ALBSIG AD, Skopje. Financial Statements and Independent Auditors Report. 31 December 2012

Transcription

1 Financial Statements and Independent Auditors Report 31 December 2012 This is an English translation of the original Report issued in Macedonian, in case of any discrepancies between the English and Macedonian version the Macedonian text shall prevail.

2 Contents Page Independent Auditors Report 1 Statement of financial position (Balance Sheet) 3 Statement of comprehensive income (Income Statement) 7 Statement of changes in equity 9 Statement of cash flows 11 Notes to the financial statements 13

3 Independent Auditors Report Grant Thornton DOO M.H.Jasmin 52 v-1/ Skopje Macedonia T +389 (2) F +389 (2) To Management and Shareholders of We have audited the accompanying financial statements of ( the Company ) which comprise of Statement of financial position (Balance Sheet) as of 31 December 2012, and the Statement of comprehensive income (Income Statement), Statement of changes in equity and Statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes, included on pages 3 to 57. Management s responsibility for financial statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the Rulebook on the form and content of the balance schemes and detailed content of the annual reports of the insurance and/or reinsurance undertakings issued by the Insurance Supervision Agency of the Republic of Macedonia, and for such internal control as Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company s preparation and fair presentation of the financial statements 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 Company s internal control. Chartered Accountants Member firm of Grant Thornton International L

4 GrantThornton An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Management, as well as evaluating the overall ptesentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and apptopriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financiaposition of the Comp any as of 31 December 201,2, and its financial performance and its cash flows for the year then ended in accotdance with the Rulebook on the form and content of the balance schemes and detailed content of the annual reports of the insurance andf or reinsurance undertakings issued by the Insurance Supervision Agency of the Republic of Macedonia. Emphasis of Mafter Without further qualifting our opinion we draw attention to the following matters: As it is disclosed in Notes 4.2 and 32 to rhe accompanying financial statements, the total equity of the Company is not in compliance with the legally ptescribed minimum of 3,000,000 Eutos in relation to the Guarantee Fond as disclosed in article 77 Qne 2) from the Insurance Supervision Legislative. In addition, as it is disclosed in Note 32 to the accompanyingltnancial statements, as of 31 December 2012 the assets coveting the equity of the Compafly ^te not sufficient according to the ptescribed aticle 73 from the Insutance Supervision Legislative. The possible measures, if any that could be undertaken by the Insurance Superr.ision Agency of the Republic of Macedonia with respect to the afotementioned noncompliances could not be determined with teasonable assurance as of the date of issuance of this report. Skopje, 27 March201.3 Grant Thornton DOO F "" ':;I *' Al{l TOPHTOH Ao0 Cetified uditor a a o it o n);; Chartored A@ountantg l\,lembs frm of Grant Thornton Int matonal Ltd

5 3 Financial statements 31 December 2012 Statement of financial position (Balance Sheet) (in Denar) At 31 December Notes Assets INTANGIBLE ASSETS 6 1,760,120 - Goodwill - - Other intangible assets 1,760,120 - INVESTMENTS Land, buildings and other tangible assets 7 17,912,474 11,023,898 Land and buildings used for Company s operations ,729,274 11,023,898 -Land - - -Buildings 10,729,274 11,023,898 Land, buildings and other assets not used for Company s operations 7.2 7,183, Land - - -Buildings 7,183, Other tangible assets - - Financial investments in companies in a group subsidiaries, associates and joint controlled entities 16,418,299 15,995,179 Shares, equity interests and other equity instruments of value in companies in a group subsidiaries - - Debt securities issued by companies in a group subsidiaries - - Shares, equity interests and other equity instruments in associates - - Debt securities issued by associates and loans to associates - - Other financial investments in companies in a group subsidiaries - - Other financial investments in companies in associates - - Investments in joint controlled entities 8 16,418,299 15,995,179 Other financial investments 9 328,066, ,088,178 Financial investments held to maturity 162,984, ,873,303 Debt securities with maturity up to one year 162,984, ,873,303 Debt securities with maturity over one year - - Financial investments available-for-sale - - Debt securities with maturity up to one year - - Debt securities with maturity over one year - - Shares, equity interests and other equity instruments - - Shares and equity interests in investment funds - - Financial investments for trading - - Debt securities with maturity up to one year - - Debt securities with maturity over one year - - Shares, equity interests and other equity instruments - - Shares and equity interests in investment funds - - See accompanying notes to the financial statements

6 4 Financial statements 31 December 2012 Statement of financial position (Balance Sheet) (continued) (in Denar) At 31 December Deposits, loans and other placements 165,082, ,214,875 Given deposits 165,082, ,214,875 Loans secured with mortgages - - Other loans - - Other placements - - Derivative financial instruments - - Deposits of reinsurance companies at cedents, based on reinsurance contracts - - PART FOR CO-INSURANCE AND REINSURANCE IN GROSS TECHNICAL PROVISIONS 15 23,020 26,115 Part for co-insurance and reinsurance in gross unearned premiums provisions 23,020 26,115 Part for co-insurance and reinsurance in gross mathematical provisions - - Part for co-insurance and reinsurance in gross claims provisions - - Part for co-insurance and reinsurance in gross provisions for bonuses and discounts - - Part for co-insurance and reinsurance in gross equalization provisions - - Part for co-insurance and reinsurance in other gross technical provisions - - Part for co-insurance and reinsurance in gross technical provisions for life insurance where the insurer takes over the investment risk - - FINANCIAL INVESTMENTS WHERE THE INSURER TAKES OVER THE INVESTMENT RISK (INSURANCE CONTRACTS) - - DEFERRRED AND CURRENT TAX ASSETS - - Deferred tax assets - - Current tax assets - - RECEIVABLES 10 58,076,239 89,978,238 Receivables from direct insurance works 41,696,617 56,029,524 Receivables from insurers 37,242,984 54,288,972 Receivables from agents 4,453,633 1,740,552 Other receivables from direct insurance works - - Receivables from direct co-insurance and reinsurance works - - Receivables from co-insurance and reinsurance premiums - - Receivables from participation in claims fees from co-insurance and reinsurance - - Other receivables from co-insurance and reinsurance works - - Other receivables 16,379,622 33,948,714 Other receivables from direct works 10,815,036 7,378,004 Receivables from financial investments 990,537 1,026,963 Other receivables 4,574,049 25,543,747 Receivables based on subscribed but not paid-in capital - - OTHER ASSETS 18,693,475 11,144,182 Tangible assets used for operations (other than land and buildings) 11 10,651,427 6,973,184 Equipment 10,651,427 6,973,184 Other tangible assets - - Cash and cash equivalents 12 7,729,414 4,133,231 Cash with banks 7,683,018 4,133,231 Cash on hand 46,396 - Separated cash to cover mathematical provisions - - Other cash and cash equivalents - - Statement of financial position (Balance Sheet) (continued) (in Denar) At 31 December See accompanying notes to the financial statements

7 5 Financial statements 31 December 2012 INVENTORIES AND SMALL INVENTORY 312,634 37,767 PREPAIDS 50,322,872 43,631,634 Accrued income based on interest and rents - - Deferred acquisition costs 13 50,322,872 42,001,234 Other accrued income and deferred expenses 13-1,630,400 NON-CURRENT ASSETS HELD FOR SALE AND DISCOUNTINUED OPERATIONS - - TOTAL ASSETS 491,273, ,887,424 Equity and liabilities EQUITY AND PROVISIONS ,456, ,396,900 Subscribed capital 184,034, ,034,083 Subscribed capital from ordinary shares 184,034, ,034,083 Subscribed capital from preference shares - - Subscribed and not paid-in capital - - Premiums on shares issued - - Revaluation provisions Tangible assets - - Financial investments - - Other revaluation provisions - - Provisions 26,569,896 25,279,638 Legal provisions 26,569,896 25,279,638 Statutory provisions - - Provisions for treasury shares - - Purchase of treasury shares - - Other provisions - - Retained earnings, net 3,792,921 1,212,406 Losses carried forward - - Income for the current accounting period - 3,870,773 Loss for the current accounting period (49,940,462) - SUBORDINATED LIABILITIES - - GROSS TECHNICAL PROVISIONS ,163, ,756,883 Gross unearned premiums provisions 163,036, ,839,494 Gross mathematical provisions - - Gross claims provisions 137,127,060 60,917,389 Gross provisions for bonuses and discounts - - Gross equalization provisions - - Gross other technical provisions - - GROSS TECHNICAL PROVISIONSRELATED TO CONTRACTS WHERE THE INSURER TAKES OVER THE INVESTMENT RISK - - OTHER PROVISIONS - - Provisions for employees - - Other provisions - - DEFERRED AND CURRENT TAX LIABILITIES - - Deferred tax liabilities - - LIABILITIES ARAISING FROM DEPOSITS OF COMPANIES FRO REINSURANCE AT CEDENTS, BASED ON INSURANCE CONTRACTS - - Statement of financial position (Balance Sheet) (continued) (in Denar) At 31 December See accompanying notes to the financial statements

8 Financial statements. 31 December 2012 Statement of financial position (Balance Sheet) (continued) (in Denar) At 31 December 'l LIABILITIES Liabilities from direct insurance works 10,764,819 Liabilities to insurers 10,764,819 Liabilities representatives and agents Other liabilities from direct insurance works Liabilities from co-insurance and reinsurance works 2,289,028 Liabilities based on co-insurance and reinsurance premiums 2,289,028 Liabilities based on participation in coverage of claims Other liabilities from co-insurance and reinsurance works Other liabilities 13,599,316 Other liabilities from direct insurance works 5,813,331 Liabilities from fi nancial investments Other liabilities 7,785, ,808,842 20,784,429 24,413-19,924,799 11,816,435 8,108,364 ACCRUALS TOTAL LIABILITIES ,887,424 These financial statements have been approned by the Board of Directors of the Company on 28 February and signed on its behalf by: Mr Hashim Rexhepi General Dtector / President of Board of Directors &\^r/pyba-tt iln\o Selaudin Imami t of Finances See accompanying notes to the financial statements

9 7 Financial statements 31 December 2012 Statement of comprehensive income (Income Statement) (in Denars ) Year ended 31 December Notes INCOME FROM OPERATIONS 333,912, ,394,655 Earned premiums (premiums income, net) ,524, ,226,574 Gross policy insurance premiums 326,150, ,524,837 Gross policy co-insurance premiums - - Gross policy reinsurance/ retrocession premiums - - Gross policy premiums delivered in co-insurance - - Gross policy premiums delivered in reinsurance/retrocession (8,425,500) (9,838,770) Change in gross unearned premiums provisions (12,197,299) (15,891,660) Change in gross unearned premiums provisions part for co-insurance - - Change in gross unearned premiums provisions part for reinsurance (3,095) 432,167 Income from investments 18 15,115,241 13,244,586 Income from subsidiaries, associates and joint controlled entities - - Income from investments in land and buildings - - -Income from rents - - -Income from increasing the value of land and buildings - - -Income from sale of land and buildings - - Interest income 15,025,915 12,994,574 Foreign exchange gains 89, ,012 Value adjustments (unrealized gains, reduction at fair value) - - Realized gains from sale of financial assets capital gains - - -Financial investments available for sale - - -Financial investments for trading (at fair value) - - -Other financial investments - - Other income from investments - - Other insurance technical income, less for insurance 19 8,777, ,103 Other income 20 4,495,474 1,544,392 EXPENSES FROM OPERATIONS 383,145, ,148,905 Claims incurred (Claims expenses, net) ,135, ,675,027 Gross paid claims ,457, ,680,797 Income decrease from gross realized regress receivables 21 (11,531,162) (11,615,463) Gross paid claims part for co-insurance - - Gross paid claims part for reinsurance/ retrocession Changes in gross claims provisions 21 76,209,671 13,609,693 Changes in gross claims provisions part for co-insurance - - Changes in gross claims provisions part for reinsurance - - See accompanying notes to the financial statements

