-) Holdings of Tier 2 instruments where

an institution does not have a significant

investment in a financial sector entity

0.00

38.

(-) Holdings of Tier 2 instruments where

an institution has a significant

investment in a financial sector entity

0.00

39.

Deduction from Tier 2 Capital items that

exceed Tier 2 Capital (deducted from

Additional Tier 1)

0.00

40.

(-) Deduction from Tier 2 items - other

0.00

41.

Notes

0.00

42.

Profit for the year

694,820,004.41

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

93 Croatian Telecom Inc.

38 Financial risk management objectives and policies (continued)

f) Capital management (continued)

Regulatory capital for electronic money institutions (continued)

REGULATORY CAPITAL FOR ELECTRONIC MONEY INSTITUTIONS -

FORM IEN-RK

Electronic money institution: HRVATSKI TELEKOM d.d.

Personal identification number (OIB): 81793146560

Date: 31 December 2022

IEN- RK: Section B – Capital available to calculate the amount of regulatory capital

HRK

Number

Item

Total amount

Capital available

to calculate the

amount of

regulatory capital

Excess

Common Equity Tier 1 Capital

10,386,789,929.59

Additonal Tier 1 Capital

0.00

Equity Tier 1 Capital

10,386,789,929.59

Tier 1 Capital

0.00

Regulatory Capital

10,386,789,929.59

Minimum required regulatory capital and requirements coverage

MINIMUM REQUIRED REGULATORY CAPITAL FOR ELECTRONIC MONEY INSTITUTIONS - FORM IEN-MRK

Electronic money institution: HRVATSKI TELEKOM d.d.

Personal identification number (OIB): 81793146560

Date: 31 December 2022

IEN-MRK: Section A - Minimum required regulatory capital for electronic money institutions

HRK

Number

Calculation

Amount

Average unused electronic money

3,324.87

Minimum required regulatory capital for electronic money institutions

66.50

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

38 Financial risk management objectives and policies (continued)

f) Capital management (continued)

Regulatory capital for payment institutions

REGULATORY CAPITAL FOR PAYMENT INSTITUTIONS - FORM IPP-MRK

Electronic money institution: HRVATSKI TELEKOM d.d.

Personal identification number (OIB): 81793146560

Date: 31 December 2022

IPP-MRK: Section A - Minimum required regulatory capital for payment institutions

HRK

Number

Item

Amount

Total amount of payment transactions in the previous year

241,863,642.48

Payment volume

20,155,303.54

Total amount (4., 5. ,6., 7., 8.)

806,212.14

4% of payment volume up to the amount of HRK 38 million

806,212.14

2.5% of payment volume over the amount of HRK 38 million and up to the

amount of HRK 76 million

0.00

1% of payment volume over the amount of HRK 76 million and up to the

amount of HRK 750 million

0.00

0.5% of payment volume over the amount of HRK 750 million and up to the

amount of HRK 1,875 million

0.00

0.25% of payment volume over the amount of HRK 1,875 million

0.00

Factor k

1.00

10.

Minimum required regulatory capital for payment institutions

806,212.14

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

95 Croatian Telecom Inc.

38 Financial risk management objectives and policies (continued)

g) Offsetting

The following financial assets and financial liabilities are subject to offsetting:

Trade receivables

Trade payables

31 December

2022

31 December

2021

31 December

2022

31 December

2021

HRK million

Gross recognised amounts

337

257

478

354

Offsetting amount

(111)

(57)

(111)

(57)

__________

226

200

367

297

__________

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

39 Financial instruments

Recurring fair value measurement

The level in fair value hierarchy into which the recurring fair value measurements are categorised are as follows:

31 December 2022

31 December 2021

HRK

million

HRK

million

HRK

million

HRK

million

HRK

million

HRK

million

Level 1

Level 2

Level 3

Level 1

Level 2

Level 3

Financial assets:

Assets classified as held for sale

238

Financial assets at fair value through other

comprehensive income, non-current

Financial assets at fair value through other

comprehensive income, current

201

Fair value of Level 2 financial instruments is calculated using discounted cash flows method. Carrying amount and fair

value of all the Group’s financial instruments are the same in 2022 and 2021.

