Eurohold Bulgaria AD. Annual Report

Transcription

1 Eurohold Bulgaria AD Annual Report 31 December 2011

2 CONTENTS 1. Management report for Independent Auditor s Report...45 Further information on: About Us Structure Corporate Management Information for investors Communications and Media you can find on: 3. Financial Statements Notes to the Financial Statements

3 KEY INDICATORS Indicators 2011 Change Income Statement 1. Profit / loss (before taxes) BGN % Net profit / loss (after tax) BGN % Revenue BGN % Statement of financial position as of December, Equity BGN % Liabilities (long- and short-term) BGN % Assets (long- and short-term) BGN Information on the shares Share Capital BGN % Number of shares BGN % Net profit / loss per share BGN % Finanancial Ratios Coefficient of financial autonomy BGN % Debt / Equity ratio BGN % Gross return on revenue BGN % % 11.90% 57.84% Net return on revenue BGN % 771% 17.87% 11.90% 50.90% Gross return on equity BGN % -66% 1.43% 1.08% 13.20% Net return on equity BGN % 248% 1.43% 1.08% 11.61% Gross return on liabilities BGN % % 1.61% 15.23% Net return on liabilities BGN % 953% 2.64% 1.61% 13.41% Gross return on assets BGN % -56% 0.93% 0.65% 7.07% Net return on assets BGN % 355% 0.93% 0.65% 6.22% 3

4 9 BGN mln. 14 BGN mln. Total revenue for 2011 see p. 17 Net profit for 2011 г. see p BGN mln. 330 BGN mln. Net assets see p. 16 Total assets see p. 15 (52)% 0.15 BGN Decrease in liabilities in 2011 see p. 16 EPS for 2011 г. see p. 18 4

5 Management Report of EuroHold Bulgaria AD for 2011 The present report has been drafted in compliance with the provisions of article 100n of the Law on Public Offering of Securities, article 247 of the Commerce Act, article 33 of the Accountancy Act, and appendix 10 to article 32, paragraph 1, item 2 of Ordinance 2 of on the prospectuses to be published when securities are offered to the public or admitted to trading on a regulated market, and on the disclosure of information by public companies and other issuers of securities. The management report of Eurohold Bulgaria AD presents commentary and analysis of the financial statements and of other material information about the financial position and results achieved as a result of the operations of the company. The report reflects the company s position and prospects for development, as well as the main risks faced by it. Eurohold Bulgaria AD also drafts a consolidated annual report on the activity which includes the financial results of the parentcompany, its subsidiaries and associated companies. In order to get a comprehensive picture of the Group s financial position as a whole, the users of this annual report should read it in conjunction with the consolidated annual report of Eurohold Group for In managing the company, the members of the Management Board apply the best international practices in corporate governance, seeking to be among the leaders in the implementation of transparent corporate practices in Bulgaria. The business model implemented by the company is built on fundamental principles such as ensuring the rights of and the equal treatment of all shareholders. I.COMPANY OVERVIEW History The trade name of the company is EUROHOLD BULGARIA AD. The trade name is defined in Art. 2, paragraph 1 of the Articles of Association of the Company. According to Art. 2, paragraph 3 of the Articles of Association, the trade name of the company may be spelled in English, as follows: EUROHOLD BULGARIA S.A. EuroHold Bulgaria AD is a holding company, registered in the Republic of Bulgaria, which operates in compliance with Bulgarian legislation. EuroHold Bulgaria AD is a public company as defined in the Public Offering of Securities Act. The initial registration of the Company is with the Commercial Registry at Sofia City Court, under file 14436/ 2006, under , volume 1509, page 116. On EuroHold Bulgaria AD was reregistered with the Commercial Registry at the Registry Agency in compliance with the requirements of the Commercial Registry Act. The unique identification code (UIC) of the Company is EuroHold Bulgaria AD has been set up for an indefinite term, which means that the Company is not limited by a specific term or other preclusive condition. EuroHold Bulgaria AD is a public limited company formed by the merger between EuroHold AD, registered under file 13770/ 1996 of Sofia City Court and Starcom Holding AD, registered under file 6333/ 1995 of Sofia City Court. By means of the merger, the newly established holding company EuroHold Bulgaria AD strengthened its position as one of the biggest Groups in Bulgaria with significant potential for development, considerable equity and financial resources. EuroHold Bulgaria AD was established with a capital in the amount of BGN 50,002,586, divided into 50,002,586 ordinary, registered, nonprivileged, dematerialized shares with one vote at the General Meeting of the Shareholders, with dividend rights and liquidation quota, with a nominal value of BGN 1 each one. Since the Company s establishment several capital increases by cash contributions have been performed and as of the date of this report the capital of the Company amounts to BGN 127,345,000, divided into 127,345,000 ordinary, registered, non-privileged, dematerialized voting shares, with dividemd rights and liquidation quota, with a nominal value of BGN 1 each one. The capital of the Company has not been increased by contributions in kind. The Company has not issued any shares that do not represent capital. All shares, excluding the shares owned by subsidiary companies, issued by EuroHold Bulgaria AD give their owners the right to vote at the General Meeting of the Shareholders. 5

6 When EuroHold Bulgaria AD was first established, it had many subsidiaries in its structure, which operated in the fields of insurance, leasing, real estate and manufacturing. Aiming at optimizing its costs and achieving higher synergies among all subsidiaries, EuroHold s management decided to split its subsidiaries functionally into separate legal entities within the Group. On EuroHold Bulgaria AD founded EuroIns Insurance Group EAD, aiming at the consolidation of its insurance activities. On a session of the General Meeting of the Shareholders of EuroHold Bulgaria AD was held and a decision was reached to do a contribution in-kind of the shares, held by EuroHold Bulgaria AD in its subsidiaries EuroIns AD, EuroIns Romania Asigurare Reasigurare SA and the health assurance company St. Nicolay Chudotvorets EAD (currently EuroIns Health Assurance EAD). The described in-kind contribution was performed after the Bulgarian Financial Supervision Commission and the Romanian Insurance Supervisory Commission granted their approvals. Subsequently, EuroIns Insurance Group EAD acquired Macosped Osiguruvanje AD, Skopje (currently EuroIns Osiguruvanje AD, Skopje), whereby the acquisition was approved by the Ministry of Finance of the Republic of Macedonia on At the end of 2008 began the formation of the automotive sub-holding of EuroHold Bulgaria AD EuroHold Automotive Group EAD. The company was founded in 2007 and its initial share capital was formed by a contribution in-kind of the shares from the capital of Cargoexpress EOOD (currently Bulvaria Varna EOOD) a dealer of Opel and Chevrolet for the city of Varna. Similar to the establishment of EuroIns Insurance Group EAD, the consolidation of the automotive activities of EuroHold Bulgaria AD was made by means of a contribution in kind of the company s shares in its subsidiaries Scandinavia Motors EAD official importer of SAAB for Bulgaria, Nissan Sofia AD the biggest dealer of Renault Nissan Bulgaria and EuroLease Rent-a-Car EOOD exclusive franchise partner of Budget Rent-a-car for Bulgaria. The General Meeting of the Shareholders of EuroHold Bulgaria AD approved the above described contribution in-kind at its session held on , and on the automotive sub-holding was founded. In the meantime, in April 2009 EuroHold Automotive Group EAD, renamed to Avto Union Group EAD, acquired control over Avto Union AD s group, which owns Auto Italia EAD official importer of Fiat and Lancia for Bulgaria, Bulvaria Holding EAD Opel and Chevrolet dealer in Sofia, Gransport Auto EOOD official importer of Maserati for Bulgaria, Milano Motors EOOD official importer of Alfa Romeo and the scooters Piaggio, Vespa and Guillera, Star Motors EOOD official representative of Mazda for Bulgaria and Bulvaria Rent-a-Car EOOD franchise partner of Avis Europe for Bulgaria. At the end of 2010 EuroHold Automotive Group EAD (currently Avto Union Group EAD) transferred its participations in Scandinavia Motors EAD, Nissan Sofia AD and EuroLease Rent-a-Car EOOD to Avto Union AD. In 2010, Avto Union AD also acquired Espace Auto EOOD. In the end of 2010 Avto Union Group EAD sold its shares in Avto Union AD to Eurohold Bulgaria. By this transaction the reorganization of the automotive group has been completed. The ownership right over the shares has been transferred entirely in In 2011 the transaction was finalized and the total consideration was determined based on conditions included in additional agreement between the parties. In 2011, Bulvaria-Rent-a-Car EOOD was pooled into EuroLease Rent-a-Car EOOD, which became its universal assignee. This primary aim of this transformation has been to optimize the operating costs of the company and to achieve better market segmentation, which in turn will improve the levels of customer service and satisfaction. This is a prerequisite to strengthen the market presence of Avis and Budget in Bulgaria and to increase their market shares. In the end of 2011, Avto Union AD signed preliminary contract and agreement to transfer the effective control in Eurolease rent-a-car to the leasing subsidiary BG Autolease Holding B.V., whereby the management of the company was transferred to the new owner. On the final contract for the transfer of the shares was signed. At the end of 2008 EuroHold Bulgaria AD acquired 100 per cent of the share capital of the Dutch company BG AutoLease Holding B.V. (with former trade name Wivotech B.V.), which in turn had acquired another Dutch company BG AutoLease Group B.V. (with previous trade name Doesign B.V.). EuroHold Bulgaria AD decided to do an inkind contribution in the share capital of its subsidiary company BG AutoLease Holding B.V. of its controlling stakes in EuroLease Auto EAD, Bulgaria, EuroLease Auto IFN SA, Romania, EuroLease Auto EAD, Macedonia. BG AutoLease Holding B.V. in turn contributed in-kind the aforementioned shareholdings in the capital of BG AutoLease Group B.V. the leasing subsidiary in the structure of EuroHold Bulgaria AD. EuroHold Bulgaria AD deemed its manufacturing companies as non-strategic, therefore a decision for their sale,which took place in August 2008, was taken. 6

7 EuroHold Bulgaria AD owns the investment intermediary Euro-Finance AD, which is a member of the Group since In the real estate business the Group owns two companies EuroHold Imoti EOOD and Avto Union Properties EOOD. Scope of Business The official scope of activity of EuroHold Bulgaria is acquisition, management, evaluation and sale of shares of Bulgarian and foreign companies; acquisition, management and sale of bonds; acquisition, evaluation and sale of patents, concession of licenses for patent use to companies where the Company has shares; financing of companies where the Company has shares. The Company can participate in Bulgarian and foreign companies and organizations, regardless of their scope of business activity, as long as it complies with the conditions set by the Law and the Articles of Association of the Company. The company operates in compliance with Bulgarian legislation. The main acts, governing its activities are the Commerce Act, the Law on the Public Offering of Securities, the Financial Supervision Commission Act, the Law on Measures against Money Laundering, the Supplementary Supervision of Financial Conglomerates Act. The main ordinances in place are the Ordinance 2 of September 17, 2003 on the prospectuses to be published when securities are offered to the public or admitted to trading on a regulated market, and on the disclosure of information by the public companies and the other issuers of securities, Ordinance No. 39 of 21 November 2007 on the disclosure of a holding in a public company, Ordinance on the minimum contents of a proxy form for the general meeting of shareholders of a company, whose shares have been subject to a public offering etc. Headquarters and Address of the Management The headquarters and the address of the management of EuroHold Bulgaria AD is Republic of Bulgaria, Sofia, 1592, 43 Christopher Columbus blvd. The head office of the Company is located at the same address. This is also the official correspondence address of the Company. Business address: 43 Christopher Columbus Blvd. Telephone 02/ ; 02/ Fax 02/ Web site [email protected]; [email protected] Since the registration of EuroHold Bulgaria AD as a business entity, there has been no change in the Company s name. There have been no changes in the scope of activity of the Company. The Company is not limited by time or another termination condition. So far the Company has not transferred or pledged its entity, has not acquired and has not disposed of assets of significant value outside the Company s usual course of business. EuroHold AD is not aware of any filed claims for the opening of an insolvency proceeding against itself or any of its subsidiaries. Management Bodies EuroHold Bulgaria AD has a two-tier management system, as follows: a Management Board which consists of four natural persons and one legal entity, and a Supervisory Board of three natural persons. Management Board The Management Board of EuroHold Bulgaria AD consists of five members: Kiril Ivanov Boshov Chairman; Assen Minchev Minchev Executive Director (CEO); Zlatolina Ivanova Mukova Member; Assen Emanuilov Assenov Member; Expat Capital AD member, through its two representatives Nicola Simeonov Yankov and Lubomir Christov Stoev Supervisory Board The Supervisory Board consists of four members: Assen Milkov Christov Chairman; Dimitar Stoyanov Dimitrov Vicechairman; Ivan Georgiev Munkov Independent member; Nikolay Vassilev Vassilev Independent member. There are no family ties among the members of the Management Board and the Supervisory Board, including the natural persons, representing the legal entity member of the Management Board. The activity of the company is not dependent on the individual professional experience or qualifications of other employees. 7

8 The company is represented by the Executive Director of the Management Board, Assen Minchev Minchev, and the Chairman of the Management Board, Kiril Ivanov Boshov. Share capital As of the date of this report the share capital of the Company amounts to BGN , divided into ordinary, registered, non-privileged, dematerialized voting shares, with dividend right and liquidation quota, with a nominal value of BGN 1 for each share All of the Company s shares are from the same class and are fully paid in. The entire capital of the Company has been paid in with cash. All the shares issued by the Company are in circulation. The Company s shares are registered for trade on the Premium Equities Segment of the Bulgarian Stock Exchange Sofia AD with stock index 4EH. After the successful completion of the dual listing procedure of the shares of EuroHold Bulgaria AD, the shares were registered for trading on the Warsaw Stock Exchange (WSE), Main List, with stock index EHG. The first day of trading on the WSE was 15. December The Company hasn t bought and, hence, does not possess its own shares. As of ,227,682 shares of the capital of EuroHold Bulgaria are owned by subsidiary companies. The shares have a nominal value of 1 BGN each. The Company has not issued shares which do not represent capital. All shares issued by EuroHold Bulgaria AD give their owners voting rights on the General Meeting of the Shareholders. The Bulgarian legislation does not govern the existence of any authorized but unissued capital, therefore there are no acquisition rights and/ or obligations over the Company regarding authorized but unissued capital. The share capital of the Company has not been increased by in-kind contributions. The Company has not undertaken any actions related to the issuance of warrants, convertible and exchangeable securities or rights. The competent body to make any decisions related to the Company s capital increase is the General Meeting of the Shareholders. As per Art. 13, paragraph 5 of the Articles of Association of EuroHold Bulgaria AD, the Management Board of the Company can take decisions to increase the capital of the Company to up to EUR 200,000,000 (two hundred million) for a period of 5 (five) years after a registration with the Commercial Registry of an amendment to the Company s Articles of Association, which was voted on the General Meeting of the Shareholders on , and is in compliance with the provisions of Art. 194, paragraph 1 and 2, Art. 196, paragraph 1 and 2 of the Commerce Act, as well as with the provisions of the Public Offering of Securities Act. There are no parties that own equity options over EuroHold s capital or over the capital of any of the companies, members of EuroHold Group. EuroHold Bulgaria AD and its subsidiaries do not have any engagements to issue such options. Changes in the Share Capital EuroHold Bulgaria AD was established on with a capital in the amount of BGN 50,002,586, divided into 50,002,586 ordinary, registered, non-privileged, dematerialized shares, with one voting right on the General Meeting of the Shareholders, with dividend rights and liquidation quota, with a nominal value of BGN 1 each one. The Company s capital has been formed by a merger without liquidation between EuroHold AD and Starcom Holding AD. The amount of the capital is defined in the Reorganization Agreement, approved at the General Meeting of the Shareholders of the two merged companies. Between May and June 2007 EuroHold Bulgaria AD executed a successful capital increase subscription by issuing 12,500,646 new shares with a nominal value of BGN 1 per share and issue value of BGN 3.35 per share. During the course of the subscription 50,002,586 rights were issued and each one gave the right to purchase 0.25 new shares. The total amount of the subscribed and paid in shares reached 12,495,050 or 99.96% of the amount offered. After this capital increase was completed, the Company s capital amounted to BGN , divided into ordinary, registered, non-privileged, dematerialized voting shares, with dividend right and liquidation quota, with a nominal value of BGN 1 each one. Between March and May 2011, with a resolution of the Management Board of EuroHold Bulgaria AD, on grounds of the powers granted by Article 13, paragraph 5 of the Articles of Association of the Company, the capital of EuroHold Bulgaria AD was increased through the issuance of 46,146,076 new shares with a nominal value of BGN 1 and issue value of BGN 1 per share. The Company issued 62,497,626 rights whereas the ratio of rights/new shares was 1/1. 46,146,076 shares were subscribed or 73.84% of the amount offered 8

9 for subscription. As a result, the capital of the Company amounted to BGN 108,643,712, divided into 108,643,712 ordinary, registered, nonprivileged, dematerialized voting shares, with dividend right and liquidation quota, with a nominal value of BGN 1 each. On the Management Board of EuroHold Bulgaria AD took the decision for a subsequent capital increase of EuroHold Bulgaria AD. The Company issued 36,214,570 new rights at a ratio number of rights/new shares 3/1. 18,701,288 new shares were subscribed or 51.64% of the rights offered. The total capital of the Company was increased from 108,643,712 to 127,345,000 BGN. The new issue was registered in the Commercial Register on and started trading on the Bulgarian Stock Exchange (BSE) on Expected is a registration for admission to trading of the new issue to the Warsaw Stock Exchange (WSE), where the Company s shares have been traded since , following the dual listing Shareholder structure (number of shares) Starcom Holding AD Expat Capital AD Other legal entities Other physical entities The majority shareholder of EuroHold Bulgaria AD is Starcom Holding AD. The majority shareholder does not own shares, bearing different voting rights. The seat and business address of Starcom Holding AD is Bulgaria, Etropole, 191, Ruski blvd. Shareholder structure(%) 5.4% Starcom Holding AD Regarding the Company there are no applicable actions which could lead to a change in the shareholders rights. 26.9% 50.9% Expat Capital AD Other legal entities There are no provisions in the Articles of Association and/or in the Internal Regulations of EuroHold Bulgaria AD, which could lead to delaying, deferring or preventing a change in the control of the Company There are no provisions governing the ownership threshold above which shareholder ownership should be disclosed in the Articles of Association and/or in the Internal Regulations of the Company. There are no provisions in the Articles of Associations of the Company, which define stricter rules, than the ones required by the law about changes in the capital. 16.8% Other physical entities As of the date of the present report, Starcom Holding AD controls per cent of the issued shares, out of which per cent are object of repo deals. Starcom Holding AD is the only entity that may exercise direct control over EuroHold Bulgaria AD. The Chairman of the Supervisory Board of EuroHold Bulgaria AD, Assen Christov, may exercise indirect control over the Company. Assen Christov is a majority shareholder and directly owns 51 per cent of the voting shares of Starcom Holding AD. Through this stake, Assen Christov controls directly the majority shareholder and indirectly EuroHold Bulgaria AD. Shareholder Structure As of the end of the fiscal year, there are two legal entities that own on a nominal basis more than 5 per cent of the shares with voting rights. There are no natural persons shareholders, who directly hold more than 5 per cent of the shares with voting rights. All issued shares are from the same class and give one voting right each. Expat Capital AD is the second main shareholder in EuroHold Bulgaria, in possession of a qualifying stake in the Company s capital. As of the date of this report Expat Capital AD controls the voting rights of approximately 17% of the issued and outstanding shares. The shares of Expat Capital AD do not bear different voting rights. Expat Capital AD is a joint stock company, duly incorporated and operating under the laws of the Republic of Bulgaria. The Company has its registered office in Sofia, 96A, G.S. Rakovski str. 9

10 The company's capital amounts to BGN 1,124,000, divided into 1,124,000 shares with a nominal value of BGN 1 each. The company is managed by a Board of Directors Nikola Simeonov Yankov, Nikolay Vassilev Vassilev and Lyubomir Hristov Stoev. Expat Capital AD is the sole owner of a licensed management company Expat Asset Management EAD, which manages three mutual funds and many individual portfolios. Expat Capital AD is the management company of Expat Beta REIT that invests in real estate in Bulgaria. Eurohold Bulgaria AD neither has arrangements with other parties, nor is aware of such arrangements the enforcement of which might result in a future change in the Company s control. The primary way for restricting possible abuse on behalf of the majority shareholder with the operations or the assets of the Company is through applying the provisions of article 114 of the Law on the Public Offering of Securities, which stipulate that the company may not, unless being explicitly empowered to do so by the General Meeting of the Shareholders, acquire, transfer, obtain or grant for use, or as a collateral in any form whatsoever, fixed assets, as well as obligations to be incurred to any stakeholders when the transactions/ obligations exceed 2 per cent of the company s assets. The Statutes of the Company do not provide any additional restrictions. The Company s capital has not been increased through in-kind contributions. The Company has not issued any shares that do not represent capital. All shares, issued by EuroHold Bulgaria AD, give their owners the right to vote at the General Meeting of Shareholders. II. OVERVIEW OF ACTIVITY Main Scope of Activity EuroHold Bulgaria AD is registered in the Republic of Bulgaria. Its main activities include: acquisition, management, evaluation and sale of participations in Bulgarian and foreign companies financing of companies, where the c\company participates; participation in Bulgarian and foreign companies. EuroHold Bulgaria AD s revenues are formed mainly by its financial activity, related to acquisition, disposal and management of participations and financing of related companies. As of EuroHold Bulgaria AD has direct participation in five subsidiary and two associated companies. 19.6% Breakdown of investments % 0.5% 8.4% 65.8% Insurance Car sales Leasing Asset management and brokerage Real estate The companies from EuroHold Bulgaria AD s portfolio operate on the following markets: insurance and health assurance market, leasing market, financial, automotive, real estate. The overall business is focused across the line of Car sales Leasing Insurance. During the period covered by historical information the Group s companies offer the following services: Insurance services; Health assurance services; Financial and operational leasing; Financial intermediation; Sales of new cars; Sales of used cars; Car repair services; Sales of spare parts; Rent-a-car; Investment properties management 10

