Eurohold Bulgaria AD INTERIM CONSOLIDATED MANAGEMENT REPORT AND CONSOLIDATED FINANCIAL REPORTS

Transcription

1 Eurohold Bulgaria AD INTERIM CONSOLIDATED MANAGEMENT REPORT AND CONSOLIDATED FINANCIAL REPORTS 1 January - 31 December 2011

2 Interim Consolidated Management Report, 31 December 2011 CONTENTS 1. Interim Consolidated Management Report as of 31 December Interim Consolidated Financial Statements as of 31 December 2011 Further information on: About Us Structure Corporate Governance Information for investors Communications and Media you can find on: 3. Notes to the Interim Consolidated Financial Statements as of 31 December Declaration

3 Interim Consolidated Management Report, 31 December 2011 CONSOLIDATED INTERIM MANAGEMENT REPORT containing information on important events occurred in the fourth quarter of 2011 and cumulatively from the beginning of the current year in accordance with Art. 100n, para. 4, item 2 of the POSA EUROHOLD BULGARIA During the period March May 2011, with resolution of the Management Board of Eurohold Bulgaria AD, the capital of Eurohold Bulgaria AD was increased through the issuance of 46,146,076 new shares with nominal value of BGN 1 and issue value of BGN 1 per share. The Company issued 62,497,626 rights whereas the proportion number of rights/new shares was 1/1. 46,146,076 shares were subscribed or 73.84% of the amount offered for subscription. Currently the capital of the company amounted to BGN 108,643,712, divided into 108,643,712 ordinary, registered, dematerialized, freely transferable shares with nominal value of BGN 1 each. With resolution from the Management Board of Eurohold Bulgaria AD voted a decision for a subsequent capital increase of Eurohold Bulgaria AD. The company issued 36,214,570 rights whereas the proportion number of rights/new shares was 3/1. 18,701,288 shares were subscribed which represents 51.64% of the amount offered for subscription. The capital of the company increased from BGN 108,643,712 to BGN 127,345,000. On 30 November the new issue was registered in the Commercial Register and from 4 January was listed for trading on the Bulgarian Stock Exchange. It is expected the new issue to be registered for trading on the Warsaw Stock Exchange, were the shares of the company were listed from 15 December 2011 as a result of the realized dual listing. *** According to the consolidated financial statements for the fourth quarter of 2011 the consolidated income from operating activities of the company amount to BGN million compared to BGN million for the same period of The revenues from sales for the current reporting period which include insurance premium income, sale of vehicles and real estate, amount to BGN million as compared to BGN million for the same period last year, where the insurance premium income registered a growth with 4 per cent, whereas the income from automotive activities declined with 2 per cent. The financial revenues, including revenues from leasing operations, investment brokerage and the activities of the parent company decreased to BGN 35 million compared to BGN 38.3 million. The negative result was due to the realized downturn from the parent company with 50 per cent, while the revenues from leasing activities and investment brokerage registered a growth respectively with 12 and 21 per cent.

4 Consolidated Interim Management Report, 31 December 2011 The Group realized a profit for the period amounted to BGN 0.6 million compared to BGN 2.5 million for the same period last year. The table below represents the information regarding the revenues of the subsidiaries for the fourth quarter of 2011 compared to the same period of The results are on a stand alone basis of the companies without taking into consideration any intercompany eliminations. In the consolidated result of Eurohold Bulgaria has been written off deferred tax liability amounting to BGN million due to the discretion of the management which takes into account the requirements of Standard FRS 12 Income Taxes. The deferred tax liability was accrued in 2008 and 2009 as a result of a reporting of a financial income from investment operations related to the insurance sub-holding. Under Standard FRS 12 the Company is entitled to write off a deferred tax liability in respect of both criteria, namely the company controls the period of reverse occurrence of the temporary difference and it is probable this temporary difference will not reverse in the foreseeable future. The company applies an accounting policy adopted for the entire group deferred tax liabilities and therefore the two amounts written off and accruing respectively in 2008 and The result of the continuing operations for the year is a loss amounting to BGN 2.3 million compared to a profit in amount of BGN 1.2 million for the previous year. Retained earnings by segments Net result Parent company 13,929 3,978 Insurance business (10,225) (3,571) Asset management and brokerage Leasing services (111) 345 Automotive business Real estate (1,841) 305 Net result from operating activities 2,114 2,342 Discontinued operations - Production - (281) Total net result 2,114 2,061 Total revenue Parent company 8,951 15,367 Insurance business 282, ,297 Asset management and brokerage 12,039 10,240 Leasing services 19,296 18,974 Automotive business 110, ,582 Real estate 6,006 8,617 Production - 11,322 Total revenue 439, ,399 The consolidated expenses from operating activities of the Eurohold Group as of 31 th of December 2011 amount to BGN million compared to BGN million for the same period in The operating expenses, including insurance activity expenses and