10 8 Financial statements 31 December 2012 Statement of comprehensive income (Income Statement) (continued) (in Denars ) Year ended 31 December Notes Changes in other technical provisions, net of reinsurance - - Changes in mathematical provisions, net of reinsurance - - -Changes in gross mathematical provisions Changes in gross mathematical provisions part for coinsurance/reinsurance - - Changes in equalization provisions, net of reinsurance Changes in equalization provisions Changes in equalization provisions part for co-insurance / reinsurance - - Changes in other technical provisions, net of reinsurance Changes in other technical provisions Changes in other technical provisions part for co-insurance / reinsurance - - Changes in gross mathematical provisions for life insurance where the insurer takes over the investment risk, net of reinsurance - - Changes in gross mathematical provisions for life insurance where the insurer takes over the investment risk - - Changes in gross mathematical provisions for life insurance where the insurer takes over the investment risk part for co-insurance and reinsurance - - Expenses for bonuses and discounts, net of reinsurance 22 44,902,006 46,411,600 Expenses for bonuses (related to result) - - Expenses for discounts (not related to result) 44,902,006 46,411,600 Net expenses for insurance implementation 116,808, ,111,360 Acquisition costs 23 43,896,169 37,075,120 -Fees 17,328,406 6,820,023 - Other acquisition costs 34,889,401 34,448,270 - Change in deferred acquisition costs (8,321,638) (4,193,173) Administration expenses 24 72,912,334 71,036,240 - Depreciation of tangible assets that serve in ordinary course of operations 2,713,793 3,312,832 - Costs for employees 29,546,477 29,555,033 - Charges for services of individuals who perform no operations (contracts, copyright agreements and other legal relations) all fees included 1,608,229 1,375,781 - Other administration expenses 39,043,835 36,792,594 Expenses from investments 42, ,615 Depreciation and value adjustments of tangible assets not used for operations - - Interest expenses 1, ,413 Foreign exchange losses 41, ,202 Impairment provision(unrealized losses, reduction at fair value) - - Realised losses from sale of financial assets-capital loss Financial investments available-for-sale Financial investments for trading (at fair value) Other financial investments - - Other expenses from investments - - Other insurance technical expenses, less reinsurance 26 24,679,561 19,713,002 Expenses for prevention - - Other insurance technical expenses, less reinsurance 24,679,561 19,713,002 Value adjustments of receivables based on premiums 27 12,685,074 21,198,409 Other expenses, including value adjustments 28 2,892, ,892 PROFIT FOR THE YEAR BEFORE TAXATION - 4,245,750 LOSS FOR THE YEAR BEFORE TAXATION (49,233,115) - INCOME TAX (EXPENSE) , ,977 DEFERRED TAX - - PROFIT FOR THE YEAR AFTER TAXATION - 3,870,773 LOSS FOR THE YEAR AFTER TAXATION (49,940,462) - OTHER COMPREHENSIVE INCOME/(LOSS) - - INCOME / (LOSS) ATTRIBUTED TO THE SHAREHOLDERS (49,940,462) 3,870,773 See accompanying notes to the financial statements

11 9 Financial statements 31 December 2012 Statement of changes in equity 31 December 2011 (in Denars) Reserves Share Premiums from issued Legal Statutory Provision s of treasury Other Total Purchase of treasury Revaluated Retained earnings or (loss) carried Profit / (loss) for current Total equity and capital shares reserves reserves shares reserves reserves shares reserves forward year reserves At 1 January ,034, , , ,223, ,526,127 Changes in accounting policies Adjustments in the previous period At 1 January 2011 adjusted 184,034, , , ,223, ,526,127 Profit or loss for ,870,773 3,870,773 Profit or loss for ,870,773 3,870,773 Non-owners changes in equity Unrealised profit/loss from property, plant and equipment Unrealised profit/loss from available-for-sale financial investments Realised profit/loss from available-for-sale financial investments Other non-owners changes in equity Transactions with owners ,010, ,010, ,212,406 (26,223,392) - Increase / Decrease of share capital Other payments made by owners Dividends paid Other allocation to owners ,010, ,010, ,212,406 (26,223,392) - At 31 December ,034,083-25,279, ,279, ,212,406 3,870, ,396,900 See accompanying notes to the financial statements

12 10 Financial statements 31 December 2012 Statement of changes in equity (continued) 31 December 2012 (in Denars Share capital Premiums from issued shares Legal reserves Statutory reserves Reserves Reserves of treasury shares Other reserves Total reserves Purchase of treasury shares Revaluated reserves Retained earnings or (loss) carried forward Profit / (loss) for current year Total equity and reserves At 1 January ,034,083-25,279, ,279, ,212,406 3,870, ,396,90 Changes in accounting policies Adjustments in the previous period At 1 January 2012 adjusted 184,034,083-25,279, ,279, ,212,406 3,870, ,396,90 Profit or loss for (49,940,462) (49,940,462 (Loss) for (49,940,462) (49,940,462 Non-owners changes in equity Unrealised profit/loss from property, plant and equipment Unrealised profit/loss from available-for-sale financial investments Realised profit/loss from available-for-sale financial investments Other non-owners changes in equity Transactions with owners - - 1,290, ,290, ,580,515 (3,870,773) Increase / Decrease of share capital Other payments made by owners Dividends paid Other allocation to owners - - 1,290, ,290, ,580,515 (3,870,773) At 31 December ,034,083-26,569, ,569, ,792,921 (49,940,462) 164,456,43 See accompanying notes to the financial statements

13 11 Financial statements 31 December 2012 Statement of cash flows Notes (in Denar) Year ended 31 December CASH FLOWS FROM OPERATING ACTIVITIES Cash inflows from operating activities 350,060, ,771,767 Insurance and co-insurance premiums and advances received 324,290, ,704,900 Reinsurance and retrocession premiums - - Inflows from participation in coverage of claims - - Interest received from insurance works - - Other inflows from operating activities 25,770,508 5,066,867 Cash outflows from operating activities (313,507,234) (323,225,913) Paid claims, agreed insurance amounts, participation in coverage of claims from co-insurance and advances given (114,945,713) (99,604,470) Paid claims and participation in coverage of claims from reinsurance and retrocession - - Co-insurance, reinsurance and retrocession premiums - (9,838,770) Fees and other personal expenses - - Other expenses for insurance works - - Interests paid (1,025) (373,413) Income tax and other charges (923,357) (4,792,827) Other outflows from regular activities (197,637,139) (208,616,433) Cash outflows from operating activities, net 36,553,351 - Cash flows from operating activities - (6,454,146) CASH FLOWS FROM INVESTING ACTIVITIES Cash inflows from investing activities 15,062, ,524,007 Inflows from intangible assets - - Inflows from property, plant and equipment - - Inflows from property, plant and equipment not used for Company s operations - - Inflows from investments in the Group s companies: subsidiaries, associates and joint controlled entities - - Inflows from investments held-to-maturity - 311,515,782 Inflows from other financial placements - 56,381,823 Dividends received and other participation in income - - Interest received 15,062,341 13,626,402 Cash outflows from investing activities (48,019,509) (376,013,535) Outflows from intangible assets (2,009,462) - Outflows from property, plant and equipment (5,848,070) (1,462,949) Outflows from property, plant and equipment not used for Company s operations (7,183,200) - Outflows from investments in the Group s companies: subsidiaries, associates and joint controlled entities - - Outflows from investments held-to-maturity (111,152) (316,744,108) Outflows from other financial placements (32,867,625) (57,806,478) Outflows from dividends and other participation in income - - Outflows from interests - - Cash inflow from investing activities, net - 5,510,472 Cash outflows from investing activities, net (32,957,168) - See accompanying notes to the financial statements

14 12 Financial statements 31 December 2012 Statement of cash flows (continued) Notes (in Denar) Year ended 31 December CASH FLOWS FROM FINANCING ACTIVITIES Cash inflows from financing activities - - Inflows from increase of share capital - - Inflows from received long-term and short-term credits and loans - - Inflows from other long-term and short-term liabilities - - Cash outflows from financing activities - - Outflows from repayment of long-term and short-term credits and loans and other liabilities - - Outflows from purchase of treasury shares - - Outflows from dividends paid - - Cash inflows from financing activities, net - - Cash outflows from financing activities, net - - TOTAL CASH INFLOWS 365,122, ,295,774 TOTAL CASH OUTFLOWS (361,526,743) (699,239,448) CASH INFLOWS, NET 3,596,183 - CASH OUTFLOWS, NET - (943,674) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE ACCOUNTING PERIOD 12 4,133,231 5,076,905 EFFECT ROM CHANGE IN FOREIGN EHXCHANGE CURRENCY IN CASH AND CASH EQUIVALENTS - - CASH AND CASH EQUIVALENTS AT THE END OF THE ACCOUNTING PERIOD 12 7,729,414 4,133,231 See accompanying notes to the financial statements

15 13 Notes to the financial statements 1 General The insurance company Albsig AD, Skopje ( the Company ) is a shareholding company registered in the Republic of Macedonia on April 2007, with head office located on blvd. Kliment Ohridski No. 52/A, 1000 Skopje. The Company s sole founder is Insurance Company ALB Siguracion S.C. incorporated in Albania, Punetoret e Rilindjes Street No. 10, Tirana, which owns 100% of the Company s share capital. The Company is registered for performing 12 classes of non-life insurance, and most significant activities of the Company are motor vehicle insurance, property insurance and third party liability insurance. The Company performs its activities on the territory of the Republic of Macedonia and as of 31 December 2012 employs 113 persons (2011: 118 persons). 2 Accounting policies The principal accounting policies adopted in the preparation of these financial statements are set out below. The determination of the Company s accounting policies is based on acknowledged, familiar and practical experiences of the provisions of the Law on Insurance Supervision and the Rulebook on chart of accounts for insurance and reinsurance undertakings, the Rulebook on the form and content of the balance schemes and detailed content of the annual reports of the insurance and/or reinsurance undertakings issued by the Insurance Supervision Agency of the Republic of Macedonia and other legal regulations. These policies are consistently applied to all years presented, unless otherwise stated. 2.1 Basis of preparation The Company maintains its accounting records and prepares its financial statements in accordance with the Law on Trade Companies, Law on Insurance Supervision and bylaws prescribed by the Insurance Supervision Agency of the Republic of Macedonia. The financial statements have been prepared as of and for the years that ended on the 31 December 2012 and Current and comparative data stated in these financial statements are expressed in Denar. The Company s reporting and functional currency is Macedonian Denar (MKD) Where necessary, the previous year presentations have been adjusted to conform to the changes in the current year.

16 14 Accounting policies (continued) 2.2 Use of estimates and judgements The preparation of financial statement requires the Management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the future periods, if the revision affects the future periods. Judgements made by the Management that have significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are disclosed in Note Foreign currency transactions Transactions denominated in foreign currencies have been translated into Denar at rates set by the National Bank of the Republic of Macedonia on the date when incurred. Assets and liabilities denominated in foreign currencies are translated at the Statement of financial position date using official rates of exchange prevailing on that date, and any foreign exchange gains or losses, resulting from foreign currency translation, are included in the Statement of comprehensive income in the period in which they incurred. The middle exchange rates used for conversion of the Statement of financial position items denominated in foreign currencies are as follows: MKD MKD 1 EUR Intangible assets Intangible assets, that are acquired software for the Company, are measured at cost less accumulated amortisation and accumulated impairment losses. Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in part of the intangibles, and when it can be measured reliably. All other expenditure is expensed in profit and loss as incurred. Amortisation Amortisation of intangible assets is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. Annual amortisation rate according to the estimated useful lives, for the current and previous period for the software is 25%.

