Koncar Elektroindustrija : 27.07.2016. SUPERVISORY BOARD MEETING OF KONČAR - ELECTRICAL INDUSTRY Inc. WAS HELD

Koncar - Elektroindustrija d.d

BOARD'S REPORT ON MANAGEMENT OF KONCAR GROUP FOR THE PERIOD JANUARY-JUNE 2016

Koncar Group consists of KONCAR - ELECTRICAL INDUSTRY Inc. as the parent company and 17 related companies in which the parent company has a controlling influence (more than 50% of the votes in the General Assembly). In part of the companies, apart from common shares, regular shares were also subscribed. In addition, the parent company exercises minority managerial influence (49% of the votes in the General Assembly) in an (associated) company.

Companies within the Group are legally independent companies and the parent company supervises them, directs them strategically and supports them through supervisory boards and companies' assemblies in accordance with the Companies Act, the Statutes of KONCAR - ELECTRICAL INDUSTRY Inc. and the statutes of the companies. The parent company also manages part of the assets not invested in the companies, but is directly or indirectly in function of financial support of sales, products and equipment of associated companies as a credit - guarantee potential.

Potential liabilities of KONCAR - Electrical Industry Inc. for the total issued guarantees on the date 30 June 2016 amounted to 581.8 million HRK, which is a decrease in the amount of 117.2 million HRK compared to 31 December 2015.

The reduction applies to payment and performance guarantees of the company KONCAR - Electric Vehicles Inc. in the amount of 165.4 million HRK, and the reduction of guarantees for loans of associated companies in the amount of 28.1 million HRK with an increase in performance guarantees of KONCAR - Power Plant and Electric Traction Engineering Inc. in the amount of HRK 68.8 million HRK and other companies in the amount of 7.5 million HRK.

The share of performance guarantees in the total guarantees and joint and several guarantees amounts to

Koncar - Elektroindustrija d.d_ , Fallerovo setaliste 22, 10000 Zagreb, Hrvatska, www.koncar.hr

Predsjednik Nadzomog odbora: Petar Vlaic: Uprava: Darinko Bago: predsjednik. Marina Kralj Milisa. Jozo Miloloia, Davor Mladina. Miroslav Poljak: clanovi Reg1stmano: Trgovacki sud Zagreb , MBS 0800409036 . Ziro racun Zagrebacka banka d d poslovni racun broj 2360000-1101376107 MB: 3282635 . 018: 45050126417

Changes in ownership structure

In May 2016 Restructuring and Sale Centre published an invitation for expression of interest and submission of binding offers for the purchase of 526,926 shares of Koncar - Electrical Industries Inc property of the Republic of Croatia and the Croatian Pension Insurance Institute. The shares constitute 20.49% of the share capital of the Company.

After the sale of shares there have been significant changes in the ownership structure of the Company. Share ownership of Addiko bank d.d. I PBZ CO OMF - category B increased from 9.95% to 16.37%, the share

ownership of Societe Generale - Splitska Banka dd / AZ OMF-category B increased from 6,84% to 14.50%, the share ownership of Societe Generale - Splitska Banka dd / Erste plavi OMF-category B increased from 7.86% to 13.97%. Valmar Riviera d.d. left the group of ten largest shaerholders and Addiko banks d.d./OMF­ category B (1.88%) and Zagrebacka Banka d.d./AZ Profit Voluntary Pension Fund (1.12%) entered that group. The share ownership of the State Administrative Office for State Property Management / Republic of Croatia was reduced from 4.58% to 2.33%.