5 Consolidated Interim Management Report, 31 December 2011 expenses related with automotive activities, amount to BGN million while for the previous year amounts to BGN million. The expenses related to the leasing activity, the investment brokerage and the activities of the parent company amount to BGN 12.2 million as compared to BGN 19.7 million for the period ending 31 th December The interest expenses of the companies from the Eurohold Group for the period ended 31 th December 2011 amount to BGN 14.4 million compared to BGN 11.8 million for the previous period. The administrative expenses and the depreciation and amortization expenses for the period decreased from BGN 61.7 million in 2010 to BGN 59.3 million realized in The consolidated assets as of the end of the reporting period amount to BGN million whereas the same figure amounts to BGN million as of 31 st December The most significant increase in the consolidated assets more than twice registered the financial assets from BGN 42 million as of to BGN 86.3 million during the current reporting period. The consolidated equity for the Group Eurohold amounts to BGN 202 million, while the non-controlling interest is BGN 49.9 million, respectively for the comparative period the equity amounts to BGN 155 million for the Group and BGN 52.3 million for the noncontrolling interest. The growth of the equity is due to the successfully completed in May and November two consecutive capital increases of Eurohold Bulgaria. The capital of the company increased with total BGN 64,847,364 - from BGN 62,497,636 to BGN 127,345,000. The non-current consolidated liabilities decreased with 70 per cent from BGN million as of the end of 2010 to BGN million as of 31 th December The decrease in non-current liabilities is mainly due to principal payments made on bonds and bank loans of the leasing company Eurolease Auto EAD amounted to BGN 49.2 million. The current liabilities of the Group registered growth with 28.6 per cent and amounted to BGN million compared to BGN 162 million as of the end of Тhe current liabilities increased due to increase in the technical reserves of the insurance companies owned by the Group. The technical reserves of the insurance companies as of 31 th December 2011 amount to BGN million compared to BGN million as of the end of The company registered a positive cash flow from operating activities. EUROINS INSURANCE GROUP In 2011 Euroins Insurance Group (EIG) reports consolidated gross written premiums at the amount of BGN mln, which is at the level of 2010 when consolidated gross written premiums were BGN mln. The trend of growth in non-motor lines compared to 2010 continues during the period Property and Accident grow with 90 % and 29 % respectively. Written premiums in Casco and Cargo fall by 32 % and 28 % respectively as a result of the stagnating economy in all countries of operation. According to preliminary financial reports for 2011 the consolidated net result is loss at the amount of BGN 11.2 mln compared to loss of BGN 4.3 mln for the previous year. The increase in the net loss is due mainly to the increase in the technical reserves as of the end of the period compared to previous year end and the related increased expenses.

6 Consolidated Interim Management Report, 31 December 2011 During the reporting period from 1 January 2011 till 31 December 2011 the following material events have taken place in the activity of the group subsidiaries: Euroins Bulgaria During 2011 Euroins Bulgaria AD (Euroins) realises gross written premiums at the amount of BGN 76.5 mln or 6.4 % increase compared to the same period of previous year when the gross written premiums were BGN 71.9 mln. The increase is due to MTPL insurance and Green card that have increased with BGN 10.6 mln. or 36.6 % compared to The company continues to follow its strategy to maintain a reasonable level of MTPL premium whereas for the year the average risk premium has increased from BGN 131 to BGN 179 as a result of price increase and significant decrease in acquisition expenses. For 2011 Euroins reports a net profit at the amount of BGN 170 thousand, compared to loss of BGN 2.2 mln for the previous year. The motor insurance lines still keep the largest share in the portfolio of the company during the period i.e. Motor Hull has 27.4 % and MTPL has 51.7 % or total of 79.1 % of gross written premiums. Incurred claims, net of reinsurance are at the amount of BGN 33.4 mln. or with 10.2 % more than the same period of 2010 when they were BGN 30.3 mln. Claims ratio, net of reinsurance for the period is 68.8 %. The change in both indicators is due to the increase in incurred but not reported claims reserves for MTPL insurance during The company continues to follow successfully its long-term strategy for optimization of its operating expenses, as its administrative expenses for the period are at the amount of BGN 8.6 mln, or with 16 % lower than the same period of 2010 when they were BGN 10.2 mln. There has been significant improvement in acquisition expenses with 2.7 percentage points compared to 2010 whereas the net acquisition expense ratio in 2011 is 28 %. Net investment result for the period is positive at the amount of BGN 4.9 mln, compared to profit of BGN 752 thousand for The trend of increase of the technical reserves net of reinsurance continues during the period, they have increased to the amount to BGN 54.6 mln. or with 26.8 % compared to 31 December 2010 when they were BGN mln. During the fourth quarter of 2011 Euroins Bulgaria introduced new tariffing factors for MTPL insurance aiming at more accurate determination of risk and attraction of low-risk clients. Since November 2011 Euroins has started sales of new Motor Hull insurance product that represents a unique combination between insurance and free of charge technical inspection. During the twelve months of 2011 the company made numerous changes in its activities aiming at meeting the new regulatory requirements as well as improving customer service.