17 15 Accounting policies (continued) 2.5 Tangible assets Recognition and measurement Tangible assets consist of property and equipment. Property and equipment are recorded at cost less accumulated depreciation and accumulated impairment losses (if any). Cost includes expenditures that are directly attributable to the acquisition of the asset. When parts of an item of property or equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment. Gains and losses on disposal of an item of property and equipment are determined by comparing the proceeds from disposal with the carrying amount of property and equipment and are recognised net within other operating income in profit or loss. Subsequent costs The cost of replacing part of an item of property or equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property and equipment are recognised in profit or loss as incurred. Depreciation Depreciation of property and equipment is charged so as to write-off the cost of assets over their estimated useful lives, using the straight-line method, as follows: Buildings Computers Furniture and equipment Motor vehicles 40 years 4 years 5 years 10 years Depreciation methods, useful lives and residual values are reviewed at each reporting date. 2.6 Impairment of non-financial assets The carrying amount of the Company s non-financial assets, are assessed at Statement of financial position date to determine whether there is any indication of impairment. If any such indication exists, the asset s recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that are largely independent from other assets and groups. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated to reduce the carrying amount of the assets in the unit (group of units) on a pro rata basis. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their net present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

18 16 Accounting policies (continued) 2.7 Financial instruments Classification of financial assets Financial instruments are classified into four categories, depending on the purpose for which the assets were acquired. The categories are as follows: Financial instruments at fair value through profit or loss are financial instruments which are acquired principally for the purpose of trading or, which, on initial recognition are designated by the Company at fair value through profit or loss. The Company has no financial assets classified under this category at the reporting date. Financial assets held to maturity are non-derivative financial instruments with fixed or determinable payments and fixed maturity that the Company has the positive intention and ability to hold to maturity. The Company s financial assets held to maturity at the reporting date consist of investment in government bills. Loans and receivables are non-derivative financial instruments with fixed determinable payments that are not quoted in an active market, other than those that the Company intends to sell in the near term, those that the Company upon initial recognition designates at fair value through profit or loss, or available for sale, or those where the Company may not recover substantially all of its initial investment, other than because of credit deterioration. At the reporting date, the loans and receivables consist of cash and cash equivalents, receivables from insurers and other receivables, time deposits in domestic banks, assets from reinsurance and investments in joint controlled entities. Financial instruments available-for-sale are non-derivative financial instruments that are either designated in this category or are not classified in any of the other categories. The Company has no financial assets classified under this category at the reporting date. Classifications of financial liabilities Financial liabilities are classified in accordance with the substance of the contractual engagement. Financial liabilities at amortized cost consist of insurance liabilities and other liabilities. Reinsurance, insurance and other liabilities are recorded at their fair and subsequently are measured at their amortized cost using the effective interest rate method. Initial recognition The Company initially recognises loans and advances when incurred. All other financial assets and liabilities (including assets and liabilities at fair value through profit or loss) are initially recognised on the trade date at which the Company becomes a party to the contractual provisions of the instrument. All financial assets, unless financial assets at fair value through profit or loss, are initially measured at fair value plus, in the case of financial assets not at fair value through profit or loss, transaction costs that are directly attributable to their acquisition. Derecognition The Company derecognises financial assets when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred.

19 17 Accounting policies (continued) Financial instruments (continued) Any interest in transferred financial asset that is created or retained by the Company is recognised as a separate asset or liability. The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled or expired. Off-setting Financial assets and liabilities are offset and the net amount reported in the Balance Sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. Income and expenses are presented on a net basis only when permitted by the accounting standards or for gains and losses arising from a group of similar transactions, such as in the Company s trading activity. Subsequent recognition of financial assets After initial recognition, the Company measures financial assets at fair value through profit or loss and financial assets designated as available-for-sale, at fair values without any deduction for transaction costs it may incur on their sale. The fair value of quoted financial assets is their bid prices at the reporting date. If the market on which the financial asset is quoted is not active, the Company establishes fair values by using a valuation technique. Valuation techniques include the use of recent arm s length market transactions, references to the current fair value of another instrument that is substantially the same, discounted cash flow analysis and optional pricing models. If the value of equity instruments cannot be reliably measured, they are measured at cost. Held to maturity investments and loans and receivables are measured at amortised cost using the effective interest method, less impairment losses. Realised gains and losses, and unrealised gains and losses arising from changes in the fair value of financial assets at fair value through profit or loss, are included in the profit or loss in the period in which they arise. Net changes in the fair value of financial assets classified at fair value through profit and loss includes interest income. Unrealised gains and losses arising from changes in the fair value of financial assets available-for-sale are recognised directly in profit or loss, except for impairment losses and foreign exchange gains and losses on monetary items such as debt securities, which are recognised in profit or loss. When financial assets available-for-sale are sold or impaired, the cumulative gains or losses previously recognised in equity are recognised in the profit or loss. Where financial assets availablefor-sale are interest bearing, interest calculated using the effective interest method is recognised in profit or loss.

20 18 Accounting policies (continued) 2.8 Impairment of financial assets Assets carried at amortized cost The Company regularly performs evaluation of the items of balance sheet (Statement of financial position) according the Rulebook on the methods of evaluation of balance sheet and preparation of financial statements, Law on Trade Companies and according the Rulebook on chart of accounts for insurance and reinsurance undertakings. The Company classifies its receivables based on insurance premiums, receivables based on recourse depending on the period of delays in payment in liability settlement by the debtor, as of the date of maturity of the receivable and other receivables. Based on this classification, the Company determines adequate impairment provision- Special provisions of receivables in the following manner: Group of receivables Period of delays in payment in debtors liability settlement Impairment provision (in % of total value of individual receivable) A to 30 days 0% B 31 to 60 days 10% - 30% C 61 to 120 days 31% - 50% D 121 to 270 days 51% - 70% E 271 to 365 days 71% - 90% F more than 365 days 100% Impairment provision in respect of receivables from legal entities under bankruptcy procedure is recognised to 100% amount of the value of such receivables. Furthermore, the Company performed an individual assessment of plaintiff receivables and if there is objective evidence of their impairment a permanent write-off is recognised. Assets carried at fair value The Company assesses at each reporting date whether there is objective evidence that a financial asset is impaired. Significant or prolonged decline in the fair value of the financial asset below its cost is considered as objective evidence in determining whether the assets are impaired. If any such evidence exists for financial assets available for sale, the cumulative loss measured as the difference between the acquisition cost and the current fair value is recognized in the current profits and losses. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in current profits or loss, the impairment loss is reversed through profits and losses. 2.9 Cash and cash equivalents Cash and cash equivalents comprise cash in hand, call deposits and highly liquid securities with original maturities of less than three months, which are subject to insignificant risk of changes in their fair value. Cash and cash equivalents are carried at amortised cost in the Balance Sheet Employees benefits

21 19 Accounting policies (continued) Defined contribution plans The Company contributes to its employees post retirement plans as prescribed by the national legislation. Contributions, based on salaries, are made to the national organizations responsible for the payment of pensions. There is no additional liability in respect of these plans. Obligations for contributions to defined contribution pension plans are recognised as an expense in the profit or loss. Short-term employee benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A provision is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably Current and deferred tax expense Current tax expense at 10% rate is paid to non deductible items for tax purposes adjusted for tax credit, and as well as on the distributed profit for dividends to legal entities nonresidents and to individuals. Undistributed profit (retained earnings) is exempt of taxation. Deferred tax expenses is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. The tax rates that are currently valid are used in determination of deferred tax expense. Deferred tax expense is charged or credited in the profit or loss except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. The Company has not recognized any deferred tax assets or liabilities at 31 December 2012, as there are no temporary differences existing at that date.

22 20 Accounting policies (continued) 2.12 Provisions A provision is recognised in the Statement of Financial Position when the Company has a present legal or constructive obligation as a result of a past event that can be reasonably measured, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. A provision for onerous contracts is recognised when the expected benefits to be derived by the Company from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Company recognises impairment loss on the assets associated with that contract, if any Shareholders Capital Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction of the initial measurement of the equity instrument. Repurchase of treasury shares When the Company purchase treasury shares, the amount of the consideration paid, including directly attributable costs is recognised as a change in equity. Repurchased shares are classified as treasury shares and presented as a deduction from total equity. When treasury shares are sold or reissued subsequently the amount received is recognised as an increase on equity, and the resulting surplus or deficit of the transaction is transferred to/from share premiums. Provisions Provisions which consist of statutory provisions are created throughout the periods by allocation of the retained earnings on the basis of the legislation and the decisions of the Management and the Company s Shareholders. Dividends Dividends are recognised as a liability in the period in which they are declared Revenues Earned premiums from insurance contracts Accounting policies for revenue recognition from insurance contracts are disclosed in Note Investment income Income from the investment in financial assets consists of interest income, recognised as accounting for the effective yield of the assets or the applicable interest rate.

23 21 Accounting policies (continued) 2.15 Expenses Expenses for subscribed premiums Expenses for subscribed premiums consist of direct expenses from signed insurance contracts such as fees for agents, brokers and other distributive channels included in the sales. Acquisition costs Acquisition costs consist of employee salaries, agents and brokers fees, expenses for printing insurance policies, and other acquisition costs which relate to acquiring new or renewing existing insurance contracts. The aforementioned expenses that occur to acquiring new or renewing existing insurance contracts in the reporting period are deferred to that extent that they are recoverable from the subsequent future revenues. Rent expenses incurred for operating leases Payments based on operating lease are recognised as expenses to profit and loss using the straight - line method during the lease period. Received discounts are recognised to profit and loss as integral part of the total lease expenses Classification of the insurance contracts Insurance contracts are defined as contracts by which the Company accepts significant insurance risk on the commencement of the contract, agreeing to compensate the insurer if the defined future insured event adversely affects the insurer. Insurance risk is risk other than financial risk. Financial risk is the risk of a possible future change in one or more of a specified interest rate, security price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract. Insurance contracts may also transfer some financial risk. Insurance risk is significant if, and only if, an insured event could cause the Company to pay significant additional benefits. Once a contract is classified as an insurance contract it remains classified as an insurance contract until all rights and obligations are extinguished or expired Insurance contracts Recognition and measurement Premiums Gross premiums written reflect business written during the year, and exclude any taxes or duties based on premiums. Earned proportion of premiums is recognised as revenue. Premiums are earned from the date of concluding the insurance contract until the reporting period, based on the pro rata temporise model. Outward reinsurance premiums are recognised as an expense in accordance with pro rata temporise method in the same accounting period as the premiums for the related direct insurance business. Unearned premiums provision The provision for unearned premiums comprises the proportion of gross premiums written which is estimated to be earned in the following financial year, computed separately for each insurance contract using the daily pro rata method, adjusted if necessary to reflect any variation in the incidence of risk during the period covered by the contract.

24 22 Accounting policies (continued) Insurance contracts (continued) Claims Claims incurred comprise the settlement and handling costs of paid and outstanding claims arising from events occurring during the financial year together with adjustments to prior year claims provisions. Claims paid are recorded in the moment of processing the claim and are recognised as the amount to be paid to settle the claim. Claims paid in non-life business are increased by claims handling costs. Claims outstanding comprise provisions for the Company s estimate of the ultimate cost of settling all claims incurred but unpaid at the Statement of Financial Position date whether reported or not, and related internal claims handling expenses and an appropriate prudential margin. Claims outstanding are assessed by reviewing individual claims and making allowance for claims incurred but not yet reported, the effect of both internal and external foreseeable events, such as changes in claims handling procedures, inflation, judicial trends, legislative changes and past experience and trends. Provisions for claims outstanding are not discounted. Whilst Management consider that the gross provisions for claims and the related reinsurance recoveries are fairly stated on the basis of the information currently available to them, the ultimate liability will vary as a result of subsequent information and events and may result in significant adjustments to the amounts provided. Adjustments to the amounts of claims provisions established in prior years are reflected in the financial statements for the period in which the adjustments are made, and disclosed separately if material. The methods used, and the estimates made, are reviewed regularly. Reinsurance assets The Company cedes reinsurance in the normal course of business for the purpose of limiting its net loss potential through the diversification of its risks. The reinsurance is performed through the Parent Company, which concludes reinsurance contracts on a Group level, and cedes the appropriate share of the assets, liabilities, income and expenses from reinsurance to the Company, that arise from risks and claims in the appropriate insurance contracts. Assets, liabilities and income and expense arising from ceded reinsurance contracts are presented separately from the related assets, liabilities, income and expense from the related insurance contracts because the reinsurance arrangements do not relieve the Company from its direct obligations to its policyholders. Only rights under contracts that give rise to a significant transfer of insurance risk are accounted for as reinsurance assets. Rights under contracts that do not transfer significant insurance risk are accounted for as financial instruments. Reinsurance premiums for ceded reinsurance are recognised as an expense on a basis that is consistent with the recognition basis for the premiums on the related insurance contracts. For general insurance business, reinsurance premiums are expensed over the period that the reinsurance cover is provided based on the expected pattern of the reinsured risks. Insurance contracts (continued)

