Sijeanj 2013.

October 2013CITY OF ZAGREBCity Office for Economy, Labour and Entrepreneurship

12Structure of the City GovernmentCity AssemblyMayor 21 city administrative bodies336 city institutions17 city precincts, 218 community councils

23Quality management system under the ISO 9001:2008 standardThe City Office for Economy, Labour and Entrepreneurship is the first administrative office of the City of Zagreb which established and certified, on 12 April 2005, a quality management system for it operations in compliance with the ISO 9001: 2000 standard.The quality management system which has been certified and is maintained and developed, is the first step toward a more efficient, accountable and professional city government.The application, maintenance and further development of the quality management control system in compliance with ISO 9001:2008 requirements is ascertained by regular annual audits.A commitment to the needs of citizens and other users of our services and their satisfaction with services rendered are the most important values according to which the City Office for Economy, Labour and Entrepreneurship measures and ascertains its overall performance.

ISO 9001 Q-72234City statistical profile Dominant economic, financial and political status in the Republic of CroatiaPopulation: 790,017 - 18% of Croatias total populationFDI in Q1, Q2 2013 (in millions of euros) Croatia 426,9 Zagreb 238,3398.890 employed persons (March 2012) or 29.26% of total employment in Croatiain the period January - July 2013th average monthly net salary is 846 EUR or 16.9% more than Croatia

45 Accounts for roughly 37,96 % of Croatias total exports (EUR 1.656 million)Accounts for roughly 59,56 % of Croatias total imports (EUR 4.840 million); (January-June 2013)in the period January - Septembar 2013 average number of registered unemployed was 45,644, or 13.35% of total average unemployment in Croatiain the period January - Septembar 2013 annual average unemployment rate in GZ is 10.36%, and 19.95% in Croatia32.026 companies, or 32,93 % of Croatias total, operate in the City of ZagrebThe City of Zagreb participates in Croatian free enterprise:52,72 % of total revenues;54,8 % total fixed assets investment;32,93 % of the number of businesses;40,3 % of the total number of employed in free enterprise

Source:FINA

56In 2010

CROATIAS GDP: 44.4 billion per capita: 10.057

ZAGREBS GDP: 14.7 billion per capita: 18.645

Source: City Office for the Strategic Planning and Development of the City Statistics Department

In 2010, the share of the City of Zagreb in the overall GDP of the Republic of Croatia was 33,3 %, which is an increase of 1,9 % in comparison to 2009.The gross domestic product decreased in real terms by 1.5% in the first quarter of 2013, as compared to the same quarter of 2012. The largest contribution to the gross domestic product decrease is realized in the exports and imports of goods and services, the final consumption expenditure of households and the gross fixed capital formation. The gross domestic product decreased in real terms by 0.7% in the second quarter of 2013, as compared to the same quarter of 2012. The largest contribution to the gross domestic product growth is realized in the export of tourism services and imports of goods and services.

6Structure of Zagreb` s economy based on total revenues

OtherFinancingTransport and storageProfessional, scientific and technical activitiesConstructionInformation and communicationElectricity, gas, steam and air conditioning supplyProcessing industryWholesale and retail commerceSource:Economic trends in the City of Zagreb and Zagreb County, I-XII 2012., CCE Zagreb Chamber8City of Zagreb Budget for 2013 881 million (HRK 6,67 billion)

Structure of 2013 Budget revenues

9Structure of 2013 Budget expenses and outlays

Source: City Finance Office

10InvestmentsInvestment policyAllocation of considerable funds for construction of utilities infrastructure and equipmentFunding sources: Budget, funds from City-owned companies and institutions, international capital market, public-private partnerships and concessions

1011 Credit ratingStandard&Poors* : - local currency issuer rating BB+/negative/ - foreign currency issuer rating BB+/negative/* updated 12.8.2013.

Moodys**: - foreign currency issuer rating Ba1/negative** updated 1.2.2013.

