1 eng - Croatia Airlines · To the Shareholders of Croatia Airlines d.d., Zagreb: We have audited the accompanying financial statements of Croatia Airlines d.d., Zagreb (the ‘Company’)

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PUBLISHER Croatia Airlines d.d., Zagreb, Savska cesta 41

www.croatiaairlines.hr

EXECUTIVE EDITOR Ksenija Ælof

EDITOR ASSISTANTS Ana ∆ulumoviÊ, Davor JanuπiÊ

DESIGN Ivana IvankoviÊ PrliÊ, Nenad VujoπeviÊ

PHOTOGRAPHY Damir FabijaniÊ

PROOF READER Mirjana Miholek

TRANSLATION Lancon d.o.o.

PHOTOLITOGRAFY AND PRINT ZRINSKI d.d., »akovec

1 C R O AT I A A I R L I N E S A N N U A L R E P O R T 2 0 0 6

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Report of the Supervisory Board

Pursuant to Articles 300c, 300d and 263 of the Companies Act and Article 24 of its Articles ofAssociation, the Supervisory Board submits to the Annual General Meeting of Croatia Airlinesd.d. the following

Report on the supervision of the company’s operations in 2006 and on the examinationof its financial statements

1. The Supervisory Board has fulfilled its obligation to supervise the operations managementof the company Croatia Airlines d.d. (hereinafter: the Company). The Supervisory Board hasestablished that the Company operations were managed in accordance with the law, theCompany’s Articles of Association, other relevant by-laws and the decisions made by theAnnual General Meeting.

2. In the course of 2006, the Supervisory Board numbered thirteen (13) members, followingthe decision made by the Company employees in 2006 to nominate their representative to theSupervisory Board. In line with the Audit Act, the Supervisory Board established the AuditCommittee at its 59th meeting held on 11 October 2006.

In the course of 2006, the Supervisory Board held three (3) meetings and once voted byfacsimile. It received regular reports from the Management Board on all the relevant businessevents as well as on the course of operations, profitability of operations, the Company revenuesand expenditures, and its overall financial position. The Management Board reported to theSupervisory Board every three months, semi-annually and annually and the Supervisory Boardapproved all the reports thus submitted without objections.

3. The Supervisory Board observed the term specified in Article 300c of the Companies Actfor the examination of the Company’s audited financial statements submitted by the CompanyManagement Board, and it established that the statements had been prepared in accordancewith the accounting records held by the Company and that they give a fair and objective viewof the financial position and business performance of the Company for the year ended 31December 2006. The Supervisory Board has approved the 2006 Financial Statements togetherwith the opinion of the Company auditors Deloitte & Touche, thus confirming together with theManagement Board that the annual financial statements are in accordance with Article 300dof the Companies Act.

4. The Supervisory Board has examined the Management Board report on the Companybusiness operations and has agreed that the profit earned in 2006 in the amount of31,521,578.58 kuna should be used to cover the loss from previous years.

5. The Supervisory Board has examined the 2006 Annual Report presented by the ManagementBoard and has established that it represents accurately and fairly the business operations andcurrent financial position of the Company. Based on these findings, the Supervisory Boardhas accepted the 2006 Company Annual Report presented by the Management Board.

6. Following the above stated, the Supervisory Board submits this report to the Annual GeneralMeeting with the proposal that the Annual General Meeting should take the decisions that fallwithin its responsibility on the basis of the proposals made by the Management Board and theSupervisory Board.

In Zagreb on 31 May 2007

Miomir Æuæul, PhD President of the Supervisory Board



Members of the Supervisory Board

Miomir Æuæul, Phd Ratimir AndrijaniÊPresident member

Miroslav KovaËiÊ Marija »aËiÊmember member

Bianca MatkoviÊ Boæo Jusupmember member

Niko RaiÊ Boπko MatkoviÊmember member

Zdenko MiËiÊ Josip Horvatmember member

Ante NosiÊ Josip Grgecmember member

Petar TurkoviÊmember

President ot the CompanyShareholder’s Assembly

Boæidar Kalmeta

Management Board

Ivan MiπetiÊ, PhdPresident and C.E.O.