11 Capital Investments Description % ownership Number of shares Investments (BGN) Method of financing Investor EuroHold Bulgaria AD Investments in 2008 EuroLease Auto Skopije EAD Incorporation EuroIns Insurance Group Capital Increase EuroLease Auto EAD Capital Increase EuroLease auto IFN Romania Share purchase EuroLease auto IFN Romania Capital Increase EuroLease auto IFN Romania Share purchase Eurohotels AD Capital increase Geoenergoproekt AD Share purchase BG AutoLease Holding, the Netherlands Share purchase EuroLease Rent-a-car EOOD Capital Increase 100% Own funds EuroHold Bulgaria AD 100% Borrowings EuroHold Bulgaria AD Own funds EuroHold Bulgaria AD 51% Own funds EuroHold Bulgaria AD 66,92% Own funds EuroHold Bulgaria AD 70.54% Own funds EuroHold Bulgaria AD 91.21% Own funds EuroHold Bulgaria AD 80% Own funds EuroHold Bulgaria AD 100% Own funds EuroHold Bulgaria AD 100% Own funds EuroHold Bulgaria AD Autoplaza EAD 50% Own funds EuroHold Bulgaria AD Total Investments in subsidiaries in 2008 EuroIns Share purchase Macedonia 83,25% Own funds EIG AD EuroIns Capital increase Macedonia 8,10% Distribution of dividends EIG AD EuroIns Capital increase Takovo, Share purchase EuroIns Capital increase EuroIns Share purchase EuroIns Capital increase EuroIns Share purchase Macedonia Serbia AD AD Romania Romania 47,48% Own funds EIG AD 10% Own funds EIG AD 14,92% Own funds EIG AD 1,84% Own funds EIG AD 29,21% Own funds EIG AD 0,70% Own funds EIG AD EuroIns Health Insurance EAD Capital increase EuroIns Health Insurance EAD Share purchase 10,63% Own funds EIG AD 44,68% Own funds EIG AD EuroIns Share purchase Macedonia 83,25% Own funds EIG AD Total EuroHold Bulgaria AD investments in 2009 Euro-Finance Share purchase AD 99,99% Own funds EuroHold Bulgaria AD 11

12 EuroLease Auto Skopije EAD Capital increase 100% Own funds EuroHold Bulgaria AD Autoplaza EAD 100% Own funds EuroHold Bulgaria AD BG Autolease Holding, the Netherlands, Capital increase Eurolease auto EAD Share purchase 100% Own funds EuroHold Bulgaria AD 22,46% Own funds EuroHold Bulgaria AD Total Investments in subsidiaries in 2009 Avto Union Holding, BVI Share purchase 100% Own funds Avto Union Group AD Kamalia Share purchase Inter Share purchase EuroIns Share purchase EuroIns Capital increase EuroIns Share purchase Limited Sigorta AD Romania Romania 100% Own funds Avto Union Group AD 90,75% Own funds EIG AD 2,61% Own funds EIG AD 36,96% Own funds EIG AD 1,55% Own funds EIG AD Star Motors EOOD Capital Increase 100% Own funds Avto Union AD Total EuroHold Bulgaria AD investments in 2010 Geoenergoproekt Share purchase AD 99,47% Own funds EuroHold Bulgaria AD Total Investments in subsidiaries in 2010 EuroIns Capital increase Romania Own funds EIG AD Milano Motors EOOD Capital increase Gransport Auto EOOD Capital increase Auto Italia EAD Capital increase Avto Union AD Capital increase Eurolease Auto Skopije EAD, Capital increase Own funds Avto Union AD Own funds Avto Union AD Own funds Avto Union AD Own funds Kamalia Trading Ltd Own funds BG Autolease Group BV. Total EuroHold Bulgaria AD investments in 2011 Avto Union AD Capital increase Avto Union AD Increase in the investment share BG Autolease Holding, the Netherlands, Capital increase Scandinavia Motors AD Capital increase 100% Own funds EuroHold Bulgaria AD 100% Own funds EuroHold Bulgaria AD 100% Own funds EuroHold Bulgaria AD 0,38% Own funds EuroHold Bulgaria AD 12

13 Total Investments in subsidiaries in 2011 Scandinavia Motors EOOD Capital increase Scandinavia Motors EOOD Capital increase Nissan Sofia EAD Capital increase Eurotruck EOOD Incorporation Auto 1 OOD Share purchase 99,62% Own funds Avto Union AD 99,62% Own funds Avto Union AD 100% Own funds Avto Union AD 100% Own funds Avto Union AD 51% Own funds Avto Union AD EuroIns Capital increase Romania 90.45% Own funds EIG AD BG Autolease Group, the Netherlands, Capital increase EuroLease Auto Skopje Capital increase Eurolease Auto Romania, Capital increase Eurolease Auto EAD Capital increase Nissan Sofia EAD Share purchase Daru Car AD Share purchase Motobul EOOD Share purchase 100% Own funds BG Autolease Holding the Netherlands 100% Own funds BG Autolease Group the Netherlands 74.93% Own funds BG Autolease Group the Netherlands 100% Own funds BG Autolease Group the Netherlands 100 % Own funds Avto Union AD 99.84% Own funds Avto Union AD 100% 51% Own funds Avto Union AD Total Business Lines The current business structure of EuroHold Bulgaria AD includes three main sub-holdings: EuroIns Insurance Group AD, Avto Union AD and EuroLease Group, which specialize respectively in insurance, car sales and leasing, the investment intermediary Euro-Finance AD and a real estate company EuroHold Imoti EOOD. As of EuroHold Bulgaria AD controls the following companies: 13

14 EuroIns Insurance Group AD EuroIns Insurance Group AD (EIG) is set up at the end of 2007 as a 100 per cent owned subsidiary of EuroHold Bulgaria AD, where the entire insurance and health assurance business of the holding structure is concentrated. As of the date of this report Eurohold Bulgaria AD owns per cent of EIG s capital. EIG expands its activities through its subsidiary insurance companies in Bulgaria, Romania, Macedonia and Turkey. The insurance companies in the Group have more than 300 regional offices and more than 1 million clients in the region. The efforts and investments made during the last few years ensure the stabilization of the market positions of the companies in Bulgaria, Romania and Macedonia. As of the end of 2011, EIG owns the majority share in the companies in Bulgaria, Macedonia, Turkey and Romania and a minority share in a Serbian company. EIG s share in the capital of the companies is, respectively, per cent in EuroIns AD, per cent in EuroIns Insurance Skopje AD, per cent in EuroIns Romania Asigurare Reasigurare S.A., 100 per cent in EuroIns Health Assurance EAD, per cent in Inter Sigorta AS, Turkey. The main goal of EIG is achieving 10 per cent market share on the Balkans for the medium term in the general insurance sector. EIG s subsidiaries operate in the areas of general insurance and health assurance. The products offered include Motor Third Party Liability (MTPL), Auto Casco, Property Insurance, Cargo Insurance, General Third Party Liability Insurance, Crops and Livestock Insurance, Vessels Insurance, Aircraft Insurance, Financial Risks Insurance, Travel Assistance Insurance, Accident and Sickness Insurance. EuroLease Group The leasing sub-holding BG AutoLease Holding B.V. and its subsidiary BG AutoLease Group B.V. are holding companies, consolidating Eurohold s investments in the leasing sector on the Balkans. The companies were established in the Netherlands and acquired by Eurohold in 2008; later the shares owned by EuroHold Bulgaria AD in the individual 14

15 leasing companies in Bulgaria, Romania and Macedonia were contributed in-kind into the capital of the Eurolease Group. The companies are registered in the Netherlands in order to ensure easier access to financial resources from the international financial markets. The leasing subholding BG AutoLease Holding B.V. and its subsidiary BG AutoLease Group B.V. are united under the trade name Eurolease Group (ELG). The structure of ELG includes Eurolease Auto Bulgaria (100%), Eurolease Auto Romania (70.54%) and Eurolease Auto Macedonia (100%). The companies from the ELG group offer financial leasing of new and used vehicles, of new passenger cars and light commercial vehicles, trucks and buses. The complete name of the company is BG AutoLease Holding B.V. It was established in the Netherlands as part of the long term strategy of EuroHold to segregate its core business lines in separate stand-alone sub-holdings. EuroLease Group has a key role in the overall strategy of EuroHold Bulgaria AD it connects car dealers and insurers to pack a product with a common added value. Avto-Union AD Avto Union AD is a holding company which consolidates EuroHold Bulgaria s investments in the automobile sector. Avto Union is an automotive subsidiary which offers 11 car brands in Bulgaria. Avto Union manages the largest portfolio of car brands in Bulgaria. The strategy of maintaining a variety of brands is complemented by continuously improving the quality of supplementary products and the after sales service, as well as by offering new packaged products, combining leasing and insurance and tailored to the client s needs. The main business lines of Avto Union are: Sale of new cars, motorcycles and scooters; Sale of original spare parts and accessories; Rent-a-car (long and short-term); Car buy-backs; Through its subsidiaries, Avto Union is: An exclusive importer for Bulgaria of the following brands: Fiat, Lancia, Alfa Romeo, Mazda, SAAB, Maserati and the following brands of scooters: Piaggio, Vespa и Gilera; An authorized dealer of Opel, Nissan, Renault, Dacia and Chevrolet; For each model sold by Avto Union a test-drive of the vehicle is offered. Assistance is also provided for the registration of each new vehicle bought. Customers can benefit from the following supplementary services: Up to 5 years of Extended warranty extends the warranty by 1 or 2 years (upon customer s preferences); covers mileage of up to km; Substitute vehicle in case of car accident or damage; Internal and external car wash, etc.; Warranty and post warranty service; Vehicle buyback. Euro-Finance AD Euro-Finance AD has been member Eurohold Bulgaria since Euro-Finance is one of the first licensed investment intermediaries in Bulgaria with an almost 18 years history. The company is the only investment intermediary in Bulgaria, member of the Deutsche Borse Group and through its network and longstanding relations with international broker-dealers offers a wide range of investment products FX deals, contracts for differences (CFDs), equity trading,, fixed income trading, derivatives trading, REPOs, domestic and international SWIFT payments. Euro-Finance is a leading nonbanking financial institution in Bulgaria which aims to provide quality investment products and services, tailored to the preferences of each customer. Euro-Finance provides investment and financial services to individuals, corporate and institutional clients. Real Estate The real estate business of Eurohold Group is represented by three companies Eurohold Imoti EOOD with its subsidiary Eurohold Imoti V.Tarnovo EOOD (100% stake), and Avto Union Properties EOOD, owned fully (100% stake) by Avto Union AD. EuroHold Imoti EOOD specializes in the management of investment real estate. The company owns the showroom and body shop used by Nissan Sofia AD, a subsidiary of EuroHold Bulgaria AD, for its sales and after-sales services. The company also owns a commercial plot of land, located on Europe blvd. and designated to be a new showroom and repair shop of Nissan Sofia AD, which offers the brands Nissan, Renault and Dacia. EuroHold Imoti EOOD administers EuroHold s Business Centre, where the headquarters of EuroHold 15

16 Bulgaria AD and its subsidiaries, including several automotive showrooms, are. Avto Union Properties EOOD owns real estate in Sofia, Gorni Lozen, Plovdiv, Bourgas etc., which are to be used to build showrooms and repair-shops for the automobile companies, owned by EuroHold Bulgaria s subsidiary - Avto Union AD. Investments in subsidiaries increased by 15.1 per cent in the period Investments (BGN '000) ІІІ. OPERATING RESULTS Assets Total assets (BGN '000) Total investment increased in 2011, compared to Part of the change can be attributed to the capital increase in the automobile and leasing subsidiaries. A detailed description of the investments as at the end of 2011 can be found above. The total assets of the Company grew rapidly toward the end of 2011, compared to This is mainly due to the increased investments of EuroHold Bulgaria, already disclosed in this report. Share Capital and Liabilities At of the share capital of the Company represents 84 per cent of the assets. Breakdown of assets, % Fixed assets (0.01%) Share capital (BGN '000) Investments (95.69%) Trade receivables (2.45%) Short-term receivables (1.81%) Financial assets (0.01%) Cash (0.03%) The investments in subsidiaries, associated and other companies occupies a major share of the total assets. The second biggest share in the assets of the Company is the receivables. They can be long- and short-term and are formed as a result of the policy of active management of the free resources within the Group. The fixed assets of EuroHold Bulgaria include office equipment worth BGN 38 thousand. Cash as at the end of the period amounts to BGN 93 thousand. Financial assets include securities held for sale and as at the end of 2011 amount to BGN 24 thousand. During the reporting period EuroHold Bulgaria issued two issues of new shares, whereby the total amount of subscribed shares is 64,847,364 with a nominal value of BGN 1, each. The Company formed an additional reserve premium from the second issue in the amount of BGN 9,351 thousand. The increase in the share capital in 2011, compared to 2010, can be attributed to the profit formed at the unconsolidated basis. Eurohold Bulgaria has not made a decision regarding the distribution of the profits accumulated in previous years. 16

17 Financial result (BGN '000) Bond issues (BGN '000) In 2011, the Company reports a profit of BGN 13,914 thousand. Liabilities (BGN '000) Current liabilities represent the obligations of EuroHold Bulgaria to its subsidiaries in their free cash flow management Short-term liabilities (BGN '000) The liabilities to financial institutions have increased the most during the fiscal year, which is due to the Accession Mezzanine Capital II mezzanine loan financing agreement from 2008, which has a maturity of 7 years until the end of The funds raised were employed in the capital increase of EuroIns Insurance Group EAD with the aim of a regional expansion of EIG Liabilities to financial institutions (BGN '000) In 2011, the liabilities of the Company decreased after current portions of the debt outstanding were paid In 2011, current liabilities to financial institutions include the principal payments on a credit overdraft with UniCredit Bulbank, amounting to BGN 3,989 thousand and payable in The loan has been drafted for the purposes of the leasing company Eurolease Auto AD and has a limit of BGN 10,000 million. In this connection, as at the end of the reporting period, EuroHold reports a current receivable from related parties (EuroLease Auto AD) in the amount of BGN 3,989 thousand. The shortterm debt figure also includes the current portion of the principal payments of BGN 1,956 thousand on the financing provided by Accession Mezzanine Capital II. Total liabilities to related parties (short-term and long-term) as of the end of 2011 are BGN 4,224 thousand (2010 BGN 41, 801 thousand). In 2011 the repo deals with EuroIns Insurance Group were ended. 17

18 Analysis of Revenues and Expenses The revenues of Eurohold Bulgaria AD come primarily from its main activity related to the acquisition, disposal and management of participations and the funding of subsidiaries. +407% growth in net profit Net Result (BGN '000) Total Revenues (BGN '000) For the fiscal year 2011 the revenues of the holding company amount to BGN 8,942 thousand. The total interest income on loans granted amounts to BGN 1,235 thousand. (2010 BGN 1,083 thousand). The share of interest income from loans granted to subsidiaries is BGN 1,144 thousand (2010 BGN 910 thousand). Eurohold Bulgaria AD forms a positive financial result as of , amounting to BGN 13,914 thousand. Before tax profit is 1,353 thousand. In 2011 Eurohold Bulgaria wrote-off a deferred tax liability amounting to BGN 12,561 thousand, which is accounted for as a current profit. The profit per share for 2011 is BGN 0,11 ( BGN 0.04). Profit per share (BGN) 0.15 Total Expenses (BGN '000) The operating expenses of EuroHold Bulgaria AD amount to BGN 7,589 thousand. Interest expenses on loans received, including a bond issue, amount to BGN 5,302 thousand (2010 BGN 6,492 thousand). The decrease in interest expense is due to the repayment of loans from financial institutions as well as debt to related parties. The current portion of interest expense from interest to subsidiaries amounts to BGN 1,253 thousand. (2010 2,439 thousand). Cash flows On an unconsolidated basis EuroHold Bulgaria generates cash flows from the following activities: Income from operations with investments Income from dividends Income from interest from loans granted to subsidiaries Income from services performed During the accounting period two new share issues were executed, which were used for capital increases in the subsidiaries. For the period under review the cash flows from operating activities have negative values because receivables from suppliers and clients have been lower than total payments made to them. The main reasons for these negative cash flows are related to the nature of the business, the followed policy of an increase in the market shares of the holding s different subsidiaries, as well as the necessity to offer flexible payment schemes. 18

19 The fiscal 2011 cash flows were formed primarily by the financing and investment activities of the Company in accumulating free cash flow from the subsidiaries and employing this cash flow in financing the current activities and investments of other subsidiaries. Financial autonomy 5.58 Cash Flow BGN thousand Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Changes in cash flow Beginning cash flow Ending cash flow Financial Results The return on assets increased by 355% from % Return on assets 4.22% Capital Resources The ratios of debt to equity show how the Company is funded. As of the share of equity in Eurohold Bulgaria AD s assets reached 84%. In 2011, the long-term liabilities/ equity ratio decreased to 0.14%. This is due to the repayment of part of the Company s obligations to banks and the two capital increases of EuroHold Bulgaria. 0.93% The return on equity increased compared to Non-current liabilities/share capital Return on equity 47.30% 11.61% 4.98% 13.59% 1.08% 1.43% The debt ratio and financial autonomy ratio reflect the coverage of funds attracted by the share capital and vice versa. The financial autonomy ratio is more than one, which means that the Company efficiently manages to cover the funds attracted by its share capital. In 2011, the Company records an increase in the net return on revenues as a result of a larger realized income compared to

20 Net return on revenues % significant devaluation of financial assets worldwide. The financial crisis also caused significant disturbances on the global financial market which led to reduced confidence in financial markets and fewer investments in financial instruments. As a result, companies in the financial sector started experiencing difficulties in maintaining liquidity and raising capital % 11.90% 17.87% The financial result for 2011 results in an increase in the liabilities profitability compared to Return on liabilities 27.75% A further deterioration of the business climate may lead to an even higher unemployment rate and reduced income in the Balkan countries (Bulgaria, Romania, Macedonia and Serbia), which in turn may lead to a decreased level of consumption. The low levels of consumption will adversely affect the sales of the Group s subsidiaries. Moreover, the further deterioration of the business climate and the lack of certainty regarding the trends on the global financial markets, particularly on the Balkan financial markets, may also hinder the development prospects of the company, its results and financial condition. 2.64% Risks related to the general macroeconomic, political and social climate, and government policies The financial leverage ratio has decreased compared to 2010 as a result of the two capital increases of the Company in Financial leverage The macroeconomic situation and the growth rate on the Balkans (Bulgaria, Romania, Macedonia and Serbia) are of key importance to the development of the Group. The government policy, particularly the regulatory policy and the decisions taken by the respective National Banks regarding such external factors as money supply, interest rates and exchange rates, taxes, GDP, inflation rate, budget deficit and foreign debt, and unemployment rate and income structure, also affect the financial results of the Group IV. OVERVIEW OF THE MAIN RISKS FACING THE COMPANY 1. Systematic risks Influence of the Global Economic Crisis The global financial crisis, which started in 2007, led in many countries (including the US, EU countries, Russia, and Japan) to a slowdown in economic growth and an increase in unemployment, to a limited access to sources of financing and a Changes in the demographic structure, the mortality or morbidity rate are also important factors, affecting the Group s development. The above mentioned external factors, as well as other unfavorable political, military or diplomatic developments, leading to social instability, may shrink higher-level consumer expenditures and limit funds allocated to insurance coverage, car purchases and leasing. Ultimately, gross written premiums (GWP) in the insurance business may decrease and clients may discontinue their insurance policies, as well as postpone new car purchases and, correspondingly, new car leases. Any deterioration of the region s macroeconomic ratios may also adversely affect insurance products, car sales and lease contract origination. Therefore, there is a risk that, if the business environment broadly deteriorates, the Group s sales may turn out to be lower than originally planned. Also, any general amendments 20

21 to the government policy and regulatory systems in place may lead to an increase in the Group s operating expenses and capital requirements. If the above mentioned factors occur, fully or partially, they could have a significant adverse impact on the Group s outlook, results and financial situation. Political Risk This is the risk stemming from any political processes in the country - the risk of political instability, of changes in the governing principles, legislation and economic policy. The political risk is directly related to the likelihood of unfavorable changes in the direction of the government s longterm policies. Consequently, there exists the possibility of negative changes in the business climate. The long-term political environment on the Balkans (Bulgaria, Macedonia, Romania and Serbia) is stable and does not imply greater risks for the future economic policies of the countries. The EU integration of the countries from the region,combined with their consistent domestic and foreign policies, ensure the absence of shocks and significant changes in the policies currently in place for the near future. Sovereign Credit Risk The sovereign credit risk relates to the likelihood of a worsening in the international credit ratings of Bulgaria, Romania, Macedonia and Serbia. Low credit ratings could lead to higher interest rates and to more restrictive financing terms for business enterprises, including the Company. The credit agencies give positive assessments of the region during the ongoing crisis, thanks to the sound fiscal policies in place and the effective structural reforms. The best example of a disciplined fiscal policy is the increased credit rating of Bulgaria to Baa by Moody s at the end of July 2011 indeed, the highest credit rating on the Balkans. The policies which in the longrun shall preserve the current fiscal stability are: Controlling the size, dynamics and servicing of all financial commitments and debts, borne by and on behalf of the country and comprising both its domestic and external debt; Development and implementation of a uniform policy on public debt management, whose fundamental existence is aimed at ensuring a smooth budget funding and refinancing of maturing debt at minimum medium and long-term rates and at an optimal level of risk; Development and implementation of a funding policy, exercise of control over openmarket transactions with government securities, issuance of permits for investment intermediary activities, as well as implementation of policies aimed at the development of an efficient, transparent and liquid secondary market for government securities; Monitoring the proper servicing of all financial liabilities for which a guarantee has been issued for and on behalf of the state, as well as providing complete and accurate data on the consolidated public indebtedness, including government debt, municipal debt, and wellfare and pension liabilities; Identifying and monitoring possible risks that may arise during the implementation of the strategic goals set forth; Appropriate and timely actions to minimize or avoid the impact of identified risks and their potential negative effects. Inflation Risk The inflation risk is associated with the possibility that inflation may adversely impact real returns on investments. Inflation may affect the expenses of the Company, as a large part of the Company's liabilities are interest bearing. Their servicing depends on the prevailing current interest rates, which reflect the levels of inflation in the country. Therefore, maintaining low inflation rates in the countries of operation, is seen as a significant factor in the Company. Currency Risk This risk is related to the possibility of a devaluation of the local currency. In the case of Bulgaria this is the risk of a premature collapse of the Monetary Board as the national currency has a fixed exchange rate. The official policy of the government and the Central Bank is expected to maintain the currency board in the country until the country s adoption to the euro area. In Romania, Serbia and Macedonia the exchange rates are determined by free market forces and the rare interventions by the central banks are driven primarily by sharp market movements in the FX rates, caused by one-time extrinsic factors. Any significant devaluation of the national currencies in the region (Bulgaria, Romania, Macedonia and Serbia) could have a significant 21