1112 DESIGNATION m.DESIGNATION m.1. Central Wastewater Treatment Plant3047. Zagreb Sports and Recreation Zone502. Solid Waste Incineration Plant - SWIP1708. Conference Centre Project523. The third phase of wastewater treatment Project409. Sole Trades Centre Project404. The contract governing rendering of principal works and management of installations at the Jakuevec 5610. Project to construct underground parking garages with additional facilities at the secondary school playground site designated as Savska-Kaieva-Klaieva-Krnjavoga405. Sljeme Cable car Project

4011. Zagreb Airport Project2506. ZET (public transit company) Mass transit system renewal27212. Project Aquarium in Zagreb 9

Investment projects of the City of Zagreb1213Central Wastewater Treatment Plant

The CUPOVZ Project: one of the largest and most challenging environmental undertakings in Europe, which will resolve the problems of pollution and threats to the water table, and safeguard existing and potential water pumping sites in the City of Zagreb and the area along the course of the Sava River downstream from Zagreb.

13Financing model BOT modelThe concession granted to ZOV d.o.o. (in December 2000) encompasses: planning and construction of the Plant and infrastructure facilities, Project financing and management of the Plant until 2028, when it will be turned over to the City of managementThe Project consists of:1. The central plant building for the mechanical and biological treatment of sludge 1.2 mil. ERU (equivalent resident unit); in the final construction phase 1.5 mil. ERU2. Management building, plant and servicing premises3. Main wastewater input pipeline from New Zagreb to the Plant over a length of 10 km and the Mievac pump station4. Closure and additional construction of the Main Drainage Canal over a length of 5.5 km 5. Domovinski Bridge (transit/installation structure)6. Construction of ulineka road from Slavonska avenue to Radnika road (3 km)The mechanical portion of the treatment plant has been operational since March 2004, while the final (fourth) phase of biological sludge treatment and processing has been operational since September 2007.Approximately 98% of investments have been implemented completion depends on remaining property rights issuesThe search for a technical solution to the thermal treatment of waste sludge is under wayThere is an obligation to chemically treat wastewaterThe estimated investment value is 304 mil.

15 The third phase of wastewater treatment ProjectThe Croatian Government issued the Decision on Designation of Sensitive Areas (as published in Croatias official journal, Narodne novine, no. 81/10) on which basis the Danube Rivers entire drainage basin was proclaimed a sensitive area.The revised Water Utility Directive Implementation Plan of November 2010 adopted by the Croatian Government stipulates a transition period for the fulfilment of the commitments specified by the Community Wastewater Treatment Directive, which requires the collection of wastewater for facilities in the Black Sea drainage basin a sensitive zone for installations above 150,000 ERU with more advanced treatment by the deadline of 31 December 2018.The third phase of wastewater treatment entails, in addition to the second treatment phase, removal of phosphorus by 80% and/or nitrogen by 70-80 %.The national water management company Hrvatske vode has granted a water management license for the release of wastewater from the public sewage system in the City of Zagreb with treatment at the Central Treatment Plant (CUPOVZ), whereby Zagrebake otpadne vode is obliged to undertake activities for the construction of the third treatment phase at the Plant, to be completed by 31 December 2016, for the purpose of protecting water management interests in compliance with the Program of Water Pollution Prevention Measures with target deadlines.The Project is nominated for funding from the EU's Structural FundsThe value of this investment has been estimated at 40 million.

16Jakuevec Landfill Rehabilitation Programme

On 18 November 1998, a Loan Agreement was concluded between the European Bank for Reconstruction and Development (EBRD) and ZGOS, a City-owned company, to facilitate the rehabilitation of the Prudinec / Jakuevec Landfill.Investment value: 56 millionThe Prudinec waste disposal site rehabilitation project at Jakuevec is complete. All works broken down into packets have been assumed by the Investor.Currently, within the framework of the Jakuevec/Prudinec landfill, besides the waste disposal site there are:Construction waste recycling installation (350,000 t/yr.),Scrap metal yard (over 3,000 t/yr.),Discarded tyre yard (over 1,000 t/yr.).

1617The proposal of Zagreb Holding d.o.o., ZGOS Branch, is for the existing deadline (31 December 2012) for waste disposal at the Prudinec Landfill in Jakuevec in the City of Zagreb Physical Plan be substituted with a deadline of 31 December 2018.The previous deadline was set under the assumption that a thermal waste treatment plant would be built. However, thus far waste disposal is the only long-term waste treatment measure. The quantity of waste collected within the limits of the City of Zagreb is showing a continual growth trend. The capacity of the Prudinec Landfill and its technical potential ensure the conditions for waste disposal at the newly organized operational surfaces at the site up to 31 December 2018. Depending on implementation of comprehensive waste management measures, this deadline may also be extended.