7 Consolidated Interim Management Report, 31 December 2011 Regarding the new Law for tax on insurance premiums (in force as of ) since Euroins Bulgaria has started using new forms for insurance policies where the amount of tax is calculated on a separate row. In order to offer a better service to its customers the company has designed an electronic calculator for calculating MTPL premium which is available on the internet site of Euroins Bulgaria. A new service has been offered where customers receive an SMS message 2 weeks before the expiration of their policies. On a new Motor Hull insurance product has been introduced named I choose Euroins which is tailored for vehicles up to 6 th years old from the date of manufacture and for new cars purchased from an official car dealer and paid in cash. As of the tariff of Motor Hull insurance has been changed and as of new General terms and conditions have been applied for this insurance. Euroins Bulgaria is the first insurance company that received certificate for access to the Uniform information system for assessment, management and control of risk (UISAMCR) of the Guarantee fund. As a result since the company started issuing e- policies for MTPL insurance in 750 points of sales in the whole country where technical equipment and trained staff are available. Since the company issues e- policies for Personal Accident Insurance of Passengers in the Public Transport where the policy number is generated by UISAMCR. As a result Euroins Insurance discontinued using paper policies for these types of policies as of In compliance with the new strategy for creation of company image and branding of Euroins trademark, since Euroins Bulgaria has implemented standards for the design of the agency offices as well as new standards for customer service. Since the company has implemented automatic tariffing for issuing e-policies for Motor Hull insurance whereas tariff rates for the different vehicles, respective discounts and premiums are set in the information system in accordance with the terms of insurance. Since all offices and agencies o Euroins are obliged to issue only e-policies for Property insurance as well as to provide trainings to its intermediaries. According to the Ordinance for Compulsory medical insurance of foreigners that reside permanently or for a short period in Bulgaria a new tariff is introduced for this insurance since Euroins Romania For 2011 Euroins Romania reports gross written premiums of BGN mln. or 4% decrease compared to the same period of Property and Liability lines of business register a healthy growth of 237% and 46% respectively compared to The increase in Property is due to the introduction of new products meeting the market demand for obligatory insurance of residential properties and the increase in Liability is due to the new reinsurance contract. As a result of

8 Consolidated Interim Management Report, 31 December 2011 increased premium income of Property and Liability insurance non-motor insurance share grows up to 16.1% for 2011 compared to 12.5% for A decline in GWP is evidenced in Motor Hull and MTPL insurance lines, with 52% and 4% respectively, which is due to the decrease of average premium compared to 2010 and also to the focused efforts of the company aiming at increasing of non-motor insurance lines. The company reports positive investment result for the period. The net result is negative at the amount of BGN 11.3 mln, due to technical loss which is a result of the rational policy of the management applied for the evaluation of technical reserves. During the period Euroins Insurance Group participates in several tranches of share capital increase of Euroins Romania with total amount of BGN 11.6 mln. and increases its share from 89.71% to 92.17%. During the reporting period Euroins Romania introduces several new products that are created especially for the Romanian market like Travel insurance by SMS and Home assistance insurance. The new products are created as a result of the growing requirements of Romanian insurance market. The company also puts efforts in improvement of its existing products, e.g. Medical expenses during travel outside the country. During the period the company prepares analysis and risk segmentation of MTPL and Casco products. New tariffs for both products have been implemented as of middle of October as a result of the analysis. Additional tariffing factors are added like regions (45 classes), age of owner, engine power, car model. Three types of Casco products have been developed glass breakage, collision only and comprehensive. Along with the introduction and sale of new products, Euroins Romania puts efforts in improvement of its operating activity in the two main areas of the insurance business: - Claims handling department continues to improve its internal rules and procedures during the period. The performance of the inspectors that are in charge for claims handling is evaluated using new criteria. - The newly implemented procedures for control of the receivable collection bring about the improvement of the results of the company. Euroins Macedonia For 2011 Euroins Macedonia reports gross written premiums of BGN 14.5 mln. or an increase of 4% compared to the same period of The increase is due to the new contracts signed with large clients. It is important to note that during period the company wins again a bid for two very large clients Central Bank of Republic of Macedonia and the largest private Macedonian bank, Commerce Bank. The net result for the year is profit of BGN 100 thousand, and it is at level of previous year when the loss was BGN 3 thousand. A number of new statutory regulations have been introduced during the period including: rules for calculation of technical reserves, rules for receivables evaluation, regulations for actuary report, for calculation of liquidity coefficient, for minimum liquidity kevel and for types and characteristics of the assets covering the technical reserves, new limits for

9 Consolidated Interim Management Report, 31 December 2011 investments in Macedonia and abroad, and many others. These new regulations would require one-off accruals of expenses during the first year they are in force, or in Euroins Health Assurance During 2011 Euroins Health Assurance reports gross written premiums of BGN 3.3 mln. or 31% increase compared to The net result is positive at the amount of BGN 34 thousand compared to profit of BGN 19 thousand for During 2011 Euroins Heath Assurance continues its innovative marketing strategy by introducing new and diversified health insurance products like Individual and family health insurance and Health clause targeting physical persons and Prophylactics and Labour Medicine offered to corporate clients. On-line service Virtual clinic starts in March 2011 in association with Saint Pantaleimon Medical Center. It represents an internet site where company clients could receive consultation with doctor or medical expert from every point in the world 24 hours a day in the following areas: - traditional medicine; - medical logistics; - personal health file maintenance Since the beginning of the year a procedure for informing clients with SMS at claim registration and payment is introduced. АVTO UNION The financial result for the period from to г. is a profit of BGN 91 thousand, where the figure for the same period last year was a loss of BGN 1,090 thousand. The substantial decrease of the loss is mainly due to the realized increase of the revenues from sales as compared to 2010 of BGN 97,680 thousand to BGN 107,066 thousand for 2011, to the decrease of the operating expenses, as well as to the decrease of the interest expenses which has been accomplished through an optimization of the working capital within the automotive holding. For 2011 the sales of new vehicles, realized from the companies within Avto Union, amount to 2,552 units as compared to 2,318 units realized for the same period of 2010 year which represents an increase of 10.1%. The highest increase in the sales is in Nissan Sofia (with sales of Nissan, Renault and Dacia) with sales of 835 units for the period which is 9% increase as compared to the same period in Bulvaria Varna and Bulvaria Holding have realized sales of 762 units in 2011 which represents 18% more than the sales in 2010 of 645 units. Star Motors (Mazda) has a substantial increase of 36% with 508 sold units as compared to 375 units in During the current accounting period there have been a number of fleet contracts concluded through companies from the automotive holding amounting to over BGN 24 mln.