22 adverse effect on the businesses in the country, including the Company. Risks exist when the revenues and expenses of a firm are denominated in different currencies. Interest Rate Risk The interest rate risk is related to the possibility of changes in the prevailing interest rates in a country. Its impact is most obvious when the net income of a company decreases, as a result of an increase in the underlying interest rates, should the company fund itself with leverage. Interest rate risk is a general macro-economic risk, as it is most likely driven by the instability and perceived risk in the overall financial system. This risk is best managed by a balanced use of multiple sources of funding. A typical example of this risk is the ongoing global economic crisis, caused by the liquidity issues of the large mortgage lenders and financial institutions in the U.S. and Europe. As a result of the crisis, the required interest rate premia were re-evaluated and, eventually, increased globally. The effect of the crisis on the Balkans is very tangible and has hampered the free access to leverage. Increases in the general interest rate levels, ceteris paribus, would impact the cost of leverage used by the Company in executing different business projects. At the same time, such changes could adversely impact the expenses of the Company, as a large portion of its financial liabilities are interest bearing and have a floating interest rate component. The activities of the Company s subsidiaries are adversely affected by the continued increase in the market prices of fuel and electricity that are subject to international supply and demand and are determined by factors beyond the Company s control. The biggest business risk is concentrated in the largest business segment of the Company the insurance business. The subsidiaries operating in Bulgaria, Romania and Macedonia bring a very significant portion of EuroIns Group s overall revenues and, ultimately, in the financial results of the insurance segment. The major risk in the leasing business stems from the needs of the regional leasing subsidiaries to raise sufficient leverage at favorable interest rates, so that they can grow their leasing portfolios The leading leasing subsidiary is EuroLease Auto which is the Bulgarian based company. As such it has issued several tranches of public bonds traded on the Bulgarian Stock Exchange (BSE). Interested investors can find more detailed information about the risks in the sector from the company s prospectus. Euro-Finance AD consolidates the Company s activities in the financial sector. The risks associated with financial intermediation, brokerage and asset management relate to the high volatility of the debt and equity markets, as well as the changes in the nation s investment awareness and preferences. Unsystematic Risks Risks, Pertaining to the Business Operations and the Structure of the Company EuroHold Bulgaria AD is а holding company, hence any deterioration in the operating results, financial position and growth prospects of its subsidiaries may adversely affect the financial condition of the Company. As far as the Company s business is concerned, since it manages the assets of other companies, the Company cannot be specifically classified to one particular industry segment. Broadly, the Company s activities are focused in two industry segments (1) non-banking financial services (leasing, insurance, asset management, brokerage and financial intermediation) and (2) new car sales and services. The main risk facing EuroHold Bulgaria AD is the possibility of decreasing revenues across business segments. This could possibly impact the dividends received. Correspondingly, this could have a negative effect on the Company s revenue growth and, respectively, the return on equity. The automotive subsidiary Avto Union AD which operates only in Bulgaria is active in the new car sales, rent-a-car services and also provides aftersales services to customers. The lisence to sell certain brands on the local market is granted by the respective OEMs. Should such licenses and agreements be revoked, sales could decrease drastically. This is particularly important, given the ongoing global restructuring and repositioning of car brands and manufacturers. The business environment in the automotive industry could be dramatically impacted by purely internal forces, related to the nation s general purchasing power, access to lease-financing, general business sentiment, inventory levels, etc. Deterioration in the performance of one or more subsidiaries could lead to a deterioration of the results on a consolidated basis. This, in turn, is related to the price of the Company s shares as equity markets reflect the business potential and total net assets of the Group as a whole. 22

23 Strategic Development risks The future earnings and market value of the Company depend on the strategy, chosen by the senior management of the Company and its subsidiaries. Choosing the wrong strategy could lead to significant losses. EuroHold seeks to manage the risk of strategic errors by continuously monitoring various stages in the implementation of its marketing strategy and financial performance. It is absolutely crucial to be able to respond quickly if a sudden change in the strategic development plan is needed. Untimely or inappropriate changes in strategy may also have a significant negative impact on the Company's operating results and financial position. Risks, Related to the Management of the Company The following risks are related to the management of the Company: Poor decisions regarding investments and liquidity management by either top management or other senior employees; Inability to launch and execute new projects under development, or lack of a competent management team for those projects Possible information system errors; Possible failures in the internal control system; Departure of key employees and inability to retain and hire qualified personnel; Possible sharp increase in SG&A expenses, leading to a decrease in the Company s profitability levels. Financial Risk The financial risk is the additional level of risk and uncertainty that an investor is willing to accept, when the Company is taking on financial indebtedness, i.e. leverage. This level of financial uncertainty adds an extra layer to the business risk. When part of the capital, which a company uses to finance its activities, has been borrowed, the company has taken on predictable and/or fixed financial obligations for periodic payments. The larger the proportion of long-term debt to equity, the greater will be the probability of default on the payments of future financial obligations. An increase in this proportion (leverage ratio) implies an increase in overall financial risk. Another group of indicators is related to the flow of revenues which enable the payment of the company s obligations. Another indicator is the so called debt-service coverage ratio, which is an indication of the free cash flow before interest and taxes, which in turn can be used to repay and service the current interest components of debt due. This ratio is a good indicator of a firm s ability to service its financial liabilities. An acceptable or normal level of financial risk is generally highly dependent on the business risk. In a low business risk environment, investors should generally be willing to take on higher levels of financial risk and vice versa. Currency Risk EuroHold operates in several Balkan countries (Bulgaria, Romania, Macedonia and Serbia), whereby the national currency of each of the countries, except that of Bulgaria, is a freely convertible currency, whose value relative to other currencies is determined by free markets forces. In Bulgaria, since 1996 the local currency has been pegged to the Euro. Abrupt changes in the macroframework of any of the countries, where the Company actively operates, may have a negative effect on its consolidated results. Ultimately, however, EuroHold reports its consolidated financial results in Bulgaria in Bulgarian lev (BGN), which in turn is pegged to the Euro, which also changes its value against other global currencies, but is significantly less exposed to any dramatic price fluctuations. Liquidity Risk The liquidity risk is linked to the ability of the Company to service its maturing financial liabilities fully and on time. Low financial indebtedness and stable capitalization alone do not guarantee uninterrupted debt servicing capacity. Liquidity risks can also arise from a substantial delay in customer payment of amounts due. EuroHold aims to manage this risk through an optimal cash flow management flows on a consolidated basis. The Group seeks adequate liquidity levels in order to meet liabilities due, both under normal and unexpected market conditions, in a way that minimizes any bearing of extra costs or losses, and that takes away the reputation risk from the non-payment of obligations due. All subsidiaries exercise proper financial planning and forecasting, taking into account amounts due within the next 90 days, including the servicing of financial liabilities. This detailed planning minimizes or even completely eliminates the effects of unexpected events. The Company s senior management endorses the use of financial leverage by its subsidiaries to the extent that it is used for new business development 23

24 or as working capital facilities. The level of such borrowed money is strictly controlled and is kept within pre-approved limits, after careful consideration of the needs of the specific business segment and the economic effect of such leverage. The general policy of the management is to raise capital in the form of debt and equity financing on a centralized basis, and then distribute it to the respective subsidiaries, either in the form of equity or debt. Risk related to the possible transactions between companies within the Group under terms different from the market terms, as well as related to the dependence on the Group activity The relations with related parties arise from contracts for temporary financial aid to the subsidiary companies and stem from transactions, related to the normal business activity of the subsidiary companies. The risk with possible transactions among the companies within the Group under terms that are different from the market terms may lead to low profitability from the provided inter-group financing. Another risk from inter-group transactions is failing to realize enough revenues and therefore adequate profit for the respective company. On a consolidated level, this can affect negatively the profitability of the entire Group. There are constant transactions between the parent Company and its subsidiaries, as well as among the subsidiaries themselves, which arise in the normal course of activity of the companies. All transactions with related parties are conducted under terms that are no different from the normal market prices and are in compliance with IAS 24. Eurohold Bulgaria AD operates through its subsidiary companies which means that its financial results are directly dependant on the financial results, the developments and the perspectives of the subsidiaries. One of the main objectives of Eurohold Bulgaria AD is to realize significant synergies between its subsidiary companies as a result of the integration of the three business lines insurance, leasing and car sales. Bad results of one or several subsidiary companies could lead to a deterioration of the consolidated financial results. This, in turn, affects the Company s share price which can change as a result of the expectations of the investors about the perspectives of the company. Risk Management The elements of risk management consist of specific procedures for the prevention and solution of any problems in the operations of EuroHold Bulgaria AD in a timely manner. These include current analysis in the following directions: market share, pricing policy and marketing research on the development of the market and market share; active management of investments in different industry sectors; a comprehensive policy regarding the management of the Company s assets and liabilities, which aims to optimize the structure, quality and return on assets; optimization of the structure of raised funds aiming to ensure liquidity and a decrease in the financial expenses of the Group; effective management of cash flows; optimization of administrative expenses, as well as those for management and external services; human resource management. In the case of any unexpected events, an incorrect forecast of current market trends, as well as of many other micro- and macroeconomic factors, could impact the judgment of management. The only way to overcome this risk is to work with experienced professionals, as well as to maintain and update a comprehensive database on recent developments and trends in all markets of operation. The Group has implemented an integrated a risk management system based on the Enterprise Risk Management model. The risk management process covers all the Group s business segments and is aimed at identifying, analyzing and limiting risks in all areas of the Group s operations. In particular, the Group minimizes insurance risk by properly selecting and actively monitoring the insurance portfolio, matching the duration of assets and liabilities, as well as minimizing FX exposure. An effective risk management system allows the Group to maintain stability and a strong financial position, despite the ongoing crisis on the global financial markets. The risk management procedures aim to: идентифицира потенциални събития, които могат да повлияят на функционирането на Групата и постигането на определени оперативни цели; контролира значимостта на риска до степен, която е счетена за допустима в Групата; постигне финансовите цели на Групата при възможно по-малка степен на риск. 24

25 identify events that could impact the Group s operations and the achievement of certain goals; manage risk, so that the risk level complies with the risk appetite specified and accepted by the Group; ensure that the Group s objectives are achieved and, in the cases when possible, this is done within a lower than expected risk level. V. INFORMATION ABOUT THE MANAGEMENT BODIES The Supervisory Board and the Management Board of EuroHold Bulgaria AD each serve five year terms, while the members of the first Supervisory Board are elected for a three year term. If the contracts of the members of the Management Board and the Supervisory Board are not expressly terminated before their term is over, the latter shall be automatically renewed for a new five-year term. The members of the Management Board and the Supervisory Board have been appointed under management or supervisory contracts. Current contracts of the members of the Management Board and the Supervisory Board are in effect until the termination of the duties of the respective member. As of the date of this report, the Company has an Audit Committee in place. The Audit Committee of EuroHold Bulgaria AD was elected by the General Meeting of the Shareholders of the Company on The members, Dimitar Stoyanov Dimitrov, Ivan Georgiev Munkov and Milena Vassilieva Avramova, serve a term of 3 years. VІ. CURRENT TRENDS AND POSSIBLE FUTURE DEVELOPMENTS OF THE COMPANY TRENDS IN THE ACTIVITY OF THE COMPANY After the realization of its strategy for the sale of non-strategic assets in 2011, EuroHold Bulgaria AD has entirely focused on its main business lines. In the last two years, EuroHold Bulgaria has concentrated its main activities around the following five business lines: Sales of cars Leasing Insurance Financial intermediary Real estate There are no compensations or benefits that management members of EuroHold Bulgaria AD would receive should their contracts be terminated earlier. Supervisory Board Date of contract for management /supervision Valid until Assen Christov Until termination Dimitar Dimitrov Until termination Ivan Munkov Until termination Nikolay Vassilev* Until termination Management Board Kiril Boshov Until termination Assen Minchev Until termination Zlatolina Mukova* Until termination Assen Assenov Until termination Expat Capital AD* Until termination *At the regular session of the General Meeting of the Company, held on , the following changes in the composition of the Management Board and the Supervisory Board were adopted: Iva Garvanska and Borislav Feschiev were replaced as members of the Management Board by Zlatolina Mukova and Expat Capital AD, through its representatives Nikolay Yankov and Lubomir Stoev. Nikolay Vassilev was elected member of the Supervisory Board. Insurance According to preliminary data about the insurance market, the total premium income for 2011, divided by countries is as follows: Bulgaria million euro, Romania 1,855.7 million euro and Macedonia million euro. The premium income of the health assurance market in Bulgaria is 20.6 million euro. A decrease in the general insurance market can be observed in 2011 compared to per cent in Bulgaria, 5.3 per cent in Romania and 4.3 per cent in the health assurance in Bulgaria. There is a slight increase of 2.9 per cent in the general insurance market in Macedonia. The market share of the subsidiaries of EuroIns Insurance Group increases from 5.0 per cent to 5.6 per cent in Euroins Bulgaria, from 5.9 per cent to 8.1 per cent in Euroins Health Assurance, from 7.1 per cent to 7.2 per cent in Euroins Macedonia, and a slight decrease from 4.5 per cent to 3.8 per cent in Euroins Romania. In 2012 it is expected that the general and health insurance markets of the three countries will expand by 10 per cent on average, as a combined result of an increased MTPL insurance fees and an increase in the volume of sales of other types of insurance, which in turn has resulted from an 25

26 improvement in the economic activity in the region. According to the predictions for EuroIns Insurance Group for 2012, its subsidiaries will retain their market shares in the general insurance business and will increase their share in the health insurance market. Car Sales As of the end of 2010 and the first half of 2011 the new car market grew moderately, which is a sign of a gradual revival. As of the date of this report, there is a modest decrease in the market for new cars in the country. In 2011, the tendency for a growth of the market will be sustained as a whole except for the first half of 2012 when a slight drop of about 5 per cent is expected as a result of the expected regulatory changes in the VAT Law on the right for a deduction for vehicles and on the limit of the export of vehicles (reexport). For the second half of 2012 the expectations are for a stable growth of about 8-10 per cent over the next 3 years. old and more than 20 per cent are above 20 years old. Thus, there is huge room for a renewal of the car park. Leasing Due to the global financial crisis most of the leasing companies in Bulgaria witnessed a drop in their volume of business and in their leasing receivables. This was a result of the limited lending by the banks. The leasing business is financed mainly by bank loans and bonds. The stagnation in the credit markets in 2009 and 2010 made it harder to raise new funding for companies that are not connected to a bank. However, the leasing sub-holding succeeded in this difficult environment not only to maintain, but to significantly increase its market share after signing a loan agreement with EBRD and several local banks across all three markets of operation. Based on data provided by BNB, in 2010 EuroLease Auto was among the three largest leasing companies for cars and had 10% market share in the newly generated leasing business. Avto Union expects that its market share will increase as a result of: Excellent opportunities for the development of the existing client base of individual and corporate clients; Increase in the number of corporate clients; The expected regulatory changes limiting re-exports. They will automatically affect the market share of the Group, since dealers of Avto Union work on the Bulgarian market (the cars sold by the Group are registered in Bulgaria). The expectations for the future developments of the car market in Bulgaria have been based on the projections for a recovery of the local economy with the first signs for the improvement already present. This will be followed by a recovery across all business sectors in the next years, which will inevitably lead to more fleet deals and a recovery of the sales to corporate clients. In addition, the recovery in the economic conditions and the improvement of the business environment in Bulgaria will lead to a higher employment rate and higher disposable income. Moreover, financing will become readily available, which will further stimulate sales. Another important factor that will contribute to the growth of the new car market in Bulgaria is the currently very old and inefficient national car park. More than 85 per cent of the cars are over 10 years The financing that EuroLease Auto managed to secure in 2010 continued in 2011 as well. Due to the developed dealership network and the active receivables management, the company maintained low delinquency rates and limited repossessions of cars compared to the rest of the market players brought a moderate revival of the local credit markets. Most of the leasing companies connected to banks started to operate actively by offering more attractive terms. Some of the banks resumed their lending to external independent leasing companies. There are signs of a revival of the leasing market, resulting in stable monthly volumes of new deals especially in Bulgaria, a decrease in the share of bad leasing contracts and an accelerated sale of repossessed assets. Most of the leasing companies owned by banks and operating on the three markets started conducting active marketing campaigns, which included significant reductions in interest rates and down-payments. Due to the relatively more expensive cost of funding for ELG compared to the bank-owned leasing companies, ELG and its subsidiaries could not participate actively in the price war; however they have been actively focusing their efforts on improving the quality of the services provided to clients. The positioning of the leasing sub-holding of EuroHold as a company with sufficient capital and high market share is extremely important at the beginning of the upcoming economic revival. The improved leasing financing will affect positively car sales as well as the insurance business. 26

27 Asset management and brokerage Over the last few years capital markets have been directly influenced by the financial crisis of 2008 which brought a large drop in securities valuations and led to a decrease in the risk appetite of many investors. The beginning of 2011 brought a gradual stabilization in the market situation coupled with a gradual increase in trading volumes. Still, the market volatility remains significant. Euro-Finance AD expects a gradual increase in trading volumes as a result of the development of its inhouse proprietary Internet platform EFOCS and the inclusion of all securities registered for trading on the Frankfurt Stock Exchange, as well as the newly implemented platform for online trading Meta Trader 5. The technical reserves of the companies in the insurance sub-holding, which are managed by Euro-Finance, are expected to increase as well. Euro-Finance envisions its development toward the standards typical for investment banks, known across developed markets, by serving both individual and institutional clients. The infrastructure of the company its membership on the BSE, CD and FSE, participation in SWIFT and ESROT as well as the extremely wide network of correspondent banks and clearing institutions - enables it to offer modern investment services. Real estate The global financial crisis of 2008 impacted significantly the real estate market all over the world which resulted in a drop in the overall demand and a decrease in rental prices. In 2011 the real estate market in Europe started to gradually revive from the crisis, with housing recovery leading the way, partially followed by offices and industrial properties. This trend is valid for Bulgaria as well. There is a slight increase in the demand and supply of offices in the larger Bulgarian cities, resulting in a further decline in rental levels. The supply of new office space in Sofia continues to rise which means that the utilization of modern office space will take a few years. Main Goals The main activity of Eurohold Bulgaria AD is dictated by its main goals, and namely: To satisfy the needs of its customers by means of offering innovative and competitive products and services; To increase the amount of sales in combination with high profitability; To ensure the required conditions for a continuous improvement in the synergies between its subsidiaries; To expand the markets of operation and to increase the market shares of each of its subsidiaries; To recruit highly qualified management and employees; To provide better opportunities for professional development and growth for each employee within the Group. Mid-Term Goals and Strategies The mid-term goals set by Eurohold Bulgaria AD management are focused on the three subholdings insurance, leasing and automotive, as well as on the management of the Group s cash through the investment intermediary Euro-Finance AD. After the formation of the three subholdings, the efforts have been directed towards the strengthening of the companies market positions and development of the existing business. The main strategic goals are: Stable increase in market shares across all sectors and markets the Group operates in; Continued expansion strategy in the region; Achievement of a loyal and diversified client base. For the purposes of implementation of the strategic goals, the Company has developed up-to-date goals and development policies. Those are focused primarily on the improvement of the Group s integration, profitability and financial position: EuroHold Imoti has been only moderately affected by the negative trends in the real estate sector. Tenants of the Company are the subsidiaries of EuroHold Group that currently fill the capacity of the rented office areas and showrooms. Real consolidation of the companies at subholding structure level under a common management. Establishment of common positions on subholding level relevant to the establishment of agreements for better delivery conditions, advertising and participation in public procurements, which significantly affects the reduction of costs pertaining to these activities; 27