18Solid Waste Incineration Plant - SWIPThe purpose of constructing the SWIP is to treat municipal waste by incineration, including the recycling of energy and sludge from the Central Waste Water Treatment Plant. The City of Zagreb Physical Plan (SGGZ 02/06) specified itnjak-East as the construction site for the SWIP, right next to the CWWTP.The relevant Ministry issued a ruling whereby the intended WIP Project was assessed as environment-friendly, subject to the application of environmental protection measures and the environment status monitoring programme.The documentation required to secure a location permit has been drafted. Efforts are being made to align the existing documents with new legislative requirements, in particular, with the new Physical Planning and Construction Act (Narodne novine, no. 76/07).The Project is nominated for funding from the EU's Structural Funds The City of Zagreb and the European Bank for Reconstruction and Development (EBRD) are planing cooperation on this projectThe total investment value is estimated at 170 million.

1819The Zagreb Waste Treatment and Management ModelThe Strategic Environmental Impact Study on the Draft City of Zagreb Waste Management Plan to 2015 has been assessed.

The Strategic Environmental Impact Study on the Draft City of Zagreb Waste Management Plan to 2015 and the Draft City of Zagreb Waste Management Plan to 2015 have been submitted for public debate, which will proceed from 24 January to 22 February 2013.

The City of Zagreb Waste Management Plan to 2015 will be adopted by the Zagreb City Assembly as a separate waste management planning document.

1920ZET Mass Tranit System Renewal ProgrammeThe City of Zagreb Tramcar Fleet Renewal Programme provides for the following projects : - Procurement of 70 low-floor tramcars; - Overhaul and modernisation of 50 tramcar TMK 301 - Reconstruction and modernisation of the tram depot at Blato in Zagreb; - New fare system - Transit control and management system.70 tramcars have been procured from and supplied by the CROTRAM consortium.The production of 70 new low-floor tramcars was contracted on 18 July 2007, and a total of 70 tramcars has already been delivered.The new public transit control and management system was launched on 5 September 2008.Two short low-floor tram TKM 2300 were put into service since 2009.The value of this investment has been estimated at 272 million.

2021Blato Thermal Spa Project in ZagrebA site west of the unfinished Zagreb University Hospital in New Zagreb, Blato, has been chosen for implementation and development of this projectThe Mayor of Zagreb has issued a Conclusion establishing the Physical Planning/Architectural Tender for Developing the Preliminary Design for the Blato Thermal Spa in Zagreb (as published in Zagrebs official bulletin, Slubeni glasnik GZ, no. 18/2011)The Physical Planning/Architectural Tender should be held in 2013.The Zagreb Spa is a strategic project of the City of Zagreb according to ZAGREBPLAN, the City of Zagreb Developmental Strategy, Strategic Developmental Objectives to the end of 2013.The Project is nominated for funding from the EU's Structural FundsThe investment has an estimated value of 50 mil.

2122Conference Centre ProjectA multi-purpose centre would greatly spur the development of conference tourism.In mid-2005, a general survey-based competition was announced for a conceptual urban and architectural design for the site between Pierottijeva, Jukieva, Savska and Izidora Krnjavoga streetsThe jury proclaimed the tender a success. The award-winning works were purchased and can be used as a basis for further study and elaboration of the project at this site.The drafting of project documentation is in progressThe Project is nominated for funding from the EU's Structural FundsEstimated investment value:52 million.