10 Consolidated Interim Management Report, 31 December 2011 During the period from to the following important events have come into place in Avto Union: On 18 th July 2011 Eurohold Bulgaria AD has increased the share capital of Avto Union with BGN 850,000 through the issuance of 1,700 shares at par value of BGN 500 each. At the end of September 2011 there has been a decision for the second increase of the share capital Avto Union and on 17 th October 2011the share capital has been increased by BGN 5 million through the issuance of 10,000 shares at par value of BGN 500. On 2 nd December 2011 the share capital has been increased by BGN 7 mln. through the issuance of 14,000 shares at par value of BGN 500. As of the current period end the share capital of Avto Union amounts to BGN 34,971,500. Avto Union has increased its investments in some of its subsidiaries: of Nissan Sofia EAD by BGN 750,000, through the issuance of 150,000 shares at par of BGN 1 each and with an issue price of BGN 5 each and of Skandinavia Motors AD by BGN 850,000 through the issuance of 850 shares with par value of BGN 1,000 each. The share capital of the subsidiaries Gransport Auto EOOD, Auto Italia EAD, Bulvaria Holding EAD, Skandinavia Motors AD and Milano Motors EOOD have been increased as well. The increase has been executed through a contribution in-kind. As of the end of the year Avto Union has acquired 98.84% of the share capital of Daru Car AD authorized workshop of BMW, Mini, Rover and Mahindra. The company has an authorized after-sales center for the servicing of BMW, Mini, Rover, Lend Rover and Mahindra vehicles. The company also offers spare parts for the vehicles it services. Daru Car has a service center in Sofia Druzhba district. The deal is part of the strategy of the automotive holding to broaden its market share in the segment of after-sales services of high class vehicles as well as to increase its after-sales points as a main source of revenues due to the low margins in the sale of new vehicles in the current market situation. In June 2011 Bulvaria Holding has celebrated 20 years of existence. The company has opened officially its new showroom in Sofia, Hr. Columbus blv. 43. For the maximum convenience of the customers of Bulvaria Holding the company has now two service centers and showrooms in Sofia in the western part of the city on 84 Orion str. and in the eastern part of the city on Hr. Columbus blv. 43. On 22 nd June 2011 Motobul EOOD has signed a trade agreement with the Slovenian company G.M.T. by which the company becomes authorized distributor for Bulgaria for the next 5 years of the motor oils Castrol and BP. The company has also signed an investment contract for equipment with G.M.T. amounting to EUR 424. On 01 st July 2011 Eurolease rent-a-car has renewed its licenses of AVIS and Budget in Bulgaria for 5 years. On 21 st July 2011 Bulvaria Holding has purchased a new land plot with an area 14,729 sq. m. in the eastern part of Sofia in Liulin district amounting to BGN 817,800. Cargoexpress EOOD has been renamed to Bulvaria Varna on 26 th July 2011 taking into account the fact that the company is closely related to the activities of Bulvaria Holding and the two companies are authorized dealer of Opel and Chevrolet. On 29 th July 2011 Avto Union becomes the sole owner of the share capital of Nissan Sofia by acquiring the non-controlling interest of 2%, representing 43,584 shares with par value of BGN 1 each. The change in the legal form of the company to a sole proprietorship has been written in the Trade Registry on On 06 th August 2011 Avto Union has acquired 51%, represented by 5,100 shares of the share capital of Auto 1 OOD with par value of BGN 100 each. Auto 1 has as a primary