25 23 Accounting policies (continued) The non expensed portion of ceded reinsurance premiums is included in reinsurance assets. The net amounts paid to reinsurers at the inception of a contract may be less than the reassurance assets recognised by the Company in respect of its rights under such contracts. Any difference between the premiums due to the reinsurer and the reassurance asset recognised is included in the profit or loss in the period in which the reinsurance premiums are due. The amounts recognised as reinsurance assets are measured on a basis that is consistent with the measurement of the provisions held in respect of the related insurance contracts. Reinsurance assets are assessed for impairment at each Statement of financial position date. An asset is deemed impaired if there is objective evidence, as a result of an event that occurred after its initial recognition, that the Company may not recover all amounts due, and that the event has a reliably measurable impact on the amounts that the Company will receive from the reinsurer. Deferred acquisition costs Costs incurred in acquiring general insurance contracts are deferred to the extent that they are recoverable out of future margins. Acquisition costs include direct costs such as commission and indirect costs such as administrative expenses connected with the processing of proposals and the issuing of policies. Deferred acquisition costs are amortised over the period in which the costs are expected to be recoverable out of future margins in the revenue from the related contracts. The rate of amortisation is consistent with the pattern of emergence of such margins. For general insurance contracts the deferred acquisition cost asset represents the proportion of acquisition costs which corresponds to the proportion of gross premiums written which is unearned at the Statement of financial position date. Insurance receivables and payables Amounts due to and from policyholders, agents and other receivables are financial instruments and are included in insurance receivables and payables, and not in insurance contract provisions Related party transactions

26 24 Accounting policies (continued) In accordance with the Law on insurance supervision related parties are considered two or more legal entities or individuals that are mutually connected in one of the following manners: a) by management or capital, or in any other manner, when they mutually determine their business policy or work in coordination with each other in order to ensure customary commercial advantages; b) when one entity has significant influence over the adoption of the financial and business decisions of the other entity; c) the work or the results from the work of one entity has significant influence over the work and the results of the work of the other entity. The entities are also related when one legal entity or individual has participating interest in another legal entity. Related entities are considered also the entities that are related: Affiliated entities: a) as close family members; b) as members of the management body, supervisory body or procurator, as well as members of their close family; c) as persons employed on the basis of an employment contract with special terms and conditions, as well as members of their close family; d) in a manner that one entity, that is, entities that are related entities, jointly, directly or indirectly have participating interest in another entity; e) in a manner that a same entity, that is, entities that are considered related has participating interest in both entities Events after the reporting date Events after the reporting date that provide additional information about a Company s position at the Statement of financial position date (adjusting events) are reflected in the financial statements. Events after the reporting date that are not adjusting events are disclosed in the notes when material.

27 25 3 Accounting estimates and judgements The Company makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Key sources of estimation uncertainty Presented below is information about the assumptions and uncertainties relating to insurance liability. Note 4 disclose the risk factors in these contracts. Insurance contract provision The assumptions used in the estimation of insurance assets and liabilities are intended to result in provisions which are sufficient to cover any liabilities arising out of insurance contracts so far as can reasonably be foreseen. However, given the uncertainty in establishing a provision for outstanding claims, it is likely that the final outcome will prove to be different from the original liability established. General insurance contracts Provision is made at the Statement of financial position date for the expected ultimate cost of settlement of all claims incurred in respect of events up to that date, whether reported or not, together with related claims handling expenses, less amounts already paid. The provision for claims is not discounted. The sources of data used as inputs for the assumptions are typically internal to the Company, using detailed studies that are carried out at least annually. The assumptions are checked to ensure that they are consistent with observable information or other published information. The Company pays particular attention to current trends. Where in early years there is insufficient information to make a reliable estimate of claims development, prudent assumptions are used. The estimation of claims incurred but not reported ( IBNR ) is generally subject to a greater degree of uncertainty than the estimates of claims already notified, where more information is available to the Company. IBNR claims may often not be apparent to the Company until several years after the occurrence of the event giving rise to the claim. Each notified claim is assessed on a separate case-by-case basis with due regard to the claim circumstances, information available from loss adjusters and historical evidence of the size of similar claims. Case estimates are reviewed regularly and are updated as and when new information arises.

28 26 Accounting estimates and judgements (continued) General insurance contracts (continued) The provision estimation difficulties differ by class of business due for a number of reasons, including: - Differences in the terms and conditions of the insurance contracts; - Differences in the complexity of claims; - The severity of individual claims; - Difference in the period between the occurrence and reporting of claims Significant delays can be experienced in the notification and settlement of certain type of general insurance claims, therefore the ultimate cost of which cannot be known with certainty at the Statement of financial position date. Methods of assessment vary depending on conditions. The reasons may be: - Economic, legal, political and social trends (resulting, for example, in a difference in expected levels of inflation); - Changes in the mix of insurance contracts incepted; - The impact of large losses. Claims on general insurance contracts are payable on a claims-occurrence basis. The contracts are concluded for short periods, mostly for one year, the Company being liable for all insured events that occurred during the term of the contract. The shorter settlement period for these claims allows the Company to achieve a higher degree of certainty about the estimated cost of claims, and relatively small IBNR. Assumptions The principal assumption underlying the estimates is the Company s past claims development experience. This includes assumptions in respect of average claim costs, claims handling costs, claims inflation factors and claim numbers for each accident year. Judgement is used to assess the extent to which external factors such as judicial decisions and government legislation affect the estimates. Impairment of financial assets The Company calculates impairment of doubtful receivables based on estimated losses resulting from the inability of customers to settle their obligations, following the Management s decisions. The estimation is based on the aging of account receivables balance and historical write-off experience, customer credit-worthiness and changes in customer payment terms. This involves making assumptions about the future behaviour of customers, and future cash flows.

29 27 Notes to the finncial statements (continued) 4 Insurance and financial risk management 4.1 Insurance risk management Risk management objectives and policies for mitigating insurance risk The Company s management of insurance and financial risk is a critical aspect of the business. For general insurance contracts, the objective is to select assets with a duration and maturity value which match the expected cash flows from the claims incurred on those contracts. The primary insurance activity carried out by the Company assumes the risk of loss from persons or organisations that are directly subject to the risk. Such risks may relate to property, liability, health, accident or other that may arise from an insurable event. As such the Company is exposed to the uncertainty surrounding the timing, frequency and severity of claims under the contracts. The Company is also exposed to market risk as well through the insurance and investment activities. The Company manages its insurance risk through underwriting limits, approval procedures for transactions that involve new products or that exceed set limits, pricing guidelines, centralised management of reinsurance and monitoring of emerging issues. Underwriting policy The Company underwriting strategy seeks diversity to ensure a balanced portfolio and is based on a large portfolio of similar risks over a number of years and, as such, reduces the variability of the outcome. The underwriting strategy is set out in an annual business plan that establishes the classes of business to be written, the territories in which business is to be written and the industry sectors in which the Company is prepared to underwrite. All general insurance contracts are annual in nature and the underwriters have the right to refuse renewal or to change the terms and conditions of the contract at renewal. Reinsurance policy The Company reinsures a portion of the risks it underwrites in order to control its exposures to losses and protect capital resources. The reinsurance is performed through the Parent Company, which concludes reinsurance contracts on a Group level, and cedes the appropriate share of the assets, liabilities, income and expenses from reinsurance to the Company, that arise from risks and claims in the appropriate insurance contracts.

30 28 Insurance and financial risk management (continued) Assets/ liabilities matching Law on Insurance Supervision prescribes certain limits regarding Company s asset/liability matching policy. The Company actively manages its financial position using an approach that balances quality, diversification, liquidity and investment return, taking into consideration the limits prescribed by the Law on insurance supervision. The key goal is to match the timing of cash flows from the respective assets and liabilities. Presented below are assets/liabilities matching according to the local regulatory requirements, in relation to assets covering the technical provisions: Assets Cash and cash equivalents 7,729,414 4,133,231 Deposits with banks * 165,082,500 83,000,000 Government bills * 119,902, ,194,923 Other investments* 7,426,659 4,402, ,140, ,730,768 Liabilities (Technical provisions) Provisions for transferred premiums, net of the reinsurers part 163,013, ,813,379 Provisions for claims, net of the reinsurers part 137,127,060 60,917, ,140, ,730,768 Asset/liability matching - - * Short term deposits with banks in the amount of Denar 165,082,500 presented in the part of assets covering the technical provisions, represent the total deposits with banks and other cash and cash equivalents as of 31 December For 2011 Denar 83,000,000, presented in the part of assets covering the technical provisions, represent part of the total deposits with banks and other cash and cash equivalents which as of 31 December 2011 are in the amount of Denar 132,214,875 (Note 9). * Government bills in the amount of Denar 119,902,260 (2011: Denar 120,194,923) presented in the assets covering the technical provisions, are presented at their discounted value. The value of the government bills in the Statement of financial position as of 31 December 2012 is in the amount of Denar 162,984,455 (2011: Denar 162,873,303) (Note 9). * Other types of investments in the amount of Denar 7,426,659 (2011: Denar 4,402,614) presented in the part of assets covering technical provisions, are not matured insurance receivables for which is allowed to use them as assets covering the technical provisions may not exceed 10% of the of the unearned premiums provisions (Note 10). The following table shows limits under requirements of the Law on Insurance Supervision for separate assets covering the provisions on these contracts of insurance in terms of total assets covering technical provisions, and their comparison with the achieved percentage:

31 29 Insurance and financial risk management (continued) Assets/ liabilities matching (continued) in % Limits Achieved Achieved Assets Cash and cash equivalents < 3% 2.6% 2.0% Deposits with banks < 60% 55.0% 39.2% Government bills < 80% 39.9% 56.8% Other investments < 20% 4.6% 2.9% Furthermore, according the Law on insurance supervision, the total deposits of one insurance company in one bank may not exceed 25% of the assets covering the technical provisions of the Company. As of 31 December 2012 and 2011, the Company is in compliance with the prescribed index. Responsibilities to third parties Product feature The Company writes liability insurance. Under these contracts, compensation is paid for injury suffered by individuals, including employees or members of the public. The main liability exposures are in relation to bodily injury. The timing of claim reporting and settlement is a function of a number of factors, including the nature of the coverage, the policy provisions and the jurisdiction in which the contract is written. The majority of bodily injury claims have a relatively short period, with most of the claims for a given accident year settled in full within a year. Many liability insurance contracts are not subject to significant lags or claim complexity risks and hence have materially less uncertainty. In general, these contracts result in lower estimation uncertainty. Risk management Risks arising from liability insurance of third parties are managed primarily through pricing, product design, risk selection, appropriate investment strategy, rating and reinsurance. The Company therefore monitors and reacts to changes in the general economic and commercial environment in which it operates to ensure that only liability risks which meet the Company s criteria for profitability are underwritten. For bodily injury liability contracts, the key risk is the trend for courts to award higher levels of compensation. In pricing contracts, the Company makes assumptions that costs will increase in line with the latest available information. The key risks associated with these contracts are those relating to underwriting, competition, claims experience and the potential for policyholders to exaggerate or invent losses.