Vice Presidents

SreÊko ©imunoviÊ Svemir RadmiloExecutive Vice President Executive Vice Presidentmarketing and network management sales

Miljenko RadiÊ Vanja RollerExecutive Vice President Executive Vice Presidentoperations maintenance and engineering

Damir ©prem Josip BiliÊExecutive Vice President Executive Vice Presidentfinance, accouting, controling, HR management,revenue calculation and investment legal affairs, IT and infrastructure


REPORT OF THE BOARD OF DIRECTORS

Responsibility for the Financial Statements

Pursuant to the Croatian Accounting Law, the Management Board is responsible for ensuringthat financial statements are prepared for each financial year in accordance with the InternationalFinancial Reporting Standards (“IFRS’’) as published by the International Accounting StandardsBoard which give a true and fair view of the state of affairs and results of Croatia Airlines d.d.(the “Company”) and Croatia Airlines Group. (“Group”) for that period.

After making enquiries, the Management Board has a reasonable expectation that the Companyand the Group have adequate resources to continue in operational existence for the foreseeablefuture. For this reason, the Management Board continues to adopt the going concern basis inpreparing the financial statements.

In preparing those financial statements, the responsibilities of the Management Board includeensuring that:

n suitable accounting policies are selected and then applied consistently;

n judgements and estimates are reasonable and prudent;

n applicable accounting standards are followed, subject to any material departures disclosedand explained in the financial statements; and

n the financial statements are prepared on the going concern basis.

The Management Board is responsible for keeping proper accounting records, which disclosewith reasonable accuracy at any time the financial position of the company, and must alsoensure that the financial statements comply with the Croatian Accounting Law. The ManagementBoard is also responsible for safeguarding the assets of the Company and the Group andhence for taking reasonable steps for the prevention and detection of fraud and otherirregularities.

Signed on behalf of the Management Board:

Ivan MiπetiÊ, Phd

President & C.E.O.

Croatia Airlines d.d.

Savska 41

10000 Zagreb

Republic of Croatia

Zagreb, 22 March 2007


INDEPENDENT AUDITOR’S REPORT

To the Shareholders of Croatia Airlines d.d., Zagreb:

We have audited the accompanying financial statements of Croatia Airlines d.d., Zagreb (the‘Company’) and of Croatia Airlines d.d., Zagreb and its subsidiaries (the ‘Group’), whichcomprise the balance sheet as at 31 December 2006, and the related income statement,statement of changes in equity and cash flow statement for the year then ended, and asummary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statementsin accordance with International Financial Reporting Standards. This responsibility includes:designing, implementing and maintaining internal control relevant to the preparation and fairpresentation of financial statements that are free from material misstatement, whether due tofraud or error; selecting and applying appropriate accounting policies; and making accountingestimates that are reasonable in the circumstances.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit.We conducted our audit in accordance with the International Standards on Auditing. Thosestandards require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance as to whether the financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditor’sjudgment, including the assessment of the risks of material misstatement of the financialstatements, whether due to fraud or error. In making those risk assessments, the auditorconsiders internal control relevant to the entity’s preparation and fair presentation of the financialstatements in order to design audit procedures that are appropriate in the circumstances, butnot for the purpose of expressing an opinion on the effectiveness of the entities’ internalcontrol. An audit also includes evaluating the appropriateness of accounting policies usedand the reasonableness of accounting estimates made by management, as well as evaluatingthe overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion.

Matters affecting opinion

As described in Note 6, the Company transferred the revaluation surplus which represents thedifference between depreciation based on the revalued carrying amount of the asset anddepreciation based on the asset’s original cost, in the amount of HRK 24,676 thousand throughthe Income statement in accordance with Croatian Tax Law. This is a departure from InternationalAccounting Standard 16 - Property, Plant and Equipment, which requires that revaluationsurplus should be transferred directly to retained earnings. The retained earnings in the balancesheet at 31 December 2006 is understated, and net income for year then ended is overstatedby the amount of HRK 24,676 thousand.


Opinion

In our opinion, except for the effect of the subject discussed in the previous paragraph, thefinancial statements present fairly, in all material respects, the financial position of the Companyand of the Group as at 31 December 2006, and their financial performance and their cashflows for the year then ended in accordance with International Financial Reporting Standards.