11 Consolidated Interim Management Report, 31 December 2011 activity import and sales of spare parts of vehicle. With this investment Avto Union AD has complemented and supported its after-sales activities as a primary source of revenues. On 01 st September 2011 the Trade Registry has registered the merger of Bulvaria Rent a Car EOOD and Eurolease Rent a Car EOOD. As a consequence all assets of Bulvaria Rent a Car EOOD have been included in the assets of Eurolease Rent a Car EOOD which has become the universal assignee. There has been no liquidation in place. The primary aim of the restructuring is to achieve better segmentation of the market which will lead to increase in the service level and consequently to the increased satisfaction of the clients. This is expected to strengthen the market positions of AVIS and Budget in Bulgaria and to increase their market share. The merger of the two companies aims to achieve optimization of the working capital, reduction of the rent expenses, expenses for software, optimization of financing and maximum usage of the fleet of vehicles. The expected reduction amounts to BGN 500 thousand on a yearly basis. There have been no changes in the legal form of the company, the company address, the management or the ownership. As of the end of 2011 Eurolease rent-a-car has been transferred to the leasing subholding of Eurohold Eurolease Group which has been executed with the purpose of restructuring the companies in the sub-holdings by functionality. In 2011 continues the offering of integrated and bundled products for the clients of Avto Union which is accomplished through the synergies between the different holding groups of Eurohold. The main points in the future development of the services of Avto Union are: preferential insurance tariffs from Euroins for insurance of new vehicles; during the current period a new product has been created together with Euroins Insurance AD where through the sale of motor hull insurance at 4.5% where the clients are offered free examinations to determine the technical condition of vehicles; free tow up to 150 km in case of occurrence of an insurance event; high quality after-sales services in the services centers of the companies within Avto Union throughout Bulgaria; leasing calculators especially designed for the different car models; sale of limited number of vehicles with special pricing and special equipment bundling for a limited period of time; after-sales services at preferential terms and competitive pricing also for cars with expired production guarantee. EUROLEASE GROUP On October 4, 2011, the sole shareholder of BG Autolease Holding B.V. Eurohold increased the capital of the company after the capital increase had been registered in the Trade Register under the laws of The Netherlands. The funds were used to increase the capital of BG Autolease Group B.V., and its subsidiaries in Bulgaria, Romania and Macedonia.

12 Consolidated Interim Management Report, 31 December 2011 On September 19, 2011 BG Autolease Holding signed a preliminary agreement for the acquisition of Eurolease Rent a Car shares, a company holding franchises of Avis and Budget in Bulgaria. The purpose of this acquisition was for the activities within Eurohold to be functionally arranged on one hand and the company to widen the spectrum of services on the other hand, adding operating lease to its portfolio. Eurolease Rent a Car provides short-term operating lease (car rental) mainly to individual customers and longterm lease mainly to corporate customers and small and medium enterprises. The company is a market leader in both segments. As of the end of 2011 the company's management was transferred to the new owner, and on January 30, 2012 the final agreement for the transfer of shares was signed. The purchase price paid for the company was at the amount of BGN 4.89 million (EUR 2.5 million). The payment was made at the end of 2011 together with the transfer of control over the company. On December 16, 2011 BG Autolease Holding signed a loan agreement with First Investment Bank to finance the acquisition of Eurolease Rent a Car worth BGN 4.89 million (EUR 2.5 million) and with a repayment period till June 25, For the reporting period BG Autolease Holding realized loss of BGN 111 thousand at consolidated level, compared to a profit of BGN 346 thousand in the previous year. The income from interests has decreased by 17% due to decline in the portfolio. The consolidated net investment in finance leasing has decreased by 35%. During the year obligations to banks have decreased by 4% to BGN 74,846 thousands. At the end of the year Eurolease Group started a project for a new funding with the European Bank for Reconstruction and Development. At the end of November an extensive due diligence was performed to Eurolease Group and its subsidiaries in Bulgaria, Romania and Macedonia, and sub-holdings of Eurohold. After successful completion of the analysis a financing of BGN million (EUR 10 million) at a group level is expected. The financing will be distributed as follows: BGN million (EUR 5 million) for Bulgaria, BGN million (EUR 3 million) for Romania and BGN million(eur 2 million) for Macedonia in order to finance new leasing deals. Eurolease Auto The leasing market during the year was extremely dynamic. As a result of the increased competition and the ongoing price competition Eurolease Auto reduced the average interest rate for new business to the average rate of 8% compared to 8.5% in The average down payment was decreased to 20% compared to 21.20% in the previous year. Despite the competition and the fall-off of interest rates, Eurolease Auto EAD continued to be one of the most active players on the leasing market in the segment of new vehicles. In cooperation with the dealership network of Auto Union and thanks to the successful business contacts with car dealers outside the Group, Eurolease Auto managed to fund new leasing agreements amounting to thousands BGN. As a result of the active management of receivables, the company has achieved overall low levels of delinquencies and repossessions of vehicles compared to the other market participants.

13 Consolidated Interim Management Report, 31 December 2011 As of June 30, 2011 the sole shareholder of Eurolease Auto EAD, BG Autolease Group B.V. transferred the additional sum of thousands BGN to the full amount of the subscribed capital of the company reaching thousands BGN. Eurolease Auto will use the funds to build new portfolio in compliance with its obligations for coverage ratios with financial institutions. After that contribution, on August 22, 2011, the sole shareholder of Eurolease Auto EAD decided to increase the share capital from thousands BGN to thousands BGN by capitalizing retained earnings for 2008 and 2009, and part of retained earnings for The increase was for the amount thousands BGN and was realized through new shares with a right to vote, each with a nominal value of 1 lev. The capital increase was registered in Bulgarian Trade Register on August 31, Currently, the company's capital amounts to thousands BGN, divided into ordinary shares, each with a nominal value of 1 lev. On December 27, 2011 Eurolease Auto acquired 5.8% of the share capital of Alpha Credit REIT through the purchase of shares. On December 29, 2011 Eurolease Auto signed an Agreement for the Transfer of Receivables to Alpha Credit REIT. The company sold to Alfa Credit a portfolio of receivables with a total amount of thousand BGN for the price of 505 thousands BGN received on December 30, For the fourth quarter of 2011 Eurolease Auto reported a profit of thousands BGN compared to a profit of thousands BGN for the comparable period of The interest income has decreased by 13.31% compared to the previous period of The decline was primarily due to the reduction in net lease receivables. Net investment in finance leasing equaled to thousands BGN compared to thousands BGN in The portfolio has decreased by 20%. As a result of the agreement signed with Alpha Credit REIT, within the fourth quarter of 2011 the net investment in finance leasing decreased by thousands BGN due to the disposal of 256 cars on active leasing agreements Non-current liabilities has decreased by 31.37%, from thousands BGN at the end of 2010 to thousands BGN for the fourth quarter of The payments on principal in 2011 on bonds and bank loans equalled to thousands BGN. Eurolease Auto Romania Eurolease Auto Romania managed to secure financing for the planned new business for 2011 and gradually expanded its activities among car dealers. In 2011 Eurolease Auto Romania achieved decrease in net lease receivables by 29% compared to As a result, the amount of net lease receivables of Eurolease Auto Romania amounts at thousands BGN. The financial result of Eurolease Auto Romania for 2011 is negative at the amount of 189 thousands BGN, decreasing the losses by 67% compared to the previous year.

