INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR, CROATIA Made by MarCon for the Town of Daruvar, July 2010

1. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR, CROATIA Made by MarCon for the Town of Daruvar, July 2010

2. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR CONTENT 1 REASONS TO INVEST IN DARUVAR 2 FACTS AND FIGURES 3 TOURISM AND HOTEL INDUSTRY 4 HOTEL - CASTLE JANKOVIĆ 5 HOTEL - AQUAE BALISSAE 6 HOTEL - ROMAN FOREST 7 CONTACTS AND LINKS

3. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 1. REASONS TO INVEST IN DARUVAR Croatia, Location, Multiculturalism, Tradition, Framework • CROATIA: Daruvar is located in Croatia, the fastest developing tourist destination in Europe in the last decade, with strong growth plans for the future. • LOCATION: Daruvar is located in the center of continental Croatia, in proximity to five major capitals (Zagreb, Ljubljana, Belgrade, Sarajevo, Budapest) and many other urban areas, all of them located within the radius of 350 km. • MULTICULTURALISM: Daruvar has the most diverse population in Croatia, with Croats, Czechs, Serbs, Hungarians, Albanians, Italians, Germans, Slovenians, and many other ethnical groups living and working together since development of the town more than 200 years ago. This cultural diversity has created high levels of tolerance towards difference and positive attitudes towards change. • TRADITION: Daruvar is renowned in Croatia for having long business tradition: production of wines since the Roman times, the first thermal bath in 1772, the oldest brewery in Croatia (since 1840), and the oldest fishing pod in Croatia • FRAMEWORK: Daruvar has a stimulating legal framework for tourism and hotel investments: the county plans for economic and tourism development, recently established tourist board of the destination area Daruvar - Papuk (town and four neighboring municipalities), the general urban (zoning) plan of the town, and lower municipal taxes and fees than elsewhere. Daruvar will soon have its own economic development plan and tourism development and marketing plan.

4. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 1. REASONS TO INVEST IN DARUVAR Awards, Tourism, Hotels, and Terms • AWARDS: Daruvar has received seven yearly awards from the Croatian Tourist Board for being the most beautiful small town in continental Croatia. The wine producers from Daruvar have also received a number of medals at both national and international wine exhibitions. • TOURISM: Daruvar has the most diverse tourism resources in continental Croatia with thermal springs for health treatments and bathing, events, wineries, brewery, hunting grounds, fishing areas, nature paths for walking, cycling, and hiking, agro tourism, meeting possibilities, and many more. It provides opportunities for the growth of tourist traffic from currently 20 thousand overnight stays to anywhere from 250 to 300 thousand overnight stays by 2020. • HOTELS: Daruvar provides opportunities for new hotels that would increase the total accommodation capacity from currently 200 rooms (400 beds) to anywhere from 600 to 750 rooms (from 1,200 to 1,500 beds). The prospective development includes three hotel projects with approximately 450 rooms (900 beds) to be constructed on the sites that are fully owned by the government of Daruvar. • TERMS: The government of Daruvar is ready to develop subject hotels in partnership with renowned developers based on the 99-year concession / lease and competitive terms. The developer is required to engage the partner for management of the subject hotel and with relevant managerial experience, either through management contract or lease (i.e. sub-lease).

5. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 2. FACTS AND FIGURES Croatia • LOCATION: meeting point of Central Europe, Mediterranean (Adriatic), and Balkans • SURFACE AREA: 56,542 square kilometers • TERRITORIAL ORGANIZATION: City of Zagreb (Capital) and 20 counties (provinces) • POPULATION: 4,437,460 inhabitants, of which 47.8% in Zagreb and Central Croatia • DENSITY: 78.5 inhabitants per square kilometer • MAJOR CITIES: Zagreb, Split, Rijeka, Osijek • MAJOR AIRPORTS: Zagreb, Split, and Dubrovnik, with direct scheduled flights to most major cities in Europe • ROAD CONNECTIONS: extensive national highway system connected with those of Slovenia, Austria, Hungary, and Serbia • MAJOR ATTRACTIONS: long coastline with historic towns and numerous islands, eight national parks, eleven nature parks, and six cultural sites under protection by UNESCO

6. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 2. FACTS AND FIGURES Daruvar • LOCATION: center of continental (Pannonian) Croatia, in the County of Bjelovar-Bilogora • SURFACE AREA: 581 square kilometers (Town of Daruvar and four neighboring municipalities) • POPULATION: 25,608 inhabitants, of which 51.7% in the Town of Daruvar and 48.3% in four neighboring municipalities, with high cultural diversity (Croats, Czechs, Serbs, Hungarians, Albanians, Italians, Germans, Slovenians, etc.) • DENSITY: 44.1 inhabitants per square kilometer • MAJOR AIRPORT: Zagreb (19 airlines servicing direct flights to / from 42 airports in Europe and world in summer 2010 timetable) • ROAD DISTANCES: Zagreb (Croatia) - 135 km, Ljubljana (Slovenia) - 270 km, Belgrade (Serbia) - 324 km, Sarajevo (Bosnia & Herz.) - 337 km, Budapest (Hungary) - 339 km • ATTRACTIONS: thermal springs, Julijev Park - town park with Austro-Hungarian buildings, Castle Janković, Nature Park Papuk (in vicinity)

7. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 3. TOURISM AND HOTEL INDUSTRY Tourism Trends in Croatia • The main comparative advantages of Croatia are its geographical position (proximity to major demand generating markets) and well preserved coast with crystal clean sea water, picturesque towns, and numerous islands • The main tourist products are sun and sea holidays, touring, and nautical vacations, while the fastest developing products are incentive travel, short breaks, and spa holidays • Most overnight stays are generated by tourists from Germany, Croatia, Slovenia, Italy, Austria, Czech Republic, Poland, Holland, and Hungary • Most tourism business takes place in the coastal destinations of Istria, Kvarner, and Dalmatia, while only 2.5 mil. overnight stays are generated in the continental Croatia, of which 1.2 mil. in Zagreb and 1.3 mil. in other areas • The tourism in continental Croatia has been experiencing strong development with health, spa, meetings, events, and activities in nature as the main tourist products 57 56 53 51 48 47 45 11 11 10 10 9 9 8 2002 2003 2004 2005 2006 2007 2008 Tourist arrivals (in million) > CAGR of 5,2% Tourist overnight stays (in million) > CAGR of 4,2% Source: Central Bureau of Statistics of Croatia

8. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 3. TOURISM AND HOTEL INDUSTRY Tourism Trends in Daruvar • The main comparative advantages of Daruvar are its proximity to major capital cities in the area and the most diverse tourism resources base in continental Croatia with high-capacity thermal springs, events, wineries, brewery, hunting grounds, fishing areas, and nature paths for walking, cycling, and hiking • The main tourist products are health treatments in the medical complex Daruvarske toplice, while the fastest developing products are bathing at thermal water park Aquae Balissae, various events, and wine related products • Most overnight stays are generated by domestic tourists and the tourism business is evenly distributed throughout the year • Daruvar has received seven yearly awards from the Croatian Tourist Board for being the most beautiful small town in continental Croatia • Based on the county tourism master plan, the Tourist Board of Daruvar - Papuk will soon create its own tourism master plan for the area 22 20 19 16 16 14 13 8 8 7 6 6 5 5 2002 2003 2004 2005 2006 2007 2008 Tourist arrivals (in thousand) > CAGR of 7,7% Tourist overnight stays (in thousand) > CAGR of 9,2% Source: Central Bureau of Statistics of Croatia

9. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 3. TOURISM AND HOTEL INDUSTRY Tourism Products in Daruvar (I) The Multicultural Oasis of Health and Hedonism in the Heart of Pannonian Croatia HEALTH • Tradition in health tourism since opening of the first bath in 1772 • Medical complex Daruvarske toplice with Hotel Termal is the major provider of physical medicine and rehabilitation treatments BATHS • Thermal water park Aquae Balissae - brand new complex of indoor and outdoor swimming pools with the total pool area of 1,728 sqm, spa, restaurant, bars, and other facilities EVENTS • Several events throughout the year including international events such as Vinodar (exhibition of wines), Flig (festival of brass bands), and Dožinky (festival of Czech culture) WINES • One of the oldest wine regions in continental Croatia, famous for white wines grasevina, riesling, sauvignon, chardonnay, pinot, etc. • Wine trail and wineries Daruvar (by Badel) and Lotada BEER • Daruvarska pivovara - the oldest brewery in Croatia (since 1840), famous for production of pilsner Old Czech Beer (Staročeško pivo)

10. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 3. TOURISM AND HOTEL INDUSTRY Tourism Products in Daruvar (II) The Multicultural Oasis of Health and Hedonism in the Heart of Pannonian Croatia HUNTING • Eleven hunting clubs and nine hunting grounds that abound with animals such as deer, fallow deer, wild boar, rabbit, and pheasant FISHING • Numerous fish ponds, rivers, and streams that abound with a variety of fish species such as carp, catfish, pike fish, and trout • Sports and recreation lake in Daruvar and fish pond Končanica ACTIVITIES IN NATURE • Numerous possibilities for walking, cycling, horse riding, hiking, team building, and other activities (in winter even for skiing) • Nature Park Papuk and several excursion sites such as Petrov vrh RURAL TOURISM • Tradition in agriculture and production of fruits, honey, and liquors • Several agro tourism households (e.g. Kovačević and Konjovoda) MICE • Possibilities for meetings, seminars, small conferences, and other events at Hotel Termal and in future hotels due to central location of Daruvar in continental Croatia

11. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 3. TOURISM AND HOTEL INDUSTRY Hotel Supply in Croatia • Hotels make up only 16.2% of units and 11.6% of beds of total accommodation capacities in Croatia (private households and campsites have more units and beds than hotels) • Most hotels are owned and managed by Croatian firms such as Maistra and Valamar • The most renowned international brands are Hilton, Kempinski, Le Meridien, Radisson Blu, Regent, Sheraton, and Westin, most of them located in Zagreb, Split, and Dubrovnik • Most hotels are located in the coastal destinations of Istria, Kvarner, and Dalmatia, while continental Croatia has 106 hotels and similar establishments with 4,259 rooms and 8,025 beds (without Zagreb, as of May 2010) • Most hotels in continental Croatia (without Zagreb) are of lower quality than on the coast (66.9% of rooms with 3* or 2*), with no 5* hotels and only 16.6% of rooms in the 4* category • There are 13 thermal hotels with 1.484 rooms, of which six are not even categorized Remarks: • 571 hotels with 53,826 rooms and 104,159 permanent beds • Figures do not include villas, aparthotels, and other similar Source: Central Bureau of Statistics of Croatia

12. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 3. TOURISM AND HOTEL INDUSTRY Hotel Performance in Croatia Horwath Hotel Survey 2009: Performance in 2008 5 stars 4 stars 3 stars Average Yearly Room Occupancy Rate 50.5% 43.9% 44.1% Average Net Achieved Daily Room Rate (in euros) 121.11 73.53 51.83 Daily Room Revenue per Available Room (in euros) 61.16 32.28 22.86 Total Revenue per Available Room (in euros) 32,746 19,553 14,941 Room Revenues (% of revenue) 62.9% 64.4% 58.7% Food and Beverage Revenues (% of revenue) 31.5% 30.5% 35.2% Other Revenues (% of revenue) 5.5% 5.1% 6.1% EBITDA (% of revenue) 18.1% 21.2% 16.4% Number of Employees per Room 0.67 0.37 0.28 Payroll and Related Costs (% of revenue) 35.2% 29.4% 29.3%

13. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 3. TOURISM AND HOTEL INDUSTRY Hotel Supply in Daruvar Only Five Hotels and Similar Establishments with 203 Rooms and 383 Beds TERMAL • 157 rooms (283 beds), mostly used by guests using benefits of Croatian Institute for Health Insurance (non-registered tourism) • 2 restaurants, 2 bars, meeting room, spa, gym, sports hall, 3 pools ARCADIA • Old style villa with 10 rooms (16 beds), used as additional accommodation for guests of Daruvarske toplice and Hotel Termal • Terasa - fine dining restaurant with an outdoor terrace MLADIMIR • Hotel 3* with 10 rooms (20 beds), temporarily closed • Restaurant, bar, treatment room for massages, sauna, hydromassage, souvenir shop BALISE • Hotel with 19 rooms (39 beds) • Restaurant, bar, TV salon SLAVONIJA • Newly renovated pension with 7 suites and apartments (25 beds) • Slavonija - fine dining restaurant

14. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 3. TOURISM AND HOTEL INDUSTRY Selected Competitors in Croatia and Slovenia Only Two Strong Competitors in Croatia and Several Strong Competitors in Slovenia SPA GOLFER Croatia • New hotel 4* located within the complex Terme Sveti Martin • 157 rooms, restaurants, bars, meeting space, spa, pool • Thermal complex with total pool area of 3,650 sqm TERME Croatia • Hotel 3* located within the complex Terme Tuhelj • 138 rooms, restaurants, bars, meeting space in Castle Mihanović • Thermal complex with total pool area of 5,000 sqm SOTELIA Slovenia • New hotel 4* located with the complex Terme Olimia • 145 rooms, restaurants, bars, meeting space, spa, health center • Spa complex and thermal complex with total pool area of 3,000 sqm TERME Slovenia • Hotel 4* located within the complex Terme Čatež • 149 rooms, restaurants, bars, meeting space, beauty center, 2 pools • Thermal complex with total pool area of 12,200 sqm GOLF GRAD MOKRICE Slovenia • Castle hotel 4* located between Terme Čatež and Croatian border • 48 rooms (29 in castle, 11 in new annex, 8 in golf club house), restaurant, bar, golf course

15. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 4. HOTEL - CASTLE JANKOVIĆ

16. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 4. HOTEL - CASTLE JANKOVIĆ Site Location • Kralj Tomislav Square (the main town square) • Julijev Park • Hotel Termal & Thermal Medical Complex Daruvarske toplice • Thermal Water Park Aquae Balissae • Hotel - Castle Janković • Hotel - Aquae Balissae • Hotel - Roman Forest • Roman Forest Park • Hippodrome • Sports Airport 6 7 4 3 8 5 2 1 10 9

17. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 4. HOTEL - CASTLE JANKOVIĆ Site Description • LOCATION: Ivana Gundulića Street No. 15, approximately 250 meters northwest from the main town square, in the vicinity of major points of interest • SURROUNDINGS: Ivana Gundulića Street and houses (north), Antun Janković Park (east and south), Vladimira Nazora Street and houses (west) • ACCESS: By road from Ivana Gundulića Street • VIEWS: Attractive views to the green areas of Antun Janković Park, featuring two old ginkgo biloba trees (claimed to be the second oldest in Europe) • VISIBILITY: High from all directions, especially from south • AREA: 6,020 sqm - two adjacent plots with areas of 3,679 sqm and 2,341 sqm • FACILITIES: Main building constructed in form of letter U with external dimensions of 57.6 m x 38.0 m, three levels (basement, ground floor, attic with high ceilings), and three small adjacent houses to the north • INFRASTRUCTURE: Electricity, water supply, sewage system, and phone cables on site, good coverage by mobile phone networks • HISTORY: Constructed from 1771 to 1777 in the baroque style as the residential complex for the count Antun Janković, who received the title from the queen Maria Theresa as the Count of Daruvar • USE: Residential until early 20th century and educational from 1920 until 2004, currently used for events in the main hall and storing wines in the basement

18. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 4. HOTEL - CASTLE JANKOVIĆ Ownership, Zoning, and Development • OWNERSHIP: 100% owned by the Town of Daruvar (the firm Badel 1862 - Winery Daruvar has the concession for use of the entire basement of the main building for storing wines, for the period of 50 years from 01.11.2001. to 01.11.2051.) • ZONING: General Urban Plan (GUP) of the Town of Daruvar qualifies the site as a tourist zone for hotel development (zone T1 - hotel) • PROTECTION: Castle Janković has been protected as the cultural monument since 1969. According to the General Guidelines of the Committee of Curators from 2007, renovation and conversion of the building is possible by respecting its typology, architectural style, and immediate surroundings. • DEVELOPMENT: It is allowed to convert the main building and adjacent houses into a high-quality hotel complex, as well as to build new small additions to the north of the main building and underground spaces to the west of the main building. The Committee of Curators will need to define more specific guidelines for subject hotel development.

19. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 4. HOTEL - CASTLE JANKOVIĆ Development Concept Guidelines and Business Potential MARKET CONCEPT • Castle hotel with international 5* (upper upscale) / high Croatian 4* • The best castle hotel in Croatia and one of the leading in Central Europe • Charming hotel with fine dining, wide choice of wines, and wine spa FACILITIES PROGRAM • Approximately 40 rooms (of which 10% suites) with 80 beds • Fine dining restaurant with the best cuisine in continental Croatia • Lobby bar with an outdoor terrace • Main hall for events and one small meeting room • Small spa with specialized treatments based on grapes and wines • Winery (in the basement), wine shop, and souvenir shop INVESTMENTS • From 4.0 to 5.0 mil. euros (from 100 to 125 thou. euros per room), including reconstruction, furniture, fixtures, and equipment (FFE), development costs, pre-opening costs, working capital, and contingency BUSINESS POTENTIAL • At least 20 employees (0.5 employees per room) • Average yearly room occupancy rate from 55% to 65% • Average net achieved daily room rate from 100 to 120 euros • Total revenue from 1.6 to 1.8 mil. euros (40 to 45 thou. euros per room) • EBITDA of 25% of total revenue (from 0.4 to 0.5 mil. euros) • Tourist traffic of 15 thou. overnight stays Remarks: Business potential refers to the year of stabilized operations. All the values are estimated.

20. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 4. HOTEL - CASTLE JANKOVIĆ Business Model Terms (I) MODEL • Long-term concession / lease with management contract (sub-lease) PARTNERS • The concession will be given to the developer (concessionaire) with development experience in the sector of high-quality boutique hotels. • The concessionaire is required to have the partner for future management of the subject hotel and with managerial experience in the sector of high-quality boutique hotels. The concessionaire should engage his management partner either through management contract or lease (actually sub-lease). TERM • The length of term is 99 years with option of renewal for additional 99 years. The term includes the periods of both development (from the date of signature to the date of opening) and operations (after the date of opening). DEVELOPMENT • The concessionaire is required to develop the hotel within two years (24 months) from the date of signature. • The concessionaire is required to register the firm in the town of Daruvar, which will be responsible for subject hotel development. MANAGEMENT • The management partner is required to manage the hotel for the period of at least 10 years (120 months) from the date of opening. • The management partner is required to register the firm in the town of Daruvar, which will be responsible for subject hotel operations.

21. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 4. HOTEL - CASTLE JANKOVIĆ Business Model Terms (II) CONCESSION (RENT) FEES • The concession fee (net of value added tax) is composed of two portions: • Fixed portion - initial amount of 96,990 euros, which equals to 2,425 euros per room for 40-room hotel (20.0 euros per sqm of land area for the 3,679-sqm plot and 10.0 euros per sqm of land area for the 2,341-sqm plot) • Variable portion - yearly amount of 1.0% of total revenue (approximately from 16 to 18 thou. euros, i.e. from 400 to 450 euros per room for 40-room hotel) PAYMENTS • Fixed portion payable as a lump sum within 90 days after signing the contract • Variable portion payable after hotel opening, in four quarterly installments per year and in every year of hotel operations GUARANTEES • Concessionaire’s bank guarantee for promptly payments of concession fees REPAIRS & MAINTENANCE • Concessionaire’s responsibility for both structural repairs and maintenance (required supervision by the Town of Daruvar in the case of structural repairs) ASSIGNABILITY • Possible assignability and trade of the concession contract, but only with prior approval from the Town of Daruvar in selection of the new concessionaire TERMINATION • Possible but with the penalty fee equal to 50% of remaining concession fees

22. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 5. HOTEL - AQUAE BALISSAE

23. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 5. HOTEL - AQUAE BALISSAE Site Location • Kralj Tomislav Square (the main town square) • Julijev Park • Hotel Termal & Thermal Medical Complex Daruvarske toplice • Thermal Water Park Aquae Balissae • Hotel - Castle Janković • Hotel - Aquae Balissae • Hotel - Roman Forest • Roman Forest Park • Hippodrome • Sports Airport 6 7 4 3 8 5 2 1 10 9

24. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 5. HOTEL - AQUAE BALISSAE Site Description • LOCATION: Podkućnice Street No. 8, adjacent to the thermal water park Aquae Balissae, approximately 350 meters north from the main town square, in the vicinity of major points of interest • SURROUNDINGS: Green areas, lake, and recreation center (north), municipal promenade, Toplica River, and medical complex Daruvarske toplice (east), thermal water park Aquae Balissae (south), houses (west) • ACCESS: By road from Matije Gupca Street • VIEWS: Attractive views to the green areas, lake, and river to the north and east, as well as to the thermal water park Aquae Balissae to the south • VISIBILITY: High from all directions, especially from north, east, and south • AREA: 9,814 sqm - five adjacent plots with areas of 954 sqm, 3,592 sqm, 2,098 sqm, 2,208 sqm, and 962 sqm • FACILITIES: Parking area with 96 parking spaces, parking road, and sidewalks (total area of 2,641 sqm, leaving the green area of 7,173 sqm for development) • INFRASTRUCTURE: Electricity, water supply, sewage system, and phone cables on site, good coverage by mobile phone networks

25. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 5. HOTEL - AQUAE BALISSAE Ownership, Zoning, and Development • OWNERSHIP: 100% owned by the Town of Daruvar • ZONING: General Urban Plan (GUP) of the Town of Daruvar qualifies the site as a tourist zone for hotel development (zone T1 - hotel) and requires the need to make the Detailed Urban Plan (DPU) with specific zoning issues for the site • LOT COVERAGE RATIO: 0.50 > the maximum footprint area for construction of indoor spaces is 4,907 sqm (since the site is occupied by the parking area of 2,641 sqm and the lot coverage ratio allows construction of indoor spaces on the maximum area of 4,907 sqm, it follows that the area for construction of outdoor spaces and landscaping is at least 2,266 sqm) • USE COEFFICIENT: 1.20 > the maximum gross developed area (GDA) of indoor spaces above ground is 11,777 sqm • DEVELOPMENT: It is recommended to connect the hotel with thermal water park Aquae Balissae, thus creating a more competitive hotel product. If interested, the developer should make agreement with the Town of Daruvar, which is owner and operator of the subject water park.

26. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 5. HOTEL - AQUAE BALISSAE Development Concept Guidelines and Business Potential MARKET CONCEPT • Family thermal hotel with international 3* / 4* (midscale / upscale) / Croatian 4* • The best thermal hotel in Croatia for families with children • Connection with thermal water park Aquae Balissae FACILITIES PROGRAM • At least 150 rooms (of which 30% family rooms) with 300 beds • Three-meal restaurant, lobby bar with an outdoor terrace, and children bar • One multi-purpose hall with an area of approximately 100 sqm • Possible pool in the area near thermal water park Aquae Balissae • Covered walkway connection with thermal water park Aquae Balissae • Children club and souvenir shop INVESTMENTS • From 9.0 to 12.0 mil. euros (from 60 to 80 thou. euros per room), including construction, furniture, fixtures, and equipment (FFE), landscaping, development costs, pre-opening costs, working capital, and contingency BUSINESS POTENTIAL • At least 60 employees (0.4 employees per room) • Average yearly room occupancy rate from 65% to 75% • Average net achieved daily room rate from 60 to 80 euros • Total revenue from 4.0 to 4.5 mil. euros (25 to 30 thou. euros per room) • EBITDA of 25% of total revenue (from 1.0 to 1.2 mil. euros) • Tourist traffic from 70 to 80 thou. overnight stays

27. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 5. HOTEL - AQUAE BALISSAE Business Model Terms (I) MODEL • Long-term concession / lease with management contract (sub-lease) PARTNERS • The concession will be given to the developer (concessionaire) with development experience in the sector of high-quality family thermal hotels. • The concessionaire is required to have the partner for future management of the subject hotel and with managerial experience in the sector of high-quality family thermal hotels. The concessionaire should engage his management partner either through management contract or lease (actually sub-lease). TERM • The length of term is 99 years with option of renewal for additional 99 years. The term includes the periods of both development (from the date of signature to the date of opening) and operations (after the date of opening). DEVELOPMENT • The concessionaire is required to develop the hotel within two years (24 months) from the date of signature. • The concessionaire is required to register the firm in the town of Daruvar, which will be responsible for subject hotel development. MANAGEMENT • The management partner is required to manage the hotel for the period of at least 10 years (120 months) from the date of opening. • The management partner is required to register the firm in the town of Daruvar, which will be responsible for subject hotel operations.

28. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 5. HOTEL - AQUAE BALISSAE Business Model Terms (II) CONCESSION (RENT) FEES • The concession fee (net of value added tax) is composed of two portions: • Fixed portion - initial amount of 147,210 euros, which equals to 981 euros per room for 150-room hotel (15.0 euros per sqm of total land area of 9,814 sqm) • Variable portion - yearly amount of 1.0% of total revenue (approximately from 40 to 45 thou. euros, i.e. from 267 to 300 euros per room for 150-room hotel) PAYMENTS • Fixed portion payable as a lump sum within 90 days after signing the contract • Variable portion payable after hotel opening, in four quarterly installments per year and in every year of hotel operations GUARANTEES • Concessionaire’s bank guarantee for promptly payments of concession fees REPAIRS & MAINTENANCE • Concessionaire’s responsibility for both structural repairs and maintenance ASSIGNABILITY • Possible assignability and trade of the concession contract, but only with prior approval from the Town of Daruvar in selection of the new concessionaire TERMINATION • Possible but with the penalty fee equal to 50% of remaining concession fees

29. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 6. HOTEL - ROMAN FOREST

30. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 6. HOTEL - ROMAN FOREST Site Location • Kralj Tomislav Square (the main town square) • Julijev Park • Hotel Termal & Thermal Medical Complex Daruvarske toplice • Thermal Water Park Aquae Balissae • Hotel - Castle Janković • Hotel - Aquae Balissae • Hotel - Roman Forest • Roman Forest Park • Hippodrome • Sports Airport 6 7 4 3 8 5 2 1 10 9

31. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 6. HOTEL - ROMAN FOREST Site Description • LOCATION: Stari Slavik Street No. 7, adjacent to the park forest Rimska šuma (Roman Forest), approximately 600 meters northeast from the main town square, in the vicinity of major points of interest • SURROUNDINGS: Strma Street and houses (north), park forest Rimska šuma (east and south), Podborje Street, green areas, and football playground (west) • ACCESS: By road from both Strma Street and Podborje Street • VIEWS: Attractive views to the park forest Rimska šuma to the east and south, as well as to the green areas to the west • VISIBILITY: High from north and west • AREA: Entirely green field area of 27,751 sqm - two neighboring plots with areas of 17,949 sqm and 9,802 sqm, divided by a narrow water channel (which may be covered, thus allowing the possibility to connect two plots as one) • INFRASTRUCTURE: Electricity, water supply, sewage system, and phone cables on site, good coverage by mobile phone networks, newly discovered thermal spring nearby (located south from the site)

32. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 6. HOTEL - ROMAN FOREST Ownership, Zoning, and Development • OWNERSHIP: 100% owned by the Town of Daruvar • ZONING: General Urban Plan (GUP) of the Town of Daruvar qualifies the site as a tourist zone for hotel development (zone T1 - hotel) and requires the need to make the Detailed Urban Plan (DPU) with specific zoning issues for the site • LOT COVERAGE RATIO: 0.50 > the maximum footprint area for construction of indoor spaces is 13,876 sqm • USE COEFFICIENT: 1.20 > the maximum gross developed area (GDA) of indoor spaces above ground is 33,301 sqm • DEVELOPMENT: Since the two plots of the site are separated by a narrow water channel (surface area of 410 sqm), it will be important to make agreement with Hrvatske vode (Croatian Waters) - the state-owned institution which owns the subject channel and which has expressed interest to cover the channel and solve the draining in agreement with the developer

33. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 6. HOTEL - ROMAN FOREST Development Concept Guidelines and Business Potential MARKET CONCEPT • Congress, spa & health hotel with international 4* (upscale) / high Croatian 4* • The best congress & spa hotel in coninental Croatia • The most innovative 4* design hotel in Croatia, integrated with environment FACILITIES PROGRAM • At least 250 rooms (of which 10% suites) with 500 beds • Three-meal restaurant and fine dining restaurant • Lobby bar with an outdoor terrace, night lounge bar, spa bar, and pool bar • Congress center with the total rentable area of approximately 500 to 600 sqm • Big spa with a variety of treatments, two outdoor thermal pools, gym, tennis • Specialized health clinic, shops, and other facilities of interest to developer INVESTMENTS • From 20.0 to 25.0 mil. euros (from 80 to 100 thou. euros per room), including construction, furniture, fixtures, and equipment (FFE), landscaping, development costs, pre-opening costs, working capital, and contingency BUSINESS POTENTIAL • At least 100 employees (0.4 employees per room) • Average yearly room occupancy rate from 60% to 70% • Average net achieved daily room rate from 80 to 100 euros • Total revenue from 8.0 to 10.0 mil. euros (30 to 40 thou. euros per room) • EBITDA of 25% of total revenue (from 2.0 to 2.5 mil. euros) • Tourist traffic from 100 to 120 thou. overnight stays

34. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 6. HOTEL - ROMAN FOREST Business Model Terms (I) MODEL • Long-term concession / lease with management contract (sub-lease) PARTNERS • The concession will be given to the developer (concessionaire) with development experience in the sector of high-quality congreess & spa hotels. • The concessionaire is required to have the partner for future management of the subject hotel and with managerial experience in the sector of high-quality congress & spa hotels. The concessionaire should engage his management partner either through management contract or lease (actually sub-lease). TERM • The length of term is 99 years with option of renewal for additional 99 years. The term includes the periods of both development (from the date of signature to the date of opening) and operations (after the date of opening). DEVELOPMENT • The concessionaire is required to develop the hotel within two years (24 months) from the date of signature. • The concessionaire is required to register the firm in the town of Daruvar, which will be responsible for subject hotel development. MANAGEMENT • The management partner is required to manage the hotel for the period of at least 10 years (120 months) from the date of opening. • The management partner is required to register the firm in the town of Daruvar, which will be responsible for subject hotel operations.

35. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 6. HOTEL - ROMAN FOREST Business Model Terms (II) CONCESSION (RENT) FEES • The concession fee (net of value added tax) is composed of two portions: • Fixed portion - initial amount of 416,265 euros, which equals to 1,665 euros per room for 250-room hotel (15.0 euros per sqm of total land area of 27,751 sqm) • Variable portion - yearly amount of 1.0% of total revenue (approximately from 80 to 100 thou. euros, i.e. from 320 to 400 euros per room for 250-room hotel) PAYMENTS • Fixed portion payable as a lump sum within 90 days after signing the contract • Variable portion payable after hotel opening, in four quarterly installments per year and in every year of hotel operations GUARANTEES • Concessionaire’s bank guarantee for promptly payments of concession fees REPAIRS & MAINTENANCE • Concessionaire’s responsibility for both structural repairs and maintenance ASSIGNABILITY • Possible assignability and trade of the concession contract, but only with prior approval from the Town of Daruvar in selection of the new concessionaire TERMINATION • Possible but with the penalty fee equal to 50% of remaining concession fees

36. INVESTMENT PROSPECT FOR HOTEL PROJECTS IN DARUVAR 7. CONTACTS AND LINKS CONTACTS TOWN OF DARUVAR • Mr. Ratko Vuković, Head of Department for Economy • Trg Kralja Tomislava 14, 43500 Daruvar, Croatia • +385 (0)43 331 408; grad-gospodarstvo@daruvar.hr MARCON • Mr. Mario Šerić, Senior Consultant & Managing Director • Radunica 26, 21000 Split, Croatia • +385 (0)91 1976 901; mario@marcon.st LINKS ECONOMY AND LEGAL ENVIRONMENT • Ministry of Economy of Croatia (www.mingorp.hr) • Ministry of Finance of Croatia (www.mfin.hr) • Croatian Chamber of Economy (www.hgk.hr) • Croatian National Bank (www.hnb.hr) • Trade and Investment Promotion Agency (www.apiu.hr) • Central Bureau of Statistics of Croatia (www.dzs.hr) TOURISM AND HOTEL INDUSTRY • Ministry of Tourism of Croatia (www.mint.hr) • Croatian National Tourist Board (www.croatia.hr) • Central Bureau of Statistics of Croatia (www.dzs.hr) • Terme Sveti Martin (www.toplicesvetimartin.hr) • Terme Olimia (www.terme-olimia.com) • Terme Čatež (www.terme-catez.si)