DELOITTE d.o.o.

Branislav VrtaËnik, Certified auditor

Zagreb, 22 March 2007


CONSOLIDATED CROATIA AIRLINES Group Income Statement and CROATIA AIRLINES d.d. Income StatementFor the year ended 31 December 2006.

2006. 2005.

Croatia Airlines Group Croatia Airlines Group

thousand HRK thousand EUR thousand HRK thousand EUR

Operating revenues 1.353.759 184.877 1.410.468 190.598

Operating expenses (1.368.598) (186.530) (1.374.727) (185.606)

Financial revenues 165.330 16.602 62.655 3.073

Financial expenses (118.206) (10.540) (120.113) (10.999)

Loss / Profit before tax 32.285 4.409 (21.717) (2.934)

Income tax expense 166 23 - -

Net profit for the year 32.119 4.386 (21.717) (2.934)

2006. 2005.

Croatia Airlines d.d. Croatia Airlines d.d.


Operating revenues 1.345.166 183.703 1.402.597 189.535

Operating expenses (1.360.765) (185.463) (1.367.926) (184.997)

Financial revenues 165.217 16.600 62.406 3.382

Financial expenses (118.096) (10.536) (119.853) (10.998)

Loss / Profit before tax 31.522 4.305 (22.776) (3.078)

Income tax expense - - - -

Net profit for the year 31.522 4.305 (22.776) (3.078)


CONSOLIDATED CROATIA AIRLINES Group Balance SheetAs at 31 December 2006.

2006. 2005.

Croatia Airlines Group Croatia Airlines Group


Assets

Non-current assets

Intangible assets 3.571 484 4.127 553

Tangible assets 1.751.826 235.460 1.803.034 242.085

Accounts receivable 50.774 6.913 90.753 12.304

Financial assets 135.474 18.441 18.744 2.535

1.941.645 261.298 1.916.658 257.477

Current assets

Inventories 24.392 3.294 22.987 3.096


Financial assets 6.053 824 9.615 1.304

Cash and cash equivalents 70.972 9.663 78.479 10.640

172.101 23.404 227.440 30.816

Prepaid expenses and

accrued income 20.552 2.798 8.937 1.212

Total assets 2.134.297 287.500 2.153.035 289.505

Equity and liabilitesEquity and reserves

Shareholders’ equity 989.986 134.782 989.986 134.224

Revaluation reserves 217.794 29.652 242.470 32.874

Other reserves 8.408 1.145 60.675 8.227

Foreign exchange differences - (3.089) - (2.418)

Accoumulated losses (535.875) (72.957) (512.247) (69.452)

Result for the year 32.119 4.386 (21.717) (2.935)

712.431 93.919 759.167 100.521

Non-current liabilities 1.111.492 151.325 946.774 128.366

Current liabilities 272.942 37.160 409.271 55.490

Accrued expenses

and deferred income 37.432 5.096 37.822 5.128

Total equity and liabilities 2.134.297 287.500 2.153.035 289.505


CROATIA AIRLINES d.d. BALANCE SHEETAs at 31December 2006.

2006. 2005.

Croatia Airlines d.d. Croatia Airlines d.d.


Assets

Non-current assets

Intangible assets 2.977 403 3.955 530

Tangible assets 1.750.889 235.330 1.801.547 241.882


Financial assets 136.458 18.561 18.796 2.535

1.942.132 261.349 1.916.810 257.491

Current assets

Inventories 24.392 3.294 22.987 3.096


Financial assets 5.972 813 9.493 1.287

Cash and cash equivalents 68.715 9.355 76.105 10.318

167.203 22.737 222.373 30.129

Prepaid expenses and

accrued income 20.388 2.776 8.871 1.203

Total assets 2.129.725 286.862 2.148,054 288.823

EQUITY AND LIABILITIES

Equity and reserves

Shareholders’ equity 989.976 134.781 989.976 134.223

Revaluation reserves 217.794 29.651 242.470 32.874

Other reserves 7.827 1.066 60.208 8.164

Foreign exchange differences - (3.104) - (2.425)

Accumulated losses (536.886) (73.095) (514.110) (69.704)

Result for the year 31.522 4.305 (22.776) (3.078)

710.233 93.604 755.768 100.054

Non-current liabilities 1.111.492 151.324 946.774 128.366

Current liabilities 271.056 36.903 408.063 55.326

Accrued expenses and

deferred income 36.944 5.030 37.449 5.077

Total equity and liabilities 2.129.725 286.862 2.148.054 288.823


NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2006

Summary of Significant AccountingPolicies

The financial statements have been prepared in accordance with the International FinancialReporting Standards (IFRS) as published by the International Accounting Standards Board.