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022 STRICTLY CONFIDENTIAL

97 Croatian Telecom Inc.

40 Net debt reconciliation

Cash/bank

overdraft

Liquid

investments

Borrow. due

within 1 year

Borrow. due

after 1 year

Other fin. liabilities

(spectrum and

content) within 1 y

Other fin. liabilities

(spectrum and

content) after 1 y

Lease liabilities

Total

HRK million

Net debt as at 31 December 2020

3,003

(56)

(146)

(210)

(45)

(631)

1,919

_________

Cash flow

(126)

328

350

608

_________

Reclassification of current portion

(205)

205

Additions - increase in related asset

(intangible assets and ROA)

(317)

(338)

(655)

Termination/modification of lease

contracts

Subsidiary disposal

(4)

146

205

Other non financial movements

Foreign exchange movements

(6)

_________

Net debt as at 31 December 2021

2,871

(87)

(132)

(605)

2,085

_________

_______

__________

Cash flow

(57)

326

317

650

_________

Reclassification of current portion

(348)

348

Additions - increase in related asset

(intangible assets and ROA)

(337)

(256)

(593)

Termination/modification of lease

contracts

Other non-financial movements

Foreign exchange movements

_________

Net debt as at 31 December 2022

2,814

102

(109)

(121)

(530)

2,156

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

41 Authorization for Services and Applicable Fees

The Group is party to the following Authorization for Services, none of which are within the scope of IFRIC 12:

a) Service authorization for the performance of electronic communications services

Pursuant to Article 24 of the Law on Electronic Communications (Official Gazette No. 76/2022) and in accordance with

the Article 12 of the European Electronic Communications Code (Directive (EU) 2018/1972) and BEREC Guidelines

(BoR (19) 259), the Company is entitled to provide the following electronic communication services based on the general

authorisation which was last updated in May 2022 (in compliance with the Law on electronic Communications that was

in force at that time, Official Gazette No. 90/11, 133/12, 80/13, 71/14, 72/17):

- Internet access service in the fixed electronic communications network,

- Internet access service in the mobile electronic communications network,

- Number based interpersonal communications service in the fixed electronic communications network (including

nomadic services),

- Number based interpersonal communications service in the mobile electronic communications network,

- Data transmission service,

- Lease lines service,

- Terrestrial TV broadcasting,

- Transport of telephone traffic among operators service (transit),

- M2M services,

- Other - premium rate and free phone services,

- Other - voice over internet protocol service (VoIP),

- Other - granting access and shared use of electronic communications infrastructure and associated facilities, and

- Other services.

On 26 February 2013 the Croatian Regulatory Authority for Network Industries (HAKOM) issued to the Group special

authorization to perform account reconciliation of accounts for the provision of electronic communications services in

maritime for a period of 10 years i.e. till 26 February 2023.

In accordance with HAKOM’s decision of 22 September 2022, the Group was designated as the Universal services

provider in the Republic of Croatia for a period of three (3) years starting from 1 December 2022 with the obligation to

provide following universal services during the mentioned period:

- access to the public communications network and publicly available telephone services at a fixed location, enabling

for the voice communications, facsimile communications and data communications, at data rates that are sufficient

to permit functional internet access, taking into account prevailing technologies used by the majority of subscribers

as well as the technological feasibility,

- setting up of public pay telephones or other publicly available access points for the public voice service on public

places accessible at any time, in accordance with the reasonable needs of end-users in terms of the geographical

coverage, the quality of services, the number of public pay telephones or other publicly available access points for

the public voice service and their accessibility for disabled persons,

- special measures for persons with disabilities to access services, including access to emergency services, in the

same way as other end-users,

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022

99 Croatian Telecom Inc.

41 Authorization for Services and Applicable Fees (continued)

a) Service authorization for the performance of electronic communications services in a fixed and mobile network