28 Realization of synergies from the centralization and optimization of operations, marketing and all other business processes in the structure of the Group; Cost optimization in maintaining stock; Fixed costs optimization; Optimization of inventory level, etc.; Consolidation of all sources of funding for the purposes of minimizing the administration costs; Opening of new locations showrooms and car repairs stations; Optimization of the staff and equipment in the car repairs activity; Introduction of better guarantee conditions for sold cars; Ensuring funding for the leasing subholding; Introduction of a system for additional incentives for the insurance agents of the insurance Company Euroins AD who should forward customers to the automobile dealers and leasing companies; Change in the insurance portfolio directed towards a reduction in the automobile insurance share and a decrease in acquisition costs; Achievement of a stable market share by the insurance companies across all markets; Continued conservative policy by the insurance companies in relation to the maintained investment portfolio; Development and realization of new competitive products under the main business lines insurance, cars and leasing. VІІ. RESEARCH AND DEVELOPMENT As a holding structure, Eurohold Bulgaria AD does not carry out independent research and development operations. VІІІ. ENVIRONMENT PROTECTION As a holding company, Eurohold Bulgaria AD does not carry out independent sales and manufacturing activities. In this respect, the efforts are directed to the subsidiaries impact on the environment in performing their day-to-day operations. IX. INFORMATION REQUIRED BY THE COMMERCE ACT 1. Number of and nominal value of the acquired and transferred during the year own shares, the share capital they represent, and the price of the acquisition or transfer In 2011 the Company has not bought or transferred any of its own shares, therefore at the end of the period the Company is not in possession of its own shares. 2. Number of and nominal value of the shares owned and the share capital they represent The Company is not in possession of its own shares. 3. Information about the remuneration that each of the members of the Management Board and the Supervisory Board has received from EuroHold Bulgaria AD and its subsidiaries during the reporting year In 2011 the members of the Management and Supervisory Board have received the following remunerations by EuroHold Bulgaria AD and its subsidiaries, as follows: From EuroHold Bulgaria AD From subsidiary companies TOTAL Supervisory Board 38, , ,954 Assen Christov 14, , ,640 Dimitar Dimitrov 7,200 43,975 51,175 Ivan Munkov 10,800-10,800 Nikolay Vassilev * 6,000-6,000 Management Board 84, , ,065 Kiril Boshov 24,000 76, ,200 Assen Minchev 24,000 33,600 57,600 Expat Capital AD * Zlatolina Mukova * 1,440 64,933 66,373 Iva Garvanska * 24,000 38,160 62,160 Borislav Feschiev * 24,000 56,740 80,740 Assen Assenov 12,000 98, ,650 *At the regular session of the General Meeting of the Company, held on , the following changes in the composition of the Management Board and the Supervisory Board were adopted: Iva Garvanska and Borislav Feschiev were replaced as members of the Management Board by Zlatolina Mukova and Expat Capital AD, through its representatives Nikolay Yankov and Lubomir Stoev. Nikolay Vassilev was elected member of the Supervisory Board. The above listed renumeration figures pertain to the period when the members have been on the respective positions. During the reported period the members of the Supervisory and Management Boards have not received any remunerations and/ or compensations in kind. EuroHold Bulgaria AD and its subsidiaries do not make provisions for pension payments, retirement compensations or other similar compensations to the members of the Management Board and the Supervisory Board. The members of the Boards have been appointed under contracts for 28

29 management/control. Current contracts of the members of the Management and Supervisory Boards are effective until the termination of the duties of the respective member. 4. Company shares owned by members of the Management Board and the Supervisory Board As of the members of the Management Board and the Supervisory Board own shares from the registered capital of EuroHold Bulgaria, as follows: Name Supervisory Board Number of shares Assen Christov - Dimitar Dimitrov 200 Ivan Munkov 25,000 Nikolay Vassilev - Management Board Кiril Boshov - Аssen Minchev - Еxpat Capital AD 21,436,026 Аssen Assenov 140,250 Zlatolina Mukova - 21,601,476 There have been no stock options on shares of the Company, issued to the benefit of either a member of the management team, an employee or to third parties. 5. Rights of the members of the Boards to acquire shares and bonds of the Company As at the date of the present document, there are no agreements or other arrangements with the employees of EuroHold Bulgaria AD, regarding their participation in the Company s capital. as Company s bonds, traded on a regulated market of securities, as long as they fully comply with the Law on Measures Against Market Abuse with Financial Instruments and the Law on Public Offering of Securities. No options for the acquisition of shares in the Company have been issued in favor of the members of the Management and Supervisory Boards, employees or third parties. 6. Information about the participation of the members of the Boards in companies as general partners, the ownership of more than 25 per cent of another company s capital, as well as their participation in other companies or cooperatives as procurators, managers or board members. EuroHold Bulgaria AD has a two-tier management system, as follows: a Supervisory Board which consists of four natural persons, and a Management Board of four natural persons and one legal entity. The members of the Supervisory Board are: Assen Milkov Christov, Dimitar Stoyanov Dimitrov, Ivan Georgiev Munkov and Nikolay Vassilev Vassilev. The members of the Management Board consist of four natural persons and one legal entity, as follows: Kiril Ivanov Boshov, Assen Minchev Minchev, Zlatolina Ivanova Mukova, Assen Emanuilov Assenov, Expat Capital AD, through its representatives Nikola Simeonov Yankov and Lubomiv Christov Stoev. There are no family ties among the members of the Management Board and the Supervisory Board. The activity of the company is not dependent on the individual professional experience or qualifications of other employees. The members of the MB and the SB of the company may freely acquire shares from the capital, as well SUPERVISORY BOARD Name Position Business address Assen Milkov Christov Chairman of the Supervisory Board 43 Christopher Columbus Blvd., Sofia Details of performed activity besides the company, which is substantial to the company Avto Union AD Chairman of the Board of directors; Autoplaza EAD Member of the Board of directors; Euroins Insurance S.A. Macedonia Chairman of the Board of directors; Euroins Romania Asigurare Reasigurare S.A. Member of the Board of directors; Euro-Finance AD Chairman of the Board of directors; Scandinavia Motors AD Chairman of the Board of directors; 29

30 Details of any and all other participations as member of a management/ supervisory body and/ or partner during last 5 years Smartnet EAD Chairman of the Board of directors; Starcom Holding AD Executive member of the Board of directors. Present: Alfa Euroactive EOOD Sole shareholder and Manager; Balkan International Basketball League OOD Manager and shareholder with 50 % participation; Basketball Club Cherno More EAD Chairman of the Board of directors; Bulstar Investment AD Chairman of the Board of directors; Corporate Advisors EOOD Sole shareholder and Manager; Starcom Hold AD Executive member of the Board of directors; Formoplast 98 AD Chairman of the Board of directors. Terminated: Avto Union Group AD Chairman of the Board of directors up to , whereas the person is not Chairman of the Board of directors as of ; Geoenergyproject AD Chairman of the Board of directors up to , whereas the person is not Chairman of the Board of directors as of ; Euro Power AD (currently Power Logistics EAD) Chairman of the Board of directors up to , whereas the person is not Chairman of the Board of directors as of ; Eurotest Control EAD Chairman of the Board of directors up to , whereas the person is not Chairman of the Board of directors as of ; Etropal AD Chairman of the Board of directors up to , whereas the person is not Chairman of the Board of directors as of ; Plasthim T AD member of the Board of directors up to , whereas the person is not member of the Board of directors as of ; Profonika EOOD Sole shareholder and Manager up to , whereas the person is not Sole shareholder and Manager as of ; Formoplast AD Executive member of the Board of directors up to , whereas the person is not Executive member of the Board of directors as of Details of any insolvency, bankruptcy, receivership or liquidation related to the person as member of management or supervisory bodies for the previous five years Vitosha Investment Company EOOD (in liquidation procedure following Sofia City Court resolution, Commercial Section, Companies Department, civil case 52/ 2009 based on claim on grounds of Art. 29 of the Trade Register Act) registered as sole shareholder. As of there are no additional details of any insolvency, bankruptcy, receivership or liquidation related to the person as member of management or supervisory bodies for the previous five years. Relevant experience professional Assen Christov has Master degree in Physics from Sofia University St. Climent of Ochrida, perform specialization in Nuclear Researches Institute in Dubno, Russia. Has specialized management at Open University London. He is fluent in English and Russian language. Assen Christov has occupied the above mentioned position during different periods during last 5 years. He was Chairman of the Board of directors of Eurobank AD as of 1997 to 2000 and he performed different representative functions, he was chairman of the Supervisory board of IC Euroins AD from 2000 to 2007, Chairman of the Board of directors of Scandinavia Motors authorized dealer of SAAB for Bulgaria as of 2005 г. and today, as well as chairman of the Board of directors of investment intermediary Euro-finance AD. Details for any official public incriminations and/ or administrative sanctions During previous 5 years the person has not been subject of any official public incrimination and/ or administrative sanctions with relation to its activity; has no convictions in relation to fraudulent offences; in its capacity of professional has not been involved directly or by related parties in to insolvency/ bankruptcy procedures; has not been disqualified by court from acting as a member of management or supervisory bodies of the company or other companies. Name Position Business address Dimitar Stoyanov Dimitrov Vice chairman of the Supervisory Board 43 Christopher Columbus Blvd., Sofia Details of performed activity besides the company, which is IC EUROINS AD - procurator 30

31 substantial to the company Details of any and all other participations as member of a management/ supervisory body and/ or partner during last 5 years Present: Eurologistic Technologies EOOD Manager; Zeleni EOOD Sole shareholder and Manager; Cable Network AD Executive director; Creative Software Solutions EOOD Sole shareholder and Manager; Pofinika EOOD Manager; Smartnet EAD Executive member of the Board of directors; Stardom Hold AD Member of the Board of directors. Terminated: Euro Power AD (currently Power Logistics EAD) Executive director up to , whereas the person is not Executive director as of ; Eurohotels AD Member of the Board of directors up to , whereas the person is not member of the Board of directors as of ; Iztok Plaza EAD Executive director up to , whereas the person is not Executive director as of ; Starcom Holding AD (universal assignee of Eurohold Bulgaria AD) member of the Board of directors up to , whereas the person is not member of the Board of directors as of ; Starcom Holding AD (with previous trade name Bulgarian Holding Corporation AD) Executive director up to , whereas the person is not Executive director as of Details of any insolvency, bankruptcy, receivership or liquidation related to the person as member of management or supervisory bodies for the previous five years Far Consult OOD (in liquidation procedure) Manager, the term of the liquidation procedure is The way the term has been set is one year as of the day of registration of termination of the company as per Resolution dated г. enacted on civil case 03/2008 of Sofia City Court. There are no unsatisfied creditors. As of there are no additional details of any insolvency, bankruptcy, receivership or liquidation related to the person as member of management or supervisory bodies for the previous five years. Relevant experience professional Dimitar Dimitrov has Master Degree in Electronics and Automatics from Technical University Sofia. From 1998 to 2006 he was executive director of the holding company Starcom Holding AD. As of 2005 is procurator of IC Euroins AD and for the period he was director Informatics servicing, statistics and analysis in the same company. Details for any official public incriminations and/ or administrative sanctions During previous 5 years the person has not been subject of any official public incrimination and/ or administrative sanctions with relation to its activity; has no convictions in relation to fraudulent offences; in its capacity of professional has not been involved directly or by related parties in to insolvency/ bankruptcy procedures; has not been disqualified by court from acting as a member of management or supervisory bodies of the company or other companies. Name Position Business address Nikolay Vassilev Vassilev Independent member of the Supervisory Board 96A Georgi S. Rakovski Str., Sofia Details of performed activity besides the company, which is substantial to the company Expat Capital AD Executive member of the Board of directors. Details of any and all other participations as member of a management/ supervisory body and/ or partner during last 5 years Present: Expat Asset Management EAD Executive member of the Board of directors; Expat Alfa AD Executive member of the Board of directors; Expat Group EOOD Sole shareholder and Manager. Terminated: As of there are no details of any and all other participations as member of a management/ supervisory body and/ or partner during last 5 years. Details of any insolvency, bankruptcy, receivership or liquidation related to the As of there are no details of any insolvency, bankruptcy, receivership or liquidation related to the person as member of management or supervisory bodies for the 31

32 person as member of management or supervisory bodies for the previous five years previous five years. Relevant experience professional Nikolay Vassilev was member of two governments of Republic of Bulgaria and occupies consecutively the positions vice- prime minister and minister of economy ( ), viceprime minister and minister of transportation and communications ( ) and minister of public administration and administrative reform ( ). Before this Nikolay Vassilev was senior vice-president at Lazard Capital Markets London ( г.), as well as associated director of UBS (UBS Warburg Dillon Read) at company s offices in Tokyo, New York and London ( г.), where he works in the field of stock and emerging markets. Mr. Vassilev was tax consultant in Coopers & Lybrand Budapest, Hungry ( г.). Nikolay Vassilev has Master degree of international economy and finances from the Brandeis University (USA) and Keio University (Tokyo, Japan) in 1997, as well as Bachelor degree from the New York University (USA) and Budapest University of Economic Science and Public Administration (Hungry). From 1999 he has CFA degree (certified financial analyst) and currently is member of the Management Board of Bulgarian CFA association. He is fluent in English, Hungarian and Russian and speaks French, German and Japanese languages. Details for any official public incriminations and/ or administrative sanctions During previous 5 years the person has not been subject of any official public incrimination and/ or administrative sanctions with relation to its activity; has no convictions in relation to fraudulent offences; in its capacity of professional has not been involved directly or by related parties in to insolvency/ bankruptcy procedures; has not been disqualified by court from acting as a member of management or supervisory bodies of the company or other companies. Name Position Business address Details of performed activity besides the company, which is substantial to the company Details of any and all other participations as member of a management/ supervisory body and/ or partner during last 5 years Details of any insolvency, bankruptcy, receivership or liquidation related to the person as member of management or supervisory bodies for the previous five years Ivan Georgiev Munkov Independent member of the Supervisory Board 43 Christopher Columbus Blvd, Sofia As of there are no details of performed activity besides the company, which is substantial to the company. Present: Bulglas OOD - Manager; Terminated: As of there are no details of any and all other participations as member of a management/ supervisory body and/ or partner during last 5 years. As of there are no details of any insolvency, bankruptcy, receivership or liquidation related to the person as member of management or supervisory bodies for the previous five years. Relevant experience professional Ivan Munkov has Master degree in Law from Sofia University St. Climent of Ochrida. Ivan Munkov was legal advisor of bank Biochim AD (currently HVB Bank Biochim AD), as well as in Encouragement Bank AD (currently Bulgarian Development Bank AD). He was senior legal advisor, head of department Legal service of credit deals in Eurobank AD, head of legal department and department Business liabilities in IC Euroins AD. Details for any official public incriminations and/ or administrative sanctions During previous 5 years the person has not been subject of any official public incrimination and/ or administrative sanctions with relation to its activity; has no convictions in relation to fraudulent offences; in its capacity of professional has not been involved directly or by related parties in to insolvency/ bankruptcy procedures; has not been disqualified by court from acting as a member of management or supervisory bodies of the company or other companies. MANAGEMENT BOARD Name Position Kiril Ivanov Boshov Chairman of the Management Board and legal representative 32

33 Business address 43 Christopher Columbus Blvd., Sofia Details of performed activity besides the company, which is substantial to the company Details of any and all other participations as member of a management/ supervisory body and/ or partner during last 5 years Avto Union AD Vice- chairman of the Board of directors; Autoplaza EAD Vice- chairman of the Board of directors; Euroins Insurance Group AD Chairman of the Board of directors; Euroins Health Assurance EAD Chairman of the Board of directors; Euroins Romania Asigurare Reasigurare S.A. Chairman of the Board of directors; Euroins Insurance SA, Macedonia member of the Board of directors; Eurolease Auto IFN S.A. Romania member of the Board of directors; Euromobile Leasing AD Vice- chairman of the Board of directors; Euro-Finance AD Vice- chairman of the Board of directors; Scandinavia Motors AD Vice- chairman of the Board of directors; Starcom Holding AD Chairman of the Board of directors. Present: Alcommerce EOOD Sole shareholder and Manager; Euroauto OOD Manager; Capital 3000 AD Chairman of the Board of directors; Starcom Hold AD Chairman of the Board of directors. Terminated: Geoenergyproject AD Vice- chairman of the Board of directors up to , whereas as of the person is not Vice chairman of the Board of dorectors; Eurolease Asset EAD Vice- chairman of the Board of directors up to , whereas as of the person is not Vice chairman of the Board of directors; Eurolease Auto EAD member of the Board of directors up to , whereas as of the person is not member of the Board of directors; Eurolease Auto EAD, Skopje member of the Board of directors up to whereas as of the person is not member of the Board of directors; Euroforum OOD Manager up to , whereas as of the person is not a Manager; Eurohotels AD Chairman of the Board of directors; up to , whereas as of the person is not a Chairman of the Board of directors; IC Euroins AD General executive director up to , whereas as of the person is not General executive director; Details of any insolvency, bankruptcy, receivership or liquidation related to the person as member of management or supervisory bodies for the previous five years Iztok Plaza EAD Chairman of the Board of directors up to whereas as of the person is not a Chairman of the board pf directors; Coral Music EOOD Manager up to , whereas as of the person is not a manager; Nissan Sofia OOD Manager up to , whereas as of the person is not a manager; Nissan Sofia AD Chairman of the Board of directors up to , whereas as of the person is not a Chairman of the Board of directors; Smartnet EAD Vice- chairman of the Board of directors up to , whereas as of the person is not a Vice- chairman of the Board of directors. Coral Consult EOOD was in liquidation procedure, but currently continues its business activity on grounds of Art. 274 of the CA under the trade name of Coral Music EOOD. As of there are no additional details of any insolvency, bankruptcy, receivership or liquidation related to the person as member of management or supervisory bodies for the previous five years. Relevant experience professional Kiril Boshov has a Master degree in Accountancy and Control from the University of National and World Economy. He is fluent in English and Russian language. From 1995 to 1997 Kiril Boshov was chief accountant of Mobicom first mobile operator in Bulgaria, joint venture between Bulgarian Telecommunication Company and Cable and 33

34 Wireless, United Kingdom. In his capacity of Vice chairman and procurator he took an active participation in restructuring the assets of Eurobank AD, he represented the company before third parties and directly managed its active operations crediting and capital markets. Kiril Boshov was Chairman of the Management Board of IC Euroins AD as of 2000 until 2008, whereas in 2006 the Investors Association in Bulgaria rewarded IC Euroins AD with the price Company with best corporate management. In his capacity of Chairman of the board of director of Eurolease Auto AD he manages the process of securing financing of Eurolease Auto AD, as well as overall management of the process of execution of the International capital markets financing agreement between Eurolease Auto AD and Deutsche Bank AG branch London for the amount of 200 MM euro. Details for any official public incriminations and/ or administrative sanctions During previous 5 years the person has not been subject of any official public incrimination and/ or administrative sanctions with relation to its activity; has no convictions in relation to fraudulent offences; in its capacity of professional has not been involved directly or by related parties in to insolvency/ bankruptcy procedures; has not been disqualified by court from acting as a member of management or supervisory bodies of the company or other companies. Name Position Business address Assen Minchev Minchev Executive member of the Management Board 43 Christopher Columbus Blvd., Sofia Details of performed activity besides the company, which is substantial to the company Details of any and all other participations as member of a management/ supervisory body and/ or partner during last 5 years Scandinavia motors AD Executive member of the Board of directors. Present: Bulstar Investment AD Vice chairman of the Board of directors; Capital 3000 AD Executive member of the Board of directors; Cable Network AD Chairman of the Board of directors. Terminated: Eurohold AD Executive director up to , whereas as of the person is not an Executive director; Eurohotels AD Executive director up to , whereas as of the person is not an Executive director; IC Euroins AD Representative, on grounds of Art. 234, paragraph 3 of CA, of board member legal entity up to , whereas as of the person is not a representative, on grounds of Art. 234, paragraph 3 of CA, of board member legal entity; IC Euroins AD Member of the Management Board up to , whereas as of the person is not a member of the Management Board; Iztok Plaza EAD Member of the Management Board up to , whereas as of the person is not a member of the Management Board; Forum Plus EOOD Manager up to , whereas as of the person is not a manager; Nissan Sofia Consult AD Executive director up to , whereas as of the person is not an executive director. Details of any insolvency, bankruptcy, receivership or liquidation related to the person as member of management or supervisory bodies for the previous five years As of there are no details of any insolvency, bankruptcy, receivership or liquidation related to the person as member of management or supervisory bodies for the previous five years. Relevant experience professional Assen Minchev has a Master Degree in Accountancy and Control from the University of National and World Economy. Assen Minchev was Executive director of the holding company Eurohold AD for the period until its merger with Starcom Holding AD. From 1996 until 2000 he is member of the Management Board of IC Euroins AD, he was representative of the vice chairman of the Board of directors of Euroins Health Assurance AD. Assen Minchev was a chairman of the Board of directors of Nissan Sofia Consult AD, authorized dealer of Renault and Nissan, and currently he is member of the Board of directors of Scandinavia motors EAD, authorized dealer of SAAB for Bulgaria. Details for any official public incriminations and/ or During previous 5 years the person has not been subject of any official public incrimination with relation to its activity; has no convictions in relation to fraudulent offences; in its capacity 34

35 administrative sanctions of professional has not been involved directly or by related parties in to insolvency/ bankruptcy procedures; has not been disqualified by court from acting as a member of management or supervisory bodies of the company or other companies. During previous 5 years the persons was subject to one administrative sanction under Act Р-10-43/ for committed breach under Art. 114, paragraph1 in connection to Art. 114, paragraph 1, item 1, letter b, in connection to Art. 114, paragraph 5 of POSA. Name Position Business address Zlatolina Ivanova Mukova Member of the Management Board 43 Christopher Columbus Blvd., Sofia Details of performed activity besides the company, which is substantial to the company Details of any and all other participations as member of a management/ supervisory body and/ or partner during last 5 years Euroins Insurance Group AD Executive director; IC Euroins AD Chairwoman of the management Board. Present: Niesa AD Member of the Board of directors; Association riding club - Concour Chairwoman of the Management Board; Sofika Group AD independent member of the Board of directors; Terminated: Balkani Consult AD Member of the Board of directors up to (based on request as per Art. 233, paragraph 5 of CA), whereas as of the person is not a member of the Board of directors; United Tales OOD Manager up to г. (based on request as per Art. 233, paragraph 5 of CA), whereas as of the person is not a manager; State enterprise Management of the air traffic Chairwoman of the Management Board up to , whereas as of the person is not a chairwoman of the Management board. Details of any insolvency, bankruptcy, receivership or liquidation related to the person as member of management or supervisory bodies for the previous five years As of there are no details of any insolvency, bankruptcy, receivership or liquidation related to the person as member of management or supervisory bodies for the previous five years. Relevant experience professional Zlatolina Mukova has over 10-years experience in the field of business administration and financial management. Her carrier includes numerous management positions in public and private sector as executive director, chief financial officer and internal controller of private companies, vice minister of the transportation and communications responsible for the financing, European integration and structural reform, manager in Bulgarian Post Privatization Fund, established by European Bank of Reconstruction and Development. Zlatolina Mukova is graduate of Transportation Faculty of Technical University of Sofia, she has master degree in Economics from the University of National and world Economy, Sofia. She has certified diploma from ACCA (Association of Chartered Certified Accountants), United kingdom. Details for any official public incriminations and/ or administrative sanctions During previous 5 years the person has not been subject of any official public incrimination and/ or administrative sanctions with relation to its activity; has no convictions in relation to fraudulent offences; in its capacity of professional has not been involved directly or by related parties in to insolvency/ bankruptcy procedures; has not been disqualified by court from acting as a member of management or supervisory bodies of the company or other companies. Name Position Business address Assen Emanouilov Assenov Member of the Management Board 43 Christopher Columbus Blvd., Sofia Details of performed activity besides the company, which is substantial to the company Avto Union AD Executive director; Avto Union Properties EOOD Manager; Auto 1 OOD Manager; Auto Italia EAD Executive member of the Board of directors; 35