The financial statements have been prepared on the historical cost basis, except for aircraftand spare engines included in tangible fixed assets, which have been revalued. The principalaccounting policies adopted are set out below.

a) Revenue recognition

Sales of goods are recognised net of sales taxes and discounts when delivery has taken placeand transfer of risks and rewards has been completed.

b) Passenger revenue

Passenger ticket sales are recorded as revenue when the transportation is provided. Thevalue of unused tickets is included in current liabilities as Air Traffic Liability until the date theticket expires, after which they are credited to income.

c) Frequent Flyer awards

The Company operates a frequent flyer award program that provides travel awards to membersbased on accumulated mileage. The Company does not accrue for incremental costs formileage accumulated in relation to this program because the Company believes, based onpast experience, that such costs are immaterial.

d) Interest income

Interest income is accrued on a time basis, by reference to the principal outstanding and atthe effective interest rate applicable.

e) Leases

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

f) The Group as lessor

Rental income from operating leases is recognised on a straight-line basis over the term of therelevant lease.

g) The Group as lessee

Assets held under finance leases are recognised as assets of the Group at their fair value atthe date of acquisition or, if lower, at the present value of the minimum lease payments. Thecorresponding liability to the lessor is included in the balance sheet as a finance lease obligation.Lease payments are apportioned between finance charges and reduction of the lease obligationso as to achieve a constant rate of interest on the remaining balance of the liability. Financecharges are charged directly against income, unless they are directly attributable to qualifyingassets, in which case they are capitalised in accordance with the Group’s general policy onborrowing costs (see below).

Rentals payable under operating leases are charged to the income statement on a straight-line basis over the term of the relevant lease.


h) Foreign currencies

Transactions in currencies other than Croatian Kuna, except as described in the chapterFinancial statement in euro, are recorded at the rates of exchange prevailing on the dates ofthe transactions. At each balance sheet date, monetary assets and liabilities that aredenominated in foreign currencies are retranslated at the rates prevailing on the balance sheetdate. Non-monetary assets and liabilities carried at fair value that are denominated in foreigncurrencies are translated at the rates prevailing at the date when the fair value was determined.Gains and losses arising on exchange are included in net profit or loss for the period, exceptfor exchange differences arising on non-monetary assets and liabilities where the changes infair value are recognised directly to equity.

i) Borrowing costs

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

All other borrowing costs are recognised in net profit or loss in the period in which they areincurred.

j) Government grants

Government grants towards development costs are recognised as income over the periodsnecessary to match them with the related costs and are deducted in reporting the relatedexpense.

Government grants received in the form of direct financial support to the Company withoutany additional costs related thereto, are recognised in the income statement for the period inwhich they are obtained.

k) Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from netprofit as reported in the income statement because it excludes items of income or expensethat are taxable or deductible in other years and it further excludes items that are never taxableor deductible. The Group’s liability for current tax is calculated using tax rates that have beenenacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between thecarrying amount of assets and liabilities in the financial statements and the corresponding taxbasis used in the computation of taxable profit, and is accounted for using the balance sheetliability method. Deferred tax liabilities are generally recognised for all taxable temporarydifferences and deferred tax assets are recognised to the extent that it is probable that taxableprofits will be available against which deductible temporary differences can be utilised.

l) Tangible fixed assets

Fixed assets, except for aircraft and spare engines, are stated at cost less accumulateddepreciation and any recognised impairment loss.


Costs incurred in replacing major portions of the Group’s facilities that increase their productivecapacity or substantially extend their useful life are capitalised.

An element of the cost of aircraft relates to regular maintenance checks. These costs aredepreciated over the period from the purchase of the aircraft. Future periodic checks will becapitalised at the time of expenditure and amortised to the next check.