(continued)

- special pricing systems adapted to the needs of socially vulnerable groups of end-users of services, which include

the service referred to in the first point above

The Group is no longer designated as universal service operator for service access for end-users to at least one

comprehensive directory of all subscribers of publicly available telephone services, however, the Group shall continue

to provide the service on commercial basis.

b) Authorization for usage of radio frequency spectrum

HAKOM issued to the Company the following licences for use of the radio frequency spectrum for public mobile

electronic communications networks:

- licence for the use of radio frequency spectrum in 900 MHz and 1800 MHz frequency bands with the validity from 1

December 2011 until 18 October 2024,

- licence for the use of radio frequency spectrum in 2100 MHz frequency band with the validity from 1 January 2010

until 18 October 2024,

- licence for the use of radio frequency spectrum in 800 MHz frequency band with the validity from 29 October 2012

until 18 October 2024,

- licence for the use of radio frequency spectrum in 800 MHz frequency band with the validity from 6 November 2013

until 18 October 2024,

- licence for the use of radio frequency spectrum in 1800 MHz frequency band with the validity from 22 December

2014 until 18 October 2024,

- licence for the use of radio frequency spectrum in 2600 MHz frequency band with the validity from 1 May 2019 until

18 October 2024, and

- licences for the use of radio frequency spectrum in 700 MHz, 3600 MHz and 26 GHz frequency bands with the

validity from 12 August 2021 until 11 August 2036.

HAKOM also issued to the Group licences for the use of radio frequency spectrum for satellite services (DTH services)

with the validity from 12 August 2020 until 11 August 2025.

In March 2020 HAKOM approved the transfer of a licence for the use of radio frequency spectrum for the provision of

the service of management of electronic communications networks for digital television multiplexes MUX C and MUX E

from the companies HT Produkcija d.o.o., Odašiljači i veze d.o.o. and HP-Hrvatska pošta d.d. to the companies HT

Produkcija d.o.o., Odašiljači i veze d.o.o. and Hrvatski Telekom d.d. By the decision of HAKOM from August 2020 the

duration of the said licence was extended until 31 December 2030.

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

100

41 Authorization for Services and Applicable Fees (continued)

c) Fees for providing electronic communications services

Pursuant to the Law on Electronic Communications, the Group is obliged to pay the fees for the use of addresses and

numbers, radio frequency spectrum and for the performance of other tasks of HAKOM pursuant to the ordinances of

HAKOM and Ministry of the sea, transport and infrastructure. The said regulations prescribe the calculation and the

amount of fees. These fees are paid for the current year or one year in advance (in case of fees for usage of radio

frequency spectrum).

In 2022, the Group paid the following fees:

- the fees for the use of addresses, numbers and radio frequency spectrum pursuant to the ordinance passed by

the Ministry of the sea, transport and infrastructure (in favour of State budget, Official Gazette No. 154/08, 28/09,

97/10, 92/12, 62/14, 147/14, 138/15, 77/16, 126/17, 55/18, 99/18, 64/19 73/20 and 143/21),

- fees for the use of assigned radiofrequency spectrum pursuant to the decisions on the selection of the preferred

bidders in the public auctions procedures of 6 November 2013 (2x5 MHz in 800 MHz frequency band) and of 12

August 2021 (spectrum in 700 MHz, 3600 MHz and 26 GHz frequency bands), and

- the fees for use of addresses, numbers, radio frequency spectrum and for the performance of other tasks of

HAKOM, pursuant to the ordinance passed by HAKOM (in favour of HAKOM’s budget, Official Gazette No.

144/20 and 143/21).

d) Audiovisual and electronic media services

Pursuant to the Law on Audiovisual Activities (Official Gazette No. 61/18), the Group is obliged to pay the fee in the

amount of 2% of the total annual gross income generated from the performing of audiovisual activities on demand for

the purpose of the implementation of the National Programme.