36 Details of any and all other participations as member of a management/ supervisory body and/ or partner during last 5 years BG Autolease Group B.V. - Manager; BG Autolease Holding B.V. - Manager; Bulvaria Holding EAD Chairman of the Board of directors; Bulvaria Varna EOOD Manager; Gransport Auto EOOD Manager; Eurolease Asset EAD Chairman of the Board of directors; Eurolease Auto EAD Chairman of the Board of directors; Eurolease Auto IFN S.A. Chairman of the Board of directors; Euromobil Leasing AD Executive member of the Board of directors; Eurotruck EOOD Manager; Cargoexpress Imoti EAD Chairman of the Board of directors; Milano Motors EOOD - Manager; Motobul EOOD Manager; Nissan Sofia AD Chairman of the Board of directors; Sofia Motors EOOD Manager; Star Motors EOOD Manager. Present: Motobul Express EOOD Manager Terminated: Avto Union Center EOOD Manager up to , whereas as of the person is not a Manager; Avto Union Group AD Executive member of the Board of directors up to , whereas as of the person is not an Executive member of the Board of directors; Bulvaria Rent a Car EOOD Manager up to , whereas as of the person is not a manager; Eurolease Auto EAD, Skopje Chairman of the Board of directors up to , whereas as of the person is not a Chairman of the Board of directors; Eurolease Rent a Car EOOD Manager up to , whereas as of the person is not a manager. Details of any insolvency, bankruptcy, receivership or liquidation related to the person as member of management or supervisory bodies for the previous five years As of there are no details of any insolvency, bankruptcy, receivership or liquidation related to the person as member of management or supervisory bodies for the previous five years. Relevant experience professional Assen Assenov has Master degree in Accountancy and Control and Bachelor degree of International Trade Relations from the University of National and World Economy, Sofia. Mr. Assenov has Master of Business Administration diploma from the University of Economics Vienna. The professional carrier of Assen Assenov starts in Eurohold AD 11 years ago as accountant. In the period he is chief accountant of Eurohold AD. At the end of 2001 Mr. Assenov was elected as Executive director of Eurolease Auto AD the leasing company in the structure of Eurohold at that time. Currently Mr. Assenov is responsible for leasing and automotive business of the economic group of Eurohold Bulgaria AD. Mr. Assenov is executive director of Avto Union and leads the leasing companies of the group in Romania and Macedonia in additions he heads the automotive dealers of Nissan, Renault, Dacia, Saab, Opel, Chevrolet, Fiat, Lancia, Alfa Romео, Mazda, Maserati and lubricant products Castrol and BP (Motobul), all part of the holding structure. Details for any official public incriminations and/ or administrative sanctions During previous 5 years the person has not been subject of any official public incrimination and/ or administrative sanctions with relation to its activity; has no convictions in relation to fraudulent offences; in its capacity of professional has not been involved directly or by related parties in to insolvency/ bankruptcy procedures; has not been disqualified by court from acting as a member of management or supervisory bodies of the company or other companies. 36

37 Name Position Business address Details of performed activity besides the company, which is substantial to the company Details of any and all other participations as member of a management/ supervisory body and/ or partner during last 5 years Expat Capital AD Member of the Management Board 96A Georgi S. Rakovski Str., Sofia As of there are no details of performed activity besides the company, which is substantial to the company. Present: As of there are no details of performed activity, which is not substantial to the company. Terminated: Extracta AD (formerly named Torn AD) member of the Board of directors up to , whereas as of the entity is not a member of the Board of directors. Details of any insolvency, bankruptcy, receivership or liquidation related to the person as member of management or supervisory bodies for the previous five years As of there are no details of any insolvency, bankruptcy, receivership or liquidation related to the person as member of management or supervisory bodies for the previous five years. Relevant experience professional Expat Capital AD is founded in 2006 in city of Sofia. The company offers services in the field of assets management and financial consultation on matters related to financing, initial public offering, capital markets, mergers and acquisitions, investments, investment projects in the field of real estates, industry and services. The Company is a sole owner of licensed management company, which manages 3 contractual funds and many individual portfolios. Expat Capital AD is management company of Expat Beta a PLC with special purpose, which invests in real estates in Bulgaria. Details for any official public incriminations and/ or administrative sanctions During previous 5 years the person has not been subject of any official public incrimination and/ or administrative sanctions with relation to its activity; has no convictions in relation to fraudulent offences; in its capacity of professional has not been involved directly or by related parties in to insolvency/ bankruptcy procedures; has not been disqualified by court from acting as a member of management or supervisory bodies of the company or other companies. Name Position Business address Nicola Simeonov Yankov Representative of Expat Capital AD in the Management Board 96A Georgi S. Rakovski Str., Sofia Details of performed activity besides the company, which is substantial to the company Details of any and all other participations as member of a management/ supervisory body and/ or partner during last 5 years Expat Capital AD Executive member of the Board of directors. Present: Expat Asset Management EAD Executive member of the Board of directors; Expat Alfa AD Executive member of the Board of directors; Dextra realty SA Executive member of the Board of directors; Zonata AD Executive member of the Board of directors; Grenada OODД Manager and shareholder with 50% participation; Symol EAD Executive member of the Board of directors; Mall of Bansko EAD member of the Board of directors. Terminated: Dextra Assets AD company s representative up to , whereas as of the person is not company s representative; Zonata Clubs EOOD manager up to , whereas after this date and as of the person is liquidator of the company. Bulgarian Rating Agency LLC member of the Board of directors up to , whereas as of the person is not a member of the Board of directors. Details of any insolvency, Zonata Clubs EOOD manager up to , whereas after this date and as of

38 bankruptcy, receivership or liquidation related to the person as member of management or supervisory bodies for the previous five years the person is liquidator of the company. Relevant experience professional Nicola Yankov was vice minister of transportation and communication ( ), and he was responsible for state-controlled companies from section of transportation and communications, as well as for the raising of private investments in infrastructural projects such as airports and ports. At the same time he was chairman of the Board of directors of National company Ports and member of the councils of Economic Policy and of Economic Growth to the Council Ministry. From 2001 to 2003 Nicola Yankov was vice-minister of economy and was in charge for the development and regulation of industrial sector and he presided at the Interim committee for protection of duties and quotas. Nicola Yankov occupied different managerial positions in private companies he was member of the Supervisory Board of Lukoil Neftochim AD, member of the Board of directors of Naftex Bulgaria Holding AD, executive directors of Naftex Petrol AD, financial manager of Solvey Sodi AD and manager Cash operations at Craft Jacobs Suchard Bulgaria AD. Nicola Yankov is Bachelor in Demand-side Economy in Cornell University, USA. He is fluent in English, Russian and French language. Details for any official public incriminations and/ or administrative sanctions During previous 5 years the person has not been subject of any official public incrimination and/ or administrative sanctions with relation to its activity; has no convictions in relation to fraudulent offences; in its capacity of professional has not been involved directly or by related parties in to insolvency/ bankruptcy procedures; has not been disqualified by court from acting as a member of management or supervisory bodies of the company or other companies. Name Position Business address Lyubomir Christov Stoev Representative of Expat Capital AD in the Management Board 96A Georgi S. Rakovski Str., Sofia Details of performed activity besides the company, which is substantial to the company Details of any and all other participations as member of a management/ supervisory body and/ or partner during last 5 years Expat Capital AD Member of the Board of directors; Present: Dar Finance EOOD Manager; Acreda EOOD sole shareholder and manager; AFG Invest GmbH (Vienna) Managing director. Terminated: Bentom Investments EOOD Manager up to , whereas as of the person is not a Manager; Cremplé OOD manager and shareholder with 50% participation, whereas as of the person is not a manager and a shareholder; Logo Company EOOD sole shareholder of the company up to ; manager of the company until its reorganization into Cremplé OOD as mentioned above; Details of any insolvency, bankruptcy, receivership or liquidation related to the person as member of management or supervisory bodies for the previous five years As of there are no details of any insolvency, bankruptcy, receivership or liquidation related to the person as member of management or supervisory bodies for the previous five years. Relevant experience professional Currently, Lubomir Stoev is also Managing Partner at AFG Invest GmbH (Vienna). His extensive professional experience also includes working at Vitosha Unternehmensbeteiligungs AG (Vienna) as Executive Director ( ), as well as at a few other companies in Vienna. Mr. Stoev holds a Master of Science degree in Sociology and Economics from the University of Economics and Business Administration in Vienna. He speaks German, English and Russian and has basic knowledge of Serbo-Croatian. Details for any official public incriminations and/ or administrative sanctions During previous 5 years the person has not been subject of any official public incrimination and/ or administrative sanctions with relation to its activity; has no convictions in relation to fraudulent offences; in its capacity of professional has not been involved directly or by related parties in to insolvency/ bankruptcy procedures; has not been disqualified by court from acting as a member of management or supervisory bodies of the company or other companies. 38

39 7. Contracts, signed in 2011, with the members of the MB and the SB or related parties, which go beyond the usual activity of the company or substantially deviate from market conditions There have been no contracts signed with members of the MB and the SB or related parties, which go beyond the usual activity of the company or substantially deviate from market conditions. 8. Conflicts of Interest The are no conflicts of interest that have arisen from the duties performed by the abovementioned persons and the Company or other private interests There are no agreements among shareholders, clients, suppliers and/or other people, according to which members of the Company s management and supervisory bodies have been elected/ appointed. The guarantees, provided by the members of the management and supervisory bodies, amount to three salaries. No restrictions apply to the members of the management and supervisory bodies regarding the Company s shares they own, as well as the way they dispose with those shares. 9. Planned economic policy during the next year, including expected investments and human resources development, expected investment yieldс, as well as upcoming transactions of great importance for the Company s operations EuroHold Bulgaria AD plans to support the ongoing operations of the three subsidiaries insurance, leasing, automotive. Through the insurance subholding (Euroins Insurance Group AD) in 2012 the Company will support the insurance companies in Bulgaria and Romania by increasing their total capital basis and risk sustainability via capital investments in the two companies. By ensuring high coverage of insurance reserves, the companies will be able to attain a greater part of the net insurance risks, hence, expand their market presence. Eurohold Bulgaria AD considers the leasing business a main driver of the Company s growth. Positioning the leasing subholding as a company with sufficient capital resources and high market share is very important at the beginning of an economic recovery. The leasing business is funded mainly by bank loans and bond issues. The leasing funding support will positively affect the sales of both the automobile and insurance divisions. Furthermore, these funds will support the capital bases of the leasing companies in Macedonia and Romania, which have also ensured funding and operate with increased business volumes. The acquisitions of competitive companies for the purposes of a faster expansion and an increase in market shares are envisioned for these two particular markets. The financing of the automotive subsidiary with working capital is essential for the timely delivery of cars under fleet contracts with large corporate clients. The automobile dealers will be assisted in completing and equipping showrooms and car repair centers. Special emphasis is put on car repair centers as a main source of revenue due to the low margins on sales of new cars in the current market situation. 10. Number of employees During the reporting period EuroHold Bulgaria AD has recruited no employees under permanent or temporary agreements. As of EuroHold Bulgaria AD had 9 employees under term-labor agreements. There have been no syndicate organizations of employees in EuroHold Bulgaria AD since its incorporation. Х. COMPANY BRANCHES EuroHold Bulgaria AD does not have any registered branches in the country and abroad. XI. INFORMATION ABOUT THE CORPORATE GOVERNANCE PROGRAM OF EUROHOLD BULGARIA AD Eurohold Bulgaria AD adheres to the recommendations of the Bulgarian National Code for Corporate Governance (2007), which essentially follows the framework of the internationally accepted corporate governance rules provided by the Organization for Economic Cooperation and Development (OECD) in The Company follows the best practices in the field of corporate governance. Good corporate governance is a set of relationships between the governing body of the company, its shareholders and any interested parties - employees, business partners, creditors of the company, prospective investors and society as a whole. If a certain corporate governance principle is not applied by the company consistently, or is occasionally violated, the company is required to disclose information about that in due time. In addition, the company is required to publish a report on 39

40 how it complies with the corporate governance rules ("comply or explain") in the respective financial year as an attachment to its annual report. As a result its consistent policy regarding the introduction, improvement and perfection of the corporate governance system in the Company, the Management Board of Eurohold Bulgaria AD has established active procedures to ensure compliance with all principles of the Bulgarian National Code for Corporate Governance. Therefore, after analysing the results achieved in this field, in 2011 the Management Board decided that the company joins the Bulgarian National Code for Corporate Governance. In doing so Eurohold Bulgaria AD declares its willingness to maintain and develop the corporate governance procedures and practices introduced in the last four years. The established management system guarantees the survival and prosperity of the Company by setting a framework for the management bodies to operate in the best interest of the company and in line with the reasonable expectations of its shareholders and all interested parties. Detailed information regarding the corporate policy of EuroHold Bulgaria and the procedures about its implementation is set out in the Program for Corporate Governance. REPORT ON THE COMPLIANCE WITH THE REQUIREMENTS OF THE BULGARIAN NATIONAL CODE FOR CORPORATE GOVERNANCE Providing all shareholders with the opportunity to participate in the General Meeting of the shareholders The shareholders receive comprehensive and timely information about the agenda, date and place of every ordinary or extraordinary session of the General Meeting of the shareholders of Eurohold Bulgaria AD. The invitation and materials related to the agenda are published on the web page of the following authorized by BSE - Sofia financial medium X3News ( in the Newsletter section of Investor ( as well as on the corporate site of the Company Company s policy for transactions with interested related parties The company has developed and applies rules for the transactions with interested and related parties which have been approved by the Supervisory Board of Eurohold Bulgaria AD. In defining persons as related or interested parties, the definitions from the Law on the Public Offering of Securities are used. Eurohold Bulgaria AD abides to the requirements and restrictions set forth in Articles 114 and 114a of the Law on Public Offering of Securities. The Management Board monitors the transactions carried out by the company or its subsidiaries, which could materially affect the company or, combined, could lead to a change which exceeds the thresholds defined. The Management Board of Eurohold Bulgaria AD makes every effort to maximise the benefits for the shareholders in ensuring their equal treatment, including that of minority and foreign shareholders, by: Providing more secure methods for property registration The shares of Eurohold Bulgaria AD are registered for trade on the Bulgarian Stock Exchange - Sofia and since the shares have been traded on the Warsaw Stock Exchange. All current shareholders and potential investors can freely purchase or sell the Company s shares. The Company has signed a contract with the Central Depository to keep a shareholders ledger which reflects the current legal standing of the Company and where any changes in ownership are reflected. The Supervisory Board carefully monitors and controls all transactions where one or more of the directors have a personal interest or an interest, pertaining to third parties. In this regard, and in order to prevent any abuse of inside information, the MB of Eurohold Bulgaria AD, with the prior approval of the SB, has prepared, approved and applies a Code of Ethics regarding the internal rules of ethics and the standards of business behaviour of the managers in the holding structure of Eurohold Bulgaria AD. (The full text of the document can be found on the web page of the company ( 40

41 Management bodies The two-tier management system of the Company separates the management functions from the control functions. The decision-making process is divided between the two bodies and this is a prerequisite which results in a more thorough decision-making process and reduces the possible errors and gaps. The efficient cooperation between the two bodies ensures the high quality of the Company's governance. The Supervisory Board determines the type, amount and frequency of the information provided by the Management Board. The Management Board, on the other hand, gives detailed and timely information to the Supervisory Board about all issues related to the development of Eurohold Bulgaria AD, including the risk exposure of the company, respectively the risk management policy, and the specific measures and procedures in this area. The members of the SB and the MB of Eurohold Bulgaria AD, as per the requirements of the Law on Public Offering of Securities, inform the Financial Supervision Commission (FSC), BSE- Sofia and the Company itself, about cases when: their participation as members of management and control bodies in other companies, in which they hold directly or indirectly more than 25 per cent of the capital; their participation in companies as members of management and control bodies, or as procurators; current or future transactions for which they expect to be defined as interested parties. The members of MB and SB declare these circumstances within seven days of their occurrence. Remuneration of the members of the Management Board and the Supervisory Board In compliance with the statutory requirements and the good corporate governance practices, the amount and structure of the remunerations of the members of the Management Board reflect the duties and contribution of each member of the Management Board in the activity and results of the Company; the ability to retain qualified and loyal managers; the necessity for compliance with the interests of the members of the Management Board and with the long-term interests of the Company. The remunerations of the members of the Management Board consists of two parts: a permanent part and an additional incentives. The additional incentives are set out in the Rules of Procedure of the Management Board. The remunerations of the members of the Supervisory Board reflect their duties and do not depend on the results of the activity of the Company. The remunerations of the independent members of the Supervisory Board are permanent and reflect their participation in sessions and the execution of their duties to control the actions of the executive management. The independent members are not entitled to additional incentives. Policy on the disclosure of information The Management Board of Eurohold Bulgaria AD treats all shareholders equally with regarding any disclosure of information. The Company publishes periodical statements and notifications of inside information within the meaning of Article 4 of the Law on the Market Abuse of Financial Instruments, by the deadlines and with the contents as per the requirements of the Law on Public Offering of Securities. Eurohold Bulgaria AD has signed contracts with Service Financial Markets OOD (the specialized financial media X3News to BSE-Sofia) and with the financial media Investor BG for the disclosure of regulated information to the general public, the regulated market and FSC, within the meaning of the Law on Public Offering of Securities. The information is available on the respective web addresses of the media - and as well as on the corporate site of Eurohold Bulgaria AD ХІІ. ADDITIONAL INFORMATION UNDER APPENDIX 10 OF REGULATION 2 OF THE FINANCIAL SUPERVISION COMMISSION 1. Information about revenues from sales during the reported fiscal year As a holding company, the main activities of Eurohold Bulgaria AD are the acquisition, management, valuation and sale of participations in Bulgarian and foreign companies, and the financing of its subsidiaries. The Company does not perform any independent commercial and manufacturing activities. The revenues of Eurohold Bulgaria are formed by its financing activities. There have been no substantial transactions or transactions that affect significantly the Holding s operations during the reported period. Eurohold Bulgaria AD has not published any forecasts for the fiscal year

42 2. Related Party Transactions As at the date of Activity Report there have been no transactions or proposals for related party transactions, which may substantially affect the activity of Eurohold or of any of its subsidiaries or which are unusual in their nature. There are constantly conducted transactions between the parent Company and its subsidiaries as a result of the normal business activity of the companies. All transactions are closed at arms length. Common transactions between the Holding and the subsidiaries consist of intergroup loans, which ensure that the liquidity of different companies is managed and the investment policy is applied. The company grants loans to its subsidiaries for the purposes of working capital funding. In 2011, Eurohold Bulgaria AD has made loan agreements with the following related parties: Loans extended by Eurohold Bulgaria to its subsidiaries with the purpose of working capital funding Subsidiary company Interest rate Outstanding balance as of Scandinavia Motors EOOD 4.00% 209 Avto Union AD 6.50% 5,848 Eurolease Auto AD 1 m euribor+ 4% 4,972 Espace Auto EOOD 7.00% 103 Total: 11,132 Loans extended by the subsidiaries to Eurohold Bulgaria for the purpose of working capital funding Subsidiary company Interest rate Outstanding balance as of Starcom Holding AD 5.00% 668 Eurolease rent-a-car EOOD 5.00% 45 Eurolease Auto AD 6.50% 2,305 Autoplaza AD 7.00% 14 Cargoexpress Imoti EAD 5.00% 104 Total: 3,136 During the reported period there have been no unusual events of substantial importance to the business of the Company or to and the revenues realized and costs incurred. The company does not have any off-balance sheet transactions. 1. Loan Agreements Oustanding obligations on bank loans for working capital funds Creditor Maturit y In euro as of UniCredit Bulbank AD ,240,000 The purpose of the loan is to finance the leasing activities of the Group. Outstanding obligations on non-bank loans Creditor Maturit y In euro as of Accession Mezzanine ,000,000 The loan is in the form of mezzanine financing. 1.Financial Resourses Management The main activity of Eurohold Bulgaria, as a holding company, is to effectively manage the cash resources, accumulated across the entire structure, and to distribute them according to the specific needs of individual subsidiaries. The Company policy in this area is that the funding is carried out only in the direction subsidiaries - mother"rather than "subsidiary - subsidiary". The management of the free financial resources of the subsidiary companies is carried out in compliance with regulatory requirements and is aimed at achieving a substantial return in case of prudent risk taking. The investment policy of Eurohold Bulgaria in 2011 was performed mainly through its own resources. In 2011 the Company repaid some of its obligations to financial institutions. 2. Information about changes that have occurred during the reported period No changes to the member structure of the managing and supervising bodies of the Company have occurred during the reported period. In addition, there have been no changes to the primary management principles of the Company. At the regular session of the General Meeting of the Shareholders of the Company, held on , the following changes in the composition of the Management Board and the Supervisory Board were adopted: Iva Garvanska and Borislav Feschiev were replaced as members of the Management Board by Zlatolina Mukova and Expat Capital AD, through its representatives Nikolay Yankov and Lubomir Stoev. Nikolay Vassilev was elected member of the Supervisory Board. There is a functioning internal control system within the structure of EuroHold Bulgaria AD, 42