Rotatable spare parts are allocated to the type of aircraft concerned and depreciated overtheir estimated useful life.

In connection with the acquisition of certain aircraft and engines, the Company received certaindiscounts. These discounts are deducted from the cost of the aircraft or are deferred andcredited to the statement of profit and loss on a proportional basis over the operational life ofthe aircraft, depending on the nature of the discounts .

Included in the cost of aircraft is the residual value for each type of aircraft. Depreciation ischarged on a straight-line basis from the first day of the next month after the tangible asset isput in use. Equipment with a useful life over one year and individual cost value over 2 thousandHRK are recorded as assets. Power generating equipment and equipment of low value usedin operating activities is recorded as tangible assets no matter what its cost.

The Company engaged the Croatian Society of Professional Valuators, which at 31 December2001 performed qualified and independent valuation of aircrafts and spare engines using themarket method. The valuation effects are credited and charged to revaluation reserve.

The difference between net book value of assets that were sold or otherwise disposed of andthe amount realised from selling was recognised as net value directly to other revenue or othercosts (gain/loss from sold assets).

The costs of the ATR 42 aircraft are depreciated on a straight-line basis over a period of 20years with no residual value. Airbus aircraft are depreciated on a straight-line basis over aperiod of 20 years (except for the second-hand Airbus 320 which is depreciated over a periodof 12 years) after making allowance for their estimated residual value. The cost of 12-yearchecks are at a rate of 8.33%, and 6-year checks are at a rate of 16.67%.

The Airbus and ATR 42 spare parts are stated at cost and depreciated over the estimateduseful life of the aircraft to which they refer (20 years). Ground Service Equipment (“GSE”) andtools are stated at cost and depreciated over 16,6 years.

Buildings are depreciated over their estimated useful life of 40 years, and other assets overtheir useful life, which ranges from 4 - 10 years.

m) Intangible fixed assets

Included in intangible assets is software, which is measured initially at purchase cost and isamortised on a straight-line basis over is estimated useful life, which is two years.

n) Investments in subsidiary and associated companies

Subsidiaries are those companies in which the Company has control. Control is achievedwhere the Company has the power to govern the financial and operating policies of an investeeenterprise so as to obtain benefits from its activities. An associate is an enterprise over whichthe Group is in a position to exercise significant influence, but not control, through participationin the financial and operating policy decisions of the investee.

The results, assets and liabilities of subsidiaries and associated companies are presented inthese separate financial statements under the cost method and have been consolidated orpresented under the equity method of accounting in the Group statements.


o) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost comprises directmaterials and, where applicable, direct labour costs and overheads that have been incurred inbringing the inventories to their present location and condition. Cost is calculated using theweighted average method. Net realisable value represents the estimated selling price less allestimated costs of completion and costs to be incurred in marketing, selling and distribution.

p) Financial instruments

Financial assets and financial liabilities are recognised on the Group’s balance sheet when theGroup becomes a party to the contractual provisions of the instrument.

Derivative contracts initially are recognised on cost value, and subsequently on fair value. Onthe contractual date the Group classifies derivatives as:

1) hedging of fair value of recognised assets or liabilities (fair value hedge)

2) hedging of forecast transaction or firm commitment (cash flow hedge)

Changes in fair value of derivatives that are designated and classified as hedging and that aredetermined to be an effective hedge are recognised in the profit and loss account togetherwith all changes in fair value of assets or liabilities that are hedged items. Gain or loss fromderivative financial instruments that are used as hedging instruments are recognised withregard to the nature of the hedged item.