Also, the Group (as the operator of public communication network) is obliged to pay a fee in the amount of 0.8% of the

total annual gross income generated in previous calendar year by performing transmission and/or retransmission of

audiovisual programmes and their parts through public communication network, including internet and cable distribution

for the purpose of the implementation of the National Programme.

Pursuant to the Law on Electronic Media (Official Gazette No. 111/21), the Group is obliged to pay the fee of 0.5% of

the annual gross revenues realized from the provisioning of audiovisual media services on demand and the electronic

publication services.

e) Electronic communications infrastructure and associated facilities (ECI)

The Group, as the infrastructure operator, is obligated to pay fees to the owners and managers of the property on which

the ECI of the Company is laid either under a right of way or under a right of servitude.

Pursuant to Electronic Communications Act, the right of way fee is paid to owners and managers of the property

(Republic of Croatia, local and regional municipalities, other legal and natural persons) on which ECI of the Company

is laid. The unit RoW fees are defined in the amount prescribed by the HAKOM’s Ordinance on Right of Way Certificate

and Payment of Fees for Right of Way (further: Ordinance on RoW) in the range of 3 - 10 HRK/m2/y depending on the

property type.

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022

101 Croatian Telecom Inc.

41 Authorization for Services and Applicable Fees (continued)

e) Electronic communications infrastructure and associated facilities (ECI) (continued)

In accordance with the Roads Act, the fee for servitude on a public road is paid to the managers of public roads. The

unit fees are defined by the Government’s Decision on the amount of fee for the establishment of servitude and

construction rights on a public road in the amount of 4,75 HRK/m2/y for ECI laid on highways and 2,40 HRK/m2/y for

ECI laid on all other public roads.

If the property rights are not resolved on the basis of the RoW, the Group pays the fee for the right of servitude to other

owners and managers in the agreed amount.

The Group also pays a concession fee for cables laid on maritime property under the Maritime Property and Seaports

Act, a fee for forest land to Hrvatske šume for the installation of antenna poles under the Forest Act, a fee for installing

street cabinets in accordance with individual decisions of local municipalities, utility fees to local municipalities for

business buildings pursuant to the Communal Economy Act, water fee to Hrvatske vode and local municipalities for

constructed ECI pursuant to the Water Management Financing Act and administrative fees for obtaining approvals and

permits for construction and legalization of ECI.

Notes to the consolidated financial statements (continued)

For the year ended 31 December 2022

Croatian Telecom Inc.

102

42 Share-based and non share-based payment transactions

Long-term incentive plans (LTI) introduced in 2019, 2020, 2021 and 2022 exist at Group level.

LTI 2018 ended on 31 December 2021 and the Supervisory Board has determined final target achievement and awarded

amount of HRK 4,006,932 which was paid to plan participants in June 2022.

The LTI (Long term incentive) plan initiated in 2022, covers the period from 1 January 2022 to 31 December 2025.

Share Matching Plan (SMP), plan for the award of bonus shares to managers, is active in 2022. The term of the 2022

SMP covers the period from 1 July 2022 to 30 June 2026. Share Matching Plan is obligatory for the President of the

Management Board and voluntary for Management Board members.

Share Matching Plan (SMP) is a long-term remuneration instrument which is mandatory to the Company`s President of

the Management Board and voluntary for Management Board members. SMP 2018 covered the period from 1 July

2018 to 30 June 2022 and relates to the non-cash benefit arising from the inflow of the matching shares, with the

corresponding personal investment in Deutsche Telekom AG shares having been made in 2016. The proportion of the

number of additional shares thus granted depends on the individual’s management level: CEO: 1:1, other Management

Board members: 1:2.

Total number of Deutsche Telekom AG shares granted in 2022 as a part of the Share Matching Plan (SMP) 2018 is

shown in the following table:

Matching

Plan (SMP)

Full entitlement for the entire SMP 2018

duration

The part of the

entitlement

relating to HT*

Matching

DT AG

(pieces)

Non-cash

benefit per

Non-cash

benefit

Non-cash

benefit

(in EUR)

2018

2,918

38.30

55,888

49,215

EU Game Changer Incentive Program is introduced in 2022 for members of the Management Board and wildcards i.e.

executives below the MB. EU Game Changer covers the period from 1 January 2022 to 31 December 2025 with annual

payment instalments. Actual payments are determined by the participant group, the number of years of consecutive

overperformance and the average KPI target achievement for the respective plan year.