2223Sole Trades Centre ProjectThe project has been planned in the Kajzerica district next to the URIHO site.A competition is underway to develop an urban and architectural design for small business, municipal and accompanying facilities in the Small-Business Centre (small business learning centre with facilities for theoretical studies and practical learning, business premises, a multi-purpuse hall and parking garage). The Agreement on Cooperation in Construction of the Sole Trades Centre with Academy between the City of Zagreb and the Sole Trades Chamber of Zagreb City of Zagreb Sole Traders Association was signed (in January 2013)Urban planing tender of conceptual design had been conductedThe Project is nominated for funding from the EU's Structural FundsEstimated investment value: 40 million

24Project to construct underground parking garages with additional facilities at the secondary school playground site designated as Savska-Kaieva-Klaieva-Krnjavoga

The project is being implemented through a concession of public-private partnership (PPP), in compliance with the Public-Private Partnership ActThe project foresees the landscaping of the secondary school playground, construction of a basement garage with service facilities and a connection to the Childrens Hospital in Klaieva street by underground corridor, and construction of a gymnasium, youth centre, transformer station and tramway rectifier station. The estimated construction cost is 40 million

2425Zagreb Airport ProjectA joint project by the RoC Government and the City of Zagreb. The RoCs share in Zagreb Airport Ltd. accounts for 55% of its capital, with the City of Zagreb holding 35%, and the City of Velika Gorica and the Zagreb County 5% of the companys capital each.On 14th February 2011 the Agency has issued approval to the Ministry of the Sea, Transport and Infrastructure for implementation of the project for construction of the New Zagreb Airport Terminal The Ministry of the Sea, Transportation and Infrastructure opened a tender on 18 February 2011 for Construction of the New Passenger Terminal at the Zagreb Airport, which also entails management of the existing and newly-constructed terminals at the Zagreb Airport and the accompanying infrastructureThe government has decided to give the 30 - year concession to build a new passenger terminal at Zagreb airport French consortium Zagreb Airport International Company (ZAIC) The value of this investment has been estimated at 250 million.

25

Aquarium Project in Zagreb

Planned construction site for the Aquarium: Old City Bathing Zone on the Sava RiverThe Zagreb Aquarium would be a great boon to Zagrebs tourism and overall economy, but its greatest importance would be the enrichment of everyday life for citizens of all ages. The primary purpose of the public aquarium would be educational, but it would also play a broader social role, and contribute to the economy, the hospitality industry, tourism and commerce.The Aquarium in Zagreb would serve as a window into the underwater world and an opportunity to teach and inform citizens of all generations.This has been defined as a city project, and a public survey physical planning/architectural tender will be conducted for it pursuant to the Programme to Draft the Physical Planning/Architectural TenderThe estimated value of the investment is 9 mil.27 Sljeme Cable Car ProjectThe projects objective is to link the city of Zagreb with Medvednica Nature Park and the Sljeme zone so that citizens and tourists in Zagreb can take advantage of the recreational, sporting and tourism amenities on Sljeme.The capital investment consists of 4 preliminary projects:Construction of a new lower station at the Dolje site with a public parking garage that can accommodate ca. 500 vehicles;A bus terminal with a capacity of ca. 10 buses;Construction beneath the tramcar terminal with public parking garage for ca. 460 vehicles and an overpass above Graanska road to transfer passengers to the area of cable cars initial station;A single-cable linewith a length of 4,907.49 m, suspended from 27 supporting towers with a maximum of 125 transport gondolas for 8 persons and a capacity of 1,500 passengers/h.Based on the technical documentation, the investment has been broken down into 4 preliminary projects for securing the site permit; besides the technical documentation, an environmental impact study has also been compiledThe Project is nominated for funding from the EU's Structural Funds

The investment has an estimated value of 40 mil.

2728City-owned companiesThe basic purpose of City-owned companies is to permanently provide quality vital public services of interest to natural and legal persons.

Performance January December 2012

Zagrebaki holding d.o.o.: Total revenues 510.000.100 Total expenses 557.406.915 Loss after tax 47.600.304

Consolidated financial results of the Zagrebaki holding Group:

Total revenues 744.634.638Total expenses 789.163.228Loss after tax 45.714.045

2829Holdings subsidiaries:AGM (publishing and bookshops)Autobusni kolodvor (bus terminal)istoa (public sanitation)Gradska groblja (municipal cemeteries)Gradsko stambeno komunalno gospodarstvo (housing and utilities management)Robni terminali Zagreb (commodity terminals)Stanogradnja (housing construction)Trnice Zagreb (green markets)Upravljanje sportskim objektima (sports facility management)Vladimir Nazor (youth holidays)Vodoopskrba i odvodnja (water supply and sewage)ZagrebparkingZagrebake ceste (road management)Zagrebaki digitalni grad (IT)Zagrebaki elektrini tramvaj (mass transit)Zagrebaki velesajam (trade fair)ZGOS (waste management)Zrinjevac (landscaping)Gradska plinara Zagreb d.o.o. (Municipal Gas Co. Ltd.) - 100%Gradska plinara Zagreb opskrba d.o.o. (Gas Supply Ltd.) - 100%Zagreb Arena d.o.o. za usluge (Event Services Ltd.) - 100%Zagreb plakat d.o.o. (Zagreb Billboard Ltd.) - 51%TERME ZAGREB d.o.o. (Thermal Spa Ltd. - 50%)APIS IT d.o.o. (IT Support Agency Ltd. - 49%)VODOPRIVREDA ZAGREB d.d. (Water Mgmt. Inc. 36.13%)ZRANA LUKA ZAGREB d.o.o. (ZG Airport Ltd. - 35%)BICRO BIOCENTAR d.o.o. (13%)Holds founders rights in the following institution:Gradska ljekarna Zagreb (Municipal Pharmacies)

Manages:Sports facilities owned by the City of Zagreb1. RAZVOJNA AGENCIJA ZAGREB - TPZ d.o.o. (Zagreb Development Agency Ltd.)City of Zagreb holds 100% shares in following companies :City of Zagreb holds certain shares in the following companes:Companies in which Holding has shares2. ZAGREBAKI HOLDING d.o.o. (Zagreb Holding Ltd.)

2930Roughly 13.448 sole trades, or 16.39% of the national total, operate in the CitySole trades in the City of Zagreb

Source: Ministry of Entrepreneurship and crafts Central Sole Tradership Register

31Structure of sole trades based on National Classification in 2007ACTIVITYNo. of sole traders%INDEX30.09.2013./ 31.12.2012.Retail commerce2.70120,193,0Hospitality1.56511,693,9Construction1.2399,294,2Transportation1.53611,496,6Hair, cosmetic and pedicure salons1.1968,999,6Textile and garment manufacturing3182,490,3IT3922,9101,0Accounting and bookkeeping3232,496,7Other4.17831,1TOTAL13.448100,095,4Status: as at September 2013

32

STRUCTURE OF SOLE TRADESbased on National Classification of Activities, 2007Source: Sole Tradership Register of the City Office of the Economy, Labour and Entrepreneurship Sole Tradership Register Unit and Sesvete and Susedgrad Local Units

33Development incentivesfor crafts, trades and SMEsThe Crafts, Trades and SMEs Development Incentive Programme was adopted in September 2000.

Incentive measures and activities include:

Allocation of incentive funds;

Development of business infrastructure through institutional development incentive networks.

33341. Allocation of incentive funds (2000 - 2012)Implemented through:

1.1 Loans to businesses

1.2 Subsidizing a portion of interest on business loans

1.3 Supports to sole traders

1.4 Supports to innovator

1.5 Other supports

34352. Development of business infrastructure2.1 Development Agency Zagreb - TPZ Ltd.

Projects and activities:

Technical and technological processing and preparation of inventions for use by businesses;

Education of already established businesses and start-ups at organized seminars;

Development of operating and investment plans for businesses;

Consulting services for introduction of systems of quality and/or environmental management - ISO 9001 and 14001;

Issuing guarantees for small business loans;

Development of economic projects and studies, development and management of projects financed by EU funds, etc.

35362.2 Business zones

The City of Zagreb Business Zone Development Programme was adopted in 2005.

2.3 Clusters

Launch of the Clusters for Competitive Products project;

Preparation of a study for the Vehicles, Machine-Tools and Tools Cluster;

To date, a total of 109.845,45 has been spent for the implementation of the project.

3637Structure of funds spent to implement Programme incentive measures and activities(September 2000 August 2013)

35.915.433,51

3738TOTAL FUNDS EXPENDED TO IMPLEMENT PROGRAMME INCENTIVE MEASURES AND ACTIVITIES(September 2000 December 2012)In

3839Zagreb as a tourist destinationas a business and administrative hub, Zagreb accounts for approximately 6% of tourist arrivals and 2% tourist overnights in Croatia

the total number of tourist arrivals in Zagreb in 2012 was 767.366 and 590.538 (77%) were foreign guests. The total number of recorded overnights is 1.245.669, of which 963,863 (77%) accounted for foreign visitors.