14 Consolidated Interim Management Report, 31 December 2011 The new business generated in 2011 amounts to 420 thousands BGN with an average down payment of 28%, the average interest rate of newly generated business amounts to 9.24% and the average term is 44 months. The delinquencies rate is low taking into consideration the small size of the portfolio, the late stage of the amortization of the portfolio and the low risk for losses in case of repossessions. On August 5, 2011 Eurolease Group increased the company's capital with BGN, in order to meet the requirement to maintain a positive net equity value, which declined due to previously generated negative results within the last few years. Eurolease Auto Macedonia For the fourth quarter of 2011 Eurolease Auto Macedonia reported 74.67% growth in its lease portfolio compared to the end of As a result of good contacts with most of the dealers, the company managed to take the leading presence in newly generated business. As a result of this the company's portfolio is thousands BGN. Newly generated business for the last year reached thousands BGN with down payment of 20%, average interest rate of 10.60% and average period of 51 months. The Company has been financing new contracts, using resources from a credit line with a local bank and during the year managed to increase the size of the line to thousands BGN. On December 13, 2011 Eurolease Group increased the capital of the company with BGN. In 2011 Eurolease Auto Macedonia reported a loss of BGN decreasing from the previous period by 19%. It is expected for this trend to continue and the company to realize a positive financial result in EURO-FINANCE At the end of November was launched the new online trading platform Meta Trader 5 for real trading. In this way the investment intermediary adds a new product in the range of financial services. The vision of Euro-Finance is to develop towards the standards typical of investment banks, known in developed markets, serving both institutional customers and individual investors. The infrastructure available to the company - the membership of the BSE CD and FWB, participation in SWIFT and ESROT and extremely wide network of correspondent banks and clearing institutions enabling them to offer modern investment services. Currently, Euro-Finance is the only Bulgarian investment intermediary - member of the Frankfurt Stock Exchange, giving direct access to the Xetra through the trading platform EFOCS. Also, the equity of the company is the highest among the other intermediaries operated on Bulgarian market and amounts to BGN 16.3 million (according to 2010 data from the site of the FSC).

15 Consolidated Interim Management Report, 31 December 2011 As of 31 December 2011 Euro-Finance AD realized a positive financial result amounted to BGN 602 thousand compared to BGN 713 thousand for the same period of The company's revenues increased with 17 per cent from BGN million to BGN million. The financial expenses for the current reporting period amounted to BGN million, while in the comparable period they amounted to BGN million. The administrative expenses have remained relatively constant and amounted to BGN 1.140million. On , Euro-Finance AD acquired 125,000 shares of the capital of the AMC Sentinel Asset Management representing 50 per cent of the capital. With the above acquired stake, Euro-Finance AD became the sole shareholder of Sentinel Asset Management EAD. Asset management company was established in 2005 and provides two open-ended mutual funds - DF Sentinel-Rapid (Money Market Fund) and Fund Sentinel-Principal (Balanced Fund). EUROHOLD BULGARIA (Stand alone base) For the first nine months of 2011 the financial results of Eurohold Bulgaria AD on stand alone base is a profit in amount of BGN million compared to a loss in amount of BGN million for the same period last year. The total revenues of the company over the reporting period amounted to BGN 7,574 thousand, of which income from dividends BGN 1,268 thousand, income from financial operations BGN 5,24 thousand and interest income in amount of BGN 1,066 thousand. For comparison, in the first nine months of 2010 the total revenues amounted to BGN 7,501 thousand, of which income from dividends BGN 291 thousand, income from financial operations BGN 5,809 thousand and interest income BGN 1,401 thousand. The total operating expenses of Eurohold Bulgaria AD on individual base reduced substantially for the period and amounted to BGN 5,54 thousand compared to BGN 9,523 thousand for the same period last year or a decrease with 41,8 per cent. The interest expenses decreased to BGN 4,072 thousand for the first nine months of 2011 compared to 5,597 thousand for the same period 2010 due to reduced debt of the company. The decrease in interest expenses amounted to 27.2%. At the end of September the company's assets amounted to BGN 317,725 thousand compared to BGN 296,213 thousand at the end of The equity up BGN 240,196 at the end of September 2011 as of December 31, 2010 amounted to BGN 192,006 thousand. During the reporting period the company's liabilities decreased to BGN 77,529 thousand compared to BGN 104,207 thousand at 31 December As of the end of September the amount of non-current liabilities amount to 58,221 thousand compared to BGN 78,256 thousand at the end of The amount of current liabilities is BGN 6,747 compared to the end of 2010 when amounted to BGN 13,390 thousand. The deferred tax liabilities remain unchanged and amounted to BGN 12,561 thousand. The share capital of Eurohold Bulgaria amounted to BGN 127,345 thousand after the successful capital increase of the company.