Derivatives that are not hedging instruments are considered as trading instruments. Presently,the Group policy does not allow holding of trading instruments.

q) Accounts receivable

Trade receivables are stated at their nominal value as reduced by appropriate allowances forestimated irrecoverable amounts.

r) Cash and cash equivalents

For the purposes of the statement of cash flows, cash and cash equivalents comprise cash inhand, current accounts at banks deposits up to ninety days.

s) Available for sale investments

Available-for-sale investments are recognised at trade date and initially stated at cost, includingtransaction costs. The results, assets and liabilities in respect of available-for-sale assets arestated at cost. Investment income is included in the income statement after the date ofacquisition and only to the extent of receipts of the investor based on distribution of accumulatednet profits of the investee. Available-for-sale investments have not been valued at fair value.

t) Loans and receivables

Loans and receivables originated by the Group are stated at amortised cost less provision forimpairment, if any related value adjustments are recognised in the income statement. Fairvalue of loans and receivables originated by the Group approximates to their carrying amountsbecause they are short-term in nature. Therefore, the Management Board of the Companybelieves that the carrying amounts of loans and receivables approximate to their fair values.

u) Long-term borrowings

Long-term borrowings are recorded at the proceeds received, net of direct issue costs. Financecharges are accounted for on an accrual basis and added to the carrying amount of theinstrument to the extent that they are not settled in the period in which they arise.


v) Accounts payable

Trade payables are stated at their nominal value.

w) Hedging and translation reserves

Loans and finance leases for the purchase of aircraft are denominated in foreign currenciesand as such the Company is exposed to the risk of fluctuations in exchange rates. The Companyhas evaluated its foreign currency revenues and determined that foreign currency revenuesform a highly effective cash flow hedge against its principal and interest payments in foreigncurrency. Accordingly the Company accounts for unrealised gains and losses on translation ofthe designated foreign currency debts as a separate component of equity. The effectivenessof the hedge is monitored by management on a regular basis throughout the period.

Hedging reserves related to the unpaid portion of long-term financial liabilities are treated ashedging only in an amount relating to payment obligation due within the next 3 years. At thesame time foreign exchange differences from the unpaid portion of principal are directlyrecognised in the profit and loss account for the period.

x) Use of estimates in the preparation of financial statements

The preparation of financial statements in conformity with the International Reporting FinancialStandards, as published by the International Accounting Standards Board, requiresmanagement to make estimates and assumptions that affect the reported amounts of assets,liabilities, income and expenses and disclosure of contingencies. The significant areas ofestimation used in the preparation of the accompanying financial statements relate to provisionsfor receivables.

Future events may occur which will cause the assumptions used in arriving at the estimates tochange. The effect of any changes in estimates will be recorded in the financial statements,when determinable.

Financial Statements in EUR

Croatian Law only permits the presentation of the primary financial statements in CroatianKuna. Due to the adoption of the Euro, most European airline companies are now reporting inEuro. Accordingly, the Board of the Company decided in 2003 to change its second reportingcurrency from American dollars (USD) into Euro (EUR). Thus the balance sheets, incomestatements, statements of changes in equity and of changes in cash flows set out below aredenominated in EUR. The translation into EUR has been performed in accordance with therelevant accounting policies.

In the preparation of the financial statements as of 31 December 2006 and 2005, the Groupuses Croatian Kuna as the primary currency for recording transactions. Accordingly, the financialstatements as of 31 December 2006 and 2005 are stated in kunas and translated to EUR asfollows:

Year-end exchange rates have been used for all monetary assets and liabilities:

Non-current tangible and intangible assets together with related depreciation and amortization,as well as inventories have been stated as follows:

* Assets, inventories: at historical cost, translated into EUR at the date of purchase.

* Depreciation and amortisation: calculated on the historical cost, by applying depreciationrates indicated above.

Yearly average exchange rate has been used for all items in the income statement.

The resulting translation difference has been charged/credited to equity in the financialstatements reported in EUR.

Approval of the Financial Statements

The financial statements were approved by the Management Board and authorised for issueon 22 March 2006.

Signed for and on behalf of the Company on 22 March 2006.

Ivan MiπetiÊ, Phd Damir ©prem

President & C.E.O. Executive Vice President


linije Croatia Airlinesa / Croatia Airlinesê services u suradnji sa stranim zrakoplovnim kompanijama in cooperation with partner airline

Mostar

Warsaw

OSIJEKLYON


Partnerships

Since 15 December 2004, Croatia Airlines has been a regional member of Star Alliance, themost highly reputed airline association in the world. On that day, the contract signed on 18November 2004 in Frankfurt to associate the Croatia Airlines in the Regional Membership ofStar Alliance came into force.