All gains and expenses resulting from changes of the related provisions for all LTIP plans recognized for employee

services received during the year are shown in the following table:

2022

2021

HRK million

Expenses

__________

Notes to the consolidated financial statements (continued) DRAFT

For the year ended 31 December 2022

103 Croatian Telecom Inc.

43 Auditor’s fees

The auditors of the Group’s financial statements have rendered services of HRK 5 million in 2022 (2021: HRK 6 million).

Services rendered in 2022 and 2021 mainly relate to audits and reviews of the financial statements and audit of financial

statements prepared for regulatory purposes.

44 Subsequent events

As at 1 January 2023 Croatia joined the euro area and adopted Euro as an official currency. The fixed official exchange

rate is set at 7,53450 HRK per 1 EUR.

Croatian Telecom Inc. | Radnička cesta 21, 10000 Zagreb | +385 1 491-1000 | www.t.ht.hr, www.hrvatskitelekom.hr

Bank account: Zagrebačka banka d.d. Zagreb | IBAN: HR24 2360 0001 1013 1087 5 | SWIFT-BIC: ZABAHR2X

Supervisory Board: J. R. Talbot (Chairman)

Board of Management: Konstantinos Nempis (President), Ivan Bartulović, Matija Kovačević, Boris Drilo, Nataša Rapaić, Marijana Bačić, Siniša Đuranović

Commercial register: Commercial Court in Zagreb, MBS: 080266256 | OIB: 81793146560 | VAT identification no. HR 81793146560

Share capital: HRK 10,244,977,390.25 | Total number of shares issued: 78,775,842 shares without nominal value

CONFIDENTIAL

No.: C3-03-760756-06-01/2023

Zagreb, 14 March 2023

Pursuant to Articles 11, 25, 31 and 32 of the Articles of Association of Croatian Telecom Inc. (HT d.d.

Herald, No. 5/2022) and Articles 220, 222 and 222a of the Companies Act (Official Gazette of the Republic

of Croatia, Nos. 111/93, 34/99, 121/99, 52/00 – Decision of the Constitutional Court of RoC, 118/03,

107/07, 146/08, 137/09, 152/11 – clean text, 111/12, 68/13, 110/15, 40/19, 34/22, 114/22 and 18/23),

the Management Board of Croatian Telecom Inc., on 14 March 2023, passed the following

D E C I S I O N

I) The Management Board of Croatian Telecom Inc. makes the following proposal of the Decision on

utilization of profit:

”P R O P O S A L

of Decision on utilization of profit for the year 2022

1. It is determined that Hrvatski Telekom d.d. in the business year ending with 31 December 2022 realized

net profit in the amount of EUR 92.218.462,33 (HRK 694.820.004,41)

Net profit amount stated herein shall be used accordingly:

• A part of net profit in the amount of EUR 86.631.479,00 EUR (HRK 652.724.878,53) shall be paid out

as dividend to shareholders, in the amount of EUR 1,10 (HRK 8.29) per share.

• A part of net profit in the amount of EUR 5.586.982,71 (HRK 42.095.121,23) shall be allocated to

retained earnings.

• A part of net profit in the amount of EUR 0,62 (HRK 4,67) shall be used to increase the share capital

from Company’s own capital, in order to express the share capital of the Company as a whole number.

2. Dividend referred to under Item 1 hereof shall be paid out to all shareholders that are registered as

shareholders at the Central Depository & Clearing Company (SKDD) on May 15th, 2023 (record date).

Date on which security of Hrvatski Telekom d.d. will be traded without dividend payment right is May

12th, 2023 (ex date). Dividend payment claim matures on May 22th, 2023 (payment date).