After the sale of shares, the ownership structure of the company is as follows:

Koncar - Elektroindustrija d.d . Fallerovo setaliste 22, 10000 Zagreb, Hrvatska . www.koncar .hr

Predsjednik Nadzomog odbora Petar Vlaic: Uprava: Darinko Bago: predsjednik Marina Kralj Milisa Jozo Miloloia. Davor Mladina. Miroslav Poljak: clanovi Registrirano Trgovacki sud Zagreb MBS 0800409036 Ziro racun Zagrebacka banka d d . poslovni racun broj 2360000·1101376107. MB: 3282635. OIB: 45050126417

The President and Board members are appointed and removed by the Supervisory Board. The term of office of the President and Board members is 5 years, after which they can be reappointed. According to the Companies Act and the Articles of Association the Management Board manages affairs on its own responsibility, and it is obliged and authorized to take all actions and decisions it deems necessary for the successful management of the Company. For certain decisions, as prescribed by the Articles of Association the consent of the Supervisory Board is required.

The Company Konear - Electrical Industries Inc. is managed by the Board consisting of: Darinko Bago President of the Management Board

Marina Kralj Milisa Board member responsible for legal activities, general administrative services and human resources

Jozo Milolofa Davor Mladina

Miroslav Poljak

Board member responsible for finance

Board member responsible for transmission and distribution of electrical energy, industry and trade

Board member responsible for electrical energy production, corporate development and ICT

Note: At the Supervisory Board meeting held on 20 July 2016 at the proposal of the Chairman of the Board, former deputy member of the Board Miki Huljic was appointed a member of the Board of Koncar - Electrical Industry Inc.

Pursuant to the provisions of the Companies Act and the Articles of Association of KONCAR - Electrical Industry Inc, the General Assembly makes the decisions on election and recall of the Supervisory Board. The Supervisory Board is responsible for appointing and removing members of the Management Board and for supervising the operations of the Company. Significant transactions and business decisions (the amount of transactions determined by the Rules of Procedure of the Supervisory Board and the Articles of Association of associated companies) require the consent of the Supervisory Board.

Until the expiration of the mandate of the Supervisory Board members Vicko Feric, Nenad Filipovic, Petar Misura, Dragan Marcinko and Nikola Plavec on 3 July 2016, the Supervisory Board was composed of:

Nenad Filipovic Jasminka Belacic Boris Drazenovic Vicko Feric Dragan Marcinko Petar Misura Nikola Plavec Ivan Rujnic

Petar Vlaic

Chairman of the Supervisory Board

Vice Chairman of the Supervisory Board Member

Member Member Member Member Member Member

Koncar - Elektroindustrija d.d . Fallerovo setaliste 22, 10000 Zagreb, Hrvatska , www.koncar.hr

Predsjednik Nadzornog odbora: Petar Vlaic: Uprava: Darinko Sago: predsJednik Marina Kralj Milisa. Jozo Miloloia Davor Mladina. Miroslav Poljak: clanovi Reg1stnrano Trgovacki sud Zagreb , MBS 08004090 36 Ziro racun Zagrebacka banka d d poslovni racun broj 2360000-1101376107 MB: 3282635 . OIB: 45050126417

General Assembly held on 12 July 2016 adopted a decision on the election of the Supervisory Board members. The elected members of the Supervisory Board are the following: Vicko Feric, Branko Lampl, Petar Vlaic, Josip Lasic, Josko Milisa and Nikola Anic. The Supervisory Board members were elected for a term of four years which starts on 12 July 2016. The association of small shareholders appointed Vladimir Withers as their representative in the Supervisory Board. The member of the Supervisory Board appointed by the workers is Jasminka Belacic.

Members of the Supervisory Board accepted the proposal to elect Petar Vlaic for the Chairman of the Supervisory Board, and Josip Lasic for the Vice Chairman of the Supervisory Board.

Koncar - Elektroindustrija d d., Fallerovo setaliste 22, 10000 Zagreb, Hrvatska. www.koncar .hr

Predsjednik Nadzomog odbora: Petar Vlaic; Uprava: Darinko Bago: predsjednik. Marina Kralj Milisa.Jozo Miloloza, Davor Mladina. tv'iroslav Poljak; clanovi Registrirano : Trgovacki sud Zagreb. MBS 0800409036 . Ziro racun: Zagrebacka banka d d . poslovni racun broj 2360000· 1101376107, MB: 3282635 . OIB: 45050126417