Croatia Airlines’ first flight as a regional member of Star Alliance was the regular domestic Pula∑ Zadar ∑ Zagreb flight, and the first international flight was that from Skopje to Zagreb.

All aircraft within the Croatia Airlines fleet bear the symbols of this highly reputed internationalassociation of airline companies, and the Airbus 320 aircraft, which was leased in April 2005for a period of three years and named after the town of ©ibenik, has been painted in thecolours of Star Alliance.

With Croatia Airlines’ membership of Star Alliance our passengers have obtained high qualityservices in line with the standards of the other members. They are offered a larger number ofdestinations, more favourable prices within Star Alliance’s whole network of destinations, aswell as many other advantages such as the joint Star Alliance terminals, simplified check-inprocedures, and collection of miles within the Frequent Flyer Programme on any flights offeredby Star Alliance members.

The Star Alliance association was established in 1997 as the first truly global air traffic associationwhich provides its passengers easy access to destinations all over the globe and comfortablejourneys. Its members are: Air Canada, Air New Zealand, ANA, Asiana Airlines, Austrian, bmi,LOT Polish Airlines, Lufthansa, Scandinavian Airlines, Singapore Airlines, South African Airways,Spanair, Swiss International Air Lines, TAP Portugal, Thai Airways International, United andUS Airways. Besides Croatia Airlines, other regional members of Star Alliance are the Slovenianair company Adria Airways, as well as Finland’s Blue1. The members of the Association offermore than 16,000 daily flights and cover 855 destinations in 155 countries.

Star Alliance members

code - share partners


HEAD OFFICE AND MARKETING

Savska 41,

10000 Zagreb

Tel. (+385-1) 61-60-066

Fax (+385-1) 61-76-845

E-mail: [email protected]

PASSENGER SALES OFFICES

BerislaviÊeva 1,

10000 Zagreb

Fax (+385-1) 61-60-270


CARGO SALES

Tel. (+385-1) 61-64-573

Fax (+385-1) 61-64-575


BRANCH OFFICES

AMSTERDAM

WTC, Tower B, Level 4,

Schiphol Boulevard 207,

1118 BH Luchthaven

Tel. (+31-20) 316-42-80

Fax (+31-20) 316-42-81

VIENNA

WTC Vienna Airport

Building 645, Room 116

A-1300 Flughafen Wien

Tel. (+43-1) 7007-361-63

Fax (+43-1) 7007-361-64

A-1300 Flughafen Wien/Airport

Building 645, Room 116

Tel. (+43-1) 7007-359-62, 64

Fax (+43-1) 7007-359-63

BRUSSELS

1930 Zaventem/Airport

Box 31

Tel. (+32-2) 753-5133,

(+32-2) 753-5132

Fax (+32-2) 753-5130

DUBROVNIK

Brsalje 9, 20000 Dubrovnik

Tel. (+385-20) 41-37-76,

41-37-77

Fax (+385-20) 41-39-93

Airport

Tel. (+385-20) 773-224

Fax (+385-20) 772-266

FRANKFURT c/o Croatia Airlines

Schillerstrasse 42-44,

60313 Frankfurt

Tel. (+49-69) 92-00-520

Fax (+49-69) 92-00-52-51

LONDON

2 The Lanchesters,

162-164 Fulham Palace Road,

London, W6 9ER

Tel. (+44-208) 563-00-22

0870 4100 310 (UK ONLY)