32 30 Insurance and financial risk management (continued) Property Product features The Company writes property insurance in the Republic of Macedonia. Property insurance indemnifies, subject to any limits or excesses, the policyholder against the loss or damage to their own material property. The Company s aim is to earn income from investments due to time difference between collecting premiums and paying claims based on this type of insurance. The event giving rise to a claim for damage to buildings or contents usually occurs suddenly (as for fire and burglary) and the cause is easily determinable. The claim will thus be promptly reported and can be settled without delay. Property business is therefore classified as short-tailed, meaning that expense deterioration and investment return will be of less importance. Risks management The key risks associated with this product are underwriting risk, competitive risk and claims experience risk (including the variable incidence of natural disasters). The Company is also exposed to the risk of exaggeration and dishonest action by claimants. This largely explains why economic conditions correlate with the profitability of a property portfolio. Underwriting risk is the risk that the Company does not charge premiums appropriate for the different properties it insures. The risk on any policy will vary according to many factors such as location, safety measures in place and the age of property. For domestic property insurance, it is expected that there will be large numbers of properties with similar risk profiles. However, for commercial business this will not be the case. Many commercial property proposals comprise a unique combination of location, type of business, and safety measures in place. Calculating premiums commensurate with the risk for these policies will be subjective, and hence risky. Motor insurance Product features The Company writes motor insurance in the Republic of Macedonia. This consists of both property and liability benefits for third parties, and includes short tail coverage. The payments that are made quickly indemnify the policyholder against the value of loss on motor physical damage claims and property damage (liability) claims, at the time the incident occurs, subject to any limits or excesses. The payments that take longer to finalise, and are more difficult to estimate, relate to bodily injury claims. These indemnities cover the motor vehicle against compensation payable to third parties for death or personal injury. Risks management In general, claims reporting lags are minor, and claim complexity is relatively low. Overall the claims liabilities for this line of business create a moderate estimations risk. The Company monitors and reacts to changes in trends of injury awards, litigation and the frequency of claims appeal. The frequency of claims is affected by adverse weather conditions, and the volume of claim is higher in the winter months. In addition, there is a correlation with the price of fuel and economic activity, which affect the amount of traffic activity.

33 31 Insurance and financial risk management (continued) Health insurance Product features The Company also writes a small amount of health insurance in the Republic of Macedonia. These contracts pay benefits for medical treatment and hospital expenses of a fixed amount for each day the patient is treated in hospital as an in-patient. Generally, the policyholder is indemnified for only part of the cost of medical treatment or benefits are of a fixed amount regardless of the actual cost of treatment. Risks management Health insurance cover is subject to the primary peril of the need for treatment in a hospital. The Company manages its risks through the use of medical screening in order to ensure that pricing considers current health conditions and family medical history. Claims development Run off analysis is done in accordance with the Rulebook on minimal standards for calculation of technical provisions, which entered into force on 1 January Concentrations of insurance risks A key aspect of the insurance risk faced by the Company is the extent of concentration of insurance risk which may exist where a particular event or series of events could impact significantly upon the Company s liabilities. Such concentrations may arise from a single insurance contract or through a small number of related contracts, and relate to circumstances where significant liabilities could arise. An important aspect of the concentration of insurance risk is that it may arise from the accumulation of risks within a number of individual classes. Concentrations of risk can arise in both high-severity, low frequency events, such as natural disasters and in situations where underwriting is based towards a particular group, such as a particular geography. Geographic and sector concentrations The risks underwritten by the Company are located in the Republic of Macedonia. The management believes that the Company has no significant concentrations of exposure to any group of policyholders measured by social, professional, age or similar criteria. High-severity, low-frequency concentrations By their nature, the timing and frequency of these events are uncertain. They represent a significant risk to the Company because the occurrence of an event, while unlikely in any given accounting period, would have a significantly adverse effect on the Company s cash flows. The Company s key methods in managing these risks are two-fold: Firstly, the risk is managed through appropriate underwriting. Underwriters are not permitted to underwrite risks unless the expected profits are commensurate with the risks assumed.

34 32 Insurance and financial risk management (continued) High-severity, low-frequency concentrations (continued) Secondly, the risk is managed through the use of reinsurance. The Company purchases both excess of loss covers for classes of liability and property business, as well as whole account reinsurance which provides protection on the whole of the liability business written by the Company above a certain net retention of risk. The Company assesses the costs and benefits associated with the reinsurance programme on a regular basis. 4.2 Financial risk The Company is exposed to financial risk through its financial assets, financial liabilities, its reinsurance assets, insurance liabilities and reinsurance liabilities. In particular, the key financial risk is that the proceeds from its financial assets are not sufficient to fund the obligations arising from its insurance contracts. The most important components of this financial risk are interest rate risk, currency risk, liquidity risk and credit risk. The Company s objective is to match insurance contract liabilities with assets subject to identical or similar risks. This policy ensures that the Company is able to meet its obligations under its contractual liabilities as they fall due. Financial instruments by categories Carrying values of financial assets and liabilities of the Company recognised at the reporting date for disclosed periods can be categorised as follows: Loans and receivables Held to maturity Total 31 December 2012 Assets according the Balance Sheet Financial assets held to maturity - 162,984, ,984,455 Deposits with banks 165,082, ,082,500 Investments in joint controlled entities 16,418,299-16,418,299 Reinsurance assets 23,020-23,020 Receivables 56,251,800-56,251,800 Cash and cash equivalents 7,729,414-7,729, ,505, ,984, ,489,488 Other financial Total liabilities Liabilities according Balance Sheet Liabilities 26,649,632 26,649,632 26,649,632 26,649,632 Loans and receivables Held to maturity Total 31 December 2011 Assets according the Balance Sheet Financial assets held to maturity - 162,873, ,873,303 Deposits with banks 132,214, ,214,875 Investments in joint controlled entities 15,995,179 15,995,179 Reinsurance assets 26,115-26,115 Receivables 89,617,271-89,617,271 Cash and cash equivalents 4,133,231-4,133, ,986, ,873, ,859,974 Other financial Total liabilities Liabilities according Balance Sheet Liabilities 40,617,459 40,617,459 40,617,459 40,617,459

35 33 Insurance and financial risk management (continued) Interest rate risk The Company s exposure in interest rates is concentrated in the investment portfolio. The Company is exposed to interest rate risk primarily due to the deposits with banks with variable interest rate. In management s view the insurance contracts concluded by the Company are mainly short term insurance contracts and the interest risk is mitigated by matching the insurance liabilities with a portfolio of debt securities. Short-term insurance and reinsurance liabilities are not directly sensitive to the level of market interest rates, as they are undiscounted and contractually non-interest bearing.

36 34 Insurance and financial risk management (continued) Interest rate risk (continued) For the year ended 31 December 2012 (in Denars) Notes Total Instruments with variable interest rate Up to 1 month Instruments with fixed interest rate 1 to 3 months 3 months to 1 year 1 to 5 years Over 5 years Non - interest bearing Assets Financial assets held to maturity 9 162,984, ,984, Deposits with banks 9 165,082, ,082, Investments in joint controlled entities 8 16,418,299 16,418, Reinsurance assets 15 23, ,020 Receivables 10 56,251, ,251,800 Cash and cash equivalents 12 7,729,414 7,729, Liabilities Liabilities 16 (26,649,632) (26,649,632) Net 381,839,856 24,147, ,066, ,625,188 For the year ended 31 December 2011 (in Denars) Notes Total Instruments with variable interest rate Up to 1 month Instruments with fixed interest rate 1 to 3 months 3 months to 1 year 1 to 5 years Over 5 years Non - interest bearing Assets Financial assets held to maturity 9 162,873, ,873, Deposits with banks 9 132,214,875 63,394, ,820, Investments in joint controlled entities 8 15,995,179 15,995, Reinsurance assets 15 26, ,115 Receivables 10 89,617, ,617,271 Cash and cash equivalents 12 4,133,231 4,133, Liabilities Liabilities 16 (40,617,459) (40,617,459) Net 364,242,515 83,522, ,873,303 68,820, ,025,927

37 35 Insurance and financial risk management (continued) Interest rate risk (continued) Sensitivity analysis of interest rates Sensitivity analysis is determined based on the Company's exposure to changing interest rates on financial instruments at the Balance sheet date. As of 31 December 2012, if interest rates are 200 basis points higher/lower, and the other variables constant, the profit before taxation of the Company for the year ended 31 December 2012 will be decreased/increased by approximately Denar 482,954 (2011: Denar 1,670,457). Credit risk Credit risk represents the accounting loss that would be recognized if counterparties failed to perform as contracted. To control exposure to credit risk, the Company performs on-going credit evaluations of the financial condition of these counterparties. The Company's maximum exposure to credit risk is limited to the carrying amount of financial assets recognised at the reporting date, as summarised below: Classes of financial assets carrying value Financial assets held to maturity 162,984, ,873,303 Deposits with banks 165,082, ,214,875 Investments in joint controlled entities 16,418,299 15,995,179 Reinsurance assets 23,020 26,115 Receivables 56,251,800 89,617,271 Cash and cash equivalents 7,729,414 4,133, ,489, ,859,974 Securities held to maturity and deposits with banks The Company is exposed to credit risk in respect of securities held to maturity in terms of possible uncollectibility from other parties. However, taking into account that the Company invests in government bills and time deposits with domestic banks is not expected these investments to be recovered. Reinsurance assets The Company has exposure to credit risk in relation to its reinsurance assets. The reinsurance is performed through the Parent Company, which concludes reinsurance contracts on a Group level, and cedes the appropriate share of the assets, liabilities, income and expenses from reinsurance to the Company, that arise from risks and claims in the appropriate insurance contracts. Insurance receivables The Company is exposed to credit risk in the event where its customers from the provision of insurance services fail to meet their payment obligations. The Company's exposure to credit risk is limited to the carrying value of premiums and other receivables. The premiums receivables are owed by a large number of customers on normal credit terms and therefore there is minimal concentration of credit risk. The Company monitors premiums receivables on an on-going basis with the result that the Company's exposure to bad debts is controlled. Analysis of the age structure of due trade receivables for unpaid premiums is presented in Note 10. Currency risk The Company is exposed to risk in relation to the effects of fluctuations in the prevailing exchange rates that reflect the financial position and cash flow. The Company does not use hedging financial instruments due to the fact that these types of instruments are not in common use in the Republic of Macedonia. Table below sums the Company s exposure to currency risk.

38 36 Insurance and financial risk manageemnt (continued) Credit risk (continued) For the year ended 31 December 2012: MKD EUR Total Total assets 443,610,954 47,662, ,273,454 Intangibles 1,760,120-1,760,120 Investments 314,735,228 47,662, ,397,728 Part of co-insurance and reinsurance in the gross technical reserves 23,020-23,020 Financial investments for which the insured assumes the investment risk (insurance contracts) Current and deferred tax assets Receivables 58,076,239-58,076,239 Other Assets 18,693,475-18,693,475 Prepaid Expenses 50,322,872-50,322,872 Total liabilities 491,273, ,273,454 Equity and reserves 164,456, ,456,438 Subordinated liabilities Gross technical provisions 300,163, ,163,853 Gross technical provisions of contracts in which the insured assumes the investment risk Other reserves Current and deferred tax liabilities Liabilities arising from deposits of companies for reinsurance at cedents, from reinsurance contracts Liabilities from direct insurance, co-insurance and reinsurance, and other payables 26,653,163-26,653,163 Accruals Difference unreconciled currency structure (47,662,500) 47,662,500 - For the year ended 31 December 2011: MKD EUR Total Total assets 437,672,549 29,214, ,887,424 Intangibles Investments 292,892,380 29,214, ,107,255 Part of co-insurance and reinsurance in the gross technical reserves 26,115-26,115 Financial investments for which the insured assumes the investment risk (insurance contracts) Current and deferred tax assets Receivables 89,978,238-89,978,238 Other Assets 11,144,182-11,144,182 Prepaid Expenses 43,631,634-43,631,634 Total liabilities 466,887, ,887,424 Equity and reserves 214,396, ,396,900 Subordinated liabilities Gross technical provisions 211,756, ,756,883 Gross technical provisions of contracts in which the insured assumes the investment risk Other reserves Current and deferred tax liabilities Liabilities arising from deposits of companies for reinsurance at cedents, from reinsurance contracts Liabilities from direct insurance, co-insurance and reinsurance, and other payables 40,733,641-40,733,641 Accruals Difference unreconciled currency structure (29,214,875) 29,214,875 -