16 INFLUENCE OF THE IMPORTANT EVENTS ON FINANCIAL STATEMENTS AS OF 31 DECEMBER 2011 The Management Board is not aware of any other important events occurred in the fourth quarter of 2011, which could affect the financial results of the company. DESCRIBTION OF THE KEY RISK FACTORS 1. Systematic risks Influence of the global economic and financial crisis The global financial crisis, which started in 2007, led in many countries (including the US, EU countries, Russia, and Japan) to a slowdown of economic growth and an increase in unemployment, limited access to sources of financing and a significant devaluation of financial assets worldwide. The financial crisis also caused significant disturbances on the global financial market which led to reduced confidence on financial markets and, thus, difficulties of entities in the financial sector with maintaining liquidity and raising financing. Also, the crisis on the global financial market may affect the non banking financial services sector and the sale of the range of products and services by the Group, particularly driven by the possible further decrease in unemployment and drop in disposable incomes. Deterioration in the regional financial system and markets coupled with corresponding low consumer consumption rates could seriously lower sales across all divisions of the Group and thus may also adversely affect the Group s outlook, results and financial situation. Risks related to the general macroeconomic, political and social situation, and government policy The macroeconomic situation and the growth rate in the Balkans (Bulgaria, Romania, Macedonia and Serbia) are of key importance to the development of the Group, as well as government policy, particularly the regulatory policy and the decisions taken by the respective National Banks affecting such external factors as money supply, interest rates and exchange rates, taxes, GDP, inflation rate, budget deficit and foreign debt, and unemployment rate and income structure. Changes in the demographic structure, mortality or morbidity rate are also important elements affecting the Group s development. The above external factors, as well as other unfavorable political, military or diplomatic developments leading to social instability may lead to a curb on higher-level consumer expenditures, including limitation of funds allocated for insurance coverage, car buying and leasing. Consequently, gross premiums written may decrease and clients may tend to resign from contracts already executed, as well as postpone new car purchases and correspondingly new car leases. Any deterioration of the region s macroeconomic ratios may also adversely affect insurance products, car sales and lease contract origination. Therefore, there is a risk that if the business environment broadly deteriorates Group overall sales may be lower than originally planned. Also, general changes in government policy and regulatory systems may lead to an increase in the Group s operating expenses and capital requirements. If the above factors occur, fully or partially, they could have a significant adverse impact on the Group s outlook, results and financial situation.

17 Consolidated Interim Management Report, 31 December 2011 Political risk This is the risk arising from political processes in the country - the risk of political instability, changes in government principles, legislation and economic policy. Political risk is directly related to the likelihood of unfavorable changes in the direction of governmental long-term policies. As a result there is a danger of adverse changes in the business climate. Long-term political environment in the Balkans (Bulgaria, Macedonia, Romania and Serbia) is stable and does not imply greater risks for future economic policies. The integration of the countries in the Balkans with the EU, along with their consistent domestic and foreign policies, ensure the absence of shocks and significant changes in policies in the future Sovereign credit risk Credit risk represents the likelihood of worsening of the international credit rating of Bulgaria, Romania, Macedonia and Serbia. Low credit ratings could lead to higher interest rates, more restrictive financing terms for business enterprises, including the Company. The credit rating agencies are giving positive assessments of the region during the ongoing crisis, thanks to sound fiscal policies and effective structural reforms. The best example of disciplined fiscal policy is the increased credit rating of Bulgaria to Baa by Moody s at the end of July 2011 indeed, the highest credit rating in the Balkans. The policies which in the long-run shall preserve the current fiscal stability are: Controlling the size, dynamics and servicing of all financial commitments and debts, both domestic and external; Development and implementation of a uniform policy on public debt management, whose fundamental essence is aimed at ensuring a smooth budget funding and refinancing of maturing debt at minimum mid and long-term rates and at an optimal level of risk; Development and implement of a funding policy, while also exercising control over openmarket transactions with government securities, the issuance of permits for prime brokerage, along with the implementation of policies aimed at the development of an efficient, transparent and liquid secondary market for government securities; Monitoring the proper servicing of all financial liabilities which a guarantee has been issued for and on behalf of the state, as well as providing complete and accurate data on consolidated public indebtedness, including government debt, municipal debt and well-fare and pension liabilities; Identifying and monitoring possible risks that may arise during the implementation of the strategic goals set forward; Taking appropriate and timely actions to minimize or avoid the impact of identified risks and their potential negative effects. Inflation risk Inflation risk is associated with the possibility inflation to adversely impact real returns. Inflation may affect the amount of expenses of the Issuer as a large part of the company's liabilities are interest bearing. Servicing them is related prevailing current interest rates, which reflect levels of inflation in the country. Therefore, low inflation rates in the countries of operation, is seen as a significant factor in the Company. Currency risk