Fax (+44-208) 563-26-15

Airport Heathrow,

Terminal 2, Ground Floor

Tel. (+44-208) 745-46-83,

745-49-37

Fax (+44-208) 754-73-77

MUNICH

Airport/Flughafen

Franz Josef-Strauss, Terminal 2,

Vervaltungsgebäude Nord

Büro B. 4.1322, Terminal 2

85356 München

Tel. (+49-89) 97-592-730/731

Fax (+49-89) 97-592-736

PARIS

9, Rue du Faubourg St. Honoré,

75008 Paris

Tel. (+33-1) 42-65-3001

Fax (+33-1) 42-66-4327

PULA

Ulica Carrarina 8, 52100 Pula

Tel. (+385-52) 218-909,

218-943

Fax (+385-52) 211-998

RIJEKA

JelaËiÊev trg br. 5,

51000 Rijeka

Tel. (+385-51) 330-207, 336-757

Fax (+385-51) 335-931

RIM

Viale Shakespeare 47/1, 00144 Roma

Tel. (+39-06) 5421-0021

Fax (+39-06) 5923-792

Aeroporto Fiumicino

Palazzino EPUA

Tel. (+39-06) 6501-2057

Fax (+39-06) 6501-2056

SARAJEVO

KranjËeviÊeva ulica 4/1

71000 Sarajevo

Tel. (+387-33) 666-123

Fax (+387-33) 258-600

Airport

Tel. (+387-33) 463 158

SKOPJE

Ul. Dame Gruev 3, 1000 Skopje

Tel. (+389-2) 3115-858,

3238-940

Fax (+389-2) 3114-203

Airport

Tel. (+389-2) 3148-390

Fax (+389-2) 2561-850

SPLIT

Obala Hrv. nar. preporoda 9,

21000 Split

Tel. (+385-21) 362-997,

362-055

Fax (+385-21) 362-567

Airport

Tel. (+385-21) 203-305,

895-298

Fax (+385-21) 203-125

ZADAR

Poljana Natka Nodila 7,

23000 Zadar

Tel. (+385-23) 250-101

Fax (+385-23) 250-109

Airport

Tel. (+385-23) 343-045,

Fax (+385-23) 312-930

ZAGREB

Zrinjevac 17,

10000 Zagreb

Tel. (+385-1) 48-19-633

Fax (+385-1) 48-19-632

Airport Zagreb

Tel. (+385-1) 61-64-581/582

Fax (+385-1) 61-64-585

ZURICH

Limmatquai 138,

8001 Zürich

Tel. (+41-44) 261-08-40

Fax (+41-44) 261-08-83

AUSTRALIA

SKY AIR SERVICES (GSA)

7/24 Albert Road,

STH. MELBOURNE

Vic. 3205

Tel. (+61-3) 9699-9355

Fax (+61-3) 9699-9388

NEW ZEALAND

CROATIA TIMES TRAVEL Ltd. (GSA)

182 Lincoln Road,

HENDERSON, AUCKLAND

Tel. (+64-9) 837 9897

Fax (+64-9) 837 9898

JAPAN

DARUMA CORPORATION (GSA)

106 Liberty Hill 3,

3-30-5 YAKUMO,

MEGURO-KU TOKYO 152

Tel. (+81-3) 5701-5651

Fax (+81-3) 5701-5652

(GSA = Glavni prodajni zastupnik)

Scheduled

flights

destinations

Domestic

BraË

Dubrovnik

Osijek

Pula

Rijeka

Split

Zadar

Zagreb

International

Amsterdam

Vienna

Brussels

Düsseldorf

Frankfurt

Lisbon

London

Lyon

Munich

Paris

Rome

Sarajevo

Skopje

Tel Aviv

Zurich

SALES AGENTS

EUROPE

PRAGUE

Blue Sky Travel s. r. o. (GSA)

Ruæová ul. 15

11000 Praha 1

Tel. (+420-2) 2222-2235

Fax (+420-2) 2222-0237

SOUTH AFRICA

TOP HOLIDAYS-BROOKLYN OFFICE

Block C Momentum Office Park

Cnr. Brooklyn Circle & Fehrsen Str.,

Brooklyn

Pretoria 0181

Tel. (+27-12) 346-6869

Fax (+27-12) 346-8292

MIDLE EAST/ISRAEL

BIAF AVIATION SERVICES LTD (GSA)

1 Ben Yehuda St. Migdalor

blgd. 5th Floor, Tel Aviv 63802

Tel. (+972 3) 620 0213

Fax (+972 3) 620 8571

USA

Networld

INC./CROATIA AMERICA (GSA)

300 Lanidex Plaza,

PARSIPPANY NJ 07054

Tel. (+1-973) 884 3401

Fax (+1-973) 428 3929

Toll free 888-462-7628

Documents

1 eng - Croatia Airlines · To the Shareholders of Croatia Airlines d.d., Zagreb: We have audited the accompanying financial statements of Croatia Airlines d.d., Zagreb (the ‘Company’)