39 37 Insurance and financial risk manageemnt (continued) Currency risk (continued) The Company is exposed to changes in foreign currencies. The following table discloses the sensitivity of the Company of increase of the Denar compared to foreign currencies. The sensitivity analysis includes only the monetary items denominated in foreign currency at the end of the year, thus making adjustment of their value when the exchange rate of 1% compared to EUR. Adverse amount below marks a decrease of the profit or the other equity which appears in case the Denar increases its value compared to the foreign currencies by 1 % compared to EUR. When the value of the Denar compared to the foreign currencies decreases by 1% compared to EUR, the effect on profit or other capital is equal, but with reverse index, as shown in the table below. Changes in 2012 Changes in 2011 Profit or loss In Denars EUR 1% 1% 476, ,149 Liquidity risk The liquidity risk is the risk that an entity will encounter difficulty in raising funds to meet cash commitments associated with financial instruments. Liquidity risk may result from either the inability to sell financial assets quickly at their fair values; or the counterparty failing on repayment of a contractual obligation; or an insurance liability falling due for payment earlier than expected; or inability to generate cash inflows as anticipated. The major liquidity risk confronting the Company is the daily call on its available cash resources in respect of claims arising from insurance contracts and the maturity of debt securities. The Company manages liquidity through a Company liquidity risk policy which determines what constitutes liquidity risk for the Company; specifies the minimum proportion of funds to meet emergency calls; setting up of contingency funding plans; specify the sources of funding and the events that would trigger the plan; concentration of funding sources; reporting of liquidity risk exposures and breaches to the monitoring authority; monitoring compliance with liquidity risk policy and review of liquidity risk policy for pertinence and changing environment. Analysis based on the maturities of the financial assets and liabilities The following table provides an analysis of the financial assets and liabilities of the Company into relevant maturity groupings based on the original period to the repayment date:

40 38 Insurance and financial risk management (continued) Liquidity risk (continued) 31 December 2012 Up to 1 year From 1-3 years From 3-5 years From 5-10 years From years From years Over 20 years Total Total Assets 473,545,881 17,727, ,273,454 Intangibles 1,760, ,760,120 Investments 362,397, ,397,728 Part of co-insurance and reinsurance in the gross technical reserves 23, ,020 Financial investments for which the insured assumes the investment risk (insurance contracts) Current and deferred tax assets Receivables 40,348,666 17,727, ,076,239 Other Assets 18,693, ,693,475 Prepaid Expenses 50,322, ,322,872 Total Liabilities 491,273, ,273,454 Equity and reserves 164,456, ,456,438 Subordinated liabilities Gross technical provisions 300,163, ,163,853 Gross technical provisions of contracts in which the insured assumes the investment risk Other reserves Current and deferred tax liabilities Liabilities arising from deposits of companies for reinsurance at cedents, from reinsurance contracts Liabilities from direct insurance, co-insurance and reinsurance, and other payables 26,653, ,653,163 Accruals Difference unreconciled currency structure (17,727,573) 17,727,

41 39 Insurance and financial risk manageemnt (continued) Liquidity risk (continued) 31 December 2012 Up to 1 year From 1-3 years From 3-5 years From 5-10 years From years From years Over 20 years Total Total Assets 442,176,536 24,710, ,887,424 Intangibles Investments 322,107, ,107,255 Part of co-insurance and reinsurance in the gross technical reserves 26, ,115 Financial investments for which the insured assumes the investment risk (insurance contracts) Current and deferred tax assets Receivables 65,267,350 24,710, ,978,238 Other Assets 11,144, ,144,182 Prepaid Expenses 43,631, ,631,634 Total Liabilities 466,887, ,887,424 Equity and reserves 214,396, ,396,900 Subordinated liabilities Gross technical provisions 211,756, ,756,883 Gross technical provisions of contracts in which the insured assumes the investment risk Other reserves Current and deferred tax liabilities Liabilities arising from deposits of companies for reinsurance at cedents, from reinsurance contracts Liabilities from direct insurance, co-insurance and reinsurance, and other payables 40,733, ,733,641 Accruals Difference unreconciled currency structure (24,710,888) 24,710,

42 Capital management The Company s lead regulator the Insurance Supervision Agency sets and monitors capital requirements for the Company as a whole. The Company is directly supervised by the local regulators. Company s capital The capital of the Company for regulatory purposes is made up of the basic and additional capital and is calculated in the manner specified below: When calculating the basic capital of the Company, the following items are taken into considerations: - paid-up share capital excluding the paid-up share capital from cumulative preferred shares; - provisions of the Company (statutory) which do not arise from insurance contracts; - undistributed profit carried forward; - current year undistributed profit (after taxes and other contributions and the dividend payable), if the amount of the profit has been verified by an certified auditor; When calculating the basic capital of the Company, the following items are not included: - treasury shares held by the Company; - long term intangible assets; - uncovered loss carried forward and current year loss; The Company is required to set aside in the safety provisions not less than one third of the profit shown in the annual accounts unless the profit is used to cover previous years' losses, until the level of the safety provisions reaches 50% of the average insurance premiums collected over the last two years, whereby previous years' premiums are increased for the value of the retail price index growth, inclusive of the year for which the profit is distributed. When calculating the additional capital of the insurance undertaking, the following items are taken into consideration: - paid-up share capital from cumulative preference shares; - subordinate debt instruments; - securities with unlimited maturity; When calculating the capital of the Company, the additional capital referred above is taken into consideration only up to the amount not higher than 50% of the basic capital. When calculating the capital of the Company, the amounts of basic and additional capital shall be reduced by the following items: - Investment made by the Company into shares or subordinate debt instruments issued by another insurance undertaking or other financial institution in which the Company

43 41 Insurance and financial risk management (continued) holds a stake of more than 10%, as well as other investments in those entities, which are included in the calculation of the respective capital of those entities; - Investment made by the Company into shares or subordinate debt instruments issued by another insurance undertaking or other financial institution other than those referred above, which exceed 10% of the capital of the insurance undertaking calculated prior to the deduction of the items listed above and this item. Guarantee Fund According to the Law on insurance supervision insurance companies have to have share capital of EUR 3,000,000 depending on the classes of non-life insurance for which insurance companies holds licence, not later than 3 January As of 31 December 2012 the Company is not in compliance with this requirement. During 2012 the Company accumulated losses after taxation in the amount of Denar 49,940,962 and as of 31 December 2012 total equity of the Company is Denar 164,456,438. According to calculation of equity (form KS) as of 31 December 2012 the Company has insufficient equity in regards to the Guarantee Fund in the amount of Denar 20,043,562 and does not fulfil the regulated minimum. Required solvency margin The capital of the insurance company engaged in non-life insurance and / or reinsurance at any time should be at least equal on the required level of solvency margin of the insurance company that is calculated using the Premiums Rate Method and the Claims Rate Method, depending on which method provides higher result. The solvency margin for the year ended 31 December 2012 is in amount of Denar 58,707,140. The Company s management policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The impact of the level of capital on shareholders return is also recognised and the Company recognises the need to maintain a balance between the higher returns that might be possible with higher level of borrowings and the advantages and security afforded by a sound capital position. The Company is not exposed to external influences regarding changes in capital. There have been no material changes in the Company s capital management during the year.

44 42 5 Fair value 5.1 Financial instruments recognised at fair value The adopted accounting policy requires the financial assets and liabilities to be grouped on three levels that are based on the significance of input data used when measuring fair value of financial assets. The hierarchy according to fair value is determined as follows: Level 1: quoted prices (not adjusted) on the active markets for identical assets or liabilities; Level 2: other input data, aside from quoted prices, included in Level 1 that are available for monitoring of the asset or liability, either directly (i.e. as prices) or indirectly (that is derived from prices); and Level 3: input data on the asset or liability that are not based on data available for market monitoring. As of 31 December 2012 and 2011 the Company has no financial instruments recognised at fair value. 5.2 Financial instruments that are not recognised at fair value The difference between the carried value and the fair value of these financial assets and liabilities that are not recognised at fair value in the Balance Sheet is presented in the table below: Carrying value Fair value Assets Financial assets held to maturity 162,984, ,873, ,984, ,873,303 Deposits with banks 165,082, ,214, ,082, ,214,875 Investments in joint controlled entities 16,418,299 15,995,179 16,418,299 15,995,179 Reinsurance assets 23,020 26,115 23,020 26,115 Receivables 56,251,800 89,617,271 56,251,800 89,617,271 Cash and cash equivalents 7,729,414 4,133,231 7,729,414 4,133,231 Total assets 408,489, ,859, ,489, ,859,974 Liabilities Liabilities 26,649,632 40,617,459 26,649,632 40,617,459 Total liabilities 26,649,632 40,617,459 26,649,632 40,617,459

45 43 As of and for the year ended 31 December 2012 (All amounts are expressed in Denars, unless otherwise stated) 6 Intangibles Software Cost At 1 January Additions 2,009,462 At 31 December ,009,462 Accumulated depreciation At 1 January Depreciation for the year 249,342 At 31 December ,342 Net carrying value At 1 January At 31 December ,760,120 7 Land, buildings and other assets 7.1 Land and buildings used for Company s operations Business premises Cost At 1 January ,785,012 At 31 December ,785,012 At 1 January ,785,012 At 31 December ,785,012 Accumulated depreciation At 1 January ,490 Depreciation for the year 294,624 At 31 December ,114 At 1 January ,114 Depreciation for the year 294,624 At 31 December ,055,738 Net carrying value At 31 December ,023,898 At 31 December ,729, Land, buildings and other assets not used for Company s operations At 31 December 2011 Land, buildings and other assets not used for Company s operations in amount of Denar 7,183,200 represent purchased business premises according to concluded purchase contract. During 2012 part of the liabilities of the supplier in the amount of Denar 3,304,272 are netted by compensation with the receivables of the Company from insurance premiums from the supplier.

46 44 As of and for the year ended 31 December 2012 (All amounts are expressed in Denars, unless otherwise stated) 8 Investments in joint controlled entities At 31 December 2012, investments in joint controlled entities in the amount of Denar 16,418,299 (2011: Denar 15,995,179) are related to deposit in the National Insurance Bureau as required by the provisions of the Insurance Supervision Law of the Republic of Macedonia. National Insurance Bureau is a non-profit association established by all domestic insurance companies aimed to protest interest of its member relating to international motor car insurance and to represent the members in front of the international insurance organizations. Investments in joint controlled entities present interest bearing deposits kept on a separate bank account. The National Insurance Bureau is obligated to repay the deposit to each member on the cancellation of the operation relating to motor car vehicles. 9 Other financial investments Financial assets held to maturity 162,984, ,873,303 Deposits with banks 165,082, ,214, ,066, ,088,178 Financial assets held to maturity Government bills 166,760, ,907,603 Deferred interest income (3,775,545) (3,034,300) Debt securities held to maturity within 1 year 162,984, ,873,303 Listed - - Not Listed 162,984, ,873, ,984, ,873,303 Investments held to maturity represent government bills issued by the Ministry of Finance with maturity period from 1 through 23 July 2013 with interest rate from 4.5% to 4.75% p.a. (2011: 4.1% p.a.) Deposits with banks Term deposits with domestic banks with maturity of 3 months -in foreign currency interest rate (2011: 2.1%-4.7%) - 5,221,922 Term deposits with domestic banks with maturity of 6 months - In Denars - interest rate (2011: 4.0%-7.0%) - 33,000,000 - In foreign currency interest rate (2011: 2.1%-4.7%) - 23,992,953 Term deposits with domestic banks with maturity of 12 months - in Denars - interest rate 4.0%-6.2% (2011: 6.0%-7.0%) 117,420,000 70,000,000 -in foreign currency interest rate 2.9%-4.0% (2011: -) 47,662, ,082, ,214,875