43 which ensures that the systems for disclosure of information and accountability, and the risk management system function properly. Leading international audit companies carry out the external audit, the accounting procedures, policies and financial statements within the Holding and its subsidiaries. As at the date of the reporting period and after the end of the fiscal year, the Company is not aware of any arrangements that might cause changes in the relative part of shares held by current shareholders. The company is not a party in any pending court, administrative or arbitration procedures, which have or might have a significant impact on its financial position or its profitability. There are no decisions or requests for the termination of the Company or for its liquidation. 3.Changes in the share price of the Company The Company s shares are registered for trade on the Premium Equities Segment of the Bulgarian Stock Exchange Sofia AD with stock index - 4EH. Share price of the Company Source-BSE-Sofia The graph shows the price dynamics of EuroHold s shares on BSE-Sofia for the period (the first and last stock exchange session for the fiscal 2011). Beginning price: BGN 0,866 ( ) Closing price: BGN 1,188 ( ) Maximum price: BGN 1,515 ( ) Minimum price: BGN 0,831 ( ) Change in value: + BGN 0,322 Relative change: % Average price BGN 1,207 Volume traded for the period 35,627,707 shares After the dual listing of EuroHold s shares in 2011, they have been traded on the Warsaw Stock Exchange, Main market with stock index EHG. Source: WSE 43

44 The graph shows the price dynamics of EuroHold s shares on WSE for the period Beginning price: BGN 1.25 / 2.90 PLN ( ) Closing price: BGN 1.25 / 2.90 PLN ( ) Maximum price: BGN 1.39 / 3.20 PLN ( ) Minimum price: BGN 1.21 / 2.75 PLN ( ) Change in value: n.a Relative change: n.a. Average price : BGN 1.31 / 2.98 PLN Volume traded for the period: 27,356 shares INVESTOR RELATIONS DIRECTOR Milena Stoyanova Stoyanova Sofia 1592, 43 Hristofor Kolumb Blvd. Tel.: (+359 2) ; [email protected] [email protected] EuroHold Bulgaria AD, Sofia 23 March 2012 ХІV. IMPORTANT EVENTS AFTER THE DATE OF THE ANNUAL FINANCIAL STATEMENTS The Management Board of EuroHold Bulgaria AD is not aware of any other important or significant events that have occurred after the date of the reporting period. Assen Minchev Executive member of the MB ХV. ANALYSIS AND EXPLANATION OF THE INFORMATION UNDER APPENDIX 11 OF REGULATION 2 Eurohold Bulgaria AD has drafted a report under Appendix 11 of Regulation 2, which will be presented to the Financial Supervision Commission in a separate document, together with the Report on the Activity of the Company and the Financial Statements as at

45 rbdq Te[: Z Tel: Fax: bdo@bdo. bg 51 B Bulgaria B[vd. floor Sofia Bulgaria To THE SHAREHoLDERS OF EUROHOLD BULGARIA AD INDEPENDENT AUDITOR'S REPORT We have audited the accompanying financial statement of Eurohotd Butgaria AD, which comprises statement of financial position as at 31 December 2011, statement of comprehensive income, statement of changes in equity, statement of cash ftows for the year then ended, and the summary of significant accounting poticies and other explanatory information. Management's Responsibility for the Financial Statement Management is responsible for the preparation and fair presentation of this financial statement in accordance with lnternational Financia[ Reporting Standards as adopted by the European Union, as wetl as for such internal control system as it determines is necessary to enabte the preparation of financial statements, which are free from material misstatements, deviations and discrepancies, whether due to fraud or error. Auditor's Responsibility Our responsibitity is to express an audit opinion on this financial statement based on our audit. We conducted our audit in comptiance with the professional requirements of the lnternationat Audit Standards. These standards require that we compty with the ethical requirements and ptan and perform the audit to obtain reasonable assurance about whether the financial statement is free from material misstatements, deviations and discrepancies. The audit invotves performing procedures to obtain audit evidence about the amounts and disctosures presented in the financia[ statement. The procedures selected depend on auditor's judgment, including the assessment of risks of material misstatement, deviations and discrepancies in the financiat statement, whether due to fraud or error. ln making those risk assessments, the auditor considers the internal control system retevant to the entity's preparation and fair presentation of the financial statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's interna[ control system. An audit atso includes evatuating the appropriateness of the accounting poticies used and the reasonabteness of accounting estimates made by the management, as wetl as evatuating the overatl presentation of the financiai statement. We betieve that the audit we have performed is sufficient and appropriate to provide a basis for our audit opinion. BDc Bu(garia OOD is a spe.ia(ized auditing ompany, r'nciuded in the list of the lnstitute of CPA in Bulgaria under number 16, member of BDO internationat. BDO Butga.ia OOD is reqistered in the T.ade Register with ldentification Code and VAI Number BGBS' BDO Butgaria OOD, a Eulgarian Limiied Liabiiity Company, is a member of BrO international Limited, a 1..,K company limited by guarantee, and forms part of the intemational BDO netv rk of r'ndependent member fims.

46 IBDO Tet: Te[: Fax: [email protected] 51 B Butgaria Btvd. floor Sofia Butgaria Opinion ln our opinion, the financiat statement gives a true and fair view of the financial position of Eurohotd Butgaria AD as at 31 December 2011, and of its operating resutt and its cash flows for the year then ended in accordance with the lnternational Financial Reporting Standards as adopted by the EU. Note Without any reservations to our audit opinion, we woutd tike to note as fotlows: As at the time of preparing the present audit report, the consotidated financial statements are not yet ready. For the purposes of greater thoroughness of equity, the present financia[ statement sha[[ be reviewed together with the consotidated statement. Report on other statutory and regulatory requirements We checked the report for the activity of Eurohotd Butgaria AD as 31 December 2011 relevant to the comptiance between the report for the activity and the financial statement for the same reporting period pursuant to the requirements of the Accountancy Act. As a resutt of the check we hereby certify the compliance between the report for the activity and the financiai statement as at 31 December 2011 in retation to the financiat information. Sofia, 30 March 2012 ffi BDO Bulgaria OOD Stoyanka Apostolova, CEA, Registered Auditor BDO Bulgaria OOD i5 a speciahzed auditing company, included in the tist of the lnstitute of CPA in Butgaria under number 16, member of BDO lnternational. BDO Butgaria OOD it registered in the Trade Register wr'th ldestificatjon Code and V,AT Number 8G EDO Bulgaria OOD, a Butgarian Limited Liabiiity Company, is a member of 8DO lnternational Limited, a UK company limited by guaentee, and formi part of the intemationai BDO network of independent member fims.

47 Annual Report 2Ol1 Eurohold Bulgaria AD Statement of comprehensive income For the year ended December 31, Revenue from oderatinq activities Divi{qngl inqolne Gains from financial activities Interest income Expen ses on operat!_lg ac_tj-v-tles lntgf_e-fi_elpels!9_ L g$sgguf:nele1a];1$ v i tteq _ Salaries and related expenses Depreciation Hired services and ot[gr -e_5pengp_s, 29L t3-97l _ ,345 rc,494.**_-.,-(4,371) " * *- (s13) iri (L,227\, (12,621) Profit from operating activitieq Other revenue Profit before tax 2,746 Tqx qxpqlqqq P11ofr!9!te;'tex _24*4L Other comprehensive income Total Net profit (in BGN) pgl5"herc -_*_qo.4_ Prepared by: Signed on behalf of the Board: Date: 3/23/zlt Read throush and verified for identity: h/lr**,"',1 / BDO Bulgaria OOD,'/ w& ' t.,o-'tr. &" f-}l..-# \, K{s.(*/if\*t',, S"A-/l'+t\ *] Il o.l ll d'l tji '\"a)--/,'s-z ^.ol/' These financial statements have been approved from the Board of Directors of Eurohold Bulgaria AD. The accompaning notes to the financial statements form an integral part of these statements. 47

48 Annual Report 20l1 Eurohold Bulgaria AD Statement of financial position As at 3U12 2OLL ASSETS BGN'OOO BGN'OOO Non-current assets Machinary and equlpmen! Intang!b!e aqsets N,9 4 1 c Lr qe1!19 99_! ye b-! e 9 f f,q n f e!-e!ed p? rtig s- Trade and other receivables *Inv_es!!1[*el!t_s, Investments in subsidiaiiei, issociiiei ind other comoanies 13. *L!-3_9-?_ - -8_1s_ L5, ,713 Cug-e,nt-99p9!9 lilan-c!e! qs_s_e!!, _14 -, Trade re,qeybles_- '_:--''-_ _-- Rg.c-e_i va blqs f,tqm t-ql q_ted pari eg O! h e1,c_u 1 1e-1-! 1e-ce [yab! es Cash and cash qqulvatents L52-417_85_ 1-?, ,24'3 TOTAL These financial statements have been approved from the Board of Directors of Eurohold Bulgaria AD. The accompaning notes to the financial statements form an integral part of these statements. 48

49 {i runoxolo Eurohold Bulgaria AD Statement of financia! position (continued) As of 31/12 2OLL EQUITY AND LIABILITIES Eqvity $haqg capit-ql -S_t1a1e_p,q9-mjun, General reserves Revatqalign rg,s_grye Retained earnings P!'-oJi! fqr thg pg!:-iqd Total eouitv Non-cuqqent liabi lities Borrowings Re!ated pg$199!!q,p!! jties Repo qon!1qcts-!!a-bi!!!ies to related parties Deferred tax liabilities 20LL 2010 BGN'OOO ;;;;;,, 29t363 6,250 L,716 89,403 2, ,OO ?9,3:t87 E.3g Current liabilities Trade payables Rgl gted -pq1!ieq lia b-! liti es_ Bgp,o, g,sttfa-c!9 li,qb_iljlies to related parties 9t her qq r!:-e!t lia D-il ru es?? ,394 _, _-L,l.?e_,, q,5,1_2, l3,39o Total liabilities LO4,2O7 TOTAL AND SHAREHOLDERS 2,.3 Prepared by: Signed on behalf of the Date: 3/23/2OL2 Read through and verified for identity: ll ii 2 n wrlr,,,nt^"-f BDO Bulgaria OOD These financial statements have been approved from the Board of Directors of Eurohold Bulgaria AD. The accompaning notes to the financial statements form an integral part of these statements. 49

50 i eunoxolo Eurohold Bulgaria AD Statement of cash flows For the year ended December 3L,2(01-1- CASH FLOWS FROM OPERATING ACTIVITIES f 1qf,i,!,,b-9f 9r,9la; Adiusted for: -PePl-esleliglt*-* Interest income t$efeslsxpefrges _ Dividend income Gains from sale of investments BGN'OOO 2010 BGN'OOO 2,71-8 le _ (1,083) 6,492 1?91) (g.8sg) 4d U:,!n Sl:!!p-t rl lv_ojkj!"9-,ceptte! i Chqns,e lq [qde-.q[d,s!hef "f99s,!yo.b!9s _Qh-elr9*e_grlg{e_-e!fq_9_tr'glpeye!"tes, Net cash flows from ooeratino activities CASH FLOWS FROM INVESTING ACTIVITIES Pavments for investments Receiots from the sale of investments Re_c_e!119.( / Qpl!eo". I oeqq _BrSlggdS Net cash flow generated /(used) bv investins activities f r9_!q ljyldelrlr CASH FLOWS FROM FINANCING ACTIVITIES - -,479- (sq9l (1,996),_- _(2,018) _* 25,964 - _2,16.-s* ,402 Ppge e-dg,frs m,igsge!.c9 _o,t I hqle_s Proceeds from bqlrgwings &ep,e yne n! cf- b-oss-wra s s Payfne4t Sf_ L!tefe-S!-Old -coqrmissions on oans olhetprc-cee!-s_1p-qyle!_t9f 1o_ryfj4qpc1119-C,c!yi!i_e9 Net cash used by financinq activities Net increase/(decrease) in cash and cash eouivalents -Qash,ar4-geslssluele$r s!*t!s lgsultilg,gl!h e perlod at the end of the Prepared by: Date:3/23/2072 I ov/ Signed on behalf of the sl33s (7-2,9-1e) _ G,E?-O,L -- csz) (24,386) :,z;:= tpn$n, s r-= / \ /Y-lI s f-=/ tx\ 0 li^il,**;p 1 I q -! }:Jr '\ri,v1"y/s,l / BDo Bulgaria ood \*-o+=-o Fq;'k*i/ Read through and verified for identity: l\ tt lt e-!=]/ *l X j These financial statements have been approved from the Board of Directors of Eurohold Bulgaria eo. rtr=e -- accompaning notes to the financial statements form an integral part of these statements. 50

51 {ieunonou Eurohold Bulgaria AD Statement of changes in equity For the year ended December 31, 2011 Balance as at 1 January 2010 Profit for the-period Other comprehensive income for the period Balance as at 31 December 2010 Share capital General reserues BGN'OOO BGN'OOO Share Revaluation premium reserve BGN'OOO BGN'OOO Retained Total earnings Equity BGN 'OOO BGN'OOO 9?Ae:9 -,9.?50, _ 2-9,?5,? -!,746.q9/-l_o,_3_. 1 g 9,? 6_-q 2,7!6_-.?_J16,. 62,498 6,250 29,363 L,746 92,L49 192,006 Batance as at 1 January?qu_ Prgfit for the p,_eiqd lsgqe of 1_e_w_s,hqrg-s_- _ Other comprehensive income for the p_eriod Balance as at 31 December 20Lt Prepared by: Date:3/23/20L2 Read through and verified for identity:,ilrvfr -I] tn*ttu I I BDO Bulga ria OOD Signed on behalf of the %s r/rvt \(ss These financial statements have been approved from the Board of Directors of Eurohold Bulgaria AD. The accompaning notes to the financial statements form an integral part of these statements. 51

52 Notes to the Financial Statements for 2011 (stand alone) Notes to the Financial Statement for 2011 Found in 1996, Eurohold Bulgaria AD operates in Bulgaria, Romania and Macedonia. The company is owner of a large number of subsidiaries within the sectors of insurance, financial services and sales of cars. 1. INFORMATION ABOUT THE GROUP Eurohold Bulgaria AD is a public joint stock company established pursuant to the provisions of article 122 of the Law for Public Offering of Securities and article 261 of the Commerce Law. The company is registered in Sofia City Court under corporate file 14436/2006 and is formed through the merger of Eurohold AD registered under corporate file 13770/1996 as per the inventory of Sofia City Court, and Starcom Holding AD, registered under corporate file 6333/1995 as per the inventory of Sofia City Court. Eurohold Bulgaria has its seat and registered address in the city of Sofia, Izgrev Region, 16 G.M. Dimitrov Blvd., EIK Since 21 st of January, 2010, the new registered address of Eurohold Bulgaria AD is: City of Sofia, 43 Hristofor Kolumb Blvd. The managing bodies of the company are: the general meeting of shareholders, the supervisory board /two-tier system/ and the managing board. 1.1 Scope of Business The scope of business of Eurohold Bulgaria AD is: acquisition, management, assessment and sales of participations in Bulgarian and foreign companies, acquisition, management and sales of bonds, acquisition, assessment and sales of patents, granting patent use licenses to companies in which the company participates, funding companies, in which the company participates. 2. SUMMARY OF THE GROUP S ACCOUNTING POLICY 2.1 Basis for Preparation of the Financial Statement The financial statements of Eurohold Bulgaria AD are prepared in compliance with the Law of Accounting and all International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), interpretations of the Standing Interpretation Committee (SIC), interpretations of the IFRS interpretation committee (IFRIC), which are effectively in force since 01 January 2009 and are adopted by the Commission of the European Union. The company has considered all standards and interpretations applicable to its activity as at the date of preparation of the present financial statement. The separate financial statement is drafted in compliance with the historic price principle, excluding those financial instruments and financial liabilities, which are measured at fair value. New and Amended Standards and Interpretations The accounting policies adopted are consistent with those of the previous financial year, except the following new and amended IFRS and IFRIC interpretations adopted as of 1 January 2011: IAS 24 Related Party Disclosures (Amendment) effective 1 January 2011 IAS 32 Financial Instruments: Presentation (Amendment) effective 1 February

53 Notes to the Financial Statements for 2011 (stand alone) IFRIC 14 Prepayments of a Minimum Funding Requirement (Amendment) effective 1 January 2011 IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments effective 1 July 2010 Improvements to IFRSs (May 2010) The application of these standards and clarifications is described below: IAS 24 Related Party Transactions (Amendment) The IASB has issued an amendment to IAS 24 that clarifies the definition of a related party. The new definitions emphasise a symmetrical view of related party relationships and clarifies the circumstances in which persons and key management personnel affect related party relationships of an entity. In addition, the amendment introduces an exemption from the general related party disclosure requirements for transactions with the government or entities that are controlled, jointly controlled or significantly influenced by the same government as the reporting entity. The amendment is applied retrospectively. The adoption of the amendment did not have any impact on the financial position or performance of the Group. IAS 32 Financial Instruments: Presentation (Amendment) The IASB issued an amendment that alters the definition of a financial liability in IAS 32 to enable entities to classify rights issues and certain options or warrants as equity instruments. The amendment is applicable if the rights are given pro rata to all of the existing owners of the same class of an entity s non-derivative equity instruments, to acquire a fixed number of the entity s own equity instruments for a fixed amount in any currency. The amendment is applied retrospectively. The amendment has had no effect on the financial position or performance of the Group. IFRIC 14 Prepayments of a Minimum Funding Requirement (Amendment) The amendment removes an unintended consequence when an entity is subject to minimum funding requirements and makes an early payment of contributions to cover such requirements. The amendment permits a prepayment of future service cost by the entity to be recognised as pension asset. The amendment is applied retrospectively. The Company is not subject to minimum funding requirements and therefore, the amendment has had no effect on its financial position or performance. IFRIC 19 Repayments of Financial Liabilities with Equity The interpretation clarifies that equity instruments issued to a creditor to extinguish a financial liability qualify as consideration paid. The equity instruments issued are measured at their fair value. In case that this cannot be reliably measured, the instruments are measured at the fair value of the liability extinguished. Any gain or loss is recognised immediately in profit or loss. The interpretation has had no effect on the financial position or performance of the Group. Improvements to IFRS In May 2010, the IASB issued its third omnibus of amendments to its standards, primarily with a view of removing inconsistencies and clarifying wording. There are separate transitional provisions for each standard. The adoption of the following amendments resulted in changes to accounting policies, but they have had no impact on the financial position or performance of the Group. IFRS 3 Business Combinations: The measurement options available for non-controlling interest (NCI) were amended. Only components of NCI that constitute a present ownership interest that entitles their holder to a proportionate share of the entity s net assets in the event of liquidation should be measured at either fair value or at the present ownership instruments proportionate share of the acquiree s identifiable net assets. All other components are to be measured at their acquisition date fair value. This improvement clarifies that the amendments to IFRS 7 Financial Instruments: Disclosures, IAS 32 Financial Instruments: Presentation and IAS 39 Financial Instruments: Recognition and Measurement, that eliminate the exemption for contingent consideration, do not apply to contingent consideration that arose from business combinations whose acquisition dates precede the application of IFRS 3 (as revised in 2008). Finally, it requires an entity (in a business combination) to account for the replacement of the acquiree s share-based payment transactions (whether obliged or voluntarily), i.e., split between consideration and post combination expenses. 53

54 Notes to the Financial Statements for 2011 (stand alone) IFRS 7 Financial Instruments - Disclosures: The amendment was intended to simplify the disclosures provided by reducing the volume of disclosures around collateral held and improving disclosures by requiring qualitative information to put the quantitative information in context. IAS 1 Presentation of Financial Statements: The amendment clarifies that an entity may present an analysis of each component of other comprehensive income either in the statement of changes in equity or in the notes to the financial statements. IAS 27 Consolidated and Separate Financial Statements: This improvement clarifies that the consequential amendments of IAS 27 made as a result of the amendments of IAS 21 The Effects of Changes in Foreign Exchange Rates, IAS 28 Investments in Associates and IAS 31 Interests in Joint Ventures apply prospectively for annual periods beginning on or after 1 July 2009 or earlier when IAS 27 is applied earlier. IAS 34 Interim Financial Reporting: This improvement requires additional disclosures for fair values and changes in classification of financial assets, as well as changes to contingent assets and liabilities in the interim condensed financial statements. IFRIC 13 Customer Loyalty Programmes: This improvement clarifies that when the fair value of award credits is measured based on the value of the awards for which they could be redeemed, the amount of discounts or incentives otherwise granted to customers not participating in the award credit scheme, is to be taken into account. Standards issued but not yet effective and not adopted earlier Standards issued but not yet effective and not early adopted up to the date of issuance of the Group s financial statements are listed below. The list is of standards and interpretations issued, which the Group reasonably expects to have an impact on disclosures, financial position or performance when applied at a future date. The Group intends to adopt those standards when they become effective. IAS 1 Presentation of Financial Statements (Amendment) - Presentation of Items of Other Comprehensive Income The amendment is effective for annual periods beginning on or after 1 July The amendments to IAS 1 change the grouping of items presented in OCI. Items that could be reclassified (or recycled ) to profit or loss at a future point in time (for example, upon derecognition or settlement) would be presented separately from the items that will never be reclassified. The amendment affects presentation only and has no impact on the Group s financial position or performance. The Group is in the process of assessing the impact of this amendment on its financial position or performance. The amendment has not yet been endorsed by EU. IAS 12 Income Taxes (Amendment) - Recovery of Underlying Assets The amendment is effective for annual periods beginning on or after 1 January The amendment clarifies the determination of deferred tax on investment property measured at fair value. The amendment introduces a rebuttable presumption that deferred tax on investment property measured using the fair value model in IAS 40 should be determined on the basis that its carrying amount will be recovered through sale. Furthermore, it introduces the requirement that deferred tax on non-depreciable assets that are measured using the revaluation model in IAS 16 should always be measured on a sale basis of the asset. The Group does not expect any impact on its financial position or performance. The amendment has not yet been endorsed by EU. IAS 19 Employee Benefits (Amendments) The amendment is effective for annual periods beginning on or after 1 January The IASB has issued numerous amendments to IAS 19. These range from fundamental changes such as removing the corridor mechanism and the concept of expected returns on plan assets to simple clarifications and re-wording. Earlier application is permitted. The Group is in the process of assessing the impact of these amendments on its financial position or performance. The amendments have not yet been endorsed by EU. IAS 27 Individual Financial Statements (Revised) The Standard is effective for annual periods beginning on or after 1 January As a consequence of the new IFRS 10 and IFRS 12, what remains of IAS 27 is limited to accounting for subsidiaries, jointly controlled entities, and associates in the separate financial statements. Earlier application is permitted. The Group is in the process of assessing the impact of this Standard on its financial position or performance. The Standard has not yet been endorsed by EU. 54