3. This Decision shall enter into effect as at the day of its passing”.

II) This Proposal shall be referred for approval to Supervisory Board of Croatian Telecom Inc., for further

referral to the General Assembly of the Company as a joint proposal of Management Board and

Supervisory Board.

III) This Decision comes into force as of the day of its passing.

President of the Management Board

Konstantinos Nempis

To be delivered to:

Members of the Management Board

P7 Legal Affairs Department

F1 Controlling, Transformation and Investor Relation Sector

F2 Treasury and Accounting Sector

MB and SB Secretary

Supervisory Board

This is to certify that this Decision is

identical as the signed original thereof

Croatian Telecom Inc. | Radnička cesta 21, 10000 Zagreb | +385 1 491-1000 | www.t.ht.hr, www.hrvatskitelekom.hr

Bank account: Zagrebačka banka d.d. Zagreb | IBAN: HR24 2360 0001 1013 1087 5 | SWIFT-BIC: ZABAHR2X

Supervisory Board: J. R. Talbot (Chairman)

Board of Management: Konstantinos Nempis (President), Ivan Bartulović, Matija Kovačević, Boris Drilo, Nataša Rapaić, Marijana Bačić, Siniša

Đuranović

Commercial register: Commercial Court in Zagreb, MBS: 080266256 | OIB: 81793146560 | VAT identification no. HR 81793146560

Share capital: HRK 10,244,977,390.25 | Total number of shares issued: 78,775,842 shares without nominal value

CONFIDENTIAL

No.: C3-03-760756-05/2023

Zagreb, 14 March 2023

Pursuant to Articles 11, 13 and 31 of the Articles of Association of Croatian Telecom Inc. (HT d.d. Herald,

No. 5/2022) and Articles 300.a, 300.b, 300.c and 300.d of the Companies Act (Official Gazette of the

Republic of Croatia, Nos. 111/93, 34/99, 121/99, 52/00 – Decision of the Constitutional Court of RoC,

118/03, 107/07, 146/08, 137/09, 152/11 – clean text, 111/12, 68/13, 110/15, 40/19, 34/22, 114/22 and

18/23), the Management Board of Croatian Telecom Inc., on 14 March 2023, passed the following

D E C I S I O N

1. Separate and consolidated financial statements for the year ended 31 December 2022 are determined,

the Reports by the certified auditor Ernst&Young d.o.o. Zagreb for the year ended 31 December 2022

are accepted, in the text as attached hereto, making an integral part hereof.

2. The documents referred to in item 1 hereof shall be forwarded to the Supervisory Board of Croatian

Telecom Inc. for consent and, upon the obtaining of consent, they shall be deemed determined by the

Management Board and Supervisory Board of Croatian Telecom Inc. and shall be presented to the

General Assembly.

3. All Management Board members will sign the report.

4. This Decision comes into force as of the day of its passing.

President of the Management Board

Konstantinos Nempis

To be delivered to:

Members of the Management Board

C3 Legal Affairs Department

F1 Controlling, Transformation and Investor Relation Sector

F2 Treasury and Accounting Sector

MB and SB Secretary

Supervisory Board

This is to certify that this Decision is

identical as the signed original thereof

Croatian Telecom Inc.

Radnička cesta 21, 10 000 Zagreb

Croatian Telecom Inc.

SUPERVISORY BOARD

No: NO-01-654868-06-01/2023

Zagreb, 22 March 2023

Pursuant to Articles 300.b, 300.c and 300.d of the Companies Act (Official Gazette of the

Republic of Croatia, Nos. 111/93, 34/99, 121/99, 52/00 – Decision of the Constitutional Court

of RoC, 118/03, 107/07, 146/08, 137/09, 152/11 – clean text, 111/12, 68/13, 110/15, 40/19,

34/22, 114/22 and 18/23), pursuant to Articles 11, 18 and 31 of the Articles of Association of

Croatian Telecom Inc. (HT d.d. Herald, No. 5/2022 – clean text) and pursuant to Articles 4 and 7

of the By-Laws on the Work of the Supervisory Board of Croatian Telecom Inc. (HT d.d. Herald,

No. 6/2019 – clean text), the Supervisory Board of Croatian Telecom Inc., at their 1

session in

2023, held on 22 March 2023, passed the following

D E C I S I O N

Consent is given to the annual financial statements of the Company and Consolidated

financial statements of HT Group for the business year 2022 with the auditor's report

attached thereto in the text as enclosed to the session material.