47 45 As of and for the year ended 31 December 2012 (All amounts are expressed in Denars, unless otherwise stated) 10 Receivables Receivables arising from insurance contracts 70,467,536 79,573,146 Less: Impairment provision of receivables arising from insurance contracts* (33,224,552) (25,284,174) 37,242,984 54,288,972 Receivables from agents 4,453,633 1,740,552 Other receivables from direct works 15,559,732 7,378,004 Less: Impairment provision for other receivables from direct works* (4,744,696) - 10,815,036 7,378,004 Receivables from interest from National Insurance Bureau 990,537 1,026,963 Given advances 1,608, ,927 Receivables from deposits interest from 993, ,625 Receivables from employees 672, ,819 Receivables for overpaid income tax 216,010 - Receivables for bank guarantee 157,507 - Given borrowings to related parties - 20,945,817 Receivables from related parties abroad - 177,217 Receivables from interest from financial assets held to maturity - 2,877,302 Receivables for over paid personal tax - 59,040 Other receivables 925,461-4,574,049 25,543,747 58,076,239 89,978,238 As of 31 December 2012 the balance of given loans id from, receivables from given borrowings in the amount of Denar 20,945,817 and related interest bearing borrowings to related parties in the amount Denar 177,217. In 2012, by recommendation from the Insurance Supervisory Agency are transferred to term deposits (Note 9). Analysis of the age structure of receivables arising from insurance contracts as of 31 December 2012 and 2011 is as follows (in Denars): Gross Adjustment Net Gross Adjustment Net Up to 30 days 8,408,522-8,408,522 10,153,223-10,153, days 5,852,069 (656,140) 5,195,929 5,402,088 (540,209) 4,861, days 9,245,117 (2,958,677) 6,286,440 9,538,204 (2,956,843) 6,581, days 17,975,146 (9,173,768) 8,801,378 18,180,486 (9,272,048) 8,908, days 3,827,260 (2,703,204) 1,124,056 7,185,644 (5,101,808) 2,083,836 over ,732,763 (17,732,763) - 24,710,887 (7,413,266) 17,297,621 Matured receivables 63,040,877 (33,224,552) 29,816,325 75,170,532 (25,284,174) 49,886,358 Non - matured receivables 7,426,659-7,426,659 4,402,614-4,402,614 70,467,536 (33,224,552) 37,242,984 79,573,146 (25,284,174) 54,288,972 Receivables (continued)

48 46 As of and for the year ended 31 December 2012 (All amounts are expressed in Denars, unless otherwise stated) Analysis of the age structure of other receivables from insurance direct works as of 31 December 2012 and 2011 is as follows (in Denars): Gross Adjustment Net Gross Adjustment Net Up to 30 days 8,286, ,286,062 1,117,075-1,117, days 149,667 (14,475) 135,192 60,260-60, days 20,965 (6,499) 14, , , days 668,736 (272,466) 396,270 1,287,689-1,287, days 6,434,302 (4,451,256) 1,983, , ,495 over Matured receivables 15,559,732 (4,744,696) 10,815,036 3,691,493-3,691,493 Non - matured receivables ,686,511-3,686,511 15,559,732 (4,744,696) 10,815,036 7,378,004-7,378,004 Provision for impairment and write offs due uncollectibility The movement of the provision for impairment in respect of receivables arising from insurance contracts during 2012 and 2011 is as follows: At 1 January 25,284,174 4,099,611 Additional impairment provision for the year of receivables arising from insurance contracts (Note 27) 12,685,074 21,184,563 At 31 December 37,969,248 25,284, Tangible assets used for operations (other than land and buildings) Equipment Cost At 1 January ,177,796 Additions 1,462,949 At 31 December ,640,745 At 1 January ,640,745 Additions 5,848,070 At 31 December ,488,815 Accumulated depreciation At 1 January ,649,353 Depreciation for the year 3,018,208 At 31 December ,667,561 At 1 January ,667,561 Depreciation for the year 2,169,827 At 31 December ,837,388 Net carrying value At 31 December ,973,184 At 31 December ,651,427 Pledged equipment At 31 December 2012 and 2011 the Company has no pledged equipment.

49 47 As of and for the year ended 31 December 2012 (All amounts are expressed in Denars, unless otherwise stated) 12 Cash and cash equivalents Cash with banks -in Denars 7,268,176 2,589,082 -in foreign currency 414,842 1,544,149 Cash-at-hand 46,396-7,729,414 4,133, Prepaids Deferred acquisition costs As of 31 December 2012 and 2011, the deferred acquisition costs by insurance classes for are as follows: Accident insurance 456, ,253 Third party liability auto insurance 44,563,378 34,352,541 Casco 721,082 1,043,229 Green card 3,616,269 4,327,227 Transportation of goods 62, ,746 Insurance of property against fire 453, ,264 Other property insurance 2,504 17,726 Travel insurance 105, ,814 Health insurance 293, ,096 Border policies 49,010 98,338 Total 50,322,872 42,001,234 The changes of deferred acquisition costs during the year are presented in acquisition costs (Note 23). Other accrued income and deferred expenses During 2012, receivables for overpaid dividends in 2010, based on recommendation from Insurance Supervisory Agency, in the amount of Denar 1,630,400 are completely written-off (Note 28). 14 Equity and reserves At 31 December 2012 and 2011 the shareholders capital consists of 300,000 ordinary shares with nominal value of EUR 10 per share. Shareholders of ordinary shares are entitled to receive dividends that can be declared and are entitled to one vote of the Assembly of the Company for equivalent of 1 ordinary share. All shares carry the right to participate proportionately in the distribution of the rest of bankruptcy or liquidation estate. Owner of 100% of the shares of the Company is the Insurance Company, ALB Siguracion Sh.a. Tirana, Albania. Statutory reserves Safety reserves Under local statutory legislation, the Company is required to set aside 1/3 of its net profit for the year (unless the profit is used to cover previous years' losses) in a statutory reserves at a level not lower than 50% of the average insurance premiums collected over the last two years, whereby previous years' premiums are increased for the value of the retail price index growth, inclusive of the year for which the profit is distributed. The safety reserves are used for covering long term insurance liabilities.

50 48 As of and for the year ended 31 December 2012 (All amounts are expressed in Denars, unless otherwise stated) 15 Gross technical provisions Gross Reinsurance Net Gross Reinsurance Net Unearned premiums 163,036,793 (23,020) 163,013, ,839,494 (26,115) 150,813,379 Unearned premiums provisions 163,036,793 (23,020) 163,013, ,839,494 (26,115) 150,813,379 Claims reported 88,663,314-88,663,314 54,787,035-54,787,035 Claims incurred but not reported 47,281,521-47,281,521 5,827,283-5,827,283 Provisions of indirect expenses 682, , , ,071 Other technical provisions 500, , Claims provisions 137,127, ,127,060 60,917,389-60,917,389 As of 31 December 300,163,853 (23,020) 300,140, ,756,883 (26,115) 211,730,768 Unearned premiums provisions Gross Reinsuran ce Net Gross Reinsurance Net As of 1 January 150,839,494 (26,115) 150,813, ,947,834 (23,948) 134,923,886 Policy premiums for the current year 326,150,780 (8,425,500) 317,725, ,524,837 (9,838,770) 312,686,067 Earned premiums in the current year (313,953,481) 8,428,595 (305,524,886) (306,633,177) 9,836,603 (296,796,574) As of 31 December 163,036,793 (23,020) 163,013, ,839,494 (26,115) 150,813,379 Claims provisions Gross Reinsurance Net Gross Reinsurance Net As of 1 January 60,917,389-60,917,389 47,737,696-47,737,696 Incurred, reported claims (Note 21) 33,876,279-33,876,279 12,029,020-12,029,020 Incurred, but not reported claims (Note 21) 41,454,238-41,454,238 1,277,602-1,277,602 Provisions for indirect costs (Note 21) 379, , , ,071 Provisions for direct costs (Note 21) 500, , Other technical provisions (430,000) - (430,000) As of 31 December 137,127, ,127,060 60,917,389-60,917,389

51 49 As of and for the year ended 31 December 2012 (All amounts are expressed in Denars, unless otherwise stated) Gross technical provisions (continued) Movement in unearned premiums and claims provisions in 2012: Accident insurance Third party liability auto insurance Casco Green card Transportation of goods Insurance of property against fire Other property insurance Travel insurance Health insurance Border policies Other insurance Total Provisions for unearned premiums 2,825, ,379,460 4,464,257 22,388, ,906 2,805,178 15, ,739 1,814, , ,036,793 Reinsurance unearned premiums - - (2,100) (13,779) - (7,141) (23,020) Net unearned premiums (less reinsurance unearned premiums) 2,825, ,379,460 4,462,157 22,374, ,906 2,798,037 15, ,739 1,814, , ,013,773 Claims provisions 2,943, ,735,567 7,087,989 17,564,917-1,725, , , ,127,060 Reinsurance transferable part Net claims provisions (less reinsurance transferable part) 2,943, ,735,567 7,087,989 17,564,917-1,725, , , ,127,060 5,769, ,115,027 11,550,146 39,939, ,906 4,523,556 15,500 1,573,999 1,814, , ,140,833 Movement in unearned premiums and claims provisions in 2011: Accident insurance Third party liability auto insurance Casco Green card Transportation of goods Insurance of property against fire Other property insurance Travel insurance Health insurance Border policies Other insurance Total Provisions for unearned premiums 2,473, ,634,718 4,757,997 19,376, ,429 3,622,506 80, ,213 2,059, , ,839,494 Reinsurance unearned premiums - - (2,360) (16,593) - (7,162) (26,115) Net unearned premiums (less reinsurance unearned premiums) 2,473, ,634,718 4,755,637 19,360, ,429 3,615,344 80, ,213 2,059, , ,813,379 Claims provisions 282,057 52,749,604 4,272,619 2,707, , ,423-11,055-60,917,389 Reinsurance transferable part Net claims provisions (less reinsurance transferable part) 282,057 52,749,604 4,272,619 2,707, , ,423-11,055-60,917,389 2,755, ,384,322 9,028,256 22,068, ,429 3,866,199 80,587 1,242,636 2,059, , ,730,768

52 50 As of and for the year ended 31 December 2012 (All amounts are expressed in Denars, unless otherwise stated) 16 Liabilities Liabilities to co-insurers for claims Liabilities to co-insurers for claims 10,764,819 20,784,429 10,764,819 20,784,429 Other liabilities from direct insurance works Other liabilities from direct insurance works - 24,413-24,413 Liabilities from coinsurance and reinsurance works Liabilities based on coinsurance and reinsurance premiums 2,289,028-2,289,028 - Other liabilities from direct insurance works Liabilities to National Insurance Bureau 423,126 1,290,302 Liabilities for fire fight contribution 4,681,480 9,884,738 Liabilities for contributions to traffic safety 708, ,395 5,813,331 11,816,435 Other liabilities Liabilities to employees 2,982,346 5,058,923 Trade payables local 4,765,407 1,314,166 Tax liabilities 3, ,182 Trade payables- abroad - 648,871 Other liabilities 34, ,222 7,785,985 8,108,364 26,653,163 40,733, Earned premiums (premiums income, net) Analysis of earned premiums as of 31 December 2012: Gross policy insurance premiums Change in gross provisions for unearned premiums Gross reinsurance policy premiums Change in gross provisions for unearned premiums part for reinsurance Net income from insurance premiums Accident insurance 11,124, ,124,431 Third party liability auto insurance 229,674,383 (12,197,299) ,477,084 Casco 13,137,520 - (768,750) (260) 12,368,510 Green card 50,890,653 - (5,043,000) (2,814) 45,844,839 Transportation of goods 124, ,331 Insurance of property against fire 8,057,579 - (2,613,750) (21) 5,443,808 Other property insurance 1,636, ,636,128 Travel insurance 9,135, ,135,560 Health insurance Border policies 2,370, ,370,195 Other insurance Total premiums 326,150,780 (12,197,299) (8,425,500) (3,095) 305,524,886