18 Consolidated Interim Management Report, 31 December 2011 This risk is related to the possibility of devaluation of a local currency. In the case of Bulgaria this is the risk of a premature collapse of the Monetary Board and the drastic change in corresponding fixed exchange rate of the national currency. The official government and central bank policy are expected to maintain the currency board country to the adoption of the euro area. In Romania, Serbia and Macedonia the exchange rates are determined by free market forces and rare interventions by central banks are driven primarily by sharp market movements in FX rates, caused by one-time extrinsic factors. Any significant devaluation of currencies in the region (Bulgaria, Romania, Macedonia and Serbian) can have a significant adverse effect on businesses in the country, including that of the Company. Risks exist when revenues and expenditures of a firm are derived in different currencies. Interest rate risk Interest rate risk is related to the possibility of changes in the prevailing interest rates in a country. Its impact is most obvious on the Net Income of a firm, as in cases of increases in underlying interest rates, should the firm fund itself with leverage. Interest rate risks are part of general macro-economic risks, as it is most likely driven by instability and perceived risk in the overall financial system. This risk is best handled through the balanced use of multiple sources of funding. A typical example of this risk is the ongoing global economic crisis, caused by capital shortage and liquidity squeeze in large mortgage lenders and financial institutions in the U.S. and Europe. As a result of the crisis, the required interest rate premium were re-evaluated and consequently dramatically increased globally. The effect of the crisis on Balkans is very tangible and has hampered access to leverage. Increases in general interest rate levels, ceteris paribus, would impact the cost of leverage used by the company in its business development efforts. In parallel, such changes could adversely impact the expenses of the Firm, as a large portion of the Firm s financial liabilities are interest bearing and have a floating interest rate component. 2. Unsystematic risks Risk relating to the business operations of the Company EuroHold Bulgaria AD is а holding company and any deterioration in the operating results, financial position and growth prospects of its subsidiaries may adversely affect financial position of the Company. The Company is involved in managing assets and other companies and thus cannot be specifically attributed to being exposed to one particular industry segment. Broadly, the Company is focused on the industry segment (1) non-banking financial service (leasing, insurance, asset management, brokerage and financial intermediation) and (2) new car sales and services. The main risk facing EuroHold is the possibility of decreasing revenue across business segments. This could possibly impact the dividends received. Correspondingly, this could have a negative effect on consolidated revenue growth and respectively return on equity. The largest business risk comes from the largest business segment of the Company namely the general insurance operations, as the subsidiaries operating in Bulgaria, Romania and Macedonia bring a very significant portion of the Firm s overall revenues.

19 Consolidated Interim Management Report, 31 December 2011 The activities of all subsidiaries of the Company are adversely affected by continued increases in market prices of fuel and electricity that are subject to international supply and demand and are determined by factors far beyond the Firm s control. The largest business risk comes from the largest business segment of the Company namely the general insurance operations, as the subsidiaries operating in Bulgaria, Romania and Macedonia bring a very significant portion of the Firm s overall revenues. The major risks in the leasing business stem from the needs of the regional leasing subsidiaries to raise sufficient leverage at favorable interest rates, which in turn leaves them room to grow and provides proper interest margins that drive profitability. The leading leasing subsidiary is EuroLease Auto which is the Bulgarian operating company. As such it has issued several tranches of public bonds traded on the Bulgarian Stock Exchange (BSE) and thus has publicly disclosed a lot of information, including certain risk considerations. Eurohold s Brokerage and Asset management arm is Euro-Finance AD. The risks associated with financial intermediation, brokerage and asset management relate to the overall general financial markets condition and the inherent volatility, along with the investment awareness and activeness of the general audience. The car-sales segment which is present only in Bulgaria and is hosted under the umbrella of Avto Union AD is active in new car sales and also provides after-sales services to customers. Along with that, it provides rent-a-car services under short and long-term operating lease contracts. The ability to sell certain brands is a result of having a valid license issued by the OEMs to market and sell a given brand on the local market. Should such licenses and agreement be revoked, the impact on sales and the financial position of the company could be materially negative. This is particularly important, given the ongoing global restructuring and repositioning of car brands and manufacturers. The business environment in the automotive industry could be dramatically impacted by purely internal drivers related to general purchasing power, access to lease-financing, general business sentiment, inventory levels, etc. Deterioration in the performance of one or more subsidiaries could lead to a deterioration of the results on a consolidated basis. This in turn, is related to the price of the Company s shares as equity markets reflect the business potential and total net assets of the Group as a whole. Strategic development risks Future earnings and market value of the company depend on the strategy chosen by the senior management team of the company and its subsidiaries. Choosing the wrong strategy could lead to significant losses. Eurohold seeks to manage the risk of strategic errors by continuous monitoring of various stages in the implementation of its marketing strategy and financial performance. It is absolutely crucial to be able to respond quickly if a sudden change is needed at some stage in the strategic development plan. Untimely or inappropriate changes in strategy may also have a significant negative impact on the Company's operating results and financial position. Risks related to the management of the company The following risks are related to the management of the company: Poor investment management and liquidity management decisions by either top management or other senior employees; Inability to launch and execute new projects under development;