COMPARISON OF RESULTS RECORDED IN I. - XII. 2011 and I. XII. 2012 PERIODS:

I. XII.2011. No. of tourist arrivals730.945 (+9 % in comparison to 2010.) - of these foreign 551.043 (+13 % in comparison to 2010.) No. of tourist overnights 1.183.125 (+8% in comparison to 2010.) - of these foreign 884.055 (+10% in comparison to 2010.)

I. XII.2012. No. of tourist arrivals767.366 (+5 % in comparison to 2011.) - of these foreign 590.538 (+6 % in comparison to 2011.) No. of tourist overnights 1.245.669 (+5% in comparison to 2011.) - of these foreign 963.863 (+8% in comparison to 2011.)

Source: City Strategic Planning and Urban Development Office Statistics Department3939394141 40 40Tourists arrivals and overnights 2006. 2012.I. VI. 2013. 476.056 arrivals, growth of 14,2 % as compared to the same period of 2012.805.339 overnights , growth of 17,2% as compared to the same period of 2012.

Izvor: Gradski ured za strategijsko planiranje i razvoj Grada - Odjel za statistiku

ArrivalsOvernights(in 000)Y e a r4041Estimated tourist spending in the City of Zagreb in 2009, Tourism Institute

Context for the development of the City of Zagreb as a tourist destination Tourist spending in the City of Zagreb in 2009

Context for the development of the City of Zagreb as a tourist destinationThe City of Zagreb investment policy directly impacts the development of tourism through implementation of the following capital projects:Zagreb Airport ProjectConference Center ProjectZagreb Sports and Recreation Zone Paromlin Hotel/Residential ComplexStrategic recommendations for tourism development in the City of Zagreb*:The focus of tourism development will be based on 3 key products: 1). Business and Culture, with events2). Tours and Brief Vacations3). Cuisine/Shopping and Special Interests42

THANK YOU FOR YOUR ATTENTION!Republic of CroatiaCity of ZagrebCity Office for Economy, Labour and EntrepreneurshipTrg S. Radia 1Phone: +385 1 610 1194, 610 1102Fax: +385 1 610 1499, 610 1077E-mail: gospodarstvo@zagreb.hrURL: http://www. zagreb.hr42Sheet1UKUPNA SREDSTVA ZA PROVEDBU POTICAJNIH MJERA I AKTIVNOSTI IZ PROGRAMA ( rujan 2000. prosinac 2009.)Grad ZGMinistarstvo53,700,000.008,640,000.0033,165,656.4124,692,182.6418,691,150.003,466,382.241,671,000.005,801,819.03116,496,007.6833,332,182.641*149,828,190.3232,780,762.969,681,223.002,538,112.00650,000.00650,000.00800,000.0043,911,985.963,188,112.0047,100,097.96SVE uk160,407,993.6436,520,294.642*196,928,288.28SVE Grad i Min196,928,288.283*TOTAL FUNDS EXPENDED TO IMPLEMENT PROGRAMME INCENTIVE MEASURES AND ACTIVITIES (September 2000 August 2009)EUR:7.28296HNB srednji teaj na dan 23,02,2010,City of ZagrebMinistriesAllocation of incentive fundsDeposits with financial institutions7,108,919.101,143,781.40Subsidies for a portion of interest6,590,841.925,349,913.39Supports to sole traders4,319,788.46Supports to innovators934,238.49Intervention funds to entrepreneurs2,585,290.15Other supports989,267.52Total:22,528,345.636,493,694.791*20,572,430.76Business infrastructure developmentDevelopment Agency Zagreb TPZ Ltd.- business premises4,359,443.76- operating costs, projects and activities1,760,155.53454,752.92- regional security instruments86,048.3786,048.37Clusters for Competitive Products project146,944.14Total:6,352,591.79540,801.296,467,164.17Overall total:28,880,937.437,034,496.082*27,039,594.93Overall total (City and ministries):35,915,433.513*

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