53 51 As of and for the year ended 31 December 2012 (All amounts are expressed in Denars, unless otherwise stated) Earned premiums (premiums income, net) (continued) Analysis of earned premiums as of 31 December 2011: Gross policy insurance premiums Change in gross provisions for unearned premiums Gross reinsurance policy premiums Change in gross provisions for unearned premiums part for reinsurance Net income from insurance premiums Accident insurance 4,727, ,727,603 Third party liability auto insurance 218,442,712 (15,891,660) ,551,052 Casco 9,465,883 - (861,000) 58 8,604,941 Green card 60,022,865 - (6,056,520) 1,266 53,967,611 Transportation of goods 1,604, ,604,718 Insurance of property against fire 8,128, ,128,846 Other property insurance 2,678,867 - (2,921,250) - (242,383) Travel insurance 1,186, ,186,016 Health insurance 10,419, ,419,245 Border policies 5,848, ,848,925 Other insurance , ,000 Total premiums 322,524,837 (15,891,660) (9,838,770) 432, ,226, Investments income Interest income from government bills 6,998,420 6,573,466 Interest income from term deposits with banks 6,808,230 5,093,578 Interest income from Guarantee Fund 990,537 1,026,963 Income from default interest 213, ,870 Foreign exchange gains 89, ,012 Interest income from current accounts in banks 15, ,697 15,115,241 13,244, Other insurance technical income, less reinsurance Income from recourses 5,050,505 - Income from liquidated claims in prior periods 3,359,412 - Other insurance technical income 367, ,103 8,777, , Other income Income from salary withholdings 3,701,665 1,218,239 Income from calculation of claims from National Insurance Bureau 319, ,950 Other income 474, ,495,474 1,544,392

54 52 As of and for the year ended 31 December 2012 (All amounts are expressed in Denars, unless otherwise stated) 21 Incurred claims (net costs for claims) Gross Reinsurance Net Incurred, paid claims in the current year 116,457, ,680, ,457, ,680,797 Changes in provisions of incurred, reported claims (Note 15) 33,876,279 12,029, ,876,279 12,029,020 Changes in provisions of incurred, but not reported claims (Note 15) 41,454,238 1,277, ,454,238 1,277,602 Changes in provisions for indirect costs (Note 15) 379, , , ,071 Changes in provisions for direct costs (Note 15) 500, ,000 - Income from recourse receivables (11,531,162) (11,615,463) - - (11,531,162) (11,615,463) 181,135, ,675, ,135, ,675,027 Analysis of incurred claims as of 31 December 2012: Total paid claims Changes in gross provisions for claims Participation of reinsurers in paid claims Participation of reinsurers in changes in provisions for claims Net Accident insurance 2,502, , ,356,504 Third party liability auto insurance 93,310,203 64,546, ,856,652 Casco 12,201,229 1,299, ,500,581 Green card 5,701,308 8,299, ,000,330 Transportation of goods Insurance of property against fire 854, ,693 Other property insurance 1,624, , ,327,103 Travel insurance 237, , ,464 Health insurance Border policies 26, , ,609 Total 116,457,265 76,209, ,666,936 Analysis of incurred claims as of 31 December 2011: Total paid claims Changes in gross provisions for claims Participation of reinsurers in paid claims Participation of reinsurers in changes in provisions for claims Net Accident insurance 6,898,764 (1,015,553) - - 5,883,211 Third party liability auto insurance 86,759,701 11,462, ,222,011 Casco 7,973,905 2,668, ,642,197 Green card 6,384, , ,362,134 Transportation of goods - (177,175) - - (177,175) Insurance of property against fire 156, ,698 Other property insurance 920,597 (38,050) ,547 Travel insurance 586,566 (234,699) ,867 Health insurance Border policies - (33,000) - - (33,000) Total 109,680,797 13,609, ,290,490

55 53 As of and for the year ended 31 December 2012 (All amounts are expressed in Denars, unless otherwise stated) 22 Expenses for bonuses and discounts, net reinsurance Insurance representing companies - 155,226 Other expenses for bonuses and discounts 44,902,006 46,256,374 44,902,006 46,411, Acquisition costs Costs for employees sales 30,682,256 30,087,453 Commission 17,328,406 6,820,023 Marketing and expenses for new products 3,627,954 3,371,277 Expenses for sold policies 579, ,326 Representation - 211,349 Advertisement - 18,865 Change in deferred acquisition costs (8,321,638) (4,193,173) 43,896,169 37,075,120 Commission expenses from basic non- life insurance in 2012 and 2011 are presented as follows: Commission Insurance brokerage companies 12,518,189 4,654,161 Insurance agents 3,162,992 1,215,707 Travel agencies 1,647, ,155 17,328,406 6,820, Administration costs Costs for employees administration 29,546,477 29,555,033 Rents 12,392,536 12,733,194 Expenses for the managing bodies members 4,792,696 4,112,283 Telephone costs 3,879,159 3,813,564 Expenses for court taxes and bailiffs 3,397,642 3,901,035 Depreciation of tangible assets 2,713,793 3,312,832 Used electricity 2,358,111 2,140,369 Fuel 1,948,413 1,883,108 Services to individuals 1,608,229 1,375,781 Expenses for maintenance of fixed assets 1,495,708 1,439,679 Other administrative costs 8,779,570 6,769,362 72,912,334 71,036, Employee expenses Salaries costs in the Company are separately recorded, the part of the salaries in sales is part of the acquisition costs and the salaries for the employees in the administration in valuation and in liquidation are presented as administration costs (Notes 23 and 24). Gross salaries for employees 38,599,227 36,733,650 Taxes and contributions from salaries 18,603,873 17,284,673 Other expenses for employees and awards 3,025,633 5,624,163 60,228,733 59,642,486

56 54 As of and for the year ended 31 December 2012 (All amounts are expressed in Denars, unless otherwise stated) 26 Other insurance technical expenses, less reinsurance National Insurance Bureau 13,643,385 10,347,104 Fire fight contribution 5,631,608 6,054,777 Insurance Supervision Agency 2,308,448 1,997,960 Other contributions 3,096,120 1,313,161 24,679,561 19,713, Value adjustments of receivables based on premiums Impairment provision of receivables from insurers 12,685,074 21,184,563 Permanent write off of receivables from insurers - 13,846 12,685,074 21,198, Other expenses, including value adjustments Other prepaid income and deferred costs (Note 13) 1,630,400 - Paid penalties and contributions 1,093, ,160 Additionally determined expenses from prior years 168, ,732 2,892, , Income tax (expense) Current tax expense 707, ,977 Deferred income tax , ,977 The reconciliation of the total income tax in the Statement of comprehensive income for the years ended 31 December 2012 and 2011 is as follows: Unrecognized expenses for tax purposes from the current year 7,073,474 3,749,773 Tax credit for expenses with deferred recognition - - 7,073,474 3,749,773 Tax expense at rate of 10% (2011: 10%) 707, , Earnings per share The basic earnings per share is calculated so that the net gain for the year attributable to ordinary shareholders is divided by the weighted average number of ordinary shares during the year. Earning attributable to shareholders (49,940,462) 3,870,773 Less: dividends for preference shares - - Net (loss) / gain attributable to holders of ordinary shares (49,940,462) 3,870,773 Weighted average number of ordinary shares 300, ,000 Basic earnings per share (Denars per share) (166.47) 12.90

57 55 As of and for the year ended 31 December 2012 (All amounts are expressed in Denars, unless otherwise stated) 31 Commitments and contingencies Litigations As of 31 December 2012, the legal proceedings raised against the Company is in amount of Denar 52,104,495. There are no provisions from potential losses recorded, regarding legal proceedings at the reporting date. Various legal actions and claims may be asserted in the future against the Company from litigations and claims incident to the ordinary course of business. Related risks have been analysed by the Company s management as to likelihood of occurrence. Although the outcome of these matters cannot always be ascertained with precision, the management of the Company believes that no material liabilities are likely to result. Tax risk The financial statements and the accounting records of the Company are subject to tax control by the tax authorities in the period of 5 years after the submission of the tax report for the financial year and they can cause additional tax liabilities. According the evaluation of the Management of the Company and at the date of these statements no additional terms and conditions exist that may cause contingent liabilities of material significance on such basis. Capital commitments There are no significant capital commitments contracted at the reporting date that are not already recognized in the financial statements. Pension plans The Company has no defined pension plans for pension contributions or contribution share options as of 31 December 2012 and The Management considers that the present value for the future employee liabilities in terms of pension contributions and jubilee awards are of no material significance for the financial statements as of 31 December 2012 and Compliance with statutory regulations a. The Company is required to maintain its operations, i.e. the amounts of the investments of assets from equity within the limits prescribed in the Article 73 from the Insurance Supervision Law. As of 31 December 2012, assets covering the equity are less by the amount of Denar 90,451,125 from the equity of the Company calculated according the statutory requirements. b. As of December 31, 2012 the Company has accumulated losses in the amount of Denar 49,940,462 and as such the total equity of the Company at December 31, 2012 is in amount of Denar 164,456,428. Based on calculation of equity (form KS) according instructions by Insurance Supervisory Agency as of December 31, 2012, the equity of the Company is in amount of Denar 164,456,428 equal to Euro 2,674,088 calculated by the exchange rate at December 31, 2012 and is not in compliance with the determined minimum of Euro 3,000,000 in relation to the Guarantee Fund as prescribed in article 77 (line 2) from the Insurance Supervision Legislative. The Management of the Company believes that non-compliance of this indicator does not have a material effect on the financial statements.

58 56 As of and for the year ended 31 December 2012 (All amounts are expressed in Denars, unless otherwise stated) 33 Related party transactions Transactions with ALB Siguracion AD, Tirana, Albania and its shareholders The Company is fully owned by the Insurance Company ALB Siguracion S.C., Tirana, Albania and its shareholders. The balance at the year end and transactions with ALB Siguracion AD, Tirana, Albania and its shareholders during the year are as follows: December 31, 2012 Parent Company Key management personnel Total Total Assets 471, ,749 Receivables 471, ,749 - Receivables from insurers from insurance premiums Receivables from regress Receivables from investments Receivables from reinsurance premiums 23,020-23,020 - Other receivables 448, ,729 Investments Given deposits Off-balance sheet records Guarantees and other forms of warranty Total Liabilities 2,289,028-2,289,028 Laibilities 2,289,028-2,289,028 - Liabilities towards insurers from damages, insurance amounts and other agreed amounts Liabilities towards insurance companies based on reinsurance premiums 2,289,028-2,289,028 - Liabilities from financial investments Other liabilities Off-balance sheet records Guarantees and other forms of warranty Total Revenues 106, ,584 Total Expenses 8,425,500 3,858,031 12,283,531

59 57 As of and forthe yearen&ed 31 December 2012 (All amounts are expressed in Denars,.unless otherwise stated) Related party transaction (continued) December 31,2011 Parent Company Key management pe15onnel Total Total Assets 21,149,149-21,149,149 Receivables - Receivables from insurers from insurance premiums - Receivables from regress - Receivables from investments - Receivables from reinsurance premiums - Othe receivables Investments - Given deposits Off-balance sheet records - Guarantees and other forms of wananty 21,149,149 26,1 s 21,123,034-21,149,149 26, j23,034 Total Liabilities Laibilities - Liabilities towards insurers from damages, insurance amounts and other agreed amounts ,871 - Liabilities towards insurance companies based on reinsurance premtums 648, ,871 - Liabilities from,financial investments - Other liabilities Off-balance sheet records - Guarantees and other forms of warranty Total Revenues Total Expenses ,399,730 Transactions with the Nationalnsurance Bureau of the Republic of Macedonia Investments in joint controlled entities Receivables from the National Insurance Bureau Liabilities to the National Insurance Bureau lncome from investments Income from claims proceedings Income from realized recourse receivables Exoenses 16,418,299 4,945, , ,800 45,507 13,643,385 15,995, ,147 1,290,302 6,518, ,950 4,133,061 10,347, Events after the reportlng date After 31, December the reporting date until the approval of these ftnancial statements, there are no adjusting events reflected in the financial statements or events that are mateialty significant fot disclosute in these ftnancial statements. 35 Approval of financial statements The financial statements for the period ending 31 Decembet 2012 (including compatative rnfotmation) have been approved by the Managing 'oo 28 February and s on its behalf by: (5 C,-**E Mr Hashim Rexhepi Genetal Dlr:ector f President of Board of Dhectots '1..!:i,;. l' - ; i.'\-).' Imami t of Finances