The Management Board of the Company is hereby informed on the consent of the

Supervisory Board to the annual financial statements of the Company and to the

consolidated financial statements of HT group for the year 2022.

Therefore, the annual financial statements of the Company and consolidated financial

statements of HT Group for the business year 2022 with the auditor's report attached

thereto are adopted both by the Management Board and the Supervisory Board in the text

as enclosed to the session material.

The annual financial statements of the Company and Consolidated financial statements of

HT Group are to be forwarded to the General Assembly of the Company.

Ivica Mišetić, Ph.D.

Deputy Chairman of the Supervisory Board

This is to certify that this Decision is

identical as the signed original thereof

Croatian Telecom Inc.

Radnička cesta 21, 10 000 Zagreb

Croatian Telecom Inc.

SUPERVISORY BOARD

No: NO-01-654868-06-02/2023

Zagreb, 22 March 2023

Pursuant to Articles 220, 222 and 222a of the Companies Act (Official Gazette of the Republic

of Croatia, Nos. 111/93, 34/99, 121/99, 52/00 – Decision of the Constitutional Court of RoC,

118/03, 107/07, 146/08, 137/09, 152/11 – clean text, 111/12, 68/13, 110/15, 40/19, 34/22,

114/22 and 18/23), pursuant to Articles 18, 25, 31 and 32 of the Articles of Association of

Croatian Telecom Inc. (HT d.d. Herald, No. 5/2022 – clean text) and pursuant to Articles 4 and 7

of the By-Laws on the Work of the Supervisory Board of Croatian Telecom Inc. (HT d.d. Herald,

No. 6/2019 – clean text), the Supervisory Board of Croatian Telecom Inc., at their 1

session in

2023, held on 22 March 2023, passed the following

D E C I S I O N

I) Consent is given to the Management Board’s proposal on utilization of profit for the year

2022, as follows:

“P R O P O S A L

of Decision on utilization of profit for the year 2022

1. It is determined that Hrvatski Telekom d.d. in the business year ending with 31 December

2022 realized net profit in the amount of EUR 92.218.462,33 (HRK 694.820.004,41)

Net profit amount stated herein shall be used accordingly:

• A part of net profit in the amount of EUR 86.631.479,00 EUR (HRK 652.724.878,53) shall

be paid out as dividend to shareholders, in the amount of EUR 1,10 (HRK 8.29) per share.

• A part of net profit in the amount of EUR 5.586.982,71 (HRK 42.095.121,23) shall be

allocated to retained earnings.

• A part of net profit in the amount of EUR 0,62 (HRK 4,67) shall be used to increase the

share capital from Company’s own capital, in order to express the share capital of the

Company as a whole number.

2. Dividend referred to under Item 1 hereof shall be paid out to all shareholders that are

registered as shareholders at the Central Depository & Clearing Company (SKDD) on May

15th, 2023 (record date). Date on which security of Hrvatski Telekom d.d. will be traded

without dividend payment right is May 12th, 2023 (ex date). Dividend payment claim

matures on May 22th, 2023 (payment date).

3. This Decision shall enter into effect as at the day of its passing”.

II) The Proposal referred to under item I) hereof shall be referred for adoption to the General

Assembly of the Company as a joint proposal of Management Board and Supervisory Board.

III) This Decision comes into force as of the day of its passing.

Ivica Mišetić, Ph.D.

Deputy Chairman of the Supervisory Board

This is to certify that this Decision is

identical as the signed original thereof