55 Notes to the Financial Statements for 2011 (stand alone) IAS 28 Investments in Associates and Joint Ventures (Revised) The Standard is effective for annual periods beginning on or after 1 January As a consequence of the new IFRS 11 and IFRS 12, IAS 28 has been renamed as IAS 28 Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to associates. Earlier application is permitted. The Group is in the process of assessing the impact of this Standard on its financial position or performance. The Standard has not yet been endorsed by EU. IAS 32 Financial Instruments (Amendment): Presentation - Offsetting Financial Assets and Financial Liabilities The amendment is effective for annual periods beginning on or after 1 January This amendment clarifies the meaning of currently has a legally enforceable right to set-off and also clarifies the application of the IAS 32 offsetting criteria to settlement systems. The amendments to IAS 32 are to be retrospectively applied. Earlier application is permitted. However, if an entity chooses to early adopt the amendment, it must disclose that fact and also make the disclosures required by the IFRS 7 Offsetting Financial Assets and Financial Liabilities amendments. The Group is in the process of assessing the impact of the amendment on its financial position or performance. This amendment has not yet been endorsed by the EU. IFRS 7 Financial Instruments: Disclosures (Amendment) - Enhanced Derecognition Disclosure Requirements The amendment is effective for annual periods beginning on or after 1 July The amendment requires additional disclosure about financial assets that have been transferred but not derecognised to enable the user of the financial statements to understand the relationship with those assets that have not been derecognised and their associated liabilities. In addition, the amendment requires disclosures about continuing involvement in derecognised assets to enable the user to evaluate their nature, and the risks associated with the entity s continuing involvement in those derecognised assets. The amendment has only disclosure effects. The amendment has no impact on the Group s financial position or performance. IFRS 7 Financial Instruments: Disclosures (Amendment) - Offsetting Financial Assets and Financial Liabilities The amendment is effective for annual periods beginning on or after 1 January The amendment introduces common disclosure requirements. These disclosures would provide users of the financial statements with information that is useful in evaluating the effect or potential effect of netting arrangements on an entity s financial position. The amendments to IFRS 7 are to be retrospectively applied. The Group is in the process of assessing the impact of the amendment on its financial position or performance. This amendment has not yet been endorsed by the EU. IFRS 9 Financial Instruments: Classification and Valuation The new standard is effective for annual periods beginning on or after 1 January IFRS 9 as issued reflects the first phase of the IASBs work on the replacement of IAS 39 and applies to classification and measurement of financial assets as defined in IAS 39. Phase I of IFRS 9 will have a significant impact on (i) the classification and measurement of financial assets and (ii) a change in reporting for those entities that have designated financial liabilities using the fair value option. In subsequent phases, the IASB will address hedge accounting and impairment of financial assets. The completion of this project is expected over the first half of The Group is in the process of assessing the impact of the new standard on its financial position or performance. The Standard has not yet been endorsed by EU. IFRS 10 Consolidated Financial Statements The new standard is effective for annual periods beginning on or after 1 January IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. It also includes the issues raised in SIC-12 Consolidation Special Purpose Entities. IFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 will require the management to exercise significant judgement to determine which entities are controlled, and therefore, are required to be consolidated by the parent company, compared with the requirements that were in IAS 27. The Group is in the process of assessing the impact of the new standard on its financial position or performance. The Standard has not yet been endorsed by EU. 55

56 Notes to the Financial Statements for 2011 (stand alone) IFRS 11 Joint Arrangements The new standard is effective for annual periods beginning on or after 1 January IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities Non-monetary Contributions by Venturers. IFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted using the equity method. The Group is in the process of assessing the impact of the new standard on its financial position or performance. This standard has not yet been endorsed by the EU. IFRS 12 Disclosure of Interests in Other Entities The new standard is effective for annual periods beginning on or after 1 January IFRS 12 includes all the disclosure requirements that were previously included in IAS 27 related to consolidated financial statements, as well as all the disclosures that were previously included in IAS 31 Interests in Joint Ventures and IAS 28 Investments in Associates. These disclosures relate to an entity s interests in subsidiaries, joint arrangements, associates, and structured entities. A number of new disclosures are also required. The Group is in the process of assessing the impact of the new standard on its financial position or performance. The Standard has not yet been endorsed by EU. IFRS 13 Fair Value Measurement The new standard is effective for annual periods beginning on or after 1 January IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change the requirements for an entity to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. This standard should be applied prospectively and early adoption is permitted. The Group is in the process of assessing the impact of the new standard on its financial position or performance. The Standard has not yet been endorsed by EU. IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine The interpretation is effective for annual periods beginning on or after 1 January This interpretation only applies to stripping costs incurred in surface mining activity during the production phase of the mine ('production stripping costs'). Costs incurred in undertaking stripping activities are considered to create two possible benefits a) the production of inventory in the current period and/or b) improved access to ore to be mined in a future period (striping activity asset). Where cost cannot be specifically allocated between the inventory produced during the period and the stripping activity asset, IFRIC 20 requires an entity to use an allocation basis that is based on a relevant production measure. Earlier application is permitted. The Group is in the process of assessing the impact of the new interpretation on its financial position or performance. IFRIC 20 has not yet been endorsed by the EU. 2.2 Comparative Data Eurohold Bulgaria AD presents comparative information for one previous period. 2.3 Functional and Reporting Currency The Bulgarian Lev (BGN) is the functional and reporting currency of the group. Data presented in the statement and the attachments thereto are in thousand BGN (000 BGN). Since 1 January 2009, the Bulgarian lev is fixed to the EURO exchange rate: BGN 1,95583 for EUR 1. Cash, receivables and payables denominated in foreign currency are reported in the BGN equivalent on the basis of the exchange rate as at the date of the operation and are revaluated on annual basis using the official exchange rate of the Bulgarian National Bank on the last working day of the year. 2.4 Accounting Assumptions and Approximate Estimates Upon drafting the financial statement in compliance with IAS, the management is required to apply approximate estimates and assumptions, which affect the reported assets and liabilities, and the disclosure of the contingent assets and liabilities as at the date of the balance sheet. Despite the estimates are based on the management s knowledge of current developments, the actual results may vary from the estimates used. 2.5 Income Company s income is recognized on the accruals basis and to the extent economic benefits are obtained by the Company and as far as the incomes may be reliably measured. Upon sales of goods incomes are recognized when all material risks and benefits from the title of goods are transferred to the buyer. Upon provision of services, incomes are recognized considering the stage of completion of the transaction as at the date of the balance 56

57 Notes to the Financial Statements for 2011 (stand alone) sheet, if such stage may be reliably measured, as well as the costs incurred for the transaction. Dividend incomes are recognized upon certifying the right to obtain them. Eurohold Bulgaria AD generates financial incomes mainly from the following activities: Incomes from operations with investments Incomes from dividends Incomes from interests under loans granted to subsidiaries Incomes from Services 2.6 Cost Costs are recognized at the time of occurrence thereof and on the accruals and comparability basis. Administrative costs are recognized as costs incurred during the year, and are relevant to the management and administration of the company, including costs that relate to the administrative staff, officers, office expenses, and other outsourcing. Financial costs include: costs occurred in relation with investment operations, negative differences from financial instruments operations and currency operations, costs for interests under granted bank loans and obligatory issues, as well as commissions. Deferred costs (prepaid costs) are forwarded for recognition as current cost for the period contracts they pertain to, are performed. Other operating incomes and costs include items of secondary character in relation to the main activity of the Company. 2.7 Interest Interest incomes and costs are recognized in the Statement of Comprehensive Income using the effective interest rate method. The effective interest rate is the rate for discounting the expected cash payments and proceeds during the term of the financial asset or liability up to the net book value of the respective asset or liability. The effective interest rate is calculated upon the initial recognition of the financial asset or liability and is not adjusted afterwards. The calculation of the effective interest rate includes all received or paid commissions, transaction costs, as well s discounts or premiums, which are integral part of the effective interest rate. Transaction costs are internally inherent costs directly related to the financial asset or liability acquisition, issue or derecognition. The interest incomes and costs stated in the Statement of Comprehensive Income include interests recognized on the basis of effective interest rate under financial assets and liabilities carried at amortized value. 2.8 Fees and Commissions Fees and commissions costs, which are integral part of the effective interest rate for a financial asset or liability are included in the calculation of the effective interest rate. Other fees and commissions incomes, including logistic services fees, insurance and other intermediation fees, are recognized upon providing the respective services. The other fees and commissions costs relevant mainly to banking services, are recognized upon receipt of the respective services. 2.9 Types of Activities As a holding company with main activity for acquisition and management of subsidiaries, Eurohold Bulgaria AD performs mainly financial activity. The companies within the issuer s portfolio operate on the following markets: insurance and health insurance, leasing, finance, automobile and real estate. Insurance and Health Insurance line: Insurance services Health insurance services Leasing line: Leasing services Financial line: Investment intermediation Automobile line: Sales of new cars Car repairs services Real estates: Investment property management Tourist property management 2.10 Business Combinations and Goodwill Business combinations are accounted by using the purchase method. This method requires the assignee to recognize, on the date of acquisition, the acquired differentiated assets, undertaken liabilities and participation, which is not controlling the acquired 57

58 Notes to the Financial Statements for 2011 (stand alone) entity, separately from the goodwill. Any costs directly pertaining to the acquisition are carried in the statement of comprehensive income for the period. Differentiated acquired assets and undertaken liabilities and contingent obligations within a business combination are measured at fair value on the date of acquisition, regardless of the extent of non-controlled participation. is able to measure participations, which are not controlling for the acquired entity, either at fair value, or as proportional share in the differentiated net assets of the acquired entity. The acquisition cost excess above the share of assignee in the net fair value of differentiated assets, liabilities and contingent obligations of acquisitions, is carried as goodwill. In case the acquisition cost is less than the share of investor in the fair values of the company s net assets, the difference is recognized directly in the statement of comprehensive income Taxes Income Tax The current tax includes the tax amount, which should be paid over the expected taxable profit for the period on the basis of the effective tax rate or the tax rate applicable on the day of preparation of the balance sheet and all adjustments of due tax for previous years. The company calculates the income tax in compliance with the applicable legislation. The income tax is calculated on the bases of taxable profit after adjustments of the financial result in accordance with the Law for Corporate Income Tax. Current income taxes are defined in compliance with the Bulgarian tax legislation the Law for Corporate Income Taxation. The nominal tax rate for 2010 is 10% of the taxable profit. Deferred Tax Deferred tax is calculated using the balance sheet method for all temporary differences between the net book value as per the financial statements and the amounts used for taxation purposes. The deferred tax is calculated on the basis of the tax rate that is expected to apply upon the realization of the asset or the settlement of the liability. The effect from changes in the tax rates on the deferred tax is accounted in the income statement, except in cases when it is about sums, which are earlier accrued or accounted directly in equity. Based on IAS 12, Income Taxes, the Company recognizes only the portion of a current tax asset or liability from the acquisition or sale of financial instruments for which the Company expects to realize a reverse benefit in the foreseeable future, or does not control the timing of the reverse benefit. The Company s policy applies equally to each class of financial instruments. In 2011 Eurohold Bulgaria wrote-off deferred tax liabilities amounting to BGN thousand upon management s discretion and in compliance with the requirements of IAS 12, Income Taxes. Deferred tax liabilities were accrued in 2008 and 2009 as a result of reported financial income from investment operations related to the insurance subholding. Under IAS 12, the company eliminates the deferred tax liability under two criteria the company controls the timing of the reverse benefit of the temporary difference, or it is likely that such temporary difference will not be reversed in the foreseeable future. The Company applies accounting policies adopted for the entire Group regarding deferred tax liabilities and therefore writes-off both amounts charged in 2008 and 2009, respectively. VAT Eurohold Bulgaria AD has a VAT registration and charges 20% tax upon delivery of services. Withholding tax Pursuant to the Law for Corporate Income Tax, payment of incomes to foreign individuals or legal entities is subject to withholding tax within the territory of the Republic of Bulgaria. Withholding tax is not due provided the foreign legal entity has proved grounds for application of the Agreements for Avoidance of Double Taxation before tax rate or applicable tax rate on the day of expiration of the tax payment term Fixed Assets Fixed Tangible Assets Fixed tangible assets are measured at acquisition cost, less the amount of accrued amortization and possible impairment losses. The company has fixed the 2010 value materiality threshold to BGN 700, under which acquired assets, regardless they have the characteristics of fixed assets, are accounted as current expense at the time of acquisition thereof. 58

59 Notes to the Financial Statements for 2011 (stand alone) Initial Acquisition Fixed tangible assets are initially measured: - at acquisition cost, which includes: purchase price (including duties and nonrefundable taxes), all direct costs for making the asset in working condition according to its purpose for assets acquired from external sources; - at fair value: for assets obtained as a result of free of charge transaction; - at evaluation: approved by the court and all direct costs for making the asset in working condition according to its purpose for assets acquired as a contribution of physical assets. Borrowing costs directly related to acquisition, construction or production of eligible asset are included in the acquisition cost (cost) of this asset. All other borrowing costs are accounted on current basis in the profit or loss for the period. Further Measurement Further costs for repairs and maintenance are accounted in statement of financial position when the same criteria as at initial recognition are in place. Upon sales of fixed assets, the difference between the net book value and the sales price of the asset is accounted as profit or loss in the statement of comprehensive income, in Other Incomes item. Fixed tangible assets are derecognized from the balance sheet upon sale or when the asset is finally decommissioned and no further economic benefits are expected after derecognition Amortization Methods The company applies straight-line method of amortization. Amortization of assets begins from the month following the month of acquisition thereof. Land and assets in process of construction are not amortized. The useful life by groups of assets depends on: the usual wear and tear, equipment specificity, future intentions for use and the probable moral aging. The estimated useful lives by groups of assets are as follows: Buildings Plant and equipment Vehicles Fixtures and fittings Computers Impairment 25 years 3 10 years 4 6 years 3 8 years 2 3 years Net book values of fixed tangible assets are subject to review for impairment, when events or changes in circumstances have occurred, which evidence that the net book value might permanently differ from their recoverable amount. If there are indicators that the estimated recoverable value is less than their net book value, the latter is adjusted up to the recoverable value of assets. Impairment losses are recognized as expense in the statement of comprehensive income during the year of occurrence thereof Fixed Intangible Assets Intangible assets are presented in the financial statement at cost, less the accumulated amortization and possible impairment losses. The company applies straight-line method of amortization of intangible assets at expected useful lives of 5-7 years. Net book value of intangible assets is subject to review for impairment, when events or changes in circumstances have occurred, which evidence that their net book value might exceed their recoverable value Investment Property Investment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, or use in supply of services or for administrative purposes. Investment property is measured at fair value Positive Goodwill After initial recognition, goodwill is accounted at acquisition cost, less accumulated impairment losses. The positive goodwill is reviewed for impairment on annual basis. The impairment loss of goodwill is not subject to refund in future periods Employment Benefits Annual Paid Leave The Company recognizes the undiscounted amount of estimated costs relevant to annual leaves that are expected to be paid against the employees service for the ended period as a liability Financial Assets Investments in Financial Assets Investments in subsidiaries are measured at costs in the separate statement of the parent-company. The companies in which the company holds between 20% and 50% of the voting rights and may significantly affect, but not to perform control functions, are considered associated companies. 59

60 Notes to the Financial Statements for 2011 (stand alone) Investments in associated companies are accounted by using the equity method. By using the equity method, the investment in associated company is carried in the statement of financial position at acquisition cost, plus the changes in the share in the net assets of the associated entity after the acquisition. The goodwill related to the associated entity is included in the net book value of the investment and is not amortized. Remuneration condition The remuneration that the acquirer transfers to the acquiree in exchange for a company includes any asset or liability arising from the arrangement under consideration. The acquirer shall recognize the fair value of the contingent consideration at the acquisition date as part of the consideration transferred to the acquiree in exchange for the company. The acquirer shall classify an obligation to pay the remuneration condition as a liability or as own equity on the basis of the definitions of an equity instrument and financial liability in paragraph 11 of IAS 32, Financial Instruments: presentation and other applicable IFRS regulations. The acquirer shall classify as an asset the right to return the previously transferred consideration, if specified conditions are met. Paragraph 58 provides guidance on subsequent accounting for remuneration condition. In 2010 Eurohold Bulgaria acquired Avto Union AD, as part of the agreed remuneration is is conditional. As of Eurohold Bulgaria estimates the fair value of the conditional remuneration to BGN 0. In 2011 events have created conditions to accrue a remuneration on the basis of the agreed on conditions in the amount of BGN 26,770 thousand. Thereby, the value of the investment in Avto Union AD was increased Investments in Financial Instruments Financial assets within the scope of IAS 39 are classified as financial assets at fair value in the profit or loss, loans and receivables, held-tomaturity investments, available-for-sale financial assets or derivatives defined as hedging instruments in effective hedge, where appropriate. The company classifies its financial instruments at their initial recognition. Financial assets include cash and short-term deposits, trade and other receivables, financial instruments and financial instrument derivatives quoted and unquoted on the stock exchange. Financial Assets at Fair Value in Profit or Loss Financial assets at fair value in profit or loss include financial assets held for trading and those designated at fair value at inception. Financial assets, which are usually acquired for the purposes of selling in the near term, are classified as held for trading. Investments Held-to-Maturity Investments held-to-maturity are financial assets, which are non-derivative and has fixed or determinable payments and fixed maturity, that the company has the positive intention and ability to hold to maturity. Initially, these investments are recognized at acquisition cost, which includes the amount of consideration paid for acquisition of the investment. All transaction costs directly related to the acquisition are also included in the acquisition cost. After the initial measurement, held-to-maturity investments are carried at amortized cost by using the method of the effective interest rate. Gains and losses from heldto-maturity investments are recognized in the statement of comprehensive income when the investment is derecognized or impaired. Loans and Other Receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such financial assets are initially recognized at acquisition cost, which is the fair value paid for acquisition of financial assets. All directly attributable acquisition transaction costs, are also included in the acquisition cost. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest rate method. Gains and losses from loans and receivables are recognized in the statement of comprehensive income when derecognized or impaired. Financial Assets Available for Sale Financial assets available for sale are nonderivative financial assets that are so classified and are not classified in any of the three categories listed above. Initially, these investments are presented at fair value. Subsequent to initial recognition, financial assets available for sale are measured at fair value. Unrealized gains and losses from fair value are carried in separate item of the other comprehensive income until the financial assets are not derecognized or are not defined as impaired. Upon derecognition or impairment, cumulative gains and losses previously recognized in equity, are recognized in the statement of comprehensive income. 60

61 Notes to the Financial Statements for 2011 (stand alone) Derivative Financial Instruments Derivative financial instruments are classified as held-for-trading, unless they are effective hedging instruments. All derivatives are carried as assets, when their fair values are positive and as liabilities when the fair values are negative Inventory Materials and goods are measured at delivery cost. Their value includes the sum of all purchase costs, as well as other costs incurred in relation to the delivery thereof to their current location and condition Short-Term Receivables Receivables are measured at amortized cost, which usually corresponds to the nominal value. Impairment is estimated for the purposes of meeting the expected loss on the basis of separate measurement of individual arrangements Liability Provisions Liability provisions include expected costs related to obligations under guarantees, restructuring, etc., as well as deferred tax asset Deferred Tax Payables Current tax payables and current tax receivables are recognized in the statement of financial position as tax calculated on taxable income for the year adjusted for the tax on taxable income for previous years and paid taxes Equity Equity is presented at its nominal value pursuant to the court decisions for registration Liabilities Financial liabilities are recognized during the period of loan with the amount of gained proceeds, principal, less the transaction expenses. During subsequent periods financial liabilities are measured at amortized cost, equal to the capitalized value, when applying the effective interest rate method. In the statement of comprehensive income, loan expenses are recognized during the period of loan term. Current liabilities, such as payables to suppliers, group and associated companies and other payables, are measured at amortized cost, which is usually equal to the nominal value Financial Risk Management Factors Determining Financial Risk Implementing its activity, the company is exposed to diverse financial risks: market risk (including currency risk, risk from change of financial instruments fair value under the impact of market interest rates and price risk), credit risk, liquidity risk and risk from change of future cash flows due to a change in market interest rates. The overall risk management program emphasizes on the unpredictability of financial markets and is aimed at mitigating the possible adverse effects on the Company s financial result. The Company is exposed to currency risk through payments in foreign currency and through its assets and liabilities, which are denominated in foreign currency. Currency Risk As a result of foreign currency exposures, gains and losses occur, which are carried in the statement of comprehensive income. These exposures include the cash assets of the Group, which are not denominated in the currency used in the local companies financial statements. Eurohold Bulgaria AD has no investments in other countries, except in the countries it operates Bulgaria, Romania, Macedonia, and the Netherlands. In case the local currency is exposed to currency risk, it is managed through investments in assets denominated in Euro. Interest Risk The company is exposed to interest risk in relation to the used bank and trade loans as part of the loans obtained have floating interest rate agreed as basis interest (EURIBOR/LIBOR) increased with the respective allowance. In 2010, the floating interest rate loans are denominated in euro. The interest rates are specified in the respective appendixes. Credit Risk Credit risk is mainly related to trade and financial receivables. The amounts stated in the statement of financial position are on net basis, excluding the provisions for doubtful receivables determined as such by the management on the basis of previous experience and current economic conditions. Liquidity Risk Liquidity risk is that the company may encounter difficulties in servicing its financial obligations when they become payable. Policy in this field is aimed at ensuring that there will be enough cash available to service its maturing obligations, including in exceptional and unforeseen conditions. The management s objective is to maintain 61

62 Notes to the Financial Statements for 2011 (stand alone) continuous balance between continuity and flexibility of financial resources by using adequate forms of funding. The company s management is responsible for managing the liquidity risk and involves maintaining enough cash available, arranging adequate credit lines, preparation of analysis and update of cash flows estimates Measuring Fair Values Fair value of financial instruments traded on active market (for example securities held for trading and held for sale) is based on the market quotes as at the balance sheet date. The market quote used to define the values of financial assets and financial liabilities held by the Company, is the price at the Bulgarian Stock Exchange Cash Flows The statement of cash flows shows the cash flows for the year in relation to operating, investment and financial activity during the year, the change in cash and cash equivalents for the year, cash and cash equivalents at the beginning and at the end of the year. The operating cash flows are calculated as result for the year adjusted with the non-cash operating positions, changes in net turnover capital and corporate tax. Investment activity cash flows include payments in relation to purchase and sale of fixed assets and cash flows related to the purchase and sale of entities and operations. Purchase and sale of other securities which are not cash and cash equivalents are also included in the investment activity. Financial activity cash flows include changes in the amount or composition of share capital and the related costs, the borrowings and the repayment of interest bearing loans, purchase, and sale of own shares and payment of dividends. Cash and cash equivalents include bank overdraft, liquidity cash and securities for term less than three months. 3. Dividend income Euro-Finance AD Bulland Investments ASPIC Plasthim-T AD 534-1, Gains from financial activities Gains from sale of investments 6,428 13,968 Foreign exchange gains - 3 6,428 13, Interest income Interest income from related parties loans 1, Interest income from third parties loans Interest income deposits ,235 1,083 62

63 Notes to the Interim Financial Statements for 2011 (stand alone) 6. Interest expense Interest expense bank loans 3,996 3,711 Interest expense bond obligation Interest expense from related parties loans 1,253 2,439 Interest expense from third parties loans 53-5,302 6, Losses on financial activities Losses on sale of investments 197 4,129 Other financial expenses , Hired services and other expenses Hired services expenses 1,116 1,033 Other expenses ,477 1,227 63

64 Notes to the Interim Financial Statements for 2011 (stand alone) 9. Machinery and equipment Cost: Machinery and equipment Fixtures and fittings At 1 January Additions - 2 Disposals (14) (1) At 31 December Additions - 1 Disposals - - At 31 December Depreciation: At 1 January Depreciation charge - 10 Disposals (14) (1) At 31 December Depreciation charge - 11 Disposals - - At 31 December Carrying value: At 1 January At 31 December At 31 December

65 Notes to the Interim Financial Statements for 2011 (stand alone) 10. Intangible assets Cost: Software At 1 January Additions - Disposals (46) At 31 December 2010 Additions 4 Disposals - At 31 December Depreciation: At 1 January Depreciation charge 8 Disposals (47) At 31 December 2010 Depreciation charge - Disposals - At 31 December Carrying value: At 1 January At 31 December At 31 December Non-current receivables from related parties Loan principle Espas Auto EOOD Skandinavia motors EAD 209 1,039 Eurohold Imoti EOOD - 7,844 Eurolease Auto EAD borrowings from Unicredit Bulbank AD 982 5,241 Eurolease Auto - Romania Avto Union AD 5,848-7,142 14,393 65

66 Notes to the Interim Financial Statements for 2011 (stand alone) 12. Trade and other receivables Trade and other receivables Investments in subsidiaries, associates and other companies 13.1 Investments in subsidiaries Value as at Increase Decrease Value as at Share capital of the subsidiary % control in the subsidiary Euroins Insurance Group AD 207, , , % 80.82% Avto Union AD 22,122 39,620-61,742 34, % 99.98% BG Autolease Holding B.V. 22,785 3,745-26,530 26, % 100.0% Euro-Finance AD 18, ,145 14, % 99.99% Eurohold Imoti EOOD 1, , % 100.0% Scandinavia Motors AD , % - 272,011 43, ,381 The control in Scandinavia Motors AD is exercised by Avto Union AD, which owns 99.5% of the share capital of Scandinavia Motors AD Investments in associates Value as at Increase Decrease Value as at Juliunica AD Formoplast AD 2,257 1,032 3,289-2,258 1,032 3,

67 Notes to the Interim Financial Statements for 2011 (stand alone) 13.3 Investments in other companies Value as at Increase Decrease Value as at Bullend Investments ADSIC Sevko AD Formoplast AD Hebar AD Financial assets Securities Trade receivbles Trade receivbles Tax receivables Receivables from related paries Interest receivables Skandinavia Motors EAD 5 19 Starcom Holding AD - 16 Espas Auto EOOD 9 2 Eurohold Imoti EOOD Eurohold Imoti Veliko Tarnovo EOOD Eurolease Auto - Romania - 97 Avto Union AD 39 - Erolease Auto - Macedonia

68 Notes to the Interim Financial Statements for 2011 (stand alone) 16.2 Dividend receivables Nissan Sofia EOOD Other receivables Avto Union AD 9 4 Auto Italia EAD 1 1 Bulvaria Holding EAD 1 1 Euroins - Health Insurance AD 2 1 Euroins AD 6 4 Nissan Sofia EOOD 2 2 Eurolease Auto EAD 3,993 3,989 BG Autolease Holding B.V ,193 4, Other current receivables Receivables from sale of investments Interest receivables Deferred expenses Other receivables ,581 1, Cash and cash equivalents Cash at banks Cash in hand

69 Notes to the Interim Financial Statements for 2011 (stand alone) 19. Share capital BGN BGN Issued shares 127,345,000 62,497,636 All ordinary shares are fully paid. The share capital is distributed as follows: Share holders % Number of shares Par value Starcom Holding AD 50.88% 64,797,934 64,797,934 Expat Capital AD 16.83% 21,436,026 21,436,026 Other companies 26.87% 34,211,301 34,211,301 Other individuals 5.42% 6,899,739 6,899, % 127,345, ,345,000 The distribution of the share capital is based on information from the Bulgarian Stock Exchange, Warsaw Stock Exchange and repo contracts of Starcom Holding AD for 9,000 thousand shares. 20. Borrowings Accession Mezzanine 28,612 30,729 Unicredit Bulbank-financing leasing activities 6,259 10,249 34,871 40,978 Analysis of the borrowings from financial institutions: Bank Type Curren cy Size contracted Balance as at Interest rate Maturity date Security Accession Mezzanine Unicredit Bulbank AD Working capital related to the leasing activities Loan EUR 15,000,000 15,000, % EUR 10,000,000 5,240,000 Annual interest rate for regular loan + 5% Pledge on shares Pledge on property and shares 69

70 Notes to the Interim Financial Statements for 2011 (stand alone) 21. Related parties liabilities Starcom Holding AD 668 5,205 Eurolease Auto EOOD 2,305 5,991 Euroins Insurance Group AD - 16,428 Autoplaza AD Auto Union AD Cargoexpress Imoti EAD Eurolease Rent-a-car EOOD Formoplast AD Trade payables 3,136 28, Trade payables Payables to employees and social security institutions Related parties liabilities 23.1 Interest payables Eurolease Rent-a-car EOOD 3 - Avto Union AD - 3 Starcom Holding AD 19 - Eurolease Auto EOOD Euroins Insurance Group AD Autoplaza AD 1 10 Cargoexpress Imoti EAD Other payables Avto Union AD* 1,000 2,932 Euroins Health Insurance AD - 1 Eurolease Auto EOOD 28 - Euroins AD - 3 *The liability to Avto Union AD is for its capital increase. 1,028 2,936 70

71 Notes to the Interim Financial Statements for 2011 (stand alone) 24. Other current liabilities Payables for acquisition of investments 3,368 2,724 Loan principle 5,946 3,994 Interest payables 876 1,365 Tax payables Other Deferred tax liabilities 10,563 8,512 In 2011 Eurohold Bulgaria wrote-off deferred tax liabilities amounting to BGN 12,561 thousand upon management s discretion and in compliance with the requirements of IAS 12, Income Taxes. Deferred tax liabilities were accrued in 2008 and 2009 as a result of reported financial income from investment operations related to the insurance subholding. Under IAS 12, the company eliminates the deferred tax liability under two criteria the company controls the timing of the reverse benefit of the temporary difference, or it is likely that such temporary difference will not be reversed in the foreseeable future. The Company applies accounting policies adopted for the entire Group regarding deferred tax liabilities and therefore writes-off both amounts charged in 2008 and 2009, respectively. 26. Events after the reporting period. No significant events after the reporting date have been identified by the Board of Directors of Eurohold Bulgaria AD, that may influence the interim financial statements. Asen Minchev Executive member of the BD Eurohold Bulgaria AD, 23 March

72 Appendix 11 Information on Eurohold Bulgaria AD, under Ordinance No 2 of the Financial Supervision Commission about the prospectuses for public offering and admission to trading on a regulated market of securities, and the disclosure of information by public companies and other issuers of securities 1. Structure of the capital of the Company, including the securities that have not been admitted to trading on a regulated market in Bulgaria or another EU member state, indicating the different classes of shares, the rights and obligations of each class of shares, and the portion of the total capital represented by each class. The capital of the Issuer amounts to BGN 127,345,000 (one hundred twenty seven million, and three hundred forty five thousand), divided into 127,345,000 (one hundred twenty seven million, and three hundred forty five thousand) shares with a nominal value of BGN 1 (one ) each. All shares are of the same class - ordinary, non-privileged, dematerialized, with voting rights. Each share gives one vote at a General Meeting of the Shareholders, dividend rights and liquidation quota, in proportion to its nominal value. There are no securities that have not been admitted to trading on a regulated market in the capital of the Issuer. 2. Restrictions on the transfer of securities, such as restrictions on the ownership of securities or the need to obtain the approval of the Company or of another shareholder. The shares of the Issuer are freely transferable. The Articles of Association of the Company do not include any restrictions on the transfer of shares to third parties. Under the Law on the Public Offering of Securities, peresons who acquire shares exceeding certain thresholds outlined by the Act, should be reported to the Financial Supervision Commission. 3. Information on the direct and indirect ownership of 5 per cent or more of the voting rights in the General Meeting of the Shareholders of the Company, including information on the shareholders, the size of their share participation and the way in which the shares are owned. The majority shareholder Starcom Holding, registered at the Commercial registry, UIC: , with its registered office:etropole municipality. Sofia, bul 191 Ruski blvd., has a direct share ownership with 64,797,934 (sixty four million seven hundred ninety-seven thousand, nine hundred thirty-four) shares representing per cent (fifty and eightyeight hundredths) of the capital of the Issuer. Other shareholders holding directly or indirectly 5 per cent or more of the voting rights are as follows: - Expat Capital AD is limited company duly incorporated and operating under the laws of the Republic of Bulgaria.The Company has its registered office in Sofia 96A G.S. Rakovsky str. Expat Capital AD holds 21,436,026 (twenty one million four hundred thirty-six thousand and twenty-six) shares representing per cent (sixteen point eighty-three hundredths) of the capital of the Issuer.

73 Other legal entities which own a total of 34,211,301 (thirty four million, two hundred and eleven thousand, three hundred and one) shares, representing per cent (twenty six and eighty-seven hundredths) of the capital of the Issuer; Other individuals who hold a total of 6,899,739 (six million eight hundred ninety-nine thousand seven hundred thirty-nine) shares, representing 5.42 per cent (five point forty-two hundredths) of the capital of the Issuer. 4. Information about shareholders with special control rights and a description of those rights. No shareholders have special controlling rights. 5. The control system over the right to excersise a vote when an employee of the Company is also a shareholder and when the control is not exercised directly by them. In exercising their right to vote, the employees of the Company, who are also its shareholders, are verified by the management at the General Meeting of the Shareholders. The number of shares owned by the respective individual, the contents of the authorization document (if any), the presence or absence of statutory barriers to voting, and any other special requirements of law are also verified at the meeting. 6. Restrictions on the right to vote, such as limitations on the right to vote of the shareholders which own a certain percentage or number of votes, deadlines for exercising the rights to vote, or systems in which the financial rights attached to the shares are separated from the actual ownership of the shares. There are no restrictions on the rights to vote, or systems where the financial rights attached to the shares is be separated from the actual ownership of the shares. There are no explicit restrictions on the deadline for exercising the right to vote. The deadline for a shareholder to excersise a vote shall be specified in the invitation to the General Meeting of the Shareholders of the Company. 7. Agreements among shareholders of which the Company is aware and which may lead to restrictions on the transfer of shares or voting rights. The Company is not aware of any agreements that could lead to restrictions in the transfer of shares and voting rights. 8. Provisions concerning the appointment and dismissal of board members of the Company and the changes and additions to the Articles of Association of the Company. The following provisions in the Articles of Association of the Issuer concerning the appointment and dismissal of members of the governing bodies of the Company apply: Article 33.(1) The Supervisory Board supervises the activities of the Management Board.The Supervisory Board can not participate in the management of the Company.

74 (2) Members of the Supervisory Board are elected by the General Meeting of Shareholders for a period of five (5) years. The first Supervisory Board is elected for a term of three (3) years. (3) The Supervisory Board shall be composed of three (3) to seven (7) persons.they can be physical or legal persons. In the second case, the entity shall appoint a representative to carry out its duties. (4) members of the Supervisory Board may be reappointed without limitation. (5) A person under article. 234, paragraph 2 of the Commercial Act or article 116a paragraph 1 of the Law on Public Offering of Securities cannot be a member of the Supervisory Board. (6) Members of the Supervisory Board must meet the following additional conditions: a) The have not been convicted of a crime of general nature; b) They have not been declared bankrupt or are in a bankruptcy prosecution as a sole trader; c) Do not have the right to hold an office. (7) At least one third of the members of the Supervisory Board must be independent persons under article. 116a paragraph 2 of the Law on the Public Offering of Securities. Article 38.(1) The Supervisory Board: a) elects and dismiss members of the Management Board; b) Determine the remuneration of members of the Management Board; c) Monitors the activities of the Management Board, by requesting and hearing evidence and reports on each single matter affecting the company; d) Carries out the necessary research in order to fulfill its duties; e) Approves regulations for the activities of the Management Board; f) Convenes the General Meeting of the Shareholders; g) Adopt rules for its own work; h) Performs other tasks assigned by the regulations, this statute and decisions made at the General Meeting of Shareholders. (2) The Supervisory Board may use experts to assist iperforming its duties. Article 43. (1) The Management Board manages the Company as it operates under the supervision of the General Meeting of Shareholders and the Supervisory Board.It decides on all matters related to the scope of activity of the Company, except for the matters which by law or by the provisions of this statute ate entrusted exclusively to the General Meeting of Shareholders or to the Supervisory Board. (2) Board members are elected by the Supervisory Board for a term of five (5) years. (3) (Amended ) The Management Board may be composed of three (3) to 9 (nine) persons.they can be natural persons or legal entities. In the latter case, the legal entity shall appoint a representative to carry out its duties and be jointly liable for the actions of their representative. (4) Board members may be reappointed without limitation. (5) A person/entity under Art. 234, para. 2 of the Commercial Law or Art. 116a para. 1 of the Public Offering of Securities cannot be a member of the Board (6) Board members must also meet the following additional conditions: a) have sufficient professional qualification and experience to manage the operation of the Company; b) have not been convicted of a crime of general nature; c) have not been members of management or supervisory body or general partners in a company which has been declared bankrupt or has been terminated due to bankruptcy

75 in the past two years preceding the date of the declaration of bankruptcy, if there have been unsatisfied creditors; d) have not been declared bankrupt or are not in production for bankruptcy as a sole trader; e) have not been deprived of the right to hold office. Article 53. (1) The Board shall elect a chairman from among its members. (2) The Chairman of the Board organizes the Board's activities in compliance with the requirements of the law, the Articles of Association of the Company and the decisions of the General Meeting of Shareholders. Article 54 (1) (Amended ) - The Governing Board with the approval of the Supervisory Council authorizes one or several of its members (executive members) to represent the Company.The authorization may be revoked at any time. (2) The names of the persons authorized to represent the Company are entered into the Commercial Register and are published as provided by law. (3) Restrictions on the representative authority of authorized persons under the preceding paragraphs shall not have effect with respect to third parties, except the restrictions of the power of attorney as provided by law. (4) Empowerment and its revocation shall have effect against third parties upon their entry and after their publication as provided by law. (5) The management of the Company may be assigned to a procurator with a decision of the Board in compliance with all regulations.unless specified otherwise, its powers are limited to the extent specified in the Commercial Code. The following provisions in the Statute are concerned with the issuing of amendments to the Statute: Article 16. (1) A reduction of the capital is decided during the General Meeting of Shareholders to change the Articles of Association of the Company, taken with at least 2/3 (two thirds) of the votes of the represented at the session of the General Meeting of the shareholders, as permitted by the law. Article 29. (1) The decisions of the General Meeting of Shareholders shall take effect immediately, unless their action is postponed. (2) The decisions of the General Meeting of Shareholders on amending the Articles of Association of the Company, an increase or decrease of capital, transformation and dissolution of the Company, appointment and dismissal of board members and the appointment of liquidators shall be entered in the Commercial Register by the lot of the Company and shall be valid after their entry into the Commercial Register. Article 30. The General Meeting of the Shareholders: A. amends the Articles of Association; 2. increases and decreases the share capital; 3. transforms and terminates the Company; 4. elects and dismisses members of the Supervisory Board; 5. appoints and dismisses Certified Public Accountants (registered auditors); 6. approves the annual financial statements after their certification by the certified public accountant (certified auditor), decides on profit distribution, the contents of the "Reserve" fund and the payment of dividends; 7. decides bond issues;

76 8. appoints liquidators upon termination of the Company, except in cases of bankruptcy; 9. devotes of responsibility the members of the Supervisory and Management Board; 10. empowers those who manage and represent the Company for transactions in cases provided for in the Law on Public Offering of Securities; 11. makes decisions on claims against members of the Board and appoints a representative to conduct the process; 12. determines the remuneration and bonuses of the members of the Supervisory Board; 13. resolves other issues related to the Company and the competence of the General Meeting of the Shareholders, under the active regulations and this statute. 9. The rights of the governing bodies of the Company, including the right to decide on the issue and redemption of shares of the Company. The Management Board of the Issuer A. organizes, manages and controls the Company and provides management and protection of its property; 2. manages and represents the Company; 3. through its executive members, signs contracts with employees of the Company, amends and terminates relationships with them, imposes disciplinary sanctions for violations, gives employees incentives, has the rights and obligations of an employer towards the employees of the Company; 4. reports upon the request of the Supervisory Board on the occurences sincesince the previous report, but not less frequently than once every 3 (three) months; 5. resolves the relations between the Company and the state and municipal budget; 6. controls the expenditures and revenues of the Company; 7. carries out any legal action to ensure the normal functioning of the Company in terms of laws, the Articles of Association of the Company and the resolutions made at the General Meeting of the Shareholders; 8. convenes the General Meeting of the Shareholders, sets out the meetings agenda, ensures compliance with the statutory requirements for a convention of the General Meeting of the Shareholders; 9. makes the necessary disclosures and publishes information related to the Company's activities to the respective government authorities and the media; 10. submits to the Supervisory Board the annual financial statements, the report on its activities during the past financial year, the report of the chartered accountant (certified auditor) and the proposal for profit distribution; 11. in cases provided for in the Law on Public Offering of Securities and in other regulations, pre-approves transactions between the Company and stakeholders other than those approved at the General Meeting of the Shareholders or the Supervisory Board; 12. subjects to the limitations provided in the Law on Public Offering of securities and other regulations: a) makes decisions to close or transfer the subsidiaries of the Company or significant parts thereof, to acquire or dispose of shares in other companies, to finance companies, in which it participates; b) decides on the acquisition and disposal of fixed assets of the Company and of property rights over them, use of loans, granting guarantees and warranties, participating in contracts, tenders and competitions; c) adopts decisions for a mortgage or a pledge on the assets of the Company; 13. makes decisions to open or close branches; 14. accepts internal and other acts;

77 15. decides on a mortgage and pledge of the assets of the Company; 16. pursuant to article 204, paragraph 3 of the Commerce Act, for a period of five years from the registration of an amendment of the constitution adopted by the General Meeting of , decides to issue bonds with par value of 200,000,000 (two hundred million euros), defines all mandatory and optional parameters of bond issues, states and amends in accordance with market conditions and investor interest all terms and conditions of bond loans, includin the terms and conditions of the bond issue decided on the General Meeting of the Shareholders on prepares and submits for adoption by the General Meeting of the Shareholders programs and development plans of the Company; 18. performs other tasks assigned by the regulations, this Articles of Association of the Company and decisions made at the General Meeting of the Shareholders. 10. Material contracts of the company, which become effective, are modified or terminated due to a change in the control of the Company in implementing a mandatory tender offer, and the consequences thereof, unless such disclosure may cause serious harm to the Company; exception to the preceding sentence shall not apply in cases where the company is obliged to disclose information under the Act. There are no material contracts of the Company to cause action, be modified or terminated because of a change in the control of the Company in implementing the mandatory tender offer. 11. Agreements between the company and its management bodies or employees for the payment of compensations for termination or dismissal without legal basis or a termination of employment for reasons related to the tender offer. The Company has no agreements with its management bodies or with individual employees to provide, in connection with the tender offer, special benefits when a dismissal is made without legal grounds or other termination of employment is initiated in connection with the tender offer. Assen Minchev, Executive member of the Management Board of Eurohold Bulgaria AD

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